Chad Duval: You’re listening to Start FM, Episode Number 12. Hey guys. Have you guys ever had just like a crazy emotionally draining day? That is basically how today was for me. I had to rush home real quick to do a quick intro for this next podcast that I’m super excited about. But yeah, today was crazy. I went to bed last night and checked the weather for Connecticut in the area where the duplex is and when I went to bed, it said the low temperature was going to be 26 degrees.

Chad Duval: So, historically with that property, that’s no big deal. There’s no frozen pipe issues, there’s no issues with the property. But when I woke up this morning, I checked it again, and it said it was only 16 degrees. So I kind of panicked. I ended up renting a car and rushing down to the property because in the past, if the basement of that property, the accessory unit doesn’t have the heat on, it usually has … There’s an issue with a few of the pipes that are on the outside wall of the property that end up starting to freeze.

Chad Duval: So, being that the property is vacant right now because we’re trying to sell it, I was a little concerned because I don’t know if the realtors have played with any of the heat. So, I rushed down there today. Thank God everything was fine ultimately, but for the first half of the day, I guess it was a two hour drive, so a two hour drive and then the hour to go get the car and everything was kind of a stressful couple of hours. I feel super emotionally drained.

Chad Duval: You’re probably asking yourself, why the hell are you sharing this? Well, through this whole process, because I’ve had all these issues with frozen pipes in that unit, I wanted to share a quick little tip for you guys. If you live in the northeast or anywhere where it gets cold, and you’re worried about pipes freezing and it starts getting really cold especially once you get into January and February when temperatures go below zero. And they’re always screaming about wind chills and frozen pipes, a quick little hack to avoid any frozen pipes is to have all of your faucets, have them actually dripping a little bit so that you actually keep the water moving within the pipes of the property.

Chad Duval: It’s a lot harder to freeze moving water than if it was to just sit still all night. And also another little trick that I’ve started doing too is actually start opening up the vanity doors for those faucets. It allows some of the warmer air to actually get to those pipes as well. So, that’s my little tip today. It all stemmed from a crazy drive down to Connecticut.

Chad Duval: So with that, I wanted to share two quick sponsors with you. Again, as you guys have been listening, two sponsors of the show are Buildium and HoneyBook. Buildium, if you guys are looking to take it to the next step with your properties, it’s a good software that I used on my first couple of properties when I was up to like 10 units. It’s really cheap. I think it’s only 20 bucks a month. There’s some plans like that, but if you guys want a discount, just go to chadduval.com/buildium, and we’ve worked together and got you guys a free trial for two weeks. So go to chadduval.com/buildium and check it out.

Chad Duval: And then also the second sponsor is HoneyBook. I reached out to them because I just started using them because I have so many different projects going on and it’s hard for me to keep track of everything, financing, invoices, the books, project management, all that stuff because I have a lot of different projects going on. So I reached out to them and they’re giving away a whole year for 50% off. All you have to do is just go to share.honeybook.com/startfm.

Chad Duval: And also just to give you guys a little bit of insight. I’m actually working with two other companies, companies that I use a lot of. I don’t know if you guys are familiar with Blind Barber or 47 Brand clothing and hats. Those two companies I’m in contact with to try and get you guys some discounts as well. Especially that Blind Barber. Beard Balm I’ve been using it ever since I’ve been growing my beard for the past year, absolutely love it and actually reached out to them and it seems like we might actually be able to get you guys some discounts. So keep an eye out for that.

Chad Duval: And with that being said, today’s guest is David Pere. He’s a marine for over 10 years. He’s got a lot of good tips on VA loans. I’m not sure if you guys are familiar with that. It’s a very low down payment loan. It’s kind of like an FHA loan. He’s got a lot of good tips about that. He’s got a great story. So I hope you guys enjoy this interview.

Automated: This is Start FM. Now, here’s your host, active real estate investor and entrepreneur, Chad Duval.

Chad Duval: David Pere, how are you doing, man? Welcome to the show.

David Pere: Hey, brother. I’m doing well, yourself? Thanks for having me.

Chad Duval: Good. Good. Trying to stay warm over here. It’s lightly snowing outside. I’m kind of jealous because you’re in San Diego.

David Pere: Yeah, my family had like they were all posted about snow days today, and I’m like, yeah, it’s going to be 70 or 80.

Chad Duval: Oh, man. Yeah. Where’s your family? Over here on the East Coast?

David Pere: Missouri right now.

Chad Duval: Oh, yeah. Yeah, it’s crazy, man. All kinds of snow going on. I feel like it’s really early this year.

David Pere: Yeah. I mean, I like it. I kind of miss it like after being … Not that I can complain about being in Hawaii for the last three years. But like I haven’t really … It hasn’t really felt like Christmas in probably the last like four Christmases for me. It’s just not the same.

Chad Duval: Yeah, no, totally. When I lived in California, I had the same issues. I was like this does not feel like Christmas at all. We’re laying at the pool on Christmas day. It’s just not the same.

David Pere: Yeah, it’s not something to really complain about, but at the same time I miss some sledding and snowball fights and like hot cocoa and all the other good stuff, and I don’t know, spiced drinks like cider.

Chad Duval: Yeah, exactly, exactly. Well, perfect man. Thanks again for being on the show. For everybody who’s listening who doesn’t know who David Pere is, why don’t you give a little bit of a background, who you are and how you got started in real estate?

David Pere: Yeah. I joined the Marine Corps in 2008. So I’ve been in the military for 11 years now. I kind of traveled the world. I do logistics for the Marine Corps. I’ve lived in Japan, San Diego, Missouri, Hawaii, San Diego, bunch of other countries I’ve visited, been to Afghanistan on a combat tour, all that normal good stuff.

David Pere: And then it was 2015 and I was on recruiting duty in Missouri and someone handed me the book Rich Dad Poor Dad, I kind of jokingly was like ah, I don’t read like, meh. Get that thing away from me. Man, I kid you not, this dude, like straight pulled a CD out of his pocket and handed it to me and was like, “Well, I’ve got it on disk, so you can listen to it while you drive. And I know you drive a lot on recruiting.” I was like [inaudible 00:07:11].

