Ashley:
If you think you need connections, a big budget or years of experience to find a great deal, today’s guest is actually going to change your mind. She walked into her first real estate auction at 18 years old, bought a vacant lot for $12,000 and has been finding deals that MLS doesn’t ever show you.
Tony:
Tiffany DeSilva is a Florida based investor, builder and creator behind Beauty and the Builder, and she’s done 11 deals using tax deed sales, REO auctions, hard money financing, and basically just a willingness to see value where other buyers walk away. So Tiffany, welcome to the Real Estate Rookie Podcast. Excited to have.
Tiffany:
Yeah, thank you. I’m so excited to be here.
Ashley:
Well, Tiffany, before we get into the deals, kind of paint the picture for us, who you were before you started real estate investing.
Tiffany:
Yeah, for sure. Gosh, I was 18, so freshly out of high school, didn’t exactly have a graduation because it was during COVID, unfortunately. But I think the staying home paid off because obviously it led me down the rabbit hole of learning how to invest in real estate. So 18 years old, obviously you don’t have, or I didn’t have any credit, didn’t have much money. I was working three jobs at the time and that’s where I was able to save up, excuse me, about $12,000. Ended up running across a TikTok video on buying tax deed sales. I thought it was interesting. Did a quick Google search. Lo and behold, a property five minutes down the road from my house came up and I thought it would be a brilliant idea without knowing anything about anything to bid on it. And that’s kind of how it all started.
Ashley:
So most 18-year-olds aren’t going to tax auctions. So what did you learn once you got there?
Tiffany:
Yeah. Well, everything was done online. So because this was five minutes from where I was living, I knew that the area couldn’t have been so bad. It was in kind of like a subset neighborhood, no HOA, large vacant parcels. I mean, really just prime land for development, which at the time I did not realize and kind of stumbled on accident through all of this and just decided to go ahead and watch the auction. Thankfully, I had my mom there. I told her my max bid was going to be 12,000. As soon as we got there, somebody outbid me right at 12,000, got a little frustrated and she goes, “Just put $100 over. How bad can it be? If you’re willing to spend 12 grand, what’s $100 going to do? ” And I did, and lo and behold, I still own that property to this day.
So it was definitely the right call. Thanks, mom.
Ashley:
What was the website that you were doing this on?
Tiffany:
Yeah, so this was the local county tax deed auction. I know not every county or state offers them, so you have to kind of dig a little bit through Google to find the actual auction site where it’s hosted on.
Tony:
And Tiffany, just for the Rickies who aren’t familiar, what is a tax deed sale? What does that even mean?
Tiffany:
Yeah, so a tax deed sale is basically, the best way to explain it is when you own property, you have to pay taxes on it. You don’t exactly, even if you own it outright, you’re not having expenses with it. So every year you have your property bill that comes through the mail, it pays for public things like schools, fire department, things to keep the community safe. And essentially, some people either don’t pay them or don’t know that they have to pay them, unfortunately. And the county later sells these as tax liens, which is not the same thing, which is selling the debt on the property. And then after a while, every state works a little bit differently. They later motion for these properties to go up for auction, the actual property itself, where investors like me can then go out and buy them to pay off all these back taxes and have the city, of course, have their funds to run whatever they need to run.
Tony:
So when you buy one of these at an auction, you were then responsible for, I guess, paying the city or the county back for whatever taxes were due?
Tiffany:
Correct. Yes. So you’re paying whatever the county taxes are on that property or parcel, plus the interest that whoever bought the tax lien incurred over the years.
Tony:
Interesting. I wasn’t aware. I thought it was either or. Either the tax lien would be sold or would go for auction, not that it was both.
Tiffany:
No, I was just going to say, I’m not sure if it’s like that in every state. I know in Florida, that’s how it works.
Tony:
Got it. Okay. Yeah. And every state will be a little bit different. But when you won that bid at 12,100, did that also include the tax lien and the interest that was accrued or was that just for the parcel itself?
