Interested in pulling the trigger finally? Well now it’s possible after hearing this episode, you’re going to learn what it takes to lessen the burden every month by purchasing a multi family. That’s right, our guest has only purchased a multi family and it’s been a blessing and gateway to more deals!
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Sunny Burns Real Estate Background:
– 26 year old real estate investor
– First real estate deal a quadplex, was his best ever deal that has allowed his wife to stay-at-home
– Property is 20 min from NYC, found off the MLS in 2015, cashout refied all $67k of their initial investment
– Based in Garfield, NJ
– Say hi to him at http://www.famvestor.com
Click here for a summary of Sunny’s Best Ever advice: http://bit.ly/2nxya1d
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate podcast. We only talk about the best advice ever, we don’t get into any fluffy stuff.
With us today, Sunny Burns. How are you doing, Sunny?
Sunny Burns: Good, how are you guys?
Joe Fairless: I’m doing well, and I’m channeling the Best Ever listeners, and they’re doing really well as well, because we’re gonna be talking to you, and learn more about what you’ve got going on as a 26-year-old real estate investor who’s first real estate deal was a quadplex, and the property is 20 minutes from New York City, where you’re based.
Let’s talk a little bit about that, but maybe before we dig into that deal, do you wanna give the Best Ever listeners a little more about your background and your focus?
Sunny Burns: Sure. I’m a mechanical engineer – that’s my profession, that’s my 9-to-5. I work for the Department of Defense as a prototyping engineer, I do some cool stuff there. I recently printed a 3D grenade launcher.
My wife and I recently got into real estate. We really started diving into it about two years ago, and wanted to create some financial freedom for ourselves, so that’s why dove in and we bought that four-family, to create that passive income. My wife was an art teacher, but she was able to retire (…I like to say) and stay at home with our two sons – we just had another son two weeks ago.
Joe Fairless: Congratulations on the new arrival.
Sunny Burns: Thank you!
Joe Fairless: Alright, let’s talk about the quadplex, because that is your one and only deal, right?
Sunny Burns: That is.
Joe Fairless: Okay, cool, so let’s dive into that, because this is going to be really beneficial for real estate investors who are starting out, and learning how you got your first place. When in New York City do you live?
Sunny Burns: Well, we don’t live in New York City, we live actually in Northern New Jersey, in Garfield, New Jersey. There’s trains right into the city, it’ll take you 35 minutes to get into the city via train or bus – bus two blocks away.
Joe Fairless: Okay, cool. So you’re in Garfield. Are you from the New Jersey area?
Sunny Burns: Yeah, born and raised here, so I’ve been here all my life. That’s why we were looking local.
Joe Fairless: Okay, you looked local… How did you find the property?
Sunny Burns: Basically just off the MLS… We were just looking at realtor.com, and I got regular e-mail from them; one day I just got an e-mail for this 12-bedroom, 4-bath quadplex, and I looked at my e-mail and was like “Wow, this is the property we’ve been looking for.” I showed it to my wife, and I’m like “Let’s buy this thing.”
Joe Fairless: Okay. 12-bed, 4-bath quadplex… What criteria were you looking for on your search?
Sunny Burns: Ideally what we wanted was a property that was gonna cash flow at about $1,000/month. That was our basic, very bare bones criteria, but we were searching for a long time for something to meet that. That was after we kind of left the unit and everything was fully rented out, because right now we’re still owner-occupying.
Joe Fairless: Alright, you’re living in it, you’re renting out the other three units.
Sunny Burns: Yeah.
Joe Fairless: Cool. And you did that because you got an FHA loan, is that correct?
Sunny Burns: No, we actually did conventional financing through a smaller bank; we put 10% down. We went with the smaller bank because they don’t charge you borrower-paid PMI (they take care of the PMI) and we got a great rate at 4%, which we’ve since refinanced to a 3,5%.
Joe Fairless: Cool. They don’t charge you borrower PMI, so you did a smaller bank, 10%… What was the purchase price, how much did you have to put in – if any – to get everyone moved in, and what’s the rent?
Sunny Burns: The purchase price was $430,000. We put down 10%, so $43,000, and then we put about $20,000 in materials. We did all the renovations ourselves. Then for rent – so we live in unit one. Unit two we rent out to my in-laws actually, for $1,000/month, and the other two units we rent out for $1,700 each. So in total it’s about $4,410/month, while we live in one of the units.
