The “Creative” Framework for Low-Down, High-Return Rentals

Dave :
It felt like almost everyone picked up a new side hustle in 2020 when you were just sitting at home during the lockdowns. And for a lot of you it was probably real estate investing, and today’s guest was no different on Kit. Loda made his first two deals during the first year of the pandemic, but what does make Ankit different is his nine to five main hustle during that time, because while a lot of us, or at least I was sitting at home watching Tiger King trying to figure out when we would be allowed to go out, he was working in pharmaceutical r and d, helping to develop the Covid vaccine. Now, fast forward a few years, Ankit uses his skills from that job to make his real estate investing more strategic, more profitable. And honestly, Ankit is one of the most creative investors I’ve ever spoken to, so I think you’re really going to enjoy this.

Dave :
Hey everyone, it’s Dave. Welcome to the BiggerPockets Real Estate Podcast where we bring you a new investor story every single Monday. And today’s guest on Kit spent 25 years climbing the corporate ladder, and then during the pandemic he decide to apply those skills to scale a real estate portfolio from zero to 30 properties in just two years, and he’s still going even as interest rates rise. In today’s episode, we’re going to hear from Ankit about how he reimagined the property manager role to create a bespoke concierge service. This is super cool. You’re going to really like this. We’ll also talk about why he’s not afraid to propose creative financing arrangements even in his real estate journey that he’s relatively early on in and how he finds opportunities even in high priced markets. I’m Kit, welcome to the BiggerPockets podcast. Thanks for being here. Hey, how are you, Dave? I’m doing great. I’m super excited to talk to you about your real estate investing journey. Why did you decide to get started in, was it 2020? Is that right at the beginning of the pandemic?

Ankit :
Yeah, you’re right. I mean, just like everybody, we had a lot of time at our hand after our typical nine to five jobs, so we did a lot of cooking and a lot of baking, and still we had a lot of time. So from an investment perspective, I know we had almost a decade worth of experience and money saved up. So me and my wife, we decided we every now and then used to invest in stocks here and there a little bit, but we thought to take a leap of faith and invest in real estate as an asset and understand the nuances and the fund that goes behind the scenes. So that’s exactly when we first got our investment property, our typical 25% down payment, which took almost a decade of savings to put together, and that was our first one during Covid.

Dave :
Wow, that’s super cool. I want to hear more about that because there’s so many challenges during covid to getting started in real estate, but our producers before the show put together a little info sheet where I learn a little bit about you and it says here, you sort of just went through and said you casually have this nine to five job, but were you working on the Covid vaccine at the same time?

Ankit :
Yes, that is absolutely correct. I was having too much fun in my day job. Yep. I was on the data science team on making one of the covid vaccines over here, and it was a fun life, almost a hundred hours a week, no weekends and no Christmas or Thanksgiving because it was a time of a need. And just as a data person I am, I was also enjoying taking break from my vaccine and pharma work and diving into the real estate numbers that just kept the fun going.

Dave :
That is unbelievable. The fact that you described that as fun is very admirable. It sounds very stressful, but thank you for all your work on that and still you somehow found time for real estate. Actually, that kind of makes sense to me sometimes when I’m really busy at work and I work at BiggerPockets, so we talk about real estate a lot. It’s kind of nice to have a different professional activity to sort of just take your mind off and just think about something else in a productive way. Is that sort of how you saw real estate?

Ankit :
What I would say is I realized my day job is basically a warmup. The grind is actually in the after hours and then over time, being a data person, I loved diving into numbers and investing, be it stocks or real estate. What I wanted to focus on really having an asset that would produce cashflow over a period of time. In my day job, I do a lot of predictive analytics and machine learning algorithms. And with this first real estate investment, I realized how much time it took for me to lead to that end of one. And within no time, I might reach a ceiling where my mortgage or lenders won’t lend me any more money based on the debt to income ratio. So I need to figure out a way to be able to do this more creatively.

Dave :
Got it. And so what was the creative approach you took?

