Co-Living Real Estate Isn’t Passive: What Investors Get Wrong

Katya Borisova (00:00)
this is a profitable niche. However, as more people are getting in, more of the prices are going down. The price per room is going down by significantly, and it’s way harder to fill in the rooms now because it’s a supply and demand thing. And a lot of the I have an issue with the investors that are just like,

The ones that like, they bought a couple of properties or invested in few or learned something, and now they’re selling like courses and telling how they can invest with them.

Cody Crabb (02:01)
Welcome back to the *Real Estate Pros* podcast by Investor Fuel. I’m your host, Cody Crabb, and today I’m joined by Katya Borisova, a real estate investor and certified residential appraiser in the Phoenix area. Katya owns eight properties. She specializes in co-living and brings a unique perspective from sitting on both sides of the valuation table. Katya, thanks so much for joining us today. I really appreciate your time.

Katya Borisova (02:24)
Thank you so much, Cody. Thank you for having me.

Cody Crabb (02:26)
Course. so take me back to the beginning. How did you go from you you mentioned that you kind of started out from zero, to kind of get to getting to where you are now. Tell me about those that first entrance of how how did you make that work early on? And how did you even know real estate was gonna be something that you wanted to get into?

Katya Borisova (02:47)
Well, this is an excellent question. Thank you so much for it. because actually this was truly a humble beginning. unfortunately I went through a divorce and I used to work in corporate world, had a very successful career, grew up into the hierarchy and during my divorce I lost my job and I stood up inside of my beautiful home and was making decisions as to how am I gonna progress going forward.

And so one thing I I always had the urge and always liked real estate. I just didn’t know what to do with with that urge and how to get in. and so eventually I met a friend of mine. I’m I’m originally from Bulgaria, he’s Bulgarian, he’s an investor here in the Phoenix area, and he gave me some guidance and insight as to how he does things. He has been in the market for years at the time as a broker and and agent and investor.

And he introduced me to someone else, a hard money lender here in town. And so I initially didn’t know what I’m doing. So my friend, my Bulgarian friend, his name is Ogie, he helped me to acquire my first property. He found it for me, he wholesaled it to me. And it started small house, just a regular standard Trento. So I added that, and then for a couple of years I was just sitting on the sidelines, freaking out.

Trying to figure out what am I gonna do with my career. I was trying still through the go to go through finding a job and working for someone else. And in a couple of years, I’ve decided that no, I certainly like I some some other shebang happened, COVID came, lost another job, and that was the defining moment for me to almost like the universe saying, Hey, go figure it out. This is not your path. You there is something else for you. That’s how I read the science. and so

my friend Ogie introduced me to the wholesaler I mentioned. he amazing man, unfortunately. He passed, but he helped me a lot. So he basically took a small condo from his portfolio. I told him, listen, I have some money on the side. I am really afraid to put it in because I am a single mom. I don’t know what I’m doing. And he’s like, Don’t worry, let me help you out, get this first one. I will give you a fair price for that. And you take it, remodel it and just resell it.

And I will guide you through the process, but you figure out how you’re gonna get it done. And so anytime I had a like he would give me his contractors and stuff, and I would check and the prices were very high, and I just couldn’t figure out like what am I doing. So I decided I was gonna be my own manager. I have a degree in building and architecture back as a in vocationary school years ago. Instead of high school, I went to a building and architecture school, and so I I knew some.

But again, it’s another country, another building material. I mean, completely different structure. And so I didn’t know people started calling, spend a lot of too much money. I remodeled, the first mistake we made as investors when we start. I think everybody makes that mistake. You remodeled the home like you’re gonna live there. And you spend way too much money. And and I knew I was told don’t do that, and I did it. but that first condo ended up selling.

Quick, it fell through the people kind of had to change banks, so it took a little bit longer. The point being is I made some money. I made $15,000, which wasn’t much, but it’s like at least I didn’t lose money. And I went to my friend to the wholesaler at the time, his name was Eric, and I was like, Hey Eric, this is what happened, this is how much I made. I don’t think it was like very successful. He’s like, Are you kidding me? In my first deal, I lost money. You are successful, you made money. So that was kind of the encouragement he gave me.

