How to Build a Rental Property for Less Than You Think
Ever thought about building your own investment property, but worried about how much it could cost? In this episode, we talk with Chloe and Valerie, two Factora women turned real estate investment partners, who are proof that building your dream rental property may be more affordable than you think.
What you’ll learn:
How they formed their real estate partnership
How much money they had to bring to the table to buy the lot, design and build
How they designed the property to create 6 different rentable spaces out of 2 units
How much they expect to cash-flow in the first year
Tips for women looking to get into real estate development
Featured in this episode:
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Hi. This is Allegra Moet Brantley and you're listening to the coffee and coin podcast where women talk wealth. I'm the founder and CEO of Factora, a company on a mission to lead 1 million women to 1 million in net worth. Because when women have more money, we'll have more power to be the change we want to see in the world. If you're ready to hear real women share their real numbers and investment journeys and have a sneaky feeling you should be doing a little more with your money, you are in the right place. Just sit back, relax and turn me up.
All opinions expressed by Team Factoria and podcast guests are solely their own and do not necessarily reflect the opinions of Factorio Incorporated. This podcast is for informational purposes only and should not be used as the basis for investment decisions. Team Factoria. And podcast guests may maintain positions in the securities or investments discussed in this podcast.
Welcome back to another episode of copy and coin. I have Chloe and Valerie on the podcast with me today. Hey, Ah ha. And they are calling in from Austin, Texas, where I'm also based. And they are here to talk about a real estate investment that they went in on together. That's also based in Austin. And it's live and it's a real thing today, right? Oh,
yes, it is. It is live. It's launched. It definitely feels like you know, we've been working on it for, you know, a year and a half. So it's really nice to see it finally fruition?
Well, it's been really awesome to follow along and watch it come to life on the socials. Let's go back a little bit so that we can prepare our listeners for this tasty treat of how to get into a real estate partnership with someone and bring a real estate investment property to life. So I know you guys because you both took effect for a while circle at different times. I know Chloe took hers very early on the company started at the end of 2018. And she was an early adopter in the 2019 in the spring, and then Valerie took hers later in 2020. But I believe Valerie if I'm not mistaken, you've had me come in to Facebook before you even ever took a well circle.
Oh, yeah, Allegra. I've been following your journey. I think since you first got to Austin, I remember taking your negotiation workshops. So I have been following you for a long time.
I love it. Well, that was so great to be invited into Facebook really early on, in fact, for a days, and so I'm very happy to be reuniting today. So kind of before we get into the incredible wealth building journey you guys are on today. I just want to open it up to ask a little bit more about what was your relationship with money and investing a few years ago?
Yeah, I can start um, so before I guess well, circle. So let me go back to I am at Austin. I moved to Austin in 2017 to go grad school. I was in oil and gas and Houston hated it. And I was like, I want to pivot. And I literally had no like desire, I guess. I mean, you remember this, like I was gonna buy like a condo maybe right. And I had like literally zero desire. But like when I first moved to Austin and I started sort of seeing you and other people who were doing real estate. Austin was already a hot market then. And then I I looked at them and said, Wow, like they, you know, I have a knowledge job. So my background is I'm a data scientist, and you know, other people, you know, on there, we're having different kinds of work there. We're still you know, buying these houses and renovating it and having all these creative strategies. And I was like, that's so cool. So I think after we I had that well circle, the OG wall circle. You know, I went on to buy a single family house that I renovated entirely and how sad and I just don't know if I would have had that if I didn't, you know, had the chance to be exposed to other people and other people's sort of wild strategies and knowing that that is possible. So yeah, I
feel like my new favorite term is possibility drop. And I've heard that phrase, but Brooke Castillo uses it and I'm a big fan of her work. But she says that when people do things or say things in your world, it suddenly becomes a possibility. Ready for you. And so you're kind of talking about, Chloe that you saw other people doing it. And you're like, well, I could do this too, which I love because I remember our first phone call. Y'all really close in oh, gee, because I used to take phone calls with everyone that was going to come into the wall circle. That stopped in spring 2019 Because I was on the phone for literally three months. But I remember you saying, yeah, one day, maybe I'll own a swanky condo downtown. And like, that's totally fine and great. But that seems like the only vision you might have for real estate. So it has been really incredible to watch how different real estate turned out in your world. And when you talked about that first house you bought and the house hacking? I mean, watching you do weekly projects, I mean, what's it called when you put not decals on the wall, but when the wall goes from flat to having like the nice little, like picture frame molding and you're like putting in your own crown molding you are piling up, like doing it all. I mean, I have never done a project like that. And I've done a lot of real estate investing. So you were just really hands on and getting it done. So that was so cool to watch.
