Real Estate Investing: How to Play the Housing Market Without Buying a House


Chris Hill: Hey, everyone!
Thanks for joining us! We’re coming to you from Fool
global headquarters in Alexandria, Virginia. I’m Chris Hill, joined by Matt Argersinger
and Austin Smith. Thanks for being here, guys! We’re going to be talking real
estate investing. We have a lot to cover. But speaking of a lot of information about real
estate investing, we have a free 40-page e-book. It covers everything. Whether you’re a newbie or you’re an experienced
investor, there’s a lot of great stuff. I know you guys put a lot
of work into that. It’s free. You can get it by going to real.fool.com. We’ll take your questions in
a little bit about real estate investing. But Matty, let me just start with you.
We talk a lot in this studio about stock investing. Real estate investing,
why is it so appealing to you right now? Matt Argersinger: It’s been
appealing to me for a long time, Chris. I’m so excited at The Motley Fool,
we’ve really taken a big step into the asset class. I think a lot of investors who’ve been following
The Fool for years probably think of real estate, they immediately think of REITs,
or maybe they think of buying a rental property, a home, renting out part
of their home, maybe through Airbnb. And that’s the extent of
what they think about real estate. They don’t think about the idea;
can I own a piece of an office building? Could I own a self-storage facility?
Could I do those types of things? What’s remarkable is, yes. The answer more
than ever before today is yes, you can. The individual investor has more options today
— we’re going to talk about lots of them — to get into real estate investing and to
do it in a way that really was only available to very wealthy, very connected
investors as little as five years ago. That’s what Austin and
I have been working on. I’m trying to expand the investor set
within the marketplace. It’s really exciting. Hill: It’s a great point! Austin, obviously, stock
investing has revolutionized over the last 25 years. But I think, to Matt’s point, a lot of people
don’t think about real estate in the same way. And the fact of the matter is,
there are tremendous opportunities. Austin Smith: Technology is really
a tidal wave in this industry right now. We keep saying to ourselves, this feels like
where equity investing was 25 years ago. The door’s cracking open. Individual investors are really getting unprecedented
access and benefits in real estate that have been a challenge to access before. With things like crowdfunding, the advent
of technology that supports so many investors, really unique tax benefits like opportunity
zones, are really making this space so compelling, even beyond what people
have been used to. We’re really excited to cover all of
the ways that you can profit from real estate, which is more than just buying
a rental property or renting on Airbnb. Hill: Let’s talk about a few of the ways
that you can play the real estate market. Obviously, to Austin’s point, buying a home,
right off the bat, for a lot of people, if you do that the right way, let that expand
over decades, that can work out well for you. Argersinger: Absolutely! Buying a home, I think, is how
almost all of us get started in real estate. We don’t think of ourselves as real estate
investors when we maybe buy our primary home. But it can become that. You can think about, instead of buying a single-family
home, maybe you buy a duplex; you live in one, you rent out the other. Or, you could have
an accessory apartment attached to it. Or, you just buy your first home, buy another
home later on that you move to, and continue to rent your first home. I think that’s a lot of ways
we become landlords, in a small way. That’s our introduction into real estate investing. Beyond
that, the world gets a lot, lot bigger. It’s interesting. We’ll talk about REITs.
REITs came about in the 1960s. They’re mutual funds of real estate. It’s a great way, today and back then,
for investors, in a single investment, to own a piece of many,
many properties around the country. You get diversification instantly
through investment. We have a chart. If you look at investing in REITs over the
last 20 years, if you just invested in equity REITs vs. the S&P 500,
they’ve massively outperformed. I think $100,000 in REITs has more
than doubled, it’s grown almost to $700,000. That’s done much than the stock market. And that’s probably surprising to a lot of
people, given the fact that we had a pretty big financial crisis in 2007 to 2009,
which was driven in part by a housing crisis. REITs suffered during that period
of time. But they bounced back. And over that period, they’ve done
substantially better than the stock market. So, starting with your primary home, but then
maybe moving up to REITs, and then, of course, even beyond that, we can talk about. Hill: You think, Austin, about the individual
stocks out there, whether it’s home builders, or even companies that are in the home
improvement business like Home Depot and Lowe’s. I think for people who are stock investors,
who maybe don’t want to jump immediately into a REIT — we can get to some of the pitfalls
with REITs in a second — there are obviously stocks that they can go
to right off the bat. Smith: Absolutely.
You mentioned homebuilders. We think NVR is an
exceptional operator in this space. There’s also tech-powered real estate companies
like Redfin and Zillow that are really interesting to watch right now. Redfin in particular is a company that we
feel like has really strong leadership. Zillow just had a change of leadership.
There’s a lot of changes occurring there. Both are tech-powered real estate, but also
the advent of i-buyer programs being a really interesting addition
to these companies. There’s a lot of different ways to get access
to the real estate space in equities or REITs. If you want a microcosm of what Matt was talking
about, about the potential strength of REITs, today in the market, we were looking at a REIT
portfolio, eight or nine REITs that we follow. They were all in the green,
the market was in the red. I think there was one that
was just slightly below the line. But nice to see on a day that, when the market is zigging,
the real estate sector as a proxy is zagging. Argersinger: That’s another great point. If you look at just REITs, for example,
REITs tend to have a correlation to the rest of stock market between 0.4 and 0.7, which means
there’s some correlation to the stock market, but it’s a weak correlation. On a day like this, the market’s
down, REITs tend to hold up better. We saw in, I think it was May,
when the S&P had a really tough month. I think the S&P 500 was
down between 6% and 7%. The real estate sector and REITs were
the only part of the market in the green. If you’re looking at your portfolio and saying
to yourself, “Gosh, I love my stocks, I love the companies I’m invested in, but I’m pretty
heavily weighted in tech and maybe some other places,” maybe real estate’s
a place to look at. Hill: Let’s go back to something you
mentioned earlier, Matt — office buildings. That’s something I think a lot of investors,
myself included, don’t really think of when we’re looking for
opportunities to invest. But those are the types of deals that you
guys are working on in the service you run. Argersinger: That’s right. Austin mentioned the technology
that’s come about in the last five years. Really, it’s crowdfunding.
You have a lot of platforms out there. We’re working with several of them. Now, from the convenience of your laptop,
you can make real investments in single-asset commercial property, in institutional-quality
property, from around the country. One of the first investments we made when
we opened our service — we’ll talk about our service — we invested in a class A office
building in Tampa, Florida. Wonderful investment. Probably going to do about 17% annual returns
for us. It’s a signature building,
a signature asset in a great location. That really wasn’t even
possible more than five years ago. The passage of the JOBS Act, new regulations,
new technology, have enabled a lot investors with few clicks of a button
to make real investments in real properties. Hill: Well, and it’s a good reminder that,
just as investors, if we have a consumer experience at a store, whether it’s good or bad,
that’s not necessarily a reason to go out and buy shares of that retailer.
You mentioned Tampa. There are a lot of people who may be watching
and are thinking, “Well, where I live, it feels a little bit like a real estate bubble,
maybe it’s not a great market.” Tampa is one of the best markets in
the country right now, in terms of real estate. Argersinger: Absolutely! The whole state of Florida
has seen a huge influx of population. A lot of people think that’s because
a lot of seniors move down there. That’s actually not the case.
They’re seeing rapid employment growth. A lot of younger people are moving to
places like Tampa, St. Petersburg, Jacksonville. There’s a big trend, kind of a lot of the
Northeast cities — places like New York City, New Jersey, Pennsylvania, are seeing a lot of outflows.
Population is going South and Southwest. One of the places we look as we’re making
these commercial real estate investments is states like North Carolina,
South Carolina, Atlanta, Georgia, Florida. Texas is obviously seeing a big boom
in places like Austin and Dallas. And those are some of the locations
that we’re finding a lot of opportunities in. Hill: What are a couple of the metrics
people should be looking at when they’re looking to invest in real estate?
Whether it’s REITs or something else. Smith: Real estate’s going to have its own lingo,
just like any investing sphere. We focus on IRR. That tends to be one of the master metrics of real
estate investing. It stands for internal rate of return. It’s a total return you realize over
a period of owning an investment property. It includes distributions, or dividends, for our
equity investors out there, plus any appreciation when it comes time to
sell that property at the end. There’s also the capitalization or cap rate for short,
which is the inverse of the price to earnings ratio. This is a very quick way to look
at how affordable or expensive a property is. Hill: We’re going to get to a couple of REITs
for anyone looking to put REITs on their watch list. Matty, there are pitfalls. Despite what Austin was saying about what’s
happening in the market today, no one should just blindly go into REITs, just as they shouldn’t
blindly go into an entire industry worth of stock. Argersinger: Absolutely.
All REITs are not equal. First, there are REITs
for every part of the market. There’s hotel REITs, office REITs — we talked
about officers — retail REITs, senior housing REITs, self-storage REITs… there’s all kinds. Not all those sectors are going
to be performing well at the same time. For example, hospitality REITs are for the most part
trading at really bargain valuations right now. That’s because the
hospitality market hasn’t done so well. There’s been new competition that’s come
into the space, between Airbnb and others. There’s also fears that we’re at a cycle
peak for the stock market and the economy. Hospitality REITs tend to be the most
sensitive to changes in the economy. So, there’s that situation. Also, when investors start to look at REITs,
they’re always attracted by the dividends. REITs are required to pay out 90% of their pre-tax
income, so the dividends are usually pretty juicy. But just because you find a REIT that has
an 8% dividend doesn’t necessarily mean it could be a good investment. Usually, that’s a sign that it’s
paying out more than it should be. It’s probably not covering its dividend
obligations through its funds from operations. Plenty of pitfalls to follow. I would say, look for REITs that have been
around for a long time, that have consistently grown their funds from operations over time,
good managers with long track records. All the things we tend to look for in stocks
and good companies apply to REITs as well. Hill: Let’s get to some
of your questions in just one second. But, first, Austin,
I’m going to hit you first. What is a REIT that you’ve got your eyes on right
now that maybe people can put on their watch list? Smith: Sure. I have my eyes on it
and my hands, since it’s in my portfolio. Physicians Realty Trust, DOC, is really
interesting. It’s a relatively young REIT. It’s only been on the market for a few years.
It’s also still relatively small at $3.3 billion market cap. Pays a really enticing 5.3% yield. I hope,
to mass caution, I’m not yield-chasing there. We like this one a lot. It’s a really recession-resistant
industry in the healthcare sector. If you are believing that we’re late-cycle
and you want something that is going to be more durable in that volatile
environment, this is the sector to be in. And, there’s a really favorable macroeconomic
trend where a really large portion of the population is aging into a really
high healthcare need point in their life. We expect this REIT will see really high occupancy,
and we are seeing that today at above 93% occupancy across their portfolio.
Hill: Matty, what about you? Argersinger: Urban Land Institute
does this major survey every year. They’re an institute that has
tens of thousands of real estate professionals. They monitor and report
on the real estate industry. For two years running now, the No. 1 area
where their members are seeing the best prospects and the best opportunities
is warehouse fulfillment. That probably seems obvious, right? The rise of Amazon, even Walmart and
Target really required to have distribution within one mile of major urban centers.
It’s a huge trend, it’s been a huge trend. As consumers, of course, we’re used to the
idea of two-day shipping, one-day shipping, now same-day shipping.
That’s not going to change. These major companies need that. So,
the company I like is STAG Industrial, ticker STAG. It’s been around for a long time.
Really conservative management. They own major warehouse and distribution
facilities in nearly 40 states. Really broad. And, they have some of the best locations,
right outside major cities like Charlotte, North Carolina,
that’s growing, outside Dallas. Tenants include FedEx, DHL, companies that
need those types of facilities to process goods, distribute goods.
Pays almost a 5% dividend. I own the company.
I’ve owned it for a long time. It’s a recommendation for us in our service,
and it’s one I’m really excited about. Hill: A lot of great information.
Even more information in the 40-page eboo I mentioned. It’s free. Go to real.fool.com to get that.
Just type in your e-mail address. Let’s get to the questions.
A lot of great questions coming in from the viewers. Sandeep asks, “Can shopping mall
REITs survive the retail apocalypse? Will the retail bankruptcies
take the REITs down too?” That’s a great question because it gets that
a trend — Austin, we’ve been seeing these headlines for a few years now. Sports Authority, Toys R Us, more and more
well-known retailers that are either closing hundreds of locations or just
going out of business altogether. Smith: Sure. I’ll reference the oft-attributed quote here,
“Statements of my death were overly exaggerated.” That seems to be the case
with the retail space right now. We look at REITs like Simon Property Group
or Retail Opportunity Investment Corporation, ROIC, have been beaten
down on this downbeat perception. Now, I think you have to be choosy in this space. Let’s be
very clear, physical retail is under a lot of pressure. But when you look at some of these really
good operators, they might have central anchor tenants in grocery stores, which are going
to be a lot more durable in a tough retail environment. I’d say, can retail survive? Absolutely.
Is there pressure in the retail space? Absolutely. We’re going to be looking for retailers [REITs]
who have deeply undervalued assets in their portfolio, or maybe have exposure to tenants
who are going to be a lot more durable in a retail apocalypse.
Argersinger: Yeah, I agree. I think those are all good points. If you look at the retail segment of the REIT market,
it’s amazing to see the cap rates in that space. Cap rate, capitalization rate,
also mentioned earlier, it’s the net operating income of the property divided by
the value of the property. Usually, the higher that number, the quote-unquote
cheaper in most cases the property is. Some of the cap rates in the retail space
are in the 7-9% range; whereas, when I talked about warehouse and fulfillment earlier,
we’re talking the 4-5% range. That’s a huge spread. There are definitely going to be opportunities
in retail REITs. Simon Property Group is interesting. They actually own
some really quality properties. They’ve been divesting
a lot of their lower-tier malls. I think at some point, they might
be a good turnaround candidate. One we’ve actually recommended
recently is STORE Capital. The interesting thing about them is, think
of Wawas, or gas stations, or convenience store REITs, that’s what they focus on —
places where there’s high customer traffic, or generally a pretty captive audience. Single tenants, triple net lease,
pretty conservative management team. Berkshire Hathaway actually
owns a percentage of STORE Capital. That’s one in the REIT category that
I would say, if you’re looking for opportunities, might be one to look at. Smith: Chris, if I may, real quick,
we’ve been spending a lot of time on REITs. There’s a lot of value to be had there. But let’s talk about one philosophy we have
as we approach real estate that we believe permeates REITs, fix and flip, crowdfunded real
estate, multifamily properties — dollars follow people. We look at migration patterns really heavily. We believe that if you’re going to be making
a real estate investment, let’s make sure that the geography makes sense. Going back to the retail REIT question, if
there are really strong geographies that have really great inflow — maybe in Atlanta, maybe
a Denver, some of these more affordable emerging 18-hour cities — they stand a much greater
chance of surviving a tough retail environment. If you have the opportunity to acquire REITs
or properties that have exposures to these cities, we think that’s a much
safer pond to be operating in. Hill: Several people asking, “You’ve talked
about REITs, are there some non-REIT stocks you like to play the housing market as well?”
Smith: Interesting. I have two. Interested in Redfin and Zillow
right now. Two we mentioned earlier. I wouldn’t say that I have a favorite between the two.
I really love the leadership team at both. Glenn Kelman over at Redfin, Rich Barton over
at Zillow, recently re-assuming the helm as CEO. You have i-buyer programs at both. I think
either company could really be a runaway winner. In fact, the real estate industry is such that you
could see both be runaway winners. I own both. Really interested to
see how they both develop. Argersinger: One that comes to mind immediately
— I think Austin might have mentioned earlier — is NVR. It’s a home builder.
The track record is tremendous. They have a really unique business
model, too detailed to go into right now. Again, one of those home builders that for
a long time focused in the Mid-Atlantic region. They really expanded down to the Southeast.
A lot of those stronger markets we were talking about. If you like the homebuilding space, and it
looks pretty interesting right now on a cycle basis, that might be one to take a look at. Hill: JR asks, “Would you consider REITs to
be defensive stocks in case of a recession?” Argersinger: Absolutely, I think so. You have
to remember, even in a recession, REITs will suffer. Everything’s going to suffer. But the advantage that a lot of REITs have, especially
in the office categories or industrial categories, is that you have tenants
who have signed multi-year leases. Five-year, 10-year, even 15 or 20-year leases. As long as those REITs have strong tenants,
creditworthy tenants, tenants that are large and have good balance
sheets, they’re going to hold up. In a stock market downturn,
we’ve seen that REITs tend to hold up better. Hopefully, there’s not another housing crash
or something like that around the corner, because everything will do badly. But REITs tend to have less
correlation to the overall stock market. If you’re looking for a little balanced in
your portfolio, I think REITs can be a great option. Smith: In the real estate space as a whole, a triple
net lease is another great way to approach that. Matt’s actually provided investment
recommendations to our premium members. I believe they’re assuming
17 years of a 20-year triple net lease. What this means is, you have a lease that
is guaranteed, there’s an agreed-upon rate. The tenant on the property pays
all taxes and maintenance on it. So, your floor is guaranteed.
You know what you’re going to be making. And then, typically, the way these leases are written
is that there is some upside if they outperform. You get to capture some of the upside
without locking yourself into a downside. If you believe we’re late in the market cycle,
which many people believe, a triple net lease investment could be a really interesting way
to approach investing over the next few years. Hill: If you think about all the headlines
over the last year about interest rates, and how often that is the dominant business story
of the day, how do you guys think about macroeconomic stuff like interest rates
affecting the housing market? Argersinger: It’s a good question.
I tend to weigh macro less than other factors. Interest rates are important. REITs and real estate stocks in general, financial
stocks in general, tend to be a little more sensitive to changes in interest rates.
Again, I always think that’s a short-term phenomenon. I think the best operators, the companies
with the best balance sheets, no matter what happens to interest rates,
they’ll do just fine. Also, I do feel like money tends to fall back
to REITs, actually, when interest rates go down, just because there
becomes a real chase for yield. So, if you can find a really great REIT or
operator that’s paying 4%, 5%, 6%, and you’re confident in that dividend yield, as interest
rates plummet, you’re going to get 1.5% to 2% on Treasuries,
they become very attractive. But then overall, looking at the economic
picture, I think Austin said it right. If you find REITs that have long-term leases,
where there’s even built in price escalators, usually — most leases include 2% to 3% increases in
rents every year from great tenants — you’ll do just fine. Hill: You guys have talked a little bit
about industry-specific REITs. We’re getting a couple of questions
about that. You mentioned warehouses. Someone asked me about
data center REITs like Digital Realty. Are there industries at one end of the spectrum
or the other where you just think that this is looking particularly attractive right now? Or, like, “Ooh, boy, I can cross this off
my list because this industry REIT is just not going to be as good an opportunity as
anything else I see on the spectrum”? Smith: There’s going to be opportunities and
challenges at every end of the spectrum. So we don’t want to make any blanket statements
that data centers are 100% certain and retail REITs are 100% doomed to failure. There’s going to be some fabulous opportunities
in the retail category, I promise you; but it might be more challenging.
Be careful where you step. Maybe something like senior housing has really
good favorable macroeconomic trends behind it; but if you are acquiring either an individual
property or a REIT that has exposure to the wrong geographies, maybe where that local population
isn’t aging as quickly, that could be challenged. I don’t want to make any blanket statements
and write off any category, or have people migrate their money
to one category wholesale. Hill: Paul asks, “Are there tax considerations
with REITs that would make them more or less suited for tax-advantaged accounts like IRAs?”
Great nuts and bolts question there. Argersinger: Generally, I’d say REITs are
very favorable for tax-advantaged accounts. That’s where you love to have them.
They’re paying dividends. A lot of REITs pay monthly dividends. By the way, because of the way REITs are
structured, most of their dividends and distributions are considered
ordinary income distributions. So you’re usually going to pay your ordinary
income tax rate on those if they’re not treated as qualified dividends,
as we’d expect from a normal dividend company. They’re disadvantaged in that way if
you’re having them in a taxable account. So, if you’re able, putting them in a tax-advantaged
account like an IRA is a great option. Hill: Are there any
international REITs that you guys like? We’ve talked about different markets with
in the U.S., what about outside of the U.S.? Smith: I don’t have any
international REITs on my radar right now. Doesn’t mean there’s not a lot of great opportunities.
I just haven’t brought that into my recent analysis. Argersinger: Actually, because the
United States has the real estate investment trust, REIT, structure, it doesn’t really
exist the same way in other countries. You will find U.S.-based REITs like American
Tower, funny that it’s named that, that has significant overseas assets.
You can invest in them. Most of their assets
are still the United States. But that’s one example, where a U.S.-
based REIT is doing things internationally. You can play it that way a little bit. Hill: For somebody new to the space, would you
recommend investing in individual REITs or an ETF? Smith: I think The Motley Fool’s had a really
great track record and wonderful experience buying individual companies with the caveat of,
don’t put all your eggs in one basket. Whatever diversification can afford yourself
while buying individual REITs or individual companies, that’s generally the
way that we like to approach investing. Hill: Vince asks, “Is it better to invest
in a REIT or for you to take the money you’ve saved and own a property yourself?” We talk all the time about stock
investing coming down to temperament. There’s a different type of temperament
that comes with being a landlord. Argersinger: Certainly, Vince. As a person who owns rental properties —
I know, Austin, you do as well — obviously comes with a whole host of headaches. REITs are certainly the easy and nice and efficient
way, and low-cost way to invest in real estate. We haven’t talked a lot about
crowdfunding as another option. There are certainly ways
beyond REITs to invest in real estate. It just depends on appetite
for risk, appetite for time. If you’re willing to invest the time and the sweat,
in a lot of cases, you can go those routes as well. Hill: One viewer asks, “I’ve heard the term
house hacking get thrown around a lot lately. What in the heck is house hacking?” Smith: This is a really great rebranding of
renting out a spare bedroom in your house to help pay down your mortgage. Hill: OK. Another viewer asks, “How does
the whole accredited investor thing work? What is or is not
restricted to accredited investors?” Argersinger: Let’s talk about
commercial real estate crowdfunding investing. We talked about earlier, this rise
of crowdfunding platforms out there. Most of the opportunities you see today are
reg D opportunities, which means you have to be an accredited investor
to take advantage of them. A lot of the recommendations we’ve made in
the service, the real estate properties we’re investing in, you’ve had to be accredited,
which means, if you’re a single person, you have to have at least $200,000 in gross income
per year; if you’re married, that’s $300,000. Or, you can have a net worth of greater than
$1 million, less your primary residence. Those are the qualifications. If you meet those, you’re an accredited investor,
and you’re able to invest on these platforms. But we’ve also seen the rise of reg A and
reg A plus offerings, which are also private real estate opportunities that are
available to non-accredited investors. It’s still a very small part of the market. There aren’t a lot of platforms out there
that are doing that right now. But it’s growing. There will be opportunities, even if you’re not accredited.
Smith: We’ve talked a lot about these platforms. Let’s put a name to them so the
viewers know what we’re referencing. There’s many crowdfunding
platforms out there. We’ve interacted with
some of the largest ones. We see a lot of great opportunities on platforms
like RealtyMogul, RealCrowd, CrowdStreet. They tend to bias
towards accredited investors. RealtyMogul does have an option available
for non-accredited investors who don’t meet that threshold, as well as Fundrise. They specialize in what’s called regulation
A access, which is for non-accredited investors. Hill: Let’s talk for just a second,
before we wrap up, about Millionacres. This is a new venture from The Motley Fool.
What got you interested in this in the first place? It seems like, among other things, one of
the themes that we’ve hit here today is how it really seems like we’re just
getting started with real estate investing. The opportunity, as you said, Austin,
it’s a little bit like the late 1990s for stock investing, when you saw the rise, not just
of companies like The Motley Fool, but of brokerages going online, and discount
brokers like Schwab and Ameritrade and E-Trade, etc. Smith: I can’t speak for both of us,
but certainly what got me interested in Millionacres, and why we’re here today, is that this
space is larger than the equity space. There’s so much money to be made. But also, up until very recently,
it’s been obfuscated and challenging. It’s really intimidating to people. The Motley Fool’s mission is to help demystify
these spaces, to shine a light on these opportunities and say, “Hey, there’s a really fabulous way
to make money here and improve your wealth and your lifestyle. Let’s educate you to get there, help you figure
out how to navigate these waters, understand where the good and bad opportunities are.”
Penny stocks? No, thanks. Great, well-run companies? Yes. Really derelict properties
down the street? Maybe not. But, a really great
crowdfunded deal? Yes. We’re here to play that same role that
The Motley Fool did in equities for real estate, and shine a light on all the ways that
people can invest in it. It’s really exciting. It feels like where The Motley Fool started. Especially with the emergence of technology
in the space, there’s so many great ways for people to invest all across the country,
either be it through REITs, crowdfunding, and half a dozen other excellent avenues.
Argersinger: Couldn’t have said it better. I would just add this one little piece. Earlier this week, we all went to Nobu, famous
Japanese restaurant right here in D.C. We dined with a lot of our members. We also dined with the folks who
managed that property, who we’re invested in. That’s an example of a recommendation that
we recently made to invest in a restaurant in one of D.C.’s hottest neighborhoods,
in a beautiful luxury condominium building. That was a real recommendation that
we’ve made, that our members are invested in. Just imagine the idea of investing in a property
just like you do if you bought shares in Starbucks. You go there, you order your coffee every
day, you feel like you’re contributing to the Starbucks brand. Well, imagine owning a property, investing
in a property, and going to visit that property, and dining at the restaurant that
is the main tenant of that property. That’s the experience Austin
and I want people, investors, Fools, members around the world, to get used to.
That’s what’s happening. These real estate markets and properties that
were only available for the very wealthy or the well connected, your rich uncle at the
golf club, that’s no longer the case. These platforms are out there for you to
make these investments and do it yourself. Hill: And we’re just getting started.
Argersinger: Just getting started! Hill: Go to real.fool.com to learn more.
Get that 40-page ebook, it’s free. Check it out at real.fool.com.
Thanks for giving us a thumbs up! Don’t forget to subscribe to our YouTube channel
so you don’t miss any of the live Q&A’s that we do. Austin Smith, Matt Argersinger,
guys, thanks for being here! Smith: Thanks, Chris!
Hill: Thanks so much for watching! We’ll see you next time! Fool on!