And then I did that and I kind of stood for another two years and did nothing. I was still afraid. I didn’t know. I’m like, no, no, no. Pixel Flip is not my area. I don’t think I want that. And then a few years later, and it’s so we’re talking twenty twenty two. I started looking again and I got really lucky, got a very nice, small, normal property, but but a very good deal, like a very clean home, still needed some remodel.

Learn through my friend Ogie how to do the whole remodeling and and how to structure the deal on the front so that I can actually refinance on the back and actually pull my money out. That was a big lesson that he taught me. I’m forever grateful because I’ve been able to buy all of my properties with the same chunk of funds, basically the same amount of money, just refer recy recycling the money in a way. but I learned that from him.

And so yeah, that’s kind of the humble beginnings of my real estate portfolio. I knew I wanna hold them, I didn’t know what I’m doing. I was trying, to put people in. so did some deals that everything was, funky at that time. Like there were people that were trying to do assisted living homes. So I rented that house to somebody that wanted to do assisted living, they didn’t have licenses.

The city ended up closing that program for months. They had to pull out. And now I’m standing, I was working on my other deal, so I bought another one, which is a completely new s host different story. Really bad house. Really bad house. I was literally like pulling my hair there. And now I’m sitting with two homes, like no funds in the bank, trying to figure out what am I gonna do.

If I rent it, it’s not gonna be enough to even cover my expenses. It just was like a really, really bad situation. And to kind of close on that, I had an investor friend whom I we were talking and he was checking on me, how are you doing? He’s from another state. And I was telling him, he’s like, Hey, there is this company, that does call it in. I’m like, What is that? He’s like, Well, people separate multiple rooms and they open the home to

different people to rent rooms and basically then I kind of ended up like doing that strategy as a as a longer term in a way.

Cody Crabb (08:46)
So I this is something I’d love to get into a little bit. you you said you’ve kind of started to learn more. You’re kind of the co living person in your area, is that right?

Katya Borisova (09:43)
Yeah, so because I am an appraiser, so at that time when as I was explaining in the beginning, when I started really truly investing, I also took the step to become an appraiser. That was a big decision as well. And it’s again, because I lost my my corporate second kind of or last corporate job I should say, I was sitting there and like, what am I gonna do? And of another friend I mean, I’ve been having like this amazing situations where a friend of mine are

gonna jump in the right time or someone that I meet and just gonna create a hey, a path, maybe a stepping stone. I call them stepping stone. There is a stepping stone, maybe look into appraising. You like real estate. You probably wanna know better how to value. I’m like, yeah, this is one thing that drives me crazy. People tell me this is the value and I have no idea how to really value a property. I don’t know if I’m buying a good deal or not. And so out of that I started the whole process, started from like really like

from the bottom of the barrel again from being an executive in a seven hundred and fifty million dollar company to going to work for minimum wage and and being a trainee for a year just working forever I could can do at some points having five jobs at the same time just just pushing through as much as as hard as I can. But but that that actually shifted me into really understanding like I turned it into a business but

But also being able to understand that was the biggest value. And that’s what I try to teach people all the time. I go to real estate offices, to brokerage, to title companies. I try to help people to understand, or especially agents, how to how to select the right comps, how to value a property and investors too. Because some of the biggest mistakes that we make, as I say, first of all, you start and invest too much and make it too pretty, which has been my problem in general.

and the other one is really not understanding the value when you’re buying the property. And I don’t mean just the value as it what it is right now, and are you actually buying it with some undermarket value, but also knowing what will be the value when you remodel so you can actually set up a realistic budget and you stick to it so that you have enough equity, because that’s the only way to really truly recycle the money. Otherwise, you leave too much money in the deal.

And if you’re not really creating new capital, that may become a problem. You might end up in a position where you can’t invest anymore. So that’s kind of what I’ve been working on the last few years. Not working, but kind of, helping, people any time I can to teach them that process.

Cody Crabb (12:16)
Yeah. So I I think that this is a really that’s a really good interesting way to kind of get into the I mean, it it makes sense, right? Who’s gonna know better if something is a good deal than an appraiser? So that’s a that seems like a great like a great thing to get into if you’re if you’re doing that. so now you’re looking at a deal today with both the investor hat on and the appraiser hat on. So what are the biggest mistakes you see investors make when they try to kind of predict that value?

