ITF 52 | BRRRR Houses

 

Cody Caswell is from a third-generation real estate investing family, and he bought his first property at 16(!) years old. He hated real estate during his college years but found his way back after interning as a commercial insurance broker. Now, he is 24 years old with a residential contractor license and 14 units under his belt.

In this episode, Cody walks us through his childhood and the life lessons that he learned from his dad. He breaks down the numbers for his true “for real” deal and his strategy for BRRRRs. He also offers advice for people who want to replicate his success.

Strap in for insight from an investor who started young and did things right!

Listen to the podcast here


 

Start Young And Go BRRRR With Cody Caswell

We have a Squidward for you. We’re both stuffed up.

I love that we’re doing it together. It feels so right.

We’ve got a guy who does a lot of rehabs. Cody has a tremendous story. The dude is so young. He’s already got himself fourteen units. He bought his first property at sixteen years old. He couldn’t even drive yet, but he’s got his first property. It’s absolutely insane to know that whole thing, what that did for him and how that was a stepping stone as to where he is now.

He has a great mindset. That is something that is not taught. That came from probably generational real estate investors in his family, but it’s great that he’s out there, getting all the information he can, reading lots of books, and working with mentors at such a young age. It’s really inspiring if you can read to the end. There are lots of good nuggets.

Let’s get him up.

Cody, welcome to the show. How are you doing?

I’m fantastic. Thanks for having me. I’m excited.

Thanks so much for coming on and for reaching out. We heard a little bit about your story, and we are super excited to dive into it. How did you first hear about financial independence?

I came from a third-generation real estate investing family. It’s an interesting story. Before I was born, when my dad was about twenty years old, he started buying small single-family properties and renting them out to supplement my grandma’s income at the time. My dad had freshly moved out of the house. It’s something that they started out. They bought their mother’s house or my grandfather’s mom’s house. They ended up renting it out for a little bit of money. It wasn’t much back then. It was a little bitty house.

It was just something to supplement their income, and they ended up accumulating about ten properties. My dad saw this at a young age. He was cutting grass at the time and grew a lawnmower business. He started buying up these small single-family properties too at a young age. Over time, he just bought. He ended up being able to sell his grass-cutting business and do real estate full-time when he was about 30 years old.

After 30 years old, he spent the next 25 years investing. From the time I was born, I got to watch and witness him investing and take a lot of part in it. I got to witness real estate investing throughout my entire life. It was cool because my dad never had a W-2 job. From the time I was born, I was preached into this idea of, “You create your wealth and financial independence. You have to create your own income rather than getting paid.” I’ve never taught the process of getting paid, so it never resonated with me. Having a W-2 was almost not an option in my upbringing. I do have my dad to thank for that. It was very cool that I had that opportunity to learn that from a young age. That’s how I learned.

I love the generational story. A lot of people will go, “That’s cheating. He had this handed to him. Somebody taught him and it was easy.” If you dig in deeper, it’s not. There are many cool things that can be learned and improved upon year-after-year and generation after generation. I hope that people will take a moment and read your story because you’re going to have cool wisdom in there.

Did your dad teach you about passive income or was it like, “This is a way to build wealth?” Did he teach you the whole like, “Passive income is greater than expenses equals financially freedom, then you can do what you want and it’s unicorns and rainbows?” Was he like, “Don’t rely on some Joe Schmoe to pay you a W-2 job. That’s not how you get rich. You get rich by accumulating assets.” What story did he tell you?

Both, and honestly, it’s almost that. I was probably twelve years old when I first started doing this. Every summer, right before I would be got up for school, he would buy a property, a junk single-family. My dad’s a big single-family guy. During the summer, he would kick me and my brother out of bed at 7:00 AM and say, “You’re coming to work with me.” Not in a mean way, but like in a, “You’re going to come to learn something that nobody else is.”

As we’re in there, he’s getting us to do what a 12- and 15-year-old can do. We’re going in there and we’re painting the walls. We might be cleaning out trash and working to help him, but the whole time that we’re doing this, he’s telling us, “This is what allows us to be able to go on vacations from Tuesday to Saturday if we want. This house is going to rent for $1,500 a month forever. You work once, and you get paid forever.” That was his motto.

From the time that I was young, he was preaching to us, “This is financial independence. If you get paid more than you spend, you’re going to have financial independence and you can do whatever you want.” He also taught us from the start, “Isn’t it so much better that we’re relying on ourselves to make our money rather than relying on somebody else to pay us? He was handing it to us both ways.”

You are a little bit lucky that your parents knew that, so they were able to teach you this at a young age. I’m not going to say that everyone is dealt a certain hand and it’s what you do with that hand, which doesn’t make you successful. You were given a hand where your dad was telling you things. I have friends whose dads are into financial dependence, but they don’t care about that. It’s not interesting to them. You obviously cared about that. Throughout your whole childhood, you were helping him, mowing the grass, shoveling leaves, picking the deadly lines in the yard and doing all that stuff. When are you actually getting into it yourself? At what age?

I bought my first property at sixteen years old with my life savings. It was a mobile home because that’s all a sixteen-year-old can hold the title to. That was my decision. It was something that I had to go find the property. That’s where I say I am lucky to have a dad that did know all this and preached it all to me, but it was ultimately up to me. That point where he said, “You have enough money to go do this. If you want to go do it, go find it.”

It was up to me to go find the property and the deal. It was a junky ‘90s mobile home when I was sixteen years old. I was all into it for $5,000. The guy that owned it probably wanted to help a sixteen-year-old that was trying to do something cool, so he sold it to me cheap. I renovated it all myself, which I don’t ever suggest doing. I definitely don’t do anymore. That’s another thing. Learning from your dad teaches you a lot of things that you don’t want to do, and a lot of ways that you don’t want to invest in real estate. I have a very cool story about that too.