Tiffany:
It did. So basically the starting bid is going to be whatever the back taxes are due on the property. So in this case, it was the back taxes that were due plus the interest of whoever the lien certificate holder was. And in addition to that, which was kind of a unlucky add-on, I actually ended up buying a lien with the property without knowing as well.
Ashley:
Well, we’re definitely going to have to get into that. But real quick, before we do, what was your purpose of this property? Why did you want to buy it? What were you going to do with it?
Tiffany:
Of course. So like I mentioned, it was an empty parcel. There was no house on it. I went and went to go see obviously a person if I’m putting all my life savings down on this thing. There was nothing there. There was some debris, which I didn’t think much of it at the time, just kind of shrugged my shoulders and said it’s vacant land. Looked on Zillow, of course, ran some comps comparables to that empty parcel, saw that they were selling for about $20,000, roughly the same size. 22 acres, which is really normal in this area for an empty vacant lot. And I figured if I’m buying it for $12,100, I could probably just relist it on the market for 20,000, 19,000, just keep the difference. So it was quote unquote, a little bit of a smaller play was the initial intent was just to kind of flip it.
Ashley:
Now, walk us through the process of actually purchasing this. So you’ve won the bid with your mom. You’re excited. What actually happens once you win the bid? Are you submitting money right away? Did they hold your credit card to take payment? Walk us through the whole process until you actually close on the property.
Tiffany:
Yeah, for sure. So tax desales are a very obscure way to close in real estate. I’ve never really seen any other method of purchasing that’s the same as tax deed sales. So once you win the bid, you had to give a deposit usually 5% prior to even bidding on this. So mine was done in cash at the county courthouse, won the bid. Once we had that, you have 24 hours to go and submit the entire balance. So it has to be done here in my county specifically. At the time it was either cash, cashier’s check. I think that was it, strictly just cash and cashier’s check, and you had to give it in 24 hours. So no room for taking out credit card loans, no room for getting a normal mortgage or a hard money loan on any of this. You just have to show up and pay the next day at the courthouse, and then they mail you the deed three weeks later.
Ashley:
So that’s it. Other than that, there was no other steps or process to go through, you hand them the money and then they send you the deed three weeks later?
Tiffany:
No, it’s very straightforward. It sounds, I guess, a little cut and dry, a little sketchy because buying a house is this big ordeal and you have closing docks and you have this, this and that. You just register online, give your deposit, bid. Once you win, you go to the county courthouse 24 hours later, you pay your full balance, and two weeks later, the deed hopefully shows up in the mail. They have for me so far.
Ashley:
I wonder if this is more crazy for me because I’m in New York State where it takes like three months to close on a property. So maybe that’s why it seems so crazy.
Tony:
Tiffany, what were your plans? Because it was vacant land. When you bought it, what was the initial business plan for this parcel? Yeah,
Tiffany:
So I didn’t have as a creative of a mind as I do today with real estate. So as I mentioned previously, I noticed that a lot of the empty parcels around were selling for about $20,000. I said, “If I can get this for 12,000 and the extra 100, that’s not a bad deal. I can just put it on the market, sell it, and let somebody else deal with it. ” That didn’t end up happening. So I later, it’s always me and my crazy videos on TikTok. I was doing scrolling one day, found somebody who bought a used mobile home off of Facebook Marketplace of all the places, and I thought it was a brilliant idea. So I go to my Facebook marketplace and I start looking up, you guessed it, used mobile homes. And lo and behold, I had found a 2002 single wide about an hour from where this parcel was.
And I thought it was a brilliant idea to go see it and basically sign a contract for it.
Tony:
Why did you opt for that instead of just flipping the land like you initially intentioned?
Tiffany:
I have no idea. It was kind of more of like a … Well, I guess in my mind, the way that I saw it back then was I can either put this on the market and let it sit for a little while because usually vacant land takes a little longer to sell, put it for sale, cash out maybe six, $7,000 after closing costs, or I can try and do something a little more creative as I’m saving up and going along and hopefully make it a home run deal is what I try to go after. Even today, after all the deals that I still do, I call them home run deals for a reason and it started with this one.