And maybe don’t get it exactly right.

Katya Borisova (12:48)
Yeah, very, very good and hopefully a question that will help people to learn something from this, what I know. I think number one, and it’s not just investors, I see it with realtors, I see it with anyone that has to do something, with with a property, is selecting the wrong comps from the beginning. Comparables are absolutely key. and

I know a lot of investors are actually very good with valuing properties. I mean they really truly have their pose on on the whole market. But in many cases, I have seen it again and again. Even agents when I go to a property or when I’m about to, to appraise and preparing, I ask all the time, hey, send me the comps that you looked into. And

many times they are just not not comparable. They’re not not truly comparables. And so you can very easily if if an investor is trying to figure out what truly the value is, and is not really selecting the right comps, they can overprice or over overestimate what the value would be on the back end. Happens a lot for multiple reasons. Maybe the the comps they’re looking are not in the right range, too big. I typically tell people look it within 20% of the GLA.

Don’t go much much than that. That’s how an appraiser will look into that. From a lot standpoint, we as an appraiser will look at the bigger range. But I tell folks, you probably want to stay within twenty to twenty-five percent. just to find as close as possible and try to have similar, way the the the property looks like. I mean, the the condition of the property, the quality of the property, is it having a pool, no pool? Because

Every time there is something different, that can affect value, and in most cases it does. But folks like look into super remodeled homes and then do a very low-end remodel and expect that the value will be there. Well, appraisers are well trained to see these things. And we cannot manufacture value. I tell this all the time. Even for my own properties, I look at what is on the market around me.

I see how people remodel. That’s that’s what I tell investors. If you want an easy cheat sheet, literally remember this. Look within 20% plus minus of the gross living area of the property. Make sure that you’re selecting comparables that have similar conditions, similar prop properties in a way like a pool. If it has a pool, find something that has a pool, just to get an idea. Those are one of the one of the core things, some of the core things.

And just just be be reasonable, don’t don’t try to just like I’m gonna do all this or mine is gonna look so good and then don’t don’t invest the money to make it really as good as the others and expect value to be there. Because again, we can’t we cannot appraisers cannot manufacture value. We can only work we look at the past and we we can only work with what is actually already on the market and close.

Cody Crabb (15:42)
Yeah. So if I’m looking at comps, what are the two what are like the couple of things maybe that immediately make you say that’s not a good comp? Like what makes a bad comp?

Katya Borisova (16:33)
so as I mentioned, for example, let’s say, we have a standard home in a nice neighborhood, inside the neighborhood, but it’s in a golf community, for example. And the comps that you’re choosing, because they they they prices, the value is pretty high, but all of them are on a golf course. I mean, that’s not a good comp. You cannot choose something that you’re, you can, but it’s like at least make sure you have something else so you can.

start seeing we call it paired analysis. If they look very similar, but one is on a golf course and one is not, and and you see that one sold thirty thousand dollars more, it means that there is probably about thirty thousand dollar value from the fact someone value it more because it’s on a golf course. So those are the key things. Or I tell folks all the time, like don’t cross major streets. One of the biggest mistakes I made very early on, I just got certified, had no idea still I’m like still trying, to get my bearings

And did a appraisal of a property. And what I ended up doing without realizing at that early stage is that I chose comparables that were just across the street. My my property was north of the street, it’s a major street, and all the comps I selected were south of it. And it ended up and sometimes it’s just the street difference. The comparables below, on the south side were like just higher value properties. And the north side of that street.

Lower value property. So the the lender came back, obviously. They’re like, they see, they know, it was years and years ago. And I give it, I’m not ashamed to say these things. We we have to, as humans, we have to accept that we’re not perfect. And I say it because sometimes, appraisers make mistakes, realtors make mistakes with the data that they put in. You have to be able to hold into that, but learn your lesson and and do what you need to do. And of course, yeah, reconsideration of value.