Why My Airbnb Business Is Worth OVER $20 Million Dollars in 2019 (started with $4000) Mind Blown…


in 2014 I invested just under $4,000
into a real-estate play. This is my first and only real estate investment ever and
without any outside investment no extra money no debt no financing the loans
that investment that play is currently worth over 20 million dollars I’m gonna
talk to you about how it’s worth over & why it’s worth over 20 million dollars.
How I got there and if you’re currently a subscriber who’s built a business like
it this will help you valuate your own business and plan to maybe do some
fundraising, for example, if you wanted to get outside investors. If you’re new to
this channel I’m gonna give you something for free at the end of this
video. NO I’m not gonna try to sell you a course or a webinar. I’m actually gonna
give you a whole course for !!free!! because I believe you don’t need one (a course) to start
your Airbnb business. Alright, so my name is Sean Rakidzich this is Airbnb
Automated and let me give you some numbers. All right welcome back Airbnb family
so first let’s thank Steve MacKinnon for sharing this Forbes article with us in
our Facebook group the Hosts of Air B&B Automated you’re a boss Steve this has
inspired this whole talk and it hopefully this will provide a lot of
value to people in the YouTube space now before I get into the numbers I want to
ask all of you to like this video because their subscribers around the
world who will not see this video because they don’t get notifications for
every video but if you like this video it’ll increase the chances of them
getting notified it helps that algorithm per se so thank you in advance for
helping this video survive and move by just simply liking and leave a comment
say hi maybe yeah and if you have an Airbnb business that like in the
comments I want you to help us prove that Airbnb is awesome in the comments
tell people how many apartments or the houses you have just so people who are
watching this know that this isn’t bogus with that said let me first prove to you
that I’m an Airbnb host I think that’s important I just claimed to be an Airbnb
host and I’m going to tell you right now that we make over two million dollars a
year right off the Airbnb platform let me first give you one of our gmail
accounts that shows some deposits from Airbnb like daily deposits let me show
you my performance tab for one of my other accounts that shows that Airbnb
hosts in my competitive market typically charge 113 a night but we’re collecting
like 145 a night so we outperform the average Airbnb host des letting you know
that we are a little bit special let me show you one of our listings calendars
that it’s just jammed full month over month and we make over $9,000 one of our
high months we hit about $12,000 in cash flow and our rents are 2400 a month we
have 70 units and we can profit up to $9,000 a month with one of them
that’s gigantic I think that might be the best-performing arbitrage I’ve ever
seen by the way if you guys have one that makes more than nine thousand
dollars per month profit like tell me in the comments right now because I would
love to shoot your space and put you on this channel if you guys are crushing it
that much because you deserve an atta boy so with that said Sean’s an Airbnb
host I’ve been doing it since 2014 how did I start with less than $4,000 well
it was an accident I have a sales company and I relocated somebody from
Michigan to stay in a high-rise that I was staying in when they moved in I got
the first two months of rent free it’s called the front end lease
concession and in about a year this is gonna happen actually in Houston right
now there are places giving away 12 weeks free there are apartments right
now giving you front end 8 to 12 weeks free you could do it the same way I did
because when when apartments are hurting for occupancy they do these front end
deals they’ll even give you like a thousand bucks on a gift card right now
– super cool so right now the time for arbitrage it’s now it’s great and over
the next year or two as the recession just starts gutting people people are
gonna be giving away the farm to get people to move in like for a fact one
good fact 14% of Dallas’s real estate for apartments is under construction
right now which means in the next 12 months the available real estate will
jump by 14% and all these all these apartment owners they’ll be struggling
to fill them up so they will wheel and they will deal because unless Dallas
include leg increases its rentable population by 14% it sounds like they’re
over building doesn’t it yeah it does so how I did it for under $4,000 was a
front end lease concession that four thousand dollars went into furnishings
now in 2014 it was super easy I was making fifteen hundred to two thousand
dollars a month on this little studio apartment and I reinvested got a second
one I ended up putting my own home on it because I started traveling and so next
thing you know I have three apartments making about six thousand dollars a
month on the Airbnb now we didn’t take it seriously until 2017 when the
Superbowl hit and we decided to jump up to ten units to make a lot of money on
the Superbowl we profited fifteen grand in a weekend Thank You mr. Superbowl for
bringing people love you and from there we just kept it going and we just kept
reinvesting our profits in the growth and now we’re where we are we’re adding
21 apartments this month seven of them are relocations we’re moving units to
different buildings so we’re growing by net 14 units all right so now let’s look
at the numbers here this article Forbes says that Sandra’s 3,500 apartments and
is worth 1 point 1 billion dollars I decided I was gonna play with this and
see if we could come up with a ballpark valuation per rented apartment right so
they take an apartment they furnish it they put it out there and people rent it
all right now lyric is worth 240 million and they have 500 apartments so if we
take 1.1 billion divided by 3500 units the the total valuation per unit like
looking at that number alone is 312,000 but we did that with lyric to
240 million divided by 500 it’s like way high it’s like 450 or 480 thousand right
I’ll do the math and post it so there’s something fishy here right if this won’t
make sense this doesn’t work so I realize though that air B&B just
invested like 160 million into lyric like halfway through the year this is
kind of fresh so they have cash on hand that’s that’s got to be the explanation
so I’m like alright so if part of their valuation is based on their operating
portfolio and then the rest of that 240 million is based on how much cash they
actually have in their bank account that would make perfect sense so what did I
do I subtracted 80 million from lyric
instead of valuating them at 240 million I put them at 160 million for their
portfolio and 80 million for their cash right so take that 160 million divide
that by 500 and you now have three hundred and twenty thousand dollars per
operating apartment that is operating as a short-term rental or hotel that’s way
closer to Saunders 312 right so now we take that 320 we multiply our seventy
active units by 320 we’re worth twenty two point four million dollars so even
if that number is slightly generous and you wanted to shave off a couple million
like you wanted to shave off ten percent which would actually make our portfolio
worth less than 300 thousand per unit we’re still worth more than 20 million
dollars and that doesn’t even include my cash on hand isn’t awesome that’s super
cool right so if you are an Airbnb operator and you have a bunch of rentals
the key here to remember here is this valuation is based on the fact that that
business can be sold right these companies are large enough that you take
a piece out like the CEO or the CFO and you replace them they’re interchangeable
because they’re so big my business is large enough that if I
exited the company and they replaced me if I sold my business and they replaced
me with the CEO that knew what he was doing in real estate or hospitality or
something this business would do just fine without me it’s to that point I am
NOT needed I’m a master delegator now and I am pretty much just the CEO for
the sake of growth and at any point if I ever did sell the company they would
just remove me and they would be fine you want to get your business to the bit
you want to get your business to that point if you want to justify this phase
of valuation right if you are an operator
that is needed in your Airbnb business like you you manage all your
housekeepers you managed your maintenance staff and you do everything
else if you get removed from the business as if it were all implode when
you disappear you can’t fetch that kind of valuation so if you want to go for a
round of fundraising the reason why these numbers matter is it’s based on
what you can convince somebody to give you money based off of so let me give
you a fun example we work they have a huge backer soft bank soft baked soft
Bank convinced the world that we work was worth 45 billion dollars by buying
shares back from we work at an inflated value right South Bank I think was
trying to make us like a a sly move but now after they released their s-1
filings and they also found out that Adam Newman like the CEO was doing a
little like shady stuff like self dealing and like leasing to himself and
all these other things that just are kind of unethical and not sustainable
their valuation is dropped somewhere like 10 to 12 billion in things that
I’ve read recently so that valuation is highly speculative when they’re when
you’re in the private sector and when you’re negotiating with investors see
Softbank is willing to put billions and billions of dollars in the we work for
the chance to make money on an exit and that’s what your investors would want to
so at this point if I was going to take my business to investors and try to sell
people on giving me money for my business I would advertise my valuation
at like 30 million or more because what I would try to say is that we’ve built
it to this valuation without any outside capital we bootstrapped it the whole way
and imagine what we could do if we just had that extra firepower so that’s my
point you want to sell your business to investors in a certain light that gives
them confidence in what you’ve built if you ever want to go for a fundraising
round you need to have your ducks in a row you need to have a pitch deck you
need to have everything figured out and in this case I know where my value
stands and that’s what I would do if I went to you know if I decided to go for
fund raising but I’m not and the reason why I’m not is because I want to build
this business for the sake of the YouTube channel just as big as I can
build it without any outside capital because it’d be fun and that maintains
the integrity of this relationship because I told you I built it for four
grand without any outside and money and I’m gonna continue to do that so if
you’re new to this channel here’s your free course I’m gonna link it in a card
and I’m gonna put it at the end it’s also in the description
this free course called and what’s that Airbnb automated course free for YouTube
YouTube version and so this is over 70 videos of how I built this business over
the course of two years it’s everything that anybody would ever
want to sell you in a course they they can’t sell you a course anymore because
they can’t add value to your life beyond the free course that I’m giving you
right now and no there’s no back end so I will be selling Airbnb education
products and if you ever want one cool but I’m not gonna stuff it down your
throat you may never need one there’s thousands of people on this channel who
have built their Airbnb businesses for free right here on YouTube and this is a
roll call all of you are still watching this video
who’ve been subscribed for a couple years I’m humble brag in the comments I
know tons of you are making tons of money some of you guys are nearing a
hundred units yourselves and you guys are doing a great job and I’m so proud
of all of you so for those of you who are new welcome to Airbnb automated
watch some more videos learn about Airbnb arbitrage and a you know level up
level up with us welcome to the movement thank you and I’ll see you on the other
side