You can’t get a loan at sixteen years old. It’s $5,000. I’m sure you bought it in cash. How much do you end up putting into the mobile home?

Financial independence is getting paid more than you spend, allowing you to do whatever you want. Click To Tweet

I ended up putting $5,000 total. I bought it for $3,500. It wasn’t really in rough shape. The guy I bought it from needed the cash and it was easy for him. I put $1,500 into it, a lot of time and sweat. I’m in summer that summer. It was a great property. The crazy part is I was all-in at $5,000. At the time, I was sixteen and still in high school. I was paying my truck note. I ended up buying a new truck with it, spending every dollar out of the cash so that I got cashflowed around $450 a month after expenses and a lot of the rent was paid.

I was making $450 a month passively, more money than any of my friends and I didn’t have to work for it anymore. I bought myself a new truck. The crazy thing is I calculated up whenever I sold that property. I was doing this full-time and I was a lot more into it. I calculated up how much that property made me over the life of it. I ended up netting $32,000 on that little mobile home in the few years. As a 16 through 19-year-old, that was totally passively. That was cool to see that when I was nineteen years old when I sold it.

You said that your dad is into single-family. Do you have a strategy that you know from him? Why single-family? Is it just easy to renovate them or is that the market that you’re in?

Down here, the market works well on single-families. The numbers pan out as far as what you’re all in. He was investing hard. He’s in his mid-50s now. He hasn’t really invested hard for many years. Back then, years ago, you could hit the 2% rule from nothing. He was gobbling up the single-families, and that was what he was able to buy. I’m in a position where I’ve been fortunate enough that I was investing at a very young age. I’ve got some good mentors and friends around me that we’re able to look at larger multifamily complexes. He ended up buying a 48-unit multifamily complex as well and held it for five years. I got to watch that process through. While I was in college, I was very involved with that.

It wasn’t his cup of tea. I personally liked them a lot better. Multifamily for me works better. He’s a do-it-yourselfer. To this day, whenever he buys a one-off property, he still remodels themselves. He does all the management and the leasing himself. It is a little bit more easy to handle for him than our apartment complex. He has a problem with the power of delegation, which is something I learned through watching him. It is that, “If you want to scale this business to exponential growth, you’ve got to learn the power of delegation from the start.” He doesn’t hold that power.

One of the things I want to highlight is that you don’t have to scale. Many people get focused on this like, “How do I make a build this big business?” Your data is proof that you can buy one house summer and after 30 years, you’re going to have a whole lot of homes. There are all different rates of doing this. You don’t have to build it all in the first 2 or 3 years. That’s cool to point out.

I wonder if that’s like a Boomer thing because my parents also are entrepreneurs and not in real estate. They had a catering business, but there are always things that were like, “No one can do it as good as me. It’s a pain in the butt trying to teach people. The help always sucks.” You’re never going to be able to grow something that way, but either way, it’s what your goals are. The bigger your team, the more problems you’re going to have. The more house you got, the more problems you’re going to have. If you don’t want that, then you don’t do it.

There are a lot of ways to get success in real estate, and that’s the beautiful part of it, especially in financial independence, because that all depends on what your style of life wants to be. If you want to hang out at your house all day and get them, go fish whenever you want or go do whatever you want to do, it doesn’t take a lot of properties to do that. You could probably do that with ten houses paid off and make six figures a year. It’s not me and not what I want, but that’s what my dad saw for himself. He accumulated 40 single-families and about 50 apartments. In his life, he was managing a lot at one point, but it didn’t take thousands of years to do it.

It’s nuts that he managed all that and did all that himself. I got sucked by the third property, and I was like, “I’m done managing it. Get someone professional on here.” We can get your dad on the show, but I want to talk a little bit more about you. You’re sixteen. You got this mobile home and kept it for three years. You go to college and make $32,000 over three years. That’s a pretty big chunk of money for someone that’s nineteen going to college. Where did you go to school? Did real estate follow you through school or did you take a hiatus while you were in college? Was there ever a point where you were like, “I don’t know if I want to do real estate,” or you saw it at sixteen?

Going into college, I hated real estate because the way that I learned real estate growing up was not the way that I wanted to do it. At that time, I wasn’t exposed to BiggerPockets or much of a community to see other people doing it and the different ways that it can be done. In my head, going into college, there was one way to do it and that was it. I knew that it made great money, but it wasn’t the way that I wanted to do it. It was like, “If I have new stress in my life, I’m going to shoot myself.”

What happened was I was going to college to be a commercial insurance broker. I went to school for Finance. I ended up having an internship at the ideal brokerage I wanted to. What was crazy was within the first week of me sitting in that office, the picture became so clear. I was like, “I cannot do this the rest of my life. There’s no way that I can sit in an office from 9:00 to 5:00 for the rest of my life having a superior above me that I have to please. There’s no way that I can do this.”

From that fuel the drive of, “What else can I do to achieve my life’s dreams without having to be in an office?” I found my way back into real estate because I know real estate can work. How else is everybody else doing this? That’s when I was brought down into BiggerPockets and started finding some other mentors around me in my local market that were investing in real estate the way that I wanted it to. I found out that you don’t have to do all the work yourself or manage yourself and different things like that then to where I’m existing now.

High school was your training wheels of real estate. You see what your dad is doing. You see your dad may be exhausted. You go to college and say you don’t want to do it. You get into that job, but then you’re like, “I can’t do this. Real estate sounds way better. I like passive income.” Now you’re exposed to all the mentors. Anyone in this generation is blessed because we have the BiggerPockets and internet. We have so much information coming at us, but there’s no way you should even make these mistakes that anyone else made many years ago. When did you graduate college? What year is this?