Chad Duval: There was no way out of it.

David Pere: All right, well, fine. So I listened to it, but with the intent of being like, I listened to it, it was dumb. Don’t make me read anything else. I listened to it, and then I listened to a book from Brandon Turner, then I listened to another book from Brandon Turner. And then I mean, within three months, I bought a duplex. So it definitely changed my life, which is funny because I tried to find that guy last time I was home and apparently he did not have some … He ended up not having some good fortune, and I guess he’s in jail right now.

Chad Duval: Oh, no.

David Pere: I was going to try to thank him and tell him like, thanks for changing my life. But at this point, I think it’s probably better I don’t associate.

Chad Duval: Right. Right. Wow. So you jumped right in within a couple of months. That’s I feel like a lot faster than most people. That’s crazy.

David Pere: I had a lease coming up on the apartment and prices in Missouri aren’t that bad. So it was really easy I think compared, like if I’d been in San Diego or Hawaii, it would not have been that fast because buying a 500,000, $700,000 home is a little bit more emotionally, I guess, taxing than buying an $81,000 duplexes. I went from $550 a month for the apartment to like 615 for a mortgage. So it really wasn’t that terrible of a leap of faith because it was like, wow, the worst case scenario, it’s less than $100 more than I was spending already to live, so whatever.

Chad Duval: So you jumped into, how did you finance that deal?

David Pere: I used the FHA loan. I should have probably used the VA loan, but my lender talked me out of it and talked me into the FHA loan. So basically, his reasoning was like, oh, well, you don’t want to waste your VA loan on this but like, okay, I got that but I mean, I can always reuse my VA loan another time, which is not what he told me. He did not mention that portion. So it is what it is.

David Pere: So, I used the FHA loan, which is still only three and a half percent down at the time, I still got a decent interest rate. It’s probably cost me a decent amount more than the VA loan would over the years with like the private mortgage insurance. But it was still a very simple, not much money out of pocket to buy. I mean, it was less than four grand out of pocket to close on this property with everything.

Chad Duval: So for anybody who’s listening and is not familiar with FHA and VA loans, what’s the difference between both of those? Because I know they’re both generally a small down payment, but is there any other differences to them?

David Pere: Yeah, they’re both owner occupied, primary residence mortgages, basically designed to help homeowners get into their first house without having to have 20, 25% down. The biggest difference amongst others is that the FHA loan, so when you don’t put 20% down on a mortgage, you’re required to pay private mortgage insurance, which is basically the bank’s way of covering their butt for lending more than 80% to you.

David Pere: The FHA loan still requires that, and so for my duplex that’s like an extra $57, $81, I can’t even remember, something, 50 to 100 bucks out of pocket every month that I’m paying for this insurance. Well, the VA loan is the portion. So it’s 25% of the loan is backed by the veterans, the Department of Veteran Affairs, so the VA, and so because they back it, there’s no need for the insurance, so you’re not paying that.

David Pere: So the VA loan is actually zero down or can be zero down. I mean, you can still put money down if you want, but it’s zero down up to a certain amount. And then once you hit that limit, it’s 25% down of the amount over that limit, and that varies by zip code, but that limit actually goes away depending on when this airs. It might have already gone away, because January 1st that limit’s gone.

David Pere: So theoretically, you could buy a $1.2 million home, and it wouldn’t come out of your limit. You’d be totally cool doing that, and you could do zero down. There’s no private mortgage insurance required. There is a funding fee, which is, I’m going to mess up the numbers, but it’s like two to three and a half percent depending on if it’s your first time or second time buying a VA loan home. It’s wrapped into the mortgage. But that’s waived if you have 10% disability, and there are some other stipulations in there.

David Pere: But even still, even at like the 3.3 or 3.4%, whatever the higher rate is on the funding fee, I did the math and it still comes out as less that you’re paying in addition to your principal than the PMI is. So it’s still a better deal, in my opinion. I think you can buy that down if you put a certain percentage down on the property. So there’s all kinds of ways around that.

Chad Duval: I see. So now what’s the qualifications for a VA loan? I mean, is there a certain tenure that you need to be in a military service to get it approved for that?

David Pere: There are a couple of stipulations. For those listening, I’m not looking at the handbook right now or a lender, so if I get some of these backwards, don’t mess me up, or don’t get mad at me. The basic premise, it’s two years in the military, you have to have done two years in the military I believe prior to using the VA loan.

David Pere: If you’re in the reserves, it’s different, like you have to have done a full six years or it has to have equaled a certain amount of days on active duty while you’ve been in the reserves. So days training and stuff have to add up to whatever that amount of your time is. It’s kind of they do their system a little different. So I’m not 100% on it.

David Pere: But yeah, you have to be a veteran of the military, and there’s no … A lot of people think that it’s stopped, like there’s a lot of older veterans who don’t realize that they reversed the law back in the day and it applies for like everyone for all time. So there’s no like had to be grandfathered in. Everyone’s grandfathered in. So there’s a lot of older veterans that don’t realize they’re eligible for it and actually are because of some changes that came up, I think back in the ’90s.

Chad Duval: Oh, wow. So you have to be active. Now, are you able to … I think we were talking earlier, you can recycle those loans, or can you have multiple at the same time?

David Pere: Yes. And yes, there are some stipulations. So I can’t take out like if I bought the home I’m in right now with the VA loan, and then I bought the home next door with the VA loan, I wouldn’t be able to do that.

Chad Duval: I got you.

David Pere: If I bought the one I’m in right now and then I got stationed more than 50 miles away, I could buy one there. Or if I say this was like a one bed, one bath or two bed, one bath and I got married and had three kids is like okay, well, I can still buy one in the same area with VA loan because I need to upgrade for quality of life, to maybe a three bed, two bath or a four, three or whatever. So there’s stipulations like that.

