PadSplit Investing Explained: How to Turn Single Family Homes Into Cash Flow Rentals

Daniella Ottone (00:00)

So then you sell the property with the PadSplit concept and already PadSplit ready to place the the tenants. So in that we have a lot of people coming from

Canada investing in Jacksonville, doing PadSplit. The other day I spoke with a gentleman from Mexico. He’s building right now a PadSplit and they have never been in Jacksonville. They just know the numbers, they see the numbers work, there is a cash flow, they want to invest on it, and that’s what they’re doing.

Cody Crabb (02:05)

Welcome back to the Real Estate Pros podcast by Investor Fuel. I am your host, Cody Crabb, and today I’ve got Daniella Ottone with Ottone Group, a Jacksonville real estate team focused on residential sales, investor clients, fix and flips, and helping people step into investing with the right deals, lenders, and contractors, and strategy around them. Thanks so much for hopping on today. I really appreciate it.

Daniella Ottone (02:27)

Thank you for having me. I appreciate you having me on your show.

Cody Crabb (02:30)

Of course. so Daniella, give us the simple version. What is Ottone Group and who do you mainly help? ⁓ because it’s it maybe not as straightforward as as as it first sounds. So I’d love to hear a little more detail on that.

Daniella Ottone (02:44)

Well, we are a real estate team. we are realtors in Jacksonville, Florida. But since last year, we started migrating a little bit more towards the investor side. So we are kind of my team is a it’s a large team. We’re 30 agents, all bilingual. So we started migrating more to the investors. So we kind of got together the investors, the wholesalers, the hard money lenders, the contractors. We do kind of the entire package.

We do seminars and we guide the new investor to how to do it and how to do it properly.

Cody Crabb (03:18)

That’s great. so you know what give us a little bit of background, like what what made you start moving the business toward the investment side more? I mean, the easy answer is the market. Yeah. But like I’d love to know specifically what it was in in your area.

Daniella Ottone (03:34)

Well, as you know, like real estate changes, it fluctuates, it’s cycle, it it it changes all the time. So you if if you want to stay your in real estate, you have to be able to maneuver your way through the changes, right? with political things because of changes in guidelines, the high rates, the people kind of waiting to see what’s gonna happen. We started noticing that more of the residential, you know, the new buyer.

The new first-time home buyer or the one that was trying to buy a second home is kind of waiting on the bench right now, a little bit. Houses are not moving too much. But because the houses are not moving, the prices are going lower. More properties are coming on the market. More properties are willing to get give a good deal. So we started migrating to the investor. With us being on the

Hispanic side on the Spanish side, you know, a lot of contractors, a lot of people that actually that’s their trade line. So we had access to a lot of investors and people looking for the next good deal. So that’s how we started kind of, you know, networking more with big wholesalers here in Jacksonville. And we partner up with them and we also partner up with another company called Pet Split, that we either

Help the people flip fix and flip or we help them keep and rent.

Cody Crabb (05:49)

Yeah, yeah. I think ⁓ like you said, because the real estate re real estate is one of those one of those things. It goes up and down. When it goes w up, it goes way, way up. When it goes down, it goes way, way down. so when did you realize your clients needed more than just like a real estate agent? Like it what that you what did you see that that made you

Daniella Ottone (06:08)

Well,

with my market, because we have always catered to the minority, you know, to the Spanish customer, it has always been my my target market. Mm-hmm. It’s we’re used to holding them by the hand. You know? So when somebody wants to do business here and normally it’s easier for you to do business on your own language. First of all, you normally feel more comfortable doing langu in your own language. And then second

When they come from a different country, finances are different. We have credit reports. They don’t have credit reports in their country. We there the way that finances are managed is different. You know, a lot of people sometimes they don’t believe in banks. So they don’t save the money on the bank. It’s like, you know, so we have to educate them through the process. We have to help them build in credit. So we do a lot for them.

So we’re used to holding them by the hand and kind of finding partnerships with different lenders, with different companies that will help us doing that. And now with the way that we’re targeting on investment, we did the same thing. We follow kind of the same model.

