Month: March 2022

RE/MAX® Canada is pleased to announce the expansion of its long-standing Quest For Excellence scholarship program, both in reach and in funding. Starting in 2023, the scholarship will be offered across Canada (except for Quebec), with a total of $40,000 being awarded to 40 eligible students.

The Quest for Excellence scholarship program recognizes the success and ongoing pursuits of leadership and community contribution.

“RE/MAX Canada is proud to support the communities in which we live and work, through initiatives such as the Quest for Excellence scholarship and our Miracle Home Program,” says Christopher Alexander, President of RE/MAX Canada. “Not only do these programs directly help people in our communities, but they also motivate others to pay it forward.”

Students who wish to apply for the Quest for Excellence scholarship program are invited to write and submit an online essay up to 1,250 words, answering one of the following questions:

1. What does a “brighter future” look like for you?
2. How have you demonstrated leadership or charity within your community to make it a better place?
3. How can we ensure fair and affordable housing for all Canadians?

“COVID-19 has really highlighted the importance of home and community for many of us. We yearned for connection during lockdowns and isolation periods, and we leaned on our communities to carry us through the dark days,” says Elton Ash, Executive Vice President, RE/MAX Canada. “As we come out on the other side of the pandemic, let’s refocus on how we can support the communities around us.”

RE/MAX Canada will review the essay submissions and award 40 scholarships, of $1,000 each, to qualifying Grade 12 students*.

Essays** should be submitted online from September 12, 2022 until March 13, 2023.  Inquiries can be sent via email to [email protected].

* To qualify, participants must be Grade 12 students attending high school in the 2022/2023 academic year, and have not previously participated in a graduation commencement ceremony. Essays should be no longer than 1,250 words, and must be submitted between September 12, 2022, and March 13, 2023.

** All essay entries become the property of RE/MAX Canada. Photos and names of winners may be used in print publications and media. Each RE/MAX office is independently owned and operated.

About the RE/MAX Canada Quest for Excellence:

The Quest for Excellence started in 2000 in Western Canada. To date, RE/MAX has disbursed $306,000 through the scholarship program. For more information, please visit https://blog.remax.ca/quest-for-excellence/

About the RE/MAX Network
As one of the leading global real estate franchisors, RE/MAX, LLC is a subsidiary of RE/MAX Holdings (NYSE: RMAX) with more than 140,000 agents in almost 9,000 offices with a presence in more than 110 countries and territories. Nobody in the world sells more real estate than RE/MAX, as measured by residential transaction sides. RE/MAX was founded in 1973 by Dave and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. RE/MAX agents have lived, worked and served in their local communities for decades, raising millions of dollars every year for Children’s Miracle Network Hospitals® and other charities. To learn more about RE/MAX, to search home listings or find an agent in your community, please visit remax.ca. For the latest news from RE/MAX Canada, please visit blog.remax.ca

Whether you’re looking to lease or buy commercial real estate for your business or as an investment, it’s critical to be aware of ALL the costs you’ll be undertaking before signing that agreement. While expenses like monthly mortgage, insurance payments, or utilities may be obvious, take into account the following not-so-well-known costs:

Costs To Watch For When Leasing Commercial Real Estate

Type Of Lease

Not all lease agreements are created equally and they often vary according to sector: retail, industrial and commercial. For example, your landlord may propose a lease that includes a flat fee for all utilities, repairs, and other costs. Another option may include a base fee plus a percentage of your sales. Make sure you’re aware of what kind of lease you’re signing, what’s included, and what extras you’ll need to pay throughout the agreement.

Base Rent Increases

Often, the base rent you agree on is only negotiated for the first year of your lease. After that, an escalation clause will allow the landlord to raise the rent by a certain percentage each year (usually 3-4%) to allow for maintenance costs and changes in the market. Be sure you understand when and by how much you can expect rent increases.

Insurance

Landlords are required to carry insurance for liability of common areas and protection of the commercial building itself. However, they also have the right to require tenants to carry insurance that protects them against claims that might arise from business operations as well as contents and improvements coverage that protects the landlord’s investment in the property itself.

Costs To Watch For When Buying Commercial Real Estate

Closing Costs

Closing costs include legal fees, land transfer taxes, your commercial real estate agent’s commission, and sales tax. Make sure to include them in your budget along with your down payment and other upfront costs.

Renovations and Repairs

Just like when you purchase a home, you’ll likely want to make some improvements to the space. Make sure to consider all possible renovation costs before completing on your sale – including the roof, mechanical and HVAC, interior design and painting, landscaping, signage and windows, and even the parking lot. Depending on your industry and business operations, you may also need to make renovations and repairs that reflect relevant regulations.

Downtime

It’s easy to underestimate or overlook the amount of downtime your business will have during the renovation of your new property or the move itself. Make sure to plan accordingly, and account for the costs of any interruption to your business operations.

Have you seen the price of homes in Northern BC, Fraser Valley, Victoria and Vancouver lately? The British Columbia housing market has been one of the hottest housing sectors before and during the coronavirus pandemic, and once the COVID-19 public health crisis is in our rear-view mirror, this western province could maintain its juggernaut status moving forward. And it is not only Vancouver that’s contributing to the region’s meteoric gains and sizzling sales activity.

In January, the B.C. housing market continued to experience tight conditions, resulting in higher prices.

According to the British Columbia Real Estate Association (BCREA), residential property sales tumbled 14.7 per cent year-over-year to kick off 2022, totalling 6,138 units. But the average sale price in B.C. surged at an annualized rate of 23.5 per cent in January, to $1,042,169.

Price gains were seen across the province, from Chilliwack (+43.5% to $907,385) to Powell River (+29.9% to $600,868).

Although sales slowed due to a lack of supply, housing experts purport that activity was still strong compared to previous years. Total active listings fell to near record lows in January, totalling just 13,000 units. Industry observers say that a healthy figure would be closer to 40,000 listings, to put this number into context.

As a result, higher prices could continue to be the norm in the upcoming year, predicts BCREA Chief Economist Brendon Ogmundson.

“We expected home sales in 2022 to moderate from the frenetic pace of 2021,” said Ogmundson in a news release. “However, sales activity will remain high by historical standards.”

Because of the enormous rise in prices and the volatility in the sector, homebuyers are under tremendous pressure to get their feet in the door before valuations grow even higher, even if that means being cavalier and abandoning reasonable tactics to purchasing a home. The province is adding a layer of protection for households purchasing a house or condominium.

What “Cooling Off” Legislation Could Mean to the British Columbia Housing Market

This spring, the provincial government is expected to introduce so-called “cooling-off” legislation. The objective of this policy is to give homebuyers the opportunity to change their mind on the purchase of a residential property.

The Province proposed that prospective homebuyers be allowed to back out of their purchase agreement with little or no legal consequences in a recent statement. This is already instituted for pre-construction condominium sales.

The BC Financial Services Authority (BCFSA) said it would consult with industry experts, stakeholders, and other professionals to determine the proper consumer protection measures. This could also include assessing the blind bidding process and condition waiving in offers.

“People looking to buy a home need to know they are protected as they make one of the biggest financial decisions of their lives. Especially in periods of heightened activity in the housing market, it’s crucial that we have effective measures in place so that people have the peace of mind that they’ve made the right choices,” said Selina Robinson, Minister of Finance, in a statement. “With this step, we’re moving ahead to protect people and their interests in the real estate market by bringing in a cooling-off period for homebuyers and looking at additional measures to ensure effective safeguards are in place.”

Blair Morrison, CEO of BCFSA and superintendent of real estate, added that it is critical that the province ensures fair markets and promote public confidence in the B.C. real estate market.

“BCFSA’s goal is to ensure that British Columbians are protected when buying and selling homes – one of the most important financial transactions of their lives. Both buyers and sellers need to be supported and have time to make good financial decisions,” said Morrison.

Andy Yan, urban planner and adjunct professor at Simon Fraser University, told CBC News that this could trigger a “calming effort” in the B.C. real estate market. He added that it could encourage families to rely on home inspections and conduct the necessary research.

Public consultation is presently underway, and a final decision from the government could be imminent.

British Columbia Real Estate Industry Voices Concerns

Industry insiders have voiced concerns surrounding a cooling-off period as a way of reining in rising prices. The British Columbia Real Estate Association (BCREA) recently released a white paper called A Better Way Home: Strengthening Consumer Protection in Real Estate, which outlines alternatives to the proposed cooling-off period. Elton Ash, Executive Vice President of RE/MAX Canada, shared the BCREA’s concerns and supported their recommendations in a memo to Minister Robinson.

“I support thoughtfully designed, properly vetted and evidence-based policy that protects British Columbians and enhances professionalism and transparency in the real estate sector,” Ash wrote. For the “cooling off” period, as well as other policy interventions being considered to improve consumer protection, Ash recommend that the BC Government:

• Commit to undertaking fulsome consultation with real estate professionals and the public prior to announcements of any intention to implement policy.
• Ensure each proposed policy has a corresponding problem statement, objectives, goals and metrics to evaluate its effectiveness, making those available to the public.
• Provide public timeframes for monitoring and evaluating new policies.
• Ensure that any new rules are harmonized with existing rules and other regulatory requirements.
• Consider the specific impacts of potential policies on BC’s diverse regional markets, especially in rural, northern and remote communities.
• Ensure that a policy does not lead to an increase in unrepresented buyers or sellers.
• Consider the impacts of potential policies on commercial real estate.
• Consider the impacts to all parties in the transaction, balancing differing priorities and needs.
• Consider the impacts on a seller’s market compared to a buyer’s market.
• Ensure that measures don’t negatively impact affordability.
• Consider how these policies would interact with each other if multiple measures were adopted.
• Provide adequate notice for consumers and real estate professionals. Resources, education and adequate time to adjust practices and develop new standard forms for brokerages will help with compliance.
• Provide adequate information about data requested from brokerages, including its uses and how it would be reported to licensees, as well as the frequency and complexity of the reporting required by brokerages. This will ensure licensees understand what is expected of them, how they would benefit and how consumers would benefit.

“Market conditions throughout the course of the pandemic have highlighted the increasing difficulties faced by prospective homeowners in BC. A greater imbalance between supply and demand has resulted in heated market conditions,” Ash adds. “While the government should be looking at all options to ensure the public is best served, steps to increase housing supply should be at the top of this list.

The Biggest Buying Decision of Your Life

Whether this policy measure will impact the broader B.C. housing market remains to be seen.

In any market, purchasing a property is the most significant buying decision of your lifetime. However, these are not normal conditions, considering the average price to buy a home in the province is north of $1 million. This could leave buyers saddled with immense mortgage debt and payments, in addition to the wide variety of costs associated with home ownership.

The current environment is evidence that having a real estate agent guide you through the landscape is critical. From rock-bottom housing stocks to fierce competition throughout the region, a realtor is a resource to help ensure you are making the right moves. A real estate agent by your side can mean all the difference between winning and missing out in the home-buying process.

Sources:

David:
This is the BiggerPockets Podcast Show 583.

Johnny:
If you want to get to X amount of income a year, we’re going to need to do these things within your savings rate, we’re going to need to do these things with your assets. Whether it’s selling it, whether it’s doing a cashout refinance, and then we’re going to come up with a plan where you can acquire one every single year for the next five years to hit this milestone of yours.

David:
What’s going on everyone. It is David Greene, your host of the BiggerPockets Real Estate podcast. The show where we teach you to find financial freedom through real estate. Now, if you are looking to have a better life and real estate is the way you want to get there, you, my friend, are in the right place. At BiggerPockets, we are a community of over 2 million members that are all committed to the same goal as you, to find real estate to hit financial freedom.
We do that by bringing in experts in the field, subject matter experts, people who have walked the path you’re trying to walk and are looking back at showing you what they did to get there, as well as people that made mistakes so you can avoid them. Today’s guest is actually a close friend of mine. It is Johnny Hoang, an agent on the David Greene team, here to talk about what to look for in a realtor to have success.
Joining me is going to be my co-host, Rob Abasolo, who helps me to take on this incredibly important topic of picking the right agent to represent you. And it’s fitting because Rob and I recently had to go through this exact same process ourselves for the houses that we are buying. Rob, welcome to the show.

Rob:
Howdy, howdy, man. I’m excited because we’re really unpacking a lot here. One of the things that Johnny talks about that really I don’t think a lot of people give enough thought to is that working with a good realtor is a two way street, right? It’s a partnership in that both parties are expected to give effort. And when one party doesn’t give effort, then the other party moves on. So, we talk about things like, what’s a kiss of death when you’re a realtor? What are some things that a potential client can say to you that may deprioritize them on the list?
We also talk about things that you can tell your realtor in the making that’s music to their ears? It was really nice to talk to Johnny, because clearly, he is one of the best at what he does, and that’s always an exciting thing to get to talk to someone that is so good at their craft.

David:
Yeah. So, you’re going to hear about this, but Johnny owns real estate himself, he’s also an investor, he is a house hacker, and then he helps clients do the same thing. And when I buy property in the Bay Area in California, Johnny is actually the person that I have represent me. He just put me under contract on a $2.2 million place in Moraga that he negotiated all himself. It was a deal he found me that had actually expired. It was not on the market. So, we were able to negotiate directly with the seller’s family.
There was a couple other people that were sniffing around it too, and Johnny got so many compliments from the seller that I said, “Man, he’s just doing so good. We got to bring him on here so he can share what he’s doing well.” Then that gives everyone a blueprint of what they should be looking for when they find their agent. I’m excited to let you guys hear about this. I think this was full of a ton of really good, actionable practical steps.
Before we get to the show, let’s take a quick word for today’s quick tip. Today’s quick tip is go to biggerpockets.com/agentconnect, A-G-E-NT-C-O-N-N-E-C-T. There, you can type in the name of an area that you are interested in investing in and get a list of agents that you can sort of do your research on to see if they might be the right person to help you with your deal. BiggerPockets provides them. If you’re using a BiggerPockets agent, you are much more are likely to find somebody who invests in real estate themselves, understands what you’re trying to do, and listens to the same annoying voice that you are right now on this podcast, me, and Rob with a slightly less annoying voice, teaching how to get this done.
Now, it’s not a guarantee that they’re going to be a Johnny or a Rob or a David, but you have a great place to start. And in today’s show, we are actually going to tell you what questions you should ask them and what answers you should expect to receive. Rob, is there anything you want to add on that before we bring in Johnny?

Rob:
I want people to just pay extra special attention because Johnny does give us some of those secrets for finding these unicorn realtors as well. I think it’s really great to hear it straight from the source.

David:
That’s awesome. All right. Let me tell you guys a little bit of about our guest today. All right. BiggerPockets, I have a special treat for you today. Joining us on this podcast is a real estate agent on my team, The David Greene Team, Johnny Hoang. Johnny is my top agent. He sold $67 million worth of real estate in 2021 in only his second full-time year in resale real estate. Johnny has done 20 deals and currently owns 10 properties across three different states. He also invests in virtual real estate, cryptocurrency, NFT, stuff like that. Like he’s one of my coach when it comes to that side. And he is joining us today to share with us what to look for in a really good agent,.Johnny, welcome to the show.

Johnny:
Thanks, David. And thank you for such an elaborate introduction. I feel honored to be here.

David:
That’s basically the only reason that I’m on this show.

Rob:
Yeah. His introductions are always the best, man. Quite the accolade list. $67 million on your second year. I mean, I got to imagine that’s a very small percentage of people out in the realtor world that are actually doing that. Right?

Johnny:
I would think so. Based on the data I’ve looked up, we’re one of the top producing teams. So, yeah, I would think so.

David:
Well, where did you rank in Keller Williams overall?

Johnny:
I believe it was, in NorCal, it was 11 I believe, if I’m not mistaken. Our team hit top five from my understanding as well, but me personally, it was 11.

David:
But you were in the top 100 agents of all Keller Williams, right?

Johnny:
Yes, I was.

David:
Okay. That’s pretty impressive for the second year. Johnny’s definitely doing something right. You also invest in real estate. So, we are here to pick your brain about what to look for in an agent. Here with me is Rob, who is not a real estate agent. I love that we’re getting to come at this from two different angles, right? Someone that sees behind the curtain and somebody that doesn’t know what the heck is going on, on the other side of the curtain, because our listeners sort of straddle both sides. Rob, if you don’t mind, what’s like the first pressing issue that you’ve always wanted to know about what happens in the world of real estate agents that you’ve always been afraid to ask.

Rob:
Mm, I guess, for me, it’s, I’m always very curious for a realtor. How do you prioritize which phone calls to take and which phone calls to decline? Because I got to imagine, at your level, you’re selling a lot of houses. $67 million, that’s a lot of houses. I got to imagine you get a lot of phone calls every single day. Is your phone just blowing up every single moment of the day?

Johnny:
That’s a great question. We do have a system in place in terms of how we prioritize people that need to buy a house now versus the one that have to buy a house later. The main way we prioritize that in my opinion is just understanding what their goals and their timelines look like and seeing how we can help them and how we can create a plan to help them. We would never shy away from anyone. There’s always going to be a place for someone that comes to us.
We just have to figure out a game plan and a timeline of what that looks like. But to answer your question, Rob, our main priority is to help the people that need a house ASAP. These are going to be the people that are renting a home, their lease is ending, and they need a transition into a new home as soon as possible. These are going to be the ones that are looking to sell their homes, and again, need to relocate for a job opening they just had that is requiring them to work a month later.
Versus the ones that are still playing with the idea of investing in the market and just want some information about how to get started, when to get started, how much capital they need to build up. We also have a plan for them as well. To answer your question, it’s really just, what does the overall timeline look like and what type of expectations do we need to set to see if we can come to those terms?

Rob:
Yep. Very fair question. I’m kind of curious, I mean you’re 28, so obviously millennial. I think you’re a millennial. You’re a millennial, right?

Johnny:
Yeah. I just hit the cusp.

Rob:
Okay. Yeah. I’m on the opposite side of that cusp, but do you prefer if someone is contacting you out of the blue, are you a phone call guy or a text message guy? Is a text message a bit of a breath of fresh air?

Johnny:
I don’t like text messages that much, to be honest. I like to pick up the phone. I like to hear someone’s voice. I like to hear the tone. I like to hear the energy. I just like those conversations to be completely honest. I feel like there’s so much that can be misconstrued in a text message and there’s not enough information for me to really understand how to help someone through a text message. I’m a phone guy. I love Zoom meetings as well, of course. And most importantly, I like to meet them in person. But to answer your question, phone guy all the way.

Rob:
And David, obviously you’re a millennial yourself. What are your thoughts on the matter? Are you a text message guy or a phone call guy whenever you’re talking to clients?

David:
That’s funny because I’m a millennial barely on the other side. Like, I’m one year within before I would’ve been like gen X or whatever it was. I, believe it or not, I’m the opposite of Johnny. My voicemail full because I don’t like people leaving voicemails. I probably get 30 phone calls a day. 15 of them are from spam. So, if I get a number that I don’t recognize, I just don’t answer it because it’s almost always some kind of a fraudulent call.
What I tee each people on our team to do is, if you call someone and they don’t answer, you send a text message saying who you are, because that’s what I need. You need to text me and say, “I’m so and so, I’m calling for this purpose.” And then I can either schedule a call or kick them to the right person, or call them back. But I think, Rob, you’re asking a very good question because this is one obvious problem people have when connecting with an agent is, if you’re calling and they’re a text person, you’re going to be really frustrated they’re not getting back to you.
And if you’re texting and they want a phone call, you’re going to be frustrated that they’re not communicating the information that you’re looking for. I mean, kudos to you. You’re already starting this thing off with some really good questions.

Rob:
Well, I’m really just diving into my pain points here because I think that’s a very fair bit of advice here. I always call my realtor first because I get a lot of people that send me emails and text messages and direct messages. If I’ve never met them before, there’s really no reason for me to respond if I don’t know them. But if I talk to someone via Zoom or via phone call, I can at least … There’s a human element there. It’s like, oh, that’s a real person. Here’s their tone. So, what I do is I typically will call my realtor. Hopefully they’ll answer.
I can’t expect that from super, super busy realtors, but if they do, we have a conversation and I’ll say, all right, I’m going to summarize what we talked about in a text message. Here’s what I’m looking for. If you could get me on a list, here’s what I’m looking for. Let’s say that someone contacts you Johnny and they’re like, “Okay, hey.” They got you to answer the phone. Can you sort of give me two directions here on how this phone call can go? If you write someone off immediately, for example, what is like the kiss of death that someone can say to you in that first phone call that sort of deprioritizes them amongst kind of that group of people?

Johnny:
Sure. In a broad statement, I would say someone that doesn’t have the right expectations. So, it’s going to be someone that calls me and says, “Hey, I just listened to the podcast and I want to buy in San Jose. I currently have 5K, but I’m talking to 10 other people to raise some capital. I want to do a bird deal where I can get 150% cash on cash. Don’t tell me I can’t do it because a lot of people have told me I can do it.” In a situation like that, of course, I would take on to unpack it, to really understand where they got this information, and figure out if I can come up with a plan to adjust their expectations to match the market that they’re giving.
If it’s a battle between the two of us and I just feel like everything I’m saying to them is just going one ear out of the other, they’re giving me just a lot of retaliation as to why it would work, that’s a relationship that I don’t want to get involved in. Because I can just tell that our expectations aren’t going to be aligned. I won’t be able to serve them correctly. It just won’t be a good relationship. Typically, when people are really out of line with their expectations and they’re not listening to someone that’s been in this market for quite some time and has done quite a few deals, that’s my sign to just say, “I’m not the right fit to help you. Maybe I can give you some information to better educate yourself about this market, but at this time, I’m just not the right one to help you.” That’s essentially what would be a red flag for me and the ones that I can’t help.