Ashley:
Now, I’ve only owned one property with a mobile home on it and it already came with the property when I had bought it, but was there a process involved with that now where could you just take that mobile home and just plop it on the lot, rent it out and be done with it? Or what did you actually have to do? Were there any permits or anything that needed to happen?
Tiffany:
Oh yeah, absolutely. This was in a very, I want to say it was still kind of rural, but it was within city limits, county, you have to deal with all of that. So after buying the parcel, bought it through a tax deed sale, which is, you don’t get a normal deed through it as well. You get a tax deed, which does not come with clean title, hence the lien that I later found on the property. Called in the county, said, “Hey, this is what I want to do, found a mobile home. What do I have to do? What are the steps? Walk it through me. Give it to me like a step-by-step YouTube tutorial.” So went through it. They were thankfully very nice, very expensive process, but they were very helpful in kind of aiding a civilian who has never done this before, let alone an 18-year-old who shows up with this big stack of paper saying, “Hey, here’s my blueprints that I hand drew with a number two pencil.” And they were like, “This looks great.” So I had to learn how to do all of that, getting lots of tips and tricks from contractors, the movers that I actually hired to bring the mobile home onto the parcel as well, which was done obviously after the permits were approved.
But I went in, applied for everything. It does cost obviously a little bit of money, has some planning involved. You have to have all the infrastructure for it, so septic, well, electrical, all that good stuff, which needed to be pre-planned. So when I actually called them to see what the possibilities were with this land, they later informed me that there was a $6,000 lien on the property from an old mobile home that burnt down and the county had to go and clean it up, hence the debris that I found on that property, and I was now responsible for it. Lucky me.
Tony:
Well, I want to talk a little bit more about the additional lien that you found, but I’m noticing a bit of a theme here, Tiffany, with your bias for action. There are so many people who listen to this podcast and they read books, they watch YouTube videos, they go to conferences, they do all of these things, but they never take action and they just get stuck in this mental gymnastics of consuming more content and waiting for the perfect moment. But now in two different scenarios, you saw something about auctions and like a day later, you’re signed up, you’re registered, you’re submitting stuff, you saw something about a mobile home, and now a day later you’re under contract to have a mobile home on your property. What do you think allows you to go from seed of an idea to taking action so quickly and not get caught in that analysis paralysis that so many people find themselves stuck in?
Tiffany:
First of all, and I just have to be very real, giving credit to obviously my parents for letting me live there for free. So it is just something I have to put out there. We are blessed. I am blessed. And so just knowing that I have a place and kind of like a secure … Gosh, how do I even word this? Knowing that I already have kind of like a security going on obviously helps a lot. I think in my terms of things, or as the Gen Z crowd would say, we are a little bit delusional. So I think it really just is … The way I see it and the way I explain it to a lot of people is what’s the worst that can happen? And if the worst case scenario is still something that you’re able to manage and chew, then it’s fine.
I had a worst case scenario happen. I’ve had multiple worst case scenario happens and I’m still here and I’m still buying properties and every year it just keeps growing and growing. So I think really it’s just kind of putting yourself in, “Hey, this is the best case and this is the worst case.” If the worst case were to happen, do we have different exit strategies? Do we have different ways we can go about fixing these things? And if you’re okay with that, take the step because ultimately you’re going to learn along the way. If you don’t take the first step, you won’t uncover what comes after that anyways.
Tony:
Tiffany, I could not agree more. I think so many people, if they just thought through what is the actual worst case scenario here, it would actually resolve maybe a lot of those fears that’s holding them back. Because for most of us, the worst case scenario is that we lose some money. That is usually the worst case scenario when we talk about real estate investing. And the good thing about money is that we can typically go out and make more. Most of us, just because a deal goes bad doesn’t mean that we’ve then lost our ability to produce more revenue, to produce more income. So I love that approach. But you talked about the worst case scenario and thinking through that, but there’s also this best case scenario. So once you work through whatever issues there were with the lien, what happened as the end result with this property?
