When Jhanel Wilson was forced to make a decision and leave her full-time job in 2012, she became a full-time investor. She then turned $100K into $72K in cash flow and $2M in assets. Today, we’re talking with Jhanel about her work in Section 8. She is diving into hacking the Section 8 algorithm, the benefits of investing in Section 8, and the key to choosing tenants in that market.
Jhanel Wilson Real Estate Background:
- Founder and CEO of The Savvy REI
- 17 years of real estate investing experience
- First investment was a distressed property on the verge of being demolished. After pulling all her resources, Jhanel successfully completed the project and started cash flowing immediately after seeing the power of real estate.
- Portfolio consists of 40+ proprietors and 100+ units
- Her ebook: Buy Real Estate with No Money Down Using High Limit Credit Cards
- Based in Philadelphia , PA
- Say hi to her at: http://jhanelwilson.com/
- Best Ever Book: Dare to Lead: Brave Work. Tough Conversations. Whole Hearts.
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TRANSCRIPTION
Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with our guest today, Jhanel Wilson. Jhanel is joining us from Philadelphia, Pennsylvania. She is the founder and CEO of the Savvy Real Estate investor, and has 17 years of real estate investing experience. Jhanel’s portfolio consists of over 40 properties that comprise 100-plus units.
Jhanel, thank you for joining us, and how are you today?
Jhanel Wilson: I’m doing good today. Thank you for having me.
Ash Patel: Before we get started, can you tell us a little bit more about your background and what you’re focused on now?
Jhanel Wilson: Yes, I went to school for chemical engineering. So I started working as an engineer [unintelligible [00:01:29].16] At the same time, I worked for about nine years as engineer; at the same time, I built up my portfolio, and then in 2012, I started investing full-time and left my job.
Ash Patel: What were you investing in? Was it just single-family homes initially?
Jhanel Wilson: I’m mostly small multifamily, mostly duplexes up to 4-units.
Ash Patel: Alright, so you had a full-time job, and you’re balancing your growing real estate portfolio. What was that like?
Jhanel Wilson: It wasn’t that bad initially. I worked for the USDA doing research, and it was a lot of doing experiments during the day, and I felt like I had extra time to do other stuff up to around, like, two o’clock. So every day, I would just check on my projects, either at lunch or after work. And for a long time, it went really well, up until the Great Recession. They were having hiring freezes for the government, and then they had a buyout. And when they had this buyout, a lot of people retired. And when they retired, they started dumping so much work on to me… So then I got to a point where I had to make a decision. So that was a reason why I left; it wasn’t that I couldn’t balance it — I was single with no kids at the time, so it definitely made it easier… But it was when the great recession hit and the government didn’t have the money, and like I said, they overworked me, so I had to make the decision, and it was the right decision. So I [unintelligible [00:02:43].20].
Ash Patel: So now you’re working past two o’clock, and that’s not cool.
Jhanel Wilson: Sometimes. Sometimes things get hectic and I do have to put in a long week and work on a Saturday if I have to. But for the most part, when things are normal, I’m not working that hard. There are weeks where I might work for, like, five hours.
Ash Patel: Wow. Okay. Sounds like a great gig, working for the government. So you quit your job and started real estate full-time. So now you had to ramp up and really make things happen. What did you do?
Jhanel Wilson: Well, I’m a buy-and-hold investor, so my goal was to build up enough rental income that almost matched my job income. And when I did that, even though I took a huge hit from my salary, I adjusted pretty well; I was frugal for a long, long time. My spending got a little bit out of hand last year, just making double [unintelligible [00:03:35].27] But I had to scale back a lot and really rev all my money back into the business, and hunker down. And eventually, I did a refinance in 2017, and my [unintelligible [00:03:49].19] had appreciated so, so much. And when I did that refinance, I had about an extra $200,000 to invest with, and I turned that into another huge portfolio, and now I’m like in a whole other chapter. So now, I don’t struggle, my rent pays more than what my bills are. Yeah, that’s just where I am now. So I did stumble at first, but now with that refinance and pulling the cash out and reinvesting it, I’m in a pretty good spot.
Ash Patel: I see that question pop up a lot in some real estate forums, where people are like, “Hey, if I have $100,000 or $200,000, what would you do?” What did you do with that 200 grand?
