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Show Summary
In this episode of the Investor Fuel Podcast, host Leo Wehdeking speaks with JT Smith, a seasoned real estate investor who specializes in the buy and hold strategy. JT shares insights on his approach to real estate investing, the importance of understanding market dynamics, and the lessons learned from a challenging deal. He emphasizes the value of authenticity in building relationships and the need for continuous learning in the industry.
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Investor Fuel Show Transcript:
JT Smith (00:00)
A couple years ago I purchased a large building in one of the nicer sub markets that I work in.Leo Wehdeking (00:05)
or something.JT Smith (00:08)
And this was about two or three years ago when the interest rates were still low. And I got myself into the property, couldn’t pass up the deal. I was already finishing two other properties, so I sat for a little bit. And I thought I was going to get fancy and change the zoning and add a third unit in the basement.Leo Wehdeking (00:14)
finishing two other properties so I thought I was going get fancy and change the zoning and have a third unit in the basement.JT Smith (00:24)
and while that was happening all the interest rates started jacking up. And so all of a sudden my carry costs started to get out of control and I wasn’t able to focus my resources on it because I had other deals in play that were closer. eight months went by this property sat and I put a little bit of money into it and I had a lot of carrying costs on itLeo Wehdeking (00:28)
I was able get out of the control and I wasn’t able to focus my resources on other deals and play that were eight months went by this property sat.JT Smith (00:43)
and I ended up having to dump it to another investor, unfinished, I got beat up, I took a loss. And was the only time in almost 25 years of doing this that I’ve ever taken a loss on a deal. I moved on, I regrouped, and I’m doing another deal right now.Leo Wehdeking (00:46)
Okay,Hey everyone welcome to the investor fuel podcast I’m your host Leo Wehdeking and today I am joined by someone I’ve been looking forward to chatting with JT who’s been making serious moves in the real estate industry JT glad to have you here man I think our listeners go ahead go ahead
JT Smith (02:47)
Okay, thanks.Hey, thanks for having me. happy to be here. I love talking real estate.
Leo Wehdeking (02:53)
Good, good, good, good, Listen, I think our listeners are really going to take something away from how you’re approaching your real estate business and invest and invest in some of them. So let’s try to dive in and why, you know, for people that may not be familiar with your world, can you give us the short version on what’s your main focus right now?JT Smith (03:17)
Yeah, I’m laser focused on buy and hold rentals. I have been doing what many people refer to as the BRRRR strategy since before it was called the BRRRR strategy. It used to just be called real estate investing. Now it’s got a fancy name. But I’ve been doing that since about 2004 and buying properties, renovating them, holding them as rentals. So I have a ton of experience doing that.in the mid-20s units and I self-manage them all and it’s a very smooth, smooth business.
Leo Wehdeking (03:45)
and I self-manage them all and it’s a very smooth business.Alright, alright and can you tell us in what markets are you operating in right now?
JT Smith (03:58)
Yeah, one of my kind of secret sauce elements is I live in Pittsburgh, Pennsylvania, which is in western side of the state. one of my number, my primary criteria is I invest no further than 15 minutes from my front door.Leo Wehdeking (04:16)
Perfect, love it. ⁓ Listen, JT, something that actually caught my attention about you ⁓ was the way that you’ve been able to know your own market, you know, and how you actually, you know, being able to become your own self-operator. All right, can you ⁓ let us know how you’ve been able to keep that running smoothly?JT Smith (04:42)
Sure, you know, lots of people consume all kinds of real estate podcasts, read books, and a lot of the macro rules of thumbs and formulas are very simple and it seems like a very easy equation. The 1 % rule or the 50 % rule or the, you know, buy 70 % of ARV. There’s a million of those kind of rules. We all know those kind of rules of thumb that everyone throws around. The trick is the assumption that you put into the form.Leo Wehdeking (05:05)
The is the assumption that you put in the rulefor
me. So you need to know, and I exclusively work in three zip codes basically, in neighborhoods that I live in one of the zip codes. So knowing the block by block micro-marker within the…
JT Smith (05:56)
So you need to know, and I exclusively work in three zip codes basically, in neighborhoods that I live in one of the zip codes. So knowing the block by block, micro market within theneighborhood, the good part of the neighborhood, the bad part of the neighborhood, knowing exactly what the rents are, knowing exactly what the ARVs are, knowing what’s going on, what the traffic is like, what kind of transactions are going on, watching it, watching on Zillow, watching on Facebook marketplace, watching all the places
or who will post and sell those things so that I know those numbers by the back of my hand. So you have to know the market dynamics. And then obviously you have to know rehab. You have to be able to walk into a house and then in 10 minutes say this is 20 grand, this is 30 grand, this is whatever that number is going to be so you can do the normal simple, I’ll use air quotes, simple equation that everyone makes it out to be. The equation is very simple. You have to have the correct assumptions in the equation or it doesn’t work.
