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Show Summary
In this conversation, Stephen Horan shares his experience of recovering from a wildfire that destroyed his home. He discusses the importance of financial diligence and strategic investment in real estate, highlighting how he managed his insurance payout and leveraged loans to renovate a property that has significantly increased in value.
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Investor Fuel Show Transcript:
Stephen Horan (00:00)
Within one year, a wildfire that came through our town actually burnt that house down. The insurance policy was up to date and ⁓ one of the policies was our personal property policy, we chose to, rather than immediately reinvest back in our primary home, we wanted to invest that money completely separately and just make sure thatit at least grew. I would hate for that policy or that amount of money to decrease in size. So I became, I became very diligent about how to take care of that money. I read, I read quite a few books. There’s some pretty ⁓ well-known staple literature, you know, regarding real estate that I went over and ultimately I chose to buy an as is home.
Michelle Kesil (02:22)
Hey everyone, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil. And today I’m joined by someone that I’m looking forward to chatting with, Stephen Horan, who’s been making serious moves investing in California. So excited to have you here, Stephen.Stephen Horan (02:37)
Hello, thank you.Michelle Kesil (02:38)
Awesome. I think our listeners are going to take something away from how you’re approaching your small rental portfolio. So let’s dive in. For those not familiar with you and your world, can you give us the short version of what your main focus is?Stephen Horan (02:57)
The short version of what my main focus is is scaling my current portfolio. Equity that’s built up. I’m just trying to be creative in whatever opportunity presents itself, whether that’s a small multifamily, whether that’s like an affordable, realist ⁓ self storage facility. I do numbers on ⁓ like quite a few different asset classes just to make sure that I’m open to something that comes across the table.Also, whatever type of creative financing can get me ownership of that property is really my focus. I hope that answers your question.
Michelle Kesil (03:32)
Sure. And how long have you been a real estate investor?Stephen Horan (03:35)
2017 is when I bought my first rental property. I would say what really got me in the door is purchasing my primary home in 2012.Michelle Kesil (03:44)
Yeah, what got you like started on this? You just mentioned the primary home, but then yeah, what kind of took you to that next phase of this journey?Stephen Horan (03:52)
The, I would say my story is like a little irregular than many others. I think everybody has a unique story, but mine would be after purchasing that primary home. We lived there a few years. ⁓ We realized when we had our first child that it was like of lesser quality to stay. Just lots of homeless people around the house. We chose to sell the house and buy something in the country that move.Within one year, a wildfire that came through our town actually burnt that house down. The insurance policy was up to date and ⁓ one of the policies was our personal property policy, we chose to, rather than immediately reinvest back in our primary home, we wanted to invest that money completely separately and just make sure that
it at least grew. I would hate for that policy or that amount of money to decrease in size. So I became, I became very diligent about how to take care of that money. I read, I read quite a few books. There’s some pretty ⁓ well-known staple literature, you know, regarding real estate that I went over and ultimately I chose to buy an as is home.
was a three bedroom, bath ⁓ with
Mostly the personal property money, but also I took a loan on my retirement in order to acquire the property. I did a couple different other kinds of loans in order to renovate the property.
The insurance policy, the personal property amount is what I purchased that home with mostly. I did pull my, ⁓ pulled a loan on my retirement in order to acquire the property and then a couple of different loans in order to renovate it. That house is worth a few times more than what I originally purchased it for. And ⁓ that move is what I was able to then pull equity. ⁓
then put a down payment on a conventional loan for one of the cheaper homes in the area. ⁓ That house also appreciated significantly and gave ⁓ rents increased several times to the point that I have a good significant amount of equity in that one. I was able to purchase a couple other homes, ⁓ partner on one flip, ⁓ partner on another flip, which was acquired in a subject to financing. ⁓
I was able to buy a owner finance home, was my most recent real estate transaction that I’ve done. I was able to build an ADU on that property and then I rent that out now and that’s probably my…
That’s probably my most favorite deal that I’ve done. anyways, I hope that answers your question of how I got started and how I got it going. I think it gives a good background.
Michelle Kesil (07:23)
So what are some of the main keys that have allowed you to continue to grow your business and continue to have it run smoothly?Stephen Horan (07:34)
The main keys is, mean, real estate in itself is when I lean on things that will likely be there is that rent growth is there, appreciation seems to be there, write-offs on expenses that happen on the property will be there. There’s just so many benefits, ⁓ but specifically what I have been able to do with it is probably just keeping an open mind regarding…financing, like if a deal comes through and there’s some way that I can handle it, you know, if it’s subject to, I can, or if I can put a minimal down payment, but somebody can hold the note. Those are all things that I think specifically I am open to and that ability has really opened doors. ⁓ Separate from that, I don’t know, having, being ambitious, I think there’s a mental state that’s like very necessary in order to.
continue to grow. ⁓ I’m trying to keep that as a high priority at the moment. I think that can easily be a fault and time can pass and you can become a little sleepy if you’re okay with how things are. ⁓ But there’s a fine line between ambition and being content. ⁓
think that answers that.