I had to go pick up different comparables, do analysis and actually even prove to them, yep, you were right to call this off because at the end of the day I could see the difference, of any but anyway, these are these are things that matter and I’m giving it as an example because sometimes people will just, yeah, it’s just right on the border, it’s very close to this street. And I would tell them, like, please don’t cross major streets. If you’re not certain about the area, stay, within the, better, pick a

mile, north from there, mile, mile and a half, two miles north, but a good comparable, because that’s another thing that most people don’t understand or or or have a misconception about investors, that you have to stay within one mile. And we have to look within the last three months. That is not correct. We appraisers we look way over the one mile if necessary. If we need to find a comparable that is true comparable, we will go two miles, three miles, five miles, wherever is needed.

Obviously, that has to be it’s a some really, really unique property that we cannot really have something to bracket it with. It’s called bracketing. but those are the yeah, those are the biggest lessons. So don’t worry to go over a mile. If you have a really good comp that truly is like yours, it’s has the same influence, pick pick it up, send it to the appraiser, be prepared. That’s another thing. When you’re ready to appraise your property.

Be prepared with comparables. I say that to agents, I say that to investors. Have, what did you look into when you were making decisions to buy this property or after you re you remodeled it and now you’re ready to refinance or sell? What comparables you looked into to make that decision? And and send them. Don’t be afraid to send them. I mean, but don’t expect that the appraiser is gonna use them either, because many times, they’re not good comps, but if they are, we’re gonna use them.

Cody Crabb (20:09)
Yeah. So okay, let’s switch gears a little bit, to co living. you said you have a perspective there that a lot of appraisers don’t, which is that you kind of have a have gotten to the point of being a little bit of a specialist in your area with co living. Can you tell us a little bit about that?

Katya Borisova (20:25)
Yes, the co-living journey was an interesting one. So as I mentioned, I kind of got pushed into that sphere or part of the real estate investment market. because because of a need, I literally was like about to get bankrupt. I had two property settings and didn’t know what to do. And I had to make a decision of shoot I now I need to invest even more to segment,

rooms and and create more more more areas, where people can rent. It was a scary moment for sure. But once when when I got into that, what I have realized is that there are certain things that, investors, if they know about it, they will be rather more successful to be able to refinance their properties. And

Number one is, and it that’s now well known, but at that time, people didn’t know it. I was educating a lot of the folks, not to put closets in all of the rooms, like true built up closets, because that could be a flexible area, or maybe down the road you decide to rent it as an assisted living home. maybe it doesn’t necessarily you don’t necessarily need a closet, and it’s way harder to appraise a property that has seven bedrooms and three bathrooms than to appraise a property that has four or five bedrooms.

And three bathrooms and maybe two flex rooms. One could be dining area, one could be office, however you choose to use it. but but those are those are the kind of the key lessons learned from that as well, being in that on that side of the of the market. And me being an appraiser again, I always look into kind of what is the lender gonna look for? How do do we need to explain what is happening so that

The underwriter is really truly able to understand and be able to kind of process, process that long. That’s something that that I became an expert in, and in my market, I’m the expert in co-living properties. Lenders use my services, investors use my services because it is it’s it’s not common practice for appraisers. Many appraisers don’t want to appraise those properties.

because they don’t understand, what is needed. And for me, what what really pushed me in that direction is because I I had to become an an investor in that and I had to learn, what it means, how it works. And then, obviously being able to apply that knowledge and now actually help lenders and investors to successfully execute those three finances or closing code deals.

Cody Crabb (22:59)
it’s interesting ’cause I think a lot of investors would probably assume more bedrooms equals more value. but what I mean Keg, what would you say about that? I mean it seems like on on its at at first that sounds right, but I’m guessing there’s a little more to it than that.

Katya Borisova (23:15)
You’re very right, and you’re asking a very good question. I often have to find myself explaining that. typically bathrooms bring value. Bathrooms having more more bathrooms is valuable, but to an extent. And I’ll tell you why I say that. Bedrooms by themselves do not bring value because and and I should be careful when I say that, because for example, if you have a standard home that is four bedrooms, two beds.