Rob:
What about you, Dave? I’m sure you got a couple of kiss of death statements here that you’re like, “Oh man, I can’t believe I have to unpack this.” Can you give us an example of that similar to Johnny’s?

David:
Yeah. There’s two kinds of people. The first is someone who says, “I need help buying a property and I want someone to represent me.” And they’re checking to see, can I trust you? Are you good? Are you competent? Are you skilled? And then there’s the other person who just wants information from you. They’re saying, “Hey, what can you educate me on in this area?” And they haven’t really decided if they actually want to buy or if they want you to be the one representing them.
When you get a client that’s telling you, “Here’s what I’m going to do in this market.” And, as the expert, you’re explaining to them why that might not be a good idea. You’re just basically checking to see like, is this person open-minded or are they stubborn? Because everybody eventually comes to the same conclusion. It just matters how fast you get there.
Do you get there because you willingly took this advice that made sense or do you have to go the hard way and you have to bang your head against that brick wall over and over and over? And meanwhile, prices go up $50,000 to $100,000 while you’re waiting. Part of what I think a good realtor’s doing is they’re not letting their client have unrealistic expectations. They’re not telling them what they want to hear, just so that they can get them signed up.
If a realtor doesn’t have a lot a business, if they’re not that good, if they’re not making that much money, they’re going to say whatever they have to say to get that client signed up, knowing eventually the client’s expectations are going to shift, but I want to lock them up now. I think what Johnny is describing is a more honest way to do business, but it will often lose you a lot of clients. Everybody wants to hear what they want to hear. They don’t want to hear what the reality is.
I was going to ask you Johnny, when someone’s looking for an agent, or when you’re looking for an agent, because you, like me, invest out of state, do you look for someone that tells you what you want to hear or do you look for someone that tells you what it is, and how do you gauge how honest they’re being?

Johnny:
I would say it’d be the second scenario. The first scenario I would want to speak to real estate agents and clients here, just to give you some tips. Someone that is being very agreeable, for example, if you have an intro call with an agent and you’re throwing all these grand ideas to them and they’re saying, “Yes, Johnny, I can do it. Yeah, that’s no problem. I can do that 60% cash on cash. We do those all the time.” You really have to pay attention to how agreeable they are and if they even have experience in doing these things.
Because I’ve noticed the top agents are super direct. They tell you how it is, and they give you examples of what can actually be done in the market, and they give you data points, right? They’re just not the yes, man. Typically, what I’ll look for an agent when I’m buying houses is someone that likes to explore ideas with me, but also puts me in my place.
Someone that can tell me, “No, Johnny. You can do this in this neighborhood. But you advise me that you don’t want to be in a bad neighborhood. So, if you want to be in a good neighborhood, you’re going to have to pay a premium in exchange for cashflow if you want to be in this type of neighborhood.” I’d rather have someone tell me that I have to pay more to be in a better neighborhood and lose out on profits than someone to tell me that, “No, you can buy in this neighborhood. It’s a great neighborhood. You’ll still get the cashflow.”
And then down the line I find out it’s a horrible neighborhood and my house is just not performing the way I want it to perform. So, to answer your question, David, I would say pay attention to someone that’s super agreeable, because that’s for me at least, always a red flag. For me, I would always want to check the information that they’re confirming with me, right? If I’ve done these analyses, but I’m not quite sure if it’s going to hit these numbers, but they keep telling me it’s going to hit these numbers, again, that would be kind of a red flag for me.
Sometimes I’ll even test the agents and I’ll tell them, “Can I do a 40% cash on cash here? This is what I’m seeing.” And if they tell me a little fib just to try to push me along, that’s probably not someone I want to work with. I want someone to assess my situation and really understand where I’m coming from and tell me what I can and cannot do in this market.

Rob:
That’s really great, man. I test my realtors with caution, right? I don’t necessarily expect them to know the nitty-gritty of what I’m looking for, because honestly I expect myself to really be analyzing all of these different things. Really what I want to stress check for is if there’s something that I’m missing. I’m really more looking for a realtor to point out flaws in my plan versus helping me formulate the plan.
If I come out at them and I say, “Hey, I’m looking for a 40% cash on cash in this neighborhood,” it’s exactly what you said, I want them to say, “Well, theoretically, what you’re saying is correct, but I wouldn’t do it in that neighborhood for this reason, this reason, this reason.” I definitely think that there’s a little bit of compromise that needs to come from both sides. Setting those expectations at the very beginning, I think, is something that I’ve learned over the years, is a lot easier to maintain the status quo when you can have that conversation at the very forefront of your conversation.
Kind of want to shift the gears here a little bit. I mean, we’ve touched on this a bit, but Johnny, can you give me an example of something that a client might call you and say, that’s like music to your ears? What’s something, if it’s the first phone call, client says this to you, what would make you say, “Oh thank goodness, I love these kind of clients?”

Johnny:
Yeah, sure. Music to my ears. If a client were to call me and say, “Hey Johnny, I’m currently paying $2,500 in rent right now. I want to find a way to get into real estate that doesn’t cost me too much and will enhance my living situation. Can you help me?” That type of client, I just love them because it’s very common for us in the Bay Area to pay $2,500 in rent. But if you can find a way to get into the real estate market and reduce those living expenses while reaping the benefits of being a homeowner, depreciation, tax incentives, I feel like that’s a win all day long.
Because that’s essentially what we teach here on The David Greene Team as well is just how to buy houses every single year using these strategies. So, when I hear someone with that type of situation, it’s music to my years, because I know I can help them. I know the expectations are going to be aligned there. As soon as they hit their first deal and then we work on the second deal the next year later, and they start seeing that passive income come in, and the financial burden being lifted off their shoulders after every single deal, that’s what excites me. That’s what fulfills me.
That’s why I got into the resale space, to help other investors realize that this is the path you want to take if you want financial freedom. It’s going to take a little while, but every house you buy is just, I feel like you just buy more time. That’s kind of long-winded but I hope I answered your question.

Rob:
You did great Johnny. You did great. Yeah, so if I’m hearing this correctly, we’re basically, when I’m talking to a realtor, I want someone that can listen to my needs. Hey, I need a house. I’m paying this amount. Set the right expectations. Hey, if I’m paying $2,500 a month, I want to keep it at that. It’s your job as a realtor to come in and say, “Well, in this market, you can spec this.” And then carve out a plan. Is that the process that you take whenever you’re talking to new clients?

Johnny:
Yeah. That’s exactly the process. I mean, I think the successes I found in resale was being able to listen to the consumer and coming up with the game plan for them to allow them to just follow it throughout the following years. Can I give you guys a little antidote in the beginning stages of my investing career?

Rob:
Yeah.

Johnny:
Okay, cool. As a child growing up, I always knew I would be a millionaire. I just didn’t know how I’d do it. I just didn’t know how I was going to get there. And through BiggerPockets, that was when I found that vehicle, and I knew that, okay, this is what’s going to get me to my first million. This is what’s going to get me to 10K of passive income a month. All I have to figure out is, how many homes do I have to buy and how many homes do I have to have in my portfolio to produce me X amount of income every year?
And how many homes do I have to buy in the next five years? And how much equity do I have to have within these homes? And when is the equity going to compile up to where I make my first million? When I found out how to create that blueprint, well, I didn’t create it. It was just from BiggerPockets. It was stuff I put together that I found on the forums, but I don’t want to take credit for anything that I didn’t fully create.
But yeah, when I found out how to come up with the blueprint based on what I’ve learned from BP, I just felt like that financial weight on my shoulders, it was just lifted, right? Because now I know, if I save up X amount of income every single year and I buy X amount of homes in the next six years, that’s when I’m going to net my first million. In the next six years, that’s when I’m going to have 10K in passive revenue if I stay consistent and continue to act and buy a house every year.
That was a very broad way of explaining it. But typically, someone that comes to us, we’ll assess their situation and see how much liquidity they have, see what type of assets they have. Then we’ll tell them, “Okay, if you want to get to X amount of income a year, we’re going to need to do these things within your savings rate. We’re going to need to do these things with your assets, whether it’s selling it, whether it’s doing a cashout refinance, and then we’re going to come up with a plan where you can acquire one every single year for the next five years to hit this milestone of yours.”

Rob:
I guess what I like about that is you aren’t just looking at their situation, but you’re using your experience to sort of help them carve out a plan for themselves. I mean, how often are you finding yourself, sort of in a sense, not financial planning, but how often are you relaying some of this personal anecdote and journey that you’ve had and helping people carve out similar things for themselves?

Johnny:
I would say it’s pretty often. I mean, think it’s at least 70% of the clients that we work with. Because another thing I want to mention too is, when I first started investing, we didn’t really have anyone to walk us through this process, and outside of BP, I mean, I’ve always said I’ve had hundreds of mentors through the podcast and just listening to people’s failures and successes. But to actually have someone physically there and someone you can pick up the phone and call to bounce ideas off of each other, I think that’s invaluable when you first start on your real estate journey.
To be able to cultivate that type of environment and that type of service, I think, is very important. To answer your question, Rob, I feel like yes, 70% of our clients come to us, and that’s basically what we do for them. We help them plan ahead. You can kind of see it how it’s a win-win for both of us, right? As they grow their portfolio, it grows our exposure. I think it’s just a win-win for everyone.

David:
Yeah, Johnny, one thing I want to ask you, of the 67 million in real estate you sold in 2021, what do you think was your most common client’s profile? What were they looking for and how did you help them?

Johnny:
Yeah, sure. So, I would say the most common profile would be the house hackers. Typically, they’ll come to us with about $2,500 that they’re currently paying in rent. They’ll have maybe 100,000 to 150,000 in maybe stocks or just sitting in the bank that they want to deploy. And they’re looking to reduce their living expenses by 30% to 40% through using real estate as that vehicle. I would say that’s a bulk of them. I think what was really cool was, in 2020, when I, towards the end of the 2020, I should say, when I started getting some traction, a lot of the people I helped in the end of 2020 started buying again with us the following year, because they’ve built up enough equity.
They’ve been able to convert their single family homes operate like a multi-family, so they’re cashflowing in most cases. Now, those same people I helped in 2020, I’m helping them again in 2022. Most of these people that we’ve helped in the very beginning, it’s really cool to see that they’re learning a lot and they’re able to grow by just repeating the same process. But yeah, I would say the house hackers, that’s the main bulk of where the volume came from.

David:
So, do you have a deal that one of your clients did you can walk us through, that was a house hacker, and kind of explain what the numbers worked out for that person?

Johnny:
This is a recent deal that we closed on about two months ago. This deal was in Upper West open, which is a very good area in the Bay Area. And purchase price was right around 1.2 million. They did a Jumbo loan at 10% down. So, down payment was about 120K. We were able to get a 25K closing cost credit. So, they basically just had to come in with a down payment, which was again, 120. The rehab amount was 30K. So, the total cashout lay on this deal was 150K.
Before I go on, I’ll back up just a little bit to convey what their situation looked like. This is someone that was paying $2,500 in rent every month, or $30,000 a year. And they wanted to get started in investing in real estate. They told me they’d been paying rent for last five years, which amounts to 150K that they’ve been paying to their landlord, which amounts to the down payment they’re paying now, ironically. They wanted to park it in real estate and figure out a way that made sense to them.
This property, again, was $1.2 million purchase. And what was cool about it is the main house was a three, two. It also came with a two bedroom, two bath detached ADU. It was converted from the garage, which is very common in this area. And the kicker to this is that the basement level also has another two bedroom, one bath that’s partially converted. It has all the rough plumbing in there. Just doesn’t have the dry wall and Sheetrock up, but pretty much partially converted for. Their total PITI in this is $6,000 of paying a month. And total rent they’re getting is $3,500 for the main three, two.
Then for the ADU, that’s a two bedroom, two bath, they’re renting out one bedroom for 1,200 bucks to one of their buddies, and they’re living in the other room. In this scenario, they’re basically paying $1,300 a month to live in a good area of Oakland. So, it was an opportunity to basically reduce your living expenses by half, from 2,500 to 1300 bucks, plus with the tax incentives you get for owning real estate as well, and the value add opportunity with that basement floor that they plan to convert down the road.
I just love these type of situations because it really just takes one or two deals to really change your life. Right? A saying that I really like is you’re always one decision away from changing your life. I felt like this is like these type of decisions that we can help people understand to help them grow.

David:
100% agree. One of the things I get asked a lot is, I live in expensive market. Should I invest out of state or should I stay here? It frequently comes up, because I wrote the book, Long Distance Real Estate Investing, but when your house hacking, you can get away with 3.5% down, 5% down. When you’re investing out of state, you’re probably going to be at 20% to 25% down in almost every scenario. And when you’re investing out of state, you’re not saving in the rent money that you’re paying if you’re currently renting.
One of the things that I tell people all the time is you should house hack a deal every single year. And anything in addition to that, use the bird strategy, use long distance real estate, some combination of the two. But if you could get a house for 5% down, 3.5% down, even 10% down, that you can rent out, and then when you move out of it, you’ll have another unit that can generate more revenue, that’s in no brainer.
I wanted to ask you, Johnny, of the clients that you’ve had, have you had any that just had a hard time going forward with a house hack because they had their heart set on long distance investing or have most of them sort of understood that house hacking is going to make more wealth if you’re in expensive market?

Johnny:
I feel like a lot of them come to us wanting to understand how to invest out of state because they think it’s more beneficial. In some cases, it is. But in most cases for the people that come to us, it’s not. I would say a lot of eventually understand that starting off with a house act is a lot more viable option and a more beneficial one. Because I mean, what I always tell them is, to put things into perspective, if you look at the overall cash outlay that you’re deploying, let’s say you’re looking into a market like Texas, for example.
Let’s say average purchase price is 200K and you’re doing a 20% down. So, you’re basically deploying 40K out of your pocket. Let’s say we look at a house hack here that’s 800,000 with a 5% conventional loan. You’re still deploying that same 40K. Although in one market, you’re assuming more debt. So, essentially that’s a little more risk, versus the other market where it’s a little less debt assumption, so it’s a little less risk some would say.
But if you really put it in perspective, if you look at appreciation gain, 6%, 7% on a house that’s 200K versus 800K, substantial difference. If you look at reducing your living expenses where you can pay less in rent, which is a profit in its own that is not tax, I think when people come to that conclusion, they’re like, “Oh, okay, there’s a light bulb. I can buy something in the high appreciating markets.” It probably does make more sense right now, like buy a couple of these in a high appreciating market, build that equity, whether that’s just letting the market continue to go where it’s at or do a little forced appreciation, have that be my nest egg, take that equity, extract it and move it into a different market. Usually, people see that it’s more beneficial to house hack, but we do have certain situations where they want to go out of state versus house hacking.

David:
It’s just so uncommon to find a realtor who can break down what you’re doing and help them see the value in why it would make more sense to house hack in this case. That brings me to a problem that Rob, you and I were facing when we were looking in Arizona Area to buy a property. We were looking in a couple different cities and we had a couple different agents. I remember saying, “Look, if we’re going to do this, we need to get an agent who specializes in this type of real estate and has background into what we’re trying to do.
And you were like, “Got it, Dave, I’m on it.” I remember thinking, is he really going to be on it? Did he understand what I was saying? And you did. You ended up finding a really, really good agent. I wanted to ask you if you could share what the process that you went through was like to find that person.

Rob:
Yeah, definitely. I knew that we were going to be going into a luxury buy here. It’s not very common for a lot of realtors to necessarily have $2, $3, $4 million listings that they own. It takes an experienced realtor. I didn’t want to just call up anybody. I just went and I looked up most successful brokerages in that city. I found one, I called them, and the receptionist was like, “What are you looking for? Give us some details here.” And I was like, “Well, I’m looking for a very specific realtor. I’m looking for someone that A, specializes in luxury, and B, and this is more important, specializes in short-term rentals.”
Because it’s always really nice to have a realtor that I have some common ground with, just so that they don’t … So I can pull my weight in the relationship if you will. And they were like, “Okay, great.” They set me up with this realtor and I talked to them, and I did the mini interrogation of like, who are you? What do you do? No, but I talked to them for a bit and I started kind of asking, probing for more short-term rental related questions, to the point where they were like, “Okay, yeah. I don’t actually know too much about short term rentals.”
I was like, okay, that’s what I thought, no big deal. And they said, “But I do know one guy, one guy who’s just the short term rental sniper out here in Arizona. He’s the guy you need to talk to. He owns a property management company. He owns five luxury rentals. He is a luxury specialist in the short-term rental market.” And I was like, “Okay, great. That sounds too good to be true. You’re just giving away a $3 million lead? All right. Sure.”
He was buddies with this guy. We connected, I talked to him and he completely wowed me. I finally met somebody that I could go toe to toe with on the short term rental side and actually educate me in the luxury space. I remember I talked to him and I was so fired up, and I called David. I was like, “Dude, I think I found him. I found the guy. He’s smarter than me in short term rentals and he’s going to help us.” And David was like, “Ha-ha, yes. This is exactly what I wanted.”

David:
Well, I think part of why you really liked him was he owns them himself. Right? He owned short-term rentals in the price point we were looking at in that area. I don’t think you could find a better agent than someone who literally is doing what you’re asking them to help you do. And that gets passed up a lot, is if you’re an investor and you’re looking to find a real estate agent to help you, and they are not an investor, you’re going to be frustrated a lot when you’re wanting information that they just can’t provide. So, I kind of wanted to turn that to you, Johnny, and ask, how much do you think your own investing experience played a role in your success representing people that were trying to do the same thing?

Johnny:
I think that played a huge role in my success because I personally wouldn’t want to go to someone for advice if they haven’t done what I’m seeking advice for. It just doesn’t seem productive to my goals. I think being able to convey the mistakes and the successes I’ve had, being able to convey what plans have worked for me and what plans have not worked for me, and being able to just speak with confidence when it comes to that because I have that experience, I think it’s definitely the game changer. I definitely think it’s contributed to 80% of my successes within this space.
I think it’s just a breath of fresh air when you know someone that knows more than you and knows someone that’s been there, done the mistakes so you don’t have to do those mistakes yourself, and really has a plan in place and has executed on that plan. So, I would say it’s a huge percentage of my success in this space, David.

Rob:
I wanted to quickly kind of ask a follow up here because obviously you’re crushing it. You’re crushing it in the realtor game and you are also investing. For you, personally, where are you at right now? Are you want to heavy up in investing? Does the idea of investing fuel your desire to be a realtor? How has that arc really panned out for you personally, Johnny?

Johnny:
Yeah, sure. I feel like they both coincide with each other because I do enjoy helping other investors get started in their journey, but I also do really enjoy buying houses and building my portfolio for sure. But I think both of them coincide with each other. For me personally, I want to have the opportunity to help over a hundred people this year and I also want to have the opportunity to have 50 doors at the same time. To answer your question, Rob, it kind of coincides with each other. Because the more I learn from investing, the more I can then convey to clients as well. It just feel like a full circle in my opinion.

Rob:
Awesome, man. That makes sense. I like to see that you’re still wanting to grow, right? Because this is the same thing that I went through with my Arizona realtor, where he’s got a property management company where he manages 60, 75 luxury properties. He owns six luxury short-term rental properties and he’s a realtor. I was just like, “Why are you doing this to yourself? Just focus on any of those three things and you’re probably going to be fine.” I think he just genuinely love connecting with investors, especially investors in his specific niche because they’re few and far in between.

Johnny:
Yeah. [inaudible 00:35:21] really cool about the resale space is like, through the mentorships that we can provide to people and seeing them grow, it’s like I bought the houses to be honest. We’re bouncing ideas off of each other. We’re coming up with these game plans, and just seeing them actually come to fruition, it’s like, damn, that’s basically like my deal too. I always like that creative side of real estate where you can come up with different plans, whether that’s buying a single family house, chopping it up into three different units and really extracting the cashflow and seeing it all come to fruition. It’s pretty cool to me. That aspect of the business, I enjoy a lot as well. Just kind of the more project management side and kind of the more visionary side, if you will.

Rob:
I’ve got to imagine that, in your journey now, you’re on year two, as we’ve talked about, you’re crushing it. Year one, I have to imagine, was the year that Johnny marketed the heck out of himself. You were just out there marketing and building your reputation and your brand as a realtor. Year two, I got to imagine that maybe it flips a little bit where you don’t have to market as much and people are finding you. So, can you give us an example of how we find our Johnny, how we find this unicorn realtor that is seasoned investor that knows about cash on cash returns and house hacks and appreciation, all that kind of stuff? How do I find a good realtor like you?

Johnny:
Yeah, I would say, first and foremost, BiggerPockets, going through their forums. What I really like about their forums is because you can see how other people are … How helpful they are. I’ve had countless times where people would reach out to me from an old post that did two years ago about house hacking or about one of my flipping posts. And they just reached out because they thought my answer was very constructive and it was very helpful to them. So, I would say, for me personally, I like to scavenge through the BiggerPockets forums and look for agents that are having these good responses and people that convey that they know what they’re talking about within their market.
Agent Finder is a great place to do that. And just reconfirming that again, what the responses they have within the forums. Outside of that, I really like what you did, Rob, because that’s something I’ve done in the past as well. Just call different brokerages, different high producing brokerages, and look for the top producing agent. But I would say nine out of 10 times I did that, they always referred me to someone else. Because the top producing agent is typically pretty busy, and I think coming from a more investment background, they just wanted to refer me out to like another producer.
But to summarize everything, I would say use the forums that … Use it as a resource because it’s a really big one. That’s where I found most of my business and one of realtors, I should say. Then use your technique of just calling different brokerages and trying to find a top producer and interviewing the one that just makes the right fit for you.