I know you ended up getting it appraised. And I’m curious, I mean, all you did was you added a temporary structure basically to this piece of land. What did it end up appraising for once it was all said and done?
Tiffany:
Yeah. Afterwards, gosh, after everything, because the mobile home also did need some renovations, which I had to learn myself. Again, worst case scenario and I was knee deep into it and I learned a lot, which I’m very grateful for. It ended up appraising for about 175 at the time because this was during COVID. So I kind of got right at the cusp of the peak. And this area specifically is very, it’s right next to a big metropolitan city that requires a lot of work. And so for it being so close, it was a very desirable neighborhood as well.
Ashley:
What was the total amount that you put into it?
Tiffany:
So in total, the tax deed was 12,100 for the land. The mobile home costs me 12,000 as well. Moving the mobile home cost me, I want to say it was $13,000 and then actually renovating … Yeah, moving it costs more than the actual mobile home. It was crazy. Permits and stuff, I don’t remember. It was probably around like $3,000. It wasn’t really that much. And then obviously well, septic, electrical, and everything else in between is whatever the difference is from about 55,000. That’s the total that I spent.
Tony:
So you invest 55 and it’s worth, you said, 175.
Tiffany:
Was during COVID. I think I could still get that realistically.
Tony:
I mean, that is an incredible … I’ve never done mobile home investing before, but you right now are kind of selling me on the concept of maybe buying my first mobile home because the margins are just so … Those are crazy margins. It’s almost like 3X what you put into it, right? It’s incredible.
Tiffany:
You definitely don’t hear returns like this, I think in most cases, which is kind of why I call them my home run deals or winning the lottery deals because you can theoretically win the lottery with real estate. You just have to, like I said, get creative because if you were to have bought this on market or even off market with land in a mobile home already there, I don’t think you could ever reach 3X returns in a year.
Ashley:
The one thing that I was thinking of is how you said it was $13,000 to move the mobile home. I actually remember talking to somebody who invested in mobile homes and they said that they love to do … They don’t like to own the mobile homes. They like it when somebody else owns the mobile home and they just rent the lot. And they said they have such low turnover because it’s so expensive for the homeowner to move their mobile home to a different park that it’s almost like you’re guaranteed to some sense to have a long-term tenant that actually stays there because it’s just crazy to actually move it to another home. And so their options are either to just leave it or to try and sell it right there where you’re still getting your lot rent hopefully while they’re trying to sell the property and then someone else pays it instead of having a vacant lot sit there.
So coming up, Tiffany actually graduated from tax deed lots and went into buying REO bank owned properties for 60 cents on the dollar actually. So when we come back, we’re going to talk about how this new strategy worked for her. We’ll be right back. Okay. So welcome back. Tiffany, you learned on the first tax deal and eventually moved into REO owned bank properties. So first of all, tell us of what that is and what does it mean?
Tiffany:
Yeah, of course. So REO Bank owned properties is where somebody doesn’t pay their mortgage, the lender later goes in and forecloses on that property. They go through the full legal process. It generally, at least in the state of Florida, as far as I’m concerned, and I think most other states work like this, it later goes through a process where it’s auctioned off to the public through the county website, but this time instead of tax deeds, it’s foreclosures. Again, same kind of process where you have to pay for these upfront, usually within 24 to 48 hours. So it’s a lot harder for beginners to get into this because these houses are selling for $200,000 and you have to have that in the bank the next day to write a cashier’s check to the county. So when these properties don’t sell through the county auction, the lender then forecloses on them officially, keeps the property.
They’re not in the business of holding these homes. They’re not in the process of property management, of being landlords. They later then go off to these third party auction sites where they put them for sale and people and investors like us can go in and buy them.
Tony:
So there’s a lot of similarities between the tax deed sale and the REO. It’s just, and one, the homeowner lost that property or gave that property up to the local municipality. And then in the other, the homeowner gave that property back to the bank that held the debt.
