I am so excited to share my interview with Jen McMurray, real estate broker, investor, and owner of Bachelorettepadflip.com. Jen started flipping houses with the goal of paying off over $70K in student loans. After five years and 8 flip houses later, Jen became debt-free! She shares her secrets to success and how she got into the real estate business below!
HOW DID YOU GET INTO REAL ESTATE INVESTING?
I’ve been officially investing for almost 9 years, but I say I’ve been in real estate since birth. My dad owns a real estate brokerage, so I was at job sites & open houses before I was in preschool!
I got into real estate investing accidentally. I was broke (grossing [not net!] $24K/year) and needed a place to live. All I could afford was a very beat-up fixer-upper for $75K. That was the first domino that caused a chain reaction over several years.
HOW DID YOU USE REAL ESTATE INVESTING TO PAY YOUR STUDENT LOANS?
For me, the key to my success was utilizing the capital gains exemption to my benefit. I knew the only way I could touch that $70K in student loan debt was to throw large amounts of $ at it and fast. So I started by doing live-in flips so I could avoid capital gains, and I could net as much as possible.
From Flip 1, I split my profits: half for down payment/repairs for the next house & half to pay on my student loan balance. Within 5 years, all of that $70K student loan balance was wiped out!
WHAT TIPS CAN YOU SHARE FOR OTHERS WHO ALSO WANT TO PAY DOWN THEIR LOANS?
Be on the right side of interest. When you have student loan debt (or medical debt or whatever), you’re on the wrong side of accruing interest. By doing live-in flips, you’re accruing equity and paying down principal which can help when you sell.
This strategy isn’t for everyone: it involves great sacrifice, annoyance, and frustrations, but it offers some of the greatest benefits. I simply would not be where I’m at right now without leveraging the capital gains exemption to my benefit.
WHAT IS YOUR FAVORITE REAL ESTATE INVESTING STRATEGY?
Single-family homes under $200K in the “Big 4” of my metro area is my sweet spot. One of my chief requirements is that I can buy, flip, and sell and keep it under $200K.
That keeps me in the first-time home buyer bracket AND real estate investor/landlord bracket. I like to have my flips open to the largest pool of buyers. I’ve only done one that fell over The $200K threshold.
HOW DID YOU FIND YOUR MOST RECENT FLIP HOUSE?
Direct mail marketing.
HOW DID YOU CALCULATE THE ARV (AFTER RENOVATION VALUE) AND DETERMINE YOUR RENOVATION LIST?
This is never a popular answer b/c it’s not helpful to people just starting out, but experience. I know what my subs will charge for certain jobs. I know how much I’ll have to pay for flooring, etc. As I do my initial walk-through, I make an extensive list of what I know has to be addressed.
I’m able to calculate the time frame pretty accurately to then budget for holding costs. And as a Real Estate Broker, I know the market extremely well and know reasonably what it’ll sell for. Calculating gets easier when you get to the point of using the same subs over and over, and same sources for products.
HOW DO YOU CHOOSE THE MOST IMPORTANT AREAS TO FOCUS ON IN A HOUSE TO MAKE YOUR DESIRED PROFIT?
I always start with the big ticket items b/c that’s what tends to scare buyers the most. So the HVAC, roof, plumbing. I get home inspections on my flips, so I know going in what condition they’re in & if I need to budget to replace.
The next thing I address is what I know will appear on the home inspection report: wires not in a junction box, no GFCIs in wet areas, broken garbage disposal, etc. The last thing is fun stuff– if I have any $ left on the budget. Maybe a fun accent wall, or new barn door, etc.
I also focus my spending on kitchens and bathrooms.
WHAT WAS YOUR FAVORITE PART OF THIS LATEST FLIP HOUSE PROJECT?
As with them all, they all have headaches and surprises. But this one stayed on track for the most part. But the best part of this flip was the neighbors. They were incredibly supportive & encouraging of the project- which is NOT always the case.
HOW DO YOU FINANCE YOUR FLIPS?
This varies greatly. My most common route is either a commercial loan or I have a line of credit at the bank. Being single & self-employed, traditional secondary market lending isn’t in the cards for me.
I’ve partnered with my Dad before on some flips, and he will sometimes front the purchase in cash. It just depends on the house, the scenario, the urgency, and the goal.
WHAT WAS YOUR BIGGEST CHALLENGE WHEN GETTING INTO REAL ESTATE INVESTING?
The behind the scenes stuff – Taxes, insurance. Trying to budget for those increased expenses that aren’t covered since I’m not a salaried employee, all the while working a feast or famine career.
WHERE DO YOU SEE YOURSELF AND YOUR BUSINESS IN 5 YEARS?
Florida house bought and slowing down the feverish pace. Flipping is not my main hustle- nor do I want it to be. It’s a means to the end that has worked well for me. But I never want it to dominate my life forever because it is so intense & stressful.
WHAT ADVICE CAN YOU GIVE TO NEW REAL ESTATE INVESTORS?
Do NOT abide by the rule: go big or go home.
Just go home if that’s your motto in flipping. You don’t have to flip the huge house. You don’t have to flip the gut-job house. You don’t have to design it over the top. I see that most often in rookies- they tackle these houses that honestly should be bulldozed because they see that on TV.
Or they pull out all the stops on the design. For your first flip (or even your 2nd), stick to a lipstick flip…preferably a live-in flip that awards you some flexibility WHEN (not if) you screw up.
Big thank you to Jenn for sharing all of her expert tips with us today!