This is the next edition of my Getting Started Interview Series. In these written interviews, I ask investors all the details of how they got started in real estate investing, and then I share their answers with you! You can see an archive of all my blog interviews here.
Today’s investor profile is about Sarah Brandenberger (better known to her 20k+ follows on Instagram as Nerds Guide to Wellness). I’m one of those followers, and I’ve been so impressed with Sarah and her husband Justin’s journey. In around 3 years, they paid off all their personal debt, flipped houses, and now own 3 rentals (and counting)!
And as a daddy to two little girls, I especially enjoy Sarah’s cute pictures of their new baby girl who makes trips out to the properties with them! Apparently, their baby has already been to two closings! #learnearly
I’ll let Sarah tell the rest of her story …
Personal
Name
Sarah Brandenberger
Age (and your spouse/partner’s age, if applicable)
I am 30 as well as my husband, Justin
Do you have kids? (if so, how old are they?)
We just had our first baby in June! She is 7 weeks old.
What area of the country do you live in (& urban or rural)?
Rural Indiana (yay midwest prices!)
Career/Source of regular income
We both have full-time jobs. I am a genetic counselor and am currently working as a Medical and Scientific Liaison. My husband works in an RV factory and manages a cabinet shop. (Fun fact, every RV but one company is built in our rural area of Indiana. It makes our area a good place for real estate because this provides great income.)
I also like to show people that you can be successful with or without a college degree. I have all of the degrees (3) and the hubs does not, and our income is about the same.
What hobbies do you enjoy? What do you do for fun?
I spend a ton of time on Instagram (@nerdsguidetowellness) as well as reading and learning all I can about investing (team index funds) and real estate.
My husband is an avid deer hunter and spends all the time he can outdoors. Hunting, fishing, you name it. And helping me tackle my endless list of great home improvement ideas. We are on our second live-in flip.
Any fun/interesting/ or little known facts about you?
I tend to be more adventurous than I seem…. And one of my favorite things to do is scuba diving. My husband seems to fear nothing, so we have loved doing lots of things together, including skydiving we still took lots of vacations while paying off our consumer debt). Someday, we want to do a cage dive with sharks. (Shark week is his favorite)
This photo also really sums up our marriage. This is us skydiving, as we left the plane. He said he wanted me to jump out of the plane first, so he could watch me freak out. It sounds about right for all the things we do. I am nervous, he is excited, but we both go for it together.
[Chad: “I am nervous, he is excited, but we both go for it together.” What a cool quote and image to sum up taking risks together! Lol. Who was excited and who was screaming when you first bought the real estate properties?!]
1. Wealth Stage
How long ago did you begin investing in real estate?
Less than a year ago on September of 2018, we bought our first rental property. It was something we had been planning to do for over a year, though. Once we were consumer debt-free.
What was your wealth stage when you began investing in real estate?
Growth! We just finished our last live-in flip, which we will rent out once we find our next home. One with way less DIY.
Has your wealth stage changed since starting investing in real estate? If so, what is it now?
In Spring 2016 we were in Survival. Somewhere in late 2017, we hit Stability. June of 2018 we were personally debt-free except our home mortgage. After that, we started super saving.
We sold our first live-in flip August of 2018. We bought our first rental house with some of this money, and we have continued to super save.
Then we finished our current live-in flip in June. We bought a duplex in March 2019, and will buy another single-family rental in early September for our buy and hold strategy. Beyond real estate, we also invest about 15% into Index funds within our 401ks since the saver and growth phases.
[Chad: This is the perfect example of the power of the live-in-flip strategy to jump-start your saving and investing. By reselling their home for a tax-free profit, they could reinvest 100% into the next deal – a rental – and then they are off to the races.]
2. Real Estate Investing Strategy
What was the primary real estate investing strategy that you used to get started?
Live-in flip for sure got us started. We sold it FSBO and used the money to buy our first long-term rental and do a few improvements in our second live-in flip. Our long-term plan is to buy and hold.
Has your strategy changed since then? If so, what is it now?
Long term buy and hold. We are super-saving up 20% down payments as fast as we can to buy more properties. Our goal is to own 5-6 free and clear within the next 5 years using the debt snowball method. Right now we are growing the snowball before we start to roll it.
[Chad: Again, Sarah and Justin are living a perfect example of a solid path to financial independence using real estate. They needed cash early on, so they focused on the live-in-flip. Now they are in the “load-up’ or acquisition phase where they pour all their savings and energy into buying those 5-6 properties. And next, they’ll pour those same savings into a debt snowball to pay off their debt. When it’s all said and done, they’ll have a SOLID income from rentals and they can take a break or do whatever is next for them.]