Yeah, I mean, yeah, I think it's a it's a good place at the good time that I guess I found myself and I think having other women like you're totally right that possibly Trump, like I would not have thought that I could do what I have done and what I will do if I didn't see other woman do it, right. And specifically women because especially women of color, because I just never thought that people that look like me, especially what as a woman, like I didn't know this was possible, right? I didn't know that I could be you know, tiling backsplashes in this kitchen. You know, I didn't know that I, I could use this chop saw to make, you know, accent walls and all this stuff, right? If I didn't see other women do it honestly. Right? I wouldn't have done it.
It's, it's exciting. Because even when you said, you just now said, I wouldn't have been able what I wouldn't have been able to do what I've done, or what I'm going to do. So I can't relate to dig into what you've got planned next. But first, I want to hear a little bit from Valerie, what was your experience, either with money or wealth building, or even real estate a few years ago?
Yeah. You know, a few years ago, I think I had a lot of limiting beliefs around wealth building, and you know, and real estate as a vehicle for wealth building, it felt like it wasn't applicable to me, it felt like it was applicable to people who are already wealthy, or, you know, were wealthy older men, that's who it felt like it applied to. And I think, even kind of moving through that I saw my first real estate purchase was was a condo as a turnkey condo. And going through that process already kind of shifted me from beliefs that I had, where you had to buy property with somebody else, you were buying something to, you know, kind of live in forever, and you know, buying, you know, a condo, I knew that that was not going to be my forever home. But just going through that process, I think kind of opened up, it started to kind of open up the door to, you know, to thinking differently than I had in the past. And once I, you know, kind of went through my first real estate purchase, that's when I got connected with, you know, the factory community. And I think again, being able to see other women, women who, you know, were coming from different, you know, backgrounds, different careers, making these moves, may made it feel like wait a minute, it could be applicable to me, and I think it also opened, it opened up, you know, could have things that I never thought about I thought, okay, you had to buy a property had to be 20% down and it was like, there's this whole world of things that you could do. There's all of these different financing strategies, there's all of these different opportunities that just we're not, we're just not, you know, kind of in my eyesight. So then getting connected with the community. I think that's where I saw other people doing these amazing things. I was like, wait a minute, I could be doing this too. So then my next, my next real estate purchase was in in a partnership, it was a bungalow. And, you know, we found out about this homestyle renovation loan, and, you know, renovated this this Eastside property and going into this property. We went in with a very investment focused mindset. So we knew we wanted to short term rented for, you know, you know, for weekends when it was really popular time in Austin. So we were already thinking about how do we house hack, and that was a completely different perspective than kind of the perspective that I went in buying my first property, which is the
condo. So I heard you say partnership, and I just want to dig in there because I feel like we need different versions of the word partnership when you initially set it. I took it as I used to think that you bought a property with someone you were in a romantic partnership with. And then when you bought that second property, was that with a partner of that sort? Or was that with more of a business partner? Well,
that that's a great question. So while it was my romantic partner at the time, we went into it very much with with a mindset of this is an investment we're going in as 5050 partners. So even though, you know, that was my romantic partner at the time, the way that we approached the investment was very much a business focus.
Okay, so Chloe had one property, Valerie had two properties before you guys came together on the property that we're going to talk about today. Right? Yes. All right. So how did it go down? Talk to me about how you two got connected and decided to create a partnership?
Um, yeah, I think it I'm so we it was during pandemic, um, you know, we were definitely locked down in, you know, open house was having an investor woman investor webinar, I don't even remember what the topic was at the time. But all I remember is we were doing like, intro in the beginning. And I was like, making notes of like, all the people that I was like, okay, cool, because like, I was just like thinking about who I want to partner with. So I went into that mindset. And then, you know, I sort of chatted with Valerie, while that was happening, we got connected. And then, you know, that's how it all started as a surfer, the chat function of the zoo on webinars.
So shout out to open house Austin, just because that term can sound very generic Open House is actually a brand and Austin that really cares about education for especially women to be able to acquire properties, both personally or through partnerships. And so back to her at Open House are very connected brands. Because ultimately, we both care about financial freedom for women, open houses, focusing on doing that through real estate, and Factorio is focused on doing that through all of the different asset classes to build wealth with. Okay, so you guys met on the zoo, as all good friendships start exploring the pandemic era. And you took notes on each other, and then how did you actually meet up and, you know, get started?
Well, so So Khloe reached out to me, and later, I learned that she had reached out to a few other women as well. So she got stuck
on that meeting.