Driving For Dollars: The Origins of Deal Machine


(dramatic electronic music) – [Voiceover] This is
Wholesaling Houses Elite, the No Fluff and BS podcast; with tips and tricks to help
you become an elite wholesaler. Our guests will spill the beans on what it takes to be the best. (dramatic electronic music) – [Man] This podcast is brought
to you by Lead Gen Pros, making it incredibly easy for the average real estate
investor and business owner to get more leads. They work with a variety of companies who specialize in real estate investing and who are looking for a systemized way to increase their lead flow
and grow their business. If that sounds like you, check out the leadgenpros.com. Hey, what’s up guys, welcome to another podcast here at Wholesaling Houses Elite podcast. My name is Max Maxwell, and with me today, not only do I have one, but I have two special guests. These guys are from DealMachine. We have David Lecco and Joshua. How are you doing, man? – Doing good.
– We’re doing great. – So I know you guys hear me talk about driving for dollars and DealMachine, they go hand in hand. Now you get to meet the
guy that created it, you get to meet its VP of Sales. You get to kind of learn how
David and I first connected, all the way to where we are now. So guys, introduce yourself. Welcome to the podcast, and kind of introduce yourself. – Awesome. So, my name is David, and I created the app
for myself back in 2016. I want to introduce you guys to Josh, we went to elementary school. – Elementary school?
– That’s right. – All the way back?
– Way back. – Okay. – Way back. Fifth grade, I think we started
going to school together. David, as he was beginning
to build the DealMachine with our other friend Dave,
who’s another partner. They had some real success, and I had a sales and marketing background and joined after six months or
so after the initial launch, just to help spur on the growth that they were already seeing. – Yeah. – So David, let’s talk about like, you creating this app from scratch. This idea. What was your challenges? Why did you wanna create this? Were you an avid investor going out, closing deals and stuff? – Yeah, I was just getting into it. I first got into it because
I read Rich Dad, Poor Dad, – [Max] Just like me. – and I wanted to retire early. And so I played the CASHFLOW game, which is basically teaching you to use your income from
your day job and invest it. So that way, your passive income exceeds
your living expenses, and then you can do whatever
you want, essentially. And so, I was going to buy
my first rental property, and I couldn’t find any
good deals on the MLS. So I started driving for dollars, and that’s when it all started. – Yeah, so you got that term. Were you looking at, with talking to other investors, where did you learn that
term, driving for dollars? – So I found a real estate
investing Association, and I had no idea what that was. – [Max] Like a Ria. – Yeah, it’s a Ria. – [Max] Your local Ria?
– That’s right. And I showed up, and then I heard people
talking about it there. – Got it. So while you were driving for dollars, what did you find? And we’re talking not that long ago. – 2016.
– Yeah. So we’re talking like three
years or less ago where, you found out what
driving for dollars was, you were having problems
finding rental properties, anything to flip on the MLS. Said, “I’m gonna go drive for dollars because you learned it at your local Ria. What issues were you having that made you wanna create something
to solve the problem? – I was not following through. Because I spent all my time driving, that was honestly a lot of fun. I’d write down the addresses, and I’d take pictures of the house, and eventually, I just kept doing that but I
wasn’t sending out any mail. I wasn’t looking up the owners, I was just doing the fun part. – I think that’s crazy. You go back to where
we were three years ago when I started this business … We kinda started around the same time. I’m almost three years in. It’s like, three years ago, the best way to drive for dollars was to have several apps open and take screenshots and pictures, so that you go back home and look up each individual address on the tax assessor’s website. – [David That’s Right. – Just three years ago, to the point where we are now, obviously you guys know
what a DealMachine is, where like, taking a picture on-site and it’s automatically
sending out a postcard to the homeowner, instantly. So, walk me through that
place where you were like, “Listen, I’m frustrated with
the way this has happening,” to the point where you kind of was like, “Okay, let’s do this.”
– Yeah. So about three weeks into this, I was getting home from work and driving a couple nights a week. And I had a list of properties. I drove by, on that third
week, one of those properties, and somebody else was renovating it. And so I was like, “Oh, shoot, “did somebody buy this
before I even followed up.” And so, I felt really guilty. I had the sick feeling and I was like, “I need to go home right now
and look up all these owners “and get out the mail before
it kind of becomes out of date, “before my list becomes out of date.” – So you just decided, “Listen, I drove by a house. “I saw this house first, “but because of my inaction to
follow up and all that stuff, “I lost out on a deal.” – Yeah, awful feeling. But motivating. – So you decide you’re
going to create something? – Not yet. – Not yet?
– Not yet. Then I had to look up
the owners, all right? I didn’t have the idea
for DealMachine yet, but I was like, threw
on friends on Netflix. and it took like three episodes
to look up 40 properties. And then I was trying to
decipher my handwriting because I had kind of
written it in the car and it wasn’t totally clear, and then pairing that with
the photos on my phone, so I could put together a
mail piece with the photo that’s gonna be really personal
and get a better response. And that’s the point where
I had the moment of like, “I need a technology to do this for me.” – So, you were the best
coder in the world, and you decided the build this? – Not the best coder in the world, because the first time I coded it, it looked pretty bad. But it didn’t need to look good, it was just for me. – [Max] Correct, it was for yourself? – It needed to look up the owner, and it needed to send out a postcard. – Isn’t that crazy that
some of the best products come from your own personal struggles? – Yeah.
– In this industry, that’s kinda like when
we created our Ria rail, it came from a struggle of
being the double investor on the end of the phone. – That’s right – And it solved a big problem for you. You were trying to solve
the problem for yourself. – Yeah. I think a lot of startups will talk a lot about market research, they’ll talk about
doing surveys and stuff, I was just trying to solve my problem. – [Max] In your own case study? – Yeah. – That’s perfect. So at this point, you start building. And where we’re at, in the year is 2016 still? – That’s right. So we’ve got eight
full-time team members now. – Wow. – Yeah, people have done a lot of deals. – Yeah, I’ve done several, we drove by some today. – That’s right. – When did you bring on Joshua? When you bring on Josh? – So Josh was the third
person, including me. The first person I brought
on was our friend, Dave, and he is the main technology person. – Got it. – All right, Dave came on board in … I’m trying to think. I put the app on the App Store … January 2017. And then people started to kinda find it. And I was like, “Oh, man, we need to focus on this.” So I brought on Dave in about April. – It blew up. – Not yet. I mean, it took a while. It took like a full year and a half before Dave and I had taken any salary. And then Josh came on- – January-
– 2018, right? – Formerly January … Literally, January 1st or 2nd 2018 was the first emails I sent out like, “Hey, what’s that about DealMachine, “to people that can talk more than- – So you guys go to
elementary school together to the point where you’re
now building an app and you can reach out to a friend and say, “Hey, I need your advice.” – [Josh] Yeah. – We’ve always been
interested in business, and worked on projects together before. – Yeah, we worked on
projects together before. Dave, the other founder, and I, have done businesses in the past. Agency that we both worked
right out of college at, we had done together a group
from five to 75 people. So we were really, really
familiar with each other as friends as well as business associates from that perspective. – So, let’s talk about
when you and I met yet. We met in 2017? – [David] We did. – And that was at a Sean Terry event. What month was that? – October. – So October, I had just started a YouTube video. like just started YouTube at that point. And we met in the hall, I think in a break. No, it was at the pre-event meeting, at the pre-event bar- – [David] Happy hour.
– Happy hour, yeah. We met there, we started talking, and I was there big sip, Mississippi, and it was like, “Hey, look, “I got way better bourbon
back at the hotel room. “Let’s all just go back
there and kick it.” We kick it and you told me about the app. And I was like, “Oh my
God, that’s genius.” I think it’s crazy to go from that, where we were at the Sean Terry event, to a year later, exactly the weekend, we’re at my own event. And you had sponsored the event, and your app has done well. It changed my company, changed the way … I literally eliminated four processes and created one plus that sent mail, to where we are now. Even off the topic, that just shows the hustle, and how determination takes
you to that next level. So, you’ve built this app, it’s going. Traction is coming. You now have got eight
full-time employees. What have you seen the most? What are most of your customers saying that are using this successfully? Like, what is their best … What is the best way to use it? What’s the best tool? How are you managing? How are people managing that? – I gotta let Josh answer that because he works with
our bigger companies. – [Max] And that’s the enterprise plan, the bigger people go to
an enterprise, right? – Right.
– Yeah. And to your point, the reason they typically go to enterprise is because they do what
makes them successful, which is scale it with team members. And so eventually, especially
as you’re building a business, you don’t have the time
ago driving yourselves. Well, the first variation
of the app that we built was really for the individual driving; where we’re at now and where we see most
successful people was, “I need to get other people
sending me properties.” As many people as I can, whenever they see a distressed home, they’re trying to sell
to associate themselves with distressed homes to those people, so that they get those properties sent to them through DealMachine, and they decide what they want
to do with him from there. – That’s crazy because, I remember talking about this
DealMachine app for a while because it eliminated so
many processes for me. So, our good friends that we both know, the Polite’s, Dedryck and Crystal Polite. They took … I think they were the first ones I know of because they taught me something, how to take the app to the next level. Like when they started hiring drivers, from their mom on to more and more people driving for dollars for them and they’re making six figures on a deal, that changed my thought
process on how they do things, I was like, “I’m under-using this app.” And that’s to your point
where the enterprise plan … Let’s talk about the enterprise plan, to the bigger guys. What is the features
of the enterprise plan? – The biggest jump is gonna
be on the user limits. On our basic plan, you get one main user; so main user, being someone
who can actually hit send mail- – [Max] Myself?
– do all that- Yourself. And then three drivers. Drivers can only add properties, they can’t do anything
else inside the app. – So that’s the basic level. – That’s the basic, yeah.
– Okay. – So you get three team members, On our enterprise plan, you get five main users
like yourself on that plan, and you get an unlimited number of drivers that can be on your plan. So there’s literally no
limits on the number of people that can be on your team
sending you properties that are opportunities in your market, or even in the virtual market, if you’re trying to jump into it, throwing up Craigslist
ads in the virtual market for people to join your team
and jump into a new area. In addition to the user, the the unlimited users, you also have a automated signup workflow. So people can come to a live web page, sign up for your team as a deal finder, have the app and start
sending you properties without you lifting your finger at any point in that process. – So, I can go into a Facebook group, or Facebook Marketplace, or Facebook private … like the yard sales of North Galana, and literally put my personal
link in there and say, “Hey, I’m paying people
that $500 to $1,000 a deal.” And they don’t have to know you, they sign up. They go through the signup process. There’s a video that
tells them how to use it, and they just start sending you property? – [David] Yeah.
– 100% automated. – So that’s the scalability in the app? – That’s right. – Let’s talk about money because … Let’s talk about what’s
the basic plan cost? – The basic plan is $49 a month, and 99 cents for a postcard
or an enhanced search. – Got it. So 50 bucks a month, $49, and every time you send
a postcard costs you $1. And then the enterprise is the same, but just probably more because
more people you can add. – Exactly. So it’s 1.99 a month today, it actually is going to 2.99
in the next couple of months, we don’t have a hard time on that. – [Max] Better get on it now. – Get on it now. We’re grandfathering everyone that signs up before then and a big push to the 2.99. It is going to be a big feature update to the deal finder onboarding process, making it even more
educational for deal finders, in addition to automated on your side. So it’s gonna get to 2.99. It’s currently 1.99, and it’s 80 cents per postcard
and 80 cents per skip trace. So you save money on
the back end, as well, just as your volume increases. It eventually pays for itself. – Love it. Let’s talk about like most of the people. They’re beginning, they’re probably gonna be
at the $49 level, right? A lot of people are not doing
what the Polite’s are doing, what I’m doing, with hiring drivers are
just using a lot of people. The $49 plan, what are some of your
best case uses on people your success you’re
seeing with your users? How should somebody that
is driving for dollars now, the old fashioned way
like you and I used to do, and switch over to the app, how should they use it the best? And what will they most
use to get out of it? – I got a good answer. All right, your video on the Hot zip codes, is a perfect place to start and figure out where to go driving. Because a lot of times, it’s about just being in the right area. – So I don’t know if
people know that video, but somebody put it right here. Be at the description-
– Make it happen. – It’ll be on the description somewhere. But that video, I showed people how to
find the hottest zip codes in their market for free. Take that and start
driving in those zip codes to seed you can find any properties. But what type of numbers
does somebody have to put up to make this lucrative? – Totally. – You’ve gotta do at least 200 properties that look distressed in some way, meaning that the property
is physically distressed and run down. – So, if I’m getting this right, if I pay pay … If I sign up for DealMachine
at 49 bucks a month, and you’re telling me your average user usually adds 200 properties
before they get a deal. – You’re saying around 250
to 500 bucks worth of effort, I can probably more
likely be close to a deal than most people are? – I wanna be conservative, so I’ll say like 600, 700 bucks because you wanna mail a few times. – Because more it’s for mailers. – Yeah, because each time we mail, right? You’re finding out that 200 mail pieces in circulation is what’s what’s consistent. – Yeah, as long as
you’re repeating that … We always say at least
that’s what it takes because- – Obviously, this is no guarantees we wanna say, “You do exactly this, “you’re gonna get a deal.” – There’s so many stories
of people getting it on their 50th property, and they’re just … Crazy success stories. So we kind of bumped those numbers up to be a little bit more realistic. We had an example, here in
North Carolina actually. One of our basic users
that I met, Elbert Diaz, in Raleigh, he came to me one day and he said, “I saw this (mumbles) in our chat”. And he was like, “I’ve gotten
seven deals off DealMachine.” I’m like, “Dude, that’s amazing. “That’s so awesome.” Like, “I want to meet up with you. “Let’s grab a coffee.” Because we don’t always get
to see people in person, because we’re so virtual. So we got a coffee and like, “Hey, I know you said you got seven deals. “How many is that at?” So he pulls the app out? He doesn’t even know this. He had 93 properties to DealMachine, and had seven deals from those 93. – [Max] What a ratio. I’d kill for ratio like that. – That’s good. Not sustainable, but still, it’s such a niche list, and when those properties are distressed, it’s a great indicator-
– [Max] Let’s talk about- – that they might need to sell it soon. – Let’s talk about the niche list. Why is driving for dollars different than any other vacant list I can pull, any other absentee owners? Why is that? I know why, because I’ve talked about you
need to drive for dollars, tell me some of the benefits of why driving for dollars is the best and why that list is not anywhere else. – You’re gonna spend way less on mail because it’s a smaller list. These houses are in disrepair. – [Max] Because you’ve
physically seen them. – You’ve laid eyes on it, and compare that to
the traditional method, where a beginner wholesaler will buy an absentee-owner property list, and they’ll send out thousands of pieces. Everybody’s doing that. And you don’t really know what
properties are on that list, you just know they’re absentee, they might have some equity. But when the property is distressed, that’s an indicator about
their life situation. So that’s what I would
have to say about that. – I think doubling down on
that idea that everyone, all those other lists you mentioned, Vacant, Absentee, anything else, everyone’s buying this. It’s easy for them to do it. They can do it from their couch at home and just make it happen. And what they can’t do
from their couch at home, which most people fall off when it becomes more of an effort thing, is go out and drive in sales to verify that these properties are distressed. And the unique thing about
a distressed property, even if it fits some
of the other criteria, what you double verify in person when you see a distressed property, is that these people
can’t sell this property in this is current of- – [Max] Right, they’re not on the market. – Their only option is
to sink a bunch of money into it themselves or
sell it at a discount. – Correct. – And those are the only two options. – Those are the
conversations you wanna have. So not only do we verify that
they have to sell a house in a non traditional way, when they do have to sell, even if that’s today or in the future, we also know they’re not
currently taking care of it, and then we also know unless you are marketing to those people. So by the time that
your marketing overlaps with their personal timeline, you also hit that moment
where you’re getting a deal that no one else is marketing to, and you’re getting at a margin
that they know factually, they can’t sell traditionally. So you’re getting a better
margin because of that, as well. – That’s interesting. So what are some of the
features on the app? Once you driving, you drop a pin on a house that
you’re sitting in front of, what can they do once they do that. – So from there, you can see the owner. You can see if it’s
absentee-owned or owner-occupied, or corporate owners. And then you can press a
button to send a postcard. – [Max] You can customize the postcard? – Yeah, and it features
the picture of the house, you just took. – So the picture of the house goes on the front of the postcard- – [Josh] In the back. – in the back, and is sent out to the homeowner? – That’s right. – And it’s full color on both sides. – And you get a push
notification when it arrives. – I get it every day, I love it. I love it. – So like, you’re ready
to answer the phone in case they give you a call. That’s amazing. I mean, that’s game changing software. And what I like about the software, it allows somebody at
a very beginner level to get in the game, all based on their own effort with a little bit of money behind them. And it also allows somebody like me, who’s an enterprise customer, to scale my driving for dollars effort without having to create my own funnel, without having to have my
own proprietary software to sign people up. and literally just track who’s putting … That’s the best feature I like, is to track where people have
drove in the entire city, and the track who’s
actually put the deal up. Because when it comes to time
to pay out the commissions, which I love paying, I gladly pay those
commissions or those bonuses. Is because I can tell
who uploaded that photo. That’s amazing, that’s amazing. So what are some of your
favorite new features that you’ve rolled out recently? – Well, I like to pay by the hour because I like the consistency of it. So, I usually would get
these texts and be like, “Hey, I drove seven hours today.” And they’re always even
and hour and a half. So I’m like, “Are you really
driving a full seven hours, “and it’s just like six
hours and 20 minutes?” – [Max] Yeah, that matters.
– Right. So now, the app with the rat tracking, shows me where she’s been
and how long she’s driven. So that way, I can just verify that. And also, I want to keep
her in the right areas. So she like ventured off somewhere I don’t really wanna invest in, then I can just let her
know that very easily. – Yeah, pull back. – And there’s also accountability
that comes with that, because part of that driver report also says how many properties they added. So, if you have a quota, you need to add 18 properties
per hour to qualify, in addition to the time spent. So, you can immediately verify that that driver had an average of 18 per hour or whatever that number is for you, and how long they drove over that time. So it’s all all right there. – And if you have a question, you can actually chat
with us right in the app. – Yeah, that’s one feature I love, is your customer service is fast. – Will get back? Yeah, really under five
minutes during business hours. – Yeah. Don’t be 1:00 am frustrated and reach out. I have people do that. And they’re like, “Why did you answer?” “It’s 1:00 am? We’re just not gonna do that right now. I love DealMachine. I personally use it. I know a lot of people have
had a lot of success from it. Where can people find you at? You and DealMachine? – Well, I think you’ve got it
hosted on your site, right? – Yeah. – Is it therealmaxwell.com/dealmachine? – Yeah. So I’ll leave a link
below in the description and I think you gave me something where it’s like 30 days free or two weeks free or something like that? What was the feature, I don’t remember? – It’s 30 days and it’s extra … It’s like $40 of credits that
they can use to send mail. – Double bonus. – What, I didn’t even know that. – No one else gets that. – I didn’t even know that. So, your first month’s free and you get 40 postcards or something, or like skip traces? – Yeah, we want you to be successful. We want to show you the value. – I honestly did not know that. – How’s that coming out your shirt? – I didn’t know that. So, go sign up. I’m gonna leave the link below and you listen, basically get your first month free, and your first 40 postcards. Use them wisely, use them fast. I did not know that. But where can people
find you on Instagram? You’re on Instagram, people? – Yeah. So my handle is @dlocal, and our company’s one is @dealmachineapp. – Cool. And you’re at a lot of the events we do. Live ’19 was amazing, you guys were there. I just followed you and
you got three photos. So hopefully by the time
you guys listen this, he has at least a fourth photo up there. You can find me
@joshuajohnsont on Instagram. I will be there and I will
have more than three photos by the time you’re- – Anxiously awaiting the fourth photo. It’s probably not gonna
be from watermarks. – I’ll share my whole flip. The flip that I did last
year on DealMachine, I’ll share a bunch of pictures from it- – Perfect. – Along with my awesome dogs. – Content. And then they can also probably
find you in the chat bar. – [David] Yeah.
– Every now and then. – I’m there. I jump in, especially for all
of our enterprise customers, I try to do. I’m not normally Manning those directly. We’ve got other staff that
manages those directly, but I probably still spend an
hour or two a day on there, talking to people. – I love that. Can I put you guys on the spot? – Yeah, we kinda are already. – Yeah, right. I want to know if you are
working on any new updates that may be coming down the road, something that you can just maybe tell us a little peek about? – Oh yeah. – We got a few-
– We got some we’re always working on, but nobody knows what’s
coming next until now. – I feel like I need
to buy a movie ticket. What’s going on? – All right. So, we thought about the
main success people have is because of the personalization of the postcards and the list. And so we wanted to
take it a step further, and we’re gonna release
some ballpoint pen letters, so that your your letters
can actually be written with a ballpoint pen
that you would send out through DealMachine. – So real hand-written-type letters? – Oh, yeah.
– Right. – And it’s gonna be cheaper than anywhere you can find these. I think the cheapest we’ve
ever seen is like $5, – [Max] Yeah, that’s true. – For a totally handwritten letter. And so, these are gonna be two or below, $2 or below. – Perfect. – So we’re super excited
about that update. We’re just giving you
another unique piece of mail to put into your campaign. – So these are gonna be like postcards, like if I’m traveling
in Mexico and I write- – [David] Enveloped, like an invitation or so.
– Oh, full envelope? Oh wow. – You put a real stamp on it. Big color fumbled. – I know through reading a
lot really listening a lot is that that is actually
isn’t more open mail. If somebody sees a
hand-written piece of mail that is not computer ink, and real ballpoint pen, that open rate goes way up. Because that is a
personalized time took out. We all get mail in our mailbox, we can tell the difference
between printed mail and real handwriting. That’s a big difference now. I’m gonna try it. So, what do you think the best
use case on that would be? What do you think they
should use that more on? Because it’s a little bit more pricier, what should they use it for? – This can be exactly
double the cost, whatever. If you’re enterprise or you’re basic, double the cost of the postcard. My main thing, so part of what DealMachine also offers is a campaign feature. By default, you can repeat postcards in any number of times-
– I do eight, eight times a day. – however many days in between you want. And so, our campaign feature lets you actually reduce
sequential messaging. So you don’t have to
send the same postcard every single time or the same mail type. And so what I’m telling people
from a cost perspective, or from an impact perspective, have that first mailer be that letter, that really impactful, unique piece of mail
that’s gonna stand out, and then from a cost
balancing perspective, – Switch the switch to this. – Switch to the postcard, save money, so over the course of a year … Let’s say you send a letter
the first and the last time, and again, you can customize
the copy on both of those however you want, and then you send 10 postcards in between. It’s gonna cost you- – Set up your mail sequence, but you get that personal
touch in the beginning and towards the end. – Exactly, yep. And so that’s one of the things
I’m really recommend people. Is leverage it to where you’re not … Especially, balance your
budget appropriately. Leverage it to where you get
the high impact touchpoint at the beginning an
end where that can make a big difference in your
campaign performance. And then sort of the
savings of the consistency of the postcards in between. – So there you have it. That’s the bomb. They’re putting out handwritten postcards, I’m sorry, handwritten pieces of mail, real envelopes, in the very near future. And I’ll be the first to test that. I wanna test that. And when it goes out, I’m going to send one to myself to see if it looks really dope. Then I’ll report back to let
you know if it’s real or not. That’s cool, man. I really appreciate both of you guys coming to North Carolina, shooting some content with me, hanging out in the podcast room and … – Thanks for having us.
– Appreciate it. – This is awesome. – This is awesome.
– We have some fun time. So, make sure you guys go out, get DealMachine in the links below. You get 30 days and 40 postcards for free. I mean, if you don’t
sign up, you’re crazy. That’s a month your first
40 postcards out for free. You can’t beat that. So I appreciate Dave, I appreciate Josh, both you guys, and I’ll see you guys next. Peace. (dramatic electronic music) – [Voiceover] Thank you for listening to the Wholesaling Houses
Elite podcast with Max Maxwell. Make sure to tune in next week to see what Elite Wholesalers
will have in the hot seat. (dramatic electronic music)

No Money, No Deals, No Time? Overcoming Real Estate’s “Big Three” | BP Podcast 272


