Dave:
Do you feel like given everything going on in the investing climate, that you missed the boat on real estate investing? Well, today’s guest bought his first deal only 15 months ago, experienced pretty much everything that could possibly go wrong in his first year of investing, and he’s still building a great portfolio at super affordable prices and what he calls small town America. Hey everyone, it’s Dave and I’m back here with Henry Washington. Henry, what’s up man?

Henry:
What’s up bud? This is a doozy.

Dave:
Yeah, this is a very fun conversation that we’re going to be having with investor Clay White from Manhattan, Kansas. He started in real estate last year with very little capital and honestly not much more than a desire to avoid a corporate nine to five job at all costs. But he’s become an agent and his own general contractor and he’s surviving in the business on what seems like pure hustle. So let’s get right into this conversation. Here’s me and Henry with Clay White. Clay, welcome to the BiggerPockets Real Estate podcast. It’s great to have you here.

Clay:
Nice to be here.

Dave:
It’s good to see you again. I actually had the privilege of having lunch with Clay and his mom at BP Con. You had won some sweepstakes for private lunch, all of us together. It was a lot of fun.

Clay:
Yeah, it was.

Dave:
Well, I’m glad to have you here now. I was very intrigued by your story when we were having lunch together. Let’s just start at the beginning. I know you graduated from college a few years ago, so can you just take us back to when you were graduated and trying to figure out what you were going to do and why you sort of picked real estate?

Clay:
Yeah, I mean, I had no idea what I was going to do to be honest, but everyone else was graduate at the same time and it seems like they were all going out finding their nine to five. So I figured that must be the thing to do. So I followed suit, I went out and I applied everywhere. I got a job offer to go down to Houston, Texas and work a nine to five, but that day, that job offer came in. I was like, wow, is this really what I want to do for the next 40 years of my life? I’ve always been an entrepreneur. We did a whole bunch in college and I almost felt like I was selling out by taking that. So I said, no way. I can’t do it. So I turned it down, got my real estate license.

Henry:
Literally, this is what people go to college for to get the big job opportunity. That’s a good point. Out of state even you get to go and join the workforce. How did your parents feel when you made that decision?

Clay:
I think they were pretty supportive at that point.

Henry:
We got different parents, bro.

Clay:
Yeah. But no, I went to college with a high lofting goal of getting a good job and going into middle management for the rest of my life. I was convinced I was middle management material. I was going to have an awesome life and that’s what I was going to do.

Dave:
Well, it’s so funny Clay, because I think a lot of people, they start that job, realize that they hate it and then try and find a way out, but you were just like, Nope, Uhuh not even starting.

Clay:
I couldn’t do it. I couldn’t do it. I felt like I was so myself short.

Henry:
What gave you the confidence to know you could figure it out outside of turning down that job?

Clay:
Well, I read the wrong statistics for sure. I went online and I looked what real estate agents earn and I read somewhere they made $80,000 year one and I was like, ah, that’s got to be so easy. This is perfect. I’m going to knock it out. No problem.

Dave:
Alright, well tell us what you did next. You made this decision and how did you go about actually getting into real estate?

Clay:
So I used to paint houses as part of an internship in college and I had an old buddy of a buddy several years older than me that got into real estate and I figured, hey, apparently they make great money and that’s just such an easy job. It’s a no brainer. So I called him up, I had a few questions for him and he was like, sweet man, let’s get you down for an interview. And I was like, awesome. Done. So I walked in a few weeks later after I got my license applied and got hired on with him, and I sold houses for probably three months. I want to say. I got hired in March of 23 and then around June I was like, wow, these people are getting steals. Why am I not doing this?

Henry:
I mean, you’re telling the story that a lot of people who have jobs in the real estate industry tell is that they realize, hey, these investors seem to be getting the long end of the stick on all these transactions I’m working on. How do I go from where I’m at to where they are? So how did you make that jump? What was your first dealer?