Tiffany:
Yeah, precisely. The only difference is that once the lender gets ahold of it, they sell it in creative means, which means we can also buy it in very creative means. And that’s kind of where the shift is and where it makes it a lot more attainable for newer investors like myself to get involved.
Ashley:
Now, Tiffany, how can people actually find these properties besides just some that may be listed on the MLS?
Tiffany:
Yeah. So funny enough, a lot of these properties actually are not even listed on the MLS, which makes it a lot better for us investors because there’s a lot less competition out there for them. But usually you’ll find them on third party auction sites such as auction.com or HubZoo are two of my favorites that I’ve bought property off of. And they’re listed just like normal houses. Sometimes you can even find them listed on Zillow and you just kind of scroll through and you’ll see a big fat auction red tag on them. And that’s how I know I’m looking for that.
Tony:
Of all the different websites that are out there, can you maybe rattle off a few of your favorites and why you like those?
Tiffany:
Yeah, for sure. My top favorite that people hear me talk about all the time is auction.com, just because they’re very easy to work with. I’ve built relationships with the entire company at this point because I’ve done so many deals with them. I’m bidding on their site every week practically. HubZoo is another really good one. There’s another one called Home with an X. That one’s also really good. And there’s a couple off ones that are sometimes state specific. So Realty Bid is a really good one, and those are kind of the ones that I have off the top of my head.
Tony:
And Tiffany, is the process to get on those websites just as simple as it was for you to do the tax deed sales where you’re literally just like, “Hey, name, email, phone number, whatever it is, ” and you can immediately start submitting bids on different auction properties?
Tiffany:
Yep, precisely. All it takes is a phone number, an email, and your name. That’s it. Sometimes, depending on the property, I’ve noticed that they started implementing a deposit, which is usually about a thousand dollars, but it’s nothing that will keep you out of the game and there’s still tons of opportunities out there that don’t require a single dime to get in.
Ashley:
How are you analyzing these deals? Do you have a formula or a method? If you’re bidding on at least one a week on these sites, is there some kind of formula or method that you’re using to evaluate them before you bid?
Tiffany:
Yeah, 100%. So I didn’t have a formula when I first started, and then I started kind of noticing a pattern. So I reworked everything backwards, divvied up some numbers, and I’ve noticed that I kind of land on a 60 to 65% ARV. So once I run my comps for the property to make sure this is what the area is selling for, and I always do a backup strategy. So for me, that’s renting it. So I also run comps for rentals. And after seeing that, whatever that may be. So for example, I recently just bought a property. It came appraised after I bought it for $300,000. I spent 183,000 on it. So if you do the math, that’s about 63% or something. And I’ll know a lot of investors tend to stay around the 70% mark. For me, that’s just a little too risky because I can’t cash out refi if I wanted to.
I would still have money in the deal and I probably wouldn’t cash flow.
Ashley:
So how fast do you actually have to move on these? Are these properties listed and you have to bid on them within 24 hours? What is kind of the timeframe that you actually have for an underwriting process?
Tiffany:
Yeah. So for these, it’s a very slow impatient game. There was a property that I ended up finding. This was one of my first REO Bank owned deals where I kind of uncovered this whole formula. And I remember just kind of watching the auction. I wasn’t really sure how to go about it. I just knew it was too good of a deal for me to just let somebody else buy it. And that was enough reason for me to act on it. Excuse me. Watched the auction, noticed that nobody bid on it, which I thought was very peculiar, came back three days later and it was auctioned again for the same starting bid, same time and day, just the following week. And I was like, “That’s weird. Did nobody want to buy this? ” Mind you, this was a brand new 2023 construction. There was nothing wrong with this house.