this is the BiggerPockets Podcast show
272. You’re listening to BiggerPockets radio simplifying real estate for
investors large and small if you’re here looking to learn about real estate
investing without all the hype you’re in the right place stay tuned and be sure
to join the millions of others who have benefited from BiggerPockets.com your
home for real estate investing online. What’s going on everyone this is David
Green today’s host of the BiggerPockets podcast and I’m here with my co-host mr.
Brandon Turner I don’t know what makes you think you me the host today I have
bigger stronger hands in you and I could just take the microphone away that is
completely – all right guys so this is Brandon and David here are we’re
actually doing a special show today just for all of you that is a little
different than normal we’re not doing an interview we’ve actually done maybe half
a dozen of these since the beginning of the podcast because sometimes we just
hear certain issues that are coming up over and over and over and over with
investors and we just want to we would want to touch on them today in fact
today we’re covering the big three I got no deals I got no money and I got no
time and so we wanted to spend a good chunk of time I don’t know an hour ish
whatever going through that before we do we got a few housecleaning things to do
so let’s get to that first number one today is we gotta get today’s all right
today’s quick tip is very simple if you have not yet introduce yourself in the
BiggerPockets forums we actually have a forum for that for people to introduce
themselves it’s such a good idea to do right is get out there and meet people
and say hey my name is John and unless your name’s not John and then say hey my
name is Bill or Sally and I am looking to do whatever in wherever right by
doing those things you people will jump in they’ll get keyword alerts and
they’ll go in there and meet you talk to you you never know what kind of
relations you do so head over there be a pocket scomp slash new member and I know
we set this one up times but it’s so important so do that today now David you
were to do this are you ready yeah I am born ready Brandon you tell me where you
want to go first all right so let’s just dive right into this so we’re gonna
cover like we said earlier with the big three today which are no no money no
deals in no time and I think we should hit in that
order because that’s generally the order in which people struggle the most right
the biggest problem people have today I hear it over and over and over and over
especially with new investors is they don’t feel like they have enough money
to get involved and so what we’re gonna do actually may go through kind of a I
think we’ll go through a philosophy of how to think about not having money and
then we’ll actually go through some tactics actual things you can do
starting today to invest in real estate even if you don’t have a lot of cash
that’s not good I get I didn’t give you a choice everybody so while we start
with that philosophy so the thing I like to stress about no money I would say I
wrote a book on creative finance and the thing I talked about in there is that
creative finance is often like a toolbox there is no one way to do it the more
tools you have though the more projects you can take on so all you have is a
hammer you can hit somebody in the head with it or you can pound in a nail but
you can’t build a house but the more tools you do have the more you can take
on so I actually recommend getting a good broad overview have a lot of
different strategies cuz then when a deal comes into your view into your
targets you can figure out where best to fit it how can you best take that deal
down so I definitely recommend that yeah I think that that’s that’s a amazing
point that Brandon made comparing the more you know about real estate the more
tools you have in your toolbox or on your tool belt the more opportunities
that you’re gonna have to take down a deal so we’re gonna talk about some of
the common ways that people that are they’re dealing with with no money or no
deals or no time can kind of overcome those hurdles when it comes to the
solution that you’re gonna use though you can only use what you already know
if you don’t understand how seller financing works you can’t propose it to
the seller in a way that makes sense to them to the where they’re seeing a win
if you don’t know how to explain to somebody that has the money that you
don’t have hey this is a great deal you’re gonna get an amazing return in
it’s a really safe bet you’re not gonna be able to use private money okay so the
more that you learn about how real estate works the more options you’ll
have the more options you have the more powerful you’re gonna be and that’s what
this is all about we want to be able to take down every single deal that comes
our way you can only do that when you understand a lot about real estate and
the options that you have available to you nice alright so the second thing on
a kind of philosophical side of creative finance is this the better deal you have
the easier the financing is let me prove that to you if I were to sell you my
house my house is worth let’s say three quarters of a million dollars right
three hundred and some thousand dollars if I were to sell you my house right now
for 10 grand and you had two weeks to figure out how to come
ten grand to buy my house but you had nothing no money at all what would you
do my guess is even in that one second of
silence right you’re already starting your brains working like well maybe I’d
borrow it from a parent or maybe I’d partner with you on it or maybe a
partner or somebody else honor me like that exactly the point right now you’re
not gonna find a ten $300,000 house for ten thousand bucks right but the point
is the better deal you get the easier the financing becomes so like while we
are gonna talk a lot about here about no money strategies and low money
strategies remember that the deal matters moron so that’s we’re gonna go
after that so why don’t we just run through kind of a list of different
things that both David and I have done in our investing to be able to acquire
real estate deals and you know actually before we do that maybe people don’t
know who you are David I know you’ve been on the show a few times but can you
give like a 30-second explanation of who you are and your investing strategies
you got it my name is David Green I’ve been a police stop here officer that’s
enough so we’re gonna go it’s about nine years I’ve been a police officer I
started buying rental property with my own money and then I was buying about
two maybe three deals a year and kind of slowly building up my passive income
well I got to the point where I learned how to BER and I started buying two to
three deals a month and I really saw BER is an acronym that stands for buy rehab
rent refinance repeat it ends the order in which you are purchasing and
financing your properties it’s the most efficient way to do it I’m sure we’ll
talk about that more today but my my career really took off as far as my
success with real estate and what I found is that when I learned more about
real estate I started making better more efficient
decisions and my wealth started to grow a supercharged rate now I’m passionate
about sharing that with other people so now I work as a real estate agent in
order to California I share the stuff that I’ve learned about real estate
investing with my clients and I’m just kind of like totally jumped all-in on
this real estate thing I’m a big fan of bigger pockets because I know the bigger
pockets is what helped make me to be I got the successful level that I’m kind
of operating at now I wouldn’t have done it without it and I want all you guys to
be able to do the very same thing I did because if a dumb blue-collar cop can do
this all of you guys can do it too I don’t know dumb is the right word but I
will go with it we’re gonna go through the list now of a ways that we’ve done
our deals using a little – no money down in fact I mean I didn’t have any money
the first like seven years of my best you think I built like I achieve
financial freedom – real estate like was able to quit my job without ever putting
money into deals I want to kind of walk you guys through
some of those strategies and the first thing that I did so I’ll give you guys a
quick story of how I did it so I had a triplex that came up on the market in my
area amazing deal for those triplex I really wanted it and there was one two
small problems right the first one is I had no money I mean like a thousand
bucks to my name maybe and the second problem was I had no job cuz I just quit
it to go flip houses which I hadn’t really flipped into yet so like I had no
ability to get a mortgage none right so what most people do is they go well
guess I can’t do it and they walk away but the deal was so good and that’s why
I was telling us earlier the good deals you figured out so I actually went name
was talking with some friends of mine who knew that they loved real estate
like they liked the idea of buying real estate but listen they were they were
you know your quintessential bankers best friend they had full-time jobs both
of them worked for the government made really good income made had amazing
credit scores of low income low debt they had their house paid out and there
are perfect bowers right but they didn’t have the hustle or the time needed to go
in and put all the work into a deal and so instead what we did it was just
partnered together in talking with them I said hey would you guys ever be
interested or I think I even approached it this way do you know anybody who
would be interested in this that’s how I always approached asking people for for
like lending I said you know anybody because then it makes it not so awkward
right for somebody you know am I asking them for money I’m asking them if they
know anybody that would want to be in on this opportunity and that’s another
mindset shift right there I’m not asking for money I’m asking for people to join
my opportunity and they said sure that we actually think that would be a very
fascinating thing so I said okay great so what they did is they actually
because they had their house paid off they used a line of credit on their
house to cover the down payment so they didn’t even put any money in the deal
they got a line of credit in their house to cover the small down payment and then
we went to a bank and we got the mortgage in their name not all banks
will do this but this was a small local community bank the mortgage is in their
name but both of us are untitled now even if they we could have probably both
put us on title as long as there were strong enough to cover which they were
but at the time we just all thought it would be better that way anyway
regardless at the end of the day I put no money mine into the deal
technically they put no money of theirs into the deal because it was a line of
credit we bought the deal and every year this
is what I love about the story is every single year we go once a year to this
Mexican restaurant in my town which is the
I don’t know it’s like the best restaurant in my town or second best and
shout out the savory fairs being the best but we go to this Mexican
restaurant we sit down we eat an amazing dinner and then I showed them all the
books I show them here’s all the income that came in here’s the expenses like
that’s really all that they care about right and then we figure out how much
profit we made over the last 12 months we each write at WIC we write ourselves
a check for an entire year thil profit and every year I walk out of that meal
with like $5,000 extra it’s fantastic I just love that it’s like free money
every year I just get like 5 grand and they they actually use that money
oftentimes for a cruise they want to cruise every year and they just use that
money so again it’s like taking an asset with no money figuring out a couple
creatives off from options in there and then getting a better life because of it
so again that’s just that’s kind of a partnership how I did that there’s
actually a few different strategies incorporated in there but primarily like
I use the partnership because I didn’t know what to do so I don’t if you use
partnerships you want to go on to the next one or two and pick something else
yeah I think the point that I want to make about partnerships is that like
when you’re building a house not everyone does everything there’s a roof
guy there’s a contractor guy there’s an electrical guy there’s a plumbing guy
there’s a floor guy they all kind of specialize in what they do and a lot of
new new real estate investors think that they got to learn how to build an entire
house from the ground up they have to know all the framing and all the
painting and everything and you really don’t if you’re really good at doing
your thing there are people out there that know how to do their thing when you
put everyone together that’s how you build a house okay so if you know you’re
really good at analyzing deals get really good at analyzing deals and find
people that are not really good at analyzing deals but they’re good at
raising money or they’re maybe like that gadfly that can just talk to anybody and
they can find people that might want to raise money before you for the deal or
contribute to the deal or maybe you find a contractor who’s really really good at
fixing stuff and he’ll go in there and do it for free to make the deal work
okay there’s always somebody who has a skill
that you can be partnering with to fill in a gap that you don’t have that’s the
best point of partnerships now the thing that I would say for people who don’t
want a partner with somebody is consider house hacking now most investors know I
need to put 20 to 25 percent down if I’m buying an investment property because
that’s what most banks demand however you can buy a two three or four unit
property that will still qualify as a primary residence that you can use a
primary residence loan to get and sometimes those can be as little as
three and a half three point five percent down or even less I know of in
my areas some government grants where we’re actually
getting the government to give you 5% towards your down payment so you don’t
have to pay anything okay if you bought a four-plex that way rented out three of
the units and lived in one yourself you could have yourself your very first
investment property that would most likely cash flow or at least be breaking
even without having to put a lot of your money down then you create equity
through that property and boom you’ve got money for the next deal so that’s
actually how I started my very first like rental property I know I had one
live in flip but my first rental property was a duplex I lived in one
half rent to the other half out it wasn’t an FHA loan but it was basically
the same thing it was like a whatever back bit was 2008 so they had a bunch of
weird loans but anyway I bought this thing lived in one unit and then my
mortgage payment was like 620 a month or 630 somewhere like that and the tenant
came over and paid me rent a 650 once I got to rent it out and I was like this
is amazing like that’s how I discovered the power of rental properties so that
means I didn’t have to spend all of my income going towards my mortgage payment
which most people do they spend the biggest chunk of their money easy their
taxes are going towards that so that was a gave me the ability to actually stop
working that’s when I quit my job and one started flipping houses and that
what’s led to the triplex I told you guys about earlier so how ii very
powerful I know other guys do it as well I got a Scot trench who wrote the book
separate step for life Craig curl up who has been on the
BiggerPockets podcast he’s a bigger pockets financial analyst I think he
does it and others like I mean it’s such in fact I was going through I’m putting
together a future book for bigger pockets this is the first hint at it but
it’s coming out here this fall that Josh Dorkin and I are writing and in the book
is like a bunch of stories of our podcast guests and some really legit
good real estate investors and as I’m putting these stories together and
compiling them and writing these stories I realize a pattern it was over and over
and over and over of how many successful investors started with house hacking you
don’t need to but it’s such a good way to build that foundation so yeah great
house hacking awesome what else we got all right next up is private money now
private money is a fancy way of saying somebody else’s cash okay
we’re living in an era right now where interest rates are ridiculously low now
that’s good for spurring the economy it’s terrible for anyone who’s trying to
make any kind of interest off of their money so if you find somebody and
they’re they’re out there trust me that has a lot of cash sitting in the bank
it’s not doing anything you can offer them the opportunity look I found this
great deal we’ll use your money will use my deal in
my time in my expertise well partner together on the deal
however you decide that you want to offer it to them and that’s how you’re
gonna put the deal together now get out of the mindset of thinking that they’re
doing you a favor by giving you their money you’re doing them a favor by
getting them a way better return than they would have got on the bank and like
Brandon said earlier the better your deal is the more likely they’re gonna be
to jump in and want to do this with you okay so if you find a deal finding the
money is gonna be much much easier that’s just a matter of we’re gonna talk
later on in this podcast about the Lapps funnel and it’s a really cool way that
Brandon’s come up to make sure you’re successful pretty much anything you do
but if you get out there and you tell enough people I’m looking for someone
who wants to earn a really good return on their money somebody knows somebody
that has that money that you can use for your deal that’s that’s so good yeah and
again just to harp on that one more point one more time I mentioned it twice
already like I mentioned David’s is like you are not begging for money you have
to get out of that mindset if you find good deals you are offering something
amazing what’s funny is when I tell that story I told a minute ago about the
partnership of the triplex I tell the story and I always get one of to react
one of three reactions the first reaction people say wow that was great
good job Brandon right but a lot of times I get one of two completely
opposite reactions some people say well why would that partner ever do that they
can just go do it themselves that you’re just ripping them off Brennan the other
people say why would you give your partner’s half a deal for not bringing
anything other than money to the deal that’s crazy Brandon they’re ripping you
off and isn’t that funny how like they’re completely two different
opposing thoughts yet like it’s just because like where do you value like
what do you value the deal and them and then hustle and the knowledge and all
that like what does that fit in and again I value that very highly today I
probably wouldn’t give somebody half just you for giving me a downpayment in
fact I wouldn’t write like I’d figure out another way cuz that’s a very
expensive money in fact that probably ain’t for like hard money over that cuz
I’m not giving fifty percent away so speaking of hard money you want to go
there yeah so let’s say that you find this great deal and you offer to someone
and you say hey and they you can come in on this you’ll finance it and I’ll do
all the work and they say I want half and you say there’s no way I’m giving
you half right you can go find a hard money lender which is basically just a
lender who is lending money against a hard asset which in this case would be
real estate and where where I’m located you’re typically finding somewhere
between nine and twelve sent to use your money and somewhere
between two and four points now that is expensive but it is usually much less
expensive than 50% of the deal if that’s what somebody wants what’s the point a
point would be 1% of the loan value so if you’re looking to borrow a hundred
thousand dollars from a hard money lender a point would be 1,000 bucks so
if they want two and a half points that would be $2,500 right now that’s because
they’re making a riskier loan to you because they’re loaning against a
property that’s usually in bad condition and their their their money isn’t
secured by anything other than that asset so it’s a little more expensive
but it’s often way less expensive than half of the deal okay so so hard money
is another way that you can find people who they don’t make money unless they
loan money they need you you’re a lead to them and they’re trying to find
people like you to let you borrow money to buy deal and if the deal is good
enough it will absolutely pay for the points and the higher interest rate that
you’re having to use to get the hard money hard money is definitely better
than no money and if your deal is good enough it’ll work now another strategy
we can talk about is the bursh Reggie burr is an acronym that stands for buy
rehab rent refinance repeat okay now all of those things when you’re buying a
rental property are being done in some point typically when you’re buying the
property you’re financing it as you buy and they’re kind of in the same step
well with burr you’re not gonna finance it until after
you fixed it up right so a typical deal for me where I’m gonna burst something
would look like I buy a property that would normally be worth 120 thousand but
I get it for 60 thousand because it’s in such bad shape and this person really
needs to sell it okay then I spend about thirty thousand dollars to fix it up
because it needs a lot of work but maybe I get forty five to fifty thousand
dollars worth of value out of that rehab because my contractor is better than
everybody else’s contractor because I’ve spent a lot of time finding the best
ones okay so I’ve spent ninety thousand dollars on this house that’s gonna be
worth 120 thousand we call that the ARV the after repair value it’s now worth
120 thousand the bank’s gonna come in they’re gonna say hey David I see that
you just bought this house for a hundred twenty thousand and you want a loan I’m
gonna let you borrow somewhere between 70 and 80 percent usually of whatever
that after a pair of value is which would be what the appraiser comes back
and says it’s worth so when he comes back and he says it’s worth 120 thousand
dollars they’re gonna let me borrow anywhere between 70 and 85 thousand
dollars on that now I’m not sure about the math I had to just do it in my head
maybe used to be closer to 90 thousand dollars
seventy percent at eighty four thousand so whatever eighty percent of 120 is is
ninety-six there you go so somewhere between eighty four to ninety six
thousand right now in this hypothetical example I only spent ninety thousand
dollars on this house okay so the bank’s gonna come back if they let me borrow on
the low-end eighty four I’m leaving six grand in the deal and if they let me
borrow on the high-end I’m getting ninety six thousand that’s six thousand
more than what I put in okay so I walk away with basically no money left in
that deal on average because I added so much value through buying the property
correctly and doing a very good rehab that’s the way that bir rewards you for
doing a really good job with your investing and you end up getting all
your money back and then you can go invest in the next thing and you don’t
have to worry about not having money now you need money up front to be able to do
this but I could come from hard money it can come from private money it can come
from partnerships it can come from creative financing there’s all kinds of
things that you can do to actually get that money the point is you’re getting
it back so you can pay those people back without having a really high interest
rate and now boom you’ve got a property that you financed at a low interest rate
and it’s very profitable I personally think way more investors should be doing
this learning how to burr it’s gonna absolutely supercharge the amount of
success that you have in real estate and understanding that I’m not leaving any
of my money in this deal is a really powerful incentive do a really good job
there you go yeah I love the burst strategy I do it all the time in fact
that I talk a lot about on the show the four Plex that I bought for my daughter
Rosie the week she was born if you’ve never heard that let me tell you a quick
story so the week rosie was born I bought a four-plex I used direct mail
marketing to get it I bought the four Plex for super cheap the guy want a
ninety thousand but it was a disaster I mean just a complete pit needed a
complete gut job every unit pretty much need to be remodeled and it’s actually
four separate houses but I really liked it a lot so he on a ninety I said
there’s no possible way I can do that I could pay like 40 and he basically hung
up the phone a month later came back and said okay
can you go a little more forty five I said okay I can do forty five and so I
bought it I ended up putting a hundred and twenty thousand dollars of work into
this so it needed a massive for him and I wouldn’t over budget on this thing but
yeah at the end of the day now we have a hundred and sixty thousand dollar total
into it it’s worth somewhere between 220 and 240 right now so I got all the
sequitur in it so then I went to a bank and I refinanced it now my plan was to
refinance eighty percent of it or the bank when I went through it they said
that would be just fine even the 70 to 80 percent that’s fine then
the day they they stop mean they only let me do like a hundred and ten I think
my loans for one hundred and ten so I got a little bit of money left in the
deal if I want to go back now and refinance it again which I might at some
point I could by this point I didn’t but either way I didn’t get all my money out
but I still got this thing done now it’s on a thirty year well I shouldn’t say
it’s on a thirty year mortgage but I set up payments so it’s paid off in 17 years
so why did I do that why did I set up this pay off in 17 years
because in 17 years Rosie Lew is gonna be going off to college that should be
worth by that point 17 years from now to 20 to 40 should be worth hopefully three
three fifty somewhere in there you know conservatively so you know she’ll have a
third of a million dollars to use for college or to use for her own real
estate down payments or to use for whatever but basically I was able to
help my daughter not be strapped by hundreds of thousands of dollars of
student loan debt because of a real estate deal that I made today and I mean
anybody can actually know we’re not really talking about no money here but I
just love that strategy because any parent if you got a kid under the age of
like five right now or six or seven all you need to do is buy one property that
breaks even like I’m not saying breaking but like if all you did was bought a
property that broke even on a 15 year mortgage you could pay that thing off
over the next 15 years and that your kids college and you get to use that as
a case study to show your kids how wealth and financial freedom works in
the real world so anyway this is a side note there I think that’s just kind of
one of my coolest things strategies for real estate Brendon let me ask you how
much equity is in that house right now so counting what I put into it or the
actual loan right now so if I have one sixty and it’s worth 220 that you know
let’s say conservatively it’s worth 220 and I have 160 in this what’s that sixty
grand of equity but I only owe one hundred and ten and it’s worth – what
did I say – twenty so what’s that hundred ten thousand
dollars in equity so you’ve got a hundred and ten thousand dollars of
equity in this property if you wanted to buy another property and this wasn’t
Rosie’s property it was just a regular person would you have any problem with
one hundred and ten thousand dollars in equity in that house that you could tap
into through an equity line of credit or a business line of credit or anything
else yeah I definitely could in fact right now I could even go to a bank or
even a private lender and I could say hey look this is worth 220 mm you know
minimum it’s kind of a weird property to estimate which is why it’s hard to know
exactly what it’s worth but you know say it’s worth 220 Island on 110 hey can I
borrow a sixty thousand dollar line of credit on it and most banks will say in
fact I don’t know why I never actually
thought of doing that I should actually just go do that I can get a line of
credit this is awesome this is like live help him from from David Green here if I
go to a local community bank and say hey can I get a second mortgage on this
rental property there are some that will do that not a lot but some and then I
have more cash to go and do another deal and so I could tap into equity if I want
to but I also just really like the idea paying that off before college so the
point here is you really only need to get one really good deal and that should
provide you money for your next deal which would provide you money for your
next deal and as long as you’re buying right every time and adding value to
your properties you’ll only struggle with not having money for your very
first deal okay so do everything you can to get that first deal and do a really
good job with it and then boom that problem is gonna be solved for you okay
in order to get that first deal another way that you can look into doing this is
with seller financing okay and now really quickly seller financing is
basically just I’m gonna buy your house but I’m not gonna give you the cash for
it that I got from a bank you’re gonna hold the no and I’m gonna make a payment
to you instead of a payment to the bank all the time now you may be thinking
people don’t care about that but they really do there’s people out there that
would totally carry the note for you because they’re probably gonna get a
better deal themselves as far as how much that the purchase price of the
house is so one of the options that I’ll do is I’ll say hey I want to buy your
house they’ll say I want a hundred grand and I’ll say well I can give you sixty
five and they’ll say no way I need a hundred and I’ll say okay I’ll tell you
what I can give you sixty five F I pay cash I can give you 85 if you fund half
of the deal and I can give you your hundred if you fund the entire thing is
0% interest okay I give them options so that they don’t feel like they’re being
taken advantage of they can choose and if they really want that hundred grand
and they’re willing to finance the entire note as long as I calculate it
and make sure that a cash flows that’s a win-win for me because I’m putting no
money into this deal the rents gonna be going up every single year I’m making
money right out the gate he’s happy cuz he got to feel like he got more for his
house and he still has some passive income coming in we all win so don’t
neglect to tell people this is something that I can do for you if you’re not
having any money right there’s tons of creative things like that that you
should be spending your time learning if you’re really worried about not having
money that people have used before to find success in the past when they
didn’t have money you’re not the first person with this problem you’re not even
the millionth person with this problem there are tons of people who have been
here before books have been written articles have been written podcasts have
been recorded tons of work has been done for how people got started just keep in
mind when you’re done listening to this find that first deal and that should
supply you money for your second yeah I love that and in fact the mobile
home pipe that I just closed down here a couple months ago I bought my first
mobile home park the seller actually carried the contract on that most of it
I think we put down I think at the end of the day we ended up putting down
around 10% it was about to be 20 but we know it we have some good negotiation in
there I think what we had 5% interest for a 25 year note on it with no balloon
payment like that was from a seller and why people say well why would he hold
why would this guy take a 5% interest on it when he was just getting all the cash
flow before it’s cuz now this guy who was like I think he was in his 70s maybe
even late sixties early seventies anyway he’s now like able to just get a check
every single month we’re gonna mail him a check and he sold the people he knew
he’s actually a bigger pockets member so he knew me and the partners Ryan and
Mindy and he could trust that we were just gonna give him steady income for
the rest of his life he’ll never again have to worry about that park wants to
worry about phone calls want to worry about tax stuff like we are now the
owners of that park he just makes money every month so seller financed in a very
cool way to finance your deal my last twenty-four unit apartment complex also
with seller financing so you never know if you don’t ask right it doesn’t hurt
to ask somebody hey can you carry the contractor on it alright so then the
last point I hear about money that I just want to cover real quickly is that
this idea of you doesn’t have to be one of these you heard example after example
here but like creative finance is about finding a combination of things it’s
about asking how do I get this done not like you know will I get this done
it’s not a yes-or-no question right I think Rich Dad Poor Dad talks about that
you know Robert Kiyosaki says you know the rich poor people say I can’t afford
it rich people ask how do i afford it right so like the way that I figured out
most of these creative strategies was not reading a book I mean yes you should
read books but I didn’t like nobody told me in order to finance my 24 unit I
would have to do a combination of a triple net lease option combine that
with a home equity line of credit combine it with the partnership combine
it with seller financing and then Berthe thing nobody told me that that’s what I
would have to do to get that done and most of you have no idea what even I
just said right but like that’s how I did and you know when I figured that out
at about 4:00 in the morning trying to just trying to figure it out asking that
question over and over how do I get this done
that’s how you get these deals done it’s usually a combination of thing so if you
have no money you got a hustle you got to figure this stuff out and continue to
ask how do I get it done that is so good brandon and i think you just you just
saw a perfect example of you had a lot of things in your tool belt you used all
of them you use that the hammer for this the crowbar for this the screwdriver for
this the nail gun for this you put everything together to be able to build
that thing you needed to build and your reward was you made a bunch of money
because you knew how to do this stuff right and that’s just a matter of
educating yourself and knowing what options that you have available and not
having a quitters attitude where you say I don’t have any money I can’t do this
screw that there’s people that have done it with no money you can do it with no
money to listen to this again if that’s what you need to do write these things
down understand all the concepts we’re talking about and study them until you
can recite them to someone else that’s when you know you really know it and
don’t let no money down hold you back now the next thing that we find that
people fall into is this quitter attitude because of no deals they say
well there isn’t any deals anymore right now my opinion is the reason people do
this is because they got used to 2010 when every single house was for sale and
you would just like it was like hitting water falling out of a boat there was
tons of deals everywhere right it was it wasn’t hard to do well well now you got
to look for water a little bit more right or you got to make your own okay
and that’s what we’re gonna talk about today there’s lots of things you can do
if you take the same attitude that you had with the no money thing and you’re
like I’m gonna figure out a way to do this and you apply it to making a deal
you can do the very same thing where you can find a deal where it didn’t appear
that there was a deal before that’s how I’m getting like 80 to 90% of the
properties and I’m buying I am making it make sense for me now the point is you
don’t have to have like one specific tactic that’s magic and if I just do
this I’ll be completely successful right you have to pick something that you
think is gonna work something that you feel comfortable pursuing and just go
and go and go and go until you master that thing in a vegetable pay off there
are tons of ways people are finding deals the process and sticking with it
is more important than the specific tactic if you want to lose weight
there’s so many ways to do it right you could do sit-ups you can do pushups you
can go running you can do CrossFit there’s a ton of different things but I
guarantee you if you just picked any of them and you stuck with it long enough
you would get results okay once you’ve mastered one of them then worry about
going on in finding the next thing but don’t be the
guy that is always chasing the newest thing and trying to find the quick and
easy fix without having to work hard those people never find success okay
so Brandon and I both believe that in this market in most markets in the
country good deals are not found good deals are made okay there are several
ways to make deals and we’re going to share with you guys some of you actually
that good deals are not found good deals are made that’s a great idea
do they need to give credit so be ready Brandon when they tweet it yes will make
it easier at sign like Instagram Facebook or Twitter bigger pockets at
sign bigger pockets but yeah good deals are not found good deals are made David
Green okay so we’re gonna talk with you about that’s exactly what I’m gonna do
I’m gonna talk about some of the ways that we are making good deals where
there was no good deal okay the very first one and the easiest ones that’s
what we’re gonna start is just buying a fixer-upper property when I find people
that say David I can’t find a deal that makes sense and I say show me what
you’re looking at every single one of them is showing me primo properties that
pictures show great that are pretty much already at market value and they’re
trying to force that square peg into the round hole of a good deal and they can’t
find a way to make it work and they’re frustrated okay I’ll tell you guys right