Ankit :
If I can say this overnight, me and my spouse, we basically ate up the entire BiggerPockets website, if I can use that word. I told this insight to my wife and she was all over the internet and trying to find resources because she realized we might be the only one thinking about this. There might be other investors in that space. So that’s when we stumbled upon creative financing options, seller financing options. And then when we started looking at deals, we started to think through that angle. Even though with time we started saving our day job money, our bonuses and everything that we could typically buy with an investment, but we forced ourself to do more and more creative thinking and think outside the box thinking that we might not have the resources we need to save that money for a rainy day. So that’s how we started and we started talking to brokers and sellers through MLS. Nothing, any secret sauce behind it, just your typical MLS listing and just being creative with that approach.

Dave :
You live in New York, so were you trying to invest in New York or were you looking out of state?

Ankit :
So our journey in Cambridge, Boston area, because that’s where me and my wife were based out in Covid, we were locked down. So that’s where we were starting to anchor more and more investment properties. And then once the pandemic was behind us, my pharma company is in the New York, New Jersey area, which made us to move to New York City. This forced us to manage our real estate portfolio remotely. Coming from a pharma background, we believe a lot in standard operating procedures, your SOPs and guidelines. So for my own team, we started establishing that. Now you could think that, hey, you don’t have a really big portfolio to even start thinking in that direction, but coming from pharma where drugs take 10 to 15 years for approval, I worked for a brief time for a Japanese pharma company where the visions were for a hundred years, not two or five year.

Ankit :
So I started thinking from that lens that, hey, I might not have a hundred property or 200 property portfolio today, but with time I might. So if I establish my SOPs and guidelines today and build a team around it, it’ll force me to automate this and live my lifestyle from anywhere. And that’s why when we moved to New York City, it forced us to build that team and processes for our Boston properties, and that just opened the floodgates for us to invest literally anywhere. And that’s when we started looking creative deals in New York area, in Pennsylvania area and Florida area and so on.

Dave :
I’ve had a very similar experience, and this is such good advice and a really valuable insight. I moved not just into a different state, but I moved to Amsterdam and at that time I was self-managing, I think it was eight or 10 units, something like that. And I felt like I had that under control and at no point was really thinking about hiring a property manager or building a team, but when I moved, I had the same experience where I was forced to just figure everything out and I realized it’s really not that hard real estate, it takes time, it takes effort. It’s not the most complicated business in the world. If you can find good reliable people in four or five positions, you can probably do it. And I think what you said about setting up this team and sort of creating an infrastructure before you have a lot of properties makes a lot of sense because it’s sort of a chicken and egg problem, right? Because you can’t wait until you have a hundred properties to figure out how to manage a hundred properties. You sort of have to build the infrastructure. And then once you get good at managing eight properties or 10 properties or 12, you can see a clear path to 15 or to 20 to 25 because you’ve already built the infrastructure to support a bigger portfolio.

Ankit :
I hundred percent agree. I feel like I’m literally speaking to myself. I mirror image because having done those self-management, we have rolled up our sleeves, been there for lockouts, for toilet clogs, for net networking, for leakage and whatnot, doing that self. Now you exactly know when you’re building a team, what are the types of best practices and emergencies you need to make ensure whether you’re in the country, outside the country, anywhere, right? If you have that systems and process in place, it’s a well oiled machine. The fun is in building that team.

Dave :
It is fun. I know people see this as daunting, and it can be at the beginning, but if you just jump in and start talking to people, you realize that it’s not that challenging. Have a conversation with three agents, five agents, go meet five property managers. You’re going to learn so much just from those conversations. Even if you don’t hire any of them, you’re going to learn so much that you’re going to gain a lot of confidence about what to look for in the next conversation you have and the next conversation you have. And at least personally, I like doing that. I feel like I’m getting closer to the business that I want to be running. We got to take a break, but if you enjoy these insights from the BiggerPockets Real Estate Show, you may want to check out our premier real estate event.