Jhanel Wilson: So I am an active investor. What that means is I have relationships with wholesalers and then I do the rehabs, I have small crew, and then I can refinance and get my initial investment out and reinvest it again. So because I’m so active, I manage; I make sure I don’t have any losses, I make sure we’re on time. I make sure I’m spending low money on materials, I make sure I get the biggest impact for the value-add. And when you have a whole bunch of conversions – I had to turn single families and the duplexes and the triplexes… So because I did so much value-add — not the average or initial investor can probably do what I do with that money, I turned that $100 grand into about $72,000 to cash flow and to about $2 million in assets. It was a lot of wheeling and dealing and grinding, though. [unintelligible [00:05:14].10]
Ash Patel: So what do you recommend for others to follow in your footsteps? How can they build up these relationships with wholesalers?
Jhanel Wilson: You basically have to network. I wish I would have known that sooner. So whenever I’m meeting new people and they tell me, “How can I get started?” I say, “The first thing you need to do is build up your network.” People are information, and every new person you meet has something that they can add value to you. So either it’s finding deals, finding hard money lenders, finding a niche that they’re doing… Always network and learn new strategies on what to do.
Ash Patel: That’s a great point. I learned that much later in life than I wish I had, but that is so important. Even if you have no money, no real estate knowledge, build your network, surround yourself with those people. That is great advice. Do you manage all of this yourself? Do you have partners?
Jhanel Wilson: I’ve mostly owned them, and then with my fiancee, we own about 22 together, and it’s just to pay for the household bills. But we manage them ourselves using Buildium. But recently, I did hire someone in-house to hire them for us. So we basically got to train her to manage our properties the way we like to manage. I did try other property managers, but they don’t care as much as we care. I don’t feel like they have the relationship aspect as we do. But they also don’t watch our money as much as we do. If we have a turnover, we’re in there the following week, finding tenants two weeks later; basically they’ll be more lax with it. And so we just found it more economical and it just made more sense to hire someone in-house to manage the properties.
Ash Patel: And what duties does this person have?
Jhanel Wilson: Right now she’s doing everything. I basically trained her first on managing the tenants. We also are hiring a VA too, so she gets the calls and then she directs them to the maintenance staff. We have a lot of Section 8 tenants, so we have inspections, so she keeps an eye on the inspections, she makes sure that we pass the second one on time… And now she has a hold of that, how to manage construction projects.
Ash Patel: Good for you for offloading a lot of your tasks. What’s the VA going to do?
Jhanel Wilson: I tried to get a lot of my tenants to put requests in through the app. I have a lot older tenants and they’re just — they don’t want to do it. So they call. I still have people who call, so the VA will take the phone calls and put it in our CRM or Buildium, and assign it to the person. We have a list of people that they go down for— depending on what it is… Like, they’d call this person, doesn’t answer, they’d call this person… And then the project manager is just going to check at the end of the day and just make sure everything went well.
Ash Patel: So staying true to your 9-5; you’re trying not to work a lot. You’re trying to offload a lot of tasks, which is great.
Jhanel Wilson: Yeah, I worked really hard to build this portfolio, and I’m learning that people are asking me to teach. And I read this book again, The Millionaire Real Estate Investor by Gary Keller, and in it, it does say, “Once you made a million or whatever, you are supposed to teach this.” I was like, “Oh, maybe this is what I’m supposed to be doing.” So when people ask me, and they really appreciate the information, and I’m doing things that aren’t commonly taught, I do see a value in the teaching. So I’m trying to transition things, and [unintelligible [00:10:20].12] make it more passive and to start teaching more.
Ash Patel: Now, when you say teaching, is it teaching your own staff or teaching others?
Jhanel Wilson: Teaching others, teaching others online. For the first time, I’m mentoring; I got my first group of 10 a couple months ago. So I’m trying to teach classes and mentor.
Ash Patel: Yeah, I love teaching other people, and I try to get people to go from residential mindset to non-residential commercial. All of my properties are where people don’t shower; and over the years, I’ve preached that so much, and I’ve had a lot of people take me up on the advice, and I’ve mentored them through the years. And now the deal flow has gotten through the roof, because a lot of these folks are feeding my pipeline, which was never my intention, but just a reward, so to speak, for teaching. So it’s one of the most rewarding things you can do. And it always pays back, and builds your network as well.