now the majority of what I’m buying is distressed property that needs some work
and nothing that I look at looks really good if agents send me a deal that has
like good looking pictures I’m irritated with them for wasting my time
I don’t want it man I want a house that smells like cat pee that has walls in
the wrong places that looks like somebody started to fix it up and then
ran out of money and just left it there and it’s been rotting for the last year
right that’s like that perfect deal for me to be able to find because I can add
value through my rehab and I can make it worth a lot more money now there’s a lot
of different ways that we’re gonna do that but Brandon have you had a similar
experience uh I mean I suppose so I mean everything I’ve ever bought every single
property I’ve ever purchased ever has been a fixer-upper so there hasn’t been
one right I think I Kember who it was I think it was Michael Woodward who was on
the podcast back like four years ago and he had this line that I thought was just
classic he just said like when he walks into his house he brings his two boys in
the house with him his two young kids and they take a big whiff and just
smells like you know cat pee and everything he says boys what does that
smell like in the Unison ago money yeah I just love that story because
like that’s what like I’ve known investors who are like oh yeah I went to
that house I walked in the front door and he immediately turned around and I’m
like good for you that’s why I’m successful right like that’s why cuz I
go in and I’m like I like that so anyway fixer-uppers fantastic and that’s a good
way to make a deal happen but there’s other ways as well one of my favorite
tactics is to look for what I call hidden bedrooms which means you’re
looking for opportunity to add square footage at a bedroom at a bathroom
whatever where there isn’t currently one most specifically this is gonna be a
little bit market dependent but I’ll tell you what I look for I look for
two-bedroom houses that I can turn into a three-bedroom house and they’re
actually quite prevalent like a lot most agents don’t know what they’re doing so
like those list the house at a two-bedroom house and not realize that
there’s actually a third bedroom and right now there’s just you know some
reason no closet or they call it a rec room but the number of bedrooms makes
the biggest difference for me at least for rental properties but flippin as
well like a different the difference in value between a two-bedroom and a
3-bedroom in my area is huge that might be different your area I’m not saying
it’s a hard and fast rule everywhere but in my area between a2 and a3 is
massively different I hate renting two-bedroom houses out
I love renting three-bedroom house though so the way that I do that I look
for two-bedroom listings that have over a thousand square feet if there’s over a
thousand square feet listed on the listing and it’s only two bedrooms
there’s probably a hidden bedroom somewhere right there’s probably like
this massive rec room or this big attic space that’s just like empty and so I
will often turn those into a third or even a fourth bedroom making the value
is significantly higher again I I found you know like this hidden deal but
really I just made it because nobody else saw that so yeah yeah the reason
that this works is because Brandon I understand the way that properties are
valued okay now multifamily properties are considered a business and they’re
valued based on how much money they’re generating for the owner how much profit
okay single-family homes and by single-family I mean anything for two
units or less our value based on what somebody else paid for it so appraisers
are assuming that even though we’re investors they don’t care they don’t
know the difference to them how much is this house worth based on what another
house is worth because that’s what most people who are buying a house to live in
care about okay a three-bedroom house is gonna be worth noticeably more than a
two-bedroom house because almost everyone in the modern-day family wants
at least three bedrooms a four will be worth more than a three but not as
three more than two two a five will be worth more than a four but not quite as
much and eventually once you get above five it doesn’t really matter it’s just
the square footage in that area right yeah it’s a weird house because you
don’t need that many bedrooms okay so because we understand that we know how
appraisers think we we put the property in a condition appraisers gonna care
about more all right now another thing that appraisers care
about isn’t just the number of bedrooms it’s also the number of bathrooms like
anything more than one bathroom helps you a lot it’s hard living in a one
bathroom house if you can add a second bathroom to a house or a third bathroom
to a house that has two you can increase its value quite a bit because now
they’re using comparables that are three twos instead of two ones or two twos
okay that’s why that works there’s lots of ways that I figured out through
rehabs where I can add value to my home without spending a lot more money okay
we don’t need to actually go spend 30 grand add another wing onto a house
oftentimes there’s parts of that project that are already done for you and you
just have to go fill in the completions so I do a lot of investing in Florida
now in Florida they have what they call Florida rooms it’s like a sunroom okay
or we have them in California that oddly enough they’re called California rooms
it’s basically just like a part of the house that is like an indoor / outdoor
living space so it has a roof it has electrical run to it but it doesn’t have
four walls maybe it’s missing one wall so you’re still feeling like you’re in
the backyard in Florida they put up these screens or these Nets so the bugs
can’t come in there and bite you right the cool thing is the foundation the
roof the drywall the electrical and sometimes plumbing are already run to
that area but it’s not included in the square footage of the house now
appraisers care about how many square feet the house is because what they
generally do is they say the average price per square foot for this area is
$100 I multiply that times how many square feet the houses say it’s a
thousand square feet and boom that’s how they come up with the value of your
house then they adjust it based on how many bedrooms and bathrooms has next to
the comparable properties if I can add three or four hundred square feet to my
thousand square-foot house I’m making the price per square foot get multiplied
by a lot more square feet which means my house is gonna be worth a lot more if I
can do that for only six or seven thousand dollars because most of that
work is already done and all I have to do is rent up some drywall and put in a
ceiling fan and maybe build a closet not only did I add three or four hundred
dollars our sorry square feet of space but I did it very cheaply and I could
add a bedroom or a bathroom or bow to the home and boom I just created my
extra bedroom I routinely do this for six to seven thousand dollars okay
and I add 30 to 40 thousand dollars worth of value to the house because I
don’t have to build a whole wing onto a house I’m taking space that’s already
there and I’m improving it now that deal might not have looked like a great deal
when it was a two-bedroom one-bathroom house it was worth all the same as the
other ones but if I buy it and then I make it a three-bedroom two-bathroom
house with extra square footage now it’s comparing to much more expensive
properties my value skyrockets and then when I go to refinance and I’m getting
all my money or sometimes more of my money back out the lazy investor wants a
house that someone else has already done the work the pictures look great
it’s already renting for the most that it can be there’s nothing to be done to
improve it and they want to try to make that work as their investment the wise
investor looks for ways to add value to his property or her property get more
money back out of the deal and grow their net worth slowly and
systematically man that was awesome I love that example the sunroom or the
California room they’re very cool alright so I want to shift gears here a
little bit we’re gonna still talk about how to find deals I know you guys are
looking for some action ellipse and I hope that was actionable for right
before I’m gonna we’re gonna give you what we do to find deals however before
I do I want to explain a little bit about the process because again the
process is more important than the specific tactic that’s true and almost
anything right but in this case specifically like again I could give you
a couple tactics which we will but if you don’t run it to the right processor
you’re never gonna get this is what the process looks like and I call it the
lapse funnel El APs and it stands for this leads you have to get leads into
your business then you have to analyze them a you have to analyze them then of
all the ones you analyze you need to make some offers or I call that pursuing
a deal you have to go after some of those deals that you analyzed because
now you know how much to pay for right because you analyze it so you go after
him you pursue it and then the final s Sun laps is success some of those are
gonna turn out here’s a real life example so I sent out 300 direct mail
letters a year and a half ago when I was looking for almost two years ago now
when I was looking for that property for my daughter who was soon to be born so
it’s about 300 letters out of them I got back like 40 phone calls but I was a
good ratio I got a good number back it was a very targeted audience that I
mailed to it was like absentee owners who own their property over five years
with a certain amount of equity I can’t remember
my head but so anyway so I sent this list 300 got back 40 phone calls some of
them were tire kickers whatever but of them there was about a dozen that were
serious like put contenders right so out of those twelve I analyzed those ones
seriously so Ella’s leads I got three hundred cold leads forty hot leads you
could say and then I had twelve deals that were like worthy of analyzing I
made offers on all twelve and then I got one of those eventually accepted right
so now would I is that guaranteed you send out three
hundred letters you’re gonna get a deal of course not right but if you
consistently work this lapse funnel you’re going to get deals in fact this
is the exact process that every single solitary investor in the world does
don’t believe me like they’ve they might not know the word lapse funnel could I
made that up because I like making up names for things like burn house hacking
but like they they do it anyway like you can’t buy a house without pursuing it
right they don’t fall in your lap you can’t really pursue a deal unless you
know how much to pursue it for you have to come up with some kind of price in
your head and then you can’t really analyze deals if you don’t have some
kind of lead source right so my point is this
every single person follows the Lapps funnel the investors that are like the
best in the world the ones that we’ve interviewed here on the podcast for
years now like I came up with this sort of like methodology after talking to
almost 300 different investors the ones that are the high-volume investors are
the ones that are getting their goals accomplished are the ones that recognize
the funnel again they might not say laps whatever but the same thing they know
how many leads they’re getting they know how they’re getting leads so that’s what
we’re gonna focus on next you want to add to that before we move on to the
actual tactics yeah I just want to add that this is not unique to real estate
investors this is how every successful business person or sales person is
making money so in my first year being a real estate agent I was the number one
in my office out of a hundred right I didn’t know sales I was a police officer
the reason I did so well is I already understood this principle that Brandon
is talking about that I was applying into my real estate investing business
so it made sense to apply it to my real estate agent business right I had to go
get a bunch of leads which for me was people that I knew that would know
people that wanted to sell a house I had to talk to them at analyze is this
someone who’s gonna send me referrals or is this someone who doesn’t write maybe
they don’t even know anybody who lives in a house so that’s not a person that
I’m that’s worth pursuing then to pursue the people that I knew would
be most likely to send me deals and then I ended up having success okay you can
apply this to any thing that you’re trying to accomplish but why not apply
it to real estate investing because that’s what your goal is and that’s
where you get the most bang for your buck technically I applied this to
dating right so there’s a lot there were a lot of girls out there in college
right and there was tons of leads out there and then I analyzed some of them
and I found some that were you know fitting and then I want to be careful
here because how they were listened to this later and then I you know I
analyzed them and then I pursued one of them and then I got rejected this is
actually true story I got rejected from Heather the first time I asked her out
and then I got rejected from headed the second time I asked her out
maybe I rejected the third time I asked her and then the fourth time I was
basically like this is true story I was like I can’t be your friend I have to
just break this friendship off because like I need like I like you and she’s
like fine we’ll go out and and somehow it’s so like for the first like a month
I thought she was just be nice because I held that over her which there’s a lot
of sales techniques built into that story but I’m not gonna go into it now
because we want to get to the actual tactic so funnels are everywhere people
make fun of me because I put approached everything in life into a funnel right
people he means me all right so let’s get into some ways to fill your funnel
number one the MLS which means the Multiple Listing Service which is basic
the MLS is like this back in the day let me give you a quick lie people don’t
know the actual story and you can correct me if you know this any
differently than what I’ve known it but back in the day everyone had lists that
may be like facts around like here’s all the properties that are for sale and my
brokerage would send it over to your brokerage we compiled this big list of
them well then this thing called the internet came around and those lists
went online but still today those lists are governed by a whole bunch of
different groups called the different MLS’s right there’s like a MLS in the
northern Bay Area and there’s an MLS in the Seattle area and there’s an MLS and
like different just tons of I think there’s hundreds anyway and so the MLS
is when we people save the MLS we really mean the MLS essences but that would be
weird to say okay so there’s the MLS we’ll just call that and it’s where all
the real estate agents put their deals that are for sales so other real estate
agents can see it to have perfect access to the MLS you need one of two things
you can see there be a real estate agent or you
to have a real estate agent that’s gonna give you access to it you know I’d give
you a way into it now there’s a third way and that you all know about it I’m
sure it’s the portals so imagine a portal like you’re sitting outside a
house and you look into the window so Zillow Redfin Trulia realtor.com those
are portals they look into the MLS’s and they have special arrangements work out
with the various MLS’s but they’re not perfect well since we don’t have a good
real estate agent I’ll just have to jump in and do the job instead now the key to
finding a really good real estate agent is something I refer to as RK are rock
stars no rock stars okay you don’t want just any real estate agent you want a
really good agent and furthermore you want a good agent that knows how to work
with investors they could be an amazing agent that’s really good at working with
families trying to find a house and they will be horrible for the purposes that
you’re serving right remember our our tool belt analogy you don’t want a
hammer when what you really need the screwdriver you need to go find the
right agent to help you now one of the questions that I’ll ask agents when I
tell them I’m an investor looking for property is do you buy properties
yourself right if you find an agent that does buy investment properties
themselves they already get everything you’re trying to do especially if
they’re good at it right and they’re gonna know people that you’re gonna need
for your team in the book that I wrote for BiggerPockets long distance real
estate investing I talked about the core for those are the four people that you
need to put on your team to help you invest successfully if you find an agent
already knows those people boom in one step you’ve kind of figured out that
problem for yourself now agents will send you deals keep in mind that you’re
looking at deals for how you can make it a good deal you’re not just to give her
something that’s already been made so tell your agent I’m looking for houses I
can add square footage to I’m looking for two-bedroom one-bathroom houses
that’s what I want to go see then when you notice when they send you the list
that one of them has a thousand square feet that’s the one that you click on
and you start looking into and say hey where can I take a dining room and turn
it into a bedroom or a den or whatever the case may be maybe it already has a
bedroom and all I have to do is add a closet and it’s a it’s a official
bedroom right that’s something you can do for six or seven hundred bucks and
add a lot of value to your house by doing it right let your agent know this
is what you’re looking for and then kind of gauge how are they responding do they
seem really insure themselves like this isn’t something I do that’s the wrong
agent keep moving on if they get excited when you talk about this and you know
you found someone they can help you yeah and I love that and so to go back to the
rkr the rock stars and rock stars find a
rock star in your life i’m sony was awesome in that market you want to buy
in and ask them if they know any real estate agents cuz rock star is no rock
star is another thing you can do is go to your Facebook pages ask your family
and friends anybody have a recommendation now there’s no guarantee
they’re gonna be good it’s like a guy at work is an agent right but at least it
gives you some leads that you can then analyze and then you can pursue one of
those agents and you’ll find a good one right laps works in everything all right
so anyway so finally good real estate agent they can actually help you find
deals on the MLS like like David said one thing I like to do is have it your
agent if they have the ability which most do I’m assuming do you guys have
the ability set up automatic email alerts okay yeah so I can get an email
set up so that anytime a 2-bedroom house comes on the market in my Mart in my
area or any house under $200,000 I’ll get an email cuz I want to be notified
very very quickly so I’m gonna work with my agent to get the right email alerts
set up it’s a very quick actionable tip tip you can do today like don’t go to
bed until that’s done so anyway get a real estate agent okay next up is going
to be the wholesaler right wholesalers are people whose job it is to find a
deal put it under contract and then find someone like you that wants to buy it
now the question that I often get asked is is David if they buy properties for
themselves or they’re a wholesaler and they get great deals why would they give
it to me right that’s the question everyone says the reason is they
probably don’t have enough money to buy properties that they get under contract
just like you were worried that you didn’t have enough money at one point
okay everybody out there has the same problem they either don’t have money and
they have deals or they have deals and they don’t have money but no matter
where they are in the cycle somebody’s gonna have a property that’s a really
good deal that they can’t do anything with you want to know that person and
you want that person more importantly to know you so they bring you that deal now
the analogy that I like to use is I don’t want to just go learn how to catch
fish I want to find a fisherman that is so good at catching fish that he catches
more than what he can actually eat and the fish are gonna go rotten if he
doesn’t sell it to me at a discount right now I often find the most success
with this with wholesalers but I also do it with other investors who will earn a
wholesale fee for bringing me a deal or a real estate agent who does it himself
but he just he’s got three or four going on and his contractor is completely
swamped and he doesn’t have any more money you might as well represent me in
the sale of it then just lose it completely because that fish is gonna go
bad right so by by using the labs funnel to continually what we call lead Jenner
for more leads it can be properties for yourself or it could be people that are
gonna find properties and let them know if you find me a deal that means these
criteria I will pay you fill-in-the-blank five thousand dollars
I’ll send you a bunch more referrals for your business all that you partner on it
with me whatever you want to do but find people that are also like you looking
for deals and don’t think that they won’t help you just because they’re also
looking for deals they’re gonna find fish that they don’t
have time to eat and they want to sell it so that it just doesn’t go rotten in
the boat well you guys know most Dave is really good at analogies he’s fantastic
all right another technique for finding deals
check out things like Zillow I mean I actually got a deal last year just
somebody who was like I want to sell my house I don’t want to use a real estate
agent but they know Zillow cuz it’ll you know
like – it’s a powerhouse right so there’s one posted or like put their
house on Zillow and I happen to be looking at it that day and I went and
bought it and we flipped that house and so check things like Zillow but also you
can just spend time analyzing deals you find over on Zillow or realtor or Trulia
Redfin and get real comfortable with it those are good sites as well another
online website you can go to find deals actually is called BiggerPockets calm a
lot of you didn’t know that we actually on BiggerPockets have a marketplace
there are hundreds and hundreds of deals being added every single week from
wholesalers around the country from turnkey providers from real estate
agents they list the properties on our marketplace and you can go in there and
dig in and see what you can find that’s especially helpful since it’s the
national page if you’re interested in buying out of state so every you know
day or so just go in there and run through the list of all the new
marketplace listings and you might find your next fantastic deal there and let’s
go to the the big one that most I’d say most high-volume
real estate investor investors use and that is direct mail marketing and I
talked about earlier I said all 300 letters but yeah it’s like a simple
process you send a letter and then you get phone calls back and then some of
them work out right it’s just leads lapse funnel right the problem is people
will do like one direct mail like letter they’ll send out 500 letters a thousand
letters whatever and then they don’t get any calls they don’t get many and
nothing works out and they’re like this folks it doesn’t work Brendan’s a lawyer
and then they go back to watching TV every night right but the people who are
successful they just consistently send letters trying to tweak and test them a
little bit but they’re always trying to improve their
and over time is when Direct Marketing works I mean I I’ve heard some stats and
I don’t know the exact ones now on top of my head but like it’s like the
average like Direct Mail caller doesn’t call until they’ve received like seven
letters like it takes time and you got to make sure you get a letter to them
when they’re in that moment of okay fine I’m gonna sell this thing so drug
marketing can be very powerful if you’re gonna take advice from anybody on
persistence it needs to be Brandon Turner this dude married somebody so far
out of his league that most people wouldn’t even believe me if I told you
he out kicked his coverage because he was so stinking persistent right if he
got a great deal on a wife you can get a great deal on a rental property using
the exact same strategies this guy uses okay what I tell people is if your job
is to go out there and you wanted to chop down a tree and you swung the axe
one time when the tree didn’t fall would you quit what if it took five swings
would you quit you’re actually worse off if you swing five times and quit before
that tree goes down because you’ve expended all this energy and you got
blisters on your hands and you risk throwing out your back and then you got
no result okay you don’t find success from hitting a home run on the very
first pitch that you see you find success by slowly whittling down that
tree over and over and over until it finally topples and through the process
of that you learn what worked and what didn’t work and the next time you go
chop down a tree you do it in half as long because you learn how to swing the
axe better direct-mail works the same way look at all the Nazis that was
wonderful alright alright next up is driving four dollars you guys hear about
this one a lot it’s also door-knocking okay this is simply looking for
properties that appear like they’re in distress knocking on the door and seeing
if you can talk to any lives there or finding out who the owner is through the
tax records and sending them a letter saying they want to buy their house now
what I found is there’s three different ways that people find motivated sellers
it’s from some form of distress the three forms are market distress personal
distress and property distressed market distress would be like 2010 when we
talked about every single thing was for sale because the economy was in shambles
personal distress is really the best way that’s where you find someone that’s
going through like a divorce or a death in the family or a gambling debt or
whatever they have going on they have to sell that house really fast property
distress is the ones that I tend to target the house is that the house
itself is in disarray and so it’s not worth very much if you’re driving around
and you look for houses that are in property distress you’re increasing your
odds by a lot that LEED is more likely to turn into
something that’s worth analyzing that’s more likely to turn into something
that’s worth pursuing if you don’t know what to do
put on the BiggerPockets podcast drive around and educate yourself and while
you’re doing that look for houses that have really high grass need a paint job
really bad look like nobody’s been living there newspapers all over the
place all the signs is someone just stopped caring about that house and then
find a local real estate agent and say I’d like to get the mailing address for
this property right here they can look it up in the tax records for you you can
send a letter that person say hey I want to buy your house and your odds of
finding success are much bigger yeah that’s awesome alright let’s go through
that cut another couple I here’s a really tangible one that you can do
right now if you have no money to find deals I want to give you something that
it takes persistence but it can work really well and that is using Craigslist
but not like posting an ad you could do that too that’s not a bad idea but I’m
talking about going to Craigslist and finding mom-and-pop landlords who have
listed their properties for rent you can usually find them because they’re not
very good ads right property managers you can kind of tell which ones are
those and real estate agents if they’re listing it but look for mom-and-pop
landlords who just are using Craigslist to put their property for rent and then
call them up I mean like that is a lead right there and why do I say that
because every like I would say most I don’t have any stats to back this up but
I would say most landlords hate their life like most landlords have not read
the book on managing rental properties that my wife wrote most of like like
they don’t care they haven’t read the books they haven’t talked to other
Lando’s they just somehow fell into it and now they hate it because their
tenants are taking advantage of them and they’re not paying their rent and
they’re having problems there’s a lot of that that goes on so by calling those
people I mean they give you their phone number right in the ad usually like how
much easier can I get right and you call me back hey I’m a new real estate
investor and I I’m looking everywhere to find some my first property and I saw
you had one for rent and I’m not looking to rent it but I would love to talk to
you about buying it does any any chance you want to do that right yeah nine
times out of ten you might hit a no and one time out of ten you out here yes or
maybe let’s talk about it right in fact I’d probably guess more than one out of
ten you’ll get a hey let’s talk about it all right everything’s for sale to an
investor for the right price so get that conversation going and again now you’ve
got the leads you’re gonna analyze some even have those conversations and you’re
gonna pursue some of them get rejected a lot it’s gonna feel like high school
prom all over again and then another day you’re going to get some sick exactly
accepted but here’s the deal I’ve told this to people I look
all the time and I’ve done this a little bit but I’ll tell you why I failed at it
and why almost everybody does because I’m not persistent or consistent about
it right so I’ve done this one a few times but like it’s hard
I hate picking up the phone right so what I need to do I’m just thinking out
loud here like what I need to do is hire someone who likes the phone and they’re
gonna make phone calls and not just one so I want you guys to grab your phone
right now if you want to do this grab your phone right now and hold it up and
you know how you can talk to Siri right so like hold on and to remind me every
Monday at 5 p.m. go to Craigslist and get the landlords all right
and then series gonna do it for you that’s all you got to do to be able to
get like now you’ve got a system that you can work each and every week and if
you did that for 52 weeks in a row and you called 20 people every single week
do you think maybe somebody in there would want to sell you a house and maybe
you could work the Lapps funnel out right and if you’re like oh I’m busy I
don’t have time do you think you could find somebody that just has some stay at
home time and see if they want to do it I mean 20 phone calls a week is not that
bad right sorry but that’s that’s just another very simple thing you want to
have any money to do it you just got to have some hustle all right now keep in
mind that you may call those people email those people reach out to them and
they say no I don’t want to sell right they may not want to sell today but what
do you think about six months later when the pipe is busted and the tenant hasn’t
paid the rent and they have a dog that bit someone and they’re looking at a
lawsuit and all of a sudden their emotional state is oh my god I don’t
want to be a landlord anymore if you don’t call them when they’re in that
mood somebody else is going to it’s gonna be a real estate that they reach
out to to sell their house or it’s give me another investor that buys it it is
very important to be systematically and work a process and politely call that
person consistently and say hey I still want to buy your house are you
interested in it yet no okay and then two months later three months later do
the very same thing because there is gonna come a time where a lot of them
don’t want to own it anymore and with that same technique we can find another
lead source which is going to be meetups or other real estate investors okay lots
of people own real estate you are in the mood if you’re a bigger pockets person
of I want to buy as much as I can I want to own as much as I can and that’s
awesome okay there’s a part in this cycle where you don’t want to be a
landlord anymore you don’t want to own real estate anymore either you’re not
good at it or you bought bad properties or your life has changed and you just
want to put the time into it anymore and you want to get rid of it be the person
that finds that person first and say hey if you ever want to sell
I want to be the first one to get a crack at it I want to buy these
properties okay landlords on Craigslist yeah that the
reason that’s gonna work is because you know they own properties well so do
other investors okay and if you can build a really good
relationship with that person through meetups through REI a meetings through
BiggerPockets through whatever you’re doing they’re gonna come to you first
and I’ll give you guys another little quick tip here the more someone likes
you the harder it is for them to take advantage of you the more they like you
the better price then better terms they’re gonna give you on that deal
right so networking with other investors and letting them know what you want to
do and why you want to do it and bring you value to them is a great way to get
first shot when they want to sell their properties in fact so here’s a chavin
actually told the entire in-depth story yet about how I got the mobile home park
that I got recently but what happened was Ryan Murdoch who had been on the
BiggerPockets podcast back at last June I think he had bought a property from
another BiggerPockets member and the guy had carried the contract on it seller
financing anyway so this is a few years ago so now this investor was getting
ready to retire like completely get out of the game and he had this mobile home
park so you know what this guy did he didn’t go and listed with an agent he
went an email ryan said hey you have any interest in a mobile home park ryan was
like no not really but i know a guy who does so then ryan called me up and said
hey Brennan you want I know you wanted a mobile home park what do you think of
this one and he he thought there was like no way
I was gonna care about it cuz like you know he said it was a long shot but it
was exactly what I was looking for so I said sure Ryan if you partner with me I
don’t gonna buy a property I mean I mean hawai right now right that’s like sixth
out you cannot get farther away from Hawaii than Bangor Maine but Ryan
partnered with me on it we brought in Mindy Jensen as well and her husband
Carl and boom now we got this awesome mobile home park deal that it’s kind of
like we use bigger pockets in so many ways and we use that same technique
you’re saying just keep relationships with other investors they can oftentimes
be a great source you know one more just quick tip and then we’re gonna move on
to no time in finding deals and this was just one last thing about how about
finding deals is tell every single person you know that you’re looking for
a deal and get specific right so two quick quick stories first one when I was
looking for my very first apartment complex I’d read a book on buying
apartment complexes and like it was a Ken McIlroy’s ABCs every law state
investing and the next day at church I was like talking to this older couple
and I said hey someday I want to buy a Harman complex and they’re like well
that’s weird we actually have one we want to sell right was that lucky of
course did I tell every single person I knew I wanted to buy an apartment yes
right yeah take advantage of luck so just like tell everybody you want so
when you’re when those situations come up you’re prepared second quick story
even quicker I was at a real-estate meetup that Darren Sager was holding in
New York City he’s got an awesome meetup he’s old that pretty much monthly brings
in some really great speakers and I was there and I was talking about how I
wanted to buy a mobile home park to everybody that was in the room everybody
could tell and you guys are probably heard me as well right you knew who was
in that room that day mr. Ryan Murdock the same guy who then two weeks later
received an email that said he would I told everybody that room I wanted a 50
unit mobile home park he got an email from a guy that had a 46 unit
technically zoned for 50 unit mobile home park and so I was top of mind to
Ryan to think oh yeah Brennan just said and he just told me last week or two
weeks ago he wanted one so tell everybody you know you never know who’s
out there that might have a deal if you have like you know 50 friends that know
that you’re the guy or you’re the gal who buys real estate they probably have
50 friends as well so like that’s I don’t know the math there it’s a lot
right so like there’s a lot of people out there in your circle that know
people who might sell you their property so again tell everybody all right we got
to move on to the next one this is gonna be the world’s longest podcast and the
last one that a lot of people struggle with they might have some money they
might have some deals even now especially to listen to this they’re
just saying David Brandon I just don’t have time I got a full time life I got a
full time job I got family obligations of god
you know civic obligations I got church obligations I got just life is busy so I
want to talk about that for a few minutes because like I know what that’s
like right like I am for those people who know me like I this is gonna sound
like total like bragging but like I have like one of the busier lives of anybody
I know generally right like I do a lot of stuff constantly and I’m still
writing books and I’m still trying to raise my little girl I’m trying to surf
on the beach in Hawaii like I try to put commas in so I’ve learned a few cool
techniques to reduce the amount of hours it takes so the first thing I want to
mention is this understand that you have a hundred and sixty eight hours in your
week that’s actually how the math works out right so take 168 subtract out your
40 hours that you are at work and you’re at 128 subtract out another 20 hours it
looks like commuting and random like getting ready or himself so now you’re
at what are we at 108 right take out
another 50 hours of sleeping that’s fine you’re still at all what 58 hours now of
every week that you’re just like losing so I’m not saying that you don’t like
