How to purchase homes for the price of a car with Pam Hill

Pam Hill is a Harvard and Dartmouth-educated entrepreneur and CEO of a multi-million dollar real estate company, a business and money expert, a former Fortune-500 executive, and the founder of My Smart Cousin.  Her main goal is to help people understand money, increase their accountability and build generational wealth. Today, Pam shares her story of how she became a professional real estate business owner, how she purchases homes for the price of a car and how you can start your real estate business. Episode Link: https://mysmartcousin.com/tag/pam-hill/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by a very special guest, Pam Hill, who's talking to us about my smart cousin, and how she purchases homes for the price of a car, or maybe sometimes even an expensive bike. So let's get into it.   Hey, Pam, thank you so much for taking the time to come hang out with me today. I really appreciate you coming on.   Pam: Thanks so much, Michael, really looking forward to engaging conversation.   Michael: Oh, my gosh, me too. So, Pam, so excited to have you here. If you could give us a quick intro bio about who are you? Where do you come from and what is it you're doing in real estate today?   Pam: Absolutely. So I'm Pam Hill with my smart cousin. The nifty name comes really from family coining that for me, because I am that smart cousin at family reunion to always follows up make sure that folks do what they say they're going to do on their finances on their real estate and that, of course, is now brought in to my clients as well. How I got into real estate was about 10 years ago. So during the Great Recession, my husband at the time we were dating, he was looking for his first home and he was looking in Wilmington, Delaware, and we were stupefied at just how cheap there's, there's not a better word inexpensive to the wrong word, cheap houses were in Wilmington, Delaware to the tune of 20,000-25,000. In perfectly rock solid working class neighborhoods. Once I saw it, I definitely could not unsee it and that's what led me down the real estate rabbit hole since then I've bought 21 houses totaling 25 houses totaling 31 units, and have loved every step of the journey.   Michael: That is so cool and so Pam, were you living in Wilmington, Delaware or was this something that you were doing from afar?   Pam: No, so I was living not too far from Wilmington, Delaware in a suburb and so I was used to six figures and not 100,000 as in six figures. But in fact, what the average price of real estate is in the United States, some 321,000, I think I've read is the average price of real estate across all 50 states. So I was used to seeing those kinds of numbers. I had already owned real estate before as a homeowner and I really couldn't believe that there was this whole other world and once I saw it, I became committed to helping others who are looking to start their real estate investment journey and feel like they just don't have enough coin to get there. Or those who are aspiring homeowners and thinking the same thing that it's got to be a generation, three decades, 30 years slog My goal is the number of fingers you've got on your hands, 10 fingers 10 years or less. That's when the house should be paid for and everything is cream after that.   Michael: I love it, I love it. So was it just a function of where the economy was at that point in time that you and your husband were able to find houses for that price point or were you doing something different or looking in a different way than everyone else?   Pam: Yeah, no, it's a great question, because it kind of begs whether that opportunity is still there and very much still is. There are hundreds of houses listed on any given day that are maybe not as cheap as what I got them for that takes a little bit of digging, although they are that cheap still to just not in Wilmington, Delaware. So my cheapest house was 2500 in Jersey that included the all four walls.   Michael: …a roof....   Pam: Yeah, absolutely. Goal number one is don't buy anything that is best addressed through the services of a wrecking ball company. So only things that maybe they're going to take a new furnace, okay, a new furnace, but not a new every single thing you can think of and my most expensive house was 35,000 and that includes I'm really kind of a an adherent of eating your own cooking. So that includes the house of my husband and I live in the house we bought in a suburb of Philly was $35,000. So and that was in 2016. So it's still there and there are many homes in states like certainly New York, Wisconsin, Michigan, quite a number of homes that are in that 60-50-40 neighborhood and even multi families and small commercial, that price point.   Michael: And so I mean, I've got to imagine at that price point the homes are in really rough areas or need tons of rehab. Are you finding that to be the case or is there something there's something that you know that that we don't?   Pam: Right, so the homes are in areas, how would I think about it. areas that aren't so rough that no one at all lives there, I've yet to find a neighborhood that that is on livable, I suppose everyone needs a home that it's just a flat out the truth and so there are really three things that any person who's renting is looking for one is the neighborhood. So they aren't going to be concerned if crime, for instance, is a big problem and where it is, for some of my houses I work closely, you know, first thing I do is find out who the police captain is, and introduce myself, I asked the tenant to let me know if there's any kind of roughness going on, so that they don't have to feel like they're the one making the call that I can be the person making the call. If there's a car that has sat abandoned in front of their house or near their house, I call the licensing and inspection agency, so they will tow it. So those are the things I do to make the neighborhood