Cody Crabb (07:19)

So ⁓ just to kind of get some information on the the local market, I l when someone kind of focuses on a local market, I always like to get a little more information about it. So what are you seeing in the in the Jacksonville area right now in the real estate industry? If someone wants to invest there, what should they know?

Daniella Ottone (07:35)

Well, Jacksonville is really big. Superficially and terric territory, Jacksonville is the biggest country, I said the biggest city right now in the US. I understand. So we are expanding to four different regions. And right now, if you’re looking to get a good investment in Florida, Jacksonville is a big city that

Cody Crabb (07:45)

really?

Daniella Ottone (08:02)

The prices, we’re half of what is worth a property in Orlando. We’re like a third of what it would cost you in Miami. Wow. But the but on the rental side, we’re very similar. So your spread, your cash flow on a property in Jacksonville is gonna be bigger than what you would get in Orlando or or in Miami. Now we have three

Cody Crabb (08:23)

Yeah,

so people are looking at l people are looking at the rent prices and they just assume it’s the same. But what you’re saying is you could acquire property lower pri at a lower price and then your margin’s way bigger. That’s awesome. Exactly. Yeah, that’s the and that’s the kind of thing that you wouldn’t know unless you unless you were a local. So that’s that’s really good to know. so I’d love to know so you’ve mentioned that you’re you’ve kind of dabbled in flipping and and things. what’s

What’s kind of a lesson that you’ve learned from a recent project from a flip or or something similar to that? you know, what’s what’s a big mistake that new investors might make when they’re trying to do their first flip or their first yeah, there’s so many you can choose from not doing the numbers right?

Daniella Ottone (09:05)

It all falls to numbers. If you when you acquire the property, you your numbers have to be there from the purchase.

Cody Crabb (09:13)

Yeah. Later

on really numbers are ev that’s literally all that matters, really. I mean yeah you

Daniella Ottone (09:20)

Yeah,

if you’re investing it’s numbers. It’s the numbers right.

Cody Crabb (09:22)

Yeah,

and and if you and if you are kind of deciding to you know purchase something distressed like you that’s still numbers. You go, how do I know which you know what how is it worth this much because I’m gonna have to put this much into it? And it’s it really is just down to numbers. It’s always numbers.

Daniella Ottone (09:45)

It’s everything,

but what people normally don’t see is normally somebody would go in the house and said, Okay, I’ll I’ll fix this for twenty thousand dollars. But they’re not thinking that once you start demolishing, like when you start breaking to fix, surprises are gonna come. Normally surprises are like ten thousand, fifteen thousand dollars. They’re not cheap surprises. And then there is a cost for carrying that property through time.

Cody Crabb (10:05)

Yeah.

Daniella Ottone (10:11)

‘Cause a hard money lender is not a cheap interest rate. Right? It’s not cheap. And then you have cost on keeping that property. You have to keep the electricity, water, you have to, you know, there is some carrying on that cost that people normally don’t take into consideration. And that’s when the numbers go off.

Cody Crabb (11:05)

So yeah, so so for someone that is that they need to do their due diligence and really pay close attention, what would you say they should pay attention to that that a lot of people miss? You said the details, like you said, I know I need to fix this place for I could do it for probably twenty thousand, but you need to really go in and say carpet is this much, the ceiling is this much, and kind of do run the numbers. Is there anything else that people typically miss when they’re kind of trying to do this?

Daniella Ottone (11:34)

Permits.

That’s another big mistake. People think that they’re gonna start fixing without pulling permits. And now the city goes by your house, they see that dumpster inside the outside the house and you’re stuck now because they put this big red sign outside. You can’t do anything until you get your permits. And now the city doesn’t like you. So they’re not gonna make it too easy for you.

Cody Crabb (11:57)

And that’s not a great place to be in if you’re trying to

Daniella Ottone (12:01)

So get your permit

is something that people normally don’t do.

Cody Crabb (12:05)

Wow. so I’d love to hear you know, what are some exciting things that you’re doing that are that it that ⁓ our our listeners should know about? Is there are there new things in the industry that that they should they should be aware of or things that you’ve tried that have really worked for you recently?