David Pere: The other thing is you can always just refinance out of it. So, once you refinance out of it, then it essentially resets, and so you can refinance into a conventional loan or whatever and go use a VA loan elsewhere. And then obviously, if you sell, it resets and stuff like that. There are some ways around. The basic premise is you need to intend and that’s the word intend to live in the property for a reasonable period of time, which is generally assumed to be about a year. But they understand stuff comes up.

Chad Duval: Right. Yeah. So it sounds like it’s very similar to the FHA then. Because I think with FHA, you can definitely move out after a year, but then also too, you can get a second FHA loan if you get relocated, I think for work and stuff like that. So, yes, there’s always like ways around it, but I guess it sounds like a really good way. You just jump into it for a year and then refi out and then keep kind of rinse and repeating and growing your portfolio that way. Might be a good strategy for a lot of people looking to get into the game that are in the military. So you did this duplex. Do you still have the duplex now?

David Pere: I do.

Chad Duval: You do. I think from your story, you said that you house hacked it. So you bought it, you lived on one side and rented out the other. I wanted to walk through that process because I have a very similar process to that, and story to that. It’s the first property you owned, so there’s a big learning curve to that as being a landlord. And so I was curious, do you recommend house hacking? And do you enjoy living with your tenants in the same property?

David Pere: I absolutely recommend house hacking, because housing expenses are our biggest expense in just ever, for most people. And so when you house hack and you can mitigate your expenses, that’s huge. I mean, that’s the fastest way to start saving more money. Also, it takes a special person to live next to a tenant. I would say the best advice I can give you is to not let your tenant know that you are the person who owns the property.

Chad Duval: That’s such good advice.

David Pere: So if you want to self manage … What was that?

Chad Duval: That’s such good advice.

David Pere: Oh yeah, if you want to self manage, by all means, you go save your 7% or 8%, or whatever. For me, I’m going to hire a property manager and I’m going to tell them that nobody knows I own the house. And that is because I don’t want the tenants to talk to me. If you do that, it’s no different than living in an apartment or living in a duplex with a normal neighbor. Because they don’t know that they can bug you about stuff. The moment they know that you own the place, they aren’t going to care if you want them to talk to the property manager. They’re going to bring crap straight to you and you’re going to have to deal with it. And that’s just no.

Chad Duval: Right, right. Yeah, I mean, everything, I had the same experience too. I mean, everything from a light bulb is out to my toilet is clogged, everything. If they see you, they will talk to you. A lot of times too, the things that they bring to you, they wouldn’t bring to you otherwise unless they saw you. So it’s a weird scenario. So, yeah, so duplex, house hacking. And then where did your investing career go from that property?

David Pere: From there, I got stationed in Hawaii and then while in Hawaii, I bought some raw land. I mean, that wasn’t necessarily an investment. That was more like the guy next door to my house was selling his house and he had 10 acres, and I convinced him to sell me the five of it that was adjacent to my five acres, because I would rather own all 10 than deal with whoever was on the other side. I didn’t really know what that was going to look like. So I didn’t want to deal with it. So I did that. And then I bought a 10 unit was the next physical rental property.

Chad Duval: Wow. Wow. That’s a huge jump from two to 10. Do you want to walk us through that process? Actually, two things. How did you change your mindset from going from a duplex to a 10 unit? And then also yeah, let’s jump into how you actually found that 10 unit.

David Pere: My answers are going to be super uninspirational here.

Chad Duval: It’s okay. That’s how it happened.

David Pere: I didn’t really change my mindset because I didn’t plan on it. I didn’t really look for it. It kind of fell in my lap. I was looking for duplexes, triplexes and fourplexes, and I was doing direct mail marketing. Not much, but I basically printed off a list, hand wrote like 120 letters, which by the way, I get it, you get a higher response rate for handwritten notes.

David Pere: But do yourself a favor, unless that is like the property and you want to do everything in your power to talk to that specific owner because you think this is like the deal of a lifetime. Print your damn letters. Don’t hand … It took me like, I was on a 24 hour duty assignment and between hand cramps and everything else and like just taking breaks, I still didn’t get all 120. It took me like four days to write these 120 letters.

Chad Duval: Yeah. That’s so much work. Oh my God.

David Pere: And for an extra 10% return rate like, not worth it.

Chad Duval: Yeah.

David Pere: I mean, whatever. Anyway, so one of these guys calls me back and he’s like, “Yeah, I have a duplex, but I don’t want to sell it.” I’m like, “Okay great. Like, why are you calling me, right?” He was like, “I have a 10 unit though.” And that was like off to the races. I was like, “Oh, well, let’s talk,” and then I happened to be home for Christmas like two weeks later. I got to look at one of the units, maybe two, and the outside and that was about the extent and we wrote an offer, agreed and went from there.

Chad Duval: Oh, wow. That’s awesome. That’s awesome. Yes, it’s really funny. Like, you never know what you’re going to come across when you’re actually putting yourself out there. So that’s a huge tip for everybody listening is to … It’s something I say a lot. It’s like you have to take that first step and you can’t wait for all the green lights and traffic to turn green for you to take that first turn or whatever.

Chad Duval: Once you start sending out letters, if you start putting yourself out there talking to people, I found deals through my furnace guy just by talking about stuff. This is a good testament to that strategy. For those yellow letters, because I’ve never actually used a service before, because I haven’t usually sent out a ton of yellow letters. It’s usually like what you were saying, I have like a very specific few properties that I’ve been trying to get after. And those are the ones that I do the yellow letters for. Is there certain services that you’d recommend people to use if they are interested in sending out yellow letters to potential properties?

David Pere: I mean, I recommend ListSource as far as pulling lists, unless you’re doing driving for dollars and stuff. But as far as the actual sending out, I mean, I’ve heard like yellow letters or whatever it’s called dot com. But what I’ve done is I basically just typed it up in a font that it doesn’t really look that handwritten, let’s be honest, but somewhat handwritten. And I just do blue ink and print through my printer, and I sign.