Clay:
Yeah, so I read a few news articles and I figured I know everything there is to know. This has got to be super easy for sure, for sure. So I saw a $20,000 home pop up in a market 30 minutes away from where I live. Said it’s a no-brainer, walked right through, offered ’em $17,000, got to be a winner. I mean, it’s cheap enough what could go wrong, but this thing was filthy. The old owners just left. I ended up buying it for $17,000. I figured this is all I’ll ever need. So I liquidated all of my investment accounts that I had to buy this sucker cash and I bought it. I closed on it and I went out there with just those big old contractor bags of Walmart trash sacks to go clean out all the trash. And I showed up and there was a condemnation sign on the front door. But when I looked down, I realized this was a home condemned in May of 2023 when I was purchasing it in July of 2023, which means that it was not disclosed that sellers had a pulled it down and then they even found it the city had, because I called the county immediately, I called the city and I was like, Hey, what’s going on

Henry:
Guys? Alright, so Clay, you said there was a condemned sign on the door. So what did that actually mean?

Clay:
So in this particular situation, it means that nobody should be living there. So this was a home that’s been vacant for a year and they kind of catch you on it. So first it was overgrown grass that needed to be cut, and then the front porch rotted out and that front porch would actually condemn the home. It makes it a safety hazard. And when they have that excuse to go in, then they’ll go through and nitpick that whole house. So the only way to bring it up to livable condition is to then fix a 30 page document that the city wrote out.

Henry:
Okay, yes. In my area, they call it red tagging. So if they red tag your house, that basically you have a laundry list of things that they make you fix before they’ll give you a certificate of occupancy. So they basically had a condemned slash red tagged house and no one told you until after you bought it. Congratulations.

Clay:
That’s pretty bad. I was stoked. I knew this was the perfect deal for me. So I was like, wow, I didn’t know what to do. City said there was nothing I could do since it was condemned months before. If it was condemned the day I bought it, they would’ve been a lot more lenient on fixes and whatnot. But I went back to the title, I said I would love my money back. And luckily they were able to reverse it. They

Henry:
Did. Did you return a house?

Dave:
Yeah. Oh my God, I returned it. I have never heard that. I’ve never heard of that all of the years I’ve been doing this. I didn’t know you could return a house. I mean, it’s just like Nordstrom or REI, one of those stores that will just take returns, no questions asked.

Henry:
He’s like, look, I got my receipt. I don’t know what the problem is. Yeah, I mean it was actually pretty easy.

Dave:
Well, like is it the title’s responsibility to that should have been on your title report, right?

Clay:
Yeah, it should have been there. And then I had about $1,500 worth of fines that was owed to the city that they also didn’t disclose.

Dave:
Does that house just revert back to the previous owner? How does that

Clay:
Work? Yeah, it went back on market. Wow,

Dave:
Okay.

Henry:
Alright, it’s time for a break, but we’ll be right back with more from this week’s investor story in just a few moments. Welcome back to the BiggerPockets Real Estate podcast. We’re here with Clay White from Manhattan, Kansas.

Dave:
Okay, so false. Start on your first deal. What did you do next?

Clay:
Well, I was pretty defeated for a second, but I realize I never heard of anybody buying a condemned home, at least accidentally. So I figured it couldn’t be that common. So I jumped right back in. I had already liquidated my savings account so that money had to be spent on something. So my second deal, first deal I bought with a partner with a buddy of mine from college in October of 23. We purchased it for $35,000, got put 20% down, took a loan out on the rest, and I was in the middle of reading the bur book and they said, Hey, interview everybody. Do everything. So this is a town of 20,000 people or so. So we had six legitimate property management companies. We sat down, interviewed every single one of ’em same day. We asked them all for different ideas on the house, contractor recommendations, you rent estimates, and at the end of that day, I found just the most spectacular property manager. I hired her contract on for the job and the day after Thanksgiving, so about a month later it was completed, I turned it over to property management and she had it rented that Tuesday for $275 over our rent estimate. So it went shockingly well after the first one.

Henry:
So you hit a foul ball on your first deal and then hit a home run on your second deal,

Dave:
Clocked

Henry:
A digger

Clay:
Right

Dave:
After

Henry:
That. So where’d this deal come from? How’d you find it? Talk to me about that.

Clay:
Yeah, once again, on the MLS somehow, first one was wholesaler that listed on the MLS. This one was just a bank foreclosure that was having trouble selling. That area is a big VA area and FHA area, which means a lot of those loans are not any distressed property is not going to close with those loans. So it’s me and the two other investors in that town fighting for these deals and they obviously weren’t interested. So bought it right off the MLS.

Dave:
Now looking back on it, is that pretty normal in the market you were operating on where these kinds of deals are available?