Daniella Ottone (12:20)

what is really working for us is PadSplit. PadSplit is an amazing way of you obtaining multifamily income on a single family house.

Cody Crabb (12:31)

Mm. So tell us more about that.

Daniella Ottone (12:33)

So Pat Split is rent by by room. You rent by room. The property is rehabbed towards that angle. So it doesn’t require a living room, a family room, none of that stuff. It’s just bedrooms, bathroom, kitchen. So a three bedroom, two bathroom house you can easily convert it into a six bedroom, two bath house. And so you receive

Cody Crabb (12:49)

Cool.

Huh.

Daniella Ottone (13:02)

Weekly income? Okay, no. I’m gonna explain it better. So the study works. If I have a six-bedroom, two bathhouse, right? I will rent it to PadSplit. That’s who my tenant is. That’s the way that you avoid boarding house penalties. Because boarding house is not allowed, at least in here in Jacksonville. I don’t know if anywhere else, but in Florida it’s not allowed boarding house. So you rent the property to PadSplit.

Cody Crabb (13:07)

I was gonna say no.

Daniella Ottone (13:28)

Pat Split has members who they pay to PadSplit on a weekly basis. We as a landlord, we receive our pay every month. Pat Split requires like a 10% commission for placing the tenants for you, doing a background check, and basically that. You have to have the property furnished. It’s like an Airbnb.

But when I explain to people, it’s like an Airbnb for workers. Because there’s a lot of companies

Cody Crabb (14:04)

Yeah. So so I’m I’m imagining like they’re doing a really big project somewhere and they need a bunch of of construction people to be bust in from to some to somewhere. So they the company rents out instead of going to hotel, they can get a much cheaper yeah, okay. So that’s so that’s kind of who it’s aimed at.

Daniella Ottone (14:19)

Right.

Yeah, so the contracts are normally between six six months to nine months. That’s kind of how long the people stay in the house. But the yeah, the the occupancy rate is really good. Depends on the area. So there’s occupancy rates in Jacksonville, 90%, 95%, 100% occupancy. So you always have somebody renting and you always have a cash flow.

Cody Crabb (14:28)

Mm.

Yeah. Interesting.

Yeah, and I I could definitely see some benefits to your your your tenants the the people paying you rather being the company. Like they’ve got the they’ve got the money to do that. They’re not gonna have as many issues with the the day to day because they’re trying to they’re on a job and you know, I could I could see that really being a huge benefit for sure.

Daniella Ottone (15:50)

Yeah, your house don’t get destroyed as much because you know they’re they’re workers. They they get up early in the morning, they go to work, they come back late at night. There’s no couples allowed. So it’s just one person per room.

Cody Crabb (16:02)

Okay. Yeah, so you’re it it eliminates a lot of the compla complicated stuff. And also something that I just thought of too is they would probably be extra careful with your property because they are technically it’s like they’re w with their job. Like if if they did something to the property, they would be in trouble with their job, which they don’t want, obviously. So that’s yeah, so it’s kind of a little bit of a extra insurance against something something going wrong. That’s pretty neat.

Daniella Ottone (16:30)

And also like because they don’t know each other and you have different people, if somebody does something wrong, the other ones will tell you. So you know right away when somebody’s not doing what they’re supposed to be doing.

Cody Crabb (16:44)

Yeah, that makes a lot of sense. are are there are there any other advantages that I that I that I missed out on? I I feel like there’s gotta be a lot.

Daniella Ottone (16:50)

For for Patsweat?

Cody Crabb (16:53)

Yeah, for for this kind of arrangement because so I I’ve I’ve been doing this podcast for a while and I am still I I’m still hearing about brand new things that I’ve never even heard about before. It’s pretty amazing how many things that how many different strategies and and options we there are out there for for real estate investors. so I this is this is just an example. I I this isn’t one that I’ve personally heard of. So I just kind of wanted to get some more detail for our for our listeners.

Daniella Ottone (17:19)

As an investor that maybe don’t want to deal with PadSplit, but likes the concept. There’s a lot of investors right now right now that they are building for PadSplit. So with them in mind for PadSplit.