This is 2019.

In 2019, you graduated college. You’re 21 or 22 years old, quit your job and what do you do next?

I took a big dive. At the end of the internship, they offered me the job. I turned it down and said, “There’s no way I can do this the rest of my life.” I went all in. I bought an eight-unit apartment complex less than a month after that internship. What I did was buckled down when I found a deal because I said that what I had at that point wasn’t going to sustain me. I knew it wasn’t after college. I knew I needed to start building a business of it. The eight-unit apartment complex I still own it. That’s whenever my focused professional investing began.

That was probably your true, for-real deal. Let’s get into that eight-unit. You just graduated college. You left your internship making $6 an hour. How the heck did you come up with the money? How did you qualify for a loan? How do you finance this eight-unit? How did you find it? Let’s get deep into that.

Let’s start where I found it. I found it from a shared friend. My brother was doing a construction market at the time for local investors. They had about 100 units and this was one of the complexes they wanted to sell. They were selling 3 or 4 of them at the time. The other three were grossly overpriced. This one was a pretty fair price. They needed rehab and a big facelift on it. I purchased it for $387,500 and negotiated that down from $440,000. They were pretty overpriced on this as well when I came in with a pretty strong offer, but I was going to close. Since we have mutual friends, my brother was working for them at the time, they knew that I was going to close, who I was and I guess they liked me. Honestly, it came down a lot better price.

The way that I finance that, I owner financed two properties in a neighboring city a couple of years before this. I owner financed with 0% down, $40,000 a house with two properties, so it was $80,000. Over time, with money that I made doing X, Y, Z, different little one-off things and all of the cash from those two properties, I use it to pay down that debt. I paid down that debt enough to be able to turn around and get a home equity line of credit on those two properties. That line of credit funded the down payment for the loan on this eightplex.

Where did these two properties come from? Did you purchase these in college?

ITF 52 | BRRRR Houses
BRRRR Houses: The market works really well on single families. The numbers really pan out as far as what you’re all in.

 

I bought them in college. It was a deal that I lent them all out. It was a four-property portfolio that me and my older brother split. It was an owner-financed deal. He and I bought two. It was something that found its way to his. It wasn’t listed. It was just a friend of a friend who had some properties that they wanted to sell. We got in touch with them somehow and then that was worked out well. They wanted to sell them cheap. They needed the money and the properties needed no rehab. We bought those on owner-financed while I was in college. I turned nineteen at the time that I bought those.

In 2017-ish, you probably bought those with your brother. It sounds like your brother probably did a lot of the leg lifting because it is like you almost forgot about them through college. Those properties basically allowed you to get a line of credit for a down payment for the $387,000.

I financed my down payment.

I don’t want us to skip over the owner financing just because it’s rare and interesting. I want you to tell us a little bit about how that deal was structured. Did they have an offer right away of like, “We want X amount of years and this payment,” or did you guys negotiate something?

I can’t remember the exact terms, but we had negotiated what was going to work based on their rental payments. They had an X number that they wanted. They wanted $40,000 per house, which was cheap. That’s why we jumped on it. The rent in this area was only about $600 a month for these properties. They were in a neighboring city, good areas and it’s just a small town over there. It’s not going to get so much.

It’s high for $40,000 for a house.

The deal worked out great. That’s why I say the numbers worked out fantastic. What we did was we negotiated it down where our rental payments were only going to be $400 a month per property. That was the number they were good with and going to make us cashflow enough. The extra $200 a month that we got per property, we threw it on top of the mortgage.

We forgot that the properties were there. Neither one of us needed the money at the time. It was like, “Let’s just pay down this debt,” and then every bit of money that I got, I put towards those properties, trying to get them paid off because I didn’t want that line of credit. I wanted that buying power. At the time, I didn’t know what I wanted to buy in the power of four. I just knew I did want it.

Did you have to put a down payment when you were getting these houses?

No. It was $0 down. They didn’t want to lose the income of rentals. They just didn’t want to deal with the rentals anymore. The situation they were in is they’re like, “We need $40,000 a house for these properties and still make some money off these properties. We still needed the income.” There were some elderly folks. They still needed some income. They didn’t need the big chunk of cash. They didn’t want to deal with tenants anymore. It wasn’t even a big decrease in what they’re making, $600 versus $400 a month. We said, “You could still make this amount of money. We’ll take care of the tenants.”

It’s almost like they’re paying for a property manager in a reverse mortgage way.

It was a great deal. That’s why we didn’t pass it up. It’s the timing of some elderly folks that wanted income and probably knew they weren’t going to be around forever.

Let’s get back to the eight-plex because I know Craig is chomping it a bit.

Before we get too deep into the actual eight-plex itself, you brought it down from $440,000 to $387,000. You said they are your friends. Did you come in with being like, “Now pay $387,000?” That was it or how could those conversations go? Negotiation is the hardest thing about real estate and the most uncomfortable thing that people usually try to shy away from. I want to see how at 21 years old, you held your ground.

We got connected through a local agent and then we both knew. She has broken the deal between us. I never spoke to him directly about it until after the fact. We’re good friends now and he wishes he wouldn’t have sold the property to me for that. What ended up happening was four $440,000 still overpriced at the time. It needed some rehab. I ended up offering them $350,000 and they came back to me negotiating and giving me the specific numbers. I’d already read Never Split The Difference. I knew what they were doing.

I told him, “I bumped my offer up $10,000. I said $360,000.” They came back to me with another one-off number. It was like $397,246 or something like that. I came back to them with $350,000 again, and they said, “The bottom line, we need $387,500.” I said, “I can do $387,500. Let’s do that.” It’s still my ground, honestly. I bumped it up to $10,000. I knew what they were doing. That was the cool part, so I was able to counteract them against that.