Clay:
Somewhat. So we have two markets. We have the main market where I live, and then this little satellite market of about 20,000 where that pretty generally is the case. Anybody purchasing a home in that area is going to be military, which is buying on a va, which is super, super stent as far as the criteria and condition of the home. And then the same thing with any FHA loan and it, it’s not a ginormous town, so there’s not a ton of investors going around. So I mean, you really are in a dog fight with three other people and that’s it.

Dave:
Yeah, I remember you mentioning something like that when we were having lunch and I was like, man, I should move to this town. I like the idea of this low competition.

Henry:
One of the things we’ve talked about before on this show where a lot of people have talked about is if you can’t get into your first deal by yourself to bring on a partner. So it sounds like this is somebody you knew before. You guys did a deal together. How did you know you needed a partner for it and then how did you structure it?

Clay:
Well, the house was $35,000 and I had $25,000, so I was good indication to make it

Henry:
Work.

Clay:
But no, it worked out really, really well. I initially went to the bank on the first one and I was 22 working 100% on commission with just a little bit of money. So they told me no, and I tried again at the second and third bank who also told me no. So I figured I need a partner.

Henry:
That’s good, man. And what I want people to realize, this is first of all, I think the reason you had success early on is more about your mentality and your mindset approach to what you were doing versus the tactics. Yes, you had good tactics, but a lot of people a wouldn’t have said, you know what? Screw this corporate gig that’s going to pay me a bunch of money in Houston. I’m going to go be a realtor estate agent. And then to jump into a deal and fall flat on your face and to get back up and say, okay, I’m going to this again. And then to find a deal that you couldn’t do on your own, banks would say no. And then you just said, okay, well I’m going to go find a partner. A lot of people would’ve quit along that journey and just thought, well, this isn’t for me or I can’t do it. We hear it all the time. I can’t get a loan, so how am I going to do this? So I think that that mindset is huge for new investors. It’s a good example of the kind of mindset you need to be successful. So in your partnership, did you just structure things 50 50? Do you have a role or does he have a role who does what?

Clay:
Nope, it was a true 50 50. We figured we were both learning. We both might as well do everything and we will all learn as we go. So every single property manager interview, every single contractor, interview every single city inspection. We both went to ’em, we both sat back, we both asked questions and we both learned and absorbed as much as we could. Obviously we didn’t know. I read a few books and thought I had it.

Dave:
And did you have it?

Clay:
Not even remotely close,

Dave:
But it’s still the deal worked out right,

Clay:
Worked out shockingly well still have it.

Dave:
Okay. So I mean I remember a little bit from when we discussed this earlier, but what did you do after that first deal? I remember you just have been taking on a little bit of everything.

Clay:
Yeah, a little bit of everything. So after that, through both of these properties, I was renting with six other roommates and I figured maybe I don’t need six roommates at this point in my life.

Dave:
How many bedrooms?

Clay:
Five.

Clay:
So it wasn’t terrible. It wasn’t terrible, but I figured it was probably time to get my own place. So in January of 24, I purchased a duplex in the town I live in. I had the backside was rented for six 50 a month on a long-term lease. And then the front side was completely vacant and once again distressed. But I was able to get it on a portfolio loan in-house with that same bank. So they didn’t care on the condition, they knew I’d fixed up one. So they hedged their bets and figured, Hey, he may do it one more time, which I was so excited that they gave me that loan.

Dave:
How are you financing the rehab

Clay:
Out of pocket? At that point, I had liquidated all my investments. I felt like I would go in embarrassed and timid to say, Hey, please take my money back. I’m backing down here. But I wasn’t willing to admit that. And going with the partner and getting a loan on the first deal meant I stood a little bit left and I did most of the work myself. So it was just a cost of material.

Dave:
How heavy of a rehab was it that you did the work yourself?

Clay:
It wasn’t ideal. I’ll say we ended up redoing most of it. This was a home that somehow it passed inspections, but this is a 1910 tiny little thing that was laughing plaster on paneling, on drywall with just coated, they just, anytime anybody moved out, that’s two more loads of kills on top of everything. So I pulled it all apart and essentially to the laugh, we replaced the windows. We replaced four joists. We replaced flooring, paint, trim, countertops, cabinets.

Henry:
Oh, so you built a house.

Clay:
The framing and the foundation was there.

Dave:
Nice. So that was, I guess at the beginning of this year, I assume you’re still living there. It was a house hack.