Dave :
It’s called BP Con. It’s the BiggerPockets Conference and it’s taking place this year, October 6th to eighth in Cancun, Mexico. And whether you’re a seasoned investor or just starting out, BP Conn is a chance to hear from industry leaders, you can learn cutting edge strategies and network with potential partners. And right now we’re offering 10 of our listeners an awesome deal. You and a guest can attend BP Con for just 1500 bucks. That’s huge savings. And it includes three nights at a five star resort. All you can eat, all you can drink and access to the conference content of course, plus kids under 15 are free. And as an extra bonus for 10 lucky listeners, you’ll get to eat lunch with me on Tuesday. I don’t know how lucky that makes you, but we can at least talk about real estate for a while on Tuesday at the conference. You can learn more at biggerpockets.com/conference and to redeem this offer, email [email protected] before registration closes on September 18th. That will qualify you for the special lunch that I hope to have with 10 of you in October in Cancun, Mexico. Welcome back to the show. Here’s more with investor on Kit now and Kit, let’s talk about your first deal. So it was 2020, you’re in Cambridge. I lived in Boston very briefly for work many years ago, and it’s a very expensive market. So how did you make your first deal work?

Ankit :
Yeah, you’re right. I mean, like I said, 25% down payment from the property in Cambridge. The way I see Cambridge is as a recession proof market, and that’s why we decided to invest there first, mainly because of Harvard, MIT and all the amazing universities that small little town has. And coming from pharma biotech background, the way I call Cambridge is the Silicon Valley of biotech. So I realized even though it’s super expensive, but it is that recession proof market, I think you’re hitting the point very well where even by just renting that out as a long-term rental, your typical 12 month lease, I would barely make the breakeven or maybe few dollars here and there that could buy me Chipotle a couple times a month maybe, right? That’s the breakeven point. So I realized I had to do something creative to do that. And then I’ll take you to a 32nd journey in my grad school and the few early years of my career, what I had done was I was staying in LA where I studied and I got my first job and apartments were expensive in LA for an early graduate student.

Ankit :
So what I did is rather than renting an apartment, I rented an entire house and I fully furnished it. As you see an Airbnb today, I furnished that house as a bachelor pad, and what I decided is the other rooms I house hacked it. So rather than buying and doing your typical house hack in a rental, I housed hacked it by having roommates and charging them a premium for these amazing decor amenities and furniture that I added in the house and gave them flexible leasing options for that premium. What that allowed me back then almost a decade ago is to live literally rent free. I was paying literally little to nothing, and my tenants would basically cover the payment. So I’m here 10 years, fast forward in Cambridge, mattered and settled. I realized, why don’t I do that? Why don’t I buy this house and furnish it, decorate it as I would love, and anybody moving in this area would love to just get their bags and all settled in.

Ankit :
And Cambridge is a very notorious market from a landlord perspective. You can only sign 12 month lease starting from September to September cycle. There’s no other options, I thought to be that disruptor and offer flexible leasing options. If you want to end your lease in December, fine, we can do that. There is a premium obviously for that, and you’ll be surprised the people who move here are part of that category who are ready to pay that premium for that extra service. So in this first house, we fully furnished it all, utilities included, they don’t have to worry about getting any connections, any setup, just get their bags, pots, pans, everything’s included. And the response was amazing in this first house, and I literally was making two x, then my PITI and I realized that. Wow. And for the first six months I thought maybe I’m just lucky I have to wait for the December cycle to go when the leases are up. Maybe I won’t find anything in January, but boy, I was wrong. There are people always moving for a postdoc for a spring semester or some courses at Harvard or even internships. And the flow just kept coming in. And then very quickly I just doubled down on that approach and provided that extra KCI art service, if you will, professional deep cleaning services, change of sheets, pillows, maintenance service resolved in less than 24 hours. So it’s that Ritz experience, but on a lower budget if you think about it, which never attended has seen.