Joe Fairless: $1,700 each, $4,410…
Sunny Burns: $1,710 for one of the units, and $1,700 for the other unit.
Joe Fairless: Oh, so don’t forget the $10!
Sunny Burns: Yeah…
Joe Fairless: You are a true engineer. You know your numbers, you get on to me if I miss $10… I love this.
When I jump on investor calls and I’m having a conversation with an investor, they don’t even need to tell me what their occupation is, because I will know if they’re an engineer or not based on the type of questions they ask. That is the only profession – not accountants, not lawyers, not doctors, but engineers… Engineers ask the most detailed questions and exhaustive list of questions out of any type of investor.
Sunny Burns: I would definitely agree with that.
Joe Fairless: Alright, so what was that number…? $4,410…
Sunny Burns: Yes.
Joe Fairless: $4,410 divided by, you’ve got 450 into it… Alright, cool, that’s right at the 1%. And then, once you move out…
Sunny Burns: Yeah, we can definitely get $1,500 for our unit easy, and then another $500 for my in-laws unit easy, once they’ve moved out.
Joe Fairless: How long are you gonna be living there?
Sunny Burns: Until we find our next quadplex that we can also house-hack and move into and rent out as well. We’re looking for another triplex or quadplex, that’s what currently I’m searching.
Joe Fairless: Okay, cool. Tell us about the renovations – what did you need to do? Did you have to learn yourself how to do that stuff?
Sunny Burns: Yeah, definitely YouTube really helped a lot in a lot of things, but also my wife is amazing – she grew up in a really old Victorian with her family (I think it was the 1890s), so they had to repair it all the time, and she kind of just grew up really handy. I’m pretty handy myself, but I was more into car mechanics and that side of things. Learning house repair, that was definitely a learning curve, but YouTube, and she had a lot of knowledge, as well…
Joe Fairless: You know, if people asked me what would I have done differently starting out – I wouldn’t have done it differently, so perhaps that’s the wrong way to phrase it, but I was living in New York City and I bought homes in Texas in 2009… It was perfect timing – I didn’t know it at the time, but it was perfect timing. What I also wish I would have done was buy a duplex or fourplex, live in one side, rent out the other. I couldn’t make the numbers work.
It’s a little bit different because you’re from New Jersey, so it’s probably gonna be an easy answer, but I’m just gonna ask you anyway: do you feel like you’re sacrificing a New York City experience, since you’re not living in New York City, you’re 20 minutes away?
Sunny Burns: No, honestly… Personally, I can only be in New York City maybe one day a month, and then I’m tired and I gotta go back to some trees and land. I don’t know, I can’t live in that urban lifestyle too long.
Joe Fairless: Okay, cool, so that’s not how you’re made up anyway.
Sunny Burns: Yeah. But I definitely recommend that house hack – if you buy a single-family house, depending on how much you make, half your income could be going straight into that house (mortgage, taxes, repair costs), so buying that duplex at least can offset some of that money and can get on that track towards financial freedom and you’re not a slave to that house.
Joe Fairless: You mentioned that you did a refinance on it… When did you purchase it?
Sunny Burns: I purchased it in 7th October 2015, and we refinanced 10 months later.
Joe Fairless: How did that work out for you?
Sunny Burns: It worked out great. We purchased it for $430,000, we put that $20,000 into it in repairs, and I think it was under market when we bought it, so it appraised for $550,000, so that was $120,000 over what we purchased it for. We did a cash-out refinance, so we pulled out $67,000, and that was pretty much the $43,000 that we put into it and the $20,000 repair costs, and I think some closing costs wrapped in. So we just wanted to pull out every dollar that we’d put in; we wanted to pull out that money for our next investment, which we’re looking for right now.
Joe Fairless: That’s beautiful. Bravo!
Sunny Burns: Thank you. Yeah, it worked out beautifully. We only put 10% down, but right now, even after taking out that $67,000, we have 20% equity in it, which is a lot more than we initially put down.
Joe Fairless: Are all of your deals throughout your life gonna be like this?
Sunny Burns: I can only wish…
Joe Fairless: What type of luck are you having with your search right now on your next deal?
Sunny Burns: We haven’t found anything… It seems like the prices are just so high. We were looking at another house last week and went to an open house – it was like $600,000 for another quadplex, in the same town of Garfield, with two bedrooms and one bath. We have four 3-bedroom units, so we’re getting good money for a [unintelligible [00:10:44].26] unit, but I don’t know… The numbers don’t work as well, but we haven’t given our hundred percent in the search yet, so I’m still hopeful.
