Want to Know the Easiest Way to Buy a Million-Dollar Property? Fractional Investing

15% ROI”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/05\/large_Extra_large_logo-1.jpg”,”imageAlt”:””,”title”:”SFR, MF & New Builds!”,”body”:”Invest in the best markets to maximize Cash Flow, Appreciation & Equity with a team of professional investors!”,”linkURL”:”https:\/\/renttoretirement.com\/”,”linkTitle”:”Contact us to learn more!”,”id”:”60b8f8de7b0c5″,”impressionCount”:”261200″,”dailyImpressionCount”:”140″,”impressionLimit”:”350000″,”dailyImpressionLimit”:”1040″},{“sponsor”:”The Entrust Group”,”description”:”Self-Directed IRAs”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/11\/TEG-Logo-512×512-1.png”,”imageAlt”:””,”title”:”Spring Into investing”,”body”:”Using your retirement funds. Get your step-by-step guide and learn how to use an old 401(k) or existing IRA to invest in real estate.\r\n”,”linkURL”:”https:\/\/www.theentrustgroup.com\/real-estate-ira-report-bp-awareness-lp?utm_campaign=5%20Steps%20to%20Investing%20in%20Real%20Estate%20with%20a%20SDIRA%20Report&utm_source=Bigger_Pockets&utm_medium=April_2022_Blog_Ads”,”linkTitle”:”Get Your Free Download”,”id”:”61952968628d5″,”impressionCount”:”445867″,”dailyImpressionCount”:”93″,”impressionLimit”:”600000″,”dailyImpressionLimit”:0},{“sponsor”:”Walker & Dunlop”,”description”:” Apartment lending. Simplified.”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/03\/WDStacked512.jpg”,”imageAlt”:””,”title”:”Multifamily Property Financing”,”body”:”Are you leaving money on the table? Get the Insider\u0027s Guide.”,”linkURL”:”https:\/\/explore.walkerdunlop.com\/sbl-financing-guide-bp-blog-ad”,”linkTitle”:”Download Now.”,”id”:”6232000fc6ed3″,”impressionCount”:”156332″,”dailyImpressionCount”:”87″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”6500″},{“sponsor”:”SimpliSafe Home Security”,”description”:”Trusted by 4M+ Americans”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/yard_sign_100x100.png”,”imageAlt”:””,”title”:”Security that saves you $”,”body”:”24\/7 protection against break-ins, floods, and fires. SimpliSafe users may even save up to 15%\r\non home insurance.”,”linkURL”:”https:\/\/simplisafe.com\/pockets?utm_medium=podcast&utm_source=biggerpockets&utm_campa ign=2022_blogpost”,”linkTitle”:”Protect your asset today!”,”id”:”624347af8d01a”,”impressionCount”:”128447″,”dailyImpressionCount”:”124″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2222″},{“sponsor”:”Delta Build Services, Inc.”,”description”:”New Construction in SWFL!”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Image-4-14-22-at-11.59-AM.jpg”,”imageAlt”:””,”title”:”Build To Rent”,”body”:”Tired of the Money Pits and aging \u201cturnkey\u201d properties? Invest with confidence, Build To\r\nRent is the way to go!”,”linkURL”:”https:\/\/deltabuildservicesinc.com\/floor-plans-elevations”,”linkTitle”:”Look at our floor plans!”,”id”:”6258570a45e3e”,”impressionCount”:”118802″,”dailyImpressionCount”:”94″,”impressionLimit”:”160000″,”dailyImpressionLimit”:”2163″},{“sponsor”:”RentRedi”,”description”:”Choose The Right Tenant”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/rentredi-logo-512×512-1.png”,”imageAlt”:””,”title”:”Best App for Rentals”,”body”:”Protect your rental property investment. Find & screen tenants: get full credit, criminal, and eviction reports.”,”linkURL”:”http:\/\/www.rentredi.com\/?utm_source=biggerpockets&utm_medium=paid&utm_campaign=BP_Blog.05.02.22&utm_content=button&utm_term=findtenants”,”linkTitle”:”Get Started Today!”,”id”:”62740e9d48a85″,”impressionCount”:”99537″,”dailyImpressionCount”:”97″,”impressionLimit”:”150000″,”dailyImpressionLimit”:”5556″},{“sponsor”:”Guaranteed Rate”,”description”:”One-Stop