6) Buying Your First Property

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Bieke Durieu

On today’s podcast, I’m talking with my friend Bieke about what it takes to get started investing in real estate. When you hear most experienced investors speak, they often forget what it’s like for beginners. So in this episode we’re going to…

On today’s podcast, I’m talking with my friend Bieke  about what it takes to get started investing in real estate. When you hear most experienced investors speak, they often forget what it’s like for beginners.

So in this episode we’re going to cover the struggles new investors face, balancing fear with opportunity, how much work goes into finding the right property, and finally I do some analysis on Bieke’s property and give her an idea on how to make 2x more from it than she expects…

6 – Buying Your First Property

Transcript by: Arianne Elnar

Ney Torres:        [00:00:00] Welcome to the podcast. Today, I have a very good friend of mine. Bieke, welcome to the show. How are you?

Bieke :    [00:00:05] Thank you. I’m very good. Thank you for having me.

Ney Torres:        [00:00:10] Today, I wanted to interview you for the people listening because you are starting your financial freedom journey, right? And you started this journey. I’ve been watching for the last year, right.

Bieke:    [00:00:26] Yeah. About a year ago I started. Yup.

Ney Torres:        [00:00:29] How did you started this? Can you tell me a little bit your story?

Bieke:    [00:00:33] Well, it started after finishing… Well, it’s a very big cliché. Of course, after finishing my world trip. I experienced the kind of freedom that everyone wants to have.

[00:00:45] And of course when I got back, I wanted to keep that kind of freedom. So, I wanted to be just able to go wherever I wanted to go and do whatever I wanted to do, and do it at whatever time that suited me best.

[00:00:58] And, of course for that you need a certain kind of financial freedom. So that’s when I started to get into that kind of thing.

Ney Torres:         [00:01:07] So how did you start it? You read a book?

Bieke:     [00:01:12] Well, it was actually because of you that I started. You recommended me a book. A classic one, I think. Rich Dad Poor Dad. And yeah, it just changed my mindset along with many other books of course.

[00:01:26] But it helped me see how those kinds of things were possible, how I could get that financial freedom. And then you were also an inspiration of course. And all of those things got the ball rolling. Here I am. I bought my first house.

Ney Torres:        [00:01:42] I’m sorry. Before that, congratulations because you don’t know how many people come to me and say, “I want to do what you do.” Like yesterday I had somebody texting.

[00:01:54] And I actually have a webpage where I say, “Follow these steps. I’m not your coach or anything like that.” And very little people actually come back for a second call, even though I don’t charge any money.

[00:02:06] It is just people say they want it, but they don’t do it. And the reason I want to have this phone call with you is because when you’re doing this for a couple of years, like I have been. And most people that are listening this with already some experience in doing what they do, we forget how it feels when it started. And I will like you to share with us your feelings, your worries.

[00:02:35] I wanted to make this episode before you rented your house because you are exactly in that moment where you pull the trigger and now you have to make it work, which is I think the most stressful moments.

[00:02:49] How do you feel about this property right now? What are the feelings you’re going through?

Bieke:    [00:02:54] Oh, wow. It’s very crazy. It is stressful. It is exciting. It is everything at once. I think I’m already like 50 gray hairs further from the beginning. So, yeah, it’s just at this point its kind of like it might be too good to be true. I don’t know. It all sounds good on paper, but now we’re getting the house ready. We’re painting. We’re finishing up. And I have to look for tenants and not just one. I have to do for four tenants because I’m going to rent out per room. So, it makes it even more stressful because it’s not just one.

[00:03:34] And yeah, I have a couple of people now that are coming to visit this weekend, but it’s like if they don’t want it, then I need to find other people. And then, what if I don’t find people? What if I have to pay that mortgage myself, which is pretty big for what I’m making right now. So, yeah, it’s just crazy stressful right now.

Ney Torres:        [00:03:57] I relate to that. Thank you because I just remember. I remember buying that first big property. And let me tell you the story very quickly. I bought a property that nobody else wanted. And, I see that over and over again. I tend to go to places that nobody else wants because I have the wheel to make it work, right?

