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SHOW NOTES FOR EPISODE 157: LEASE OPTIONS AND CRACKED HOUSES
She learned real estate investing through the school of hard knocks. From buying vacant lots at land auctions to acquiring multifamily apartments, Whitney Nicely believes in diving in head first and figuring it out later. In this funny and information-packed interview, you’ll learn how this spunky Tennessee girl has managed to build her bustling real estate business from scratch without much more than a strong drive to succeed and an unyielding desire to learn.
What You Will Learn
- How spending all your money on one property limits your growth opportunities
- How you can buy cheap properties at auctions
- What key things you should look for when buying a house at an auction
- How lease options allow you to buy a property with none of your own money
- How insufficient due diligence impacts your bottom line
- Why multifamily properties are your best investment for the long-term
About Our Guest
Whitney Nicely
Whitney Nicely went from no investments (or strategies) to 19 houses, 19 apartment units and 7 plots of land in less than three years — all bringing monthly money to her bank account on autopilot. She has traveled the United States speaking on stages, teaching her simple strategies, and meeting with other successful real estate investors- and still buying houses the way she teaches others. Whitney is the Principal Broker for Whitney Buys Houses, LLC.
More About Whitney
- Born and raised in Knoxville, TN
- Attended UTK (University of Tennessee, Knoxville)
- 4th generation entrepreneur
- Raised by real estate investors
- Investing since she was young
- December 2012 – Bought her first piece of land
- 2013, broke away from the “family business” (dump truck company since 1939 – run by her mom)
- She saw money in the mailbox since she was young and wanted that to happen to her mailbox
- When she was in middle school, her family would take her out to real estate auctions on Saturdays
- Got her real estate license early
- Became an apprentice and got her auctioneer’s license
- Was at a foreclosure auction where they were selling 90 properties (mostly raw land)
- Raised her hand cause a friend told her to
- Ended up buying 1.07 Acres in a failed subdivision in Decatur, TN which included a boat slip in the marina for only $1,200
- Drove down and saw the lot and found out that the people around her paid $40-65,000 cash for their each of their lots
- She still owns it but hasn’t seen the lot since
- She still leads one real estate auction a year to keep her license
- She doesn’t do foreclosure auctions, only free-and-clear properties
- Bought a half-acre of industrial land in Knoxville at an auction for $1,500. Rented out the driveway for $250 per month (in 6 months she got her money back)
- Bought 3 acres under a lake
First Rental Property
- Went to an auction with money from her savings – bought a house for $30,000 – rented it out for $800 per month
- But now she didn’t have any more money to buy another house
- Went to her brother, used his money to buy another house
- Now, they had two houses and some raw land but they both were broke
- One house slid down a hill
- Here broker said to go to an REI meeting
- She went and they were teaching a class on lease options
- President of REI said to go to a seminar for $75
- She fell in love with lease options
Lease Options
- Put $3,000 on credit card to go to another seminar in Florida to learn lease options
- Once she learned out how to buy houses without any money, she was off
- Did 14 deals the next year
Big Mistake
- When she bought the house with her brother
- For Sale By Owner
- Should have figured she had a bad deal when, at closing, the seller said: “You paid way more than anyone else would.”
- Smelled bad
- Went into basement and saw snakeskin
- Didn’t look around
- Didn’t see crack in the wall, on the backside of the house, with the sun shining through
- Didn’t do an inspection
- Didn’t see that the house had no A/C or heating, cast iron pipes, outdated electrical
- Took 18 months to gut and rebuild
- Took all of their paychecks, auction fees, etc. to do the work
- Ate breakfast, lunch, and dinner at their mom’s house
- Despite that, after repairs, they hope to make $50-75K
- Real-life lesson on what you SHOULD look for in a house purchase
Bigger Mistake
- Bought house at an option
- In an area of town they didn’t know
- Paid $15,000
- When they walk in they were attacked by fleas
- Water squished as you walked on the carpet
- House to the left had lots of traffic, people coming and going
- Smelled something and police officer friend said never come to the house again
- Sold it at auction for $11,000
Buying Cracked Houses
- She loves buying “cracked” houses NOT “crack” houses
- In lower income areas
- Blue collar
- Bad credit
- Bought three “cracked” houses at $2,500, $3,000, and $5,500
- Sold the first for $12,000 (lease option)
- $5,000 down
- $300 per month until they pay off the $12,000 balance
- Has lease option on all the houses
- Makes $900 a month from each ($2,700 per month total)
- Didn’t have to do any work on the homes
- Loves to buy homes $100-150,000 range
Lease Options Deals
- Has done 57 creative financing deals in 3 years
- Only one person has actually taken out a mortgage
- Only about 1% every really complete the payments to own the house
- She makes most of her money on lease option deals
Biggest Success
- House in Dandridge, TN on the lake
- First lease option
- People who lived in house owed $121,000
- She listed it on Zillow for $145,000 but she didn’t know the previous seller listed it for $135,000
- People from Chicago called and wanted to buy it but wanted the house at the previous listing price
- Said they had a house in Chicago they had to sell first
- She said they could live there on the lease option for a year
- Paid $1,000 monthly rent, $1,000 deposit
- Her first payment wasn’t due until the first of June
- Sold May 13
- In 8 weeks, made $18,000
Venturing into Multifamily
- Boyfriend didn’t like creative real estate deals even though she made $100K in 6 months
- Broke up in a Krispy Kreme parking lot
- Got back with boyfriend and made him go to “apartment school”
- Found out about an apartment deal, that she had checked on earlier in the year that was going to down in price soon.
- Her whole class wanted to partner with her
- Did 3 deals in 10 days
- 11-units – $225K – $7,000 gross per month – $4,700 cash flow
- 5-unit – $125K – $2,500 gross per month
- 3-unit – $89K (found on Craigslist) – $1650 gross per unit
- Her boyfriend loves apartments
- Don’t borrow private money, raise capital or have investors normally
- Took a house they had free and clear and took out $100K equity line of credit to buy the three commercial properties
- They are committed to paying off their mortgages quickly
Advice for Old Dawgs interested in real estate investing
- Buy multifamily properties
- Pay $30-40K for small multi to get $4-6K per month
- Or buy notes or mortgages
Buying Local
- Likes to buy close to home
- One reason she buys close is that she can take over property management if she has to
Future of Her Business
- Wants 100 doors
- Wants to pay off all mortgages and be “free and clear”
Rap-It-Up
- Favorite real estate book: The Cash Flow Quadrant by Robert Kiyosaki and Miracle in the Mountains by Harriet Thomas Kane
- Favorite business book: The Shoemaker of Dreams: the Autobiography of Salvatore Ferragamo by Salvatore Ferragamo
- Most valuable web site for success (other than your own): IfThisThenThat – IFTTT.com
- Favorite app: Facebook
- Favorite quote: “She goes to inspect a field and buys it; with her earnings she plants a vineyard.” – Prov 13:16
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? I would take $900 and put $100 on 9 different houses. Then, she would take remaining $100 to buy “bandit signs” and advertise those she would hope to make $10,000 in a week and more as she sells the rest of the houses.
How to Reach Whitney
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