David Pere: What I do is I always make sure that I sign it myself and in blue. A lot of times I’ll sign it, it really just depends on my mood. Sometimes I’ll sign it, and then hand write my email and phone number instead of printing my email and phone number. I haven’t really noticed any difference in whether I hand write the email or the phone number. So now I just print everything and just sign under my name or over my name or whatever. And then the one thing you should never not do, you should always hand write the address on the front.

David Pere: Always hand write the name and the address on the envelope because if it’s not, and they don’t know who you are, like they have a really good chance to just throw it away. So the name of the game is getting them to open the envelope. I think they care more about that than whether the letter itself is handwritten or just signed.

David Pere: I mean, I’ve seen some weird, I mean, people do some strange … Some people do no return address because they just … I mean, they probably get a much better open rate that way because it piques people’s curiosity. But I kind of like the return address because I like to get one or two back so that I have like one of every mail out I’ve ever done, I’ve had one that came back returned and I’ve kept it unopened. So like someday down the road, maybe I don’t know what I’m going to do with it. But I’ll have like this stack of unopened returned letters I sent out and I have no idea what that means, but I just kept them.

Chad Duval: Well, then at least I mean, I would use it. I mean, if you’re getting stuff back, at least you can knock that address off of your list and not mail to it again, and not wasting it going forward.

David Pere: Absolutely.

Chad Duval: But no, it’s a good strategy. I like that. I mean, now that you say that looking at all the mail that I get on a daily basis, 99% of the stuff that’s not handwritten is going in the trash. So that’s a really good little tip for everybody. With your 10 units, do you have any like value add plans that you’re looking to implement with that property? Or it’s basically a plug and play. You bought it so well and everything’s pretty much in tip top shape, you’re just going to collect cash flow.

David Pere: I did a little value add for it. I’ve done some small updates here and there. I painted the exterior and I redid the fascia on the roof, and I repainted some trim, and I’ve done a couple of windows. The exterior of the building looks a little nicer. Other than that, I mean, there really hasn’t been too much that I’ve done to it other than like routine stuff.

David Pere: Until recently, I’ve had a banner month where I blew a furnace which isn’t too bad. I mean, we had budgeted for the furnace, but I didn’t have the budget for the furnace in my capex budget anymore because I had had someone just randomly die in the property and like no one knew they died in the property for two or three weeks.

Chad Duval: Whoa.

David Pere: So it cost me between environmental cleaning fees and reflooring the entire unit, it was probably like five grand out of pocket. So, my furnace money had gone to that, and then the furnace blew. So I had a rough I mean, that’s like six or seven grand in expenses over 45 days that was not accounted for. So, that’s probably been the roughest, but I have a good property manager so I didn’t really deal with anything emotionally with that. It was just like having to write the check.

David Pere: Actually, I didn’t write the check. She just held it out of my income and, whatever I just kept, use my reserves. There wasn’t a huge value add with that other than slowly increasing rents, doing a little bit of adding RUBS, so that I pay utilities. It’s just an older building, so it’s just not wired for it to be done through the building.

David Pere: But I have done probably like 200 and 250 in RUBS, ratio utility billing system, basically having tenants pay a portion. It’s definitely not covering all of the utilities, but it’s covering probably about a quarter of the utilities right now, which is better than we bought it. And then I’ve increased rents by on a gross, I’m trying to remember what they were, think it was right around 4,200, 4,400 when I bought it, and we’re at 48 or five grand, kind of depending on late fees and stuff.

David Pere: So I’ve increased rents by about 600 a month, and then also decreased expenses through the RUBS. And then yeah, so it worked out. So I did that. That was purchased in February of 18. And we just refinanced last month, and I got … Well, I guess I put 10,900 down and I got 14,000 back when I refinanced but I paid off the seller financing piece. So I really only got to keep like seven of that. So I would say I almost got all my money back out of the refinance, but I also dropped my payment $200 a month, so it’s a win-win all the way around.

Chad Duval: Yeah, that’s crazy. I mean, even with that 250 that you guys did for the RUBS, I mean, that’s like 250 and that’s what, three grand a year. So out of 10 cap, and that’s a 30,000, increased in value just by implementing RUBS. Do you guys do the RUBS through your property manager? Or do you guys do like … I know I’ve used RUBS before in the past and used the company called Multifamily Utility Company right there in San Diego, to do all that, do like third party, but are you running that all through your property manager software?

David Pere: I was just talking to one of my buddies about this. I may end up doing kind of third party for RUBS because we could probably do it more efficiently. But right now, it’s just done through my property manager. If I could find a way to do that, where I save even more money, that would be cool. I mean, I’m always down for cutting my expenses. But you’re right. Yeah, actually it’s funny. We appraised it with the refinance and it appraised much lower than I would have thought, given how much we’ve improved the NOI on the property. But it’s still improved. I have 62,000 in equity that we built in the 18 months, and then almost nothing invested in the property anymore.

Chad Duval: Right.

David Pere: So, it’s still a win for sure. But I was thinking it would have appraised for like 40 or 50,000 more, but it just wasn’t worth fighting the appraiser out at the time because I wasn’t trying to get any more cash out of it anyway.

Chad Duval: Yeah, so that just happened to me too. And everybody who I’ve talked to about the scenario says, if you’re doing a refi, it’s going to come in significantly lower than if it’s for sale. They’re always trying to match that sale price or get close to that sale price. So one of my properties, it just sold, and it sold at 480 or the appraisal came in at 483. But six months prior to that it appraised at like 440 because it was a refi so it’s like yeah, $40,000 difference.

David Pere: That makes me feel better.

Chad Duval: Yeah. I mean, you would think an appraisal shouldn’t be swayed either way, they should just appraise it for what it is, but seems to be a trend right now. Even talking to a bunch of other banks too, they said that that’s typical. So very interesting. But yeah, and then to go back to the Multifamily Utility Company, I highly recommend them only because they have a service as well that’s their collection service.