Rob:
I do want to touch on the power of a good forum. I mean, just in the past couple years, I’m an online guy, I like being online. I like talking to people on the internet. I’ve posted so many things on Reddit that years later, people will still send me DMs on Reddit and say, “Hey, I really like this tiny house or the shipping container that you’re building,” or whatever, and all that kind of stuff. It’s so crazy, the DMS that I get, exactly the same way on the BiggerPockets forum too, where if you put thought into your post, if you post something or you have an answer that’s just super well thought out, the amount of DMs that just come from that, people that are just wanting to pick your brain on that subject, or work with you, it’s really pretty impressive. I think.

Johnny:
Yeah, it stays there too. Right? I mean, I don’t know what type of backend work BP does, but my post that I get a lot of traction about was almost like from four years ago. Now, I’ve seen some posts date back to like six, seven years ago that I still refer back to, and I’ve screenshotted to put into my syllabus. Those posts are there forever. So, it’s a good way to market yourself without having to really market yourself in my opinion.

Rob:
Yeah. What about you, Dave? I mean, obviously you gave me the secret sauce here.

David:
When I wrote Long Distance Real Estate Investing, I put in there several ways that you can find top producing agents or people that will help you. One of them was using BiggerPockets, and it was just like Johnny said, is you go through the forums, you look for people that are engaged, and when you call them, here are some questions that you ask. A common mistake that I see is people assume all agents are the same and you just grab the first one you see and then you go look for the house. What happens is you end up doing all this time and energy and effort and emotion looking at properties, and then you send them to your agent to say, “Tell me this, tell me that.” And you wear the agent out and then they just stop responding to you.
Then you start calling the listing agent yourself and you start saying, “What about this? What about that?” And the listing agent’s like, “You’re not my client. You have your own agent. They should be finding that out.” And you end up in this agent purgatory where nothing’s getting done and you can’t figure out why. I look at it differently. I look at it like an agent is an asset, just like the real estate is an asset, and I have to go hunting for it. I can’t just assume every deal’s the same.
I can’t treat people like that either. I have to find the agent that will help me. The one you found for us, Rob, is an asset. When we looked at our numbers, we thought, these are too good to be true. There’s no way that it’s going to generate that much revenue. And he came back and said, “No, that’s probably the low end. It’s probably going to do more than that based on these six properties that I own myself.” And the 50 properties that are managed, that he has access to seeing that data.
Johnny is an asset. He owns property in the area that he’s helping people in. He knows what they’re going to rent for. He has contractors that he can refer you to that can do a lot of this work. He can even help you with what the bid would be or what the approximate bid would be to convert a basement or add a bathroom. He’s that knowledgeable because he does this. So, you got to put the same effort into finding your agent that you do into the property. You start with that. You look for the agent first. There’s a lot of frustrated people that are frustrated because they’re going at it the wrong way.
Now, one thing that is available now that wasn’t when I wrote Long Distance Investing is BiggerPockets has actually created a way for you to find an agent faster. Rather than having to just go through the forums and look for someone that might be in that area and might be good, you could go to biggerpockets.com/agentconnect, and then type in the area that you want to invest in. And it will pull up a list of agents that are also BiggerPockets members.
I really like that, because if they’re a BiggerPockets member, they are more likely to understand real estate investing than if they’re just someone that you found on Zillow or another site. You also can then see how many deals they’ve done for other BiggerPockets people. So, if they’ve done zero deals versus my profile, which probably has a hundred or a couple hundred on there, you can see how much action we’re getting and then you can read reviews from the people we had.
You can look and see what properties other clients bought, right? So, if you go look up our profile for The David Greene Team, you’ll see, these are the areas that we helped clients in and these were the houses that were bought. You could do a lot of the research right there because BiggerPockets made it easier. Now, you still have to do the research. You can’t just find any agent on BP and be like, “Well, they’re a BP agent so we’re good.” That would be like just finding any house that’s for sale on any platform and assuming that it’s going to be good.
But when you … I get all the time, people will email me and say, “Hey, David, what am I supposed to do with this? Will the bank approved me for this kind of loan?” The answer is usually, “Well, did you ask your loan officer?” “No, I didn’t ask them. I thought I had to know.” No, their job is to tell you that or tell you how to do it. Why are you asking me a question about title. Your title company is supposed to tell you that. And there’s just this thing with investors that think they have to do it all.
Now, if you’re looking for off market deals and you’re trying to put together creative things like seller financing, because you’re not going to get a conventional loan. In that space, you do sort of have to operate by no everything yourself. But if you’re looking at something on the MLS, you should have an agent that can direct you to what to look for. They should have connections for a lot of the things you’re going to need.
The loan officer should help you the same way. And I just want to encourage everyone who’s trying to pick up some traction, if you’re having a hard time it’s because you don’t have a Johnny. If you had a Johnny, you would just say, “What can I expect to this market?” And Johnny would tell you. Well, how much would it cost to fix that? It’d be approximately 30 to 50K. Well, what would that do for the rent? It would be about this much. You get a really good understanding by using the experts. And there’s too many people in our field that don’t understand the asset class of real estate.
Rob, I know you have seen this with as much real estate as you’ve bought, where you come across that agent and you think, I know more about this than you do, and this is your job. It’s maddening. I wanted to kind of throw that back to you, Rob, and then to you, Johnny, what are some things that you have noticed when you picked the wrong agent that lets you know, I need to move on and find somebody else?

Johnny:
For me personally, well, we’ll start with, what’s wrong in an agent? Or what I find to be not as attractive in an agent. My expectation of an agent is to find the correct deals for me and convey why the deals will work but based on the criteria I’ve given him. Red flags for me is someone that’s not communicative, someone that doesn’t send me deals, someone that doesn’t put an effort to be in front of me.
Versus a good agent, I’ve noticed that is one that’s constantly sending me deals. Hey, Johnny, this is one you should buy. These are the reasons why I should buy it. Here’s the Rentometer. Here’s the P&L. Worst case scenario, I think you’ll be here. Best case scenario, you’ll be here. It’s literally just like laid out for me like, oh crap, he put everything together. They’re in these organized folders. And all I have to do is reconfirm the math, do my due diligence real quick and say yes or no. That experience works really well for me.
I’ve noticed that when I’m on the other side as a real estate agent, helping our clients, it works really well for them as well. Because they’re coming to us looking for some type of guidance. Of course, as a client, you still should have a game plan in place and double check everything. But I really like the experience where they lay everything out on the table and it’s as simple as yes or no. And I think that’s what makes a good agent, someone that does a lot of good follow up and someone that can just lay everything out for you and consistently provide you deals where you can look at it and review everything they’ve given you, and it’s as simple as, does it meet my criteria or does it not? And you say yes or no.
I think the ones that create challenges are the ones that just blindly send you deals and say, has a little bit unpermitted work. I don’t really know what to do with it, but let me know what you think. That becomes an issue of, okay, now I got to take time from my W-2 job and look at this and spend hours researching about it, which it is part of the game. It is part of buying real estate, but what I would prefer and what I find in a good agent is someone that has listened to me in the very beginning and conveyed all the items that I need to understand to be comfortable to move forward.
Switching it back to the client side, I think that’s very important too, to be able to come to the agent with some type of general consensus of what you’re trying to do. Not saying like, “Hey, I have to 20K. I’m not really sure what I want to do. I don’t really know what the next couple years look like. Can you just find me a deal and get me a return on it?” Versus someone that says, “Hey, Johnny, I have about 50K. I’m looking to reduce some of my living expenses. I’ve looked through Zillow and looks like the price points of these homes are 800.”
“I’ve talked to a lender, they said I can get approved for 800. I’m just trying to figure out how to get started. Can you help me?” They’re vastly different in terms of the two outlooks. So, to summarize my thought process there, I would say a good agent is someone that’s proactive, someone that’s communicative, and someone that just lays everything out for me so I can make an easier decision. A bad agent is someone that’s completely opposite of that, that’s not as responsive, that gives me an extra job when their job’s supposed to be making me more comfortable and making me understand that this is the right deal for me or not. That’s basically how I’ll grade the two different sides.

David:
What about the clients, Johnny, that are going to ask you to do a lot of research that you may think is not an agent’s job? Before Rob you answer, I just want to get Johnny some follow up. What are something people will often ask of their agent that you would say, that’s something that they should be doing on their own?

Johnny:
I would say, although I know a lot about permitting and how to do those things, because I’ve done it multiple times personally, I still think a client or a newer investor, they should put the legwork to do it themselves the first time around so they can understand how that process works. Although I do run numbers for our clients, I always tell them, “This is what I came up with. These are the tools I use. I want you guys to then do it yourself to see what you come up with.” And we can both put our heads together to see if it makes sense.
That was kind of not a direct answer to your question, David, because I think it really depends on what type of expectations are set in the beginning. Because I do have clients that they’ve purchased a couple deals, and they’re like, “Johnny, I just need you to send me a good deal, give me the rents, and I’ll run everything else myself.” Then I have the other end of the spectrum where they tell me, “Johnny, I really want to learn how to invest. Can you walk me through what it looks like for the first couple deals and show me how you run the numbers, and eventually I’ll get to a place where I can do it myself?”
It’s hard for me to directly answer that question because it’s different for every client. But my standard answer to that, I guess would be, whatever you’re trying to figure out from your agent, you should try to look for the answer yourself from two different resources and then go to the agent to ask them. But it also, again, ties back into what expectations were set from the very beginning and what that communication log looks like between the two of you and what you decided on before working together. Again, David, that was kind of a running around to your answer because it’s just so different client to client.

David:
No, I was more getting at the idea that a client may say, “Hey, agent, I’m not pre-approved and I’m not going to get pre-approved until I find the perfect house, but here’s 50 houses I want you to show me. And I just want to text you randomly and have you take … Because that’s your job is you should take me to see these homes.” Then you go look at the house. You say, “What do you want to do?” And they say, “Oh, I’m not in a rush. I’m just going to wait and see.” And you find yourself in the situation where the client is kind of running the show.
And they’re telling you, “This is what I want. Go do it for me. That’s your job.” You can see, as the agent, they’re never going to get success from that. At what point do you feel it’s appropriate for the agent to put their foot down and say, “If you want to hit your goal, the way you’re going about this isn’t right, that’s not something that I can help you with?”

Johnny:
Immediately. I feel like you have to do that right away. Right away, upfront. Because at that point, you’re setting the wrong expectations, and then the relationship is just going to be bad throughout the whole time period. It’s funny because I think a lot of agents do this. I feel like, when you’re working with clients, and this is for clients as well, you’re entering into a partnership where you guys are both helping each other build wealth,.
Whether that’s through someone that’s selling the house or whether that’s through someone acquiring their property, you’re still in a partnership together. So, you have to lay out all of those things and really, really find a level of commitment on both sides, right? Because it’s just, it doesn’t make sense for someone that’s not pre-approved, but expects an agent to show 50 houses to them, because it just shows that you’re not committed and you’re not committed to making this partnership work.
I feel like people should understand that because time is very important and you should enter into a partnership with someone with a win-win attitude. So, in that situation, David, to answer your question, I think you really have to have that difficult conversation up front and immediately because that’s just going to tarnish the experience for both people as you get further into it.

David:
Rob, same question to you. When you are working with an agent, what are some of the red flags that you notice and you think, “Ugh, I don’t think this one’s going to work out, I need to cut bait and find another one?”

Rob:
There are a couple things here. I would say one, I do like to know that they have some investment experience. I mean, it’s not required, but I do want to know that they play the game a bit. That way they’re not just speaking to me in conceptual terms. They actually have tactical things that they can help, anecdotes like Johnny has, that helps me understand certain situations. That would be one. Two would definitely be the Rolodex. Hey, do you know a contractor that can help me with this basement conversion or a landscaper that can help me de-weed this plant box, or an electrician that can help replace that floodlight?
If the answer is no on the majority of those vendors, I’m just going to move on because it’s so much easier for me to find somebody that knows all these people. That way I don’t have to Google electricians, landscapers, pest control, all that kind of stuff. It’s very helpful. But really, I would say there’s two things that really irk me when I’m looking for my realtor. Thing one is when I call and I lay out my expectations and what I’m looking for. And I say, “Can you put me on a list?” And they say yes, and then they don’t put me on the list. That’s very frustrating.
Usually, I give it about a week depending on how urgent it is. And if I follow up and say, “Hey, haven’t gotten that list yet.” And then they say, “Oh so sorry. Yeah, sorry. I’m working on it.” And if they don’t send it again, then that’s basically, I’m like, okay, I’m going to move on. That would be one thing. Second thing here is whenever … And I’m a little bit more flexible than Johnny here. I mean, I don’t necessarily expect a deal to be outlined because I can do my own research.
But there’s a really big difference to me when a realtor out a deal, right? Like crazy off market deal. And I’m on BCC list. Versus when they shoot me a text message with a deal that they’ve picked out. Like, our Arizona realtor, he texts me houses from Redfin all the time.

David:
[crosstalk 00:52:43], Robby.

Rob:
When he sends me a Redfin listing, I’m like, oh, he actually was in the Redfin app. And he said, “Rob would like this.” And then he sends it to me, and I’m like, oh, this fits my criteria. This is exactly what I was looking for. He doesn’t have to bring me the off market juice. It doesn’t have to be the craziest off market gem. I just want something that’s curated based on my expectations.

Johnny:
I love that you said that, Rob. I really do because I think that’s what separates a successful agent versus a unsuccessful agent, is someone that’s more proactive in just sending the deals and not just putting people on listing alerts. I know that was your first thing. Because part of what I think made me very successful in this space is, what I’ll convey to the clients is, before we even hop in a car to go view any houses, I’ve already done some research on it to see if that meets the criteria that you’re looking to get into.
For example, if we’re going to go look at three houses, I’ve already called the listing agents ahead of time to understand what offers we have to be at, what type of offers are coming in, if they have any special terms, like a rent back for example, and just see that those type of turns meet what the client’s looking for. Then once I do all that research upfront, I’ll present it to the client because we know that we have a good shot at it. I know that, this is more advice for the agents, I know that takes a lot of upfront work, but it creates such a good experience for both people, right?
Instead of going to all these houses and then finding out after you view 10 houses, you only have a shot at maybe one, right? Opposed to just canceling out all the noise and digging deep and doing that upfront work to provide a better experience for your clients. I think that’s another thing clients should look for as well, is someone that can do that research on the backend and bring deals to you that are tangible.
Especially in a high appreciating market where it’s very competitive, half the time you don’t even know, this is what people have told me, half the time their realtors took them to places they didn’t even know they can compete against. I think that’s another thing to look for in an agent and that’s another thing to do as an agent, because it just saves everyone so much time and creates a better experience.

Rob:
Awesome, man. Well, I really like to hear it from the other side, Johnny. I appreciate you putting it out there because I’ve learned a lot, even just doing this podcast. That my expectations or what I want oftentimes, aren’t necessarily realistic, and it’s because I don’t just sit down and talk to my realtor and say, “Hey, what would you like to see?” I think you summarize it perfectly. I don’t actually hear a lot of people say that it’s a partnership. I’m in a partnership with my realtor.
I have to put forth effort, and so do they. And if they put a lot of effort out there and I don’t reciprocate, well, they’ve just put a lot of time and wasted it. I think, if you could start thinking of your realtors as partners in your investing journey, that will be a very fruitful relationship for many, many, many years.

David:
All right, Johnny. If people want to reach out and contact you, I know you’re pretty active on BiggerPockets, but let’s say that they want to use you as an agent to buy or sell a house out in this area, how can people find out more about you and where can they reach you?

Johnny:
My Instagram handle is investingjohns. Spelled I-N-V-E-S-T-I-N-G-J-O-H-N-S. And yeah, that’s how they can reach me.

Rob:
And by the way, do you happen to know your BiggerPockets profile name, or your username, or handle on there?

Johnny:
Yeah, so they can find me at [email protected] That’s spelled J-O-H, and then [email protected]

Rob:
Awesome. What about you, David? Where can people find you, my man? And how can people find you on the BiggerPockets forum too?

David:
I’m not too hard to find on BiggerPockets, believe it or not. If you search for David Greene, you should be able to find me. I think my profile name on BiggerPockets is also davidgreene24, just like on all social media. My YouTube is youtube.com/davidgreenerealestate, but everything else is davidgreen24. And if you are an agent, if you’d like to get trained by us, if you’d like to join our team, if you’d like to join what we’re doing, please do reach out.
Johnny is a great example of what it looks like when you get an agent that loves real estate, invest in real state, wants to help people, and is pretty smart, and they all come together. And he’s one of the top 100 agents in the biggest real estate brokerage in the world in his second year. Johnny, I’m very proud of you. I’m very glad to be in business with you, and I appreciate you joining us today. Rob, I got to say, I’m proud of you too. You asked some really, really good questions.

Rob:
Thank you. Thank you.

David:
I thought you were going to say, do realtors poop in the toilets when they’re showing homes? No one knows, and I was wondering if that’s where it’s going to go, but you actually avoided the poop joke and you stuck to really relevant stuff.

Rob:
Well, I did ask it, but it was edited out in post, so what can you do?

David:
All right. Well, thank you very much, Johnny. Anything you want to leave us with before we get out of here?

Johnny:
No, I think this was a great talk. Thanks again for having me, guys. This was awesome. This was very surreal to me. Yeah, my utmost gratitude to you, guys.

Rob:
Awesome, man. Well, thanks so much.

David:
All right. This is David Greene for Rob poop joke Abasolo, signing off.

 

“High-risk high return” is how most people would describe a ground-up real estate development due to the many risks and challenges to overcome. But while ground-up real estate development can be risky, it can also be extremely rewarding—which is why so many investors opt for this type of investment, despite the possible pitfalls.

If you want to get into ground-up real estate investing, though, it’s important that you do everything possible to mitigate risks and maximize the possibility for returns. Not sure how to do that? In this article, we will guide you on how to vet a development deal by evaluating the fundamentals, risk exposure, and financial return to help you invest in a development deal with greater confidence.

What exactly is ground-up development?

Ground-up development is the process of buying a plot of land and building on it from scratch—or the ground up. If there’s an existing building on the property, then the process involves vacating the tenants and demolishing the building prior to development.

There are a number of unique factors involved in each development project, so it can be tough to estimate how long these projects will take on average. In most cases, you can expect a development project to take as little as two years to as long as 10 years or more, depending on its complexity. You can expect most projects to come with a price tag of between $5M to $50M, and most take, on average, between two and four years to complete. 

For example, in Los Angeles, a $25 million, 50-unit multifamily development project takes about 3.5 years to complete. That includes about 1.5 years for entitlement and permitting plus two more years’ worth of construction.

As a result of development taking a long time and requiring industry knowledge, developers typically charge 3-5% of the total project cost as their fee. This also varies, obviously, depending on the scope of the project, the experience of the developer, and other factors.

 Why is ground-up development risky?

One of the reasons why development is riskier when compared to a stabilized or value-add property is that there is no cash flow to rely on during the development period. This means that the financials for these projects have to be in order well before the start date to avoid the pitfalls of falling behind on loan or mortgage payments.

And there are other factors that make this type of investment risky, including:

Development fee or compensation

Many costs need to be controlled during the development phase. This includes the land purchasing cost; the soft costs for permits, overhead, design, and consultant fees; the hard costs for construction; financing costs; real estate tax, and so on. 

The hard cost is the hardest to control because construction is so unpredictable. All other costs are more predictable—and in some cases fixed—which makes it easier to know what could be coming down the pipeline. As such, you should do what you can to understand the hard costs that can come with your project. Some tips for doing this include:

Tip #1: Evaluating a developer’s experience

The first thing you want to pay attention to when reviewing a development deal is the developer’s experience. Have they completed a similar project before? If not, do they have general partners who have this type of experience? 

Make sure that they are not new to the market. Even if the developer has completed a similar project in the past, be aware that entering a new market can make the entire scope of the project very different from the developer’s prior experiences. That is due, in part, to the fact that each city has a different entitlement process, and these processes can also vary within the same city. The developer will also be working with new general contractors and consultants, which could become an issue over time.

The second thing to pay attention to is the developer’s competitive advantage. What makes this developer unique and better compared to the other developers? Why should you invest in this deal? 

Some competitive advantages could be the developer’s extensive knowledge and background; the unique product type or features that the developer is providing, such as micro studios, student housing, amazing amenities, etc.; or a vertically integrated team with its own design, construction, or property management department.

Tip #2: Evaluating specific project risks

While there are many different risks for these types of projects, we are going to focus on the following risks: the developer’s underwriting and assumptions, the entitlement risks, the environmental risks, tenant issues, and construction. We could dedicate an article for each topic, so we will focus on the big picture instead. 

Underwriting and assumptions

What financial assumptions did the developer make for the project? These are metrics such as vacancy rate, project timeline, expense ratio, rent projections, etc. that should be part of their offering memorandum (OM), which is a form of business plan in real estate. The cap rate at the sale may be the most important one, though, because even just 10 basis points can vastly affect your projected return significantly. And, since the sale price plays a major role in the projected return, make sure the sale comparables in the OM are realistic and achievable. 

You don’t necessarily have to spend hours doing market research for each potential deal, though. Just pay attention to the assumptions and ask the right questions. A good OM should already have data to back these assumptions.

Entitlement risks

This is where local expertise can become very valuable. Either the developer or the project consultant must be very knowledgeable regarding the topic of entitlement risks because each region has its unique set of rules and processes for entitlement. This process can even prove to be more difficult in different parts of the same city, as getting entitlement, by-right or not, can vary by district. One example would be the process of entitlement in Santa Monica vs. Los Angeles. 

You should also check as to whether the developers already know what the project is going to look like—and be sure to ask what the entitlement process will be like. Proceed with caution if they do not already have an answer. 

Environmental risks

Environmental issues could stop your project for years and cost you and the other investors millions, but the issue can be avoided if the developers do their due diligence. This often includes a Phase I environmental study. A Phase I study is preliminary research on the project history and records, but doesn’t involve any drilling or sampling. Depending on the project size and location, a Phase I study on the site may or may not be required. 