better than how I found it. Then the other things that a renter is going to look for, is going to be the landlord as well as the house itself, those two things I can absolutely control. So I control the neighborhood, only at the barest of margins, but the house and the landlord, absolutely within my scope. So that's what I do and to your question of where are these houses? I think that the I think that the issue is that most folks don't look from the bottom up, they look from the top down. In other words, they're used to asking themselves or allowing their bank to suggest to them that they start at what they have qualified for and what you have qualified for is probably far more than you have to pay. So if your salary and such qualifies you for that average price of a home in the three hundreds, first thing you should do is tell your real estate agent, only show me houses that are 60 to 100,000. In fact, don't even give them a range. I don't want to see anything. That's more than six figures. If I do if it's more than $99,999, you're fired and they will quickly show you the houses that meet that criteria and that way you accustom yourself to that to that look and you tell the realtor, just a look where the neighborhoods makes sense for you school district wise and so on.   Michael: Interesting. There, I've got so many questions. There's so much there to unpack, Pam but and Vicki about the price point, if someone goes to buy a $20,000 home, are they able to get financing on that home right?   Pam: Going to be difficult, that's the honest truth. The easiest source of financing, if they buy a house like that is going to be if they are also looking to be a home owner, and really a multifamily home owner. So for a person who tells me, they really don't have much, much in the way of savings, but they want to do something now and moreover, they're not too satisfied with where they are living as either a renter or possibly as a homeowner, then I would help them find homes, let's say in that lower price point of that 20 that you mentioned or 30,000 that are in the areas that they are okay with, we would look at the land banks listings, for instance, sometimes there are more than 200 land banks across the US. So sometimes a land bank will have a house that is in terrible, terrible shape, but it's in a good neighborhood, that house is going to qualify for some financing that can help the homeowner if it's not that kind of house, and instead, it's something owned by Fannie Mae, by Freddie Mac, by US Department of Agriculture by Veterans Administration, all these wonderful government agencies that you didn't know we're in the real estate business, well, then that's good news because they can now become your lender, in addition to selling you the home.   Michael: Interesting, okay, so someone can just google or your online search for the local land bank and whatever market they're interested in living or investing in, and it'll pop up with listings, just like the MLS.   Pam: That's exactly right. Just type in name of your state. If nothing comes up name of your county, if nothing comes up name of your city. So try it in that order and if nothing comes up in your county, then look at the surrounding counties. I would also just type in something like land banks, United States map sometimes, you know, some set of words like that and then that should uncover all of the line land banks and help you see For your state, for instance, if you're in New Jersey, what are the land banks in New Jersey and then find it that way.   Michael- Interesting. Wow, this is so cool, Pam and so you are you self-managing all of your properties that you own?   Pam: I am, so when I first got started with this, I was working in a really demanding job in corporate America as an exec and that was not feasible to be self-managing. So I worked with a property manager and perhaps someday I will go back that route except this go round, of course, creating my own property management company. But right now, I'm right in the thick of it. So all of the units are self-managed and that includes units that are two family, three family and even four family, again, all bought for 35,000 or less.   Michael: And what are the rents that you're seeing on these types of properties?   Pam: Yep. So for a house, that's a four family that well, that particular one is all studios. So of course, the rents there are going to be a lot less, so that's 850 each for a house…   Michael: Wait, wait, wait, wait, sorry, timeout back one second, 850 each on per unit on a four family that you bought for 30 35,000?   Pam: Yeah, for 26,000, yes, that particular one.   Michael: I've been thinking about people talking and saying there's you can't find properties that are the 1% that meet the 1% rule. This is like the 678 percent rule.   Pam: And that's why I encourage folks to come to come to my smart cousin.com where I will hold you by the hand and help you not only find these, but much more importantly than just like, hey, that one there? How about that one? But to really evaluate them and see, does it meet? What I hope is a set of criteria that you've given some thought to? So for instance, you asked me a really important question, which is do I self-manage? That's a question that anyone should think about, do they have the ability to self-manage and moreover, do they have any interest in self managing or do they think that's going to lead them to hate all of humanity and…   Michael: A one way ticket…   Pam: One way ticket straight to? Why am I already 30 years of my life before I was headed downstairs? So that's how they're built. Don't do it, don't do it, turn it over to someone else, pay someone else to 10% 12%, even 15% to do the property management. But if you're built for it, then go ahead and do it. So that's one. Second is are you looking at long term rentals, which is what I do? Are you looking at short term rentals, meaning the Airbnb ease of the world? If so, well, then we need to look at a different set of properties. Are you looking to have something have tenants essentially under your feet, in other words, a to family where they're next door to you or underneath, right underneath you? So those are the kinds of questions to think about before you just run in and buy the first thing that you say.   