Exactly. And, and I was also kind of in in an interesting place, I had just kind of decided to, I was in a partnership, to move forward on a property and, and then the pandemic happened, and then that fell through. So I was kind of primed. I was, I was ready. I was looking for kind of my next next opportunity. Since, you know, kind of the, the one that I was that I was in fell through. And, you know, and and I think when, when Chloe had reached out to me, I was kind of like, okay, great. Like, I'm already in the mindset that I want to make some
moves out of it. Okay, and then how did the How did you formulate this partnership? And what did it look like? Yeah, so
we, I mean, we kind of like I think we kind of dated for a while in terms of like, dating your business partner. Right? So we actually had a recurring Zoom meeting every week, just to see right. And I was actually having zoom meetings with other ones who, right because caster net wide Right. And, you know, at that time, I was actually running. So I had some idea of like what we wanted to do on like, in in a sense that I was running different numbers, because you know, because my background is pretty analytical. Like I love running numbers. And so I already had, like few things that I wanted to do. Right. And so it was just a matter of seeing whether our visions and values aligned. And do we have, you know, same short term sort of alignment as well as long term goals that we have a chat like, you know, similar to each other. And then so we started talking about that I actually have like a list of questions that I asked all my potential partners. So we were going through that going through different scenarios and saying, you know, what could possibly be right and then, and then, you know, Valerie and I just really connected right? We have a really similar background. We're both You know, I'm a first generation immigrant. She's also she's a second generation immigrant. Right? And, and we both work in tech. And so we had flexibility on, you know, all of that, right. So more and more, we got to know each other. We were like, Okay, I feel really comfortable. I'm going on this life journey with her, right, I know that if like, something happened, she's not just going to abandon me and then run away to another country, right? She's going to be there and how my back and we're going to support each other going through because, you know, when you're actually investing in real estate, you know, this, like, there are gonna be there will be hard things that happen, right? There will be challenges, there will be one of those nights after midnight saying like, Why the hell did we do this, or I hated and, and I had a, I had a pretty good idea that, you know, whatever happens, like, we'll be able to figure it out together. Right? So that's what happened. Do you want me to go through like, actual like, step by step of like, what we did in order to? Absolutely,
I think listeners would absolutely love to know, the step by step.
Yeah, you want to? Yeah, I also want to add, you know, is clothing, clothing, and I were, you know, kind of dating to see if we were a good business partner fit. You know, we were really looking at what strengths do we bring to the table, I think that there's things like, you know, kind of, like the time and experience and talent, right, but so we were kind of looking into the talent piece, like, you know, my background is in program management, you know, close background is in data science, so we were bringing complementary skill sets to the table. And, you know, and kind of fast forwarding to, to now, you know, I see some of those strengths coming out, you know, as well, Chloe, you know, it was like, I never want to engage with guests ever. And I'd love to be able to connect with the guests directly. And, you know, and, and kind of help them, you know, throughout their day. So there's things like that, where you kind of, you kind of know what needs to kind of happen throughout the process. And you're starting to recognize how each person can, you know, really contribute in their unique way, and complement the other person throughout the process. Because, as we know, it is not a quick turnaround, it is an ongoing, long term process to be able to build something from scratch.
Totally, it's like a pre relationship, because you guys are together before you ever get to the products are being constructed in your case. And so I guess I want to hear a little bit more about what was Chloe's vision that you agreed to or got on board with or, you know, made your own? What, what were the numbers you were running? And what was your ideal for this investment? Yeah,
so I think it's like, it might be good to just like talk about, like, the my thought process behind it. So while the pandemic was happening, I was running numbers on different scenarios, meaning like, whether like a flipping would make sense, right, like whether, you know, short term rental Magneto buying something renovating in, you know, Burr strategy, and then making into short term or long term rental makes sense, right? You know, investing in commercial real estate, would that make sense, right. And I was running through all of these numbers, but I knew that I wanted to invest something in Austin, right, because I believe in the economics of, of Austin as a city, right for the long term. And I was running to all of that, I think when we met I that we kind of narrowed down or I kind of narrowed down to like, okay, we're either going to renovate, we're not going to flip, but we're gonna renovate and then turn it into some sort of like a midterm or short term rental, or development, right, because I've met couple of developers before and I was like, huh, like, I feel like, you know, you're saying seems kind of hard, but I feel like higher barrier to entry. But once you actually learn how to do it, like you, it doesn't seem impossible, right? And, you know, I saw woman developers, I was like, yeah, if she can do it, like, I can totally do it. Right.
I think one one other thing to mention here too, is that, you know, a lot of times when you're looking to renovate something, or you're coming to an existing structure, I think we always wanted, we knew we wanted to optimize what was available, right. So whether it was going to be adding on a second unit, or, you know, kind of creating a unique layout within an existing structure. But when you are limited by what exists already, there's just, you know, it's just, it's just more limiting. And I think what was exciting about the opportunity to build something new is that we could really build something from scratch, we could really take something and you know, use the space that that we have to you know, kind of create the the most intentional strategic layout to optimize as many components of you know, kind of the, the property as possible, right, like thinking about how do we optimize, you know, any exit strategies, any cashflow strategies, any equity strategies, and when you're starting from scratch, the beauty is is it's it's a canvas to be able to develop something that really will optimize for all of those.
I love that So basically, the big reveal is, this podcast is interviewing to Austin bass women, real estate developers who built from scratch a duplex. So tell us how you did that.