Small projects typically don’t do Phase I studies. If it’s a residential area, then the risks should be lower. But if the area used to be used for industrial purposes or was used as a gas station or dry cleaner, then make sure to ask the developer about this. 

Tenant issues

Evicting tenants can be very difficult in some counties, especially when there’s a memorandum to protect the tenants during COVID. If there are tenants in the existing building, make sure that the developer has a plan to vacate them, especially if it’s under rent control. 

One way for a developer to mitigate this issue is to make vacancy one of the contingencies during escrow. This way, escrow won’t be closed until the property is completely vacant. A second way to handle this is to hold a percentage of the sale price in the escrow until the tenant or tenants have vacated. The developer can also negotiate a cash-for-keys agreement with the tenants directly, which is probably the riskiest method.

If the developer cannot get tenants to vacate the building, then the project will be put on hold indefinitely. Find out what the tenant condition is with a project beforehand and assess your risks accordingly.

Construction

Construction is generally the hardest factor to evaluate because it’s difficult for even an experienced developer to manage. Supply shortages could increase the construction costs, local unions could halt construction, weather delays could happen, and any other number of issues could arise.

One thing you could do to mitigate risk with construction is to ask the developer about the contractors. Find out about their experience and reputation. Has the developer worked with these contractors before? Does the developer have experience working with these contractors?

You should also make sure that the developer reserved a contingency, which should be at least 5-10% percent of the total construction cost. The project will likely need to use this contingency. 

Tip #3: Consider climate change

The impact of climate change on real estate is a relatively new topic, but it’s getting more attention. A house flip that takes less than a few years might not be greatly impacted by climate change, but projects with longer timeframes might become harder to sell or even depreciate. 

The most common risks related to climate change are drought, flood, storm, heat, and fire. Contrary to what one would expect, these risk factors tend to positively alter important real estate metrics, such as rents and vacancy rates. For example, if a hurricane damages many properties in your neighborhood and your property is somehow unharmed, then there would be a higher demand in your area in the short term because of the shortage of supplies. 

If rents and vacancy rates are not always negatively affected by climate change, then does this mean that you should invest in areas with high climate risks? Well, maybe. You should consider the long-term impact of climate change on your property.

And one of the long-term negative impacts is a weaker capital market. If institutional investors stopped investing in this area, or if long-term residents started selling their houses and moving away, then this will have a permanent impact on the cap rate and real estate prices.

Some tools for evaluating the climate risks are Moody’s ESG Solution and climatecheck.com. Climatecheck.com is currently free to use and gives you a score for each risk category based on historical data.

Final thoughts on mitigating ground-up real estate investing risk

Real estate development is risky and difficult because there are so many unique factors to weigh and consider. The good news is, though, that as you get more experienced at this type of investment, you will be able to invest intelligently and achieve greater returns. And, once you’ve vetted the developers and completed a few projects with them, then it might not be necessary to spend as much effort at evaluating each project. Find a trustworthy and competent operator, and let your money go to work. 

I hope you found this article helpful in reaching your financial goals. If there’s a question or something that you’d like to add to this article, please comment below. 

Is the rebound in the Alberta housing market complete?

While many regions in Canada experienced a boom following the first wave of the coronavirus pandemic, the Alberta real estate market took some time to see growth in sales activity and prices. From the collapse in energy prices to the economic impacts of the lockdowns, the Alberta economy was reeling through much of 2020.

Now, fast-forward to the present day, and it seems all of that is ancient history. The energy market is soaring, the province is beginning to open again, and the real estate industry is growing. Could this western province return to its economic powerhouse status, and what might this mean for the real estate market and housing affordability in the region?

Let’s take a look at January data, for insight into what the future may hold for Alberta real estate.

Alberta Housing Market Bouncing Back

According to the Alberta Real Estate Association (AREA), residential property sales soared at an annualized rate of 26.6 per cent in January, totalling 5,085 units.

Vigorous sales activity was coupled with exceptional gains in house prices, AREA data show.

January saw the average home price climb 9.9 per cent year-over-year, to $443,398. In fact, all four property types recorded notable increases on a year-over-year basis:

• Detached: +13.8% to $511,753
• Semi-Detached: +12.9% to $441,979
• Townhome / Row: +4.5% to $298,786
• Apartment: +6.7% to $249,454

Housing supply has been a significant factor in the affordability crisis gripping the nation today, including the Alberta housing market. New residential listings declined 7.3 per cent to 7,158 units in January, while active listings plunged 27.2 per cent to 14,066 units.

Months of inventory, which measures the number of months it would take to exhaust current supply at the present rate of sales activity, fell 4.24 per cent to 2.77 months.

Here’s a regional look at market activity across Alberta in January:

Calgary

• Sales: +66% to 2,008 units
• Price: +8% to $510,641
• Months of Inventory: -61% to 1.31

Edmonton

• Sales: +20% to 980 units
• Price: +3% to $375,725
• Months of Inventory: -26% to 3.65

Red Deer

• Sales: +24% to 124 units
• Price: -5% to $312,526
• Months of Inventory: -15% to 3.24

Lethbridge

• Sales: +28% to 122 units
• Price: +12% to $342,778
• Months of Inventory: -48% to 2.8

Overall, according to AREA, this is the tightest market the province has witnessed in 15 years.

“Strong sales and lower inventory levels have caused the months of supply to fall below three months in the province, reflecting the tightest January since 2007. Tight conditions across most of the province have generally supported price growth,” the real estate association said.

But could this tight market ease? New housing construction data provides some optimism that relief could be coming soon. According to Canada Mortgage and Housing Corporation (CMHC), housing starts advanced 32.8 per cent to 30,612 units in 2021, compared to the previous year.

Despite this additional supply, the province will likely remain a seller’s market until supply outpaces demand.

RBC Economics agrees, writing in a research note that Alberta is “where conditions have tightened considerably through the fall.”

A Look at the 2022 Alberta Housing Market

Looking ahead, RBC and its analysts are monitoring interest rates and public policy pursuits as the potential “wildcards” in 2022 and beyond. “We expect new policy initiatives will be announced this year. Our view is expediting new supply should be a priority though it’s unclear what policymakers will ultimately do and when. We’ll continue to monitor the situation closely,” the bank stated.

But, according to the RE/MAX 2022 Canadian Housing Market Outlook, Alberta’s two biggest markets, Edmonton and Calgary, are forecasted to see more growth in 2022. The report projects the Calgary real estate market could see prices climb 2.5 per cent to $506,685, while the Edmonton housing sector will experience prices rise seven per cent to $404,297.

Citing RBC’s provincial outlook, RE/MAX anticipates big things for the western province, driven by greater provincial migration, an economic recovery, and municipalities welcoming more significant capital investment.

Indeed, the latest Statistics Canada data show that Alberta gained close to 4,500 residents from inter-provincial migration during the pandemic.

Whatever the case may be, Alberta and other prairie regions may have an advantage over other markets across Canada, from the renewed boom in the resource sector to relatively better housing affordability. Whether the province can continue attracting and retaining this population boom and broader economic growth remains to be seen. But the future of Edmonton, Calgary, and the rest of the province, looks bright.

Sources:

Mindy:
Welcome to the BiggerPockets Money podcast show number 283, where we interviewed Tiffany Grant from Money Talk with Tiff and talk about entrepreneurship, keeping expenses low, and leaving Corporate America to follow your dreams.

Tiffany:
I’m going to just go ahead and do it, see what happens. If I mess up, I’ll learn from that mistake, and then I take that lesson, and then I move on to the other thing. So I think that’s a big contributing factor is I’m so willing to take any risk, any risk, as long as it’s feasible, and as long as what I perceive to be the risk/reward is worth it, I’ll do it.

Mindy:
Hello, hello, hello. My name is Mindy Jensen, and with me as always is my always knows just what to say cohost, Scott Trench.

Scott:
Mindy, I’m at a loss for words.

Mindy:
You’re my favorite. Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or leave Corporate America three times, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.

Mindy:
Scott, I first met Tiffany a hundred years ago, and I’m so excited to finally be able to connect with her and bring her on this show. I love her story because it doesn’t start out perfect. She has always had an entrepreneur real streak in her bones, and then life happened. I love her quote a little bit later in the show. She says, “Life doesn’t happen to me. Life happens for me,” but life throw you a couple of curve balls, and instead of saying, “Well, I guess this is just how it is,” she didn’t stop from her dreams, and she continued on, and now she is an entrepreneur, a successful entrepreneur, self-employed, and living the dream.

Scott:
That’s right. She’s like Chuck Norris. No, I really appreciated her story. I thought it was-

Mindy:
How is she like Chuck Norris?

Scott:
“Life doesn’t happen to me. I happen to life.”

Mindy:
Oh, okay.

Scott:
I think she has a great story. I think the entrepreneurial spirit is there, and I think that the theme here is that she’s able to keep her expenses so low that it opened up a tremendous amount of options for her in of I think a number of circumstances that were a barrier to building wealth for Tiffany. So I think it’s a great episode and look forward to hearing from her.

Mindy:
Tiffany Grant from Money Talk with Tiff, welcome to the BiggerPockets Money podcast. I am so excited. We have finally connected. We have been missing each other for years.

Tiffany:
Literally years.

Mindy:
Literally years. I met you at FinCon in Washington, DC, which was a hundred. It feels like it was a thousand years ago, doesn’t it? Because it was-

Tiffany:
Pre-COVID.

Mindy:
… pre-pandemic, and then just we’ve been locked down for two years. So I’m so excited you’re here. Welcome, welcome, welcome.

Tiffany:
Thank you so much for having me. I’m so excited to be on the show. Like you said, that’s been in the works for years. So I’m finally able to finally get on. I’m so happy to be here.

Mindy:
Well, let’s jump into it. Where does your journey with money begin?

Tiffany:
Ooh, where do I start? Okay. Let’s start with when I was little, right? So just a little background, nobody in my family is really good with money, but for some reason, I always had an interest in it. So when I was about five or six years old, I started my first business, and that business was, I called it Tiffany’s Café, and I would go to my grandma, ask her what she was cooking for dinner that night, go and type up a menu, and then I would hand it out at dinner and take people’s orders, and it was like chicken was 25 cent, rice was 10 cent, big numbers for little kids. I would take the order back to my grandma, she would make the plate, I would bring it out, and then at the end, I would come around my piggy bank and collect my money.
So that was my first experience that I remember when it came to money, and then from that point on, I always had some type of business throughout the year. So seventh grade, my hustle was buying and selling books on Amazon because I love to read. So I was like, “Oh, well, how can I make sure I have a never ending flow of books? I can buy and sell on Amazon.” So I would buy them and then I would sell them back used, and then I would use that money to invest into the next book, and so on and so forth.
Then when I was 16, I remember having a business doing cheesecakes. I would make cheesecakes. At that time, I was working at CVS. So I would bring my little cheesecake samples. I don’t know if this was legal or not, but my manager said it was fine so we’re good. I would bring my little cheesecake samples and have the customer sample and they would order my cheesecakes. So that was my business at that time.
So I’ve always had something going on as it relates to money. Then I also remember being little and cutting out coupons. I mean, nobody used the coupons, but I just liked going through the motions of cutting them out.
Now, as we fast forward, I found out I was pregnant at 17. My trajectory at that point, I wanted to be a chef. I got accepted into culinary school, and then a week later, I found out I was pregnant. So I was like, “Okay. I can’t go all the way to Charlotte to culinary school because that’s too far. I won’t have a support system.” So I decided to enroll in a community college and start my career in business. Now-

Scott:
Where was this again?

Tiffany:
This is in Greensboro, North Carolina.

Scott:
Greensboro, North Carolina.

Tiffany:
That’s where I currently reside. So I ended up getting enrolled into community college because it was too late to apply anywhere else. One of the things the lady said, she was like, “What are you doing here?” She was like, “Your GPA is so good. Why are you here?” I told her the situation. She was like, “Well, I commend you for actually still following through.”
So at that point, I was like, “Okay. I have a little person that’s going to depend on me for the rest of their life, and so I need to do better as an individual, as a person so that way, this person can grow up with a different experience than me.”
So it was at that moment where I became really serious with money. I mean, I was an extreme couponer at that age. I would go into the grocery store and come out with carts full for $20. My mom was just looking at me like, “What kind of child do I have?” but that was part of that story as well.
Then I guess where it really got serious was I realized that I had to have credit to get credit, which is so backwards, but that’s how it works. So I was like, “Okay. I have to get a credit card.” I went to my local bank where I had banked since I was 16. This was when I was 22 or so. At that time, I had two kids now.
So I was like, “Okay. I need to get a small credit card.” All I asked for was $200. I got denied, and the reason I got denied was because she said the stuff on my credit report, so I had medical bills on there. That was it, medical bills, and then she said I didn’t make enough.
Now, I was always told that medical bills didn’t matter. So that’s why I tell people now don’t listen to the lie because they do. I was denied $200 because of it. Then also, the point she made was I didn’t make enough money. So from that moment on, I felt so dejected and so just rejected. I was like, “I don’t believe I’m not worth giving $200 to.” Oh, go ahead.

Mindy:
How much did you make that they wouldn’t approve a $200 limit on a credit card?

Tiffany:
So at that time, I was working at a thrift store. So I was making maybe $10-$11 an hour or so. So maybe that’s why, but nevertheless, the lesson I learned was I didn’t make enough money and I needed to get that stuff off my credit report.
So from that moment on, that’s when I started taking everything very seriously. So I got a new job that made more money. So that was my wake up call, and then I also got all of the medical bills off. Now, when I went back, this is the funny part of the story, I actually got the same exact person that I had the previous year. Okay? So when I went to her office, I was like, “Dang! This is the same lady,” but I was like, “You know what? I want to say thank you to her because because of her, I was able to work on all of the steps needed in order to come back again.”

Scott:
Just going back a second before, because I want to hear how the same lady did it and I want to build the climax even more for that, but what was the new job that you got and how did you get rid of the medical debt?

Tiffany:
Yes. Ooh. So this is good. Okay. So by that time, I had graduated with my bachelor’s. So this is fast forwarding a year from that moment. I had graduated with my bachelor’s. I had got my first entry job as a receptionist. So at that time, I want to say I was making maybe $12 or $13 an hour. It still wasn’t super significant, but it was a little up from where I was.
Now, with the medical bills, here’s a tip that I tell people, I was ready and willing to pay whatever it is that they needed because according to my credit report, it said it was 2,000 something dollars worth. Okay? Now, that was comprised of a $4 here, a $20 here, just nickeling and diming. So I called and I was like, “Hey, I noticed that there are these charges on my credit report. I just wanted to inquire and get some information about it.” So I didn’t say I wanted to pay yet.
When I said that, the lady, I hear her type in, she’s looking in the system and she’s like, “I don’t see any of those with us.” She was like, “All I see that you owe us is $30.”
I said, “Are you sure because what’s showing on my credit report is XYZ.”
Now, she’s doing some more research and she’s like, “Yeah, I’m sure. All I’m showing is we don’t have that debt anymore. I just show that you owed $30 and that’s it.”
So of course in my head I’m like, “Please, take my card. Hurry up,” but I said, “Okay. You still have to be smart about this.” So I went back to the lady as we were discussing, I said, “Okay. If I pay this $30 today, will you be able to give me something in writing saying that the debt is paid in full?” and she assured me that she could. So then I was like, “Okay. Go ahead and take my money.”
So I gave her my card number, she did that, and then I was like, “Well, what do I do about all of these other ones that are on here that you all aren’t showing?” and she said to go ahead and dispute it.
I was like, “Okay. That’s fine.”
So I went and I disputed the rest, and they all fell off pretty much. So that’s why I tell people now don’t be afraid to talk to creditors. Just don’t say that you’re going to pay yet until you have all of the information because once you say that you’re going to pay, then that restarts the whole process if you’re waiting for the seven-year thing that sometimes people do. So don’t say that you’re going to pay, but just say, “Hey, I’m just inquiring to see what’s on there.” So that’s my tip with that. So hopefully that answered your question.

Scott:
No, absolutely. Yeah, and sometimes you can negotiate those, right? “Hey, I have $2,000. It’s four years old. Can I pay $400 and get this thing resolved?” Sometimes that type of scenario can play out depending on your circumstance. So always worth a call there. I love the advice to learn and inquire, but not commit until you are fully informed and have all the facts.

Tiffany:
Exactly.

Mindy:
Because I’m in this position because I’ve talked to other people about paying off their debt, you were very smart in saying, “Can you give me something in writing that the debt is paid in full?” Those are the things that you want to make sure you are following up on. Those bills could have been written off by the company. They could have been billed in error. They could have been paid by insurance. They could have been a lot of things. Whatever happened is whatever happened. Those circumstances aren’t what’s at issue here. What’s at issue is what they are saying you still owe. She’s showing you owe $30. “I want you to tell me that’s paid in full, but here’s my $30. I’m not going to try to negotiate $30 when you say that’s all I owe. Here you go. Here’s my 30 bucks. Let’s get this off my record,” but yeah. There’s a lot of things that are on credit reports that are incorrect.
I mean, people are putting this stuff in and they’re, “I’m doing this thing you can’t even see because my hand’s over here.” They’re doing these nine keys or is it 10 keys? I guess it’s 10 keys over here. You slip up, you hit a three instead of a two, and now all of a sudden it’s on your credit report instead of mine because it’s the wrong social security number or however that works. So there’s mistakes that are made, but you’re not going to know what’s on your credit report if you don’t look at it.

Tiffany:
Exactly. See, that’s the key, too. Look at your credit report. Become aware of what’s going on because unless you’re aware, you don’t really know how to fix anything. So that was part of my journey. I had to become aware of the situation, and what prompted that was the lady telling me that I had stuff on my credit report and I was like, “You know what? Let me go out there and look and see what’s going on.”
Then second, having those conversations is so important. A lot of people just shun the bill collectors, “Oh, the bill collector is calling. Let me not answer,” but a lot of times, you can work out deals like Scott was saying or sometimes they don’t even have the debt anymore, and you’ll never know until you have that conversation.

Mindy:
Yup, and even at the time of the medical bill, my daughter was born in the beginning of November, and all the bills started coming in right around Christmas and I’m like, “Oh, if I could just pay this over a couple of months, that would just ease things up a little bit. I could do it, but I don’t really want to.” So I called up the billing department of the hospital, I’m like, “Hey, I’m getting these bills. Is there any payment plan options?” Before I could even say, “Can I have two months to pay?” she’s like, “We can do 11 months. I can offer you 11 months right now. If you need more time, you have to talk to a different department.”
I’m like, “Oh, I’ll just take those 11 months,” and it was $1,100. I was going to do it over two months, but I was like, “I’ll pay $100 a month for a year for my kid. Sure. That’s fine.”

Scott:
Well, we have to come back, though. What did the lady say the second time for the credit card?

Mindy:
Yeah, yeah, yeah.

Tiffany:
Before we go back because I just want to hit on Mindy’s point really, really quick.

Mindy:
No. Okay. Okay.

Tiffany:
I know, cliffhanger. We’re going to cliffhanger the whole episode. No. Get people to listen. No, but with contacting hospitals and stuff, they have pools of money to where they can write … I’ve gotten hospital stuff for free at one point in my life because I wasn’t making that much. So I just had a phone call. They were like, “Oh, fill out this form for financial assistance,” and boom, I didn’t even have that bill anymore. So that goes back to the point of always reaching out.
Okay. I’m not going to let you all hang off the cliff any longer. Okay. So when I went back to the bank, I ended up getting the same lady. So I was like, “Do you remember me?”
She was like, “No,” which, I mean, I understand. I mean, I’m one of thousands of people she probably saw throughout the year. So she’s like, “No, I don’t.”
I was like, “Okay. So let me go ahead and get through the process first and then I’ll tell her after the fact.” So we go through the process. She asked me, “Well, how much would you like to apply for?”
Now, in my head I’m like, “Well, I know my credit score is 750 or something at this point.” So I’m like, “Let’s do $1,000.”
So she runs it. She’s like, “Oh, you’re approved,” this, that, and the other.
So I was like, “I just wanted to thank you.” So it wasn’t like, “Oh, you told me da, da, da.” It was more of gratitude. I was like, “I want to thank you for telling me last year that I was denied and that I didn’t make enough and then I had stuff on my credit report because it set me on the trajectory to where I am today, and now, I’m sitting in front of you asking for way more than I asked for before, and I’m getting approved. So I really wanted to thank you for the impact that you’ve had on my life.”
She was just like, “You’re welcome,” but it just felt good to actually give her gratitude for that. I’m glad that I had the same person and I was able to tell her how much of an impact she had on me because I know a lot of times bankers and stuff, they don’t get that type of stuff. They’re probably all day deny, deny, deny, approve, deny, deny. So to hear someone say, “Well, this is how you impacted my life,” I felt like that would have a big impact on her life.

Scott:
Yeah. Sounds like she was a true credit to your finance story here.

Mindy:
Oh, that was terrible.

Scott:
Well, great.

Tiffany:
Yes, yes, that was the pivotal moment. So anyway, going on from there, single mom of two boys for a very, very long time, I ended up, because I was working in HR, doing Money Talk with Tiff part-time. So every time I would go home, I would just start working on Money Talk with Tiff, and then I realized, “Tiffany, you spend more time and you have more fun doing this money stuff. Why don’t you just do this money stuff?” So I quit Corporate America in 2019, and I have not been back since.

Scott:
Let’s go through a buildup to your entrepreneurial journey because I think a lot of people want to recreate that to some degree. So what year did you get the $1,000 limit?

Tiffany:
That had to be 2015 maybe, maybe 2015.