I think we won’t be able to get as great a deal, but we could probably have to settle a little bit.
Joe Fairless: For a Best Ever listener who’s looking to do what you just did – I’m not asking for your best advice, because I’m gonna ask that in a little bit… But just for someone who’s listening and like “Yes, I want that!”, what are some suggestions you would have for them?
Sunny Burns: Prior to us putting an offer on this house, we had put an offer in a week before on another quadplex in the same town of Garfield, and the advertised price was $500,000. Three days after it was listed we put an offer for $525,000. That was an offer $25,000 over asking, and we were quickly outbid by other investors. If the numbers work, other investors want in.
A guy put a cash offer over ours, and we put an offer 25k over asking… So my suggestion, how we got this property I really believe is because it was an REO, and it was owned by Wells Fargo and they have this first-time homebuyer’s program. For the first 12 days, they wouldn’t let any investors bid on it. Only people who were gonna owner-occupy and live in the property were able to put a bid in. So I think we were only competing with two other people. We just put an offer in, $5,000 over asking and we got it. I don’t think we would have gotten it any other way, especially because this is such a cash cow.
Joe Fairless: Okay, that’s similar to a hack – maybe it’s the same thing – the HomePath program…
Sunny Burns: Exactly, I was looking at a lot of that, as well.
Joe Fairless: Does that still exist, the HomePath loan?
Sunny Burns: It did two years ago…
Joe Fairless: Okay, cool. I got my second house through the HomePath program, and I only had to put 10% down. I didn’t, but there was the first-time homebuyers — or actually not even first-time buyers… If you were buying it to live in, you got the first crack at the REO property, and then it was police officers and veterans and firefighters – they got the second. If that passed through, then feeding frenzy with investors takes place, and I got it through that.
Sunny Burns: Sounds like a similar deal. When we visited this property, there’d be investors crawling all over… Every time we came there were three or four people just looking in the windows, looking around… Because it was completely vacant when we got it.
Joe Fairless: Let’s go back to $20,000 – that’s a significant amount of money to put into something and to do your own work on a property when you’re learning on YouTube, even though your wife is handy and you know car mechanics… [laughter] So talk us through that.
Sunny Burns: We redid the whole kitchen; we pulled out all the old cabinets, all the appliances – which I think there was just an old stove at that time… And we actually bought a used kitchen off Craigslist for $1,100 with the stone and sink and everything, and it magically fit exactly in our unit, so that worked out quite well.
Joe Fairless: What would you have done if it didn’t?
Sunny Burns: Well, we only bought it because it fit. We saw three or four of them… But it worked out so well. Anyway, I’m sure we would have cut the stone here or there, trying to make it work. It had an excess of cabinets, so we could kind of tetris it together.
So we did kitchens, we repaired the sidewalk… What else did we do? A lot of little repairs here and there; we painted a lot of walls. In the attic we made some storage space by putting down just plywood. We had to repair the chimney – it was kind of leaning over and falling down.
We pulled up all the rugs and refinished them to hardwood floors, we put in new vanities… Just kind of minor cosmetic tweaks here and there. We put in a centralized coin-operated laundry room… Things like that.
Joe Fairless: What repair was the most challenging to learn how to do?
Sunny Burns: Probably that kitchen. There was an L kitchen, and the sink wasn’t exactly where the hot water and cold water lines were, so we had to finagle some things here and there, but it worked out really well. I learned how to [unintelligible [00:14:41].28] copper pipes, and had to learn a lot of things on that one – hang up and make sure the cabinets were leveled, I had to put travertine backsplash, things like that.
Joe Fairless: When you are looking at these repairs or how to do them on YouTube, was there a particular channel that you were looking at, or you just do the search and whatever video pops up?
Sunny Burns: I did the search, looked for the highly rated, highly viewed ones.
Joe Fairless: Okay, got it. Now the money question – what is your best real estate investing advice ever?
Sunny Burns: Honestly, I’m just gonna give that generalized advice to those beginners in the audience who are looking to make a step towards financial freedom – don’t go and buy that single-family house if you haven’t already. Buy at least a duplex. You don’t wanna become a slave to your house. You don’t want half of your paychecks to go there, because it’s hard to get out of that and grow from there. But if you can buy something like a duplex, a triplex or a quad, you can really start to almost live for free.