Dave :
Wow. Okay. I have a lot of questions about this. First I want to just explain what Anki said if you’ve never heard of PITI. It stands for principal interest taxes and Insurance. It’s just when you wrap your insurance and taxes into your mortgage payment, it’s sort of the full package PITI. And it sounds like Ankit was doing double his PITI, which is typically your biggest expense, so that’s very impressive. But I want to just clarify what you said. So in Cambridge, you can only sign a 12 month lease, but basically you sort of got around that by saying to prospective tenants, you sign a 12 month lease, but if you want to move out in six months, I’m going to let you out. And in exchange for that flexibility and generosity on your part, you will charge a bit more than the normal rent rate. Is that what you did?

Ankit :
That is correct, yeah. But I wouldn’t allow my tenants to sign a 12 month lease. If they want a four month lease, they have to log in at this point. So I know in January or February I have to start posting and start looking for tenants. So I wouldn’t wait for them to tell me, you have to tell me today so we can adjust the rate accordingly and charge you. This is brilliant. If I can just add one more comment. My comparison was honestly as myself when I moved first to the city, if not in a rental apartment, I was looking at Airbnbs or hotels, and the price difference was enormous. So I realized there is a gray area between your long-term rental amount that you pay versus your Airbnb or Huling charges, right? There’s this gray area where I could potentially explore and dominate.

Dave :
Wow, so you basically created your own midterm rental market in a way. This is brilliant kid. I’m super impressed. Did you just come up with this idea on your own?

Ankit :
Yes, I did. I mean, I was so amazed that there is a term called MTR after this and all that. I had no idea. I came this on my own personal experience. I just thought to replicate that and solve all their toilet clogs or internet issues or whatever they need.

Dave :
Wow, that’s unbelievable. And were you self-managing during this time?

Ankit :
Yeah, for the first few ones, initially, self-managing because I had no idea in terms of what are the types of services my tenants could need, things like snow removal was completely new to me. Moving from la, a beach boy, I had no idea of snow. Snow cleaning and Boston is a beast in more than six months, in a year you have snow, so that’s the service you need and property management. So for the first few time, I didn’t do all these on my personal house, but I did for my at tenant house. And until there I tell them, you guys are really lucky.

Dave :
Well, this makes your journey to outsourcing this management even more interesting, because I imagine it would be difficult to find a property manager who could take this over easily because you sort of invented a whole new style of lease and service. Was it hard finding someone? Did you have to train someone from scratch?

Ankit :
That’s the beauty I was not finding I was creating because I knew this is such a niche space. Even when I was explaining to leasing agents and property manager, they were like, wait, what you’re doing only three month lease six months and then have to do this again? This is so much work or this is not, you don’t do this in Boston. And there were just so many nos and whys and I didn’t even bother to waste my time and energy because like I said, I had a day job. This is my side hustle, the way I started this, just spending one to two hours on a daily basis. So I thought to create this team, so I created a concierge team, a lead generation team, a maintenance team, and I trained this individual. Basically. There’s a quote that I read in one of your previous guests.

Ankit :
One of the guests had said that there’s a big difference between working in the business and working on the business. And initially I was working in the business, so I took a step back and I broke my job duties in different components and I realized that hey, I do this concierge service, let me have a person dedicated for that one person for maintenance, and the lead generation, a showings person, because Boston is such an area where there’s a lot of scams going on in terms of there’s no real houses. Agents try to all those things everywhere in the world. So people want to see the place. So I had a showing team to do that. So with time I started breaking my role into these different components and started to train people in-house completely. Even the cleaning team, we provide professional deep cleaning service. Everybody does a good job in keeping the place clean, but if you do deep cleaning, it adds that extra bonus to the tenants. So we started building those capabilities in-house over time.

Dave :
Wow, that’s super, super impressive. Especially because you were working full time, right? You were in the process of developing a Covid vaccine while you were doing all this. Unbelievable. Well, in addition to the systems which are super impressive, I think one of the main lessons I hope everyone listening is taking away from this is how Ankit really understood his customers and what they need. We often in real estate talk about landlords and tenants, but it’s no different from any other business. We are business owners and we have to provide a service to our customers. And it sounds like Ankit found a real niche inside of his customer base that people needed and wasn’t being offered because of regulation in a city. And so there is this amazing opportunity when you’re the one who does the work to find that niche and can offer something truly needed, something special, something people are willing to pay extra money for.