We, you know, I think when when we realized, you know, kind of, well, actually, I'll go back to the actual property that that we identified, when we identified the property, we were really looking for the right location to because location for us is everything, we both live in the east side, and we knew that that is going to be, you know, kind of the area that's going to see the right growth, there was the right comps in order to, you know, kind of get us to where we wanted to be from a financial perspective. And, initially, we found a property that actually had a structure on it, and we were hoping to renovate that existing structure and then build, you know, a second structure in the back. But once we actually, you know, brought out, you know, some some builders and contractors to take a look, they said that, unfortunately, that property was not worth saving. So, then we decided to go this route, where we were going to not just develop a second unit and renovate the first but to develop the entire entire property, and the entire lives. And then we also had an interesting story of how we actually, you know, kind of got the property under contract. So clearly do you want to?
And so, we, we were searching, and we got one property on each side under contract, right. And, you know, during this time, you know, you remember, during pandemic, there's like wildfire of people just trying to buy any and all properties, right. And so when we're actually under contract, you know, you have your, you have to get your cert surveys and all the due diligence, like, you know, within inspection period, and we just couldn't not get any surveyors to come out. They were like, we were like, literally offering like, we'll pay you 1000 More, and they're like, no, like, we're backed up. So anyway, long story short, it fell out of contract. And we're like, Okay, let's look for another one. This wasn't meant to be. And then a couple, you know, two months later, the agent came around and say, Hey, some developer, not like some other developer, like, took the land. And then the sellers really hated him. Like, he was just like, not a good person to deal, you know, do business with, um, so she was like, you know, we'll, we'll give you 50k lower if you want to come back and buy it. So we're like, yes, please, you know, so we actually got it for 50k, less for the lot. And then by this time, we already had, you know, we've been vetting all of the team members, you know, are the team star team, right. So, you know, we already had our architects and your art builders and everything, as well as financing lined up. That's another story, actually. But yeah, so we were like, Okay, let's start. Let's start getting permitted. You know, start the farming process, because that takes a while. And then let's, let's get to building.
So just to confirm, during the wildfire of COVID craze, everyone trying to buy properties, bids, calf buyers, left and right. You guys managed to get your property after it had fallen out of contract for $50,000 less than your original offer. Yes, congrats. That's amazing. Wow. Okay, I think so many women want to understand a little bit more about how to finance development deal, because that's not the typical thing that we hear about. And actually don't think I've ever had anyone on the podcast, talk us through it. So we'd love it if you would.
So, you know, financing. A brand new construction was kind of outside of the plan that we initially went in with. So when we realized that the initial structure was just not worth salvaging, we really had to basically rethink how we were going to finance this deal. And like shout out to Chloe, she called probably 100 lenders to be able to get the, the deal or kind of the terms that we were really looking for, and include, if you want to share more about
Yeah, so because we're first time developers, a lot of times what happens is they are looking for track record, right as be the lenders, you know, they only have land as their collateral and nothing else right? And then they're lending you close to a million dollars, right? So it's a lot of money. And what they want to see is you know, whether you've done it before or not right? So I basically had to call you know, we're on 100 banks and like two minds, and just really get good at pitching like pitching our story pitching our, our layouts and our visions and you You know, on our, the fact that, you know, we were we have a high confidence that we can pay this, you know, our mortgage and in the back end. And you know, you get used to getting say no to right? And then you just keep going at it until someone says Yes, right. And then someone did, right. So we were able to leverage both of our W tos and our assets on and basically get a lot loan on which so what happens is, when you buy something that you want to build, right, it has a structure and if that structure is considered inhabitable, which I think in our case, it was by the bank from the eyes of the bank, then, you know, you have to get creative, right. And then so for us, we kind of found a way out through the lot loan. And then what actually happened was they were like, Okay, we have this product. So you know, once you have a lot loan, you have a lot loan during the permitting process, right. So you want to get all the way permitted through the permitting. And then you get a stamp of approval from city of Austin saying, yes, you can demo and you can start building. So during those times, you paid this interest only loan for your lot, right? And what happens after is that once you have the permit in hand, the bank comes back and say, Okay, we're gonna have an appraisal based on your float, you know, your plans, right, your floor plans, right, your architectural drawings and all that. And then they basically before you even break ground, they are going to you know, appraise, you know, the future value of the property. So, so basically, what happens is, once you have this, you know, completed value appraised, then they, you know, sort of reverse engineer and say, Okay, this is how much more money that you need to put in, in order to start the construction loan, and then and then permanent loan after, right. So this bank, the cool thing about what this bank had was, they have a one time close loan, which basically combines construction loan and permanent loan together. And it's only I think, possible, because we're doing it under our personal name, I think, but you know, check with your banks to see what what kind of products that they have. But the really cool part of this strategy, because I love talking about numbers. And this is like, I think it's so cool. Because the value that it got appraised like when it's all said and done are like final product, right? Was a very high, like, it's so high to the point that whenever they did, you know, say 80%, LTV loan to value, it was over the amount of, you know, all the costs involved. And I don't wanna make it sound really complicated. But it basically it was praise very high that we didn't have to bring in any more money other than 15% down for the lot. And Lot was very cheap. Alright, so I think it's so cool, because you have very minimal amount, way less money than you need for, say, renovating a house, right? And then, you know, and we got a property that's, you know, worth a million euro.