Michael: Yeah, that makes a ton of sense and such great tidbits and advice, but I'm so sorry, I interrupted you because I would just like my mind exploded. You have to forgive me. I hope it didn't get too much on the screen here.   Pam: Oh, no, no, not at all…   Michael: So, that was your for family lower rent at 850. A unit studio? Let's get that. Let's jump back to other side….   Pam: Yes, right. Okay, so probably the standard size is going to be your three bath, three bedroom, one bathroom, right and so that I have a lot of those and I suppose the lowest cost one is 1025 and there I just keep it there because it's, you know, a great family. They've lived there a long time and I'm not interested in changing anything for them. But I have another one where someone just moved in and that's 1500.   Michael: So that you bought for 28,000-30,000?   Pam: Right, that I bought for that one within a paper that one 345, 345. So yeah, it's a it's good pickings right now, but like anything, you just have to stay strongly tethered to the ground planning for other variabilities that could occur in the market for the two family that I have there. That's two beds, one bath, and that rent is 1000 for each. So I guess I just say that to say that in the north east. Generally the rents are going to be higher however, prices I mentioned a couple of states earlier, I mentioned Ohio and I think I mentioned Michigan and so certainly the Midwest is many, many more houses for the price of a car prices for rent are lower. But that said, Certainly you would target I think, the Midwest for a good solid multifamily, perhaps a three family that you might buy in that 40 $45,000 neighborhood. This is and then it won't hurt as much to have those lower rents.   Michael: Right, this is amazing. Pam, what are some of the risks or the downsides that either you've seen or learned about that folks should be aware of and hope to help mitigate?   Pam: Absolutely, so the risks, certainly one risk. You mentioned this earlier, when you asked about obtaining a loan and I would say more broadly, the risk is ensuring that you have sufficient cash to whether all of a sudden something is needed on that house, oops, I thought I could just put something to repair this roof and in fact, what do you know the roofer went up there, he said, it's like an eight layer cake made of asphalt shingles and so now I've actually have to replace that roof at a large cost or some other thing. So that's one risk is that you need to have the pocketbook, or access to a home equity line of credit or some other string to pull on. A second risk is how you start. I don't advise anyone to start in the deeper end of the pool, deeper and meaning, let's say auctions, auctions are site on scene, you are not able, at least not legally to go into the house and see it…   Michael: I think it might be a story there…   Pam: …And see it, it is Buyer beware. So I would never advise someone to do that as their very first house. Start instead with you mentioned MLS, lots listed on MLS, start their land banks, they will allow you most of them anyway, to go inside and bring someone with you to tour the home. I'd say another one, I suppose if I had this to do over again and so like a 2020 hindsight, it's think about when you're looking at homes, if something is in a much better neighborhood, or has some other vein of silver running through it, for instance, it is in a commercially zoned area. But maybe it costs a little bit more not a ton more. So for instance, it doesn't costs 55,000 Instead of cost 65. This thing that's a little better, I would have, I would say to young Pam Hill isn't worried. Those are what you should target the ones where you've got to spring for a little more and the reason why is even though that 10,000 or 15,000 will seem like a lot in the moment, the appreciation value is significantly higher. So that is something I would suggest to folks as well, to not just pick as many as you can dollar store style. But to instead look at where it makes sense to go a little bit higher, and that includes more multi families. 2-3-4 families are always going to be a little better than a single family because that is just one piece of infrastructure in the case of the roof. In the case of the sidewalk in front of the house versus two, I've also found that with multifamily is oftentimes the person who is living in unit one, as soon as unit two becomes empty, they refer you to a friend of family or someone else for unit two and that way you have a self-reinforcing mechanism for rent being paid by both parties because neither wants to see the other get into the terrible shape.   Michael: That is very interesting, that's very interesting. Pam on the property that you purchased, and I think I know the answer, but I'm going to ask it anyhow. What has the appreciation been like because as investors we talk about cash flow or appreciation, it tends to not be both or that's what kind of land somewhere in the middle. So what have you seen with your properties thus far?   