Did you want the deal or were you okay letting it go?

I wanted the deal, but I wasn’t going to pay in the forest for it. The numbers didn’t pan out. I wasn’t going to let my first big deal as a real estate investor be something that wasn’t going to work out for me. I was okay with losing that one to get another.

The big thing is that you wanted it for the price that you wanted it for. You didn’t just want to get an eight-plex, so you could go tell your friends that you bought an eight-plex. That is a huge thing. I see this a lot of times of how stock early-stage investors want to just get in, which I think you should get in, especially like with house-hack, but you weren’t really house-hack. You’re finding multifamily, which does a lot of negotiation and buying that low means a lot. If the numbers don’t work, the numbers don’t work. You pass on it and don’t let your emotions get in the way. Do you learn that whether from your dad, BiggerPockets, or whatever?

I learned it from BiggerPockets. Honestly, it was a lot about preaching in my head, “It’s all about the numbers.” I almost ran 25 times before I made an offer, for example. I’m nervous to make an offer. This is a big sum of money for a 21-year-old, especially being my first-day professional, yet the last thing I wanted it to do was it to go South for me. It was the first big loan I was asking for from the bank. I did have another loan at the time, but it wasn’t much. It was on another property. This was the first big deal I was going to do and I wanted to impress my banker, honestly. I wanted it to be a well-performing deal for everybody. I wasn’t going to risk my relationship and my next five years of investing in getting a deal.

If you go into a bank, hold yourself to high accountability and standard. It doesn't matter your age but how you are handling yourself. Click To Tweet

I want to go back to the fact that you said in college, your dad had this 40-plex and you were involved in helping him. Were there some things that you learned that made you go, “This eight-plex is going to work and I feel confident?”

It was a very different property. I wouldn’t even say they operate the same way. Forty-eight units operate a lot as a business. It is still real estate investing, but at that point, there are a lot more costs associated with it. I would more say that the eight-plex operates more like a single-family than it does the 48-plex. They are two different ballgames.

How much do you need to put down for that eight-plex? Is that 25% down?

It’s 20%.

That’s about $60,000 or $70,000?

After the closing costs and everything, it was $60,000 and some change. Maybe $63,000. I can’t remember exactly.

The $60,000 change which you got from the HELOC on those two other properties. What was your mortgage payment plus the interest whenever you paid it on that HELOC?

All in all, it ended up being about $2,800 a month.

It’s $2,800 of true expense out. What was the rent look like? What is the eight-plex look like? Did you have to do any rehab?

I did have to do a little bit of rehab, but they were rentable how they were. I wanted to command a little bit more in rent. The market was hot at the time, so I went in. I painted the building white. It is white painted brick. I put a new roof on it. It was an apron-style roof where you see the shingles on the front. I put in everything on, painted a few of the units and that was about it. The ones that were already occupied are pretty good market rents. I left them now they were. I think we ended up down thinking about 15,000 into the rehab that was leftover from a lot of credit as well. I financed that as well. All in all, my line of credit interest was $75,000. It was around $300 to $350 a month, and then my payment was about $2,500. It ended up being about $2,850.

What were you getting with the rents? When you started, what did you bring it up to after the renovations?

Marketers were great at the time, so I was running them the $900 apiece. I was getting $7,200 a month in rent.

That is not even a single-family home in our market. It’s like a shitty condo. I’m just blown away that I know this, but I forget. You can buy everywhere and there are so many opportunities in other states. I know you’ll probably say, “We can’t find that nowadays,” but you can find something close and similar. There are still things out there. This is like, “Get out of your own space because you need to check out other markets.”

The thing that you got a few years ago, the eight-plex at $37,000, many years before that would have been crazy expensive. In 2017, there’s no way that you would buy something at 2013 prices. In 2021, if you hold it for four years, there’s no way you’re going to buy something in 2025 for 2021 prices, maybe, but most likely not. We can’t see the future. Where are you?

I’m in Lake Charles, Louisiana. Southwest Louisiana, right smack in the middle of Hurricane Alley.

Is your storm super high there?

We had the two horrible storms in 2020, Hurricane LAURA. Insurance rates went up 60%. That’s been a fantastic year and their rates were already hot. That is one downfall.

That’s $2,800 included your insurance?

No, it didn’t. That was in mortgage only. It didn’t include my property taxes or my insurance.

Why don’t we include your property taxes and insurance? What would you set aside for expenses each month to get a true cashflow tech number?

ITF 52 | BRRRR Houses
BRRRR Houses: Negotiation is the hardest thing about real estate and the most uncomfortable thing that people usually try to avoid.

 

It was all in all about $4,500. Its true cashflowing about $2,500 a month is what it ended up dropping out in the average house.

You’re making basic $30,000 a year on a property that you put about $80,000 into. That’s 30% to 40% cash-on-cash return. That’s a pretty good deal. You still have it up to this day. Do you have property management and all that kind of stuff?

We’ve got property management. For past hurricanes, we had pretty extensive damage there, but we went in and renovated all the units totally. We expect our CapEx and maintenance to go down significantly. That’s a good offset to that property.

With all these rehabs, stuff and being done, what do you think that the property is worth nowadays?

The property nowadays with value of about $550,000.

You’ve made $30,000 some odd a year for the last years and your values increased to $150,000 or so. That is a significant wealth for both.

I got all the mortgage paid down. We refinanced at the end of 2021 whenever rates were low. We ended up pulling some cash out. Whenever I refinanced our four-plex, the cash that I pulled out of it was able to pay off that line of credit and all my down payment. The equity that we built into the property was able to pay for the down payment. Basically, I BRRRR the property I ended up with no money in it.