Mortgage Lender”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/GR-512×512-1.png”,”imageAlt”:””,”title”:”$1,440 Mortgage Savings”,”body”:”Whether you\u2019re buying new or cash-out refinancing to upscale the old \u2013 get started today and we\u2019ll help you save!”,”linkURL”:”https:\/\/www.rate.com\/biggerpockets?adtrk=|display|corporatebenefits|biggerpockets|july2022_blog||||||||||&utm_source=corporatebenefits&utm_medium=display&utm_campaign=biggerpockets&utm_content=july2022-blog%20%20%20″,”linkTitle”:”Buy or Cash-Out Refi”,”id”:”62ba1bfaae3fd”,”impressionCount”:”54568″,”dailyImpressionCount”:”94″,”impressionLimit”:”70000″,”dailyImpressionLimit”:”761″},{“sponsor”:”Avail”,”description”:”#1 Tool for Landlords”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/512×512-Logo.png”,”imageAlt”:””,”title”:”Hassle-Free Landlording”,”body”:”One tool for all your rental management needs — find & screen tenants, sign leases, collect rent, and more.”,”linkURL”:”https:\/\/www.avail.co\/?ref=biggerpockets&source=biggerpockets&utm_medium=blog+forum+ad&utm_campaign=homepage&utm_channel=sponsorship&utm_content=biggerpockets+forum+ad+fy23+1h”,”linkTitle”:”Start for FREE Today”,”id”:”62bc8a7c568d3″,”impressionCount”:”57650″,”dailyImpressionCount”:”87″,”impressionLimit”:0,”dailyImpressionLimit”:”1087″},{“sponsor”:”Steadily”,”description”:”Easy landlord insurance”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/facebook-business-page-picture.png”,”imageAlt”:””,”title”:”Rated 4.8 Out of 5 Stars”,”body”:”Quotes online in minutes. Single-family, fix n\u2019 flips, short-term rentals, and more. Great prices and discounts.”,”linkURL”:”http:\/\/www.steadily.com\/?utm_source=blog&utm_medium=ad&utm_campaign=biggerpockets “,”linkTitle”:”Get a Quote”,”id”:”62bdc3f8a48b4″,”impressionCount”:”58096″,”dailyImpressionCount”:”59″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”1627″},{“sponsor”:”MoFin Lending”,”description”:”Direct Hard Money Lender”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/mf-logo@05x.png”,”imageAlt”:””,”title”:”Flip, Rehab & Rental Loans”,”body”:”Fast funding for your next flip, BRRRR, or rental with MoFin! Close quickly, low rates\/fees,\r\nsimple process!”,”linkURL”:”https:\/\/mofinloans.com\/scenario-builder?utm_source=biggerpockets&utm_medium=cpc&utm_campaign=bp_blog_july2022″,”linkTitle”:”Get a Quote-EASILY!”,”id”:”62be4cadcfe65″,”impressionCount”:”63528″,”dailyImpressionCount”:”58″,”impressionLimit”:”100000″,”dailyImpressionLimit”:”3334″},{“sponsor”:”REI Nation”,”description”:”Premier Turnkey Investing”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/REI-Nation-Updated-Logo.png”,”imageAlt”:””,”title”:”Fearful of Today\u2019s Market?”,”body”:”Don\u2019t be! REI Nation is your experienced partner to weather today\u2019s economic conditions and come out on top.”,”linkURL”:”https:\/\/hubs.ly\/Q01gKqxt0 “,”linkTitle”:”Get to know us”,”id”:”62d04e6b05177″,”impressionCount”:”52604″,”dailyImpressionCount”:”76″,”impressionLimit”:”195000″,”dailyImpressionLimit”:”6360″},{“sponsor”:”Zen Business”,”description”:”Start your own real estate business”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/512×512-1-300×300-1.png”,”imageAlt”:””,”title”:”Form Your Real Estate LLC or Fast Business Formation”,”body”:”Form an LLC with us, then run your real estate business on our platform. BiggerPockets members get a discount. “,”linkURL”:”https:\/\/www.zenbusiness.com\/p\/biggerpockets\/?utm_campaign=partner-paid&utm_source=biggerpockets&utm_medium=partner&utm_content=podcast”,”linkTitle”:”Form your LLC now”,”id”:”62e2b26eee2e2″,”impressionCount”:”39004″,”dailyImpressionCount”:”65″,”impressionLimit”:”80000″,”dailyImpressionLimit”:”2581″},{“sponsor”:”Marko Rubel “,”description”:”New Investor Program”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/DisplayAds_Kit_BiggerPockets_MR.png”,”imageAlt”:””,”title”:”Funding Problem\u2014Solved!”,”body”:”Get houses as low as 1% down, below-market interest rates, no bank hassles. Available on county-by-county basis.