[00:04:21] Nobody else wants to put the work. I go in. I get the property for cheaper, and then I have to work a lot. So, this property, I was probably making like a thousand something dollars a month, and the mortgage for this property was 2000.

Bieke:    [00:04:37] Wow. Okay.

Ney Torres:        [00:04:38] I wake up in the middle of the night wondering how the hell am I going to do it? Of course, I had a Plan B, I have Plan C, and all of that. It was a great deal though, but it was big for me. And I relate to what you were saying. I think everybody has to go through what you are going through.

[00:04:58] What else can you tell us? Can you describe a little bit the property? Where are you located right now? Where do you buy it?

Bieke:    [00:05:05] Yeah, of course. I bought a single-family home in the city of Ghent, which is one of the biggest cities in Belgium. It’s a very very popular city among both students and young professionals.

[00:05:23] It’s not in a city center, though. It’s outside. It’s in a more multicultural neighborhood, which is still one of the cheaper ones of Ghent but it’s also a good neighborhood because the city is making a lot of efforts in trying to appreciate it a little more both by making some structural changes, like adding some green areas to the neighborhood. Also, giving grants to the homeowners to update and renovate their houses.

[00:05:55] So, it should be a good neighborhood or at least become a better neighborhood. Then it’s also, the house has been recently renovated. I think about four years ago. So, everything is pretty new still. It’s a new kitchen, new bathroom, new floors.

[00:06:14] The only thing we did was a little bit of painting and some small things that had to be fixed up. And then, yeah, It’s fully equipped. It’s ready to get to move in. The bedrooms are very big, which is also a big plus especially there’s one really big one that is a duplex bedroom.

[00:06:35] So yeah, I think it’s a good deal. But of course, I’m afraid that it’s going to turn out bad still. It can still turn out to be bad. So yeah.

Ney Torres:        [00:06:48] Yes. No, don’t worry. It’s all about marketing now. And that’s why some people ask me, how do you know so many things? Because when you’re an entrepreneur, you have to learn everything. You’re going to start learning now about marketing, and then accounting, and then taxes. It’s super fun too.

[00:07:04] Do you find yourself waking up in the morning and just excited to go to, you know, your property and make it work?

Bieke:    [00:07:12] Yeah, of course. It’s very exciting, especially seeing the progress in the property because you know, it was recently renovated, but still it had people living in there for the last couple of years. So, it had some touch-ups that needed to be done. And also, I decorated the common areas.

[00:07:31] So just seeing that progress of the house getting better and nicer and getting ready to be rented, it’s fairly exciting. And honestly, I would like to live there myself. So, I think that’s also a very good starting point.

Ney Torres:        [00:07:45] Well, yeah. Sometimes it has happened to me, but you’re not investing in the city you’re living in, right?

Bieke:    [00:07:54] Nope, that’s right. It’s about 80 kilometers away. About an hour of driving.

Ney Torres:        [00:08:00] Okay. Okay. How do you feel about that?

Bieke:    [00:08:08] I think it’s not a bad thing. An hour of driving for me is not an issue. But mostly the city that I live in right now just doesn’t have the same public, the same potential tenants like Ghent does. So here, it just wouldn’t be possible.

Ney Torres:        [00:08:25] Yup. Yup. Yup. So, we have a saying, and a lot of people I’m asking though, because a lot of people has those doubts at the beginning, is I want to do something that’s close that I could keep an eye on it. But the truth is you have to invest where the numbers make sense, and live wherever you want to live.

Bieke :    [00:08:43] Of course.

Ney Torres:        [00:08:43] And can you tell us and share with us a little bit of your numbers?

Bieke :    [00:08:49] Of course, I can. Which kind of numbers would you like to know?

Ney Torres:        [00:08:54] Let’s start with what you sent me. It’s a property. It’s a house. It has 86 meters of construction that for Europe I must mention is big. Normally what I’m finding right now in that price range is super smaller. So, you have a good deal there because of the price you pay per square meter or cashflow?