I’m not what I’m saying is this take an inventory of what you’re spending your
time doing because with a hundred and sixty eight hours in your week there’s
probably time somewhere the second point I’ll make to that is this it does not
take three or four or five hours a day to invest in real estate almost every
single test mean David’s been actually talking about this a lot since you’ve
been out here we’ve been just talking about how like almost everything we do
is like a one-minute task or maybe a 5 or 10-minute task very few things in
real estate other than reading like a book or reading a contract take more
than about 15 minutes here’s what I mean by that right now the next thing that I
need to do to you know let’s say let’s go my apartment complex I got in
Cincinnati like the next thing that I absolutely have to do to get that thing
moving forward is I need to contact my assistant who is another tip but I have
a part very very part-time assistant I need to contact her to have her contact
the property manager on a systematized process so it’s like a five-minute email
I need to write and then that’s moved off my plate it’s onto somebody else’s
now we’re good kickback to me I’m gonna move it on somebody else everything’s
like that maybe you again you need to analyze a deal right maybe you need to
make a phone call to an agent maybe you need to go on Facebook and ask for
recommendations for an agent no matter what it is everything is like a
five-minute task and if you were consistently doing that every single day
that’s when progress gets made the problem is people are like you know I
don’t have any time so they work on their real estate for an hour to one day
because they’re excited after a podcast like today’s and then they don’t touch
it again for a month and then they come back and they do it again like that
logic does not work think about going to the gym doing that right I’m gonna go
run the treadmill and then a month later I’m gonna go lift some weights and then
a month later I’m gonna go do the elliptical machine which is pretty much
worthless I think and so at the end of the day like consistency is what matters
consistency with the right things and so figure out what those few little things
are that you need to do and the way I generally recommend it is analyze a deal
spend five minutes a day running the numbers on a deal maybe through the
BiggerPockets calculators or however you do it and do that or spend 10 15 minutes
a day getting some leads coming in somehow
and over time that compounds on itself it’s like the compound effective.i
Darren Hardy anyway those are just a few of my tips I just were thinking about it
when David I’m sure you got some more because you know a thing or two about
not having much free time yeah that’s right so the way that I got started
buying real estate was I working like crazy I was working a literal 90 to 100
hours a week and sleeping in my car twice a week because I didn’t have
enough time to drive home and sleep and come back again so I was doing this with
very very very minimal time and what I found out is exactly what Brandon just
said most of the tasks that I was doing were somewhere between 30 seconds and 3
minutes it was very little time that actually had to be spent once I
understood what I was doing okay so I came up with a couple things that I can
share with you guys to actually save myself a lot of time and remove that
excuse of I don’t have enough time the first is what we call the 1% rule the 1%
rule is just a rule of thumb that states if a property rents for 1% of what you
paid for it it is very likely to cashflow positively so if I’m paying
$100,000 for a house and it rents for a thousand it will cashflow positive
$200,000 from our house and it rents for $2,000 it will be able cash flow
positive now you don’t have to be right at that but if you’re close to it
odds are that that property’s gonna cash flow positive I don’t look at buying
hold properties that don’t meet the 1% rule because I don’t want to waste my
time right I can right away throw out a ton of stuff that gets sent to me by not
waste by not looking into it another thing is I got really really specific on
my own criteria that I wanted for a house and I didn’t make so many of them
that I would fall into analysis paralysis ok so when anybody brings me a
deal the three things that I’m looking for are am i buying it under market
value for me that means I want to be all in acquisition plus rehab for 75% of the
ARV so I want to be paying 75% of what that property is worth when I’m done I
want it to cashflow positively which means it’s going to need to meet the 1%
roll or close to it and I want it to not be in a really bad neighborhood if it
meets those three criteria I will buy it now the reason that I can be so liberal
with the way that I’m buying houses is because I know if it’s 75% of what it’s
worth I’m gonna be able to burn it and get all my money back out and as long as
it cash flows positive it’s not a bad neighborhood why wouldn’t I do that deal
it doesn’t have to be a home run but that’s a pretty freakin good deal and
then I can go buy the next deal right because my criteria are simple but
effective and safe I don’t need to spend a ton of time analyzing 50 properties
and trying to figure out which is the best of the
50 that I could buy I can just go buy the six that make the most sense right
or pick one out of those six and say this is when I feel best about buy it
burr it see what I learned and go and do the next one that’s really all that you
need to be thinking about when you feel like you’re overwhelmed you don’t have
enough time is that you’re probably making this more complicated than it
really needs to be yeah like that and another thing on that note is I don’t
typically and this is maybe a little more of an advanced strategy but I
typically don’t look at a property until I’m in negotiation on it here’s what I
mean by that so if I typically only get about one out of every ten offers I make
accepted so like why would I go and look at those ten properties just waste my
time right so when I find a property I run the numbers based on all of my best
estimates whether my if my agents been in the property hopefully if I’ve had a
contractor maybe in the area they might look at it I’m not gonna worry about any
of that stuff or I’ll just make it based on the photos if it looks pretty good in
the description I’ll run my numbers as good as I can and I’ll make an offer
nobody in the last five years I’ve never I don’t think I’ve ever had an offer
just flat-out accepted there’s always some negotiation because everyone feels
like they have to negotiate right that’s when I go look at a property so I wait
like they’re always like okay if I offer $95,000 for a property they’ll come back
and be like no 120 and I’ll beg okay well I don’t know if 120 will work but
let’s go look at the property cuz now I got a really good shot of getting this
thing and that’s what I’m gonna go and look at it so that has saved me a ton of
time too many investors get too caught up in the like I got to go look at the
house and my agent can’t go until Saturday and so I’m gonna go on Saturday
to look at it’s gonna take an hour to drive there and an hour to look at an
hour back then an hour over coffee that I got to talk about the deal and my time
they’re done they spent five hours and then they get rejected what a waste of
time you gotta optimize your time so anyway that’s another one another thing
that I do is I constantly you know we talked about earlier about how almost
every task is like a 1 to 5 in a task identify what that is I call that the
mins mi NS your most important next step like you know any task that you have any
big task in the world like I need to buy a rental property I always ask people
what’s your very most or like what’s your most important next step and
they’re like I gotta buy it I’m like no get more focused okay well I I need to
find a real estate agent nope that’s not it either what’s your next actionable
step your most important next step I need to open up a browser window
navigate to facebook.com ask my family and friends for recommendations for
agents that now you have your most important next step and you realize how
stupid is that you haven’t been doing this for two months like this has been
on your plate for two months and it’s really only a 30 seconds task so now you
go do it either you do it then or you time block it you put it on your
calendar as an appointment more important than meeting with the
president and you do it when the time says you put in your calendar you
schedule it if you have to wake up 10 minutes earlier wake up 10 minutes
earlier if that’s what you got to do again and the I said a minute ago but
I’ll say it again now the BiggerPockets calculators make it very very simple and
easy I mean let’s be honest like when we built the calculators when I designed
them and I put them together and had a developers build it I did it more for my
own sake or as much as for my own sake as anybody else like I needed a better
system for analyzing deals and keeping track and organized on all that so we
built the calculator so you can quickly run the numbers in under five minutes
figure out how much you can pay for a property then I go and offer on it and
if you get rejected there’s even a feature that most people don’t know
about in the calculator that you can get reminded about the about that property
later on so I’ll go in if you click the word tools on the nav bar and go to
previous reports there’s like this little ellipses next to every one of the
reports you’ve done click that and it says remind me you can choose one week
or I think is like one day in one week 2 week 3 week 4 week whatever so that way
if I want to go in Rio for edit a month from now I can do that or if I don’t
want to follow up with the seller a month later two months later
BiggerPockets will actually remind me which is a super thing and cool thing so
again there’s just these little techniques to be able to simplify your
life and the last thing I’ll say is this on that point when I got started and I
started getting overwhelmed back maybe like eight years ago I needed help but
simplifying all the things I was doing right so I brought in some help I I
realized I hated answering the phone I hated talking to tenants so I actually
brought in my mother-in-law and said hey would you mind and I think we paid her a
couple hundred bucks a month when we started we said hey would you mind just
answering phones and then just write down the message and then get it to us
and that was it but that one thing saved me so much both actual time and like
mental energy so I could focus on building my business so people think all
time well I don’t have enough money to hire a full-time assistant don’t do it
hire finally little TAS that you can find other people to take off your plate
maybe an overseas person maybe it’s a family
member a friend or somebody who just needs to earn more money listen like for
every task that you hate doing somebody puts food on their table doing that task
right for every task you hate doing somebody loves doing it if you hate
answering the phone somebody loves answer the phone my mother-in-law loves
talking to tenants it’s like her thing she’s like it’s amazing at it and like
that’s all she wants to do she doesn’t want to be involved with like buying
like they are now buying property but even that like my father-in-law handles
a lot of that stuff as well so like find people to do those little tasks in your
life if you can’t afford a full-time assistant anything you want to add no
that’s a mic drop man that’s very good all right guys so we’re going to shift
gears here and head over to the world-famous fight around it’s time for
the fire all right this is the bigger pockets
fire round we’re gonna fire some questions at one another that were
actually we found in the bigger pockets forums and we’re going to address them
because these are a real question that people are asking but before I get to
that I just wanna say I hope you guys enjoyed that last segment of the show
like that whole segment of the show it’s a little bit different show so would you
guys do me a favor head over to the show notes page for this podcast episode to
go to bigger pockets that come such podcast and you’ll find it in there and
let us know in the comment section if you enjoyed this any questions you have
any comments you have I’ll let us know there kind of gives
those feedback should you like more do you want more of these shows you can
also hit me up on Twitter at Brandon at BP and let me know do you like this
format if so we’ll do more of these if not then maybe we won’t but I thought
this was kind of a fun idea to test out so with that let’s get to the fire
around these questions again are from the BiggerPockets forums first question
few would deny that the market is cyclical it goes up for a few years and
then down for a few and then repeats I want to hear from other investors your
thoughts about how to handle this we’re nearing the top especially my area and
it scares me a little I want to keep investing but I worry about timing
should I hold on to cash and wait for the downward cycle to begin David what
do you think this is an awesome question and this is right why I wrote the book
long distance real estate investing because markets are specific to where
you live it is not the same arc in the entire country one market could be
nearing in top another market might not have even got it started yet and another
market is getting some Amazon Supercenter that’s about to go in it’s
about to blow up okay you may be maxed out at your market where you feel like
you’re at the quote unquote top but another market is ready to run and you
can get in there by learning how real estate investing works you can be
empowered to go invest and the markets that makes sense not just the markets
that’s close to you okay when people tell me that they’re afraid that the
market is reaching the top the first question I ask is like how do you know
what the top is right it may seem expensive to us but are you taking into
fact that wages are going up too and jobs are growing and companies are
moving in and interest rates are really low and it’s really is it really near
the top like what you’re thinking the next question I ask is when you say top
do you just mean that it won’t cash flow anymore
that’s what most people think I can’t buy a property that cash flows any more
there’s two things that you can do one you get better deals by getting more
leads pursuing those leads harder analyzing more of them and finding
success or two you go to a market where you are more likely to have success now
be I’m very busy just like Brandon is
running the businesses that we run it makes more sense for me to go to a
market that has a lot of deals right I actually look for markets that have a
high day on market the average house takes a long time to sell there because
I don’t want to be fighting with 19 other investors that all want the same
property and I know that my appraiser is gonna value it based on the comps he
doesn’t care how long it’s at on the market for that’s not gonna be hurting
me now if I was trying to flip houses that might not make sense for me but
because I’m buying rentals that’s something that I want right I go to
areas where I know I have a competitive advantage and it’s gonna be easier to
find a deal so I don’t care what my market is doing cuz it’s not my market
it’s just the market where I live in right if the market that I’m in right
now decides that it’s gonna be too expensive as to our defined deals other
people are there I will go to another market and I will put my system together
build my core for and start getting deals out of that area remember that
real estate is market specific what is happening in your market is not what is
happening in other people’s markets and don’t get discouraged yeah that was
great the only thing I’d add on to that is like buy good deals and bad markets
buy good deals and good markets buy good deals no matter what that’s why it’s so
important to run that lapse funnel and to know the numbers so all right next
question I’ll let you take this one all right does anyone have any tips on how
to handle cleaning of the unit after guests leave this is like an Airbnb type
of a situation there’s a small window of time each day to clean and is almost
impossible to do it yourself while working a full-time job Brandon you do
Airbnb right I had an Airbnb I actually just sold that Airbnb and basically it
basically became just a flip I held it for a year and what I’m not gonna go
into the reasons why I sold it but basically it was just too much work and
this is one of the reasons why because coordinating cleaners was tough now this
person is asking how do you do it when I have a full-time job you don’t like
that’s just the short answer it’s like you don’t clean the unit when you all
don’t have you find somebody else remember I said earlier for every job
you hate doing there’s somebody who puts food on the table there is somebody in
your market right now who wishes they had a flexible job that they could go to
for a couple hours to go and clean because they don’t have they can’t go
and get a 100 dollar an hour job at the local whatever but they can clean a
house right there’s people that are desperate for that job right now that
you could actually help them put food on their table you need to find that person
so what we did is we found a couple different people there’s one primary and
we just let them know here’s what the deal is people come and they usually
stay for a day or two days or three days we need you to be flexible and when they
leave you got to get in there like there is no other option
can you do this we set the expectations up front we define what we needed and
also we have a very clear checklist on what has to get done this this this this
we have pictures even on what we wanted things to look like within the air being
me we systematize the whole process and we
had a first-person and then we had a backup in case the first person for
whatever like one time her car got stolen and she couldn’t do it had a
backup run in there and got it done so that like again don’t do that yourself
but if you’re using Airbnb that the guests are actually paying for the
cleaning anyway there’s a cleaning fee like don’t look at that as income like
your time is better spent finding deals or spending time with your kids so
that’s my answer of that one all right next one thanks all right if I was
wondering I was wondering if I should be building a website before I start my
whole sign business I was looking at my list of things to do and wondering if I
can get buyers and sellers on my team if I do not have a website what are your
thoughts on that David so a website is a tool that can help you but it’s not
necessarily something that you have to have okay
wholesalers do a good job because they find people that are in distress and
need to sell their house and because they have a deal it’s easy to go find a
buyer like brandon said earlier find the deal and everything else is gonna come
having a website can help you but it’s not something that you absolutely need
to have now in today’s world having a website is so easy I can’t think of any
reason why you wouldn’t want to have one right if not for the simple fact that
when you’re you’re reaching out to people it will just help you establish
rapport that you can say look I have a website I’m more professional it might
not be super effective at finding deals but it might make your job easier once
you’ve found them to kind of build rapport with that person and get a deal
now a lot of people do use websites and they’re very successful at it I know
there’s one company called investor karat I believe that basically makes
like a high SEO website right out the box that helps people find you when
they’re looking to sell their house those work better in some markets than
another if you were in California with an investor care website and you know
your house is worth half a million you’re not gonna go to a wholesaler and
let him buy it for 200,000 very likely but if you’re in like Indiana Kentucky
some of these areas where they have like not as many people chasing after houses
you’re more likely to to call the person or to Google hey how sell my house in
Indiana I want to get a good deal lead propellor is another one that’s a really
good website that people use that they can drive traffic to them to find these
deals and they’re not very expensive like this is a really good way to kind
of get started see what works see what does
and then start building from there you start writing blog posts and driving
traffic to your website and you start reaching out to other people like
Brandon said and telling them hey I am looking to buy property here is my
website check it out if you hear of anyone that wants to sell call me or
have them register from my website I can get in mine India what their house would
be worth as someone’s gonna buy it for cash for me in my opinion this is a
really cheap easy and quick way to get yourself started you don’t have to do it
but I don’t know any good reasons why you wouldn’t want to yeah I actually
made my website so I have two of my apartment buying website was built
through lead propellor and my like home mine website was built through Wix calm
it cost me like $8 a month or something stupid cheap like that right then one
that’s cost me 8 bucks a month I actually did a flip last year made
$50,000 on it she found me through that website so was that worth $8 $8 a month
for that Wix website yeah if you uh if you guys were to go YouTube also if you
type in well just go to bigger pocketses YouTube page and then look for the most
popular video that we have on the entire I mean YouTube channel you can like sort
by popularity the most popular video we’ve ever put out got like almost a
million views now I think maybe half a million it’s on how I built that exact
web site I filmed it like four and a half years ago it’s horrible quality
because I was not really sure what I was doing with this technology stuff but
anyway that video people tend to like it a lot so if you want to learn exactly
how I built that website that made me 50 grand check that out alright so let’s
see last question the day on here it’s not actually a question as David and I
were going through the forums trying to look for a really good question we just
saw this post and we were like we just have to talk about this for a minute
because this is like the coolest thing so James K put a post on there that
basically said then we pull up and read the exact title of it multifamily brr
strategy that we talked about it earlier it’s like buying fixer-uppers and then
refinancing them later after they’re fixed up so multifamily Borough strategy
that created 4.5 million dollars of value in 12 months
so James K is a syndicator in Austin Texas but I think this property was
actually in San Antonio in San Antonio 174 units they basically like did the
Bur strategy they bought it they fixed it up and then they rented it like you
know raised all the rents rented it out got a fully working well it says this
the deal was bought at six point nine million they added one point three
million to the rehabs and like what mid eights the property then
appraised at 2.7 that’s when I 12.7 creating 4.5 million dollars of value in
a year and then they went refinance it because now let’s got that new value and
actually pulled out all their money and then some
so they actually made money at the thing and so now they can go back with their
investors money and do it again and again and again right so anyway that I
just thought it was super cool James Kay nice work well some of the things that I
loved about this post is that he’s using the techniques that were talking about
in this exact podcast to help you guys right so he bought this at a very steep
discount he said he bought it at 39,000 dollars a door why because it was a
direct buyer seller transaction he found an off-market deal where the seller
needed to sell that property they were very motivated and he was able to buy it
and then he did what we called the the seller the seller financing where he
actually assumed the loan that they already had he didn’t have to go get his
own loan and pay closing costs right he got to take over a loan that they
already had which was in really good shape and when you’re buying multifamily
properties the loan can be a really big deal he was able to just take theirs
then he went in and he rehabbed it effectively he added value through the
rehab he painted it he added new fixtures they made the place a lot nicer
and that ended up increasing the rents by a hundred and seventy three dollars
per door on average and this was 169 units I think that it was 174 massive
value that he created by bumping the rents up that much which made that thing
worth so much more okay by combining all of the tools that we’ve talked about
today from his tool belt they were able to put them all into the same deal and
create four and a half million dollars in twelve months by doing a really good
job on a rehab that is why I’m so excited about real estate investing in
the the stuff we’re talking about this podcast this stuff works for the big
boys and it works for the new guys right like all of this it’s the same tools
that we’re all using listen to this podcast again take notes write down the
stuff that you don’t understand and write down the stuff that you really
like master it so that you really know I can do this this is how I’m gonna make
it work and deals that don’t seem like good deals like maybe this one didn’t
even look like a great deal but he knew how much he could push the rents he knew
how much he could rehab it he got it at a better deal than what he thought
because there wasn’t a broker involved he did everything right and created four
and a half million dollars in 12 months that is amazing yeah I love that that’s
super awesome so anyway hope you guys enjoy that little it was not a question
but you know we’re cheating so that’s okay and with
let’s get today’s let’s get to today’s famous alright if you guys are looking
to the show before you know that this is the part of the show where we go through
the same four questions every single week and we ask every guest since we
don’t have a guest today it’s just me and David hanging out and talking to you
guys telling you guys what we know about solving those three big problems we all
have no time no money no deals we’re going to tweak the famous for just a
little bit we want to just give you guys some of our favorite real estate book
recommendations and business book recommendations and then we’ll go into
hobbies in the last question but so first of all favorite real estate books
if you want to know more about these topics a few books that stand out to me
first of all Anson Young wrote a book that we published here called finding
and finding great deals like it’s about finding great deals and then funding
them like it’s like it’s a no brainer go pick that out bigger pockets that comes
I store also David here wrote a book on long distance real estate investing
called long distance real estate investing and and like yeah we’re really
clever with our names so definitely check that out as well you can get and
get that bigger pocket talk about a store you can also get these books at
Barnes & Noble you can get them an Amazon but if you buy in my bigger
pockets you get a whole bunch of tons of bonuses and David’s bonuses are actually
super cool because I filmed them in my own living room so we actually did a
whole bunch of cool video filming in my own living room you guys all love it so
check it out again BiggerPockets icon slash store but that’s just a couple
real estate books anything you want to add to that or you want to go to
business books well I really like the book on investing in real estate with no
and low money down that Brandon wrote because this is a problem a lot of
people have especially when they’re new what I find is that most of the people
that are on bigger pockets now not everyone but a big chunk of them they’re
new and that’s why they’re here right there’s also a lot of successful
investors that are here I’ve listened to every single episode when it comes out
but for those of you that are new and you’re worried about specifically the no
money get that book and realize that all of these problems have already been
solved you just have to use a tool that somebody else has already made another
book that I really like is by Gary Keller is called the millionaire real
estate agent now the reason that I like this book because
not everybody out there actually wants to be an agent or should be an agent is
because he basically outlines what Brandon calls the Lapps funnel he talks
a lot about how it is all about getting leads and then working those leads into
the success that you’re looking for and it applies very very very strongly to
real estate investing if you can train your brain to start
working backwards from your goals right like I want to have success for me
that’s buying a house how am I gonna do it I’m gonna have to write offers how do
I know what offer tried I have to analyze a property how do I know what
properties to analyze I need to get leads and then start working backwards
from there using the mins the most important next step okay how am I gonna
get a lead well first I have all these things that Brandon and David just
talked about that I can start pursuing I need to start telling other people I
need to be joining a meet-up I needed me meeting real estate agents and meeting
contractors or write down a list of everything you need to do and then use
the mins fundal to figure out what’s the most important next step that I should
be taking to get myself a lead by combining these things together you’re
gonna get great leads was that just so fire that I made you sneeze now that’s
all I’m getting at is take these techniques that we’re teaching you
because we’ve we’ve talked to so many successful people and they’re all doing
it if you just copy what they are doing you will end up having the same results
that they’re having retrain your brain to think along these terms and you’ll
find yourself successful quicker than what you thought awesome
alright so let’s say favorite business book you mentioned real said agent it’s
a real estate book that’s a business book there’s two that I want to point
out that I made a big impact on me with the time thing like I don’t have enough
time that is the compound effect by Darren Hardy fantastic book I love that
book I actually read it over and over and over and the next one I actually
read a lot too the 12-week year it was a two books that I made a massive impact
on my life and one more is the 80 80 20 sales and marketing made a huge
difference on my life as well in terms of thinking in terms of funnels and
getting other people into your life to help you with things that’s why Perry
Marshall we actually had him on the podcast awhile back so again compound
effect 12-week year 8020 sales and marketing and then of course the one
thing written by Gary Keller and Jay Pappas and that had a big impact on my
life as well yep those are pretty much the exact same
books that I would recommend my advice to you guys would be if you know that
there is something holding you back you have that little itch in the back of
your brain that just says I’m not doing this because of this reason find a book
that tackles that reason listen to it on audio read it yourself talk to a friend
about it start a group where you basically hold yourself accountable to
all your buddies and say look I’m having a hard time with this thing it could be
having confidence to move forward it could be I don’t think I’m gonna math
and I can’t analyze deals it could be not a people person I don’t want to pick
up the phone and talk to somebody talk to other investors and other buddies and
let them come up with solutions for you for getting around it like Brandon
acknowledged all of you hundred thousands of people that are listening
to this I don’t like to talk on the phone and it was holding him back right
but he didn’t let that stop him he went and found someone else that likes to
talk on the phone not only is the phone talking getting done but that person now
likes him because that he’s letting them do something that they wanted to do
right I do the very same thing in my business like there could be a topic for
another podcast but I’m not afraid to say I suck at these things and I don’t
enjoy doing them and I will find someone else to do it so I can focus on what I’m
good at and that’s how we’ve been able to find
success and you guys can too love it alright next question on the famous four
with hobbies what do we do for fun let’s change a little bit what have we been
doing for fun here in Hawaii we’ve done a lot of fun stuff lately about like you
know what one of the things that I really like to do is find out what’s
going on in my friend’s life and how I can help him get there with what I have
going on in my life right and I found that when you pour into other people and
you help them become more successful you end up finding answers to your own
questions and then they’re more incentivized to do the same for you so I
would like to encourage everybody out here to go find the friends that you
already have or the business partners that you have and figure out what is
their problem and help them solve it increase that friendship make it even
better make them want to return the favor for you and maybe in solving their
problem you can kind of come up with what would help you with yours yeah
that’s awesome yeah we’ve been doing a ton of that because I got a lot of
problems and David the smart dude so other things we’ve been we’re gonna be
doing some surfing on Saturday that should be a lot of fun so anyway that’s
that’s hobbies lately has been that hanging out with family we went to
Waikiki Beach last night we actually met rich Carrie who was on the podcast just
a few weeks back rich Carrie is an awesome dude we had
some Cheesecake Factory with him that was rich eight one uh those go to the
last question David what do you think I’m gonna just ask you and then I can
maybe I’ll chime in on your answer but what sets apart successful real estate
investors those who find deals who find the money who find the time what sets
apart them from everyone else who struggles gives up fail and never get
started so every time I’m asked this question on the podcast I have a
different answer as I kind of evolved through time and what my answer is right
now is I really believe that is the perience that the investor has when they
first get started if their expectation was I’m gonna walk out there make a
couple phone calls find a deal get it under contract banks are gonna be
throwing it themselves to give me money it’s all gonna be a thirty-year
fixed-rate at a really low interest my tenants are gonna be wonderful just like
I would be in take care of my house they get discouraged very very quickly before
they’ve had enough success to make it worth it to power through that right and
then they quit so what I want to tell people is understand that you need to
protect your experience that you’re gonna have with this by seeking wisdom
listen to these podcasts and understand there are gonna be many hurdles that
come up it is they are all worth it literally every single thing that I have
ever accomplished in my life that I am proud of was hard there’s not one thing
that fell into my lap and I’m like oh this was awesome right and it just came
really easy I had to work for every single one of them and now I don’t trust
it if it comes easy it’s probably not gonna be good
Brandon just told us that story and it was kind of like oh haha my wife
rejected me four times in a row it is not fun to get rejected by someone you
have strong feelings for that is really really hard and a lesser person would
have quit and not got there right because Brandon understood it is worth
it to go through this pain he ended up having kind of like you know the awesome
fairy tale story at the end of the thing but real estate can work the same way
make sure that your experience is good by not having bad expectations and not
setting yourself up to fail don’t go after homes that are in perfect
condition and right way below asking price offers and then it gets courage
when everybody says no look for houses that you know are more likely to take
your offer look for people that you know are more likely to trust you and respect
what you do and ask them for money don’t go to complete strangers that don’t know
you at all and say can I have $90,000 to buy a house make smart decisions so your
experience isn’t bad get some success and then you’re not gonna mind the
headaches that come your way I got nothing that oh that was awesome drops
mic alright guys so I hope you enjoyed this episode of the BiggerPockets
podcast again a little bit different format than usual but I thought since
David was out visiting me here in Hawaii right now I thought it’d be fun to just
you know pick his brain talk together kind of do a little masterminding
together and try to help solve your problems good again the big three that
everyone struggles with I don’t have any money I don’t have any deals I don’t
have any time after today’s episode I hope you don’t have those excuses in
your life anymore and you can go out there and take massive action so with
that if you enjoyed this episode do me a favor share it on your Facebook page or
you know whatever social media channel you like better
or the best tell your family and friends about us like you never know like whose
life you could change completely because you introduced them to the world of real
estate investing podcast in a cool way to do that so if you thought this was a
good show to share share it and of course leave us a rating and review over
in iTunes because that helps us reach more people by being in the iTunes
charts so that’s all I got I hope to see you guys around make sure you check out
the bigger pockets webinars we do them every single week BiggerPockets comm
slash webinar and Dave you got any final thoughts nope this is the host of the
BiggerPockets podcast david green for brandon married way out of his league
turner signing up you’re listening to bigger pockets radio simplifying real
estate for investors large and small if you’re here looking to learn about real
estate investing without all the heights you’re in the right place be sure to
join the millions of others who have benefited from bigger pockets calm your
home for real estate investing online