Dave :
So I just want to commend you on that on kid. And I know that there’s no way to easily replicate this in every city. Obviously Cambridge has this unique thing, but the mindset here is replicable and applicable to almost every situation. If you try and put yourself into the shoes of your prospective tenants, your prospective buyers, you are usually able to find better opportunities then if you’re just carbon copying what everyone else is doing in your market. Alright, Anki, so let’s move on. So in 2020, you were doing all this amazing stuff, which obviously the pandemic came with its own set of challenges. It was easier in some regards because interest rates were super low. So tell me how as interest rates have evolved over the last few years, how you have grown your business

Ankit :
Interest rate has been my best friend and I don’t get scared by them being a numbers person, right? If I can crunch the numbers and understand the value, not today cash flowing, but over a period of time that can really make sense. I’ll give you a very good example. That is a high interest example. It was a property in Philadelphia around half a million price point during pandemic that we were trying to expand in another geography where you have these amazing schools and grad students and everything to start something similar and interest rates were higher. We approached the seller and they were not ready to reduce the price down. And we thought that, alright, we will try to make this work. It’s a new area. And we did the inspection of the new construction house here. We’re talking about interest rate at this point around seven, 8% when it had gone up, we did the inspection, it’s a new construction and we saw four or five major issues even in a new house.

Ankit :
I told the seller that, Hey, your house has major issues. I’m not going to pay this top dollar price. I will give you this price and I would ask you to fix all these issues. And the seller was arrogant in a way where he was like, I’m not going to do it. And I’m like, that’s fine. I’m not tied to this city or this house. It’s not for my personal, it’s an investment. That’s fine. This was a December timeframe right around Christmas. So me and my wife, we had our vacation planned in Paris for a month. So we went to Paris, we left the seller that even though we put a lot of money in inspection and all these things, no thank you. We bow down from a sunk strategy perspective, we don’t want to put more money in to just recoup that money. So we went in Paris, we were enjoying our New Year’s over there and one fine day we get a call from the sellers that, Hey, I’m ready to fix these issues.

Ankit :
Are you still going to buy it? And we told them that, Hey, we are in Paris right now. We are not in the country, but you know what? I will buy it. But you have to bring the price to this price point and you will be amazed Dave, sometimes all it takes is to ask them. The seller was so open at this point, he was telling me that you guys want to leave. I have a really high restaurant and I’ve been trying to sell this property for over four or five months and it’s just killing me. I just want somebody to take this from my neck to somebody. I just don’t want to deal with this house anymore. And that’s when I realized it’s an opportunity for me to help him and also make a win-win scenario for me. And that’s what excited me, right?

Ankit :
So what I proposed him is a completely unique approach and from a creative finance learning from BiggerPockets, obviously what I told him that I will do a seller financing deal for 12 month period balloon period. I didn’t know what balloon payment was. Absolutely. So I had to learn on the go. It was building the plane and flying the plane at the same time. So balloon payment means after 12 months I will pay him the entire principle that is remaining. So what ended up happening is I told him, I’ll make you interest only payments for 12 months, and after that I will get a typical traditional lender and refinance it and give it to them. And the best part was I told him, even the down payment, I will not pay you together because all he was looking for is to get rid of that high interest monthly payment.

Ankit :
So I told him, I’ll pay you the down payment, which is 20% of that purchase price in 10% every six months. And he agreed. So we got this property at an amazing discounted rate of 380 k going down from 4 4 50, and I only paid him 38,000, which is 10% on the day of closing and 10% after six months. And every month we had an interest only payment for six and a half interest rate around 1600 a month. And I immediately opened an Airbnb and I was cash flowing from day one. 1600 a month is peanuts. If you think about it for a market like Philadelphia.

Dave :
Wow, okay. There’s a lot to unpack there. So just so I understand, first great deal finding strategy. Just being patient honestly does so much. If you just ask, you put yourself out there enough times and if you’re patient, these types of deals start coming to you. It’s not going to work with every deal. But if you play the numbers game, these types of things start working out for you over the long run. But let me just understand the creative finance here. So the restriction is you wanted to put down less money. I’m just curious why not just buy it out right away and just get it over with? Why come up with this creative but somewhat complicated structure that you used?