Clay:
So I am not, actually, I sewed a lease until August, so I figured I’d make a little bit of money off of it. So I tried to look for a long-term tenant, realized that that is not enough to cover my mortgage at all, and I didn’t traditionally want to be losing money on that. So I tried to Airbnb it and I realized I’m not that kind of person. I’m not a Airbnb person myself. So I went on, I tried to find a big company, they weren’t super interested, so I just went on Airbnb, looked up a unit that was as close to mine as physically possible, and I found some lady that had nine of them just like mine. So I made a fake reservation for her, ask her if she’d be willing to come check out my house and give ideas and potentially manage it. And she walked through, loved it, and she’s been managing it since May 3rd of this year.

Henry:
That’s so smart. Oh my

Dave:
God, that’s such a good trick. So you didn’t know this person beforehand, right? You just fake reservation, dude, that is some hustler skills right there. That’s pretty good.

Henry:
Yeah, man, that’s a hustling mentality. That’s awesome, man. Again, that mindset of, I’m going to figure this out. That’s the very first lesson I learned in real estate. It’s the very first lesson I learned in entrepreneurship in general, but in real estate, because my first deal, I didn’t think I was going to be able to buy it. I had gone a bunch of different routes and couldn’t find the money, and my then unofficial mentor, I called him to say, can you buy this house? I told this guy I would buy it and I don’t think I can. He’s like, look, I’ll buy it. But if you want to be successful in this business, you got to figure it out. This is your first entrepreneurship lesson. Go figure out how to get this done. There’s a million ways we just don’t know the way that’s going to work yet, and that mindset will carry you far. So that’s super cool, man.

Dave:
So I can’t wait to hear what comes next in this story. There’s just a lot of twists and turns. We’re only a year into your investing career right now, clay. So what did you do after the Airbnb situation?

Clay:
Yeah, so we hit the home run on the first one, and I was flush with cash after that. Duplex, I was loaded. I got my first rent check and I was $400 richer after throwing $25,000 into two different deals. And I bought a meal and I realized I was out of money. So luckily we aced that first deal. We bought it for 35. We spent $21,000 on the rehab. So we were all in for about 56, took it back to the bank and we reappraised it at 1 37, which was so much better than we were expecting for sure. So we had that $80,000 or so in equity. We were going to do the cash out, but decided at those small local banks, they work with you well. So they actually just used that equity in the property on a line of credit for us. So then we purchased a flip in April of 24 off that line of credit. Henry, why are you

Dave:
Celebrating over there?

Henry:
Literally what happened on that same story, I was just telling about my first deal. I did a bur, but except for the refinance, I pulled a line of credit and used that line of credit to help me continue to grow. And I think that the bur with the H at the end, HELOC instead of refinance bur, yeah,

Henry:
It’s a good tactic because refinances are great and in certain situations you need to refinance, especially if you’ve bought it on hard money or private money and you’re paying a hefty interest rate. But if you’re not, you don’t have to refinance. You can get a line of credit because refinancing is selling your equity. You’re selling it to yourself, but you’re selling your equity. And so when you refinance, then you end up getting a new mortgage at a higher rate. And so refinances also hurt your cashflow because your debt service is now more. When you do a line of credit instead you don’t get a new mortgage. You keep your cashflow and you get access to the money just like you would’ve had access if you refinanced it. So I think it’s a good tactic in the right situation.

Dave:
Kendra, just for everyone listening, what is the right situation? Do you have any simple advice on when you refinance versus look for a line of credit?

Henry:
Yeah, I think you should refinance if you need the cash, right? So if you need the cash because you used a high interest rate loan to buy the property, yeah, you got to refinance and get out of that high interest rate loan. If you have a plan for the cash outside of real estate, sometimes people are refinancing because they need the cash to go do something, live life, whatever that is. If you need the cash right now, then yeah, you can refinance. But if you don’t necessarily need all the cash right now, but you want access to the money so that you can buy your next deal, a HELOC works well because now you’re not paying interest. When you do a refinance, you’re paying interest on that money you took out right away because you have a new 30 year fixed rate mortgage typically, and your interest is front loaded in the first seven to 10 years anyway.