\r\n”,”linkURL”:”https:\/\/kit.realestatemoney.com\/start-bp\/?utm_medium=blog&utm_source=bigger-pockets&utm_campaign=kit”,”linkTitle”:”Check House Availability”,”id”:”62e32b6ebdfc7″,”impressionCount”:”39972″,”dailyImpressionCount”:”78″,”impressionLimit”:”200000″,”dailyImpressionLimit”:0},{“sponsor”:”Xome”,”description”:”Search & buy real estate”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/BiggerPocket_Logo_512x512.png”,”imageAlt”:””,”title”:”Real estate made simple.”,”body”:”Now, you can search, bid, and buy property all in one place\u2014whether you\u2019re a seasoned\r\npro or just starting out.”,”linkURL”:”https:\/\/www.xome.com?utm_medium=referral&utm_source=BiggerPockets&utm_campaign=B P&utm_term=Blog&utm_content=Sept22″,”linkTitle”:”Discover Xome\u00ae”,”id”:”62fe80a3f1190″,”impressionCount”:”22096″,”dailyImpressionCount”:”82″,”impressionLimit”:”50000″,”dailyImpressionLimit”:”1667″},{“sponsor”:”Follow Up Boss”,”description”:”Real estate CRM”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/FUB-Logo-512×512-transparent-bg.png”,”imageAlt”:””,”title”:”#1 CRM for top producers”,”body”:”Organize your leads & contacts, find opportunities, and automate follow up. Track everything and coach smarter!”,”linkURL”:”https:\/\/pages.followupboss.com\/bigger-pockets\/%20″,”linkTitle”:”30-Day Free Trial”,”id”:”630953c691886″,”impressionCount”:”24925″,”dailyImpressionCount”:”75″,”impressionLimit”:”150000″,”dailyImpressionLimit”:”1230″},{“sponsor”:”BatchLeads”,”description”:”Off-market home insights”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/image_6483441.jpg”,”imageAlt”:””,”title”:”Score off-market deals”,”body”:”Tired of working dead-end leads? Generate personalized leads, find cash buyers, and close more deals.”,”linkURL”:”https:\/\/batchleads.io\/?utm_source=biggerpockets&utm_medium=blog_ad&utm_campaign=bleads_3&utm_content=v1″,”linkTitle”:”Try for Free”,”id”:”6318ec1ac004d”,”impressionCount”:”12497″,”dailyImpressionCount”:”88″,”impressionLimit”:”50000″,”dailyImpressionLimit”:0},{“sponsor”:”BatchLeads”,”description”:”Property insights + tools”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/image_6483441.jpg”,”imageAlt”:””,”title”:”Beat the shifting market”,”body”:”Don\u0027t let market uncertainty define your business. Find off-market deals and cash buyers with a single tool.”,”linkURL”:”https:\/\/batchleads.io\/?utm_source=biggerpockets&utm_medium=blog_ad&utm_campaign=bleads_3&utm_content=v2″,”linkTitle”:”Try for Free”,”id”:”6318ec1ad8b7f”,”impressionCount”:”18105″,”dailyImpressionCount”:”170″,”impressionLimit”:”50000″,”dailyImpressionLimit”:0},{“sponsor”:”Walker & Dunlop”,”description”:”Loan Quotes in Minutes”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/WD-Square-Logo5.png”,”imageAlt”:””,”title”:”Skip the Bank”,”body”:”Financing $1M – $15M multifamily loans? Competitive terms, more certain execution, no strings to personal assets”,”linkURL”:”https:\/\/explore.walkerdunlop.com\/better-than-banks\/bigger-pockets\/blog\/quote”,”linkTitle”:”Learn More”,”id”:”6318ec1aeffc3″,”impressionCount”:”19325″,”dailyImpressionCount”:”169″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2334″}])” class=”sm:grid sm:grid-cols-2 sm:gap-8 lg:block”>

2022-09-30 20:30:21

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These 14 States Are Facing Higher Real Estate Insurance Premiums—Is Your State On The List?