Okay, and so let's wait, let's let's talk about a little bit of those numbers, because I'm just trying to imagine from the listener the questions that they might be having, which are some of my own because I am unfamiliar with so when you're saying the lat loan and the permitting loan, are you saying those interchangeably? This is more built?
Yeah. Yeah. Okay. Yeah. So there's two separate loans, there's the lat loan to actually acquire the lot. And then that transitions into that construction loan, and then the permanent loan, however, with our product, that construction loan and the permanent loan, were kind of a one, a two on one deal, and
I've used the same financial institution for all of those. Okay. Yes. So then talk to me numbers, how much was the lot? How much did you secure the lot for and then what did the duplex appraise for that, where you only had to bring an additional 15%
So we we acquired the lot for 400. And we had to put down 15%, which is between the two of us $60,000. And then the appraisal of our plans, so that what it would be appraised that once it was all completed was 1.2 million. And, and, again, because kind of what we needed to pay off the lat loan and then to pay for the construction, there was enough difference there that we really only had to pay, like we only had to bring maybe a couple $1,000 When we converted from the lat loan to the one time closed construction loan, and the other night Secondly,
they were looking at the future value of the house being so high in value that they just convert that loan without you needing to put more money down credit amazing because I think a lot of people think it's way too hard to get started with the developer to develop their own property, because that feels like it's going to just be so much more outlay of cash than it would be to buy an already existing structure. So I feel like you've already done a possibility job, or this. For these listeners today,
I'll add one more thing is throughout the the time of the construction, you're only paying interest on the amount of money that you've taken out from that total amount that you have been allocated. So there are carrying costs, because you are paying monthly interest throughout the course of on the construction. So in our case, that was about $35,000. But again, that is over the course of a year at half that you're paying that amount. So that's not kind of a one time, one time drop, like you would with the downpayment.
And so that was a monthly fixed amount that you were paying on that interest.
It was a variable amount based off of how much you were actually taking out. So the more construction that got completed, the higher your interest rate was. Got it on for not the interest rate, but the the monthly payment, right, the more you took out, the higher your monthly payment.
Got it. Okay, and then. So tell us a little bit more about what that rate was. Which rate, if I'm understanding this correctly, there was a variable rate as well on how much you're taking from the overall loan, and paying off? Like, how much is that? So if it's on a fixed cost? How can people plan for that?
So it is it was a fixed rate, but the monthly payment was variable based on it now? Okay, money, right. And I think this is, this is really kind of like, the amazing part of it is we were able to secure our not only, you know, construction loan amount, but also the permanent loan amount, all at the same time. So if we would have waited a couple of years, or you know, like, if we would have waited another year, you know, you'd have to convert to a permanent loan, then, you know, obviously, the rate would be much higher. So we were locked in. Now, I don't clearly remember what the exact rate
is. I mean, I know where we started at, like 3.5, this is unheard of right? But like we're able to lock in a really low late, right, because it's a one time close.
So if I'm hearing this correctly, it's a little atypical, that you were able to get both loans at the same time, but you found a financial product that allows you to do it, most people are getting the first loan, and then when it's built, they're converting it. And so then they are having two different mortgage rates because there was the rate at at the first loan, and then there's a rate at whatever the market is doing for the second loan. So in your case, it would have been a lot higher if you hadn't locked in all at once. Absolutely. Okay, what's that financial institution? Y'all give us the cast the deets?
Yeah, no, yeah, first thing I did. Um, they have both personal and commercial. And if you, if you guys like reach out to me, I can connect you to the actual lender that I did business with. She was very pleasant to work with. But yeah,
amazing Hot Tip. Okay, so then talk to me a little bit more about how you structured your deal. I, you all know that a strong partnership is going to include time, talent and money. Sometimes you have a portion of all three, sometimes you really just have one, and you're looking for the other two. So what did you all bring to the table to get this deal done?
I think in this scenario, we really brought all three to the table. So we had the capital, you know, we we had the time and then he also had experience with renovation and real estate. However, we really wanted, we wanted the to be able to split the risk and the responsibility across to people, right. So sometimes it's not about finding, you know, kind of a gap in one of those three, but it's being able to come to the table with, you know, similar experiences, but knowing that you want to, you know, kind of split the responsibility and the risk in a project like this,
ya know, that makes a lot of sense. So, what does your working relationship look like now that the property is here who's doing what pieces?
So Valerie is definitely the the go to property manager. She's like, everybody loves her. People have really great things to say about her. I did not enjoy I property managing. And so I take care of all the backend stuff. Applied Technology, you know, tax accounting, revenue management, so a lot of pricing strategies, you know, things like that. And then we, even now, I mean, we used to, like work every day together, basically. But now Now that this project is over, and they're sort of running on its own, we tried to meet at least once a week, like on Zoom, just to go over our pricing strategies and, you know, help, you know, brainstorm ideas, marketing ideas on how, you know, we can expand our customer base, what other offerings we can have within our poverty, because we have other visions of how we can support the community.