Bieke:    [00:09:16] Mostly because of the price per square meter. It’s pretty big property and I got it for a very good price. And also, just because my own investment is very small, which makes it, of course, better return.

Ney Torres:        [00:09:36] Yeah. So, let’s start through there because most people would say financing is the name of the game in real estate. How do you get the financing? How much did you get? How much is your monthly payment?

Bieke :    [00:09:51] Well, I had a regular financing through a mortgage. And, I financed it 100% with that. So, the entire house is financed with the mortgage. But in Belgium, yeah, of course, every city or every country has its own taxes, its own laws, its own everything. And in Belgium the biggest costs are your registration costs and the costs for the solicitor, which is about 40,000 just for that.

[00:10:23] So even though the house, I got a complete mortgage for, the cost I have to pay myself. And then, taking all that into calculation, I have a return on investment of 30%.

Ney Torres:        [00:10:39] Thirty percent per year?

Bieke :    [00:10:41] Yes.

Ney Torres:        [00:10:41] Nice. Nice. Nice. Congratulations.

Bieke :    [00:10:45] Thanks.

Ney Torres:        [00:10:46] That’s better than the bank.

Bieke :    [00:10:48] Yes, exactly.

Ney Torres:        [00:10:51] Okay. So, you have four rooms. How much do you expect to get in income?

Bieke :    [00:11:00] Renting income is going to be about 400 per room, so 1,600 per month.

Ney Torres:        [00:11:08] Cool. So, you have a mortgage that’s around…?

Bieke :    [00:11:14] 1050.

Ney Torres:        [00:11:17] Cool. So, you have a cashflow of 400. Sorry, 550. And how many of these deals do you want?

Bieke :    [00:11:27] How many?

Ney Torres:        [00:11:28] Yeah.

Bieke :    [00:11:30] Well, I haven’t really thought about it like that. I wanted to, well, my goal one year ago was to have my first one within the year. So, yay. I did that.

Ney Torres:        [00:11:44] Perfect.

Bieke :    [00:11:44] But now I would like to just add one per year.

Ney Torres:        [00:11:49] That’s a really good goal. That’s a really good goal. I’m saying this because I want listeners to understand that she’s making money by holding this property. It doesn’t matter if the market goes up, if the market goes down, or if it sways sideways, does it?

Bieke :    [00:12:06] Yeah, exactly.

Ney Torres:        [00:12:07] That’s what professional investors do. What happens a lot of the time is that people think, “Oh, I’m going to buy this house because in a couple of years it’s going to be worth more.” And I have so many cases, so many people, even family that do that because they never think about the cashflow. They just think, I buy something, I’ll sell it for more tomorrow.

Bieke :    [00:12:30] Yeah, yeah.

Ney Torres:        [00:12:31] Of course, tomorrow’s uncertain. But you know better. You know better. I want you to take us back please to what was your way of thinking before, like before having this house. How did you decided to get this one?

Bieke :    [00:12:48] You mean which criteria I used to evaluate the property?

Ney Torres:        [00:12:51] Yeah. Was it easy?

Bieke :    [00:12:55] Oh, no. Not at all. I think I… Well, I had some criteria concerning the house itself. So, number of rooms, how it’s finished, how it’s… everything. And then I had some financial criteria. And just to find one house that met all of those criteria, it already took just a couple of months.

[00:13:17] And then of course, even if you have those criteria and all of them were met and you decide, okay, I’m going to go look at the property, I’m actually going to visit it. It turns out that. What it was sold as is not what it was. Like it’s sold for four bedrooms, but actually has three, or the roof is not done, like it said on the advertising. So yeah, I think I visited about 20 properties before I got this one.

Ney Torres:        [00:13:45] Excellent. That’s excellent. Those numbers are about right. So how many properties you think you have seen on paper and made an offer before going in to visit?

Bieke :    [00:13:56] An actual offer, it was the third one.

Ney Torres:        [00:14:00] Cool. Cool. Cool. Cool. So, in real estate, normally we say you look at the hundred houses, you make an offer on 10, then you visit three, and you keep one. That means to get one house, you have to look at a hundred.

Bieke :    [00:14:16] Yeah.