Scott:
Okay. Great. So 2015, you’ve just rebuilt your financial position, eliminated the medical debt, and got $1,000 in credit limit. What happens to your personal finances over the next four years that sets you up to feel confident to leave your job and take on the entrepreneurial venture full-time?

Tiffany:
Gotcha. So actually, okay, so once I was able to get approved, before, okay. So after that, I also got a Capital One card, and I would only use those two cards for gas. So I would get gas, pay it off, get gas, pay it off, get gas, pay it off just so I can keep building that. Meanwhile, while I was building that, I went, okay, so I finished my undergrad. I actually went back to school to get my master’s. So just visualize for me real quick a single mom, two boys, I was working two jobs, and going to school full-time to get my master’s degree, but-

Scott:
So let’s walk through that. So this is 2016 that this is going on. You’re in the meat of this journey. How do you enable all that? How do you handle daycare? How are you handling your household budget? How much are you saving or going into debt to get the degree? What does that look like?

Tiffany:
Okay. So leading up to that point, I was literally, so when I was in my undergrad program, I was literally living from refund check to refund check, whether it was student loans or federal tax refunds, right? So when I would get my refund, I would pay my rent up as much as I could, and in my mind I’m like, “At least we’ll have a place to stay if nothing else,” this, that or the other.
Now, once I got the job in Corporate America doing the receptionist thing, I was able to get a promotion while I was at that job. So then I was making I want to say $14-$15 an hour. Then I realized, “Okay. I don’t know if administrative work is what I want to do anymore,” because all throughout undergrad I was like, “Ooh, I just want to be an executive assistant to some CEO or whatever,” but then when I got the bottom level of that, which was receptionist, I said, “Yeah, this is not the life for me.”
So I saw the HR person walking around and started asking her questions about HR and things like that. So she took me under her wing. She started teaching me things, telling me what resources to plug into, and then I was able to get my first HR role through a temp agency here locally, which I tell people all the time, if you’re looking for a career change or anything like that, definitely check out temp agencies because they have the jobs. They’re able to get your foot in the door even if you don’t have any experience as long as you fit their criteria of what they’re looking for. So I was able to get my first HR position, and then I think at that-

Scott:
What year is that?

Tiffany:
Oh, gosh, years. It wasn’t too long after … Let’s say 2016. Let’s say 2016.

Scott:
In 2016, you’re still getting your master’s degree.

Tiffany:
No. Okay. So I enrolled in my master’s fall of 2016. So I was already in the HR position once I enrolled for my master’s degree if that makes sense.

Scott:
Okay. Great. You’re working in the HR job and you’re enrolled in the master’s program. What is day-to-day life like and how much are you able to save on a regular basis in that situation?

Tiffany:
Well, luckily, luckily, I’m very, very frugal by nature as you can see when I said I was an extreme couponer from 16-17. So I’ve always been frugal and I’ve always ever since the whole catalyst moment with the getting credit and stuff, I started budgeting. Okay? So I’ve always had a budget and I’ve always been frugal. So even as my income was going up, I still live the exact same way, if that makes sense. So I didn’t allow the income creep to get to me. I would still live like I didn’t have any money because that’s just how I live in general.
So as I kept increasing my income, my expenses stayed pretty much the same. So I was able to have more and more of a gap of what was available to me. So that’s when I started saving more, investing more.
So in 2017, I bought my first house at 26 as a single mom of two boys, and then once I did that, 2018, I ended up getting my master’s degree. So then after that, I got a job that was paying significantly more than where I was, I mean, to the tune of maybe double, triple my salary. So at that moment, I was able to really start saving because I still lived the exact same. I still live the same today.

Scott:
So what were you saving before? You were obviously saving something previous to that higher paying job because you were able to buy a house before you even got it. What is your budget looking like? How are you financing your master’s degree during that period?

Tiffany:
Okay. So my master’s degree was all student loans. I didn’t pay any of that while I was in school. What I was paying some on while I was in my master’s degree program because see, here’s the thing, too. They give you the grace period. So when I enrolled in my master’s program, my undergraduate went into deferment since I was back in school again. So while that was in deferment, and those are subsidized loans, I went ahead and started paying those down while I was working at the staffing agency, which was my first HR role.
So what my budget looked like? I really don’t spend money. I know it sounds horrible, but I really hate spending money. Everything I wear is thrift store. My car, I mean, it’s a 2010 Mazda or something like that. I still have it to this day. I just live very, very plain and very frugal.
Also, I will say another thing that really helped was having the kids, getting the tax refund, and things like that, and so that would be able to bump my savings or bump my debt payoff up a little faster because I was always disciplined with those. I wouldn’t just go spend it on whatever. It always went to debt or went to savings. That’s it.
So that also helped as well, but I mean, what did my life look like? It was go to work, go to work, get the kids, come home, cook dinner, put them in the bed, work on Money Talk, and then when I was in school, it was Monday, Wednesday, Friday. It was go to school instead of getting the kids and going home. So the kids would go to my grandparents.
So luckily, I had a very good support system through all of this. I had family that helped me with the boys as far as watching them whenever needed. I would do Uber and Lyft a lot. So I would do Uber and Lyft, they would watch the boys. So I’ve always had other side hustles going on while I was working, too. So that always helps.

Scott:
Awesome. That’s a phenomenal hustle and lots of things going on there. It’s really exciting to see. Okay. So when you get the new job that’s paying two to three times more, what is that job and what happens next? How does that translate to the next milestones in your wealth journey?

Tiffany:
Yeah. So that was still in HR. At that point, I was an HR business partner. So that was a step below VP. So I moved very quickly up the corporate ladder in HR, which I loved HR. HR was awesome. It was just I love money more. So I worked my way up the corporate ladder and I love that job, don’t get me wrong, because I’m still a people person. I love people.
So as that was happening, I was still driving Uber and Lyft. So even though I was making a decent amount of money, I was still doing Uber and Lyft. I was still doing Money Talk with Tiff, bringing in some money from that. I was still making soap. I make soap occasionally. I know you all are like, “She does freaking everything,” but I was still making soap and selling soap.
So I always had some type of cashflow in addition to wherever I was working because I knew that my goal was to not work for someone forever. I’ve always had the mindset of an entrepreneur even from the story I told you when I was five. So I get bored very, very easily working for someone else. So I’m like, “Okay. How can I do this?”
So then something happened at that workplace and I said, “Okay. It’s time for me to go.” Luckily, what I had already did was I’ve already had the budget, already knew what my daily number was, what I needed to make for the month in order to cover all my bills, and then I broke that into daily. So at that point, it was like I think as long as I made $50 a day, I would be okay.
So I’m like, “$50 a day? I can do Uber and Lyft for two to three hours, and I’m done for the day.” So it started putting things into perspective. I’m like, “I’m sitting here for eight hours every day and I can just work for a good two to three hours and I’ll be all right.”
So I quit. I didn’t have anywhere to go. Everybody was always asking, “Well, where are you going next? What company are you going to?” You notice everybody’s question and I’m like, “Nowhere. I’m going to work for myself.” It was just so scary for other people. Other people were projecting their fears onto me. They were like, “But you have a house and you have two boys and you’re a single mom. How are you going do it?” but see, they don’t have the data that I have. They don’t know that my number is only $50. If I can make $50, I’m good. So I wasn’t scared. Everybody else was scared for me. So anyway, I ended up quitting that job, but that wasn’t the last time I left Corporate America. So that was back in … Go ahead.

Scott:
So let me ask you a couple more questions about that. So first, I think that’s phenomenal and that’s the power of keeping expenses so low. I think that everyone thinks, “Oh, driving income is the one that’s exponential here and that’s the lever that’s most important,” but there’s this paradox where if you can spend very little, you can take a risk on something that’s highly variable in income like starting a business, right? It’s much easier to breakeven on a business if you’re spending $1,500 a month or $50 a day than it is if you need to generate $10,000 a month, right.
There’s also completely different tax brackets that you’re in for those things that make it that much harder to go from $8,000 to $10,000, for example, in income versus going from $1,500 to $3,000 in income. So I think it’s super powerful. For those willing to do it, you just have so many more options and you’re likely to get way richer downstream, not just because you can save up more when you spend less, but because you can take opportunities like this and say, “You know what? I can go try this shot because my worst case scenario is I Uber for three hours a day to breakeven while I figure out my shot.” So I think that’s phenomenal, and I just love the very simple but powerful math there that most people are not going to act on, but that you did.
Then second, I want to know about your cash position when you left that job. Had you built up a meaningful cash reserve and was that an influence in your decision?

Tiffany:
Okay. So this is where I tell people this is the part where I went wrong in this part of my story. Okay. So when I quit, I was confident. I was like, “Yeah.” I think I had maybe a month or two worth of expenses saved up. So I was like, “Yeah, I’m good,” this, that, and the other.
Now, I was good for a little bit and then I was like, “It’s starting to get a little tight.” I said, “Oh, no.” So luckily, my old job that I had left before I had went to that one that was paying exponentially more, they called me because they needed someone because their payroll person was going on maternity leave. So they knew that I knew the systems, I knew everything.

Scott:
I should have saved my rent for the second part here. Oh, jeez.

Tiffany:
Well, we can always edit it.

Scott:
No, we’ll leave it.

Tiffany:
So they ended up calling me. Now, I’m newly free from Corporate America. So I’m like, “I don’t want to go back,” this, that, and the other, but I was like, “You know what, Tiffany? Wait a minute. Let’s think smart because this might be opportunity here. You’re starting to see it’s starting to get a little tight. This might be what you need to take it to the next level.”
So I said, “You know what? Let’s make a deal.” I said, “I will come back and help,” because mind you, now, this is a perfect position to be in because they need me at this point. Nobody else they hired to take her place for maternity leave was working out. Nobody could understand the system. So they’re like, “Tiffany knows her stuff. She did a really good job while she’s here,” and this is the perfect position you want to be in as someone that’s getting hired, right?
So I said, “Okay. Let’s make a deal.” I’m like, “I will come help run the payroll and stuff. I need this amount of money.” I’m not going to say how much, but I was like, “I need this amount, and once I’m done with payroll, I need to be off for the rest of the day. So don’t try to give me any filler work and all that stuff. If I’m done by 12, I’m out by 12 as long as I get my job done.”
So they pretty much hired me as an employee, but I was working similar to a contractor, and that was my terms. I wasn’t going to go back if I had to get back into that employee thing. So I went back to help them out, which was fine because I loved the company, anyway.
It’s funny. While I was there, I’m thinking that the payroll lady’s going to come back. She calls me and she’s like, “Oh, I think I’m going to stay home with the baby,” and this, that, and the other.
I said, “I see what happened here, the old bait and switch.”
So anyway, I ended up staying a little longer than I thought, but I didn’t want to leave them hanging so that was fine, and then also it allowed me to save up more money. So now I tell people, if you’re going to make the big exodus from Corporate America, make sure you have at least three to six months, maybe more on the six month end of things because that’s where I ended up getting once I quit the second time.
So I actually quit corporate twice, officially, but it was just interesting how it all worked out in that way, but being an entrepreneur is very, very hard, and it’s very, very variable income. So you should at least have three to six months’ worth of expenses saved up at the minimum because you never know how things are going to go.
Then I also tell people, make sure you have intrinsic motivation because it can get very, very hard at times, and you will feel like giving up a lot of the time, but if you have an intrinsic motivation, so something within you like, “This is why I do this. This is why I’m out here. This is why I’m doing what I’m doing,” then it helps you get past those hurdles because that happens to me often. I’m like, “Darn! I could just sit at a cushy HR job and just get the regular income coming in,” and then I’ll get a text from a client saying, “Oh, I just paid off XYZ,” or “I just got approved for a house,” and I’m like, “No. You know what, Tiffany? This is why you do what you do. So keep doing it.”

Scott:
Love it. Well, so okay. So when did you quit the second time? What year is it?

Tiffany:
That was 2019.

Scott:
2019, and what has happened to your business and your personal finance story since then?

Tiffany:
In 2019, I was actually working at a financial firm. Okay. So I was there at the place helping with their payroll stuff, and then I graduated with my MBA, and January of 2019, this financial firm locally, they were like … I reached out because I actually worked on their project when I was in my MBA program. They were our client and I was like, “You know what? I want to get into the financial field. I want to get some experience under my belt in finance, not just in HR.” So they hired me on. I think it was in January of that year.
So I was working at a firm and, of course, being that as a financial firm, if there’s any professional development opportunities related to finance, guess who was there? So that’s actually how I was able to go to FinCon in 2019. The company actually paid for my lodging and everything.
Unfortunately, not too long after that, I ended up quitting, but that’s another thing I tell people, too. Always ask. The worst they can say is no because I was going to something that was finance-related, my company was like, “Yeah, sure. Go ahead.” So I was able to go to FinCon as a result of opening my mouth and just asking for it at my employer.
Now, while I was sitting at that job, I was only working with millionaires because that’s all they service, and I was like, “Hmm,” and I was studying to get my CFP because that’s what they required, but I was just like, “Mm, I don’t know if this is the type of people that I want to help for the rest of my life. I love the money thing, I love the finance thing, but I really, really like helping people pay off debt and negative net worth, getting it positive, and improving credit scores, and all that type of stuff, and I’m not getting any of that here.” I got so tired of talking about estate planning and taxes.
So I was like, “You know what? I think I’m going to just quit and just do Money Talk,” but it gave me an opportunity to see what I really wanted to do when it came to the finance field. I realized that was not the niche for me, and then it actually helped me find what my niche is.
So I’m super grateful for the opportunity and they are awesome people over there. If you are a millionaire, definitely check them out because they know their stuff, but it was just not for me. So that’s what made the decision. That’s why I made the decision to quit there, but they still refer me business. If anybody comes to them and they don’t qualify or whatever, they’ll send them to me, that type of thing. So we still have a good working relationship.

Scott:
Okay. So this is the third quitting of a job, but not Corporate America. They’re not corporate, this company. So what time did you leave that job?

Tiffany:
That was 2019. So I left from helping out with the payroll thing. That was January 2019. I got this job January 2019. So I stayed a little extra on the other one.

Scott:
Okay. So at this point, you started going into your venture full-time at the end of 2019?

Tiffany:
Yes. So August 2019 was my last day in working for anybody else. So during that time, and here’s the funny part, Mindy. I know you don’t know this part of the story, but I had created my podcast a month before FinCon because I was like, “Okay. I want to be strategic. I want to make sure I have something so I could be like, ‘Oh, yeah. I’m a podcaster,’” that type of thing. So I had a good month under my belt just for the sole purpose of going to FinCon and advertising the podcast because I knew that was what I wanted to do, but I was like, “Darn! I could really use this opportunity to get more traction on it.”
So I created the podcast a month before FinCon. So while I was at FinCon, I was like, “Oh, yeah. I have a podcast. It’s Money Talk with Tiff. It’s Money Talk with Tiff.” So I was spreading the word and stuff.
Then from there, it has just been guests the entire time I’ve had my podcast. So I would say 90% of my episodes are guests now people just keep coming like, “Oh, I want to be interviewed. I want to be interviewed.” So that’s how that whole thing started, but when I quit from the financial firm, I was in a really dark place a little bit because I had just broke up with my boyfriend, I quit the financial firm. It was just a lot going on, but I still kept my wits about me. I still tried to do as much as I could as far as Money Talk was concerned, but it wasn’t until I would say January 2020, right before COVID, where I started really putting pedal to the metal. I had booked events in DC. I had booked events in California. People were getting me to speak. That was my year of travel.
Then of course, as you all know, March 2020, COVID hit. So I’m like, “No!” Right when I was finally getting traction on all of this, that’s what happened. So I couldn’t travel. All the speaking engagements that I had booked got canceled and all of that. So I was like, “Okay, Tiffany. You have to pivot again.”
So I started doing online events, doing more one-on-one coaching virtually. Then also, I started a business in 2020 as well, another business that got me through the whole COVID pandemic.

Mindy:
What’s the other business?

Tiffany:
We started a logistics company, which is expediting. So what that means is sprinter vans and box trucks. So they do over-the-road like the big trucks do, but you don’t need your CDL. So it was easy for us to keep getting drivers. We had a good pipeline for drivers and things like that. So we were able to keep rolling, and we actually expanded quite a bit in 2220.
So you know how most people were losing business and things like that, this was an industry that was taking off, especially because even with all the shutdowns and stuff, we were able to, when they gave you the little paper saying that you were okay to keep working or something like that, we were able to get those. So we were still rocking and rolling 2020-2021, but now, I’ve decided to refocus my attention back to Money Talk, but that was how we were able to get through the pandemic.

Mindy:
Okay. So how does Money Talk with Tiff make money?

Tiffany:
Ah, so many different ways.

Mindy:
Okay. Hold on, hold on. Before we jump into that, let’s look at that. You have always had multiple streams of income and now you’ve got your main company, your main focus of income, still has so many ways of generating income. What was it? I keep seeing this millionaires have at least seven streams of income or something. I keep seeing that phrase, and I don’t know where that came from. I’ve never seen the beginning statement of that. I’ve just seen people quoting that all the time, but Tiffany’s got 500,000 streams of income.

Tiffany:
I wish. I’m working on it, but as far as Money Talk is concerned, so I do speaking, I do corporate consulting. So one of the ways I work with corporations is since I do have an HR background and now I have the financial piece as well and I have certifications in both, I’ll go into corporations to teach their employees about their benefits or to do financial wellness workshops, seminars, whatever is needed because what I have learned when I was in HR and in Corporate America is that a lot of people come in with a lot of financial mess going on, and so they can’t be as productive as employees as they want to be because they’re constantly thinking about what’s going on on the outside.
So my position, and this is actually what I want to study because I do want to get my PhD, but the relation between financial wellness and where you are financially in your productivity in the workforce and therefore how fast you’re able to move up the corporate ladder.
I believe in my situation I was able to move up so quickly because I had my finances in order for the most part, but there’s a lot of people that think about like while they’re at work, they’re thinking about what bills need to be paid, what debt, what … Also, another reason why I think I moved up so quick is because I was giving myself raises, i.e., I was quitting and then I was going to new jobs.
Now, a lot of people are scared to do that because they’re like, “Okay. Well, I have my bills. I have this. How can I make these big drastic decisions when I have all this stuff going on?” So that’s my position when I go into corporations, helping them realize the impact of how financial wellness plays on their workplace and the productivity in the workplace.
So I do corporate consulting. I do one-on-one coaching. I was doing a mastermind group, but I backed away from that. I’m in the process of writing a book. I have courses. I do brand partnerships, link insertions on my website, ads on my website. There’s so many different ways that I make money as Money Talk with Tiff. So I really don’t diversify in the way where I have multiple businesses going because at one point I had six at the same time and it was just very, very hectic. So now, I have this one, but I’m able to do so many different things with it.

Mindy:
They’re all interrelated. I’m sure that a lot of this is you create one piece of content or one thing and then you can repurpose it and use it in many different ways and make money from it multiple different ways. Yeah. Oh.

Tiffany:
Absolutely. Absolutely.

Mindy:
I love it. I love it. I’m excited for you, Tiffany. This is just, I mean, it seems like your whole life, but this has been a very, this is a lot of success in a very short timeframe in the middle of a pandemic, too. I mean, we didn’t even talk about that.

Tiffany:
Yeah. See, that’s my thing, too. One of my beliefs is everything you’ve ever wanted is on the other side of fear, right? It’s one of my favorite quotes. So anytime I feel scared of something, it’s probably because I need to go ahead and dive in. So I attribute that to a lot of my success. I’m willing to take a lot of risks even when I’m like, “I don’t know. I don’t know.” I’m going to just go ahead and do it, see what happens. If I mess up, I’ll learn from that mistake and then I take that lesson and then I move on to the other thing.
So I think that’s a big contributing factor is I’m so willing to take any risk, any risk as long as it’s feasible, and as long as what I perceive to be the risk/reward is worth it, I’ll do it. So I think that has helped me tremendously in both my career, my business, everything in life. It’s just the ability to look fear in the face and just say, “Get out my way. I’m still moving on.”

Mindy:
You say you’re willing to take on risk, but you are doing it from a very conservative financial position. You have increased your income without increasing your spending so you are increasing your savings. You’re increasing the delta between what’s coming in and what’s going out, and that is really the biggest financial superpower you can have is to have so much more coming in than you are spending.

Tiffany:
Yeah. See, the thing is when I say I take risks, I take important risks and calculated risks. So for instance, with getting the job that was making double or triple, yeah, I could jump out the frying pan into the fire, which it ended up being the case, but I was like, “Let me go ahead head and make this move, make this transition, make the best of it, and if things don’t work out, I can just go drive Uber and Lyft,” that type of thing, but a lot of people don’t even get to that point.
So a lot of times we hold ourselves back from success because we’re just scared to take on risk or we’re scared to just do the thing that we’ve been thinking about. We just sit there and think about it for years and years and years and years, and then we never do it. So I have always lived my life to where I just do things, which, of course, like I said, it bites me in the butt sometimes, but I never look at it like … I always look at life like life happens for me, not to me. A lot of people say, “Oh, life is happening to me. Oh, woe is me,” whatever, whatever, but I believe that life happens for me.
So even if it’s a “bad decision”, there’s still a learning opportunity there. So that’s the key to how I live my life. Even though I could go through the most horrible things, it’s like, “Okay. What was I supposed to learn in this instance?” and then I don’t sit there and wallow in it. I just use that lesson onto the next venture, onto the next thing. So yeah.

Scott:
How do you invest personally?