Deal Sourcing for Beginners | Simon Zutshi


– This video is all about deal sourcing for beginners. So what is deal sourcing? Well very simply, it’s about going to go and find a property that’s
gonna be a great deal. And in a minute I’ll tell
you what a great deal is. So my name is Simon Zutchi, I’m the author of Property Magic, the Amazon number one
property best seller. I’m the founder of the
Property Investors Network, and I’ve been investing
in property since 1995, and teaching other people how to be successful investors since 2003. One of the most important
things you need to learn to be a successful investor, is how to find great property deals. So first of all, you kind of need to know well what makes a good property deal? So a couple of criteria I
want you to think about. First of all, if we can buy a property for less than it’s worth, so maybe worth 200,000. We can find someone who’s what we call a motivated seller. They need to sell quickly, they want speed and certainty. We might be able to buy
that house for 180, 160, or maybe even 150,000 pounds. And that’s quite a big discount. But actually when you find
the motivated sellers, you can save tens of thousands of pounds off the purchase price. So, if we buy at a discount we buy for 170, it’s worth 200, it means the day we buy,
we get 30,000 pounds of instant equity. So, that’s the first
thing we wanna look for. Sometimes we will pay
for full market price, I’ll explain why we
might do that later on. But buying with equity on day one is always a good thing. The next thing is this, we wanna make sure we buy a property in an area of strong rental demand. We want to be able to quickly
and easily rent it out to new tenants if the
current tenants move on. Link to that, we wanna make sure we get cashflow. What that means is, when we take the rental income each month and we pay the mortgage, we pay the insurance, we pay the manager fees, anything else, there must be some profit leftover. That’s what we call the cashflow. We only ever buy properties that have positive cashflow. The next thing is, it’s great if we can buy a property where we can add value. If you buy a brand-new property, well we can’t add any value to that. If we buy an older property, then we can do things
to increase the value. Maybe we can renovate it, we can put a new kitchen in, new bathroom. New carpets, we can paint it. And what was a bit of a tired house suddenly becomes a really
desirable property again. Maybe we can extend it. Do a side extension, convert
the garage into a room. Maybe we can extend the
back, go into the attic. In some areas in London it’s even worth digging
down into the basement, because space is at a real premium. So what can we do to add
value to the property? And sometimes, we might
actually buy a property at full market price. Maybe it’s worth 200,000 pounds, and by spending 30,000 pounds on it, it might cost us 230 in total, we can make the value maybe 300,000. So if we can add value to a property, there’s maybe a good reason I should buy at the full market price. The next thing we want to do is if we can minimise the amount of money we put into the deal. That’s always good, because that means you can buy more deals. And finally, we want to try and maximise
the return on investment. So return on investment is a comparison of how much does it generate
for us every single year, compared to how much we have to put in to get that cash generating asset. So it’s a percentage. So we take the annual profit, divide by the initial investment, multiply that by 100 to
give us a percentage. The higher the percentage, the better the deal is for us. So when we’re looking for great deals, and we need to understand
what makes a great deal, we look for as many of the criteria as we possibly can. If a deal’s got all those criteria, you need to move really quickly. Because if it’s a great deal, guess what? If you don’t buy it,
someone else who’s quicker will come in and snap up that great deal. So by educating yourself, by learning what makes a great deal and moving quickly when you
know you’ve got a great deal, then you’re gonna be a
more successful investor. Usually, you wanna pick an area sometimes called a gold mine area you wanna focus on. Typically it should be
close to where you live or where you work, ’cause you’re gonna have
a better understanding of which are the good areas, which are the not-so-good areas. But, if you have a bit of a power team are your people around
you who can help you? Maybe you can infest further afield. But most people starting, for beginners where you live or work
is a great place to do. If there are no deals, or you don’t think there are deals right where you live, try going out maybe 45 minutes from where you live and draw a little radius around. Somewhere within that radius there’s gonna be an area
where deals stack up better maybe than where you live, and that’s the area to focus on. So I do hope it’s been useful. If it has, please post questions below. Please feel free to like, to share. And why not come and subscribe
to the channel as well? My name’s Simon Zutchi, I encourage you as always to invest with knowledge,
invest with skill.

Example Deals: 100% Owner Financed Real Estate Investing Deal Analyzed – Does It Make Sense In FL?


Joe: Hey, it’s Joe. I’ve got another deal
to analyze here. This is another email that I received. This one came from C.R. Harpe
in Florida. Thanks, C.R. C.R.: “I have a deal that has some good features
to it but I’m broke and have bad credit. I need this deal to get some cash flow coming
in and start replacing my income and allow my wife to be home with the kids. I’ve located
a grouping of duplexes that the seller is willing to sell with 100% owner financing
for $109,000 for each building. They’re rented and in good shape. I contacted a local realtor
that I found on Craig’s List and she drove by and said that they looked good and that
his rents are normal. If I can get my own financing, he’ll give me a 20% discount for
not having to carry the note. I cannot go to traditional lenders because my FICO is
596.” Joe: And these days if you want to get an
investment loan you’re going to need a 720 and you’re going to need to show income to
support those properties even without their rent. It’s very difficult to get an investment
loan these days. C.R.: “I found a private lender but most won’t
touch anything under $1,000,000. The only one that I found that will handle smaller
acquisitions will do 65% loan to value on the appraisals or purchase price, whichever
is lower.” Joe: This is hard money he’s talking about
here and I would stay away from hard money, unless you know for sure that you’ve got a
buyer and you’re going to be able to get out of that deal quickly. Hard money — I can’t
say it’s never profitable — I’ve used it and I’ve made a profit from it, but it eats
into your profits so much and there’s so many other ways to finance a deal than using hard
money. This is one thing that I guess I should reiterate — you don’t need cash to buy properties
if you find the right properties and go after the right types of deals. What so many of
you are doing are looking at properties that are not going to be available that way. This
one looks like it might be possible to do it on terms without cash or hard money because
the guy said he would finance it 100%. So let me finish the letter here.
C.R.: “The county has the building assessed at $121,000. For the three that I would like
to buy, the total comes to $363,000, so I would need to get $265,000 to the seller.
That’s not quite the 65% loan purchase price.” Joe: He’s talking about the 65% loan to value
that he could use for hard money — don’t do it that way. First of all, if you try to
show that you’re paying a certain price for a property, and if you’re trying to show that
you’re paying more for it than you are, and then getting the down payment funneled back
to you through the seller, that’s loan fraud. You’ll get yourself in trouble; you’ll get
yourself put in jail — so don’t do that kind of thing. Make sure that the lender understands
exactly what you’re doing and that all of it is revealed. We’ve done some very creative
stuff in the past where we have been able to do rebates and things like that, and all
of that’s legitimate as long as the lender’s aware of it and accepts it. I’m not just talking
about the loan broker being aware of it but also that it’s in the loan documents and that
it’s obvious that that’s what’s happening. Because the broker and the actual lender are
two different entities, and a lot of times a loan broker will just tell you, ‘Well, just
do this this way and that way and the lender will accept it.’ When in fact, what he’s saying
is that that way the lender won’t know about it and he’ll get his fee and you’ll get the
deal done, but you will have committed loan fraud. That’s happening less these days simply
because investment loans are fewer and farer between than they have ever been.
C.R.: “How can I structure this to get no out of pocket costs and still pick up the
property? He has 17 of these to sell total. He wants to do 6 at a time and here are the
details. Don’t share the address or the city as it’s so small that others can find it easily.”
Joe: The thing you have to know that he didn’t give me the information for is how much they
rent for. And he doesn’t need to know just the amount that they rented for. He also needs
to know what the history of the rent is. So you want to look at the Schedule E of the
owner of this property. Ask him to just send over the Schedule E of that property so that
you can see what he reported to the IRS. Typically he’s not going to report more than what he
made. So if you can see the Schedule E you can tell that he made x amount of dollars
over the last year. If you average that out then you can figure how much you can expect
to make with this with this particular manager in place. Can you keep that manager in place?
Is that manager a good manager? Can you talk to that manager and find out a little bit
about the properties from him? What kind of condition is the property in? How long have
the tenants been in there? How often do they turnover? All of these things are going to
be important if you’re going to buy these properties as investment properties. If you
are, and he’s willing to do 100% financing, can you do them using the hierarchy of zero
down structures that I taught you in one of the earlier videos?
Joe: In this case, we’re talking about doing a subject-to deal. Now does he have a loan
on these properties? We don’t know if he has a loan on these properties; we need to find
that out. If you’re paying $363,000 for these properties, how much in loans does he have?
If he has a total of $200,000 in loans on them and he wants the rest of his equity to
get the $363,000, and if he wants the full assessed value and you’re willing to give
that to him, and the numbers make sense because it has enough income to cover the payment
on that — let’s say he owes $200,000 on regular notes and he wants to get to another $163,000
in notes — you could do a multi-mortgage on this, and have him deed you the property.
You could make payments on the existing loan for that $200,000 and then you could make
a payment on another loan that equals $163,000 for these three properties to him personally
to where he has a mortgage on all three properties so that if you default he can take all three
properties back from you and protect his equity. Joe: There’s lots of ways to do this. The
next way down is you can do it on a land contract from him. He could just say, ‘Okay, 363. Do
a balloon payment after 5 years, x amount interest rate.’ Let’s say your payments on
that thing are $3,000 a month and the income on it is $3,600 a month and the payment covers
taxes and insurance and you’ve got to figure in your property management — do you still
have enough money to break even and make these deals work in the long term? And if you do,
and they’re good selling investment properties, do you keep them yourself at that point or
do you want to try to make another chunk of money and maybe sell them for $5,000 more
to an investor who gives you $5,000 for each duplex so that you make $15,000 on the deal
and then turn it around and sell it that way? You have to — because then you can show,
if the investor only has $5,000 on each of these deals and they break even and again,
remember what we talked about in depreciation on long term investment and how properties
go up in value and you can take deductions even if you’re breaking even, it’s going to
make sense if they pay off over a period of time.
Joe: What you want to try to go for when you’re making this offer to this guy is to get as
long a term on these loans as you can. I don’t think I’d do it for 5 years, I’d want to try
15, I’d prefer 30 years — I want to be able to pay these off over a long period of time
so that I know that they’re advertising. And if there’s enough money to make them pay off
sooner than that then obviously you want to pay them off sooner than that so that they
start cash flowing for you personally. I hope that helps.