Ney Torres:        [00:14:16] That’s about what your numbers just represent right now. Don’t you think?

Bieke :    [00:14:20] Yeah, pretty much. Although I didn’t make any offers until I visited the houses because as I said, the advertising is sometimes just so wrong compared to what it really is.

[00:14:31] It’s risky to make an offer. Especially in Belgium. If your offer gets accepted, you have to go through the deal. Like there’s no way back. Even if it’s just oral agreements, they can actually make you buy it.

Ney Torres:        [00:14:44] Because they will sue you if you don’t?

Bieke :    [00:14:46] They could. I mean they probably won’t, but they could. Yes.

Ney Torres:        [00:14:51] Is there something like a cool down period? In some countries we call it due diligence period. Do you have something like that?

Bieke :    [00:15:01] No, we don’t have that. Well, we have a… Normally, if you sign a contract, you have a clause in there that states that you have, I think it’s three weeks to get your finances in check. So, to get a mortgage. And if you cannot get the mortgage within those three weeks, then you can back out of the agreement. But only if you get proof from three different banks that you cannot get a mortgage.

Ney Torres:        [00:15:27] Okay. Yeah. And just to remind everybody out there, you can put whatever you want in the contracts too. Right?

Bieke :    [00:15:36] Yeah, of course. Of course.

Ney Torres:        [00:15:37] You are in a very competitive market.

Bieke :    [00:15:41] Yeah.

Ney Torres:        [00:15:42] Well, did you find occasions where you just made an offer on a property, everything’s ready, and you know, you never get a house?

Bieke :    [00:15:51] Actually, no. Because yes, it’s very competitive, but the properties that I’m looking for, not necessarily because the properties that I want to rent, they usually don’t have gardens or just a small terrace. They don’t have a garage. So, young families are not really looking for those properties. So that way there’s less competition.

[00:16:19] And also the neighborhoods that I’m looking in, as I said, they’re, multicultural so a lot of families wouldn’t necessarily want to live there either. But the people that I want to rent to, they usually just stay there for one year, two years, max three years. So, the location isn’t that important for them.

Ney Torres:        [00:16:41] So what’s your niche and why?

Bieke :    [00:16:44] My niche is young professionals. Because when someone graduates from university, so in Ghent there’s a lot of students, it’s a big university city, and when they graduate and they’re not in a relationship, usually renting an apartment or house by themselves is just too expensive. So what they do is they just rent a room in a house together. So, four people, three people in one house. So those are just my niche.

Ney Torres:        [00:17:11] Perfect. Something you understand very well.

Bieke :    [00:17:14] Yeah. Thank you.

Ney Torres:        [00:17:17] All right. I wanted to talk to you right no about your property. I’ve been looking at your property for the last hour. I think I have good news for you too. Maybe a couple of ideas. You may like it or not. I want listeners to listen to it too, because that may give them ideas if they are in real estate. If not, well, just one more tool if you ever get into real estate or to apply into whatever they’re doing.

[00:17:43] Well, when you go through, I call it mastery. Mastery is when you learn something and then you just started coming better and better and better on it, right? So, there’s four levels of mastery. First one is a novice. I don’t know how to pronounce that in English. You’re just new to the job. You know very little or nothing. And then you become competent. And that’s exactly where you are right now. You are performing this real estate investing thing for the first time, and there’s a lot of things you don’t know, but you’re doing it. You know how it feels like, right? You can make an offer.

[00:18:23] Then you become experienced and you can perform based on unique situations. And the fourth one is mastery expert where you can just invent new ways to do the same thing. Right? I want to pinpoint to you that we talked probably nine months ago, and I told you, you should start writing a blog, but I don’t think I told you why it’s important to write a blog. And by the way, if listeners are listening to this, you can visit… She’s making it happen. It’s your blog, right?

Bieke :    [00:19:02] Yes.

Ney Torres:        [00:19:04] Don’t forget to keep the blog. It’s something I fail when I started this real estate journey is because…

Bieke :    [00:19:09] I know. I really need to get to it again. It’s been awhile, but yeah. It’s on my to-do list. After finding tenants, I’m going to get back to it for sure.