Tiffany:
Okay. So investing. I will be honest. Most of my investing is tied up into my house, my real estate. That’s typically people’s biggest thing, but I also have, of course, retirement plans and things like that. I will say because I started investing in the stock market, so a retirement plan when I was 19, no, 18. It was 18, 19, somewhere up in there. Ever since then, now granted, I wish I would’ve kept that money around. I had to cash it out when I was 20 something, when I was going through that tough period, but I’ve always loved investing into the market. So of course, that’s a percentage. So I jotted down some numbers. I would say 50% real estate, probably 40 or so percent stocks, and then 10% bonds, somewhere along those lines because I do like to have, and of course within that-

Scott:
Most of your net worth is in your business.

Tiffany:
Well, that, too. Yes.

Scott:
So yeah. So that’s another huge investment there.

Tiffany:
See, that’s the thing. As an entrepreneur, it never clicks to me that this is a business. I have so much fun doing it and it’s just to me, it’s not work. So it’s not until people pointed out like, “Well, Tiffany, you have your … What about your …” I’m just like, “Oh, that’s right.”

Mindy:
I would be interested to see what your business is worth. I think your investment allocation will be very different once you can factor that in, but I mean, that’s a whole entire different show factoring in the business.

Tiffany:
Yeah, because I’m just over here thinking, “Now, I’m going to have to go back to my net worth and my financial plan and incorporate the business,” because I did not like that, and that’s a good point. So that might be something that I do after the show, actually, is start incorporating my business into there.

Scott:
Yeah. It’s interesting with folks like with your business where most of the businesses related to your name, and your image and likeness. So you have to be thoughtful about how you value it. It probably generates a lot of income for you, but it may not be a ton of value that you can put on your net worth statement from that. So something to think about. As time goes on, make sure that it’s about the bigger brand like BiggerPockets, right? BiggerPockets is not about Josh Dorkin, our founder. It’s about the business of helping people invest in real estate and learn how to build private wealth.

Tiffany:
That’s a good point because when I started this, I keep trying to get myself out of the mindset that this is a side hustle because I’ve had it as a side hustle for so long and now I’m like, “No, Tiffany. This is a business.” So recently, I had to start treating it like I wasn’t a corporation. When you’re working for someone, you get up, you go to work, and you’re at your desk until lunchtime, and then you’re at your desk for the rest of the day. As an entrepreneur, sometimes that’s hard because you look around your house and you’re like, “Oh, well, the dishes. Oh, well, the laundry. Oh, there’s the bed. Oh, let me go get something to eat,” and then you look up and then nothing gets done.
So I’ve recently had to start implementing, “Okay. From 8:00 to 5:00, this is what you’re doing, period. Don’t get distracted with what’s going on out there,” and then so on and so forth. So sometimes it doesn’t click because originally when I started Money Talk, it was just a blog. I was just blogging about my journey. So I never expected it to become a business, but now that it is, I need to step into that and actually own that.

Scott:
Is there anything else you want us to cover or dive probe into before we do our outro?

Tiffany:
No. That’s all, I think. I think I gave you all enough of my life. No, I’m just kidding.

Scott:
I think it’s been a great show. So thank you very much. It’s been wonderful.

Tiffany:
Thank you. Thank you. Thank you.

Scott:
Great. Mindy, you want to take us to the outro?

Mindy:
I do. Okay. Tiffany, this has been super lot of fun, but we’re not done yet. We still have our famous four. Are you ready?

Tiffany:
Let’s go.

Mindy:
Okay. Tiffany, what is your favorite finance book?

Tiffany:
So I struggled with this question, but I want to say the most impactful to my life is Your Money or Your Life by Vicki Robin. That book has changed my entire outlook on how I view money. So that would be the one I would say, Your Money or Your Life.

Scott:
Classic. Wonderful. What was your biggest money mistake?

Tiffany:
Well, I went over a lot of them in this episode, but I would say quitting corporate the first time with not enough money saved up.

Scott:
Nice. Completely negating my rant in favor of that right after you said it. Perfect.

Tiffany:
But, but just make sure you have enough. Don’t just do it with one month. It’s not going to work probably, but anyway.

Mindy:
What is your best piece of advice for people who are just starting out?

Tiffany:
Budget. Budgeting is a lifesaver. I don’t care if you don’t want to call it a budget because I know that triggers some people. Call it a cashflow statement. Call it a money manifestation, whatever you want to call it, but you need to know how your money’s flowing in and flowing out. Otherwise, any of this stuff that you heard me talk about in the podcast that you hear me talk about all the time would not be possible unless I knew how that money was flowing. That’s the only way to get to any other financial goal.

Scott:
What is your favorite joke to tell at parties?

Tiffany:
So believe it or not, I’m a very funny person, apparently, but I never tell jokes. Usually, I just say stuff and people start laughing. So I don’t have a favorite joke, honestly. No dad jokes, sorry.

Scott:
Oh, no.

Mindy:
No dad jokes?

Scott:
We’re going to look up at Dad Says Jokes, who is my favorite Instagram account at this point. Let’s see what he has to say today. I woke up this morning to find two birds sitting in the sun in our backyard eating ice cream. They were basking robins. That’s fantastic.

Mindy:
That’s terrible.

Tiffany:
So why are you looking for that? I’m so horrible with this stuff. Me and my friends, we were all on a call and we were just rambling out dad jokes. I had to Google all of mine and they weren’t even funny, and I was just like, “Dang! Missed the mark.”

Mindy:
This is from Cadence. So I am the troop cookie manager for our girl scout troop, and when I was picking up cookies, my friend Cadence, my new friend Cadence was standing there helping out with the cookie pickup and she said, “Why do fathers always bring an extra pair of socks when golfing? In case they get a hole in one.” So that’s from my friend Cadence.

Scott:
Oh, fantastic.

Tiffany:
I’m just here for the …

Mindy:
Did you know the dogs can’t operate an MRI machine? The CAT scan.

Scott:
Oh, nice.

Tiffany:
Oh, okay.

Mindy:
That was from Daphne’s homework.

Scott:
All right. Tiffany, where can people find out more about you?

Tiffany:
So you can find me at moneytalkwitht.com and all social media platforms, @MoneyTalkWithT, and also, check out the Money Talk with Tiff podcast. I’d love to have you over there.

Mindy:
Awesome. Tiffany. I’m so glad we were finally able to connect. This was a super fun show and I really appreciate you taking time to share your story with us. I really loved it.

Tiffany:
Yes. Thank you so much for having me. I had a ball. I hope you all did, too. Hopefully, my jokes made it through.

Scott:
They all landed perfectly. Thank you, Tiffany.

Tiffany:
All right. Thank you so much.

Mindy:
Okay. We’ll talk to you soon.

Tiffany:
Bye.

Mindy:
Okay. That was Tiffany Grant from Money Talk with Tiffany. Holy cow! I love her story, Scott. I love her spirit. I love her smile. Wow. She never stopped smiling that whole time even when she was talking about some of the less exciting things that have happened in her life. She just doesn’t seem to allow anything to sway her from her goals. I really love her spirit.

Scott:
Yeah. I think her attitude and her ability to maintain, to stay grounded and keep her expenses low even as her income was rising is obviously a huge theme in her success and a theme we hear consistently across many guests on this show. Then I think her attitude as well and willingness to take risks and pursue her dreams and get clear on what she wants and do what she likes day-to-day I think are all huge tailwinds behind her. So I think her career as an entrepreneur is just getting started and the sky’s the limit for her.

Mindy:
I could not agree more. She is going to continue to crush it. Again, the number one superpower that she has financially is her ability to keep her expenses low. She doesn’t seem to feel like that’s a hardship. It seems like that’s just the way it is. She’s not feeling the pinch. I identify with her. As she’s telling her story over and over again I’m like, “Yeah. There’s a lot of things that you do that I do, too,” and I just completely identify with that. I don’t spend a lot of money as you can see if you’re following along with my budget, www.biggerpockets.com/mindysbudget, where I am completely screwing up every single month. So far, two months in a row blowing it, but I am still trying to stay within my budget.
Somebody said, “Oh, I think your budget was too tight to begin with.”
I’m like, “Oh, no, no, no, no. I could tighten that way up. I could tighten that so much more if I really chose to.” I don’t think it’s too tight. I want to live within this budget. I don’t think it’s a hardship and I think that Tiffany is the same way. It’s not too hard. She’s just conscious of it, and being conscious of what you’re spending and spending on things that matter is so important and it’s allowed her to live her dreams, and that’s what it’s all about, right?

Scott:
Absolutely.

Mindy:
Should we get out of here, Scott?

Scott:
Let’s do it.

Mindy:
From episode 283 of the BiggerPockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, “Let’s jam, Sam.”

 

David:
This is the BiggerPockets Podcast show 582.

David: I bought properties that didn’t cash flow because I got them significantly undervalue. I bought one in Florida probably five years ago, maybe six years ago that I was able to buy for around 195, and it was worth almost $260,000. It was an credible deal from a wholesaler, but it didn’t cash flow. I didn’t care, I basically bought myself $150,000 of equity, and it’s only gone up since then. Am I okay to lose a couple hundred bucks for a couple years so I can get that? Yes. Now in what circumstance would that be a bad idea?

David: What’s going on everyone? It is David Greene, your host of the BiggerPockets Podcast here today with a scene green episode. On this show format, we take questions from people just like you that have submitted them to biggerpockets.com/david, and I’ll do my best to answer them for everyone here. Hoping to give you some practical advice and maybe some insight into how real estate works so that you can further your knowledge, your perspective, your education, and ultimately your success.

David:
Now, if this is your first time here, BiggerPockets is the company that teaches you how to build wealth through real estate. We’ve got an awesome website so check it out at biggerpockets.com. We’ve got a forum where you can ask just about any single question you can think of, and somebody will answer it. We’ve got an agent finder where you can get connected with real estate agents that are also BiggerPockets fans. We’ve got this awesome podcast and a whole bunch of other things.

David:
So if you’re looking for a community of over two million people on the same journey as you, you found it. Today’s episode is awesome. So we get into some pretty deep stuff. We talk about what an agent can do to get their business started and what you as a client should look for in an agent. We talk about zoning issues and what things to be aware of and what things probably aren’t going to be as big of a problem for you. We talk about Hawaii real estate and the approach, the strategy that you should take if you’re actually interested in investing in Hawaii like me.

David:
We talk about how to have a conversation with your spouse if they’re not wanting to invest in real estate or they’re debt averse. And we talk about when cash flow is important and when it might not be important, make sure you listen to that one. It’s always controversial when you take on the cash flow gods, but I think I did a pretty good job of laying out when cash flow matters and when it’s not as important and what the best use for it is, as well as when that applies to house hacking.

David:
Now, I also read some comments from the YouTube channel. So if you’re listening to this on YouTube, please go to YouTube right now and leave me some comments. I’d love to read yours on the next show. All right, for today’s quick tip. If you’re not a BP pro member, consider becoming one. If you become a pro member, you to every single webinar that BiggerPockets has ever done, many of them hosted by me. So when you’re waiting for the next podcast to drop, you can go check out a webinar.

David:
I’ll give you a second quick tip. BiggerPockets has a YouTube channel that has content that isn’t the same as the podcast where me and other people interview different guests, oftentimes in a shorter format where we just go right after the meet and potatoes, and we try to make those fun. So check out some of the interviews that I’m doing on YouTube for BiggerPockets, and then leave me a comment about what you thought. All right, everybody, I’m going to get into today’s show. If you like this, please go to biggerpockets.com/david, leave me a video or a written question. And if you didn’t get a chance to get your question answered, you can always send me a message on social media, I’m davidgreene24. All right, let’s get into it.

Katie Lawrence:
David, hi, thanks so much for taking these questions. I have loved this section of the BP where real people get to ask you things. So I appreciate it. My name is Katie Lawrence, I’m in Arvada, Colorado, and I have an agent-related question. So I’m a long time investor, I have a real estate investment company with my husband. We do fix and flips, We do BRRRRs, we have rentals, renovations.

Katie Lawrence:
So last November, I became an agent. So I have a few questions around the agent side of things. So we’ve obviously selling and buying homes, have worked with a number of agents. So my question is around residential clients. How do you provide value? What are a few things that you and your team do that make you stand out as real estate agents from a residential client perspective? And then the same question for an investor client because that’s why I got into real estate from a licensed perspective because I wanted to buy and sell our own properties.

Katie Lawrence:
So when you’re dealing with an investor client, how do you provide value there? What are a few things that might set you apart from other agents? Okay, that’s it. Thank you so much, and I hope you are having a great day.

David:
First off, thank you so much for such a great question, Katie. That was very sweet, very well articulated and very practical. Anybody who is in Katie’s area, if you work with Katie, I don’t know what kind of service you’re going to get right now because she’s brand new. But I would bet on the fact Katie is going to be a superstar. Why? It’s not just because she’s so nice, she’s asking the right questions.

David:
What Katie is saying is exactly what you want to hear from anyone you work with. What do I have to do to be better? There’s two kinds of approaches to life. One is how do I find an environment that is easier for me to be myself and I can still be successful? These are people that frequently change relationships. They frequently change jobs, they frequent jump from investing strategy to investing strategy.

David:
They’re trying to figure out how do I avoid change and stay comfortable, but still be successful? Then you’ve got people that say, “What do I need to change about me to be successful in this environment?” Now, my personal belief is that there is no way you will not be success if you ask the question Katie is asking. Unless there’s some physical deterrent, like you’re four foot tall and you want to play in the NBA or something where the competition level is so high that you just can’t get there, you’ll be fine, and the competition is not so high in almost everything in life that you won’t be successful.

David:
In fact, most people are not competing with you at all because they’re not asking that question. Now, I’ll give you a practical example for both because you’re asking the right questions and Katie, when you get this down, you should hit me up about being on the David Greene team, I’d love to talk with you about it if this is your attitude. When clients come to us, me, my team, we say the exact same thing you do.

David:
What do we have to do to help this person be successful? And the entire system that has been created has been what we found people need in order to be successful. Either buying residential real estate to live in or are investing in properties that are often residential as well. First off, there’s this misnomer that because I’m an investor, I only work with investor clients or want them, not true. I really, really want people that just want to buy a regular house.

David:
The job is so much easier and I feel like we could do such a better job working with someone that just wants to find a place to live. We actually Excel at that, and then the same comes for selling homes. We’re even better at selling them than we are helping buyers believe it or not. So if you’re listening to this and you’re wondering about that question, I really want to work with people that want to just buy a house. Now, you also will work with investors when they come across your plate, but you need to understand Katie, they’re a lot more difficult to work with because they have a higher expectation, they have a harder standard to hit.

David:
Now they’re going to build more wealth because they’re taking on a more difficult endeavor. That’s absolutely true. And that’s why I encourage everybody to go ahead and do that and use us when you can, but you need to know going into it. It’s harder to make an investor happy, it’s harder to get them what they want because what they’re looking for has more dimensions to it. So the people who want to buy a regular house just to live in want it to be a good house and a good area at a good price.

David:
Investors want all that, plus cash flow, plus a rehab that has to happen, plus they’re going to compare it to every other house that might be better. Plus, they’re looking for ways that they can use creative financing, there’s all these other elements. So in general, if you come to work with my real estate team and you want to buy a house, the first thing we do is sit you down and explain to you, “This is what goes into buying a house. It is a full presentation.”

David:
Now, if we’re going to sell your house, we give a listing presentation that explains, “Here’s our technology, here’s our marketing, here’s how we negotiate, here’s our plan to sell your house, here’s how we’re going to make you as much money as pot possible, and here’s our track record of where we’ve done it before. This is why you want to use us.” Not every agent does that, but many of them will give some form of a listing presentation if they’re good, and if they’re professional, hardly anyone does it for buyers.

David:
We do it for every buyer. If you’re going to work with us, we have to explain, “This is what the process looks like. The contract, the inspection reports, the appraisals, the loan, how the down payment works, how the earnest money deposit works, what a contract looks like, how the system will work when we’re showing you homes, how we’re going to find them, what to worry about an inspection report versus what’s not as important, what the market is like, what different homes are, how fast they’re selling.”

David:
We want you to know when you walk into this exactly what you’re going to be getting. Then we assign you with an agent that we think would be the best fit for your personality. Now, they’re all going to be working with you. So all you have to figure out when you’re new is, is this a person who I mesh well with? My personality works well with theirs, and I believe that I can help them. Setting their expectations is something that many agents shy away from because it can be confrontational, but it absolutely has to happen if you want to be successful.

David:
They’re coming to you because you are the expert. You know the market, you know which houses they can get, you know what price they can get them for. Don’t be afraid to give them the truth upfront and then back it up with facts. Now there’s also going to be an element of customer service, but that’s the easiest part for agents because they’re all really likable people that want to work with others and help others. So you’re probably just from your demeanor on this video, not going to struggle with having a good attitude and being cheerful.

David:
It’s going to be more giving people direction that you want to focus on. Tell them what it looks like and paint a picture as accurately as you can for what to expect, and then they won’t freak out when they actually go on the journey. As far as investors, you’re going to have to be pickier because the word investor is never defined. Just like the word deal is never defined. Everyone’s a real estate investor if they buy a property, even if they live in it, they still invested their money into it.

David:
So when they tell you what they’re looking for, you have to help narrow down with them specifically if it can happen or if it’s not going to happen. And maybe that won’t work, but this would. That’s what I do with investors is they often come to me after listening to this podcast and say, “Okay David, I heard you and Brandon talking and I want to deal at 70% of ARV in the best school district that’s going to cash flow 25%, and I want light rehab. I don’t want a complete fixer upper, and I want to be able to take my time when I see it. I don’t want to feel rushed and I’m okay to wait.”

David:
And the problem with that is those properties don’t exist out here. And if you did find one, it would go so fast, you wouldn’t be able to wait. So I have the unfortunate job of having to educate them on the fact that that strategy won’t work, but this one would. Now, many times that’s just difficult for people to swallow. They don’t want to listen to me, they want to go find another agent that’s going to tell them what they want to hear. So many of those people end up losing money because they don’t take action for a year or two as they’re trying to find that one unicorn that’s out there and prices go up.

David:
Conversely, we have a lot of people that I had to push on and say, “You have to make the decision to buy this house, but if you pass on it, here’s what’s likely to happen.” And those people did trust me and move forward, and they’ve now made hundreds of thousands of dollars over a two to three year period. If they bought even earlier, they have even more. Many of those clients are now coming back and saying, “Hey, I want to sell this property and I want to buy a better one or a couple of them or I want to buy a new primary, and I want to invest out of state.” They have all these options that they can get into.

David:
They never would have bought those properties if I wouldn’t have relied on my own expertise and confidence to firmly stand when I said, “I know it’s scary, but I think that you should do it.” As an agent, you have to have that confidence Katie. You can’t let the client go tell you, “Hey, this is what I want.” Unless that client actually knows what they’re doing. If they have experience, if they have a firm understanding of how the market works and they have a crystal clear criteria, yeah, that makes your job easier, you just go find what they want.

David:
If they’re coming to you, they don’t know how real estate works, assume that they’re going to be wrong about a lot of things and educate them about what they can expect. And then they’ll be able to make the right decision for themselves. I think the best thing you can do is to get deep into what their goals are. So we have a system that I call going three levels deep. So if somebody says, “I want a house with a pool.” Most agents will say, “Check, I’ll find you a house with a pool.”

David:
And then there’s only two houses with pools that are in there, and neither of them are in the right market that person wants to buy in. What we do instead is I’ll say the first level is, “Well, what’s important about a pool?” And they’ll say, “Well, when as growing up as a kid, my grandparents had a pool and we’d have family gatherings and all of us, my cousins and I would swim in that pool and some of my best memories ever were for that time, and I want my kids to have that.”

David:
And I’ll say, “Okay, what was it about that pool that made those memories happen?” And they’ll say, “Well, I guess it wasn’t so much the pool as it was just a place to meet. I guess I don’t need to have a pool, but I do need a big backyard, and I need a big enough home that I can entertain where everyone can feel comfortable. We need to have a bathroom close to the backyard that the kids can go in and out of, and it needs to be in a safe area.” And I’ll say, “Okay, if you can have that, what would it mean to you?” And that’s the third level.

David:
That’s when you’ll start to see tears coming out of people’s eyes. That’s when they’re going to say things like, “I’ve been feeling like I’m a bad mom for the last five years because my kids are living in this apartment complex or the park isn’t safe, and I hate myself every night that I go to bed. I feel like I’m screwing up in life. If I could find a house where I could give them that, it would take so much pressure off of me, it would mean the world to me.”

David:
And they’re just like the water works will just start pouring out. That’s where you’re finding out what actually matters to your client. They think what they want is a pool, what they really want is to feel like a good mom or to feel like they’re making a good financial decision, to feel like they’re leading their family in the right direction. The best agents don’t just to become order takers and say, “Okay, you got it. I’ll go find you that.” Because then they come back and then goes, “I don’t know, it just doesn’t feel right.” And you play that game forever.

David:
Don’t be afraid to establish yourself as a trustworthy person, go three levels deep, find out what matters to them and then propose a strategy that you can actually make it happen for them. They will love you and your business will thrive. All right, next question comes from Kevin B. “Can you go into more details on buying a house for your five year old kid so the house is paid off when they’re 20? Are you getting the loan and property in the kid’s name? Are you using a trust or LLC to make the purchase and get the lending? Are you just buying it in your own name with plans of giving your child the funds in the future? I love this strategy and will love some more info on what Brandon has done for kids and what you have seen happen before I proceed completely from a blank slate.”

David:
Kevin, so cool that you’re looking to do this. I don’t want to speak for Brandon, but I feel confident enough from the conversations that I’ve had that I’m pretty sure I know what he did. And even if it’s not what he did, what I’m about to tell you would work for you. You’re overthinking it when it comes to should I put it in a trust? Should I put it in my kid’s name who’s five years old. You’re probably not going to find a lot of lenders that are going to give your five year old a loan.