Pam: That's a great question and it even gets back a little bit to the other question around the risks. So I would say First answering the question, the appreciation is not as high when you are buying for the price of a car and thus that is also the risk. If you are looking for a flip opportunity, you would do better to buy your standard $200,000 home, for instance, that is in a $400,000 neighborhood and needs $80,000 worth of work, you are going to be able to obtain, maybe not from a percentage perspective, you might not think, gee, that's returning as much, but absolute dollars are what matter in that example, not the percentage. So percentage wise, my houses have all appreciated quite a lot relative to others to the tune of two or three or even four times as much but think how low the base is. So those houses are really two things. Thing one is cashflow, thing two is lottery ticket for appreciation value. So as a for instance, the houses that I own in Wilmington, Delaware, I would imagine that when the Joseph R Biden library is built, I'm presuming that is going to happen in Wilmington, Delaware. Given President Biden's long experience there as a senator, that neighborhood is going to see some significant appreciation value. So that's where I see the upside, should there be a cash sale as it were of these houses. Something else that you can consider this is more of a risk. But it is something that you can consider when you buy a number of houses that have a common macroeconomic theme to them, like house for price of car, you can think about either a real estate investment trusts, so putting them under a REIT, or putting them under a hedge fund and for those investors who are interested in that higher level of return, you mentioned the 1% versus the six or seven, those investors kind of like low, low investment grade high yield bonds, might have some interest in that kind of portfolio and that can be another way to both obtain cash flow, or certainly to, to get out of the market as it were all together without selling them off one at a time.   Michael: Interesting and this has been so eye opening and so insightful. We chatted before we hit record last time we spoke about some of the things that you're doing to be an advocate for some of your tenants and people might hear that and think well, how can I be an advocate as a landlord and also have a tenant relationship? It seems almost counterintuitive, so can you speak to a little bit of the work you're doing?   Pam: I'd say first is that I do it, I do it because I feel driven to do it. In the same way that the community that I focus on mission wise is black and brown people, women, but certainly there's room under the tent for everyone. But I think about who has been disenfranchised, certainly by FHA and others, some many decades ago and still there's some of that rattling around in our system. So as I think about tenant rights, there are two in particular in Delaware that I'm passionate about. One of them says that you should not be able to discriminate against a tenant, because they receive a Housing Choice Voucher. In other words, because they receive section eight, it is legal to do that to advertise your home and say I do not accept section eight. That strikes me as a very strange, legal rule, since it is not legal to discriminate for other reasons, including economic source, I certainly couldn't tell a nurse your money doesn't spend here, missy, where are the firefighters? That's who I want. So it strikes me as the same with that and so I am advocating for that. A second one is a right to paid representation for very low income tenants who are facing eviction. This is a one year pilot of sorts that Delaware is looking to implement and that I approach from a perspective of fairness. It seems only fair, that folks who more than likely cannot afford not just a lawyer, but even a day off work to come to the eviction hearing in the first place. It seems only fair that some sort of representation for them just the same way that it's within my scope, should be available and second is from a landlord perspective, my hope is that with that representation, and usually it would not be a lawyer, it would be some sort of legal advocate. But the hope is that, that gives the tenant someone else to listen to, rather than thinking, Oh, Pam Hill, you're just talking your book, I do not want to listen to what you have to say, I'll just take my chances in front of the judge. But by hearing another person, look over their case and tell them, You owe the grant. It's just that simple. Let's work out an arrangement to make a payment. I think that that could help us both, so that's the reason that I am behind these.   Michael: It makes so much sense and it is so interesting, and frankly startling to hear that these laws exist, and it does seem so punitive to the tenant and so I really applaud you and thank you for being such an advocate for your tenants and I'm sure that they appreciate it as well. So keep up the good work.   Pam: Yes. Thank you, thank you.   Michael: Absolutely. Well, Pam, this as I've been saying it the whole show, the whole episode has been so interesting, so insightful. So much fun. Thank you again, for coming on. If people want to learn more about you want to learn more about my smart cousin, where's the best place for them to do so?   Pam: Come to my M Y, smart S M A R T cousin C O U S I N.com. Certainly follow me on instagram or twitter with the handle @mysmartcousin. If you go to my site, you'll be able to see a couple of things. One is a free eBook. Second are free webinars that I do and then third, paid courses. So look forward to seeing you there. Look forward to helping you on this journey. Please take action, even if you listen, and then tune out from any sort of hand holding from me or anyone else as quite alright. Just get going on your slice of this American Pie.   Michael: Love it. Pam, thank you again. I'm sure we'll be chatting soon. Take care, alright!   Pam: Thanks so much, Michael.   Michael: Okay, everyone. That was our show a big thank you to Pam super, super interesting story and pretty amazing what she's been able to accomplish at the price points that she has really amazing stuff and really cool work that she's doing being a Tenant Advocate where she invests locally. As always, we would love to hear feedback from you all on things that you'd like to hear future episodes on and the reviews are really helpful for us. We look forward to seeing our next one. Happy investing…