That’s infinite returns. You still have that line of credit outstanding. Did you do something else with it?

I did something else on it. I put another rental on it. We bumped up the value of it a little bit. We bought a new personal house with it. We are renovating it and when we’re done, we are going to refinance it, get all of our cashback. They are all going to be in our new house with zero cash. Every rental out of the box, so far, we’ve been blessed enough to be able to be in it for no cash. We’ve refinanced totally of it.

You’re doing the BRRRR strategy. You’re not really house hacking or buying whole returns for you. You’re buying distressed properties, fixing them up, adding value, refinanced and doing them again. What do you look for in a BRRRR house? Is there square footage you look for, 2 beds, 1 bath? What is your like fastball-down the middle of type deal?

I grew up in a construction background. We rehab the houses so I’m knowledgeable about rehabs and how much rehabs are going to cost. That’s been a huge bit of a factor for me. I want at least two bathrooms because I feel like if it’s a mom, dad and one kid, I want to give everybody their own bathroom. I don’t like one bathroom. All in all, I don’t want to be all-in for more than $150,000 over here. For single-family, I like homes on a slab. I do not like homes that are vinyl deem. I want a vinyl breaker, wood, exterior and things like that.

What does it mean vinyl deem?

It’s the raised houses. The houses that are not built on concrete slabs. I do not like that because they typically like to get on level. The sub-floor gets on level. It cost a lot of money to fix and you rarely fix it to what it was whenever they first built it and usually, the plumbing is located under the house, which leads to leaks and things like that all end up eating up your cashflow. I don’t want that. I like them built on concrete slabs. Vinyl and bricks are siding material. It holds up to the elements well over here. They can be pretty humid, harsh and gets a little cold in the winter. I like to keep things that can withstand the test of time.

You like the 2-bed, 1-bath, but what is your typical rehab or do you just make it a crappy property look nice? Are you adding bedrooms and bathrooms?

Whatever it takes. Honestly, whatever is going to pull the most cashflow out of it. Every deal is different. I’m not scared of large rehabs. I know a lot of real estate investors don’t like to do large rehabs. I don’t mind them. That’s why I have a good construction background. In everything I do, I usually renovate, probably nicer than it should be. I heard a wise investor once said, “If you go $10,000 over on a rehab or it takes you six weeks longer, don’t stress because in ten years, that matter because your appreciation is going to be so much further than what that little bit amount of money even meant that this is all going to be worse than one day.” I usually renovate stainless steel appliances. I go nice vinyl plank floors. I don’t do carpets and things like that.

Real estate is super forgiving for that reason. I try to tell people this all the time when we’re negotiating deals and they want to pass on $1,000 or $2,000. I’m like, “Literally in two months, this thing is going to be worth $5,000 more.” It doesn’t matter. You’re going to forget about that money in a heartbeat. I like what you said there about just doing all the work upfront so that way you have the least bit of maintenance going forward.

Mine look like floors are pretty much destructible, and they last forever like stainless steel appliances. They look at way better pictures. They last much longer. There is typically higher quality and bringing better renters. They’re going to pay more and it’s going to last longer. It’s a win-win. The only downside is that it’s a little bit more of a cost upfront, but what do you see brings the most value? Is it those stainless steel appliances, vinyl plank flooring, and making it look pretty, or is there something else that adds a bigger punch? It’s like, “Get that money back out afterward.”

You are making it more appealing to the eye. That’s what’s going to bring you refinance. Ganache is making it a lot prettier. That’s what’s going bring your value up a lot and better tenants. What I find as effective is using the same components to every property that you do and buying them from the big-box stores. You’re buying from like Lowe’s, Home Depot or something like that.

If you know you have a light fixture that breaks or something like that, you can always get it. They’re generally low cost and it’s the same across all of your properties. If you have one extra from rehab or something that might go to storage, it all matches across rural properties. I don’t want to want to renovate twice. That’s where I see the real value in real estate investing. You renovate one time. You do really good with quality materials, can go above and beyond. What’s expected? Your tenants are going to take better care of it. It’s never going to get to a point where you have to go in and completely renovate again. Tenants in a nicer property, in my experience, don’t trash them that way.

There’s a psychological thing too. When you have nice things, you want to take care of them, even if they’re not your things. I do love that idea. Is this how you scaled your model? You’ve got the eight-plex, but it sounds like you also are doing a bigger deal into that list or you skip to keeping the multifamily going?

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I’ve got that eight-plex and six single-family. I’m looking to scale up towards the back. We’re negotiating on some bigger apartment complexes. One is a 150-unit portfolio. There are smaller complexes that we’re looking at doing too. I’d like to stay in a multifamily, but I also only want to do the BRRRR strategy. I do not want to buy anything that doesn’t need rehab. That’s my specialty. That’s where I get to have my value. Rehabbing multifamily complexes that I want to move forward through and then we have a flipping company that’s doing about twelve.

I love this because it’s super synergistic. You’ve got to a flipping company. That’s how you make your income. You take your income minus your personal expenses and whatever is left over or you’re doing your BRRRRs with, which is producing more money on that same dollar, which is going to give you more rental income. It all work together to basically create your empire. You did say something earlier that I want to go back and touch on about using the same things in each house.

I’ve heard that advice before and I think that is an amazing advice mainly because decision fatigue is a huge thing, especially when you’re doing multiple at a time. You’ve got a lot of stuff going on and decisions you need to make. Having to think about what color you want in the countertops, what type of cabinets, hardware and floor sucks. I hired an interior designer to pick out a floor plan for me. I paid her $200. She picked it out. It looked great. I liked it. I wasn’t doing flips, but I was doing buying whole house hacks.