Ney Torres:        [00:19:19] That’s why I’m doing this podcast, because for years I’ve been saying, I’m going to do a blog. I just hate writing. But it’s called reflective learning. Reflecting reflective learning journal is the most powerful technology for learning and changing behavior on adults that I know of.

[00:19:39] So years from now, you’re going to start listening to this, or you’re going to look at this and you’re going to be like, “Oh, that’s the way I used to think.” But the learning happens when you write it down and you reflect on it. Does that make sense?

Bieke :    [00:19:54] Yeah, it makes total sense.

Ney Torres:        [00:19:56] Yup. So, don’t forget to keep up the blog. And people, if you are listening, please start a blog and whatever you want to master to.

[00:20:06] I was looking at your property. And I have good news for you too. Maybe. Maybe not. Because I do not know your market. Like I want to start saying that your goal is to have 1600 bucks, right? Euros. I’m sorry. And you have four different tenants you’re going to deal with. So that’s a lot of work.

[00:20:28] Well. I just run a software. It’s something I’d been looking at lately. I think you could make twice as much on real estate, in your piece of property. Are you ready?

Bieke :    [00:20:41] Yeah.

Ney Torres:        [00:20:43] Okay. And it’s going to seem obvious when I say it, and you’re going to come up with a lot of, oh no, but this and this and that, but these are facts. All right? What I’m telling you are statistics of your neighborhood.

Bieke :    [00:20:56] Okay. Now I’m very curious.

Ney Torres:        [00:20:58] Yes. And before I tell you, if you do this, you’re going to probably have an occupancy rate of 60%. Do you know what it is?

Bieke :    [00:21:09] No.

Ney Torres:        [00:21:10] Your daily average income is going to be 165 euros.

Bieke :    [00:21:16] Okay.

Ney Torres:        [00:21:17] Dollars, sorry. I’m talking in dollars. And your income is going to be low in January and February, but it’s going to go high on May. And it’s like a roller coaster. It goes up. It goes down. You’re going to hit 2,600 in a month. You’re going to keep 4,000 in another month. Right?

[00:21:41] Your occupancy rate is going to fluctuate from 54%. That means they’re empty half of the time, probably in January. And you’re going to be on a high of 78% on September. Do you have an idea what I’m talking about? Nope?

Bieke :    [00:22:00] I don’t know. It sounds like Airbnb or something.

Ney Torres:        [00:22:04] Yes. And before you say, no, that doesn’t work here. I have six comps of neighbors of yours that are doing it. I don’t know the legality of doing Airbnb in your town. I know Ghent. I’ve been there once or twice and it’s a beautiful city, but there’s one of your neighbors that has had an apartment for rent for 311 days last year.

Bieke :    [00:22:34] Wow. That’s a lot of days out of a year.

Ney Torres:        [00:22:37] He has an occupancy rate of 82% but he’s average is 108. He has three rooms and one and a half bath. You have four bedrooms. He has a capacity of six guests. You have a capacity of at least 10.

Bieke :    [00:23:01] True.

Ney Torres:        [00:23:02] So how does it work? You put a sofa bed. You put a basic rate, and for, I don’t know, for people, and for every extra guest you charge $15 more, $20 more. So, when you have a big group of people, your rate goes up with it, right?

Bieke :    [00:23:25] Yeah.

Ney Torres:        [00:23:26] All right. So right now, I’m just, you know, telling you another idea because I think you’re going to end up with the same conclusion. I just gave you data right now. Right?

[00:23:38] And now, the next step when I talk to people about this, it’s that they have, they don’t like it. And the reason they don’t like it is because they feel… There are many points, but they’re going to feel that their property is going to be destroyed.

Bieke :    [00:23:54] Okay. I would say a lot of work, but yeah, that as well.

Ney Torres:        [00:23:57] It is a lot of work. Yes. But if you create your team around it, which is something not that hard to do, yeah, it’s a little bit more of work, but you just made the property twice as profitable as before, in theory. On paper. According to statistics.