Leo Wehdeking (06:53)
Yeah,definitely once you enter a property and you know, it’s a fix and up
So you need definitely to know exactly or maybe have an amount in your mind, you know a real amount that that definitely you need to know.
JT Smith (07:07)
You need to know yourmarket and I know the housing stock in my market very well. I have very clear criteria. My bread and butter is all brick, two-bedroom houses. They’re easy to renovate, they’re easy to maintain, they attract the exact right kind of tenant and there’s a ton of inventory like that in my neighborhoods.
Leo Wehdeking (07:28)
All right, all right, all right, I like that. Now, JT, I know that every operator has a moment where things actually got real. All right, maybe a deal that went sideways or a time that they had to pivot real fast. Do you mind sharing one of those moments?JT Smith (07:48)
I just hadone.
A couple years ago I purchased a large building in one of the nicer sub markets that I work in. It was a very large two unit building, it could have been a three unit building, but huge units. Could have been a very high end luxury building.
Leo Wehdeking (07:55)
or something.units.
JT Smith (08:07)
And this was about two or three years ago when the interest rates were still low. And I’m financing the whole thing. I’m buying on short-term debt and I’m thinking about long-term debt once the property is stabilized. And I got myself into the property, couldn’t pass up the deal. I was already finishing two other properties, so I sat for a little bit. And I thought I was going to get fancy and change the zoning and add a third unit in the basement.Leo Wehdeking (08:18)
finishing two other properties so I thought I was going get fancy and change the zoning and have a third unit in the basement.JT Smith (08:28)
All that dragged out and draggedLeo Wehdeking (08:29)
All that bragged out and theJT Smith (08:31)
out and while that was happening all the interest rates started jacking up. And so all of a sudden my carry costs started to get out of control and I wasn’t able to focus my resources on it because I had other deals in play that were closer. You know, I was focusing on stuff I could start earning money on and six, eight months went by this property sat and I put a little bit of money into it and I had a lot of carrying costs on it and I, you never want to fall in love with the property but I loved the property.Leo Wehdeking (08:36)
I was able get out of the control and I wasn’t able to focus my resources on other deals and play that were closer. I could start earning money and six, eight months went by this property sat.JT Smith (09:32)
and I held onto it too long before I started working on it and I ended up having to dump it to another investor, unfinished, which is like, know, reeks of desperation. And I got beat up, I took a loss. And was the only time in almost 25 years of doing this that I’ve ever taken a loss on a deal. But, it took a small loss versus taking a huge loss. And I moved on, I regrouped, and I’m doing another deal right now.Leo Wehdeking (09:35)
started working on.Okay, that was smart. ⁓
Okay, okay, I’m happy to know that man, I’m to know that. Now, that’s actually good stuff, know, a lot of people they don’t like to share that kind of stuff enough, so, you know…
JT Smith (10:12)
Well, and it’s funny, I’vebeen doing this for a long time and I made, I got cocky. I thought I could take on more than I put, should have taken on and I broke my formula and I paid the price. And now it helped me refine what I’m doing. I know what I’m doing. Take it one at a time.