It also gives you subcontractors. It lets you know what you expect from them, typically. You can go in and tell them basic stuff. My guy does my countertops. He knows exactly what I pick. I know roughly within a couple of hundred bucks what the price is going to be. That’s why it helps me build out my cost estimates. The more I do with these general materials, the more I’m able to build my cost estimates down to almost a dollar.

I can get within $5,000 on a rehab. However, I haven’t been without $5,000. I’m probably at least $8,000 or $10,000. I’ve gotten extremely close with that. It’s getting that way with our flips as well on the same issue. A decision is a big thing, especially when you’re dealing with subcontractors the way that I am. My wife is an interior designer. She’s mentored design businesses. I pay her to do the designs on our flips so that I don’t have to design. I don’t want any of the decisions on that. I want somebody to say, “This is what looks good. This is what you need to do.” I’m like,” okay.”

How are you running the flips? What got you into that? Do you realize like, “We need some income. We want to just do some flipping because that’s what we know and where we came from?” Are you doing that with your brother? You dropped that on us. We also flipped twelve houses a year.

In the popping of that was, I was at a standpoint in my buy and hold business. We didn’t have a lot of cash to buy another property. I could have traded the financed one, but at the time, it wasn’t popping up at the opportunity. We didn’t have a lot of cash and I was sitting back here one day and I was like, “What is the company that I’m going to build do?” You can build a buy-and-hold company, but it’s generally slow.

You’ve got to have something else supplementing the income if you’re going to scale it. I’m the type that I do want to scale something big. If I’m going to single-family or multifamily, I want to own at least a few 100 units. I was sitting back thinking, “What am I going to do to supplement the income to actually buy more properties?” It dawned upon me.

My skills in rehabs, I do that with my brother. He owns half of that company with me because he’s extremely skilled in rehab too. At the time, it worked out where my brother needed a role in something and I was looking to build an actual business. We were both at that point. Not every deal works out for the BRRRR strategy. All of these deals were coming across that wasn’t going to work on BRRRR for both of us, and we were like, “Why are we not flipping these things?” This is what we do on the rehab side, except it’s just nicer materials and better stuff, which our subcontractors would like to do. We were like, “Let’s start flipping houses.” That scaled into what it is now.

Keep the best and sell the rest. How are you funding these flips? These are coming to a lot quicker. Are you using hard money?

Private money.

How did you find that private money?

We have to do our own local market in acquaintances, friends and things like that. We have three that we’re working with. We’re paying 8% interest, but in two points on top of that, which I’ve been informed, I can get cheaper money than that. That’s a little bit cheaper than hard money than I can get, but I’ve found that I can get cheaper private money than that. There’s a big gap on the ease of how easy it is for me to get it and the amount that I can get. That’s why I’m paying a little more, and I don’t mind. In the end our foot profit is usually good. Paying a couple of thousand dollars more in interest just for the ease of the transaction works for me.

It allows you maybe to do a 2nd or 3rd transaction on top of that. Ease definitely goes a long way.

I want to know that much about the property.

Are you agenting the deal or are you guys licensed? How do you do the offloading of the properties and the purchasing?

We use a realtor-local. I am licensed, but I only use it to run comps on our flips. As I was trying to find my focus in real estate and where exactly I was going to go with this to build a business, I found out that the realtor side is not for me. I don’t like the agency side, working with sellers or working buyers. I’m not on the sales side. I have my general contractors that are licensed as well. I’m totally on the construction side. That’s all I wanted to deal with. We use an agent.

I’ve heard people do that before. When you’re house hacking or when you’re 5, 1, or 2 deals a year, getting your agent licensed is totally worth it because you can make $10,000 or $15,000 depending on your market and spend maybe $1,000 into licensed. Fo you, you’re not house hacking. You want to scale an investor business. Your time is much better used at finding the next deal, running comps, finding better contractors, or whatever it is that you do is your 80/20 rule. That’s your 20%. Are you going to focus on that 20%? We are headed to the final part of the show. Are there any other parting words of wisdom that you want to say to everybody?

I’m going to leave that to the best advice part.

A recap of your story because it is quite interesting. You buy your first mobile homes at sixteen for $5,000. It makes you $30,000 over the course of a couple of years. You sell that. You and your brother bought a couple of properties that found your lap in college. You pay those off. You use the HELOC to buy your eight-plex. You realize that you’re good at the construction thing and now you’re basically taking what you’re really good at to construction, putting all your efforts into that, and that’s scaling your portfolio to the point now where you said you’ve got fourteen doors.

ITF 52 | BRRRR Houses
BRRRR Houses: If the numbers don’t work, the numbers don’t work. You pass on it, and don’t let your emotions get in the way.

 

I have the eight-plex and six single-family.

How old are you?

I’m 24.

I’ll be excited to see where you’re at when you’re 30.

The biggest thing is I did grow up in an investor family, but my dad totally left it up to us. Whenever we got the age of 16 or 17 years old, he was like, “You don’t have to do this the rest of your life. If you hate it, that’s fine. I will give you all the advice in the world, but it’s up to you to put in the work because I’m not going to work for you.” That’s the main thing you. Everything that me and my brother has done, he’s the same thing as a full-time real estate investor as well, we worked for.

The cool part is that even if you’re young, it doesn’t matter. If you go into a bank and you act ten years your age with confidence in the deal to bring it in, you want to partner with them, and you hold yourself to a high accountability standard, everybody’s going to treat you as if you’re 35 or 40 years old. It doesn’t matter your age. It matters how you are handling yourself. What I preached everybody is that a lot of people think I’m too young and no bank is going to take me seriously. How do I even talk to an agent without them thinking I’m not serious? It’s not about that. I’m not your age. It’s totally about how you handle yourself in this situation.