And an investor purchased it and made it seven rooms and three baths. So they increase the value by adding another bathroom. That typically, and I don’t want to say exact numbers, but it can rate between 10, 15, and $20,000. It depends how big the home can be even more, but about that to a value of a home. Once when we are looking into the gross living area and we are appraising, we are appraising, we’re already adjusting for gross living area.

My home might be two thousand square feet, four bedrooms too bad. I might have two thousand five hundred square feet, four bedrooms too bad. There will be an adjustment for the bigger area, and we don’t adjust for every square foot. There is a usually a threshold that we kind of use. but but the point being is you cannot double adjust both for gross living area and then for having additional bedrooms because it could be a bedroom, it you might like

Like we’re seeing some people are closing rooms and making them bedrooms. Some people are opening because they like open spaces. Who is to say what a future buyer is going to like? You might have a future buyer that truly comes and likes the fact that you have more rooms because they have six kids. And there might be another one that actually comes and they really value the property because it’s an open space and higher ceilings. So that’s why we cannot

As an appraisers, we do not necessarily give more value to additional bedrooms. Again, it’s because we adjust on the gross living area. But bathrooms had value. However, I also have investors that they make their homes, their co-living properties, and their six standard six bedrooms and six bathrooms. Well, that again necessarily doesn’t mean I’m giving value for six bathrooms because now you have like

Who is really the buyer of that property? it’s truly is an investor at this point, right? Or someone who is looking into assisted living. Again, investor. So in those cases, we can do cost to cure, or we just don’t give value to some of the extra bathrooms. And we put, like I do, put a lot of explanation for the lender so that they can understand what is happening and why the value we think is the way it is.

finding comparables for those is really hard, so those are pretty complex properties. and again that’s why many appraisers, like majority of appraisers, will not touch that type of an assignment.

Cody Crabb (26:03)
Hmm, interesting. So knowing all of that, you told me before we started that you think people might need to be careful about getting into co living. what what are people hearing about co living that’s catching their attention but maybe isn’t exactly right about actually operating one?

Katya Borisova (26:19)
in my opinion, well, like because again I’m living and breeding this every single day. When I got in, there were about 70 rooms. Like there is a company that does call Ivink and they had about 70 rooms in our market. So that tells you make like less than 10 properties probably. So I was one of the first that got in and again it’s because of the need. fortunately, there are a lot of investors out there that are, starting to,

Talk to investors, pulling them in, nothing wrong because this is a this is a profitable niche. However, as more people are getting in, more of the prices are going down. The price per room is going down by significantly, and it’s way harder to fill in the rooms now because it’s a supply and demand thing. And a lot of the the the I have an issue with with the investors that are just like,

The ones that like, they bought a couple of properties or invested in few or learned something, and now they’re selling like courses and telling people, how they can invest with them. And I’ve seen, this goes out like so many times now, because they cannot fill the rooms, they they they don’t know what you’re doing in the beginning, or they’re simply making money off of people’s back, just kind of telling them, Hey, this is an excellent market, come in, but

How are you going to operate? Nobody teaches you. And really, truly, the the magic in this is operations. You have to be very good working with people, have to be super patient. These are people that are literally less than a paycheck away from being homeless. I can’t even tell you how much money I’ve lost on folks that because at the end of the day, I go in this, I have a heart for people. I and I tell people that if you want to be in this business, you can make money.

But it’s getting significantly harder, number one, because of price pressure and so much more people on the market. But number two, if you don’t have heart for people, you’re gonna suffer. I’ve had people live horrible c situations. I’ve had people, like like police being called, fire department multiple times being called, or they lose their job.

begging to, to stay for a week or two because they’re gonna find a job. You let them stay. It’s a month now, or month and a half. You’re now you losing thousands and they cannot find a job. And any anyway you need to get them out. And it is just a it’s just a tough, tough business. And so my challenge is to with the folks that are, selling, $10,000 courses and whatever, and telling people coming into this industry and it’s you’re gonna make a lot of money,

But no plan is to and not everybody’s like that. There’s some that really kind of have a plan and and connect with with organizations and and really do it well. But most of the folks out there that are selling horses and telling people, Hey, this is how how you should do it and go into this, this makes you money are just like should never be doing the actual people.