Bieke :    [00:24:14] Yeah. Okay.

Ney Torres:        [00:24:17] So, there’s a couple of inhibitions that people have. First of all, with Airbnb, my property is going to be destroyed. That is not true because once… First of all, you set the rules. You set the rules for the people that go in. If you don’t want dogs or cats, you shall not allow dogs or cats. The key of Airbnb is to have a great communication and set the rules really early. Does that make sense?

Bieke :     [00:24:46] Yeah, of course.

Ney Torres:        [00:24:48] And I can give you plenty of samples of why it will be better to have Airbnb customers, short term rental customers than long-term customers. And I’m going to give you a quick, quick story of a one broker than I had. She was into real estate with me, an agent. Super smart. She was investing in the same neighborhoods that I was going to. Same classes. So, she really knows her stuff.

[00:25:16] And one day she comes and says, “Man, you’re not going to believe what I found”. And I’m like, “What happened?” She says, “I just got into my property after two years of renting it. And there’s a room missing.” And I’m like, “What do you mean there’s a room missing?” The long-term renter decided that he wanted a bigger master bedroom, so he renovated the house without letting the owner know. She took a whole wall down. Three bedrooms. Now she got two bedrooms.

Bieke :    [00:25:57] Okay.

Ney Torres:        [00:25:58] So there’s horror stories anywhere.

Bieke :    [00:26:02] Of course. That’s very true.

Ney Torres:        [00:26:03] What happens with Airbnb or short-term rentals? When a tenant goes, let’s say the average of a stay in your property is three days. Especially in Ghent where there’s like big festivals and stuff, right?

Bieke :    [00:26:17] Yeah.

Ney Torres:        [00:26:18] Yeah. That’s when you charge more. What happens is that you send a cleaning team. Preferably a cleaning company, and they look at your property every three days when they leave.

[00:26:32] Who pays for the cleaning? They do. It’s not within your rental. You charge extra for the cleaning. And they see what’s missing or if anything is broken or anything like that. If that’s the case, then you can through the app start asking for a reimbursement and show that, which is a longer process. But if you asked me to keep an eye on a property every three days is way better than going every couple of, I don’t know, months or years. Then find that you don’t have a third room.

Bieke :    [00:27:06] That’s true.

Ney Torres:        [00:27:08] The people that go in Airbnb are going to be prequalified. Have you used that before?

Bieke :    [00:27:14] I have. Yeah.

Ney Torres:        [00:27:15] Yeah. So, how did you find the property? Was it like destroyed?

Bieke :    [00:27:21] No, not at all. They were good properties for sure.

Ney Torres:        [00:27:24] Right. And why do people choose Airbnb? Why did you choose Airbnb?

Bieke :    [00:27:33] The ease of use and the fact that it’s usually cheaper than hotels.

Ney Torres:        [00:27:38] Exactly. So, there’s your competitive advantage. If you can feed 11-10 people on your house by adding an extra couple of sofas, sleeping sofa and stuff like that, you’re just going to kill the competition.

Bieke :    [00:27:55] True. I must say I have actually already thought about it. The only thing that’s… Yeah, as you said, legally, I don’t know if it’s possible in Belgium. I would have to just figure it out, I guess.

Ney Torres:        [00:28:07] Yup. And if it’s not, I can tell you somebody is making a lot of money by not following the law in your neighborhood.

Bieke :    [00:28:15] I think a lot of people are everywhere, but yeah.

Ney Torres:        [00:28:18] Yeah, yeah, yeah. And there’s some regulations in some cities and in some others there’s not. Well, that was what I wanted to say for today, and hopefully gave the listeners a little scoop of another way to think about your rentals. I’m definitely doing that with some properties. So far so good. But I’m going to call it for today. Anything you want to say before we leave?

Bieke :    [00:28:42] Well, just thank you for having me. It’s been very interesting. I’ve learned a lot again, so thank you very much.

Ney Torres:        [00:28:49] Yeah. Hey, thank you for your time. See you the next time.

Bieke :    [00:28:52] Yeah, bye.

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Financially Free Podcast with Ney Torres
Episode 4