15% ROI”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/05\/large_Extra_large_logo-1.jpg”,”imageAlt”:””,”title”:”SFR, MF & New Builds!”,”body”:”Invest in the best markets to maximize Cash Flow, Appreciation & Equity with a team of professional investors!”,”linkURL”:”https:\/\/renttoretirement.com\/”,”linkTitle”:”Contact us to learn more!”,”id”:”60b8f8de7b0c5″,”impressionCount”:”261200″,”dailyImpressionCount”:”140″,”impressionLimit”:”350000″,”dailyImpressionLimit”:”1040″},{“sponsor”:”The Entrust Group”,”description”:”Self-Directed IRAs”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/11\/TEG-Logo-512×512-1.png”,”imageAlt”:””,”title”:”Spring Into investing”,”body”:”Using your retirement funds. Get your step-by-step guide and learn how to use an old 401(k) or existing IRA to invest in real estate.\r\n”,”linkURL”:”https:\/\/www.theentrustgroup.com\/real-estate-ira-report-bp-awareness-lp?utm_campaign=5%20Steps%20to%20Investing%20in%20Real%20Estate%20with%20a%20SDIRA%20Report&utm_source=Bigger_Pockets&utm_medium=April_2022_Blog_Ads”,”linkTitle”:”Get Your Free Download”,”id”:”61952968628d5″,”impressionCount”:”445867″,”dailyImpressionCount”:”93″,”impressionLimit”:”600000″,”dailyImpressionLimit”:0},{“sponsor”:”Walker & Dunlop”,”description”:” Apartment lending. Simplified.”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/03\/WDStacked512.jpg”,”imageAlt”:””,”title”:”Multifamily Property Financing”,”body”:”Are you leaving money on the table? Get the Insider\u0027s Guide.”,”linkURL”:”https:\/\/explore.walkerdunlop.com\/sbl-financing-guide-bp-blog-ad”,”linkTitle”:”Download Now.”,”id”:”6232000fc6ed3″,”impressionCount”:”156323″,”dailyImpressionCount”:”87″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”6500″},{“sponsor”:”SimpliSafe Home Security”,”description”:”Trusted by 4M+ Americans”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/yard_sign_100x100.png”,”imageAlt”:””,”title”:”Security that saves you $”,”body”:”24\/7 protection against break-ins, floods, and fires. SimpliSafe users may even save up to 15%\r\non home insurance.”,”linkURL”:”https:\/\/simplisafe.com\/pockets?utm_medium=podcast&utm_source=biggerpockets&utm_campa ign=2022_blogpost”,”linkTitle”:”Protect your asset today!”,”id”:”624347af8d01a”,”impressionCount”:”128441″,”dailyImpressionCount”:”124″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2222″},{“sponsor”:”Delta Build Services, Inc.”,”description”:”New Construction in SWFL!”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Image-4-14-22-at-11.59-AM.jpg”,”imageAlt”:””,”title”:”Build To Rent”,”body”:”Tired of the Money Pits and aging \u201cturnkey\u201d properties? Invest with confidence, Build To\r\nRent is the way to go!”,”linkURL”:”https:\/\/deltabuildservicesinc.com\/floor-plans-elevations”,”linkTitle”:”Look at our floor plans!”,”id”:”6258570a45e3e”,”impressionCount”:”118794″,”dailyImpressionCount”:”94″,”impressionLimit”:”160000″,”dailyImpressionLimit”:”2163″},{“sponsor”:”RentRedi”,”description”:”Choose The Right Tenant”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/rentredi-logo-512×512-1.png”,”imageAlt”:””,”title”:”Best App for Rentals”,”body”:”Protect your rental property investment. Find & screen tenants: get full credit, criminal, and eviction reports.”,”linkURL”:”http:\/\/www.rentredi.com\/?utm_source=biggerpockets&utm_medium=paid&utm_campaign=BP_Blog.05.02.22&utm_content=button&utm_term=findtenants”,”linkTitle”:”Get Started Today!”,”id”:”62740e9d48a85″,”impressionCount”:”99525″,”dailyImpressionCount”:”97″,”impressionLimit”:”150000″,”dailyImpressionLimit”:”5556″},{“sponsor”:”Guaranteed