Cody Crabb (29:12)
I always say why aren’t they doing their own thing? Like if they say they can make fifty thousand dollars a day, then why aren’t they doing it? Like it’s and instead by yourself.

Katya Borisova (29:21)
Yeah, yeah, some do it, but it’s just like yeah, I just yeah. People have to be careful. I and I have to learn my own way. I’ve paid a lot of money for mastermind and and and and consulting and all kinds of things, mentorships. at some point you have to just stop. And and you just you have to say, Listen, I am going to make a stand and I’m gonna try. And by the way, every investor and we it’s well known.

You have to always have multiple strategies. There is no like if I only had the strategy of and didn’t listen to my friend who said, Hey, look into that. I don’t even I probably will go go bankrupt right there and then or be very close to b because it just was a tough time at that time. so so you have to put a stand and say, Hey, this is what I’m going to do. and if it doesn’t work, my other strategy would be to do this. And if it doesn’t work, I’m gonna keep looking for maybe what other people are doing.

maybe you give your house to someone else to operate, maybe you have to sell it, maybe y y you have to do something completely different that you might not want to. But the key is to really have multiple exit strategies and be ready to execute any of them at any point of time because it might be working perfectly today and tomorrow everything goes to pieces, right? So yeah, it’s it’s not a f it’s it’s a very fluid market. There is nothing constant in this market.

The real and the real estate in investment business in general.

Cody Crabb (30:46)
Yeah, for sure. And and so, thank you so much for all that you’ve given us. I loved this episode. I think you’re you have a really interesting story. It kind of just it’s a little bit of a mix between being prepared, but also just kind of getting pushed into it when you had no other choice. I I kind of love that. so just to kind of close us out here, for somebody that’s listening at their next deal, what would you want them to understand about value?

before they put their money into a property? What would you what would be the one piece of advice you would give them?

Katya Borisova (31:16)
I would say really find knowledgeable appraiser and get yourself, an appraisal. And I’m not saying that because I’m an appraiser, but because, the couple of hundred dollars that you can potentially save, which you’re not really saving anything, can cost you thousands of dollars. If you’re really not very familiar as to how to do this, just just get someone that is knowledgeable, that understands both in the investment side, the appraising side, and and get, get yourself a good valuation.

for what the value of the property is now, or if you at least are certain this is this that what that is, what it will be and and what could be your exit strategy. Make make decisions based on on exit strategy based on what what that value is. That’s my my advice honestly, because I I already gave the best the best advice I can give with some of the tips that I’ve shared. Even if someone just follows that they will do okay. But there are so many intricacies. Appraising is a science. It’s a

It’s it’s really not an easy thing to where you’re just looking in a couple of homes and coming up with value. you really have to know what you’re doing, and after years of experience, you’re gonna learn. But when you don’t have that and you don’t have that many deals, or you don’t do like me, if I wasn’t an appraiser and I’m doing two deals a year, absolutely I will need help with with that valuation. And that’s kind of what I advise people, don’t save the the

Whatever five, six, seven hundred dollars that you think you will be saving because it will cost you thousands at some point of time, probably.

Cody Crabb (32:41)
That right there is probably the best advice I’ve heard in a while on this podcast. Thank you so much for this. I this has been really good. if people want to connect with you, they they like what you they like what you’re saying, they like how you’re saying it. they maybe even want to work with you, who should get in touch with you and how can they do that?

Katya Borisova (32:57)
Anyone, investor, real estate agent that is having a TAF property or trying to win a the the the the seller on their site and offer a free appraisal service, anyone that needs appraising service like I I do estate, divorce, any anything that pre listing, anything that appraising wise is needed, to get in touch probably the best way is my website.

should be easy. I’m in Arizona, so it’s azappraisalcompany.com It has all my connections. So it’s again it’s AZ for Arizona, azappraisalcompany.com My phone number is there, my Facebook, everything is there, so you can get in touch. There is a button, you can request a service and we can go from there.

Cody Crabb (33:45)
Fantastic. Well, thank you so much again for your time today. and listeners, thanks for giving us some of your time too. If you liked this episode, make sure you don’t miss another one. Katya, thank you. Thank you again for hopping on today and we’ll see you next time.

Katya Borisova (33:58)
Thank you so much.