How to negotiate a deal & make $10,000 | Wholesaling Real Estate


– Do a role play kinda, yeah you can close that. I kinda wanna do a role playing
on how I go into a house. So I’m gonna set the scenario. Tommy calls Lyka, he sees our website. He calls and house is worth 120, right? And he says he wants 75,000. Okay and he owns it free and clear. And you inherited this property from a family member. Right? So this is how I come to a house. So we didn’t script this, but I’m here. Boom, boom, knock on the door. – [Tommy] Hey, how’s it going? You Max?
– Yeah, how you doing sir? – Talked to you on the phone right? – Yep, nice to meet you. – Oh you too man. – Nice looking house you got here. – Yeah man this is, I’m telling you man, this is, kinda sad. You know we had some family passed away. And you know, it breaks my heart. We got a lotta memories in here, but you know it’s time to
go, it’s time to move on. – Did you live in this house? – You know I didn’t live in here. But it was my aunt’s house. – Okay. – And I do have a lot of memories. We had like family
cookouts, birthday parties, those type of things. – Yeah, I know what you mean. It’s kinda hard and
sometimes it’s cumbersome when you just, a property
falls in your lap. – Yeah, yeah.
– Right? – Yeah absolutely. As you can see there’s some problems. We got a little leaking, I’m gonna be honest with you, right? – Well let’s go around and look at it. Let’s go around and look at it. – Alright, cool. I mean well you can see
the water stains here. – Yep. That’s not that bad though. – I mean yeah, I mean I guess, I mean it’s not that
bad, but obviously if, I mean if that’s there,
there’s something wrong on the roof, right?
– Yeah, yeah, okay. – I mean I wanna be up front with you. You know what I mean, I
wanna be real with you. So but you know I mean besides that, I think it’s a pretty good house. Now I mean, we got a
little stuff here and there but I mean you can see here, the flooring looks pretty decent. – Okay. Yeah I mean, it’s okay. It’s outdated a little bit. The kitchens look outdated,
the bath look outdated. Now remember guys, the
house is worth 120, right? – I mean it’s a little
outdated, but I mean, I mean it’s workable right? I mean–
– It is workable. Now let me tell you what we do. We’re a group of four investors, local here to Winston-Salem. – Alright.
– And we buy houses for mainly two different reasons. We’ll buy a house and we’ll
fix it up a little bit. And we’ll add it to our rental portfolio. Now the second we been doing a lot lately is we buy a house, completely fix it up, make it modernized, right? 2018. And we try to get it on the
market in the next six months. Right?
– Okay. – So this house, if you
had to take a guess, what do you think, this house is good for
our rental portfolio or you think we can flip this house? – I mean, you know I
think this either one man. Like I mean I can see a family
living in here for sure. Like my aunt did. – I think you’re right,
I think you’re right. Now you know I think on this market, I think, you know, we can
get probably 109, pushing it. You know. – Really? Are you sure? Like I looked on Zillow and
you know it looked like it was. – Yeah, I wish Zillow
was correct all the time. But you know if this about 109 pushing. Now if we do push the envelope and put granite countertops in, which is not normal
for a house this price, you’ll probably get a little bit more. But you know I gotta
compete with other houses that people are putting 120,000
in to buy a brand new house. So I gotta make this house look brand new. Right?
– Okay. – But you know what, I don’t
think you’ve run outta options. You know I think if you want
to get the highest dollar I think you should list
this with a realtor. – I should list it with a realtor? – Yeah, I think you– – Well if I list it, well I mean, why am I… – Well I mean do you want–
– I called you, right? – Yeah but you wanna get the most outta this property, right? – Well yeah, I mean I’d like to, you know get a fair amount. – Yeah, yeah. I mean listen if you could take out a loan for maybe, 30 45 grand, which
I think it’s gonna take, you fix it up, in six
months you put it on. – That’s, I mean, I kinda
want to just get it done with, you know what I’m saying. – Okay.
– Like I don’t wanna have to owe on every single month. We got other things. You know I don’t live here. – I understand.
– Don’t gotta worry about people breaking in. I don’t wanna, you know. – Well here’s the thing. I’m an investor, right? And my thing is based on numbers. And I just don’t think
we’re in the same page when it comes to selling this house. And it’s fine you know what, I go to a lotta houses. And when I leave here, I
got two more appointments. – I mean but what number,
what number are you, you looking at though,
what are we talking about? – You know it’s kinda hard to say. I would (sighs) what do
you need outta this deal? I mean what are you comfortable? What’s the perfect scenario for you? What are you gonna do with the money? – Are you saying it’s worth 109, I mean, I think if I can get 80 or so, I think that’ll be cool. – Yeah but here’s the scenario. And I understand why you want 80. It makes sense. 109, there’s a big discount. But Francis and I are
gonna go in this house and we’re gonna spend 30, maybe $40,000 to get it to look like a house from. Now think about this. You and your wife are driving around. You got $115,000 to spend. You want it to look like
a house in 2018, right? So that’s kind of what we’re up against when we’re flipping properties. I wished it was easy as on TV. But it’s really not that easy. So $80,000 is not gonna put me in there, because think about it, from 80 to put, let’s just say a minimum, I put 30 in it. I’m at 110. So there’s no money for us. That’s why I think the best option for you is maybe to get that hard money loan or you know I got phone numbers of about five or six realtors that’ll come here and take a look at it. – I mean I shot you an offer. What can you do? – I don’t really wanna insult you. I kinda wanna find out what
is your perfect scenario. You know tell me what you gotta have. And here’s the difference
between a lotta people. I buy houses. So you know the thing is I’m not gonna, the offer I give you or
the offer we decide on, it’s what you’re gonna walk away with. I’m gonna pay all the closing costs. – Okay, so you’re gonna take
care of the closing costs? – Yeah, the number we
agree on, that’s the number you’re gonna walk out
the attorney’s office, minus a couple hundred bucks
for some excise tax fees that you know, I can’t
take care of for ya. – Alright. How quickly can you close on this? – You know here’s a scenario how it works. So you and I agree on a price. I’m gonna bring $100 escrow
to the attorney’s office. This, basically I hire him at that point. He starts the title
search, probably takes him anywhere from seven to 10 days. Then we get on his calendar. I say all together three weeks. But you know, on the contract,
I like to put 30 days, because I’ve lost a property
because we weren’t able to get on the attorney’s
calendar fast enough. So I put 30, but we’ll
probably close in 20. – So you think you can
close in less than 30 days? – Absolutely, I know I can. – You know you can?
– I know I can. And listen, you never
have to come back here. You don’t have to take
anything outta the house you don’t want. – I was gonna ask you, yeah. – Yeah, you leave anything you don’t want and we’ll take care of the rest. – Okay. Man, so less than 30 days, we’re done. I don’t have to be nothing. – It’ll be the smoothest
transaction you’ve ever had. And like I said we do
this 10 times a month. – If we can get it done quick, I think I might be willing to do, 50, 55. (sighs) – I might not be your guy. And I don’t wanna insult ya. I don’t wanna insult you just because I gotta put
30, 40 grand in there. And I’m at 90. That doesn’t leave much room. And I know you’re thinking it’s easy. But I’m, I’m really at about 40,000. – 40. Can you do 42? – It’ll be tough. It’ll be tough. But you know what, I’ll get it done. Let’s do 42.
– 42? – Alright?
– 42. – So now you guys seen that. That’s $120,000 deal. But here’s what I wanna explain to you. I didn’t give him an offer
until I know he was ready to sign the contract. I gave him every opt. He sold me the house. I didn’t buy it. He convinced me to buy the house. And that’s what you don’t
wanna go into a house as a desperate buyer. Right? That just changes. I gave him a scenario. Listen you can go list it, I can get you a guy for a hard money, I can’t get him no hard money loan. I can get him for a hard money loan, there’s all these other
options that he has. And he’s upset because
he called me to get what? An offer. I got the carrot that I
wanna hang over his head. And I’m not gonna give up that carrot too early in the conversation. – [Man] Can I? I would say good point it,
like you didn’t make offer, he made the offer. – I made him make three offers. So he went from 80 to 50. I said listen I’m at 40. I’m good at 45 on this property, without even doing the math. I already know. Right so that is the difference in between going in a house, now you know how to talk to somebody. Huh? Well yeah, I know the numbers, but you should’ve already
done your homework before you got here, right? So if this house, do the math. Anybody got a calculator,
this house is $120,000. Remember we talked about that. 120 but I told him it was 109. So 120, remember I purchase on this number and I sell on this number. So let’s talk about what
we really need to be at. You’re at 120, right? You’re gonna minus 30%. What does that leave us guys? – [Man] 84. – Alright so we’re at, say okay. $30,000 rehab. How much does that leave us? – [Man] 54. – 10 grand in profit. – 44.
– 44. – I got it for 42. And I’m gonna call him and ask
for a reduction in six days. You see what I’m saying? (group laughs) I didn’t even have to think about that. And that is how you go into
a house as a confident buyer. That I don’t need this house. But if you wanna sell it,
I’m the guy to buy it. Right, because the prep conversation for me coming here is that I’m
not here to look at houses, I’m here to buy a house. You wanna show your house,
put it on the market. A lotta people come looking through it. I don’t wanna come to just see your house. I’m coming to buy that thing. That’s how you close deals. It’s called the going negative. Right? ‘Cause most people woulda gone in there and they woulda threw out the offer. They done started negotiating. You lost. If you start negotiating
with that guy at 80 grand, you’ve lost. You know you need to be at 45. You not gonna get somebody
from here to there. I started negotiating when he got to 50. And I felt that he was, he so desperate he wanted to sign that contract. I threw out my offer. I threw out 40, knowing that
if he said 45 I’d take it. And he said 42. And I didn’t argue with him. ‘Cause he won. You see that? I gave 40, he said 42. He walked away happy. Baby, I got him. He go in the car, he say baby I got ’em. He offered me 40 I said I need 42. And he said baby I got it. (group laughs) Right? So he won. He just made an extra two grand. I made an extra three. Right? So that is, that’s sales, right? And you guys that’s
back there selling cars, I hope they taught you that. You never wanna push the sale. You never wanna push the sale. You always wanna be behind. You always wanna be behind the person. You never wanna push them to a sale. Right? I don’t need this house. That’s my attitude. Remember it’s not that bad. That my money came from,
I gotta update the house. Yes your cabinets look great. But they’re 1984 cabinets. I gotta put all white ones in here. And I flip the script on his perspective. Imagine if you and your wife
was shopping with 120 grand. Would you buy these cabinets? I gotta make ’em look like brand new. So yes, your house is not in disrepair. But it’s outdated. Get ’em every time. I’m telling you. People, because he, that 80 he threw out there
when he was on the phone, that was BS. He ain’t want 80. If I gave him 80, he would’ve been happy. But he knows ’cause he read the website, that we’re investors. And 109 to 80 and you see
how I anchored him at 109? That’s called anchoring. I made him agree, we agreed. See if you don’t agree
on the starting price, then you’ll never end up
at the same ending price. Because if he thought the house was 120, and I said 109, we’re 11 grand apart. My offer would’ve had to’ve been 52 for it to make sense. So that’s it. That’s how you go in
there and close the deal.

How Do We Deal With Artificial Intelligence In Real Estate?


Hey, it’s Joe Crump. I’ve got another question here. This is from John Canada. He says, “How can we cope with AI in the
real estate business?” I’m not really worried about coping with
it, I’m excited about using it. Because AI is how we built the Automarketer. It’s a pretty smart system, and it goes
out there and finds the properties that you want. You have to put a little bit of input in there. It analyzes the responses that come in, let’s
you know whether they’re a yes or a no, it puts them into the appropriate follow up
system once they know that. It notifies you that somebody is interested
in the property so that you can call them and put the deal together. So that AI does a lot of the work for you. If I look at all the work that I had to do
before I had the Automarketer versus the amount of work that I have to do after it, 90% of
my work has disappeared. The other 10% still has to be done and I have
most of that done by outsource workers. So, I have somebody working for me as an admin
person, somebody working as a buyer finder, someone working as boots on the ground and
sometimes working as a seller finder as well. So, those different tasks, that’s about
10% of the work and then the other 90% of organizing and keeping track of all this stuff,
making sure everything goes out as it should, doing the marketing, which is the main purpose
of any business. If a business isn’t marketing it’s not
in business. So marketing is the main function of a business. Nothing happens in business, as Peter Drucker
said, until a sale is made. So, and marketing is what drives those sales. Everything else besides marketing and innovation
is an expense. So, marketing is the only real profit center
you have in your business and as long as you’re doing that, you’re in good shape. That’s why you want good AI, you want good
automation, you want a good system to do that work for you and that’ll keep you moving
forward. All right. Hope that answers the question.

Real Estate Investing Business Plan Example


Interested in real estate investing and looking
for a plan? Well today, I’m going to give you one. It’s an example of a real estate
investing business plan or maybe even a game plan, if you will, that helped me build Epic
Real Estate. It’s a really simple example, easy to follow that you can just rip off and
use in your market to achieve your financial freedom. Go ahead and click the subscribe
button. Ring the bell. I post cool stuff like this each and every week. Alrighty, let’s
do this. This is Theriault Media.
Hi, my name is Matt Theriault. I’m CEO of Epic Real Estate and if you’re looking for
a practical example of a real estate investing business plan, then I’m going to share with
you the very one that set Mercedes and I free, as well as many of my Epic clients, and when
we’re done, if you’d like some help, some extra help with yours and putting it into
action, I’ll show you how to get that type of one-on-one support.
Now, a real estate investing business plan, it’s important because if you don’t have one,
I mean who knows where you’re going to end up. But when you have a proven one in place,
your destination, it becomes very predictable. I was thinking the other day about when Mercedes
and I when we got started, we had a very simple basic game plan and it worked out wonderfully
for us, and this is the game plan that I’m going to give you right now.
We started by just flipping properties to generate some cash and then we started doing
really well for ourselves, and once we had a comfortable amount of reserves in the bank,
we were like, okay, we’re making this money, but we’re working every day to do it. We’ve
got to shift our focus to creating some residual money.
Our initial plan for creating cash flow was this. We would flip five houses, then we’d
hold the sixth and we did that a few times. Then we were like, okay, I think we can now
flip four and hold the fifth. So, that was our plan for awhile. Then, we’d flip three
and hold the fourth and then we’d flip two and then hold the third and ultimately, we
would just flip one, hold one, flip one, hold one, and eventually it created enough residual
income where we didn’t have to flip properties at all anymore to pay our bills and survive.
Once we got that residual income to exceed our monthly expenses that paid for our lifestyle,
we then redirected that excess cash flow to create more cashflow. Our assets were buying
assets. We were working less and less for money and our money was working more and more
for it. So, our money was creating our wealth. Does that make sense? I’ll show you how we
did that, but if that makes sense to you, just type in the comments below, “That makes
sense.” All right, let me show you how we did that.
I’m going to call this business plan, the Epic Game Plan, and it comes in three phases.
Phase one, this is the milestone of financial independence. That’s first. We’re going to
go after financial independence. This is where you are in control of your income. You are
in control of your profit and you don’t need a job to support yourself financially. You
are in total control of your own finances. This is where you become your own boss. If
you’re going to be financially independent, you can’t be dependent on somebody else, right?
So, you have to become your own boss, you have to be dependent on you. That’s where
the independence comes from. So, step one is to become your own boss.
Step two is to decrease your expenses. To make this happen in the beginning, you’re
going to have to cut back on the excess, most likely, depending on your situation. Perhaps
you might even have to make some sacrifices, but it won’t be for long, so exercise a little
bit of patience, hang in there. Then, step three is you go to work. You’ve
got to work like hell because you’ve just become your own boss, right? But what so many
people forget is that in the beginning you’ve also become your own employee, as well. Business
just doesn’t run without employees, so you’ve got to wear both hats for a minute. Become
your own boss, you become your own employee, and then you work, work, work until you get
your active income to pay for your lifestyle. Got it? That’s phase one.
Phase two, financial freedom. So, you’ve got your financial independence through your active
income. Your freedom is going to come as a result of your residual income. Well, that’s
now the big focus. To do that, you start by developing systems, systems around your income
generating activities. The mission here is to get your income generating activities to
happen with or without your direct participation, and then once those are in place, it’s time
to start acquiring cash flowing income properties, and as fast as and as many as you can responsibly,
of course. Then the third thing in the freedom phase
is what I call a poor man’s version of asset protection. You want to start diversifying
the locations of your properties. You want to diversify income properties geographically.
You want to diversify your teams, as well. That kind of happens as a result just by default
of you diversifying your locations and so you stay focused on these three things until
your residual income pays for your lifestyle. Do that, and the second phase of financial
freedom, it’s going to be yours. All right. Phase three, wealth creation. You
see, once your residual income is paying for your lifestyle, you’re going to keep going
with this plan, but redirecting the excess residual income that you create towards creating
your wealth. This is where your money starts to make your money and this is the big differentiator
between the common person and the wealthy person, meaning
most people go about creating wealth the slow and more difficult way, they just work, work,
work to save this giant pile of money so that somewhere down the road someday they’ll eventually
be able to create a residual income from that big pile and then they can go ahead and live
life then. They never effectively make this shift from
they working for their money to their money working for them. You see, most people, they
just don’t earn enough to save enough to create their wealth before the most active years
of their lives are over. But, when you have residual income coming in at excess, you’re
able to live and enjoy life right now and your wealth, it just gets created automatically.
This is where Robert Kiyosaki got a lot of backlash when he said, the rich don’t work
for money. Do you remember that? I think it’s lesson one of the Rich Dad Poor Dad book.
People were like, what are you talking about, the rich don’t work for money? A lot of people
had a really, I don’t know, a twisted idea of what that actually meant, but what he really
meant was they don’t work for money, their money works for their money.
This is the real estate investing game plan that I’m giving you right now on how you actually
make this happen for yourself. In this third phase, wealth creation, you’re going to be
making a big shift from working in your business to working on your business. You’re going
to be managing your assets to create more assets. Your cashflow is going to be creating
more cashflow. The second thing here in this phase is you’re
going to become a manager of managers. You’re going to manage the property managers that
manage your properties. This is where you start to become a true business owner. Then
third, the next level of preserving and protecting your freedom, and and above and beyond the
legal structures that you’ll obviously put in place, you’re going to want to start looking
at diversifying your assets. See, Mercedes and I, we got started just flipping
single family houses and then we started holding single family houses. We then moved to some
duplexes and fourplexes. Then, we got ourselves a 14 unit building, a 16 unit building, an
18 unit building, and then we got a 44 unit building, and then a 50 unit building. We
diversified into multifamily. Then, we started looking at our books, and what we did is we
crafted a nice little balance between all of the tax advantages that real estate gives
you and then also all of the potential active income that we could make. So, we structured
our portfolio to maximize our income by minimizing our tax liability.
We did that by investing in and creating seller financed notes. This is what this did for
us. It increased our cashflow, the notes increased our cashflow, and then the property that we
held onto, it offset the extra tax burden that that extra cashflow from those notes
created. We started with single family, we added multifamily, and then notes, and now
we’re adding vacant land to the mix. But take note, we’re doing all of that after we achieved
our freedom, right? This is part of our wealth creation mode.
Most people start diversifying all of these assets way too early. They go too wide too
soon when they should be going deep right at the beginning and sticking there for awhile.
If you’d like to start finding the deeply discounted off-market deals that make all
of this possible, I’ll show you in just a second. But first, if you’d like some help
creating your own Epic business plan, and even more importantly, executing the plan,
check out this video, I’ll put it right here on how you can get some one-on-one help doing
just that, okay? I’ll also put a link down below for your convenience.
Now, how do we find these deeply discounted off-market deals? Well, I made this video
on that very thing just last week and you can click right here to check it out. Don’t
forget to like this video, subscribe to the channel, and feel free to share it with someone
you know who also might find it useful. Alrighty, see you next time. Take care.

How to Invest in Real Estate with Your Retirement IRA or 401K (Roll Over 401k to IRA?)


(upbeat music) – [Toby Mathis] Can I roll over my 401k to a self-directed IRA to
invest in real estate? The answer is, absolutely. However, do you really want to? Because, depending on the
401k, again there’s two types. There’s multi-employee plans, where’s it’s an employer and they have lots of employees in it
and there’s restrictions on what kinds of investments you do, and then there’s the Solo
401k that you control. And honestly, you’re
better off using that 401k for the investment in real
estate if that’s what you’re doing because you don’t need a custodian. You can sign your own closing docs. You don’t have unrelated
debt finance income issues, that way you can borrow money. Whereas, in an IRA, you
have to pay the tax on it. IRAs are also single owners, so if spouses are buying
a property in their IRAs, well there’s actually two
owners on that property or you’re setting up an LLC, which is actually my preferred method. You’re setting up an
LLC inside of the IRA, it’s called a checkbook IRA
or an LLC inside of the 401k to make sure that you don’t
have unlimited exposure due to liabilities that could
come from that real estate. So if you own real estate, in a self-directed IRA, you’re ultimately, as the individual
retirement account holder, you’re personally liable
for the activities. So if you have a rental
property on an IRA, and there’s a slip and fall,
you’re ultimately responsible. So, we always want to make sure that we’re cognizant of asset protection when we’re setting this up. But yes, you can absolutely roll it and use a self-directed IRA or you can just use a Solo 401k. Or if this is with an employer, a past employer, they
allow you to roll the plan, I mean if it’s a past employer you can absolutely roll the plan. If it’s a current employer they could say ‘no you can’t until you leave service’. But if you have an old 401k
and you want to roll it in, one of the best things you
can do is set up a business and have a sponsor 401k. You just remove the issues. Nothing against IRA custodians but they don’t work on weekends. So if you’re buying property
and you’re there on a Saturday and it’s a bidding situation, you’re not closing and
you’re not able to even bid ’cause you can’t get a signed
offer from the custodian until they get back in the office. So if you want to avoid
that, you use a Solo 401k. Alright, we have lots of questions. I don’t see any of ’em
pertaining to that one so I’m going to skip
through to the next one. You want to add anything onto- – [Jeff] No I’m good, I’m just watchin’. – [Toby] All right. Some of this stuff is more
lawyer than accountant, so, in that particular case, as long as you’re going plan to plan, you don’t have to worry. And I’ll say, I can twist words, we can play the Roth game and say oh it has to be a traditional
IRA 401k to a traditional or a Roth 401k would have
to go through a Roth IRA. You cannot go back from a
Roth IRA into a Roth 401k. A lot of people don’t know that. So we can twist it. – [Jeff] Right. – But we don’t.
– No. – [Toby] We’re not going to do that. Even though we just- (upbeat music)