So then you sell the property with the PadSplit concept and already PadSplit ready to place the the tenants. So in that we have a lot of people coming from

Canada investing in Jacksonville, doing PadSplit. The other day I spoke with a gentleman from Mexico. He’s building right now a PadSplit and they have never been in Jacksonville. They just know the numbers, they see the numbers work, there is a cash flow, they want to invest on it, and that’s what they’re doing.

Cody Crabb (18:06)

Hmm. Now I’m also going to guess that this doesn’t work everywhere. So what are some different reasons that this may not be a solution for your area?

Daniella Ottone (18:14)

The the property has to be near big highways, it has to be near grocery stores, it has to be near, you know, ’cause a lot of people would just walk to the store. Maybe they won’t have a car. Yeah. So it it has to be in a strategic locations for this to work. If you’re too far out, it’s not gonna be a good pet split property.

Cody Crabb (18:36)

Interesting. Okay. Well, this has been really fascinating. so I’d love I’d also love to just hear a little bit about your view on so because you kind of see both sides of of the the coin here. I mean you you see the the realtor version, you see the investor version. What is something that realtors should know th about investors that they don’t currently know? And then I want you to flip it. What is something about

investors that realtors should know because you’re both.

Daniella Ottone (19:07)

Yeah. Well normally it’s not the market that I would have targeted because it’s a market that changed towards that. That’s why I moved to that. But normally the investor is as a realtor is not a good customer. Especially the investor that doesn’t know what it what he’s doing. Because then it’s gonna demand too much from me. It’s gonna demand for me to, you know, pull compar comparables for him, run numbers.

Cody Crabb (19:19)

Right, yeah.

Daniella Ottone (19:36)

Show him properties and I’m selling a torn-down property. So it’s a cheap sale that I spend sometimes even more than what it would take me to sell a high-end property for more commission. So normally as a realtor, that’s not my customer, my ideal customer. But because now we work it in a different way, meaning we are now the entire package for that investor.

Now we’re not just selling them the property to flip. We are also selling later on and we’re keeping them for a long run. So it it works for us better now.

Cody Crabb (20:20)

Yeah, for sure. And and so if that’s that’s I I see what you’re I see where you’re going with that. now on the flip side I’d love to hear like you you as a you as an investor, what do realtors not know about investors that they should know to work with them?

Daniella Ottone (20:38)

No a normal realtor doesn’t really know much how a hard money loan works because we’re not used to use those. If you’re talking about a rehab loan, maybe a conven a conventional loan that re has like a you know rehab thing to it, but they’re not familiar with a hard money lender. They don’t have many con contacts on hard money lenders.

My background is underwriting and I was a mortgage broker for many years. So to me it was easy to maneuver through that because I already knew the concept. I already had it. I already did it like many years ago. So it was easy to jump on that on that side now. But normally realtors they don’t know how to operate with wholesalers and hard money launders.

Cody Crabb (21:29)

So

yeah, so if a realtor wants to work with more w with more investors, you’d say make sure you know your stuff when it comes to the specific types of loans and stuff.

Daniella Ottone (21:38)

To know

about assignable contracts, ’cause a wholesaler is gonna assign a contract to you. Sometimes it’s double closings.

Cody Crabb (21:43)

Yeah, yeah.

Yeah. Well that that’s that is a that’s a great tip. Daniella, thank you so much for joining us today. if someone wants to connect with you online, work with you, do business with you, how can they find you on the internet?

Daniella Ottone (21:57)

And the internet is at Daniella Ottone. So it’s D A N I E L L A O T T O N E. And my phone number (904)615-3825

Cody Crabb (22:06)

Awesome. And who should be calling you? Who do you who would you like to get in touch with?

Daniella Ottone (22:10)

Anybody that wants to buy property in Jacksonville, Florida. Right here. From commercial to investment.

Cody Crabb (22:17)

Gotcha. Well, thank you so much again for your time and thank you listeners as well for your time. If you liked what you heard today, go ahead and give us a like, subscribe, comment, all the things, and make sure you don’t miss another episode of of real estate pros by investor fuel. Thank you again, Daniella, and thank you listeners. We’ll see you next time.

Daniella Ottone (22:36)

Thank you.