Michelle Kesil (08:45)
Yeah, absolutely. Awesome. What are you most focused on solving or scaling next in your business?Stephen Horan (08:54)
⁓ there’s been so many theories that I’ve gone over lately. ⁓ I was able to go to this bigger pockets conference last week and before I left, you know, ultimately like the sky’s the world and I would take any, any direction from any, you know, very successful person. But there was one thing I took home that created like a sense of content, you know, if there was discontent, it would be because like, I wish that I could have scaled faster in the last several years. ⁓ butThere was a theory mentioned by several different really successful people that keep hitting doubles. ⁓ If you can know where I’m going with that, you don’t need to hit a home run every time. But if you keep hitting doubles, you find a smaller property here, a smaller property there, maybe in five years is when that property will really speak to you.
you know, at the moment that you were able to do a great turnover on that property and then scale whatever it is, the rents or the appreciation that you were able to recoup from it. But if you keep hitting doubles, you’ll likely end up exactly where you want to be. That was like a great take home to me for what I wanted to do moving forward.
With that, I was able to like consider even just this FHA option that I briefly mentioned earlier, where
You know, technically I would live in the property for a certain amount of time for the first year, which is like a limited amount of time that I would actually live there. I may use it to like stay on call at the hospital. But after that first year, I would be able to increase rents. I would write off against my W-2 because it’s an FHA property. There’s like, and it’s a four unit. So once I move out, you know, I got another 25 % of my rents coming in.
⁓ And to me that’s hitting it double. It’s not like finding a property for a hundred thousand less than it’s worth and you know renting for twice as much as you thought but to me it is a double. ⁓ The math really worked out. The ROI for the minimal down payment that I needed to put down is like really significant. And ⁓ anyways that’s a big take home. It’s like a big focus. I just want to keep hitting singles and doubles. If a home run comes along then you know that’s that’s gonna be pretty special when that happens but.
Anyways, I hope that answers that.
Michelle Kesil (11:45)
Yeah, absolutely. I love that answer. That’s a really good way of looking at things and having a goal that keeps you focused on what’s possible toSo every business owner I know has those moments where things get real, maybe deal that goes sideways, or you need to make a fast pivot. Would you mind sharing a moment like that that you’ve experienced and yeah, how you had to overcome it?
Stephen Horan (12:14)
a deal that went sideways. this is specific to, ⁓ what my opinion is, you know, of a way we needed to pivot, butWe purchased a commercially zoned property in a vacation area near Mount Shasta, California. ⁓ Originally, very briefly after COVID, Airbnb and short-term rentals were just like, I mean, it was pretty obvious what the returns are and what, I think they were popping up everywhere they could. We did get on that train and for, I wanna say around a year, it was obviously producing very well. ⁓
property management for that type of rental is like 22 % for the area. So we chose to take it on ourself where we met a very interesting group of tenants throughout the year that it was very difficult because the conversations were always very difficult. There was like a lot of entitlement. There was a lot of like damage to the property. ⁓ There was just straight up a lot to deal with. ⁓ Like almost
Even a normal property management company would have had a difficult time, let alone us being, you know, adventurous first timers. ⁓ it was three different properties at the time. It’s a four unit and we did three out of the four. Anyways, we chose to pivot because occupancy fell a little bit. We were still dealing with a lot of these people. And as the prices fell because of occupancy, ⁓ we were just trying to increase occupancy. we decreased prices. And as we did that, we seem to get.
even just like consistently poor tenants. And it became too close of not quite enough profit in order to stay STR. So we chose to pivot. did, you we kept the furniture there, but a lot of people still wanted furniture for their long-term rentals. anyways, that was a moment that we pivoted. We were okay. You know, at the time we thought we were like,
breaking even on the property in general, which we were genuinely okay with because it was causing stress elsewhere had we continued to do the STR. There was a lot going on in our other part of our life at the moment. was, you we’re both W-2 full-time nurses. Just recently have we both been able to go fairly part-time, but at the time it was, you know, stressful.
needing to pivot. Luckily we could, right? Because it’s some kind of property that we could. And I don’t know, that’s a that’s probably a decent example of needing to pivot. And it may not have been a lot of trouble. It’s not like, you know, there’s been other situations where we actually bought the single family house just south of it. And I we tried to flip it with a partner, which we did ultimately. But we broke even on the sale because a lot of
A lot of things happened.