Henry:
So you’re paying interest on that money that you took out versus with a line of credit. If you don’t need to use that money right away, well now you’re not paying any interest, but you have access to it when you need it, and then you only pay interest on the money that you use off the line of credit. So in his case, he had about 80 grand. If you only use 20 to buy your next house, we are only paying interest on that 20 instead of paying interest on the full amount you pulled out on a refinance.

Dave:
So back to your story, clay, you pulled out a refinance and what was the deal again? Sorry, I lost it in our discussion of HELOCs.

Clay:
Yeah, so it was a flip that we purchased at the very, very end of April of 24, bought it for 52 5. We had about 60,000 in planned repairs because this was all with a general eight week holding cost. Just I figured what could go wrong. You figure that a lot

Dave:
Seems to be a theme here. Yeah,

Clay:
I pretty generally figured there’s going to be zero hiccups and it’s going to go perfectly smooth all the way. But we got this roof replaced. I got the sewer and I went to go hook up the water. I called the city, they came out, they hooked it up and they turned it on and just left. And luckily my contract was there and he goes, Hey, your water’s not shutting off just outside the home. So he grabbed the city guy, he had him shut off, he walked in and I had about four inches of water covered my entire home, just completely flooded it. And that was one which was pretty rough, which obviously that causes a little bit of rot. And we already had all the sheet rock was getting moldy, which means some of the studs behind was getting moldy. So I had a two studs underneath a window that were completely rotted and we went to go replace him, which seems more than fair, that’s something you should do.

Clay:
But the bad news was the neighbor next door was also getting a roof replaced, and he just so happened to see our two window studs out in the front yard when we cut him to go replace them. And he goes, well, that is a structural, the city inspector said that is a structural on an exterior load-bearing wall. So you cannot do that. I know it’s small, but according to code, they shut us down, said you guys need to get a licensed general contractor here and figure this out. The only bad thing is this is a town of 20,000 people. We don’t have a bunch of licensed general

Henry:
Contractors. You are the licensed general

Clay:
Contractor. Yeah, kind of. I was like, fair enough. So I called every licensed general contractor in that town, and this is two studs under a window, so keep in mind, so half the people didn’t respond to me.

Dave:
Yeah, just not a big enough job.

Clay:
Yeah, not a big enough job. I only had three people look out and said it’s not worth it. I had one guy that said we could use his permit to do it, but he wants 20% of the total job. So the cost to fix these two studs would be 20% of my $60,000 rental budget.

Dave:
What?

Clay:
Yeah. God. And I was like, I can’t do that. So yeah, it was

Dave:
Rough. Well, that’s extortion.

Henry:
I’ve never heard of anyone going through every problem in real estate investing in their first two years. All of what? Yeah. You feel literally had all of them other than a fire. It seems like you’ve had all the real estate investor problems.

Dave:
Well, we don’t know. We haven’t got to the end of the story.

Henry:
And on a second note, coincidentally, two studs under a window is the name of Dave and i’s new LLC for our property we’re going to buy.

Dave:
Oh. Oh my god. Can you imagine the

Henry:
Logo that we’re going to create for this? Just two handsome dude. It just us sitting under a window back to just a window, two studs under a window. What do you know? What small world? I can’t wait to make that the actual

Dave:
Name. Our L statement. Well, okay, before we hear the resolution of this story, clay, you’ve talked about doing a burr rehab. Are you pretty handy yourself? What gave you the confidence to do this flip as if I’m counting right, your third deal.

Clay:
So other people do, so I figured why couldn’t I? I’m not exceptionally idiot by any it tracked in my head for sure, but no, I’m not particularly handy. I love to be hands-on. I do what I can do. But the first deal, we had a rockstar contractor, this deal, I had a rockstar contractor and pretty generally since then I was just super lucky just hitting ace in the holes. And I’ve had one fantastic contractor for the last six months that’s been lights out for me. And then we have another guy who’s done incredible work too.

Dave:
So wait, how did this story end? The one with the two studs under the window?

Clay:
So luckily this is Kansas, so it’s not a super big deal. They’re not coming after you for everything. So I bought a $295 prep course online, did it in two days, went in and took my state exam, and I got my general contract’s license.

Dave:
It’s funny because Henry was joking that you were the only guy in the 20,000 person town who was a gc, and it turns out you are the gc

Henry:
Now. Somebody had to, this is the most fun starter story I think I’ve ever heard.