It would pass an FHA loan inspection with flying colors. Nothing wrong with it. I’m over here. Okay, it’s been a week. Watch the auction again. Nothing. Nobody’s bidding on this house. And I’m like, okay, that’s enough reason for me to go in and pull the trigger. So I go in and I put a bid on the third round. So it’s been reauction three times now. On the fourth go around, I think they just kind of gave up, if I’m being honest, and they just sold it to me. So again, with the 60% ARV, they were like, “Nobody else is bidding or buying this house.” And they sold it to me for what I bid for on it and it only took a month. And then later, six months later, I bought another house where it took six months from bid number one to it being reaucioned for six months for me to buy it for the price I wanted.
Ashley:
I had a contractor once that many years ago, he wanted to actually buy this property that was in our town on auction.com and he must have bid on it like 20 times. And it would just say like, “Nope, didn’t meet the minimum of it. Didn’t mean the minimum of that. ” It just kept going and going. And then you eventually ended up getting it, but it just kept getting relisted so many times.
Tiffany:
Yeah. It happens day in and day out.
Tony:
So Tiffany, the reason that they kept relisting it was because no one was actually offering what they were asking for. Is that what I’m understanding?
Tiffany:
So on this property in particular, I can almost guarantee I was the only person bidding. On other properties, I’ve seen where other people are bidding with you, but this property, it was just me and the seller. There was nobody in the room but me and the seller.
Tony:
And then what about from a due diligence perspective? When I get a property under contract on the MLS, we’ve got 30 days to kind of go through that whole process. Even if I’m buying from a wholesaler, I usually have a couple of days to get in there and do my thing. But with these auction sites, what kind of access do you have before you submit your bid? How do you make sure that you’re not stepping into something where your rehab estimates are significantly off?
Tiffany:
So with these auction properties, generally, I know a lot of people kind of get scared off, and this is where it kind of differs from the tax deed sale and the accounting auctions where you need to pay in 24 hours. The closing time on these auction deals are actually 30 to 45 days. So it’s a normal closing process. With the due diligence for checking for liens, title issues, all that stuff, you’re getting a title search done and a lien search because they also allow for hard money financing, which a lot of people don’t realize because it says cash only when you go to buy them. So it’s quite literally just like a regular closing. The only asterisk to that is that you can’t get any sort of traditional financing, so it does need to be hard money essentially for these deals. And as for going out and inspecting them, there are a lot of properties that either allow interior access or they give you the code, usually the realtor, the code, not you.
Or they have photos online that you can look through. Now, when I’m doing this and I have my buy box, of course, you asked about inspecting, kind of seeing the condition of the property. The last couple of deals that I’ve bought have been turnkey, as I mentioned. There was a 2023 new construction. It looked like nobody had lived there. It was impeccable. It was better than my house that I live in. I was like, okay, this is the … So I mean, if the house is only four years old, what could possibly be wrong? Air conditioner, roof, well, septic, all that stuff was just put in, which are the most expensive things when it comes to a rehab. So it kind of just gave me a peace of mind. And even if I didn’t had gone to see the house, I think I still would’ve bid exactly what I bid.
Tony:
I had no idea. Ash, did you know that on auction sites like that, that it was almost like a traditional closing timeline?
Ashley:
No, I honestly didn’t really know how it worked because I’ve never done it. And when that guy did it, I think he just paid, he ended up paying cash for it, but I don’t even … It was so long ago, I don’t even remember the actual process for it.
Tony:
Now, Tiffany, you mentioned hard money. How does the hard money align with the auction process? And I guess maybe even taking a step back before we talk about that, how are you finding your hard money lenders? Because I think a lot of rookie investors understand the benefit of hard money in a situation where you’re doing a lot of rehab or you need to close fast, but how do you actually go out there and find the right hard money lenders to work with?
Tiffany:
Yeah. So I stumbled across mine … Gosh, I love social media. They had followed me on Instagram, and that’s how I found my lender. I didn’t know what hard money was until I started doing REO Bank on. Like I said, this specific property that I’m mentioning here multiple times, it was just too good of a deal for me to pass up. It was right down the street from my normal neighborhood, turnkey house, new build, or came back appraised over 100K what I ended up paying for it. I said, “There’s no way I can lose this deal. I don’t know what I have to do, but I’m finding the money to make this happen.” And that’s kind of when I remembered stumbling across somebody, kyavi.com actually specifically who ended up following me because I posted lots of content about real estate investing and decided to reach out to see how it worked.