We actually live for free, and then make a couple hundred dollars after that. It’s really an awesome thing, and we’re able to grow so much quicker because of that.
Joe Fairless: Was there any convincing needing to be done with your significant other to buy a quadplex versus a single-family?
Sunny Burns: There was at the very beginning because she was really hesitant about working with tenants; she was really scared about tenants – they’re gonna sue you, they’re gonna cause all these headaches… We did credit score checks on every single tenant, we did background checks on every single tenant, we made sure that they had at least two times the rental income coming in, and we did a lot of thorough things.
Through the processes I outlined that we’d do with these tenants, I was kind of able to lower her fears and now she’s a huge fan and tries to tell all our friends to do the same thing.
Joe Fairless: Are you ready for the Best Ever lighting round?
Sunny Burns: Let’s do it!
Joe Fairless: First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Sunny Burns: I just read this one – I love reading books; I read books all the time, but this is my most recent one and I really loved it… It’s called Outwitting the Devil, by Napoleon Hill.
Joe Fairless: Yeah, that is the one that has recently come out, right?
Sunny Burns: Yeah, he died a long time ago, and he wanted to publish it, but his wife didn’t want to publish it because she thought it was too controversial. Then the family inherited it, they didn’t want to publish it, and then they finally published it. But basically, the synopsis is Napoleon Hill sometimes somehow manages to capture the devil and coerce an interview on him… So he asks the devil how he uses all these devilish tricks to ensnare humanity and never get them to succeed. It’s really an intriguing book, and I definitely recommend it.
Joe Fairless: That’s interesting. I love reading too, and I really like a lot of Napoleon Hill’s stuff. I did not like that book. I just couldn’t get into the dialogue, it just lost me. That’s interesting… To each his own. What’s your best ever personal growth experience and what did you learn from it?
Sunny Burns: I’m gonna have to say it’s buying this quadplex. It’s been about a year and a half now since we bought it. We had to do so much work to it… We really took ownership of it and we really did a great job, I feel. Our tenants really love their units, we do a good job maintaining that tenant/landlord relationship with them… So just this whole experience of stepping towards financial freedom – this experience has been great for the both of us, as a family.
Joe Fairless: What’s the best ever way you like to give back?
Sunny Burns: My wife are assisting young adult pastors at our local church, so we give back that way. Recently, I’ve been getting very much into mentoring people through breaking habits from pornography – that’s recently what I’ve been diving into.
Joe Fairless: What would you say is a mistake you made on the deal?
Sunny Burns: I’d say a mistake was really doing all that work ourselves. We had a lot of holding costs… It was completely vacant when we bought it, so it took us like three months to do all that work. Honestly, I think we could have probably saved some money if we had hired some contractors to help us out. Because I’m working full-time, my wife was actually on maternity leave with a baby, so it’s hard for her to do a lot of things…
If we had hired contractors, yes, we would have had to pay them a lot of money, but we were also paying the mortgage, the taxes, the insurance – all of that without having any tenants to help us out. That was kind of painful.
If I were to do it again, I’d definitely do some of the work, but I’d hire a lot of it out as well.
Joe Fairless: Well, you definitely have given a lot of the listeners who are looking to buy their first place some inspiration and some tactical advice. Where can the Best Ever listeners get in touch with you if they want to?
Sunny Burns: I have a blog, FamVestor.com where I’m talking about creating passive income for the purpose of investing in your family. You can leave me a message there.
Joe Fairless: Alright. Well, thanks so much for being on the show, talking about your first deal – and your only deal, but boy, it’s an inspirational deal because this is the way to get started, Best Ever listeners. If you are getting started and you’re thinking about house-hacking, get a fourplex – better than a duplex, better than a three, because you’ve got more income coming in. If you can do just a little bit of work, and also even without doing work have equity built in and then do some work with the refinance after you get it all leased up, and be able to pull all your money back out, then you can put that money back into another deal. Holy cow… Do it all over again, rinse and repeat! And especially since you did it through a smaller community bank or credit union at 10% down..
Sunny Burns: Trustco Bank. Actually, they have branches in Florida, Massachusetts, New Jersey, New York… So check them out. 10% down, no PMI – you can’t beat that, especially on a four-family. Even my credit union wanted 25%.
Joe Fairless: Yeah, those are some great terms. Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon!
Sunny Burns: Thanks!