Ankit :
The beauty is to use as little cash as possible and use that other savings or cash that you have to deploy in other parts of business. Could be hiding a team, could be investing in house number two could be exploring another area or even just as simple as putting in stock market and having that few percent return for that six months rather than giving that seller that 10% that if I can hold onto my money for a little bit more, I can make some little more percentage to that. So that’s the whole idea of getting your maximum ROI and being a numbers person, I formulate this complicated structure as easy as possible. So it’s very simple for the seller to see what’s in it for them and where I’m coming from and if these deal makes sense for them.

Dave :
How much communication did it take to hammer out this deal? Because it sounds like you did something great, which is finding a mutually beneficial situation where something that worked for you reduced the amount of cash you had to invest, allowed you to cashflow from day one, but you also created a situation to get the seller specifically what he wanted, which was money to pay off this high interest loan. Were you guys constantly negotiating? What was that discussion like?

Ankit :
It was not that difficult. It all, it required to be patient like you said, and to hear out what is it exactly he’s looking for. So he had a high interest rate of around 5%. I told him I’ll pay you 6.5% so you’ll have that extra cashflow, right? So rather than he paying off his hard money lender, he would get that extra cashflow and then he’s getting this 10% upfront payment that he could use for his Christmas or new year with his family, and then the next 10% he will get in six months and the other 80% he’s guaranteed to get that in 12 months. As long as he is leaving that obligation out and he’s making a little positive cash on that, it works for him. And it worked for me also by not putting that extra 10% out. I could force appreciate that house by putting an amazing STR features and amenities.

Ankit :
So by the time at that end of 12 months when I go to a traditional lender to refinance it, I force appreciate that house. And that’s exactly what happened. And at the end of 12 months, I again went to BiggerPockets, looked for lenders by sharing my situation that, hey, I had a balloon payment coming up. I need to find a lender, can anybody help? And the community is so amazing. I had so many outreach from different banks and mortgages and one of them whom I work with now for many, many deals, they said, yeah, we’ll do it. No problem. And you’ll be amazed in 12 months it almost doubled in value because of this creative approach that I did. And then what I did, so the house purchased was 380 K, and when the appreciation came in with the lender, it came at five 60 K. So I essentially pulled out almost one 60 to one 70 K off that house, which I used to fund another creative finance deal in Florida. And then this one was a cash flowing beast is a well machine.

Dave :
Unreal, amazing deal. That’s a great example. Thank you for sharing that with us. And Kate, you sound like a guy who understands the time value of money, which is not exactly something we have time to get into today. Maybe we’ll do another episode on that. But this idea of figuring out how to use every dollar you have as efficiently as possible, you don’t have to do this on your first deal. I think when you’re doing your first deal, it’s honestly better to just do something that’s relatively simple, figure it out. But as you progress as an investor, this to me at least is the fun part. It’s almost like a game where you’re still buying the same houses, you’re doing the same kind of deals, but you come up with these little strategies, these little tricks that help you eek out a better and better return. And I’m kidding, it sounds like you’ve learned to do that relatively quickly in your career. Okay, we’ve got to take one last break, then we’ll be back with more from this incredible investor journey. Welcome back to the BiggerPockets podcast. Let’s jump back in with on Kitt Loda. So are all the deals you’re doing now creative finance?

Ankit :
Most of them, yes. Yeah, because it takes a lot of time as you would imagine after your typical W2, your blood, sweat and tear to save up the money. And there’s emergency requirements and funding so you can typically buy, and also from a debt to income ratio perspective, it’s like one house maybe in a year or two year at the max depending on your income and debt to income profile. So now we are forcing ourselves more into the creative side of business and every two years when we clear up have that rental history to show from a tax return perspective, we then buy a typical investment property once the savings and DTI are met.