One was a big expense that this ⁓ is a part of California that freezes significantly, like lots of snowfall. ⁓ The pipes, they had water pipes going in the attic that froze and bursted and soaked a couple different bedrooms, which we needed to repair the floor and walls that we had already done. That was a significant cost expense that we didn’t expect.
⁓
I don’t know, that’s probably one example of a hurdle there that we overcame, you know, learned from, like, let’s try to keep the water constantly running or insulate it well or keep a certain amount of heat in the house to where things like that don’t happen. ⁓ I don’t know, everything does have a property to it and I couldn’t, you know, advise any less that just keep a microscope on everything you’re doing and…
Hold on very loosely, but keep a microscope on it, I would say.
Michelle Kesil (16:35)
Yeah, absolutely, that makes a lot of sense. think with real estate, sometimes things happen that are out of our control and all we can do is, yeah, try to resolve it and move forward, especially when you’re here for that long term game.Stephen Horan (16:50)
Absolutely.Michelle Kesil (16:51)
When it comes to growing your business, whether that’s through networking or relationship building, what are some things that have made the biggest difference for you?Stephen Horan (17:01)
⁓ to be completely honest, I feel like that is such a weakness of mine. It’s been eight years since I started investing in real estate and only lately have I been able to go to my first real estate meetup, two weeks ago. And that is because I obligated myself to go to BP con the bigger pockets convention and leading up to that, one of the girls that was going to be there said, Hey, well, there’s a local one you should come to. I, you know, I said, okay.I just recently moved to Sacramento area, which we don’t have a network whatsoever in. I thought it was a good time to just, you know, I’m going to the convention. I have more time to focus on real estate. Let’s take this very seriously. And in that way, I’ve been able to network quite a bit. I surprised myself. I do consider myself introverted, but when it comes to topics that I’m genuinely fired up about, it doesn’t really matter if I’m introverted. I’m realizing.
I went to the convention just like so interested, so fired up. because of that, I think I traded like 10 contacts a day, just whoever it was. I could just tell that there was something great about that other person. And I tried to figure out what it was. And ⁓ I don’t know, that’s like genuinely, ⁓ it fills my cup a little bit. Obviously it’s networking. Obviously that’s some sort of benefit like in itself, but when it…
when I can see a person and I see that it’s not completely selfish, right? Like we’re all trying to get to a better spot, but I genuinely believe that like we could help each other get there. And you know, if there’s not a benefit that I can provide, like I feel like I know somebody that could help them and sometimes passing the book like really comes around to you in karma somehow. ⁓ So I kind of ran with that and.
just the two little, like I went to that one meetup and then I went to this convention and I have no doubt in my mind I’m gonna continue doing that. But genuinely a weakness of mine, I’ve been able to do a lot independently. I’ve met a lot of handyman, handymen and a ⁓ couple different agents. I usually stick to the same loan officer for residential stuff. But there’s a lot of products out there regarding loans and stuff. So I need to just, ⁓ you know, be a little more creative.
tap into the network and be optimistic in everybody that I meet. In my opinion, I think that’s gonna start being a strength. ⁓ And that’s how I
Michelle Kesil (19:23)
Yeah, absolutely. Those relationships that you connect with are everything in this space. So I love that you’re taking advantage and seeing the value of that even when it’s, you know, not as consistent as you desire yet. It sounds like you’re on your way.Awesome. So before we wrap up here, if someone wants to reach out, connect, learn more from you. Where can people connect with you and reach you?
Stephen Horan (19:48)
Reach me email is like, you know, I’m so available through email. would, I would reply at any moment. That is [email protected]. That’s asset like a S S E T dot [email protected]. I do have the same handle on my Instagram and, ⁓ I love seeing other people’s projects, you know, face their life on Instagram. I think it’s very fun way to connect. ⁓I do post just a handful of stuff of what I’ve done so far and do expect to, you know, give a better picture of everything I’m doing and think about. I try to share that on my Instagram. That’s also @asset.adventure. That is the name of my Instagram. ⁓ That’s about it.
Michelle Kesil (20:36)
Perfect. Well, listen, I appreciate your time, your story, and your perspective. Thank you for being here.Stephen Horan (20:41)
Thanks, Michelle. Loved sharing my story with somebody.Michelle Kesil (20:44)
Of course. And for those listeners tuning in, you got value from this, make sure you’ve subscribed. We’ve got more conversations with operators just like Stephen who are building real businesses and we’ll see you on our next