3. Target Investing Market
What regional market do you invest in? Why did you choose it?
We invest in the rural midwest, in Northern Indiana. We chose it because we live here, and we are familiar with the market. You can find great deals and houses needing reasonable repairs meeting the 1% rule-1.5% rule. We love the lower midwest prices.
Do you have a particular sub-market or neighborhood where you like to invest within your market? Why do you like it?
We do! We have two towns we are interested in.
Town one is right between two smaller towns, one is a bit lower income with more renters and the other is a bit better income with very few renters. It has a good central location with a hospital.We learned early on from our realtor that there is a rental shortage in the area, with both schools and hospitals calling her office, asking if they know of any landlords/rentals available.
Our second target area has very high rent, a hot real estate market, and is somewhere we would like to live. It has a few restaurants and more high-income jobs nearby. Plus, it is one of the best school districts. All of this makes it harder to find good deals in that area, but it’s worth the search because of demand and rent rates.
[Chad: “Know thy market!” It’s always the first thing I encourage people to do when getting started with real estate investing. Do you see how well Sarah can describe her two locations and why she invests there? That’s the kind of detail and familiarity you want to have in order to successfully find good deals. Check out my step-by-step processing to picking and understanding your ideal market if you want to do the same.]
Have you chosen a particular real estate investing niche to focus on, like a type of property (ex: single-family houses), a certain price range (like A, B, C, or D properties), or a type of end customer (ex: student rentals)? If so, why?
We like single-family homes or duplexes we can buy with a conventional mortgage. Since we are saving up our 20% down payments, one at a time, we look for houses under $120,000. So far, our most expensive house will be $118,000.
We love B properties in B neighborhoods or the ideal “starter house.” I personally love a good ranch style home in need of some updated paint and newer appliances.
4. Investment Property Criteria
What formula or numbers do you use to decide if a deal is a good one?
I learned a lot from Paula Pant about running the numbers, but now I use a spreadsheet made from your articles and videos!
First, I like to start with the 1% rule, cap rate, cash flow after operations, and net income after financing. I like looking at all of the numbers because the 1% rule and cap rate help decide to buy or not, yet CFO tells me how much money I can start adding to our snowball.
[Chad: I’m a big fan of Sarah’s approach. Rather than using one formula, you use a few different formulas that all give you a slightly different but important perspective on that property’s numbers. Here’s an overview of the Back of the Envelope Math Sarah referred to.]
5. Your Team
Do you have any “inner circle” team members like a spouse, business partner, or mentor? If so, how have they helped you to get started?
My husband got us started in real estate, then I really took it and ran with it. Rental houses and flips were his dreams, and something he had always talked about.
I really got the itch when we met years ago with a financial planner. While we were doing well saving and paying off our debt, the numbers really took off when we would add a rental property or two.
Much of our “getting started” inspiration was online. I became interested in FIRE (financial independence / retire early) and becoming financially independent. And rentals would get us there a lot faster than super saving. Plus, I didn’t like the idea of drawing down my investment savings, even at a safe (4%) withdrawal rate. I liked the balance both index funds and real estate give us.
I always thought that to do real estate, you needed to be handy and DIY. Turns out, you can hire it and plan for that when running the numbers. Or you can marry well… totally kidding but my husband is the handiest person I have met.
However, it was fascinating to learn that my nerdy skills of spreadsheets and numbers are SUPER useful in the world of real estate. Money is made with good deal analysis, and I am constantly running numbers on properties.
Besides that, we are still busy building our team.
I found a lawyer and a CPA we love to help us with the big stuff. It took me 4 CPAs before I found “the one.” He was then able to recommend the lawyer to use (which we needed to quit claim deed our homes into our LLC).
I also found an insurance man we LOVE who also used to do rental properties, and is an avid Dave Ramsey fan too. We have found an AMAZING realtor that doesn’t think we are totally crazy when we make a lot of offers on properties and when I ask to see a house hours after it is listed.
We are still in the process of finding a good electrician and a handyman who will help with all of our properties.
[Chad: What a team! And I love that you are the nerd and your husband is good with the handyman stuff. I’d also put myself in the nerd plus negotiator category. Doing the actual work has never been my thing or my business partner’s preference. So, we have hired people to do almost everything from the very beginning. As Sarah said, you just have to build that into the numbers from the beginning.]
What other team members have been crucial to helping you get started?
We have an amazing family, and they have helped us a lot on our two live in flip projects. It seems like there is nothing my husband cannot figure out, but he is only one person and it has been crucial to have help for the heavy lifting or to knock out jobs more quickly.