Dave:
Yeah, talk about hustle mentality, man. That is super cool. So wait, so let me just ask 290 bucks, how long does it take?

Clay:
Well, it’s based off of your hourly, sort of just like a real estate license is, but all the general contracting exam is how you locate it in a book. It’s not based on true knowledge in the sense of the word, can you read a code book, can you understand code? And how do you find that? And it’s a four hour licensing exam. So all that textbook was, Hey, here’s where everything is, here’s how you find it, go get your license. So that’s really all it was.

Dave:
Well, I mean it’s great for this story because clearly you didn’t need to be super sophisticated to fix this one problem that you had, but that makes me even more surprised to hear that you found great contractors in Kansas because the barrier to entry seems comically low. So good for you on finding good contractors. Did it take a while screening people?

Clay:
The first one wasn’t terrible, so we just interviewed every property manager and asked every single one of them from contractor recommendations. Two of them came up with the same name, met him, seemed relatively honest, and I was like, sweet. And he knocked the first one out of the park. Then I went through a few rough ones. And the nice part about having your GC license is you don’t really need the grade. A contractor is going to charge you two or three times as much. I need some exceptionally handy people and I’ll manage it myself.

Dave:
That’s a very good recipe for success there. So after you’ve fixed the two studs under the window, how did that deal finish out for you?

Clay:
So as of right now, we’re not going to be falling behind. We’re still anticipating about a 25 to $30,000 profit on that at current margins. But this is still, it went on two or three months longer than it should have been, and it’s a loss in that sense. But we’re going to come out unca,

Henry:
That’s called real estate investing. So tell us again, remind us the numbers. What’d you buy it for? How much are you all in for and what are you expecting to sell

Clay:
For? We bought it for 52 5. We’re going to be in for just over 60 at this point. And we’re looking to list about 1 49 and depending on how that goes, most of the buyers in our market are going to be va, FHA. So we’re anticipating they’re going to ask for five, $10,000 in closing costs and then obviously commissions on top of that.

Henry:
And are you representing yourself as an agent on that deal?

Clay:
I am. I

Henry:
Am. Okay. So you’re making slash saving some money. Yep.

Clay:
That’ll help a little bit.

Henry:
We have to take one final break, but stick around to hear more about how Clay is making deals work right now. Hey, let’s jump back into this week’s investor story.

Dave:
Alright, well after that one, what deal did you do and what went terribly wrong?

Clay:
Pretty much I bought a $20,000 home in May of

Dave:
24. I can’t believe you’re saying this. In 2024, $20,000 home. That’s unbelievable.

Clay:
$20,000 home. It was not worth $20,000, I’ll tell you that.

Henry:
So you overpaid really? You overpaid. You overpaid

Clay:
Over significantly. Significantly paid after events unfolded for sure. But this was a home that I tried to buy in November of 23, but it was going through government foreclosure and then they wouldn’t get back to you and then it all went pending. And how those government deals work is you are just so far on their back burner for six months and then all of a sudden they’re ready to go and they needed all your paperwork and documents yesterday. So this is something I offered on in November that I bought in May and $20,000. We figured I would have about $65,000 in there. But when I walked in and the living room was still fine, but in the kitchen, all the sheet rock had just fell right through the ceiling and it was just on my kitchen counter now and the back bedroom also caved in.

Dave:
Oh my God.

Clay:
Which is not ideal for the most part. Typically not ideal. That’s correct.

Dave:
Yeah, for the most part, I don’t think there’s any situation where the house caving in is a good situation

Clay:
Pretty much. And I found that there was termites which weren’t so bad, they were treated, but there was terrible grading. So I had mold on all of my sill plate and a lot of the studs back there, termites had started eaten through the framing. So all the exterior walls were essentially non load bearing. So the rafters was holding up the roof. And I realized that when we got in to get the roof replaced and with the roofers walking around there, they also broke the sheet and all of the back bedrooms because there’s no support back there. So we had to put a pause on that, go through, replace all the sills all the way around the house and a lot of the studs and framing a lot of the floor joists so that way we could get up and then also patch the roof. Once we got the roof done and replaced, we went back up before we res sheet rocked over and we noticed we had about eight cracked rafters because the home could not support the weight of everybody working up there.

Dave:
Oh, from the we people? Oh my gosh.