Chad Duval: So they’re actually following up with tenants and calling them if there’s late payments and stuff like that. There’s a lot less management involved with that instead of, if you’re self managing or going through a property manager, it’s less work for them. So yeah, those are some good tips for everybody. So you had the two unit, you moved up to the 10. Are you doing anything else except for multi families right now?

David Pere: I bought another property on a partnership, but things didn’t really work. It was a lease option. Things didn’t really work out so much with that. That was a 40 unit. But there were just a lot of unforeseen, I want to say unforeseen unadvertised issues with the set property. So like we closed on it and within a few months, it became very evident that it wasn’t going to work out. So we’re actually in some litigation trying to basically get our money back out of that. So I can’t really talk too much in details on that.

Chad Duval: Sure.

David Pere: But yeah, so I scaled to a 40 unit, didn’t really work out. And now I am flipping a house while all my capital is tied up in that thing.

Chad Duval: Okay.

David Pere: It’s been an interesting road. It’s a very strange story.

Chad Duval: Huh? Well, hopefully after you get through that litigation, maybe we’ll have you back on, we’ll have to go through that scenario, what to avoid going forward, you know?

David Pere: Oh, yeah. Yeah, I can’t wait to be able to talk about all that. I mean, it’s like anything. But even looking back now, I still would have bought the deal. There’s nothing that I know now that would have been something that you could have told me beforehand. It’s all like, people relationship stuff, which if you tried to tell me that beforehand, like oh, well, this guy operates in this way, I’d be like, okay, that’s fine. I can manage that.

Chad Duval: Right.

David Pere: It’s weird things like that. It’s not like we bought this property and said, “Oh, man, we forgot to look at the utilities.” It wasn’t anything like that.

Chad Duval: Yeah, yeah.

David Pere: I guess the biggest lesson I would say for that is just always verify everything and always get everything in writing. So without going into too much detail on that, I can tell you that your due diligence period to be as thorough as you can. But if you can’t 100% verify, like something is accurate because it’s, he said, she said, or whatever, like, get it in writing from the person selling it, which is, like I had several conversations where there were confirmations of things.

Chad Duval: Without a paper trail.

David Pere: We just didn’t put it in writing, and I mean, it goes both ways. I’m sure it’s both of us in the rear because there’s, both of us are trying to say different things, and there’s no … If you do a phone call to negotiate stuff, that’s totally cool. But follow it up with an email about what you talked about and say, “Hey, this is what we talked about. Do you have any disagreements? Please respond to this email acknowledging that this is what we agreed to.”

David Pere: And then that way, if anything comes up, at least you’ve got … Because most of our conversations are out there, but there are a few things that he said that I have no way of proving otherwise, and that I’ve said that he has no way of proving otherwise. We’re kind of stuck where it’s like, well, that’s unfortunate.

Chad Duval: Yeah, yeah. No, I mean, that’s a huge point. I mean, especially with all of these high value a lot of contracts. There’s a lot of moving parts. Yeah. And if you don’t get everything in, in writing, it could definitely like, yeah, it seems like it kind of bit you in the butt a little bit. No, but it’s hard. I mean, when you have all these things going, some things you take for granted, especially if you’re partners with somebody, I can totally see that being a lack of trust, or there’s so much trust there that you never think to put that kind of stuff into writing.

Chad Duval: That kind of dovetails into the next question I want to ask and basically, what do you wish you had known when you first bought your first property that you know now? Would it be along those same vein, the same vein of making sure everything’s in writing? Or do you have any other things that you wish you had known back then?

David Pere: I’d say most of it’s probably mindset related. So most of it would probably be things like hey, man, the worst case scenario is really not that bad. So go for it. We have, I mean, a pretty substantial chunk of change tied up in this property, like two or three times my salary between me and a partner.

Chad Duval: This is the 40 unit.

David Pere: Yeah, and even that, like if everything goes to crap and I lose every penny of that, like, okay, like, that sucks, that’s miserable. But did it bankrupt me? No.

Chad Duval: Right.

David Pere: Did it stop me from buying this flip and working on this and building capital again? No. Did it stop me from building a business? No. Am I still able to take vacations? Yes. So like, really not that bad. So I think that would be the first thing that I would probably tell myself is like, dude, the worst case scenario is not that bad. Go for it. Go bigger.

David Pere: I bought the duplex because I wanted to test the waters. Well, why didn’t I buy a fourplex to test the waters? Well, because it seemed like more work and it seemed like more of a pain and $200,000 is more than $80,000, but you know it’s appreciated since then. It’s cash flowed since then. It’s paid itself down since then. That could have been much better now than the duplex. The duplex is fine, but it could have been twice as good. So, I’m not always one, like don’t go so big and get so wrapped around the units and size and everything that you like overdo yourself, but don’t stop yourself.

Chad Duval: Yeah, definitely push yourself.

David Pere: Yeah, don’t talk yourself out of crap because what if? Mitigate the downside risk and go for it.

Chad Duval: Right. Yeah, no, that’s huge, so far, I had the exact same feeling about that. I mean, some people … I mean, I don’t regret starting with the duplex. Because, again, there were so many things that I learned through that process between rehabs and estimating costs and how to manage tenants and leases and all that stuff. Get yourself, because I mean … If you go big where you’re going 40, 50, 100 units, I mean, you’re so far removed because you have to hire a full time property manager. You don’t always know the …

Chad Duval: You don’t even know the questions to ask certain people on your team unless you’ve actually done a lot of the work yourself, I feel like. That’s why I definitely am an advocate of starting small. But at the same time, I kind of wish I did go bigger, you know what I mean? Because it’s the same amount of work. It’s the clich√© thing, it’s the same amount of work to go and buy a duplex as it is to buy a 40 unit. You know what I mean? It’s pretty close to the same amount of work, you know?

David Pere: Yeah. And as long as you’ve got decent management systems, like I’ll tell you for the first month with that 40 unit, I can tell things kind of started unraveling a little bit. I mean, my property manager did everything. It was no different to me. So yeah, I totally agree.