Besides that, we have taught ourselves everything we need to know thus far. I have a really strong network of “friends” on Instagram that I am able to bounce questions off of. I have even called a few of them when I have deal questions, or when I was in a panic after closing on our first rental.
One of the best things I have learned is how to run the numbers, and your posts plus Paula Pant’s blog have been key for this.
[Chad: I’m flattered that you used my posts to help you run the numbers! Thank you. And between family, Instagram, and your “online university” of blogs and videos, it seems you’ve got it pretty much covered!]
6. Financing & Cash
What type of financing did you use for your first deal (or deals)? And was it difficult to obtain this financing?
Our favorite loan is a 20% down conventional mortgages on a 20-year term. Our first live-in flip we bought 5% down with a conventional mortgage, as this was our first home. When we moved, we put 10% down on a 15 year conventional. I do wish it was a 20-year term because the monthly payment will hurt the cash flow from this house when we move out and make it a rental house.
Since then, we have decided we want to keep our loan to value much lower. Our two other properties we have bought with 20% down conventional mortgages with 20-year terms. Once we got used to the house buying process, it is really simple. I thrive on spreadsheets and having my paperwork in order. I have a “buying a house” binder I just take with me to banks now.
[Chad: It’s cool to see how you’ve learned what’s best for you over time. But you didn’t wait to get the “perfect” financing. Sometimes you’ve just got to move forward with your financing and learn as you go. The good thing about loans is that you can always refinance them later if you’re not satisfied with the payments, rate, or terms.]
Do you plan to continue using this financing in the future? If no, what financing is next? Why?
Right now, we are in the process of starting/switching to a portfolio loan for property #4. It has been really interesting to shop for different local banks and credit unions in search of the best terms.
Shopping local is KEY. Small regional banks and credit unions have been much more competitive on rates and a bit more flexible with money down or terms.
This has been my personal goal for my maternity leave: shop lenders for better rates and new options for growth. This includes learning more about alternative ways to buy a house like seller financing. After we finalize our portfolio loan, we want to start paying off the houses we have financed.
[Chad: For those who don’t know, a portfolio loan is a loan that a bank or lender keeps rather than sells off in the secondary market. Most traditional, 20 and 30-year mortgages are sold off. So, the terms on these portfolio loans are typically for shorter periods of time (15 to 20 years) and sometimes have balloon notes in 5-7 years – but not always.]
Where did you get the cash for your first down payment, fix-up money, and reserves? How much did you need to raise?
We bought our first rental with the money we made from the live-in flip on our first home ($17,121), and we cash flowed all those renovations. Then we bought our second rental by saving from our primary jobs ($24,188 down). We will do the same for the next rental.
[Chad: Saving money is certainly the super-power of people working toward financial independence. Sarah and Justin have been doing a LOT of that lately.]
7. Deal Finding
How did you find your first deal(s)? What was the owner’s situation that motivated them to sell?
We found our two live-in-flips and our first two rental properties on the MLS (multiple listing service). We have an amazing Realtor who sent us all houses meeting our search criteria. The house we are in the process of buying right now is more interesting because I found it on Facebook marketplace.
The owner was selling this rental FSBO because she is moving to New York state. She also passed along her contacts for her favorite team members she used in her rental business that she is downsizing.
[Chad: My first deals were off the MLS, too. Even in a competitive market, there’s no reason not to have an agent automatically sending you leads every day. It’s free and easy!]
Did you try any deal-finding strategies that didn’t work?
We have given seller financing a shot twice now. Once on a piece of land, which did not work out because the sellers wanted all their money upfront to pay off debt, retire, and take a nice long cruise. We also tried this on the rental we are currently buying, but there was already an FHA offer and the seller was looking to get more cash up front since she was in the process of a big move.
[Chad: I look at seller financing as just one tool in your toolbox of strategies to buy a property. It won’t work on every situation, but you can just keep it ready and keep trying just in case.]
How many potential properties did you look at and/or make offers on before buying your first deal?
We found our first deal pretty quickly. We looked at a lot of homes on the MLS, but this was the first one that was worth walking though, and we decided to go for it.
Your First Real Estate Deal
What were the basic numbers like purchase price, remodel costs, rent, or resale price?
Our first rental property was $78,500. Our remodel was $803. It is currently rented for $780/month to amazing tenants I also found via Facebook. They autopay monthly via Cozy.co. It has been amazing. I would love to do before and after photos, but a garbage disposal, sistering floor joists, a new water heater and a professional, deep clean are not very exciting.
Here is a good before & after, though.
This was our current live-in-flip. Our “easy” bathroom remodel turned into renting jackhammers and pipe cutters and also remodeling the laundry room because the pumping was never done correctly. Fun times. Now the bathtub drains!