Okay, well, this sounds very complementary. It sounds like you've got front of house and back of house, that's kind of how my husband and I do it, too. I buy and do all the kind of customer facing elements, and he does all of the management, make sure the bills are paid credit checks, etc. We are mostly long term renting at this point with our properties. But okay, you built a duplex. Tell us about it, what is it doing? What's your vision for it, and any numbers you can share?
So I'll talk about, you know, kind of this vision that we had and what it actually kind of ended up as so we, again, we really wanted with a mindset, what were we wanted to to optimize, so we have this a&b unit. And what we designed it, we wanted to make it work really great as to single family homes, because that is what we would, you know, kind of need for to get the highest value than the highest ARV. But we also wanted to give ourselves the flexibility to have more than just two doors. So we created a layout that can be closed off and opened up to create up to six unique layouts. Between the two events.
Well definitely tell us more about that, I It's hard for me to imagine how two single family units on the same lock can actually be six different things.
So we added additional exterior entrances to the second floor into the master suites in both units. And then we also built out the attic and the front unit. And then that's an additional space. So the front house is a four bedroom, four bath, and it can be so it works as four bedroom four bath, it can also be the master suite can be closed off and be rented separately. And then there's also another way where it can be closed off and the master suite and attic can be rented separately from the rest of the house. The back unit is a two two, and the master suite can also be rented out, closed off and rented out separately from the rest of the home. And then we can also rent out both units together for a really great retreat or a compound experience.
I love that. Okay, so what are you guys currently renting it as? I mean? Is it available on Airbnb? Can we all take a look at this property?
Yeah, absolutely. Yeah, we're live on Airbnb. We're also live on peerspace. If anyone wants to book it as a event space, or retreat or anything else that you might want to use this space for.
So you're pretty much focused on short term rentals. At the start of it.
At the start of it,
yeah, have you in at
all? Yeah. And, and again, I think when we were just getting into this partnership, you know, COVID was happening and things were really uncertain. So we wanted to create as many options for ourselves as possible. So we wanted to kind of make it work for long, mid and short term rentals. And by creating these different spaces that can be opened up or closed off. It gives us like, so many different options where we could long term rent one space, mid term rent, another short term rent another and you know, kind of play around with, with all of those different options. And then, and then there's also the potential for an extra door as well. So we have a pretty generous sized carport, that is is when we're ready, we could convert that into a studio as well.
I love it. So how's it going? How when did it hit the market? And how many people have you had coming in and have you had anyone using it for your vision of beyond just staying there more so doing retreats or events?
Yeah, so we met live at the end of February, just in time for South by and we're able to book both units throughout the duration of South by so that was a really great win and we can didn't need to have guests in the space after. So that's, you know, that's one strategy. And then we just had our first educational event at the property, we had a panel, where we had women investors talk about short term rental strategies, vacation destinations. So that was our first event in the space. And then coming up April 12. We're partnering with a local wine, Wine Experience, business called snooty to have this really great sip and savor event where we have local female owned businesses, private chefs, DJ, local vendors, that are going to be on site and the property. And that's kind of the other, you know, kind of experiment for how we could use the space to really, you know, allow us to highlight local businesses give them a space where they can bring their own communities.
I love that, I think, I don't think many people think that developing a property is something that they can do. And then to hear you guys have already done it itself. In its life, you've got four bedroom house in one unit and a two bedroom and the next, that you can also use it to bring together the community or rent it to local companies. That is such a possibility job, I mean, that the theme of this episode, so talk to me a little bit about the wealth building opportunity off of owning this, what is the cashflow that you're currently making, or I know, Chloe's got some models on how to optimize this to be making, you know, more than you are at the start. So what does that look like in terms of a return on this big investment? And and how much you guys pay? What are your carrying costs today now that it's built?