Chad Duval: Yeah. So do you have property … You have property management for all your properties, right?

David Pere: Yeah, I use the same. I don’t know that I will ever like … She better not ever, like quit or decide to retire. She’s awesome.

Chad Duval: So is this like an in house property management team that you have? Or is it like, third party?

David Pere: Yeah, no, it’s third party. I mean, if they let me acquire them and go in house, like maybe one day. I would like to go vertical at some point, but I also know that I don’t know if I’ll ever find someone as awesome as she is. To put this in perspective, I kind of alluded to it earlier, but so that furnace and the person dying, environmental cleaning, whatever, between the two of those, which is like I said, $6,000 worth of stuff, I’ve had less than 10 minutes in conversation with her and no other interaction.

Chad Duval: Wow.

David Pere: She called environmental companies. She called my insurance to see if the deductible would cover it or if it was worth doing, like she did that. I didn’t even tell her to call my insurance. She just said, “Hey, we talked to your insurance company, this is your deductible. Do you want this on your insurance or do you want to pay out of pocket?” “I’ll pay out of pocket.” “Okay, cool. Thanks.” “We did this. We quoted three different places, looks like this is the amount you’re getting. So we’ll go ahead and get it done.” And then they got it done.

David Pere: She’s evicted people, turned the unit over and got a new tenant in. I didn’t even know there was an eviction going on until I got my report at the end of the month because I told her like, “Hey, unless it’s over this dollar amount, don’t bother me.” And man, she’s like her idea of like bothering me when it goes over that dollar amount is like this happened. Here’s your options. Okay, let’s do that one. Thanks. Like that’s it. It’s less than five minutes.

Chad Duval: That’s so awesome.

David Pere: My goodness, that has saved me so many gray hairs.

Chad Duval: Yeah, I know it’s almost kind of weird because when it’s like that, I’m new to that. I just hired full-time property management for all my properties, and I’ve always self managed. But once I got up to 26 units, I was like, this is too much to do myself. But I have a very similar property management company too that yeah, they basically give you your report at the end of the month and unless there’s like an emergency over a certain amount of money, they just kind of handle all of that.

Chad Duval: So that’s something to kind of think about for everybody listening. If you want to start small, it’s good to get your hands and do it, but as you progress to try and buffer in the cost of property management will save you like he said, a ton of gray hairs. It’s almost kind of eerie to own these assets and they’re operating by themselves without you having to really do that much work, maybe an hour or two a month, so it’s so crazy.

David Pere: You say eerie, I say wonderful.

Chad Duval: It is, but I’m super type A and love to have my fingers in everything. Even Holly, my girlfriend, like the first month after I got that property manager, she’s like, “You look like a lost puppy. You look like you have nothing to do.” That’s actually when I started the podcast. I was like, okay, I got to start doing something.

David Pere: I love it. That’s it.

Chad Duval: Yeah.

David Pere: Yeah, man. I spend less than an hour a month, generally, maybe two on a bad month, but usually less than an hour a month. And that’s just my balancing of books when I get my property report at the end of the month. Other than that I mean, whatever.

Chad Duval: It’s crazy. I know, it’s such a blessing. It is hard to find, at least I’ve heard horror stories of bad property management, but I mean, knock on wood. I’ve had a good experience with this new property manager. I went through some referrals and that sort of thing. Actually, yeah. How did you find your property manager for everybody listening? Any tips on finding a good property manager?

David Pere: Yeah, I wish I’d had referrals. I did kind of the hard way, I guess like three or four different interviews of people. But what I did was I compiled like a list of probably like 40 questions off different articles on Google about how to hire a property manager. I busted it down to like 15 or 20 I really liked and then I used those. There’s a couple of things and I have a full article on this on the website. I actually have it, you can get that list for interview questions from me. So if you want it, I can give you all that information.

Chad Duval: Oh, perfect. Yeah, I’ll link that in the show notes.

David Pere: Yeah, sounds good. But man, I almost fell for one of those terrible, like man. I went to this company, they were amazing. They had like this really cute looking secretary and the guy was super friendly, nice suit, firm handshake, showed me around the office, introduced me to everyone, did the right thing like touching me on the small of my back, or pat me on the small of my back while he’s like high five and like, super awesome office. I was so stoked.

David Pere: And then the one thing I did that was the most beneficial for me out of all that was taking the contract that he and I were going to sign his property management home. And that’s where I realized like, man, there’s a lot of hidden fees in here. Whoa, this guy gets paid even if the property is vacant. No way. So I dodged the bullet. I dodged a huge bullet. And then I just started looking for other people.

David Pere: So I got in with this lady. I mean, honestly, I probably would not tell people normally to go with someone like this. She was new. So she had been managing properties for a like big construction company in town for a long time. But she went solo. So she had less than a year, maybe two years, I think less than a year under her belt with her management company, and not a whole lot in her asset or portfolio yet, but her fees are like nothing. Almost there’s no like first part of the month’s rent or whatever, there’s no … It’s 7%, which is I got that discount because I jumped in when she was new, but …

Chad Duval: Yeah, that’s pretty cheap.

David Pere: She’s still only like 8%. So I mean, it’s still reasonable. So 7%, there’s not a lot of hidden fees, there’s not really any hidden fees. I pay a percentage or a portion of the marketing, advertising but I would be paying that anyway. So it’s super affordable, and she’s been wonderful. I’m sure there are probably more flashy property managers out there and they’re probably property managers who might make me feel better by like telling me all these wonderful things all the time, and she’s pretty straight through to the BS, like no BS, but I like that.

David Pere: They handle everything very, very well. So total win for me. I’ve given a couple of other people help with that. But the biggest things I would say is, if your property manager gets paid when the property is vacant, don’t touch them. And also look at the fees. Take the contract home, do not sign digitally while you’re in their office. Take their contract that you would be signing with them home and read it, and definitely read everything but especially the fees portion.