David:
So all you need to do is buy the property in your own name with the intention of giving it to your child when they 18. That can be selling the home and giving them the money, that could be transferring title from your name into their name, that could be putting on them on the title and helping them to build credit so that eventually they can refinance it out of your name, you’ll have a lot of options. What’s important is that you create those options by building equity.

David:
What you want to do is get that property and put it on. If you have a five year old and you want to give it to them when they’re 20 paid off, it needs to be on a 15-year loan. So you’ve got to go find a property that you can afford with a 15-year loan that will grow over time. When you get there, all of these questions can be answered relatively easily. You won’t have to worry about it. Transferring title is not that difficult especially if that person is able to refinance the house from you or you could sell it and give it to them.

David:
You just add them to the title and let them take the cash flow and let them do what they want with the equity through your name. I think as long as it’s your child and you trust them, you don’t have to worry about it. Don’t put this much pressure on yourself to get it down right. As is you’re building equity with that property and you don’t lose it to foreclosure because you buy it wisely, you’re going to be fine, and your kid is going to be set for life.

David:
Plug, check out Scott Trench’s book Set for Life about how you two can help set yourself and your kids for life, biggerpockets.com/store. Okay, next question comes from Gemma Silva. This is a two part question, part one. “Hello David.” Hello Gemma. “First of all, thank you for your work at BP. I always listen to your podcast.” Oh, well thank you. “I do want to buy my first rental property. I currently own the house that I live in so I was trying to buy the second property to move into it, house hacking, but the bank doesn’t give the option of conventional 5% down. It says that it is an investment property and I have to put 25% down because I already own a property. I do not know how that specifically works.”

David:
Okay, so I’m going to have to basically speculate for the bank, but I can give you an idea of why this could be happening. And I also want to encourage you to reach out to us at the one brokerage. You can email me on BiggerPockets, you can look up my website, whatever you want to do, and I can have one of my team members look at this for you. Here’s what I think is happening. When you own a primary residence and you try to buy another primary residence with a primary residence loan, this is the 5% down conventional loans.

David:
Bank underwriters will often look at that or I say bank underwriters, it could be any form of lender. And they would say, “Well, we don’t think you’re actually buying a primary residence. We think you’re buying an investment property because why would anyone move from where you are to where you’re going?” And they will often deny loans for that reason. And so they’re telling you that if you put 25% down, you can still get the house because it has to be a investment property, but that doesn’t work for you.

David:
This happened to me when I bought my house. So I was moving from one city to another and I was trying to buy a primary residence. And the bank said, “Well, he’s moving further away from work. Why would he be buying this to live in if it’s further from work than where he’s actually at right now?” And this was before I even owned a house. I was renting a house. And so we had to write a really long explanation that explained I couldn’t afford to buy a house closer to work.

David:
I had to buy this house that was further away and then it happened to be a second time when I tried to move from that house into another one where I had to make the argument that my work location changed from one place to another and I was buying my next house to be closer to that work location. It was always a big pain. Now, that may happen and you might not be able to get around it, but sometimes you can if your loan officer is diligent and hardworking enough.

David:
You need one that’s going to fight for you. You need one that’s going to write a letter to the underwriter and make a case that says, “No, this is absolutely why she’s changing from one house into the next.” She needs more space or she needs to down space or there’s something that isn’t working about your current house. Maybe you need a bigger yard, maybe you got a dog and you have to find a different place.

David:
There needs to be some explanation that your loan officer give. So for part one of your question, that’s what’s most likely going on. And my recommendation to you is that you have your loan officer fight for you a little harder. Part two. On the other hand, let’s say that’s okay. I will buy anyways, and as an investment property and I have to put 25% down. Here’s the question. This house that I’m looking at is this single family home from an investor who owns a couple properties in the area.

David:
This specific house that I want to buy, he or she is renting the bigger part of the house to a person and the smaller part to another person, but the zoning of this property is R-1, legally described as a single family house. So the real estate agent that I’m working with says that if the appraisal comes as a different zoning that it has now, because the current owner is renting out to more than one family, the following could happen.

David:
The bank could deny my loan even given a 25% down. If for some reason I get approved and can make to the closing, the city could sue me of make change the zoning of the property or the neighbors could sue me because I’m using a single family house as a multifamily house. The current owner listed as a multifamily even though it is a single family house legally and he or she won’t … The legal process to change the zoning so the buyer will assume all responsibility.

David:
I think she means they won’t apply to change the legal process or won’t apply the legal process to get the zoning changed. The seller is not going to do anything. I am scared. I don’t know anything about zoning, I don’t know what to do. Do you have any thoughts on this situation? All right, I do have some thoughts here Gemma. I’m not a lawyer and you are asking legal advice. So we have to be careful about how we handle this.

David:
The best course of action would be to talk to an attorney about this and say, “Can I be sued by my neighbors by the city? Under what circumstances would they sue me? Is there any case law for this happening before? How did the judges rule?” So you want to know what you could be getting into first off. You also want to make sure that it’s not breaking the law. Then there’s a practical component.

David:
People are doing this in many neighborhoods all over the place because we have an extreme housing shortage. If this person is living in the home and it’s their primary residence, and then they’re renting out a part of their home to someone else. A lot of the time, these zoning rules won’t apply if you live in the house and every municipality is different. You have to check in with their specific codes.

David:
I’m sad because your realtor should be doing that for you. Instead of telling you might get sued which sounds like it’s their way of saying, “I don’t want to deal with this.” They should be digging into this to find out if that’s actually the case because in many neighborhoods that I’ve come across, if it’s a single family home, it’s true that you’re not allowed to rent it out as a duplex because that would be a zoning violation. It’s not a two unit house, but if you’re living in it and then you have another person that’s using it, a lot of those rules at that point stop applying.

David:
You’re just renting out a part of your own primary residence. The last thing I would probably say is some cities care about zoning more than others. It typically only comes from a neighbor complaint if they make a big deal that the city may come and say, “Hey, you’re not supposed to be using this as a rental property.” Oftentimes though that just isn’t the case that your neighbors aren’t going to complain unless you give them some reason to and many people in your neighborhood might be doing the same thing.

David:
So I can’t really tell you, “Yes, go forward and do it.” And I can’t really tell you, “No, don’t do it at all. You shouldn’t do it because people are doing that all over the place.” I think that the best case in this situation is to get advice from an attorney, tell them what your concerns are and then call the city. I wouldn’t give them the address of the house, but I’d say, “Hey, I want to buy a house and I want to rent out part of it while I’m living in it. Can you put me in touch with the zoning department so I can ask them if they care?”

David:
And then just talk to somebody from the city and say, “Hey, if I buy this house and I live in it and I rent out the back part or I have an ADU or something, is there an issue?” And most of the time, they’re going to tell you no. That’s what happens with my team. We call when we have these questions for our clients and we ask the city, we tell the client what they said and then the client gets to make the decision.

David:
So I wish that I could be a little more particular. The problem is once you’re getting into legal grounds like that, I can’t be super specific, but I would imagine that in many cases, this is something that you’re thinking about more than the city actually would be themselves. It’s not exactly the same as if you’re going to try to do construction on the house and not pull permits. Then the city does get involved, they’re actively looking for stuff like that.

David:
Okay, we’ve had some great questions so far and I want to thank everyone for submitting them. On previous episodes that we’ve done, we’ve reviewed the comments. And in this section of the show, I’m actually going to go over the comments that people have left and share some of my favorites. The first one comes from Paul Richardson or maybe it’s Richardson Paul, I don’t suppose Richardson is a first name, that sounds like a last name.

David:
So maybe this is just, maybe Paul is very fancy, and he likes to introduce himself with his last name first. “Aside from the knowledge given here, I commend this approach on assisting those in need on their journey. I listen to many podcasts and love the patience and attention given to the quest. I have not once heard a guest being rushed through their question or multiple questions. Thank you.”

David:
Well, thank you for that, I appreciate it. It is a lot of podcasts that we’ve done with a lot of different guests and some of them are nervous and we do try to make them feel more comfortable. Sometimes they get to rambling. And so we have to get them right back on the right path. But in general, we want to share the stories of the people that are just like you so you can get their perspective. And then the host just keep everybody on the path.

David:
Next comment comes from Jake Hufine. “Great conversation here. I really have found the Q&A style podcast the most helpful as they are jam packed with golden nuggets of information. Golden nuggets or green nuggets. The ability to have multiple subset conversations on different topics is valuable compared to typical BP podcast style where we are typically focusing on one topic the entire time.” Well, thank you for that, that is a good point.

David:
Usually when we bring in a guest and we have a topic, they Excel in one niche or they have some strategy or they’re an expert in some area. So you’re getting a deep dive on that thing. But these shows are definitely more practical answers that you can take and go apply into your journey right away. So I’m glad you’re liking it. This one comes from someone who called himself the best thing that never happened.

David:
“David, I’m loving the style of videos the last few months. I’m also in Hawaii, can you discuss strategies for real estate investing on Oahu or at least your Maui strategies?” Yes I would. Now this is something that comes up a lot because I have a partner in Hawaii who helps the clients that want to be investing there, an expansion partner. And a lot of people know I’m buying in Hawaii so they come.

David:
Here’s a few things that you need to know about Hawaii real estate. One, it typically works on Hawaii time which is not like a New York minute. Things go slower, and who you know is incredibly important when it comes to getting things done. Two, getting people to do work out there is typical that in many other markets on the mainland, there’s not as many contractors that are there and there’s not as many people I found that are hungry for work.

David:
You don’t go to Hawaii because you want to work your butt off. There are hard working people there, but in general, I would say that finding labor to do work is more difficult. Three, in Hawaii, the short-term rental laws are strictly enforced. For a long time, people have been buying short-term rentals and they’ve been playing fast and loose, right? Maybe it’s not zone to allow, but nobody’s checking, that’s not the case in Hawaii, you don’t want to play over there.

David:
They have city officials that will drive around actually investigate you. And have you taken to court if you’re using your property as a short-term rental, meaning less than 30 days. And I believe the fine is $10,000 a day for the time that you’re doing that. There’s lots of reasons why there’s some political pressures in Hawaii that are a little bit different than in other areas, and it’s understandable.

David:
There’s a lot of people that don’t live in and are not from Hawaii to buy properties there, they rent them out, it drives up the price. It makes it harder for the locals to be able to afford real estate. So you need to understand the political environment if you’re going to want to invest there. There’s also a very strong hospitality industry that’s a little protective over some of the people that are using short-term rentals that guests can get around having to book in those expensive hotels.

David:
Now that’s the downside. Let me tell you about the upside. It’s freaking Hawaii. It’s one of the most desirable locations in the entire world. The weather doesn’t get bad there, the amenities don’t go bad, it’s paradise. Anytime you can buy a property in paradise, you’re probably not going to regret it. There’s also a lot of development that’s happening on that island, it tends to just keep getting better and better and better.

David:
So a lot of the properties that were built 30, 40 years ago have only improved in both price and quality because they’ve built around them. Other properties, other stores, other shops, other entertainment, there are certain areas in Hawaii that are zoned for short-term rentals. So the properties that I’ve bought out in Maui are in a very specific location where it’s legal to do short-term rentals, and that’s one of the reasons that I bought them.

David:
If you buy outside of that area and you try to do a short-term rental, that’s where you get in trouble, that’s why I have an expert in Hawaii that knows Oahu and knows Maui. They can help you avoid some of the mistakes that people make and also fight hard to get you into contract when not every agent out there is willing to put in that same kind of work. Lastly, the financing is different in Hawaii.

David:
The lenders work off of different regulations and rules in many cases, and in general, I’d say they’re a little behind the times. Things move a lot slower, it’s very hard to get escrows to close quickly, so I’m working on that too. I now have licensing that we’re working on in Hawaii, we can do loans out there. That helps our clients somewhat and it helps people close deals that normally couldn’t, but don’t expect to have the exact same experience with your loan in Hawaii that you would have in some other areas.

David:
And the last thing that I will say is when you’re buying in Hawaii, you really are taking a long term approach. You’re probably not going to crush it with incredible returns right off year one because that’s not normal for that market. What’s normal for that market is the demand continues to increase. The building is very limited, the city restricts how much properties are actually able to be built, and the zoning is pretty tough. So the value of the existing properties just keeps going up.

David:
If you’re going to buy in Hawaii which I recommend that you should just like I did, take a long term approach. Look five years out, 10 years out and look at how much wealth you can build. And then compare that to maybe somewhere in the Midwest that might get you quicker cash flow returns, but see if they’re going to be able to maintain that advantage over Hawaii. In most cases, the answer is they won’t. All right, are these questions and these replies resonating with you?

David:
Have you too wondered, “Where is David Greene investing? Can I invest where he’s doing? Can I invest with him? What would David do? What would Brandon do? What would anyone at BiggerPockets do?” Well, that’s great. You should be thinking those thoughts and you should be asking your questions at biggerpockets.com/David. I promise, everyone thinks that they’re the only one asking the question, but everyone else is always thinking the same thing.

David:
So please give us your submissions, let us know what you’re thinking. We will pick the best ones and we’ll put them on this show. And before we move on, take a minute to scroll down the comments and just leave one there for me. Let me know what you think about the show, what you’ve liked so far, what you liked on past shows and what you hope to see more of. We read those. We may pick your comment out to read on the show, especially if it’s funny or unique. And we also adapt the show based on the feedback we get from people for what they’re looking for.

Chris Rila:
Hi David, Chris [Rila 00:30:17] from Irvine, California. My question is what do you if you would like to accumulate good debt in order to buy real estate property when your wife is fully against accumulating any debt? Thank you for your time. Appreciate it.

David:
All right, thank you for that submission Chris and nice to know you’re in Irvine. I know that’s a great area. We sell property up that way. All right, your question is how do you get your partner, in this case, it’s your spouse, but this could apply to anyone who wants to buy real estate with somebody else on board with the idea of taking on debt.

David:
Here’s the first thing you have to understand, and I’m glad you pointed out good debt. You didn’t just say any debt. My guess is the person, in this case, your spouse is interpreting all debt as the same debt. You called it good debt, you’re probably doing that because they’re having a hard time seeing it as good. I have to speculate here, but my guess is your partner looks at this as debt equals risk. If you can take less risk and have less debt, life will be better.

David:
It’s a moral thing for people that are in that position, and it makes sense. I was that way at one point too, borrowing money from someone is usually bad, especially because you now are indebted to the person that you borrowed the money from. You’re losing some freedom in some ways. And frankly, for many people, borrowing debt is not the best thing for them to do. If they’re not educated on real estate, if they don’t have the means to pay it back, if they’re taking out bad consumer debt, they probably shouldn’t be taken on debt.

David:
They should be saving up money and buying the things they want in cash. Now in my mind, real estate and other asset classes are different. And what makes them different is if the thing you are buying with that debt is going to pay you a return. I would recommend having your wife listen to the episode that I did with Tom Wheelwright who is a CPA, and we talk a about how debt actually lowers risk.

David:
It may take a couple listens and a couple conversations to get that point across, but that’s a really good place to start. I would also listen closely to what she’s saying when she tells you, “I don’t want to take on debt.” I talk about going three levels deep on my real estate team. So what a lot of people make the mistake of doing is I hear someone say, “I don’t want debt.” And they say, “Well, debt’s good.” And they just argue.

David:
What’s better is if you said, “What is it about debt you don’t like?” “Well, I don’t want to lose our house.” “Okay, so what I hear you saying is you don’t want to lose security.” “Yeah, I want to feel secure and debt makes me feel nervous and insecure.” Okay. So what would it look like if we were able to find a way to take out debt that was not putting us at risk?

David:
If it didn’t jeopardize our security, would you still be against it? Maybe they’re going to think a little bit more. And then your third question could be if I could figure out a way that we could do take on debt, but it would grow wealth and make us more secure, would you be interested in it? What you’re really dealing with is likely a security issue, not a debt issue. And if you can paint a picture for your wife of how taking on debt will help set a stronger foundation for your family’s finances, will protect you against downturns, will protect you against job loss, will help you build wealth that is tax free that you’re not going to lose, and it basically could become a reserve of equity that you could tap into if there was an emergency.

David:
There’s a lot of ways that you can show how real estate investing is not just increasing risk for no reason. It’s actually reducing risk in other areas of life. And then just make sure you’re listening when they’re telling you why they’re nervous about it. That’s the advice I’d give to everyone else. When someone says they don’t want to do something, don’t try to change their mind. Keep asking questions to get to the bottom of why they don’t want to do it.

Scott:
Hey David, my name is Scott. I am living in California. I have a rent property back in NC, North Carolina. My question is since the price of these rentals have increased and it’s really hard to make them cash flow, should I just accept some negative cash for a rental property at this moment and get in and then lock in some really low rates? Or should I wait until they drop the price? And whenever the cash flow makes sense and then make the investment.

Scott:
However, I am sitting on some cash and I don’t know if I should go in now or wait. I might never be able to find a positive cash flow probably anytime soon. And I don’t want to wait until the mortgage rates increase. So yeah, let me know your thoughts. Should I look somewhere else or should I just go into these markets?

David:
All right. Thank you very much Scott, we’re neighbors in California so it’s nice to meet you. Okay, I’m going to guess that the majority of listeners as they heard you asking that question were screaming at their phone or their car or wherever they’re hearing this. “No, don’t buy. If it doesn’t cash flow, don’t buy it.” Before I make a broad generalization like that, I think we need to clarify what cashflow is, what purpose it serves, and if that’s the right thing for you.

David:
First off, let’s just be honest with ourselves. Cashflow is one way that we make money in real estate. It’s often our favorite way, but it is not the only way we make money in real estate. We make money in real estate by paying our loan down. We make money in real estate by the value of the real estate going up. We make money in real estate by refinancing and tax free and reinvesting into other assets without having to sell the one we have.

David:
You can often make money in real estate by avoiding paying taxes on other ways that you made money in real estate using depreciation. There’s a lot of clever ways that we make money in real estate. And yes, cash flow is absolutely a very important one. I don’t want to discredit that. Let’s go a little bit deeper. If I look at all the money I made in cash flow in the last 10 years, and I compare that to what I made paying the loans down and growing the equity, especially if it’s a combination of having the property value go up and the loan being paid down, I made way, way, way, way more in equity than I did in cashflow.

David:
So over a long period of time in almost every single circumstance, you are going to make more by buying and letting the property appreciate. Here’s the other thing we don’t talk about. Rent appreciates too. Buying now might not cash flow right away, but what if it’s a circumstance where it’s going to cash flow later and in 10 years, it will be cash flowing much more than something that somebody bought right now that cash flowed today?

David:
I’m just setting the table, don’t crucify me yet. I’m here to make a point. Where is cashflow important? Well, cash flow is important for several things. If you don’t have income coming in from other areas of your life and you need it to live on, cash flow is incredibly important and you shouldn’t buy anything that doesn’t cash flow. If you don’t have healthy reserves, or if you don’t make a really good income and save your money, otherwise you’re not financially responsible, cash flow is incredibly important.

David:
If we look at the ways that real estate makes money, the key is time. Time to pay down your loan, time to let it appreciate, time to let your rent grow. Time is a crucial, crucial ingredient in the wealth building element of real estate investing. Cash flow helps make sure you can make the payment so that you keep the property over time. I’ve said many times, cash flow is best used for defense. Cashflow makes sure you don’t lose a property, it’s not great for offense.

David:
It’s very difficult to build any significant form of wealth by saving the couple hundred bucks or even the thousand bucks a month that you might be saving in cashflow. Just think about if you have a property that cash flows a thousand dollars a month, $12,000 a year, that is really, really good in most cases. Then compare that to properties that might go up 50 to a 100 to $150,000 a year. That 12,000 doesn’t look that amazing when you’re putting it next to a $100,000 of growth, and many people will say, “Well, the growth isn’t guaranteed.”

David:
And I will say that is absolutely true, and neither is the cash flow. Anyone that’s invested in real estate for a significant period of time has seen cash flow is not guaranteed. You don’t know what your tenant’s going to do. You don’t know what’s going to go wrong in the property. It takes one tenant trashing a place or not leaving or needing to be evicted. It takes one air conditioner breaking or roof leak to destroy cash flow sometime for years.

David:
So it is fair that we need to talk about cash flow is important. It is not fair to make it sound like that’s the only thing that matters in real estate investing or that it’s somehow safer. Now, prudent investors do look for cash flow and I think that you should. Let’s talk about a scenario where cash flow isn’t as important. I’m about to drop a bomb here. I bought properties before that don’t cash flow.

David:
I’ve bought other properties that cash flow very strongly, but for someone in my position, cashflow is actually relatively unimportant. I have revenue coming in from probably 25 different income streams of different properties, different businesses that I own, different royalties, different things that I’m involved in. So the cashflow from one of those streams, one property in an income stream is not as important to me as others.

David:
In my overall financial position, the cash flow of a property does not mean as much. I bought properties that didn’t cash flow because I got them significantly undervalue. I bought one in Florida probably five years ago, maybe six years ago that I was able to buy for around 195, and it was worth almost $260,000. It was an credible deal from a wholesaler, but it didn’t cash flow. I didn’t care, I basically bought myself $150,000 of equity, and it’s only gone up since then.

David:
Am I okay to lose a couple hundred bucks for a couple years so I can get that? Yes. Now in what circumstance would that be a bad idea? If you can’t make the payment, this is what I’m trying to get at. Cash flow is used to make sure your mortgage payment gets made. If you can make that payment from other means, it becomes less important. So my question to you Scott, with this money that you’re sitting on, and you’re thinking about investing, are you doing anything to make cash flow with that money currently? Because inflation is eating it up.

David:
Are you buying in a market where you want the asset? It’s likely to go up in value, the rent is likely to go up, it’s not going to cause you a headache. It’s an overall strong, fundamental market. Can you afford if you’re going to lose a little bit of money every month to keep that house afloat for a couple years until rents go up? Do you have a significant amount of money set aside in reserves that you were disciplined enough not to touch if you want to move forward and buy this property that doesn’t yet cash flow?