Um, yeah, so I mean, I think underwriting all underwriting should be conservative, right? And so we're taking more conservative raw, especially now that sort of Airbnb is, you know, the market has cooled on, you know, compared to last two to three years, which was, I mean, that was, I think, abnormal, to say the least, right? I also have, like, a beach house as a short term rental in Florida. And, you know, it's the same way it was doing, you know, last year was crazy, right? So I'm looking at conservative numbers, I think, you know, we're probably aiming for 10 11,000 a month. So let's say 120k a year, our carrying costs, our mortgage is around 4900, property tax insurance. I mean, we haven't gotten 2023 one yet, but we're going to probably looking at probably like 1000, for those general upkeep, like utilities, lawn care, that kind of stuff around 500, that could include capex, and so we're probably looking at around net net revenue of like, 3500, or 4500 on mine, as a profit, and then those are averaged out over over the year. And then, you know, I think that is excluding any of the sort of, you know, events spaces, or when we're partnering with other local, you know, entrepreneurs having this space as, you know, a venue, right? You know, it's sort of not having any of those sort of extra stuff, once we hit sort of, also, another thing that I want to mention is like, you know, short term rental is a very seasonality business. So you're going to have a, you know, a busy season, and you're going to have a slower season, right, even in the market like Austin. So, like, one of the ways that we're accounting for sort of the slower season is, let's just turn one of the units, like the back unit into a midterm rental, right? So that we know that we are guaranteed, you know, rent a certain revenue, right? Whether that be okay, if we can rent out the back unit for 3500 a month, like, that's great, because we don't have to worry about, you know, vacancy, it will just be our attitude, our bottom line, right. And then we're also like, continuously, like working on how we can serve our community what they need, right? If they, if they say, Hey, like, we want a, you know, a retreat space where we want both of the units, but we don't want to pay that, that high of a cost, right? By renting out separately, we'll have you know, one listing where it's for both units, so that you can rent it all out at this counter price so that you can run your retreats for example, right? So we're welcoming, you know, any feedback on how you guys want to, you know, the audience wants to use this space, right for for your business. And we want to make sure that we you know, we were empowering, you know, local businesses and working with them and partnering with them to figure out so yeah, That's
so what I'm hearing is that you guys are in a conservative projection for your first year, you said making after costs about 35 to 4500. So let's call it 4k. And then so that's 48,000 a year, I just want to really put that into context. Because before you're doing any of these additional ideas, and you're clearly willing to get very agile and creative to to consider this investment of business and to find other ways to advance the revenue, which is great, big proponent of that. A lot of people who go into business do not make around $50,000, in their first year of business, whatever the business is, and I can tell you that from firsthand view, from starting my own business from a lot of different entrepreneurs who are either starting businesses or buying businesses, so effectively, what you're saying is, you developed a one real estate property, that is a business in and of itself. And the projection conservatively is to make $50,000 your first year as business owners.
Yeah, my head I. Yeah, it was pretty it sounds
pretty good audience, huh. So it took you it took you how long from meeting each other to opening the doors in February.
Oh, my I'm meeting each other when they meet Valerie. I think
we met we must have met at the end, like summer or fall of, I think summer of 2020.
And we actually get the loan and start on the property.
So and then we closed on the property in early 2021. Okay,
so that's not a lot of time. I mean, early 2021. And you're up and running early. 2023. It's pretty. It's pretty amazing.
I mean, yeah. And and, you know, I'm usually because we we actually built it at the worst time possible. Right. So when we started building, it was there was supply chain issues, there's labor shortage, there's everyone anyone was trying to buy house and rent, you know, renovate houses. So the you know, and materials shortage, like backlogs everything was in
the hot when Wood was the Jeff online was if you've got a bunch of lumber, you're a millionaire. Yeah,
that was definitely that time. Yeah, and so it took us longer than it would have been. So you know, you know, remember that if you want to develop now, you're probably will be able to evolve faster than what we did. But we're still happy with our, our timeline and our, you know, product that we we create a right, at that
instant, I also just just want to say that, you know, kind of building the building the property, you know, was kind of one piece of it. But we really had a hand in every single piece of the experience of building the property from working with the architects to picking out every single, you know, fixture and piece of tile and grout to actually completely furnishing it as well. So we were really, you know, we wanted to be as hands on as possible, so that we could really understand what the process was. And then, you know, kind of been with the idea when we scale, we would know what it took work each step along the way. And then we could better find the right vendors to outsource. Okay, I
heard the magic word scale. are you guys planning on doing this again, with all your newfound knowledge of how to build from scratch? Yeah, well,
right now I'm building my second property or a second project. I have another investor that I work with. But with me and Valerie, we're also welcoming any partnership, if there's anybody who wants to sort of, you know, develop, you know, residential development, and, you know, sort of use the same, you know, all the knowledge that we've learned so far, and all of the teams and trades and, you know, suppliers and vendors that we have on our Rolodex, if you will, yeah, that we're very open for partnering with anybody. And what are you looking for in
a partner? Do they need to be Austin based? Or what can they add to this partnership?
Yeah, I would say like capital and W two, probably. So a quick announcement. I actually don't think I told you this. Valerie Allegra, but I went full time into entrepreneurship, you know, as of two weeks ago,
now. Whoa, congratulations. I did not know that. Yeah.
Yeah. I mean, you know, I can always go back to being in tech, right being a data scientist. But yeah, I am doing this full time now. Along with other projects, so yeah, I have more time to develop, you know, devote to, you know, more developments and other projects.
And so basically, would you consider yourself a full time developer? Is that the entrepreneurial pursuit that you're on?
Yeah. Development and other things in commercial real estate as well.