Leo Wehdeking (10:29)
Correct and you know what that’s what actually separates the folks who just dabble from the ones who stay in the game long term. So JT let me ask you this ⁓ what are you most focused on solving or scaling next?JT Smith (10:45)
I’m looking at that property, that transaction, spooked me and I got a little more conservative in my underwriting and I looked, I’ve been, for the two years after that, I worked at three or four properties a month. I was making offers. I wasn’t getting deals because I was being too conservative. And so I just, a month ago, got into my first deal since that whole property went bad.Leo Wehdeking (11:04)
justsince I’ve
JT Smith (11:09)
and I had to flex my standards a little bit. I had to believe in an ARV that is totally supported by market comps, but I had trouble believing that somebody would really value at that level. And so my focus now is how do I get back onto growth mode and start churning ⁓ one to four properties a year and keep my crew moving and keep the inventory growing.Leo Wehdeking (11:11)
standard a little bit. had to believe in an ARV that is totally supported by market comps, but I had trouble believing that somebody would really value at that level. And so my focus now is how do I get…Alright, hey, that’s big that’s especially when you got everything in place already
JT Smith (11:42)
Yeah, I mean, have a garage full of materials. I’ve got crews that can do the work. I’ve got all the systems in place to manage the properties. It was partially a mindset thing of just like, all right, let’s get back at it. And partially, ⁓ how do I change the way I underwrite deals to make the new economics that everyone else seems to be working in work for me.Leo Wehdeking (12:05)
Yeah, exactly. Well, ⁓ depending on how you move, can either compound things or create chaos depending on how you play it.JT Smith (12:15)
I agree, I’m in my late 40s, I joke that when I was in my 20s, 20 years ago was a lot easier to take big risks. You have nothing to lose, it’s easier to risk it all. I’ve got something going that is all I gotta do is not screw it up. It’s harder to take those big risks. So that’s what saying, it’s partially a mindset.Leo Wehdeking (12:17)
HahahaExactly.
Yeah, yeah, pretty much, pretty much.
Now, JT, I know that a lot of people that are listening are either earlier in their journey or looking to level up. ⁓ And I think they will benefit from hearing this, all right? ⁓ When it comes about building relationships and growing your network, ⁓ what’s made the biggest difference for you and your business?
JT Smith (13:37)
⁓ Being authentic. Be who you, you know, be yourself. Say what you’re going to do. Do what you say. Follow through. You know, be an authentic, genuine person. Don’t be a jerk. Don’t be a liar. Don’t do crooked business. Because, especially in my market, there’s just a handful of people.Leo Wehdeking (13:38)
being authentic.JT Smith (14:00)
So it’s a small town, I see the same people, it’s You build a reputation, you to be able to trade on that reputation.Leo Wehdeking (14:09)
Yeah, yeah, definitely you cannot fake that you know relationships and being authentic being for real have a good reputation I believe that’s That’s everything not only not not only in this space, but everywhereJT Smith (14:21)
Yeah, andLeo Wehdeking (14:24)
in life everywhere in life okay you need you need to be respectful if you want to have you know like a good relation with everyone you meet in this world for whatever reason you’re meeting that person okayJT Smith (14:25)
everywhere.Yeah.
And don’t assume you know
everything, right? Like you may be surprised what you can learn from someone that you think doesn’t know what they’re talking about. Maybe they know something you don’t know. So don’t be afraid to ask questions. Don’t be afraid to learn something new. ⁓ But also don’t be afraid to take action.
Leo Wehdeking (14:54)
to talk.Exactly,
Now, ⁓ JT, before we wrap up, if someone wanted to reach out to you or connect with you, maybe collaborate or learn a little bit more about what you’re doing, what’s the best way to reach out to you?
JT Smith (15:18)
You know, I’m caught I don’t have like a social media presence that I I’m I don’t have a course I’m selling I don’t have a personal website. I’m just a guy with a with a lot of great information to share And so I would say we talked to my personal email address, which is JT Smith s ter at gmail.com JT Smithster at gmail.comLeo Wehdeking (15:24)
I’m selling I don’t have a personalSee you in just
Alright,
alright man, perfect. Well listen, I really appreciate your time, your story and your perspective. We need more people in this space who are actually doing it the same way that you do, the right way. And thank you for being here, over here, JT. Now, for those of you just toning in, ⁓ if you got value from this, make sure you’re subscribed. We got more conversations coming with operators just like JT who are out there building real businesses.
Until then we’ll see you on the next episode guys.
JT Smith (16:12)
Thanks.