David:
Now I can already see in my mind I’m going to get some hate mail for giving you this advice. I’m just trying to broaden people’s perspectives. It is very, very good to look for cash flowing properties. I would say it’s not absolutely crucial for everyone, it depends on the person. If you’re listening to this and you’re living paycheck to paycheck, and you don’t have any money in the bank and you’re tired of waiting and you’re like, “I just need to buy something. This money is burning a hole in my pocket.”

David:
You’re not the person that should say cash flow doesn’t matter. You definitely need it to matter. If you hate your job and you hate your life and you need to just get some money coming in so that you can get out of that position and put yourself in a place where you can chase your dreams, cash flow is very, very important. If you’re someone like me that doesn’t really even need cash flow until I retire and stop working or has other streams of income, cash flow is not as important.

David:
So you have to take that approach when you’re making these decisions. Scott, I think you have a pretty good idea about what your family’s needs are and how prudent you’ve been with money. And if you feel good about it, look for the upside and be delay gratification, be disciplined. And if you can be a good manager of your own wealth and money that comes into your own household, not having it cash flow would be acceptable.

David:
The next question comes from Mark R. In Wellington, Colorado. “I recently left a W2 job, but now I’m realizing that in order to make another home purchase and put my former residents up for rent that I’ll need W2 income as my realtor pay won’t count for about two years or more since it’s employment. Do you recommend that someone in my position go back to their old job in order to keep advancing in real estate? Or do you suggest they look for off market land contract deals to get in their next property or another strategy altogether if they don’t want to wait for two full years of self-employment income? Thank you a ton for the podcast also, and former law enforcement officer.”

David:
Well, thank you very much for your service there. All right, you’ve got a couple options you could look at. One, in some cases you can get a co-signer and use their income, and if you can find someone to do that, you’ve solved the problem, you don’t have to use two years of your income. Two, you can wait and once you have two years of income, you can use that. Three, you can find alternative loan products. Now, I’m not talking about subprime loans that are shady.

David:
Our company has loans that work exactly for people like you. For whatever reason, their debt’s income ratio isn’t strong enough, or they own too many rental properties to qualify, or they haven’t worked at their job for long enough or sometimes the income that people make, they’re not allowed to use it to qualify you because it’s based on bonuses or commissions or something that isn’t consistent. And we have loan products that will let you use the income of the property to qualify for the property, and there are conditions go into that, right?

David:
You probably wouldn’t use this loan if you’re going to buy a house you’re going to live in because the lender wants to know that it’s going to be generating income. But I think you should talk to us about that and let us figure this out for you. The other thing, if you’re listening to this and you’re having these same kind of problems, it’s probably because you’re going to the wrong loan officer.

David:
If you just walk into a bank like Chase or Wells Fargo or something and you ask that loan officer, “Can I get a loan?” They’re probably going to say no because they don’t have a product that will work for that. It’s like going into an Italian restaurant and asking for a burrito. They’re going to say, “No, we don’t serve burritos here, and we are not trying to help someone that wants burritos, that’s not our job.” And then you’re going to walk away with your head down thinking, “Oh, this sucks. I can’t get a loan.”

David:
But if you go to a catering company and you say I’d like burritos and they say, “Let us go find you a great burrito truck and have it come to your house.” That’s a different story. You want to look for a loan broker in these cases, it’s their job. This is the kind of business I have where we go look at different lenders and say, “Who has a product that will work for Mark here?” And then we propose, “Here’s what your rate. Here’s what your terms would be. These are 30-year fixed rate products. You don’t want to get into anything that’s adjustable or fishy in order to try to buy real estate.”

David:
Good news Mark is I don’t think that this is as dire as what you’re probably thinking. You just haven’t been going to the right location and get the right expert in your corner and you can solve this problem. Next up, we have Rob Marks in Philly. “I love your work. Thank you for all that you do. I have a question regarding asset protection. The answer may be dependent on the number of doors. So in my case, I only have two right now, but I’m curious how the answer may change based the number of doors.

David:
My question is what’s the best way to protect my rental properties? Umbrella insurance policy, some kind of writer and LLC. This comes up all the time.” First off, I can’t give you the perfect answer here because I’m not a lawyer, and that would be legal advice you’re looking for. I will share a little bit of information that might make it easier for you to a decision for yourself. First off, your homeowner’s insurance will have protections for you.

David:
One of the benefits of going that road of just beefing up your insurance is that if for some reason you get sued, your insurance’s lawyers are the one that will handle that lawsuit and they are going to be good at this because that’s their full-time job. I talked about this when I interviewed Tom Wheelwright on the BiggerPockets podcast. Number two, an LLC is designed to limit how much access people can get to what’s in that limited liability company.

David:
So in an ideal world, if you have one property and you’re sued and somebody wins the lawsuit, they can only take what’s in the property, but it’s not idea. In many, many cases, judges have said we’re going to pierce the veil of the LLC and we’re going to let this person get assets that were not held in the LLC. So I don’t want you to get the false sense of security that an LLC is airtight and perfect.

David:
An umbrella insurance policy will probably start to make the most sense for you when you get a bigger portfolio. But this is a simple question that one call to insurance provider can answer for you. My recommendation if you only have a couple doors is start with regular homeowner’s insurance and beef your policy up to cover you in case of a lawsuit for an amount that you feel falls within the realm for what previous judges have awarded to people who made claims against the landlord and the damages they received.

Clayton:
Hey David, thanks for the opportunity to ask you a question. My question is related to house hacking in a previous asking or scene green or whatever these is called. You mentioned that one of the niches that you would get in if you were just starting out to accumulate wealth would be house hacking and going to the nicest neighborhood in any town and house hacking in that neighborhood.

Clayton:
Not really caring about cash flow and just buying in that neighborhood, buying a lot of rooms, running by the room. Number one, why did you say that? It seems like it goes against cash flow, the principles of real estate investing. Number two, for whom would the strategy be appropriate? I’m moving to an expensive market and that’s exactly why I’m asking and might even be moving to a place like veil in which the medium bills is incredibly expensive.

David:
All right, thank you for that Clayton. I would love to explain why I said that. First off, I never said house hack and don’t care about cashflow, that’s not what I was saying. I was saying house hacking is the best wealth building strategy through real estate that I know of, especially for beginners and many times, people compare it to buying a cash flowing property and it ends up being a mistake.

David:
Let me break down the numbers for you of why I say you’ll get a better return house hacking than buying a traditional rental property. Let’s say you’re looking at a $200,000 property that you’re going to buy as an investment property and put 20% down. Now there’s going to be closing costs, there’s going to be some repairs, but we’re going to leave those out of this example, and we’re only going to talk about if you had $40,000 to put towards a rental property.

David:
Let’s say you could get a 12% return on that money which is incredibly strong in today’s market and higher than you’re going to find in most areas. That amazing return would turn out to $400 a month. Now let’s compare this to house hacking. Let’s say that you go buy a property with that same $40,000 to live in for yourself. That can buy you an $800,000 property with $40,000 down.

David:
Now you might not have to go that expensive, but you could. So let’s say in this case you go to Vail and you buy yourself an $800,000 property. At a three and a half percent interest rate, putting the 5% down on an $800,000 property, your principle and interest will be 3,413. I have your taxes at right around $800 a month and your insurance will be right around $70 a month. That brings your total to right around 4,280 a month.

David:
Now I don’t know what rent is like exactly in Vail, but my guess is if the property is expensive itself, then the rent will be pretty high. Let’s say you find a property for $800,000 that’s big enough that you can either split it into different units or you find a property that’s already split into different units and you have three of them. Let’s also assume that you can get $2,200 a month in rent for each unit.

David:
Assuming you live in one of the units and rent out the other two, this property will be bringing in $4,400 a month. If we subtract the 4,280 from that, you’re making $120 a month. Now obviously, $120 a month is less than the $400 that you could get if you got that awesome out-of-state property at a 12% ROI, but here’s what you’re not thinking about. You would have to pay rent yourself if you didn’t house hack. So your rent would be $2,200.

David:
Now there’s a couple ways to look at it. You could take your 2,200 in rent and subtract off the $400 that you’re getting in cashflow, and your rent is still $1,800. You’re still losing $1,800 every month. You could take the $2,200 a month that you’re saving not having to pay rent and add that to the $120 that you’re making on the Vail property. That puts you at 2,320 a month.

David:
Now, if we’re comparing 2,320 a month on a primary residence house hack to $400 a month on a long distance, 20% down investment property, which one of those looks better. It’s roughly four are times as much money to be able to do the house hack back in your pocket which puts you at around a 45 to 48% return on your investment. Much better than that 12% that would be incredibly hard to get on a rental property.

David:
Now here’s what’s even better. You pay taxes on money that you make. So out of that $400, you might paying some taxes on that. You don’t pay taxes on money that you save. That $2,200 a month that you don’t have to pay in rent anymore is straight into your pocket, and this is what people always fail to do when they wonder why house hacking is better. They forget to include the money that they’re not spending on rent in the income that the property is producing, but it functions exactly like money that you made.

David:
In fact, it’s even better because you don’t pay taxes on it. Now, as icing on the cake, those other two units that you’re renting out on your Vail property that we just put at $2,200 a month, they’re probably going to go up every year. Let’s say they both go up a hundred bucks a year. Well, next year it’s $200 more and 400 and then 600, then 800. Five Years later, you’re making a thousand dollars more because you bought that property in Vail, that $800,000 great property.

David:
The property you would’ve bought out of state, rents are not going up nearly as much. And as even a cherry on top of that icing, the rent you would’ve been paying in a Vail would’ve been going up also. So your rent would have been going up by 100, then 200, then 300 and you would have been losing money. So when you house hack, you make more money every single year from what your tenants pay you, you save more money every single year from what you would have been paying to your landlord.

David:
You put less money down which means you can afford a more expensive property, if you do it well, you get into a better area and you get to choose where you live. This doesn’t even include paying down an $800,000 homes mortgage that you borrowed 95% of that and all the other benefits that come from buying better real estate. It’s not that it doesn’t cash flow, it’s that it actually makes you way more money. We just don’t call the money that you’re saving and making when you’re house hacking cash flow because it’s a little bit different.

David:
This is part of the danger of getting in these cash flow goggles that you’re looking at all the time as you forget all the other ways that real estate makes you money, and then you get confused. When someone like me says house hacking is a better option. Clayton, I really hope that that answers your question and I highly encourage you to find the best deal you can in the best neighborhood you can in the best place that you can, make sure it’s a place where there’s a high demand for rental property so that you can keep it rented and do this every single year of your real estate journey.

David:
All right, I hope you guys enjoyed that last question, I sure did and I love when you guys asked me the tough ones. So don’t send me the softballs. I welcome you. Please submit your toughest questions to biggerpockets.com/david. I want to know what is getting in the way of your journey. What’s preventing you from taking action because if my knowledge or my perspective or insight on anything can help make it easier for you to take action, I will be very happy, BiggerPockets will be very happy, you will be very happy.

David:
This podcast will not have been a waste of anyone’s time. And if you’ve enjoyed this episode, please be sure to like, share and subscribe on BiggerPockets’ YouTube channel, as well as tell me in the comments what you thought about my answers, what you wish I would’ve done differently and what I didn’t actually get to. You could follow me on social media @davidgreene24, and you can always email me through the BiggerPockets website by just sending a friend request and sending me a message. Keep an eye out for future episodes of The Green Scene Podcast, as well as all the other formats that we’re bringing you on BiggerPockets, this is David Greene signing off.

 

Ashley Kehr:
This is Real Estate Rookie episode 164.
My name is Ashley Kehr, and I’m here with my co-host Tony Robinson.

Tony Robinson:
And, welcome to the Real Estate Rookie podcast, where every week, twice a week, we bring you the inspiration, the information, the education you need to get started as a real estate investor, or keep going if you just got started.
So, Ashley, I see that you’re not by yourself. You’re not in your closet. There’s a man behind you, who’s got a big grin on his face, so I feel like he got some good news to share. What’s happening? What’s going on?

Ashley Kehr:
In my DMs, I was reading a question. I was going through and looking through what one we should read off today, to do for our Rookie Reply. And I got a question from Nash, that was just about how he wants to quit his job and become a real estate investor. So, I thought this question would go perfect with what happened to my business partner, Daryl, today. So I’m going to bring [Daryl Clinch 00:00:56] onto the show today. Say hello.

Daryl Clinch:
Hi, everyone.

Ashley Kehr:
To talk about something amazing that he did today. So, Daryl, what did you do today?

Daryl Clinch:
So, today, I officially quit my W2 job.

Ashley Kehr:
And he’s going to be a full-time real estate investor. Wooh.

Tony Robinson:
Could we give them the back story? Daryl, how long were you on that job for? I think that’s even more impressive, of the fact that you’re walking away.

Daryl Clinch:
Yeah. So I’ve been working in the bricklayers union and with the company that I work for, for 16 years, I’ve been doing it.

Tony Robinson:
Wow. 16 years.

Ashley Kehr:
And why did you want to quit? What were the reasons?

Daryl Clinch:
During these 16 years, I constantly was working out of town, in hotels, just away from my family, all summer long, never home, away from friends. I felt like I was losing out on everything. And I mean, the work too, it was hard work definitely took a toll on your body and stuff. So, I knew I wasn’t going to last, and seeing the older guys that were kind of getting out of it, and they’re in their sixties and stuff and just could barely walk, their knees. So, I knew it wasn’t somewhere that I wanted to be for the rest of my life. So I knew I needed a change.

Ashley Kehr:
So, this summer, Daryl and I started talking about real estate investing, and how he wanted to pursue something else and change his life and get more time back. So I introduced him to real estate investing, and when he got laid off in the winter, he started doing anything and everything he could to learn the business, to help me. And, we got a bunch of properties under contract, and he lives very well below his means. So we figured out how to make it work, so he can quit his job.

Tony Robinson:
I just want to ask one clarifying question, Daryl. So, for a lot of people, even if they hate their job, even if they get up every morning and they hate the idea of getting out of bed, they still do it. Millions and millions of people do it every single day. And they do it because there’s a certain level of security, false security in my mind, but there’s a certain level of security that comes along with having that steady paycheck. So, A, were you feeling that way? Were you feeling afraid of that lack of security that comes along with having that regular job? And if so, B, why wasn’t that fear big enough to hold you back from taking this big leap?

Daryl Clinch:
So, yeah, I definitely was super nervous about change, just because, when you even think about it, you’re wondering like, “How am I going to pay my bills?” None of that you understand, until you start getting into it and being like, “Okay, I can get paid from this or this or this.” So yeah, just thinking how am I going to pay my bills, and I have a 10 year old son, and what I’m going to do. And yeah, the waking up every morning, just knowing that I had to go to a job that I hated and was just miserable with was awful. I didn’t even want to get out of the bed and do it. I lived below of my means. So thinking, yeah, this could work out. So yeah, the fear of it, thinking, “Okay, what’s the worst thing that could happen?”
Well, I’m in a hiring union. So, the worst thing that I thought that could happen, “Well, if this don’t work out, I can always call my union up, and there’s always work or companies that need workers and whatnot.” So, I figured, “Hey, if this don’t work out, I know I can get hired back on with a company.” And then the company that I also just left, I don’t think I burnt any bridges doing it, and I was really professional about it. They constantly have so much work, so I also think, if I need to go back or whatever, that they would bring me back on.

Ashley Kehr:
Worst case scenario, he goes back to what the majority of Americans are doing, goes back to a job. So, I think, just one thing about Daryl is that, he spent his winter, when he was laid off, learning as much as he could, when he just could have accepted, “This is my life. This is normal.” And just hung out, snowboarding all winter, and then went back to his job. But, he has worked alongside me every single day, for no money, and has learned everything. And, we’ve acquired a bunch of properties together. So, I’m very proud of you.

Daryl Clinch:
Thank you.

Tony Robinson:
I love, Daryl, that you went kind of, “Okay, what is the worst case scenario?” And I feel like that’s the part that a lot of people don’t do, right? It’s like, “Yeah. The worst case scenario for me is, if this doesn’t work out, I’ll just go and get another job.”? Everyone else has that same opportunity. If I failed miserably as a real estate investor, I’m a smart enough guy. I can go out and probably find another job doing something. And, Ashley, same for you. If all of your properties in Buffalo burn down today, and you had no cash to get started and you needed to, you could go out and find a job somewhere too. Everyone has that same ability.
But I think the idea of starting over scares people a lot. But, what I would challenge most of our listeners to think about is, what is scarier? The fear of stepping out and betting on yourself, or the idea of looking back 30, 40 years from now and never having done that in the first place? And I feel like, for most people, you would be more upset with yourself if you didn’t try. But you tried, Daryl, and, dude, I’m super happy for you, man.

Daryl Clinch:
Thanks. I definitely thought about things, and you need to kind of take a bet on yourself and understand that you can do it. If someone else can do it, you can do it. So I took a bet on myself, and that’s what I told my boss. I’m ready to make money for me and stop making someone else wealthy. So, here I am.

Ashley Kehr:
Your ex-boss. You no longer have a boss.

Daryl Clinch:
My ex-boss.

Tony Robinson:
Yeah. What’s that saying? Oh, I was just going to say about the boss thing, right? You talked about making your boss wealthy. It’s like a meme I’ve seen floating around the internet a bunch of times, where the employee walks up to the boss, and he tells the boss, “Hey.” The boss is driving a really nice Ferrari or something like that, and the employee is like, “Man, I really love your car, boss. It’s amazing.” And the boss turns to the employee and says, “If you work really hard, you put in extra hours, I’ll be able to buy myself a second one.” And it’s like, how true is that?

Ashley Kehr:
And I think, one thing that we have talked about a lot is changing Daryl’s mindset of just that, he has the ability to not have to work to someone, and to kind of build that own financial freedom, build that wealth and to create time. That’s one thing that’s super important to him, and important to me. And, I tried to show him that, with real estate, you can do that. And, do you have more time or less right now?

Daryl Clinch:
Oh, I definitely have more time. And, it’s nice just to kind of do the work when you want to do it too. You don’t have that anxiety of a boss calling you constantly. “When’s this getting done? That getting done?” If you want to go do something, I can go do it, and then be like, “Well, I can just do what I need to do when I get home.” Or, if I can’t sleep, I can do the work late at night, whatever I need to get done.

Ashley Kehr:
I would say, for some action items, for someone who’s in Daryl’s position that want to get out of their W2 job is, first of all, the easiest thing is find somebody to partner with, or start working alongside another investor like Daryl did. What value can you provide to that investor? So, Daryl did quality control in the military. He has a lot value and a lot of capabilities that I suck at from that side. And then also, he was a foreman in his union, so managing people, which I don’t like to do and I don’t feel like I’m good at. He’s been able to manage our contractors. He has construction experience. He has all of these strengths that are my weaknesses.
And, another thing to do too is, if you do want to leave your job, Daryl took a notebook and wrote down every single expense that he has in his life, and looked at, “Okay, what do I need to live on a month?” And it was actually way less than what you thought it was too. And then also looked at okay, “If possible, what are some things that I could actually cut?” So he is giving himself, kind of this winter buffer of time, where he really isn’t bringing in any income. And then, once our properties are rehabbed, then he will be making, hopefully, more than he did last year, by the end of the year, if everything goes as planned.

Tony Robinson:
I love those steps, Ashley, but I’m going to one up you. There is an even easier way to leave your W2, and that’s doing it the way that I did it, where you just get fired. Because then, you don’t even got a choice. But it’s worked out pretty well for me.
I think the idea of kind of figuring out what your expenses are, and using that as your target, if I take a step back, right? I just put out a YouTube video about this, and it was about the different levels of financial freedom. On the bottom level, you have financial disparity, where you’re living paycheck to paycheck, or maybe not even paycheck to paycheck, but really tough financial situation. Then above financial disparity, you have financial dependence, where you’re working a day job, all of your bills are covered, but you’re still reliant and dependent on your job to survive. And then the next step is financial independence, where all of your income, from your businesses, from your entrepreneurial endeavors, from your investments, are enough to cover your expenses, so now you don’t have to worry about that job.
And then once you get past financial independence, there’s other levels of financial freedom, where you got like FU money, where you can get the yachts and the jets and all that good stuff. But, there’s different levels to that. But to move out of… My point is, I think people oftentimes underestimate how much money they need to be bringing in, to have the option to step away from their job. If your monthly expenses are a thousand dollars a month, then you only need a thousand dollars a month in cashflow to replace your income. And obviously, I think having a decent safety net is helpful as well. When we stepped away, we had a lot of money in the bank. But I mean, if you’ve got steady cashflow coming in, you’re kind of the risky type of person, you might not even need that big of nest egg to be able to walk away from.

Ashley Kehr:
Tony, that was awesome. That was great, so make sure you guys go and check out Tony’s YouTube video that goes into more detail on that. That was a great description. Thank you for sharing that with us.

Tony Robinson:
Cool. Well, Daryl, congratulations, man. We need all the rookies to go on to Daryl’s Instagram and thank him, congratulate him. I know there’s like a time travel thing in podcasting, so by the time this is airs, it’ll be several weeks after he actually quit, but I’m sure he’ll still appreciate if you guys go back and…

Ashley Kehr:
Hey, Daryl, what’s your Instagram?

Daryl Clinch:
@darylc138.

Ashley Kehr:
Well, thank you, guys, so much for watching or listening to this week’s Rookie Reply, and we will be back on Wednesday with a guest. And, you guys, let us know in the Real Estate Rookie Facebook group, if you have quit your job, retired and are pursuing real estate investing full time. We would love to hear it and congratulate you guys.
Thank you so much for listening, and we’ll see you next time.