Jhanel Wilson: Yeah. It does. I realized, when we focus on people, the money just comes. I instead focused on the money; just focus on the bigger goal, and the money just comes. The better person you are — that’s just how I see it. Do what you like, help people and you will be blessed.
Ash Patel: That’s a great mindset. Jhanel, early on, when you started, where did all the financing come from?
Jhanel Wilson: So I was 22, and my dad had a property [unintelligible [00:11:42].08] from my grandmother. As a kid, I remember him going across the street and picking up rent. And I’ve always been into money, I’ve always been a saver; I used to wrap up coins in those papers and take them to the bank. So since I always saw him pick up money, I always had in my mind, “Property across the street equals money.”
Now, years went by, he kind of let the property go. It was vacant for over 10-12 years. And when I was in college, my grandmother called me and told me that it was about to go to sheriff’s sale, and if I wanted to get the house, I needed to come save it. So I found out it owed about $5000 in taxes, and I didn’t have any money; I wasn’t working. But I got a student loan; I got a student loan and paid off the back taxes. And then when I finally graduated and I started working, I found out that it was about to be demolished by the city, because it had a ton of violations… Like I said, it had been vacant for over 10-12 years, the joints were rotting, the walls were falling apart in the back. And I didn’t have enough money to do the repairs. So when I was in there, hearing about all the repairs and violations, there was a contractor there, and he said, “I can fix everything.” So he gave me a quote; his quote was another $5000. And the only money that I had at the time, because I was trying to pay off my loans from school and everything, I used a cash advance from my credit card. Now, I don’t recommend doing cash advances, but that was all I knew at the time.
So I took out a cash advance and I paid him to do the repairs. Now, he did the repairs, and again, I’m in a state where I don’t know what to do. I got a quote, the quote was high… And I’m like, “I’ve got $10,000 in this property. What do I do?” And I decided I’d sell it. So I got a buyer, someone was willing to pay about $45,000 for this duplex, and it was a total gut. I couldn’t believe that someone will spend that much money on this property, and it intrigued me, and I decided that I should keep it. They wanted it and they want to spend this much for it; I need to see what this is about and keep it. So I said, “I’m going to figure it out.”
What happened was — my mom’s a hairdresser and I was at her salon, and she had a client who had a property around the corner from mine. She said, “Oh, I just did a refinance; they did a drive-by appraisal, didn’t even come in and I got $70,000.” And I was like, “Whaaat?!” That’s my answer. So what I did was, I painted the outside, I put up new windows, put a new door, and I got a drive-by appraisal, and I got $63,000. I didn’t get all the $63,000. I had a mortgage on it, I had liens and [unintelligible [00:13:56].00] and all this stuff, but I had about $20,000 left over to do the repairs. I did the repairs, had more contractor drama, but I made it. I made it, and as soon as I started cash flowing, I put two Section 8 tenants in there, starting cash flowing $700 a month… And my whole perspective had changed, and I forgot all the drama I had been through, and my eyes were opened to the power of real estate. I started to build my portfolio based off of using credit cards, lines of credit… I would try to just get my name on a deed and refinance and get the cash out. So it was basically — I just got my money through leveraging credit.
Ash Patel: Are most of your tenants Section 8?
Jhanel Wilson: Yes, the majority of my portfolio is Section 8.
Ash Patel: Okay, and why do you veer towards that?
Jhanel Wilson: Well, I like automatic payments. I read this book when I first started working called The Automatic Millionaire by David Bach. And he has you set up all your payments automatically, has you do your allotments for your paycheck automatically, so you don’t have to think about anything. So I loved that part of Section 8, having automatic payments. So as soon as I get my money automatically deposited on the first of the month, my mortgage is automatically paid. I don’t think about any of that stuff. So that was my first draw to it.