And since then I’ve bought properties using fix and flip loans. I’ve also used DSCR loans on these properties. So it’s really flexible. As long as you’re using hard money, there’s really no if, ands and buts, and of course passing inspection for things.
Ashley:
That is so exciting to hear because they actually just came a BiggerPockets Pro Perk partner with us. So anybody that’s a BiggerPockets Pro gets a discount on funding. I can’t remember offhand what it is, but you get some of the money taken off of your closing costs. So you can go to biggerpockets.com/properks and check that out. That’s cool that that’s who you ended up using.
Tiffany:
Yeah. No, I have them on Speed El. They practically know me by name and they’re all my close friends on Instagram. They see me doing my deals. They’re like, “Hey, do you want me to get the pre-approval ready?” I’m like, “Send it in. Let’s go.
Ashley:
” We always love an unplanned, spontaneous pro perk shout out here to someone that’s actually using them and partnering with them.
Tony:
So Tiffany’s built an incredible strategy to find literally properties for pennies on the dollar. And I want to talk Talk a little bit more about how she’s using that to build her portfolio versus stacking some cash. So we’ll cover that after a quick word from today’s show sponsors. All right, we’re back here with Tiffany DeSilva. Now Tiffany, you kind of blew both mine and Ashley’s mind talking about the auction process. But I know some of these you’re keeping, some of these you’re flipping. How are you making the determination on whether this is a flip property or a hold property?
Tiffany:
Yeah, no, for sure. I love that question. I think for me, everything is a flip until it’s not, because ultimately I’m kind of still in the beginning stages of growing everything. Obviously I’m a lot more established now, but still I say the more capital, the better, because you can usually start bidding more aggressively or get deals done a lot faster. So for me, if I can flip a deal and it makes sense, I’m always buying, like I said, between that 60 and 65% ARV percentage. So most of the deals do work for flips, all of them. I make sure of it. And then if the market just tells me that it’s not going to flip for a next couple of months and I’m able to kind of shift gears into turning it into a rental, I’m going to do that. And I always, like I said, buy with a second strategy.
So I’m buying to make sure that I can either fix and flip it or not fix it, but quite literally just flip it because there’s almost no fixing involved at this point. Or I can take it and put it on the market and have it rent enough to cover the DSCR loan that I end up purchasing it with or later refinancing into.
Tony:
So one follow-up question on that. So if you do have to refinance, are you bringing cash to the closing or have you built in enough margin between your all- in cost on the deal, your purchase price and your renovation so that when you do go to refinance, there’s literally no cash out of pocket for you?
Tiffany:
Yeah, there’s definitely not been cash coming out of my pocket aside from the down payment and the closing costs. So I try to keep that kind of borderline there. But generally, I know a lot of people like to buy with a fix and flip because you can put as little as 10% down, which is great. But because I kind of play the market and the economy a little bit, if the house doesn’t sell in three months and I’m getting a little impatient here, I’m just going to put it on the market for rent. With that being said, I like to buy these properties if I can with a DSCR already with no prepayment penalty. So that way, if I want to just shift gears, I already have a 30-year mortgage on it and I’m good. I either just sell it or I keep it, doesn’t make a difference.
Ashley:
That’s so interesting. I don’t know if we’ve had somebody on that has done it that way. What are your closing costs for the DSCR loan compared to if you did the fix and flip loan? Have you compared the two at all?
Tiffany:
I have. And I’ve also done a comparison of whether it’s worthwhile just going straight into a DSCR or doing a fix and flip to bypass a 10% extra down and later refinancing. And what I tell a lot of people is if you have X amount to make it work and that means you have to go into a fixed flip, make it work. Make sure you’re making a safe investment, but make it work. In my case, if I can just buy straight with the DSCR, I’ve noticed that the closing costs are a lot more affordable. And of course, because it’s a 30-year, usually I do PITI, so you’re paying off principal and interest at the same time, and generally the rate is a lot lower with those. So overall, you’re saving probably a couple thousand dollars on a deal. I can’t give you a specific number just because they all kind of fluctuate, but I’d say between three and $5,000 per deal.