David Pere: If you don’t know what some of those legal words mean, use this wonderful tool called Google or Siri and get the definition so you know what you’re reading. But understand the fee setup because some places will take the entire first month’s rent. Like that might sound like just industry standard and like the norm like okay, cool, got it. But just think about the fact that if your property is vacant for two weeks, and they take the first month’s rent, your property might as well have been vacant for six weeks and you might as well be doing it on your own because I guarantee you could find someone in four weeks and not be paying that much.

Chad Duval: Yeah.

David Pere: That’s my little rant there.

Chad Duval: Yeah, no, I mean, usually the contracts are multiple, like a lot of pages too. So there’s a lot of things that they can hide into those contracts. If I was to add one more thing to look for is make sure that your property manager gets paid off of collected rent, not gross rent, so then they’re incentivized to actually get the property rented ASAP, because then they get paid. So I know some property managers charge off of gross rent, not actually off of collected rent.

David Pere: Yeah, yeah, absolutely.

Chad Duval: Yeah. So let’s see here. So, we can roll into the final four questions. I don’t know if you took a look, I think it’s there in the Zencastr link that I sent. But I have four questions that I sometimes throw into some of the interviews. I don’t know if you want to take a crack at them. I can always edit it out.

David Pere: I did not look at them, but I like that. So let’s do it.

Chad Duval: Okay.

David Pere: It’ll be more authentic this way.

Chad Duval: Perfect. All right.

David Pere: I don’t think I saw that email. I probably did see that email and just didn’t read that far down, I don’t know.

Chad Duval: Yeah. So I’m trying to figure out. Actually, after we’re done recording, we should jump into a quick conversation on like, if you have a few questions, because I know you do some podcasting and stuff like that. It’ll be fun to jam on that. But yeah, so let’s pivot into the final four. The first question is, if you were to get rid of one state in the U.S., which one would it be and why?

David Pere: Oh, man, I’m living in it, California.

Chad Duval: That’s based on real estate?

David Pere: Because the government hates their people.

Chad Duval: Oh, yeah, yeah.

David Pere: I mean, in the real estate side, too. I mean, their tenant laws are garbage. They just did statewide, or they’re passing statewide rent control, which isn’t the end of the world, but they’re like, heaven forbid that we just build apartments instead of like, controlling rents. Oh, no, that would just be too much to ask because the permit process is so important. I mean, they’re almost as bad as Hawaii in the permit process.

David Pere: They don’t have a land issue, they have a like stuck up government issue. I don’t know. There’s so much land you can build on here. And so it just baffles me that they let prices of property go up so much because there’s no supply when they could easily build out towards the East or towards the outskirts of the city with no issue. But their permit process won’t allow them. It’s just crazy. It’s so weird.

Chad Duval: It’s like they’re weird in their own way, for sure. Because I remember [inaudible 00:44:33] actually talking about San Diego in one of the podcasts I listened to and he said the same thing how it’s so politically charged that it makes it very, very hard to go in and build new supply, which is exactly what you’re saying is the rents are through the roof for sure. But yeah no, I typically agree with the California. California and New York, it’s really hard to be. I mean, there’s ways around it, but when you have other states available that are a lot easier, you might as well think if you can manage out of state, do those other states for sure.

David Pere: Yeah.

Chad Duval: Question number two, we finished this interview, you step outside, you find a lottery ticket worth $100 million. What do you do with it?

David Pere: Oh, man. That’s a lot of hookers and blow. Ah, that’s a great question. I would try to do … Well, for one, I’d do a whole … I mean, aside from all the fun things, right, like I would instantly budget a decent amount set aside for me to just go travel the world, take a year off, live my life. I would say and I’m going to try to not do this. I got asked this once and I went like super into the weeds and took like five minutes. So we’ll try to mitigate that.

David Pere: But I would probably take 20 million of it right away and throw it into an index fund and just never touch it again and say, okay, that’s going to grow if the world ends that’s going to keep growing. Then I would take I don’t even know what the max is that I could put into my kids’ like 401(k), or any kind of retirement fund.

David Pere: Maybe I would have to do like one of those fancy infinite banking cash value life insurance policies, like wherever I could stash cash where they couldn’t touch it for them, even though obviously the index fund would go to them eventually, but that’d probably be another 10 million apiece for each of my two kids. So I’m down to 60. I’d say 30 of it might just go sit in various places for what ifs and fun. Well, actually, let me retract that statement, because I’m in California, 30 of it will go to taxes.

Chad Duval: Yeah, I’m sure.

David Pere: The other 30 of it would probably go, I’d probably try to dump as much of it as I could into syndications with friends that I trust. So there’s a couple of syndicators out there that I would probably buy from just because I know them well enough to know they’re not going to screw me. I wouldn’t even care what the deal looks like. And I think if I was to dump 10 or 20 million into being a limited partner on syndications, that would be a great way to continue investing in real estate but I wouldn’t have to do any of the GP portion.

David Pere: And then the last 10 well, I guess five of that would go to all my toys and traveling and whatever and probably take the other five and I’d find a way to start a business or angel invest. That would probably be like five or 10 million of that whatever’s left over would probably be my like, not gambling money, but like play investing money where I can take a little Bitcoin or new startups or I can take a gamble on what I’m investing on and see what happens.

Chad Duval: Oh, cool. No, that’s a good answer, man. Good answer. Number three, if you could have a beer with any person, dead or alive, who would it be?

David Pere: Man, that’s a good one. You know what? I’m going to say that people are going to never talk to me again. And it’s probably not true. There’s a part of me that wants to say Donald Trump just because there’s so much anger about that answer and he’s a real estate mogul.

Chad Duval: Yeah, actually I’ve gotten that answer a couple of times, for sure.

David Pere: Yeah. Like he’s up there, for sure, because it’s intriguing.

Chad Duval: Yeah, even taking the political side of things out of it, like as an entrepreneur, a business owner, as a real estate mogul, he’d be such an interesting and he seems very charismatic and kind of looks like he’d be fun to actually have a beer with. He seems like he’d be.