And then I saw other benefits of it, like – the turnover is so low. All you have to do is pass inspections and you get paid. So I don’t have to fight with anybody—I mean, I have to fight sometimes… But for the most part, I know what I have to do to get paid, I’m in control; I like being in control of my payments, I like being in control of my buildings, and my tenants. And it just works out, I don’t have to worry about paying my mortgages. And it came in handy last year, April 1st; when people were freaking out about COVID, I was sleeping like a baby. I knew that my money was going to be there and I could pay all my mortgages. I didn’t have to put anything in forbearance, I was able to capitalize, because I could still get loans… And I took advantage of some great deals, because other people – they could not get financing. I love Section 8 for that, and they have other benefits that I take advantage of, too.
Ash Patel: What are those benefits?
Jhanel Wilson: Some of the benefits are low turnover, accountability, because a lot of tenants, they want to stay on the program, and so if they do things that jeopardizes it, like have extra people there or if they tear up the unit, they will get kicked off the program. And Section 8 is a great program, because they pay based off of how much money they make. And if they lose their job, the government pays the rest of it, so they don’t have to worry about being able to afford their rent. Also, I don’t have to worry.
Other great things that I like is that I can control how much rent I get. They base the rent off an algorithm, and I know the algorithm, so I can hack it. And even if a house is not going to rent for a certain amount in certain block in a certain area from a regular tenant, just because all they know is what’s in the algorithm, and I hit all those points, I will get higher market rent than another person who wasn’t on Section 8. So that’s one of the other great things about it.
Ash Patel: So when you say higher than market, it’s higher than an ordinary person not on Section 8; your Section 8 rent would be higher than that.
Jhanel Wilson: Some areas, yes.
Ash Patel: Can we deep dive into some of those algorithmic hacks?
Jhanel Wilson: Yep. So when you do an inspection, the inspector writes on all the amenities, and he also writes down the condition of the property. So if you have a newly renovated place, you automatically get a really high tier amount of rent. And some areas, they average the whole county. So if you’re in a low-income part of the county, they still take the average.
Now, in Philadelphia, they got real smart, and they’ll break it up by zip code. So some zip codes do pay higher than the other ones. So what you would do is just buy properties at the edge of that zip code, and take advantage of the higher rate that you would get in that zip code. And then they also gave you more money based off of amenities. So if for example, you don’t have a renovated unit, and you still want to get high market rent, you would just make up the difference with amenities; you would put in a washer and dryer, a refrigerator, and that will also bring up the rents.
Ash Patel: Putting in a washer and dryer – what’s the return on investment with the higher rent?
Jhanel Wilson: I find that the return on investment is great, because the rents are higher…
Ash Patel: Does it pay for itself in six months?
Jhanel Wilson: Yeah.
Ash Patel: Does it take a year to pay it back?
Jhanel Wilson: You could just get a standard washer and dryer for $1,000, and your rent might be another $100 a month. So it pays for itself in a year.
Ash Patel: And how often are these inspections?
Jhanel Wilson: So they used to be every year. Now, they’re every other year, which is wonderful.
Ash Patel: You just have to clean your room once every other year, huh?
Jhanel Wilson: Yes. Yes, yes, yes. Unless you have a complaint since inspection. But yeah, every other year is not that bad. You just go in there, and if you have a good maintenance crew, you can capitalize.
Ash Patel: And are there things that you do to keep your tenants satisfied, make sure they’re living in a good property?
Jhanel Wilson: Yeah, I really appreciate good service. I will go to a restaurant just because the service is better than the next one. If something is wrong, I complain, they’ll say, “We’re sorry, let me replace it, no charge.” So I try to give my tenants good service, they appreciate it and they pay me the rent on time. So if they have a problem, I fix it. And they know that we have an arrangement; I fix problems and they pay me the rent. I’m reasonable. If something happens to them or something is broken, it’s their fault, “I say bring it up over into three months.” So I always work with them. I try to do things that work out for both of us. If things don’t work out, I try to dissolve a lease, or I file eviction or cash for keys. I try to always make sure, number one, we have a good relationship. I try to always get tenants who are reasonable — that’s the first criteria. So if someone doesn’t have a lot of money—and that also goes into the right factor; we’ve got a bunch of different factors that go into the rent calculation… But tenants who make more money, their rent is also higher. So I will take a tenant who seems more reasonable, have a better demeanor over someone who is, I don’t know, high strong… Just so I know that we’ll have a long relationship, but that’s what I value more than the money.
