Josiah Smelser is renowned for using his knowledge in real estate to teach people how they can get the maximum value out of their property. He has come a long way from being a college finance professor to starting a podcast and writing a book to enlighten us with everything we need to make smart decisions. However, he never envisioned himself in real estate, and it took a large dose of boredom and hatred for his job to convince him to give a shift in his career a try. Learn more about him through the following facts.
1. Why he shifted to real estate
If you are working in a place that drains you instead of energizing you, sooner or later, you will be too tired to go to work, thus quit, and that is what Josiah did. He was working in an accounting firm, and every day, from 9 am to 5 pm, he would sit in a cubicle. He hated it so much that he decided to stop complaining and do something about it. Therefore he quit his job to pursue another venture that he found more appealing, which was appraising houses.
2. He wishes he had held on to his properties before the market crashed
Actions have consequences, and in the case of Josiah selling his properties before the market crash was a regrettable decision. While many businesses and investors lost a lot of money during the 2007-2008 financial crisis, other people like Warren Buffet saw it as an opportunity to accumulate their stock, and it paid off. Looking back, Josiah wishes that he had held on to the equity he had in his properties because he would have made a fortune.
3. He has hiked the Appalachian Trail
The Appalachian Trail has been seen as a challenge that most dare to take on, especially when they are at a crossroads in their lives and feel that time on the adventure will give them the answers they seek. About 3 million people hike a portion of the trail every year, and Josiah joined that rough estimate. After making some real estate investments, he thought it better to take a break from the industry, therefore,), Josiah divested his properties to go on a 1,100-mile hike of the Appalachian Trail.
4. He used a house-hacking strategy to make money
Although he had given up on real estate, by the time he was through with the hiking, he wanted to get back to the industry. The only way he found best to make some money was through house hacking a fixer-upper he had acquired. According to Forbes, house-hacking refers to renting out some parts of your home so that the income you get can offset the mortgage and any other bills related to owning your home. Such a strategy proved profitable to the investor.
5. How his BRRRR strategy works
BRRRR is an acronym representing "buy, rehab, rent, refinance, repeat." According to BiggerPockets, you should never invest more than 75% of a property's After Repair Value. Additionally, it would be best if you looked at properties that do not require too many repairs and know the amount of money you expect from renting any property after doing the renovations. As for refinancing, an investor is supposed to find banks that will lend them money based on the appraised value once the property has been rehabbed and rented. However, while the BRRRR approach advocates for borrowing and having some down payment for everything else, Josiah does not part with a penny of his own to invest in property. Instead, he uses 100% outside funds.
6. His worst investment
Although Josiah prides himself in using 100% outside financing and sparing cash for unforeseen expenses, he learned the hard way that sometimes, reality exceeds expectations. He and his partner tried to keep the costs of the renovation as low as possible so that they could make a $25,000 minimum profit. Unfortunately, they went through many obstacles that included banks refusing to sell to them the foreclosed property, extensive termite damage in the property, armadillo infestation, and rotten wood, among other challenges. Josiah had also not done his due diligence and only found out after listing the property that in that area, selling took some time. In the long run, the delay caused them not to buy-and-hold any more properties.
7. Why he wrote a book
Once people are successful, they usually try selling their ideas of what made them prosper, and Josiah thought it wise to put his strategies in a book. He said that he aimed at achieving financial freedom through investing in real estate and wanted to arm his readers with enough information to start a journey of their own. Since he had first-hand experience of building his own portfolio from scratch, he believed that readers could do the same hence the title "Dream It and Build It."
8. He advises clients to get a contractor they can trust
Building or renovating a house can end up becoming more expensive if you engage a contractor who tends to overprice their work or delay construction, leaving you to incur additional costs such as hotel bills. Josiah, therefore, advises that if you are interested in getting the services of a contractor, make sure that you have several bids from various contractors. He added that establishing rapport is crucial in ensuring work goes on smoothly.
9. He still uses his worst investment ordeal to lighten the mood
Josiah and his partner lost $20,000 in the worst investment project they undertook, but he does not worry about that loss. To him, what was worse was the opportunity cost that amounted to hundreds of thousands of dollars since they had their money tied up in the project hence could not invest elsewhere. Therefore to this day, Josiah and his partner send each other a meme of two men laughing, recalling the relief they felt after the six months it took to walk away from the property once they found a buyer.
10. His advice for prospective investors
Having incurred lots of losses, Josiah now advises investors to have multiple inspections of property they intend to flip. He also noted that flipping houses is about getting buyers as soon as you can; hence you should avoid buying expensive homes that will have a hard time getting buyers.
Written by Allen Lee
Read more posts by Allen Lee