David Pere: Yeah, I think that’s for sure. Like he could drink and most people, like I would maybe say General Mattis would be another, but I don’t know that he would even have a beer with me unless it was the Marine Corps birthday. I don’t know that it would be like I’d be nervous. I feel like there’s a couple of those guys where I’m just like, oh, you know what? I don’t even know what I’m saying here.

David Pere: Elon Musk, there’s my answer. No take backs, because that dude, you want to talk about a billionaire who knows how to live like a college kid and have a good time? Elon Musk. I guarantee he can drink. I mean, he smoked blunts apparently on a podcast.

Chad Duval: I know did you see that Rogan episode? That was awesome.

David Pere: I did. In fact, I just wrote that into one of my articles today talking about why I don’t like the emotional reactions of stocks, and my reasoning for that is always the fact that Musk, who’s a billionaire multiple times over and changing the entire world as we speak, smokes a blunt once admittedly, his first time ever trying marijuana, smokes a blunt once, wakes up, Tesla stock is down 9%, and two of his executives quit because they’re mad that he smoked a blunt.

Chad Duval: Isn’t that crazy? It’s so …

David Pere: Who cares?

Chad Duval: Yeah. And it’s legal.

David Pere: Yeah, he’s going to Mars. I don’t care if he smokes a blunt on the way.

Chad Duval: Right.

David Pere: I’m not a pot smoker. I’m in the military. I’m not condoning smoking pot, but I’m just saying, I don’t care if you do that. If you’re going to, like build SpaceX and Tesla and the flamethrowers. Go ahead. I mean, the man like blew up a McLaren F1 like a million dollar car in ’99 or 2000 or something like that. So he seems like the kind of guy that would be fun to party with.

Chad Duval: Yeah, totally. Totally. Yeah. Yeah, we can dig way into him. But last one. If you could eat one thing for the rest of your life, what would it be?

David Pere: Cheeseburgers.

Chad Duval: Cheeseburgers, specific cheeseburger?

David Pere: I guess I can just say like Mexican food would be a total cop out. If it had to be one specific item, it would probably be like a bacon blue cheeseburger.

Chad Duval: Oh, perfect. Oh, those are so good. Actually it sounds really good right now.

David Pere: I know. Now I’ve said it and I’m like I’m going to cheat my diet.

Chad Duval: You’re making me hungry. Oh, perfect. Perfect. All right, well, that is the final four. We can segue into final thoughts. And basically, if you want to give a little bit of where people can reach you if they want to get in touch with you.

David Pere: Yeah, so final thoughts, learn, network, take action, that basically summarizes the advice that I give everyone, learn more, network, learn, network, get around people who are doing it, and then take action. I’m not saying like go out and say, “Will you be my mentor?” But I’m saying like, just get around people who are already doing what you want to and mentorship is a byproduct of you adding value to them. I have not ever asked, “Will you be my mentor?” I’ve had coaches, I’ve had mentors. Asking that question is not how you get that result.

Chad Duval: A mentor, exactly.

David Pere: Yeah, you find ways to add value to those people. And then yeah, take action man, because the rest of it doesn’t matter if you don’t actually pull the trigger. And then I guess as far as getting ahold of me, if you go in Google or any social media platform and type in From Military to Millionaire as one word, I will pop up. And then I host the Military Millionaire Podcast.

David Pere: And if you’re in the military, and you’ve ever thought about doing like a mastermind group, we’ve got a pretty solid one called The War Room that’s all about real estate entrepreneurship, and it’s strictly service members and veterans. It’s pretty high caliber group. So it’s kind of a new development. So I just love to help answer any questions for that.

Chad Duval: Perfect, and as always, guys, I will definitely link everything in the show notes. And with that, we will get out of here. I appreciate you being on the show, David.

David Pere: Yeah. Thanks for having me, Chad.

Chad Duval: Well, guys, that was David Pere. I hope you guys enjoyed the conversation. Hope there was some value there for you guys, especially around VA loans and getting into your properties with low money down, especially if you are in the military. So if there is some value there, can you guys do me a huge favor, and if you haven’t already subscribed, to subscribe to the podcast, and leave a rating and review.

Chad Duval: And hell, can you guys share it with one of your friends. I’m trying to grow this thing. And these reviews, I don’t know if you guys know this, but it helps me convince guests to come on the show especially like David, and hard to get guests. So please leave a rating and review. I appreciate it so much. And I also want to correct something real quick at the beginning of the show, I said that there were plans as low as 20 bucks a month for Buildium. That’s incorrect. Actually, they’re as low as like I think $47 to $50 a month. So it’s still inexpensive, but it’s not 20 bucks a month. So sorry about that.

Chad Duval: And then one last thing you guys, I’m getting ready to launch a new tool for you guys. It’s a due diligence checklist. It’s something that I use every time I go in and buy a new property. It’ll cover everything from making sure that you schedule your gas reading prior to closing, to making sure that your property taxes on the property you’re buying had been paid at closing, and you get the receipt for that, and just all kinds of certain odds and ends.

Chad Duval: There’s also some obvious stuff in there as well. But it might help you, especially if you haven’t gone through the process before, it might help you walk your way through it. So getting ready to launch that, but I’m also getting ready to relaunch the bank portfolio. It’s going to be more detailed, more in depth and actually a little bit more user friendly for you guys so that you can actually just plug in your info instead of just actually looking at what I have. So it might make it a little bit better for you.

Chad Duval: But in order to get those two tools, you have to go to chadduval.com/subscribe and subscribe to my email list. That’s the only way you’re going to be able to get access to those two tools, you get an automatic link to the folder that I’m going to be putting them in. Right now, there are some other stuff in there, like examples of leases and the old bank portfolio and stuff like that.

Chad Duval: But you guys will be the first people to know and have access to these two new tools if you are subscribed to the email list. So again, that’s chadduval.com/subscribe. So yeah, we’ll get out of here. You guys remember, you don’t have to be great to start, but you have to start to be great. We’ll chat next week. See you.