Ash Patel: Do you interview all of your tenants or does your property manager do that now?
Jhanel Wilson: Well, my property manager has being doing that now, and she is seeing the difference in why I picked the tenants that way. So she picked a couple of the early ones; they have been a pain in the butt. They just complained about the most randomest things; it’s like, this is an older house, we do the best we can. The walls may not be smooth right there. It’s not a big deal, but she is learning. So [unintelligible [00:20:21].15].
Ash Patel: What’s your best tip on finding the right tenant, in the interview process?
Jhanel Wilson: I just think that once you get used to dealing with people and you are a logical person, you’re unemotional, you’re not trying to think, “Oh, I need to fill this vacancy, because I need the money.” If you start putting anybody in there, you’ll pay for it in the end; I’ve made that mistake myself.
So the first thing I do is just be logical and just make sure it’s someone that you want to be in relationship with for a long time, that they are responsible, they know that it’s important to pay their rent and have a roof over their head, and just make sure they can afford it. Because people can be optimistic and think that they can afford things that they really can’t; they don’t think about things that might happen down the road. So just make sure people can really afford everything that you’re asking them to pay for.
Ash Patel: Is there a favorite question that you have?
Jhanel Wilson: A question for the tenant? I always ask why they’re moving, because I need to know what happened with the last landlord, and if they go into some crazy story about how there—
Ash Patel: It wasn’t their fault.
Jhanel Wilson: Yeah, if they’re blaming everybody else, then I’m like, “No, I need someone who takes accountability.” So accountability is huge for me.
Ash Patel: Jhanel, you have 100 units over 40 properties roughly. Why have you chosen to stay with the duplexes and small multifamily, versus just a large complex?
Jhanel Wilson: I’m trying to get out of it, but people keep sending me more deals; that’s the problem.
Ash Patel: Okay.
Jhanel Wilson: I told myself I was not going to buy anymore, because I already have so much in the pipeline, people just keep—they know I can handle it and I feel like I can do it in my sleep. I just keep buying them. But I think I bought my last duplex a couple of weeks ago, and it wasn’t exciting for me. I was like, “You know what, this is a sign. I think I’m done. I’m done with this. I’m going to start doing larger.” I did read the book about syndications, so I need to get in that space. I need to network with people in that space so I can get out of the small multifamily.
Ash Patel: Yeah, I got it. Jhanel, what is your best real estate investing advice ever?
Jhanel Wilson: My best advice is you have to stick with it. It is a tough learning curve, but once you learn it, it gets easier, trust me. It’s just learning is the hard part. The mindset, changing how you think is the work you have to go through. Working with people, understanding people, not taking things personally, thinking logically is the biggest thing. So go through that learning curve, delayed gratification and you’ll be successful.
Ash Patel: Great. Jhanel, are you ready for the lightning round?
Jhanel Wilson: Yes.
Ash Patel: Let’s do it. Jhanel, what’s the best ever book you recently read?
Jhanel Wilson: I really loved Dare to Lead by Brené Brown. It teaches good leadership skills, which is great with your tenants and contractors.
Ash Patel: What’s the best ever you like to give back?
Jhanel Wilson: I think people should give back in whatever they are good at. And I feel like I’m good in real estate. So lately, I’ve been buying properties that have tenants already in them, which is new for me. And even though the rents are undervalued, I will not aim to push them out. I try to do stuff that works for both of us. I fix up the place and I raise it to a place that is good for them. And I feel like that has given back to my community by keeping people who have been there for years there. And I’m sure it makes up more than 10% of my salary, because I can make money in other ways that don’t impact people.
Ash Patel: That is great. And Jhanel, how can the Best Ever listeners reach out to you?
Jhanel Wilson: My website, jhanelwilson.com.
Ash Patel: Awesome. Jhanel, thank you for sharing your story with us; starting out as an engineer, working for the government, getting that real estate bug after your first deal, almost didn’t make it… And then really thriving with your relationships, your network with wholesalers, and putting all your systems in place, and learning the power of Section 8 tenants… Thank you for sharing all of that with us today.
Best Ever listeners, thank you for being on the show and have a best ever day.
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