Ashley:
Yeah. And plus when you do a fix and flip, and then if you end up needing to refinance into the DSER loan, you’re paying those closing costs twice. So yeah, you’re saving even more money. No,
Tiffany:
No, no. I was just going to say that’s exactly what works for me, but that’s why I say every investor’s a little different. And hey, if you only have enough for the 10% down payment, you better rock and roll with that, baby, because it’s better to have a deal than to not. Yeah.
Tony:
Well, Tiffany, you’re blowing my mind on the whole auction process because I just always assumed, and this is I think part of what’s deterred me from trying to leverage this as an acquisition model is just like the complexity around trying to make sure that my bids are dialed in. But the fact that you actually do get some length of time to go through a normal due diligence process, I think opens this up to me in a way that I hadn’t considered before. And while you were chatting, I just happened to, and actually’s going to laugh. I just happened to pull up auction.com and there’s literally a house that’s not too far from me. It says the current bid right now, or at least the opening bid was $275,000. It looks like the current bid right now has gotten up to 475, but it opened at 275.
And I plugged the address in a prop stream to see like, okay, what does it say in there? And there’s houses on that same block right now that are going for over 700,000, where the bid right now is 455. Now it closes in eight minutes. I don’t know if I’ll have enough time during this podcast recording to do all of that, but it’s encouraging for me to know that there are those types of opportunities out there, even in the markets that I’m in. So I appreciate you for opening me up to that.
Ashley:
Come on, Tony. Do it live. Come on.
Tony:
Well, in addition to the REOs and the tax deeds and the flipping and holding them, you’ve also done some construction, right? Some ground up development, Tiffany. So I want to talk a little bit about that. You built two tiny homes from scratch, which I think is incredible, right? You renovated a farmhouse down to the studs. How does that construction knowledge change the way that you look at deals knowing that now, not only is renovation an option, but now you’ve also got this opportunity to build something from the ground up.
Tiffany:
Yeah, no, for sure. I mean, definitely a very big learning curve. And I think everybody kind of looks at real estate. If you want to fix and flip, you have to actually do the fixed part. I’m here to tell you that you don’t, especially if you do the strategy that I just told you with the turnkey auction properties. And yes, there are a handful of them out there. I will say though, I’m very grateful that I went through that. So building two tiny houses from scratch, even though they’re tiny houses, they still have air conditioners, they still have appliances you need to put in, framing, roofing, anything you can think of. And so I think having that knowledge now not only lets me be able to inspect these properties with a lot more of a fine-tuned home. I also am able to take a deal and see how it’s going to perform post fixing it up because if we’re flipping, let’s say, for example, and we need to have a buyer and this is an affordable house and an affordable neighborhood, we’re probably going to get an FHA buyer, that house better pass all inspections.
And so having built these properties from the ground up, I can now go in and basically see, “Hey, this is what we need to fix in order to get this property in tip top shape so that whoever does come to purchase this is going to have a seamless process.”
Ashley:
Well, Tiffany, thank you. Oh, Tony, did you say something? Oh, weird. There was an echo or something. Okay, sorry. Tiffany, thank you so much for joining us today. We really appreciated you taking the time to share your journey with us. Where can people reach out to you and find out more information about what you’re doing?
Tiffany:
Yeah, of course. They can find me over on Beauty and A Builder on all platforms. That’s Beauty and A Builder.
Ashley:
Thank you so much for joining us today. And if you enjoyed this podcast, make sure you are subscribed to our YouTube channel at Real EstateRookie. Go give Tiffany a follow. And again, Tiffany, thank you so much for taking the time to share the lessons that you’ve learned and your experience so rookie listeners and us can learn from you. I’m Ashley, he’s Tony, and we’ll see you guys on the next episode.
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