Dave :
So you’re doing both, you’re sort of grinding a little bit with the creative finance and then as you can afford the traditional, I assume long-term rental kind of deals, similar types of business plans, you buy those. That’s super cool. I’m curious on ki because honestly, I’ve been investing for 15 years and I have never even asked someone to do seller financing to be perfectly candid. And I’ve done some off market deals, but I’ve never even inquired. I would probably think about it more now, but how do you get that confidence? It seems like you were learning on the fly, but you were willing to take on one of the more challenging or daunting elements of deal finding in today’s environment.

Ankit :
Whenever I look at an MLS listing or talk to an agent or a property, I don’t approach that, Hey, I’m going to target this one as creative finance or an investment. I never do that, right? I let numbers do the talking. And what I mean by that is, and I’m sure to walk you through my entire journey, there was a house in Florida that we saw, we just loved it. It was an amazing house at the canal with a dock, a pool and everything. When I saw that house, we were really in love with it. What I mean by love with it from a number standpoint, it just made sense. At that point we start to realize that, hey, is it a good investment property with 25% down or is it a good vacation home that we could use on a personal name or can we do a creative financing?

Ankit :
And we try that approach. So in this example for Florida, we asked the agent that, Hey, what is the seller looking from a price standpoint? And we got to know, just by having these human conversation, we got to know that it’s an older woman. She’s looking to stay closer to her daughter and all she’s looking is 3000 a month. So she can use that payment for staying closer to her own daughter. And I realized, wow, maybe this is an opportunity. The seller didn’t come saying with a banner that, Hey, I will do seller financing. No, no, she didn’t do that, right? So what I had to do is basically come up with a plan and come up with the numbers. Again, back calculating being a numbers person. How can I make a deal work where she gets 3000 a month and she didn’t want a huge tax payment also altogether, which didn’t say in the first, but I proposed that as a benefit.

Ankit :
So what I ended up doing is I made a proposal that I’ll pay you 3000 a month, which comes around to four and a half interest rate, whatever. So she has little bit money, I’ll buy the house at her price or even a little bit more if she wants. She’ll get the cash every month, we’ll do seller financing for three years. Learning from my Philadelphia example, I realized 12 months was too short, right? You don’t always get a property doubled so quickly. Maybe I got lucky with that one. Taking advice from all of your previous interviews, I thought let’s do a three year balloon payment this time with a low interest rate and then for the down payment rather than the 10%, six months, I took that to the next level and I propose it doesn’t hurt to ask at the max, you’ll just say no.

Ankit :
So I proposed that a 5% down payment plan every quarter for the first 12 months. She had as little hesitation in terms of trust that how will I believe that you will pay me because it’s not a traditional lender and everything. So I showed her my portfolio, our reviews online and our company’s finance sheets and everything. And then the trust was built at that human to human level. And she agreed, and she in fact said that this will actually work in benefit for her by not having that entire cash together from a tax perspective. If she can break that five, 5%, which is 35,000 every quarter, and that cashflow for the next three years is just an ideal scenario for her and even for me, where in three years I could make an amazing Airbnb, have those numbers and first appreciate and refinance it at a later time.

Dave :
Man, and Kate, you are one of the more creative investors I have spoken to on this podcast, and I don’t say that lightly, but I really appreciate your approach to this because we were talking earlier, yeah, you’re a business, there’s customers and you treat your tenant like a customer and try and find the right situation. But what you’re talking about is treating the seller like a customer too. You truly understood what the seller was looking for and did a lot of work and put in a lot of effort to figure out how you could create a mutually beneficial situation. And I love that because you’re not taking advantage of anyone. You’re helping the seller figure out and get what they want and you’re getting what you want. To me, that’s the perfect type of real estate deal where everyone is getting exactly what they want. So want to commend you on that seller finance and creative finance. It sounds great, it sounds amazing all the time, but there are risks to it. So I’m curious if you have any examples of times where it didn’t work out for you or any cautionary tales that the audience should look out for if they’re doing a seller finance dealer looking to do creative finance.