Clay:
Yeah, yeah. So it was not ideal, but we got ’em all pasture replaced, had to completely remove them, which is not fun. We ended up going through, it lasted two months, so we may, and then we listed two or three weeks ago, but finally got it all done. We ended up going $22,000 over budget. I anticipated 65 and I think we’re 86. So we’re all in at about 1 0 8 on that property. Right now we’re listed for 1 49, so still should work out. There was a lot of cushion, a lot of cushion on a $20,000 home

Henry:
In base hits. Man, the lessons you’re learning are invaluable. Just through all these pitfalls, it probably feels like you’re going through the ringer and you are, but they don’t all go this way. And at some point I think things should start to balance out. If you’re learning lessons about the properties you’re buying, things should start to balance out. So it sounds like you’re flipping homes. Is that what you’re continuing to do now? And if so, how are you sourcing these deals and how are you finding the money?

Clay:
Yeah, so as far as the money goes, at that point I had had a little bit of track record, even though they’ve been super chaotic, somehow they got to the finish line and somehow they all made good enough money where I was a decent bet at that point

Henry:
Where you want to keep doing it. Yeah,

Clay:
Pretty much. Pretty much. So I went back to the bank and said, Hey, I’m so excited, I’m ready to get another flip. And they said, I’m very happy for you, but you’re still 22 and you’re still in commission and there’s no way we’re giving you that money. So I went back with my first partner and they told us the exact same thing. They said, Hey, that equity’s done, good luck. Keep it rolling. So at this point still, I knew I wanted to keep going and they always say, find the money, you can’t just give up. So I went to my parents and I said, Hey, would you guys want to do a deal with me? It’s only going to cost X amount of money, just throw some cash my way. It’ll be awesome. We’ll all be super happy. And they also said no. They said, you’re not that kind of bet yet. So good luck.

Henry:
And your parents have real estate investing experience, right?

Clay:
They do.

Dave:
I love that. I mean, I feel bad for you, but I kind of love that.

Clay:
Yeah, they do. And they’ve had some rentals back where I’m from, so I was like, okay. I went back to the drawing board and I said, you don’t even have to give me money. You don’t even have to give me money. Just put two of your rentals up as collateral on a line of credit for us. And that they did agree to, since it wasn’t money coming out of pocket. So they put up two rentals to give me a line of credit to keep going.

Henry:
So your parents pulled a line of credit on two of their rentals and so when you needed money, I assume you had to go to them and say, Hey, I need X. And then they would pull the money from the line and give you access or did you have direct access to pull from their line?

Clay:
So I have direct access. So we set up an LLC together and structured an agreement, and now it’s pretty much, it’s still through my bank that we pull everything from, which is super awesome and convenient.

Henry:
That’s super creative, man.

Dave:
Yeah, good for you. And is this where you stand today? Is that the last two you’ve done?

Clay:
No, so I’ve bought two flips since then, a triplex, and I’m buying a commercial building on Thursday, so we’re getting there.

Dave:
Oh my god. And how are you financing all of those?

Clay:
So the nice part about how they go is one, it goes off the line of credit. We purchase ’em on the line of credit, fixed it up on the line of credit, and then anything we’re going to keep it gets turned over and amortized on its own individual loan, which replenishes the line of credit and then obviously all the flips just paid off and keep going.

Dave:
Wow. Super cool, man. I was waiting for you to say you became a loan officer or a fighter pilot or something else in the middle of this crazy story. But Clay, this has been super fascinating and just everyone out there, this is such a good example of how you could make deals work in 2024. Obviously there are hiccups here. You don’t have to be buying $20,000 deals, but clay’s finding a way that works for him. And honestly, man, I got to say, I really respect your attitude. You’re coming on this show, talking about your wins, your losses, and have a great attitude about it. To me that just signals that you’re going to be very successful at this for a long time. So you bought all these deals, we’re going to have to have you back on soon, man, and hear how the rest of these stories go.

Henry:
Yeah, I’d be excited. Yeah, man. Can’t wait to hear more about this in the future. And you are the inspiration for two studs under a window, LLC for Dave and myself.

Dave:
Yeah, we’ll make you an honorary member. You’re on the advisory board. All right, perfect. So Clay, thanks so much for joining us and telling us your story. If you want to connect with Clay, we’ll put his contact information in the show notes below. Henry, thanks man for being here and joining us on this fun discussion. And thank you all so much for listening. We’ll see you next time.