That's amazing. Wow. Okay, what, uh, what a nice conclusion that you went from, you know, wanting to maybe have a condo one day turnkey, to now you're a full time real estate investor, and even looking into, you know, additional commercial ventures and new partners. So definitely hit up, Chloe, if you're looking to get into the real estate world. So I guess I kind of want to just wrap it up by knowing what were some obstacles that you encountered, because I think it's such a beautiful picture to say didn't know anything about developing now you've done it, and you're obviously going to be able to apply those skills forward. I also just want to say before I forget, I missed their opening party all because I was out of town. But when Valerie was saying that they got to pick out every piece in the house. If you don't live in Austin, then you might not know we have a developer crisis here. People are making really ugly houses with birdbath sayings that are definitely not women picking out these furnishings. And people are paying top dollar for them. So to actually be able to know that there are women behind design choices, who think intentionally and thoughtfully about what would make a house light and happy and convenient and lovely to be inside of. It's a difference maker. Okay, but all of that to say, it's beautiful. You did it? What issues did you encounter unexpectedly along the way? And how did you overcome those?
There is? I mean, there were there was definitely a lot of things. I mean, we're going in really never having developed something new. So I mean, even just this idea of trying to figure out financing, I mean, that was a huge, like a huge battle to overcome to understand what financing options were available while we're qualifying or, you know, how could we make it work under the terms that he had. But, so, so I think that there was definitely a lot of challenges throughout I think it was really this mindset of we had confidence in ourselves that we could problem solve. So it wasn't that there was no challenges it was the challenges were coming up all the time. But we just were confident our ability to to work together and to kind of lean on each other skills and experiences to to problem solve. Along the
way. Yeah, definitely. Yeah, leaning on each other problem solve. Definitely, sometimes you have to, like think outside the box. But at the end of the day, these are, I would say, main skill sets that you need is like project management skill. Right? So the two of the biggest things that you have to watch out the entire time is budget and timeline. Right? All of those require money, right? So the fact that we actually hand chose every single thing in the house, including, you know, the door, the windows, the grounds, the, you know, the tiles, everything, even the furnitures that helped us, you know, tamper down a lot of like the budget, because that's actually the biggest reason why people don't evolve. Because if you actually have developed with some other developer, you will quickly realize that your budget is a suggestion, right? Like, it's literally everybody goes over the budget, right. But for us, we actually stayed on the budget, because we actually stayed on top of it. And, you know, it's it's almost like a full time job trying to think about how can we stay on budget? What are some of the creative ways? What are some of the compromises that we can make, right? And what are some of the compromises we can't make? Right? And like, what are some of the other things like, you know, I will consider this sweat equity for all the time that we went out to go shopping at different house stores and everything. I just don't think other developers spent this much time worrying about, you know, little details like that. Right. And we really, were trying to be intentional and thoughtful about how would one person live here and enjoy this to the fullest, right? So
probably why you see white subway tile everywhere, because it's just standard. They know they can get it. It's good if I'm stock that are special.
Absolutely. Yeah. I'm proud to say we have zero subway tiles and
Okay, well, is there just to wrap it up? Is there any advice that you would give to women who are hearing this episode that are being enlightened that they can maybe become developers or already had the itch to do it? Just anything you suggest that they could be doing? To get started?
I think my unsaid is really the first place that people need to, you know, where people really need to kind of connect to. And I think just realizing that this is for you, this is accessible to you, this is not just for selecting for people, this is something that, you know, anybody can do if they're willing to, you know, be creative and problem solve. So I think first and foremost, real estate investing and development can be for everybody.
I love it. I think I just think it's funny because you went right to mindset. And in my experience, nobody wants to hear that when I tell them, hey, the beginning of wealth building starts with mindset, we're actually going to spend a lot more time there than you want, like, no, no, give me the spreadsheets, give me the tools, give me the graphs give you the number things, and I always tell people, the best way to grow wealth, the more than any giant windfall you could ever get is to believe that you can achieve it and that you can overcome whatever confusion or obstacles are gonna get in your way, like, mindset is the basis of everything. So I totally agree with you anything to add clothing, ah, I would say
and this was what was the most important for me, as I you know, creating, you know, a community around you, of people who are doing, you know, what you want to do, right? So, you know, reach out to people join that Facebook group, right? Go to these different events, and have those people who are inspiring you, and I think you'd be surprised to see, like, if you have those kinds of people around you, you can really get a lot farther in your in your wealth building journey. You know, just by being inspired by them, right. And, you know, I have a Facebook group of women, real estate investors, I started that we're doing this educational webinars and events for and you know, but find whatever that works for you in your area, right, and then be inspired. I think that's that that made the biggest difference for me in my life.
I agree with you there to inspiration and community Factorio is all about it. So thank you all for sharing some inspiration with our audience today. And I wish you all great luck in your new venture. If you enjoyed this episode, come join us in a wealth circle. It's our live online 12 week course and community where we teach you how to create a personalized financial plan alongside hundreds of other women building wealth. It will change your life and your money for good. You can apply at factorial wealth.com forward slash wealth circle. That's factorial wealth.com forward slash wealth circle. See you in the next episode
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