Ankit :
I think there was a deal in Florida itself that we were looking where it was a creative financer similar to this 5% down payment model. It was a million dollar property the seller had agreed, right, because nobody was buying their house. But one thing to be caution in seller financing is she was selling me this house where the title was not getting transferred out or I was not getting an ownership. It was more of a lease to own model. So she agreed that, okay, you can pay me this fixed amount of money per month for X amount of years, and after that, we will do the closing. If me or my company’s name is not on that title or not on that house, I don’t want to do it. And I’ll tell you why. Even for making small renovations or updates or even installing a security camera system such as a DT, the first thing they ask is the house in your name, right?

Ankit :
If not, then you need to get approval. Then I’m not going to hunt that seller down wherever they are in the world to add a wall or add a pool or something. I’m buying the house. I’m investing my hard earned money and soul and time in that house. I want full control of it. So what I encourage people is the devil is always in the details. It’s not only the numbers, but also the qualitative information where sometimes there are some sellers which are sharks and they’re there for the blood and they just want to make the deal work for them, and they could anchor you in a lease to own option, which is good for certain business models. But if you are thinking in a lease to own, you will have the full control. And then insurance becomes a completely different challenge, right? In Florida, which is prone to hurricanes and storms.

Ankit :
If that hits what happens in that case, right? I am the tenant and the landlord, but I’ve owned the property, so which insurance policy kicks in and who kicks the can? And with all that time, my roof would still be open and prone to more damage over time. So there are these so many unknowns to be cautioned of. So you have to really take small baby steps and not approach as a house that, Hey, I’m going to do this creative finance on this one. I could buy a house outright with 25% any point by raising money and other things. But take time, have that patience. Look at the fine print, have the best of the lawyers. Don’t be just a person with an opinion in the room. Have all these veterans and experts to support you in your journey.

Dave :
That’s great advice. And especially with these seller finance deals, just hearing you speak and you do a great job explaining it simply, it can get complicated really quickly with all of the different deeds, titles, insurance policy, it’s complicated. Especially if you’re new to it, totally agree with on kit, it’s absolutely worth figuring out hiring people, spending the money to make sure that you truly understand what you’re buying, the situation you’re getting into, so no one gets screwed over whether yourself or the seller. You don’t want to create that situation. You want to make sure everyone’s crystal clear on what kind of deal they’re getting themselves into. I could ask you questions all day, but we got to wrap this show soon. So I want to turn to just ask you about your vision. What are you looking forward to? What are you trying to create in the next few years?

Ankit :
I’m really excited to create a portfolio of properties which solves people problem in the corporate leasing or student housing section or wait vacation. My vision is to really provide that customer experience, that Ritz Carlton experience, when you go in Paris, you have that service, right? I really want to give that level of service to all my tenants, not only just on short-term rentals, but also on long-term rentals and medium term rentals. So the goal is to build the portfolio creatively because let’s say I get a lottery of a hundred million, I could buy a half a billion portfolio in one day, right? But that’s not the goal. That doesn’t build the character, right? The character comes in gradual progress in going through these learnings. So my goal is to go through these bumps and these experiences in the next few years to have that personality and character build up to be able to manage that remotely. And one day I could sit with you in Amsterdam and we could go for a waffle together while our portfolio is in us.

Dave :
Awesome. I love that. Well, it sounds like you’re well on your way, and I love the mission. I think it’s so important to think about everyone who’s involved with your business and make sure that everyone is getting mutual benefit. This is what being a good business person is all about, whether it’s your tenants, your real estate agent, your lender, the seller. I think you do a great job of exemplifying one of the core values we have here at BiggerPockets, which is mutually beneficial investing, and I think you’re doing it all the right way and you’re clearly doing it in a profitable way. So everyone’s winning. So thank you Ankit, for joining us today. For everyone who wants to connect with Ankit, we’ll put his contact information below, and of course, it sounds like you’re pretty active in the BiggerPockets forums and community, so you can also find him there.

Ankit :
Thank you so much, Dave.

Dave :
Thank you all so much for listening for BiggerPockets, I am Dave Meyer. We’ll see you soon.