Oftentimes, when you act mature, confident, and know your numbers, people think you’re way older than you are. Do you get that a lot?

Absolutely. I’d rarely say, “Do you get asked your age?” Sometimes somebody goes, “How old are you on the first place?” It’s like, “I’m 24.” At the time, I worked in the bank in that eight-plex is I was 21. That’s why I was determined to make my deal. The first deal that I brought to it worked because I wanted to go in there and show them, “I know what I’m doing here. This property is going to work.” It was a no-brainer for them to said, “This deal is great. Let’s do it.” It’s been great ever since. That’s why the value of acting older than you are going in, knowing your numbers and knowing what you’re talking about is going to serve you in the end.

Let’s head over to the final four. Z, kick us off.

What are you reading?

I finished a book. It was called Into The Magic Shop by James R. Doty. It’s more of a mindset book, manifestation, being intentional in your life, and what that can manifest you. There are a lot of big things that I’m manifesting. I needed something to put me in that mode. After this, I’m starting to the book, Traction.

I read Into The Magic Shop as well because I was at an event and that guy was part of the event. We were chatting. He’s a cool and down to Earth dude. That was skeptical about his book. It’s really entertaining.

It’s talking about the power of institutional medication and what that manifests in your life. It’s so true. Whether you do it on a conscious or subconscious level, it happens in everything in your life. If you start consciously doing that, it’s like you write goals down at the beginning of the year and you’re like, “I don’t know how this is ever going to come through.” Next thing you know you find yourself in August and the goal is coming to fruition. It’s like, “How did I even get to this point?” It happens all the time. We started getting intentional in everything that you’re doing. It’s amazing what life would manifest you if you put into the universe that you want.

I have my affirmations every morning. I feel like you’re a big manifestor too.

I’m all about the magic. That’s why I was like, “I’m writing this one down.”

It definitely is all about bringing the magic into your life, being intentional on your life, and putting your wants into the universe without even knowing how you’re going to get it, how it all of a sudden, by Osmosis, starts slowing your way.

I can say countless examples of how that’s happened to me. I know countless people that it’s happened for them to where they start doing affirmations and visualizations, writing down their goals. Your second book, Traction, is another amazing book that your business will probably change because of that. We run off of the Traction in EOS platforms. I know BiggerPockets runs off that platform.

That’s why I wanted to read it. It seems like every podcast I’ll listen to in the end, they ask them what they’re reading or what their favorite book was. Somehow it’s mentioned Traction. I’m like, “I’ve got to read this.”

Second question, which is highly anticipated. What is the best piece of advice you’ve ever received?

The best piece of advice I’ve ever received was to focus on building your first bridge of success before you start trying to build a bunch of other bridges. It’s Brandon Turner that makes the reference of, “Success is like on an island. You have to build your first bridge before you’ve earned the right to start building another bridge or else you’re just going to get a bunch of half-built bridges and never make it.”

Focus on building your first bridge of success before you start trying to build a bunch of other bridges. Click To Tweet

When I was first starting to invest, even after I bought the eight-plex, I was toying around with like, “What am I going to bear down and do?” It wasn’t until about years ago that I bear down what I was going to do. I was going back and forth. I’m like, “Do I want to be syndicated in commercial real estate? Would I reach out to some syndicators and try to toy with that? That area has a lot of depth pitfalls about it. I can buy 30 single families over my life and it’s going to pay me the same amount of income. Do I want to be a realtor or do I want to be a contractor?”

That be the way that I built it. I was really dabbling in a lot of things and not really bearing down on one thing. The best advice I got was, “Think for a week whatever it takes. Sit down, slow down and think about what is going to be your path to success in this, and then afterward, you can start thinking about all the other things you want to do.”

I eventually do want to syndicate a commercial real estate and invest in hotels, boutiques or so. I’ll have so much mental clarity now that’s going to be further down the line. Once I built my success of running my flipping company to do fifteen flips a year on autopilot. My goal is 50 single-families. My flipping company would be running on autopilot at fifteen flips a year. That’s what’s going to allow me to be able to start looking in these other ventures of what I can want to do for that period of time.

That’s like The ONE Thing mentality too. I’m sure you’ve read that book. If not, it should be close to your list. It’s like, “Conquered the number one thing you’ve got in front of you and then you move on to the next thing.” I’ve heard the analogy plenty of times of the beachhead trust strategy. This is like a small history lesson. I’m not great with history, but I know like when the US stormed Normandy, they conquered one beach, and then they didn’t move onto the next beach until they conquered the first beach.

It’s to conquer and move. That’s how you build a business. You weren’t in the business. You’re scaling your businesses. You’re probably creating documentation. You’ve got your systems and processes in place. That way, you can remove yourself from the business, put someone else there, maybe give them a little bit of equity, they run the business for you, and now you can go do your bigger and better fix. Is that something that you want to do?

It’s exactly it. I was having a real problem of seeing myself into what needs to be the future to wanting it now too bad. It was like, “I want to do several hundred unit complexes and syndicate these deals.” I have to get to a point where I’ve earned the right to even do that. I have so much clarity now of I will do that sometime in my life. I’m totally okay with that. I used to not be okay with it. I was like, “I want it now.”

It was like the Dave Ramsey mentality says, “Everybody wants it and they want it now.” It was like I have to let go of that one and say, “What am I good at right now? What’s going to bring the true financial independence to a point where I’m making a lot more than I spend, and I can earn the right to start looking into these things that I want to do in the future,” as far as what I knew that single-family, small multifamily complexes, and flipping houses. I worked back from a scenario of like, “How can I build a flipping company, and then I can step out? I’ve developed that, and we’re under the process now that I can step out of this

You talk about your bridges to success island. It depends on what successful island are you going to write. Your success island of financial independence and making way more than you could ever possibly spend. If you were to take start with your hotel boutique business that you want to do in ten years, that’s like taking a big, giant leap. There’s no way that you would make that jump. You would fall in the water. Making sure you’re taking the proper steps to get there is also super big.