What were the biggest struggles and challenges on the way to your first deal?
This one, the numbers are decent but could have been better. I have gotten a lot better at running the numbers since this buy. However, this house is cute, clean, easy to maintain, and in a prime location.
We have had some great families asking to live there. So, even though our numbers are not as dreamy as the other deals we have done, we think this house will make a good long term investment.
Our goal is a smaller, paid-for portfolio with the goal of long term cash flow. It will be an easy one to pay off given it was under the 100K price point.
[Chad: I think it’s smart to err on the side of hitting a single on the numbers but finding an excellent location. It sure made your life easier as a landlord for that first deal! The numbers can get better over time with a great location.]
What has been the overall effect of this deal on your life? Lessons learned?
Do better at running the numbers. Rent rate is a mathematical decision not a feeling of what we think rent it should be. Buying a house also needs to be a math decision. We have also gotten better at keeping track of area rents and running our own comps.
Lessons learned are everything from what lease agreements to use (thanks, BiggerPockets state specific forms) to what online payment systems to use vs how to set up our own LLC vs how to find good tax people.
Final Tips & Recommendations
What books, blogs, podcasts, and/or YouTube channels have helped you to get started or do you just find extremely valuable?
Be personally debt-free before real estate. Real estate is full of people who LOVE leverage (aka debt, but a fancy term for it). To us, always knowing our family would be safe, and the rentals could be sold if needed is key. That means no personal debt like car loans, credit cards, and student loans. It makes your savings rate really high to not have any payments. Plus banks love it.
We have been able to save $74,613 to put into our real estate business in 13 months. We both work full time, but neither of us individually make over 6 figures. It may feel odd to some to share that, but I LOVE hearing the numbers and seeing what is possible. Given that we lived paycheck to paycheck in 2016, it is a big swing. But anyone can do it. There are no secrets, just hard work and living on less than we make.
- Dave Ramsey’s Podcast (or app) to get out of debt.
- Paula Pant and Coach Carson blogs to learn how to run numbers in real estate.
- Also Paula Pant if you are convinced you need to be handy in order to do real estate (which you don’t, and Paula will argue it is better to hire it out!)
- Choose FI podcast if you like the idea of FIRE.
My ALL time favorite books are The Simple Path to Wealth by JL Collins and Rich Dad Poor Dad. These two will change your life.
- The Simple Path to Wealth book plus the Whitecost Investor (blog) will teach you all you need to know about DIY investing in your 401k/IRAs with Index Funds (hello, built in diversification and automation, my favorite things!) so you are able to set it and forget it.
- Rich Dad Poor Dad will change your outlook on life and your future, and make you think differently about your primary residence.
Any big mistakes you’ve made that others should avoid?
I don’t like the idea of mistakes, everything is a learning opportunity. The mistakes keep it exciting.
People are too quick to jump into real estate with a heap of personal debt…. OR never jump in at all. Don’t wait for the “right time” and remember that “timing the market” is not a real thing. With stocks or real estate – slow and steady, consistent over time rules the day.
Run the numbers. Make a lot of low offers. There are always deals to be found, and someone just wanting to be rid of a property.
Just jump in and buy the first property, without getting stuck in the forever learning phase. I really believe you will just figure it out as you go. The worst idea is to never get into the game at all. I still feel like we have SO much to learn, but we are figuring it out with a LOT of help from an online network of bloggers, Instagrammers, and YouTubers who share all we need to know.
Mistakes are funny later. Like one cannot simply buy a dishwasher…. It does require water lines and a LOT more to install than I thought (clearly, I am not the handy one in the relationship). Everything takes longer and costs more than you think, and you will get much better as estimating rehab costs over time. HGTV is not real life, and it may start to make you crazy.
[Chad: I LOVE these tips. So good, Sarah! They were all good, but mistakes = learning opportunities is my favorite.]
Anything else you’d like other current or aspiring real estate investors to know?
I think it will take well over a year until I feel like I know what I am doing. Real estate has a steep learning curve, but you really can figure it out as you go. We are learning by doing (aka some trial by fire). A new deal still makes me nervous, and I still feel unsure of what the heck we are doing most of the time, but you have to crush those self-debilitating thoughts and do it anyway.
You can also be personally debt-free, still vacation, and drive paid-for cars that are not hideous.
[Chad: Thank you to Sarah for sharing her story! I know people will be inspired and educated after reading this. And for anyone who – like me – wants to follow along with Sarah’s journey she’s on Instagram (@nerdsguidetowellness) and on her blog nerdsguidetowellness.com]
Do you have any questions or comments for Sarah? Be sure to say hello in the comment section below.
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