It’s always to just try and all of a sudden throw together a 200 units syndication. It does a 95% chance that I would fall flat on my face. I would waste two years and go back to doing exactly what I’m trying to do right now because of what I know right now. It’s like, “I’m going to learn all those things one day. I’m going to get involved with the right people and the right groups to be able to do it successfully. Right now, I’m not. This is what I’m involved in. This is what I’m very good at. It’s what my peer group supports right now where I’m very good at doing. That’s where I need to focus until I’ve earned the right to focus on something else.”

It is time for question number three. What is your why, Cody? Are you even old enough to have a why?

I’m totally old enough to have a why. That’s an interesting question too because why has definitely changed over time. My initial why was I couldn’t imagine sitting in an office for 9:00 to 5:00 for the rest of my life. That’s what got me out and got me to go deep and just buy that first deal in a month. I couldn’t imagine a life where I had to sit in that office for 9:00 to 5:00. That was my why that drove me so far.

Now, my why is traveling. Me and my wife love to travel. I would love to live a few months in Europe. That’s what makes me feel most alive. My why is to be able to travel full-time, have different people running these businesses that I can travel full-time and don’t have to worry about it every single day. That and the want to do bigger things. I definitely do want to syndicate multimillion-dollar commercial deals. I know that in order to get there, I’m going to have to take the steps that I’m at. I’m trying to take those steps as skillfully and as quickly as I can to get there as fast as I can without falling flat on my face and tripping over someone because I was trying to take a big beep that I didn’t know yet. What’s going to be in my why in five years? Let’s do this again. I don’t know. We’ll find out.

It feels like your whole life is one step is preparing you for the next big thing. It’s a great way to go. Last question, would you rather have no nose or no arms?

I think I would rather have no nose. I can live without smells forever rather than live without being able to hold anything. That would be tough.

You have to breathe in and out after your mouth at all times.

Can you imagine all dry your throat would be all the time? I would rather have no nose. No arms would be difficult.

It was weird when you said you had to breathe through your mouth because I was like all no nose until then, but I would say the same. I was thinking you could still have a nose. It just wouldn’t smell. A lot of people have that.

Where can people find out more about you if they want to follow your story?

I’m on Facebook, @CodyCaswell and on Instagram, @CodyCaswellRealEstate. We’re looking at maybe doing a YouTube channel about rehab because the hottest thing in America is renovations that we’ll be doing everyday. We’re trying to take advantage of that trend going on. Instagram is probably the best place to find me.

Do a little DIY ghetto show. People love that. You could even just do it on your stories to start and then make it a YouTube. It’s how all the bachelor people become famous.

ITF 52 | BRRRR Houses
Into the Magic Shop: A Neurosurgeon’s Quest to Discover the Mysteries of the Brain and the Secrets of the Heart

It seems that way. I’m getting better about posting on my Instagram. I definitely get with the before and after posts, but I’m getting better about my stories. If you ever want to follow along with what we do, see some of our work, we do some cool stuff down here. I usually post the numbers. I like to educate. I always reply to every DM. Shoot me a DM.

Thanks for coming to the show. We appreciate you having you on. You’re crushing it and I’m excited to see what your why is in five years.

Thank you for having me. I appreciate it. This was a lot of fun.

That was Cody Caswell, everybody. Z, what did you think of Cody?

I liked it. Anytime we talk about magic and manifesting, I’m all in. I love that there was a big piece about that. That is a big part of it and it reminded me. I fell off my Miracle Morning wagon, and I need to get back on. I love how much you read, and maybe you’re just a much faster reader than me, but I do not read an hour a day. How much are you reading?

I read 30 to 40 minutes every morning. I am an extremely slow reader.

I like to visualize the whole thing.

I don’t know if I do that, but for some reason, I go on Amazon and my Kindle says like, “You’ve got six hours left in the book.” It’s calculating your reading time left. It’s like, “8 and 8.5 hours.” I’m like, “Am I really that much slower than everybody else?”

That makes me feel like it’s doable. I love how much you read. I think it’s such a valuable thing in this industry. I read a lot too but not like you. I definitely got to keep going with it.

Reading is super fun. It’s just consistency with it. I didn’t feel as good when I dumped my Miracle Morning every day. Not from a sick perspective, but I feel a little bit more sluggish when I do it. Cody had some great points. He seems like an avid reader. He’s got his lot of stuff going and he understands that he doesn’t need to get into these great big things before he’s ready. He’s going to conquer this one business, beachhead, build that bridge success island, then go and build the second bridge. I love that mindset.

“You work once and get paid forever.” I wrote that down from the beginning because I love that quote.

The best piece of advice he has ever received. Anything else before we head out?

No. Let’s just pray that we’re well next episode and we’re not dying of COVID but think we’re okay.

I feel like I’m on the upswing. I hope you are too. If you could please leave us a rating review on Spotify, iTunes, or wherever else you can, it’s greatly appreciated. We do try to look at them and incorporate any feedback given. We love to see that someone’s reading to us on the other end. Thanks so much for reading. Z, I’ll see you in the next episode.

See you in the next episode.

 

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About Cody Caswell

ITF 52 | BRRRR HousesCody Caswell is from a third-generation real estate investing family, and he bought his first property at 16(!) years old. He hated real estate during his college years but found his way back after interning as a commercial insurance broker. Now, he is 24 years old with a residential contractor license and 14 units under his belt. Cody learned at an early age that he could create his own wealth. His first property was a mobile home which he purchased with his life savings.

 

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