Rate”,”description”:”One-Stop Mortgage Lender”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/GR-512×512-1.png”,”imageAlt”:””,”title”:”$1,440 Mortgage Savings”,”body”:”Whether you\u2019re buying new or cash-out refinancing to upscale the old \u2013 get started today and we\u2019ll help you save!”,”linkURL”:”https:\/\/www.rate.com\/biggerpockets?adtrk=|display|corporatebenefits|biggerpockets|july2022_blog||||||||||&utm_source=corporatebenefits&utm_medium=display&utm_campaign=biggerpockets&utm_content=july2022-blog%20%20%20″,”linkTitle”:”Buy or Cash-Out Refi”,”id”:”62ba1bfaae3fd”,”impressionCount”:”54558″,”dailyImpressionCount”:”94″,”impressionLimit”:”70000″,”dailyImpressionLimit”:”761″},{“sponsor”:”Avail”,”description”:”#1 Tool for Landlords”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/512×512-Logo.png”,”imageAlt”:””,”title”:”Hassle-Free Landlording”,”body”:”One tool for all your rental management needs — find & screen tenants, sign leases, collect rent, and more.”,”linkURL”:”https:\/\/www.avail.co\/?ref=biggerpockets&source=biggerpockets&utm_medium=blog+forum+ad&utm_campaign=homepage&utm_channel=sponsorship&utm_content=biggerpockets+forum+ad+fy23+1h”,”linkTitle”:”Start for FREE Today”,”id”:”62bc8a7c568d3″,”impressionCount”:”57648″,”dailyImpressionCount”:”87″,”impressionLimit”:0,”dailyImpressionLimit”:”1087″},{“sponsor”:”Steadily”,”description”:”Easy landlord insurance”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/facebook-business-page-picture.png”,”imageAlt”:””,”title”:”Rated 4.8 Out of 5 Stars”,”body”:”Quotes online in minutes. Single-family, fix n\u2019 flips, short-term rentals, and more. Great prices and discounts.”,”linkURL”:”http:\/\/www.steadily.com\/?utm_source=blog&utm_medium=ad&utm_campaign=biggerpockets “,”linkTitle”:”Get a Quote”,”id”:”62bdc3f8a48b4″,”impressionCount”:”58083″,”dailyImpressionCount”:”59″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”1627″},{“sponsor”:”MoFin Lending”,”description”:”Direct Hard Money Lender”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/06\/mf-logo@05x.png”,”imageAlt”:””,”title”:”Flip, Rehab & Rental Loans”,”body”:”Fast funding for your next flip, BRRRR, or rental with MoFin! Close quickly, low rates\/fees,\r\nsimple process!”,”linkURL”:”https:\/\/mofinloans.com\/scenario-builder?utm_source=biggerpockets&utm_medium=cpc&utm_campaign=bp_blog_july2022″,”linkTitle”:”Get a Quote-EASILY!”,”id”:”62be4cadcfe65″,”impressionCount”:”63524″,”dailyImpressionCount”:”58″,”impressionLimit”:”100000″,”dailyImpressionLimit”:”3334″},{“sponsor”:”REI Nation”,”description”:”Premier Turnkey Investing”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/REI-Nation-Updated-Logo.png”,”imageAlt”:””,”title”:”Fearful of Today\u2019s Market?”,”body”:”Don\u2019t be! REI Nation is your experienced partner to weather today\u2019s economic conditions and come out on top.”,”linkURL”:”https:\/\/hubs.ly\/Q01gKqxt0 “,”linkTitle”:”Get to know us”,”id”:”62d04e6b05177″,”impressionCount”:”52600″,”dailyImpressionCount”:”76″,”impressionLimit”:”195000″,”dailyImpressionLimit”:”6360″},{“sponsor”:”Zen Business”,”description”:”Start your own real estate business”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/512×512-1-300×300-1.png”,”imageAlt”:””,”title”:”Form Your Real Estate LLC or Fast Business Formation”,”body”:”Form an LLC with us, then run your real estate business on our platform. BiggerPockets members get a discount. “,”linkURL”:”https:\/\/www.zenbusiness.com\/p\/biggerpockets\/?utm_campaign=partner-paid&utm_source=biggerpockets&utm_medium=partner&utm_content=podcast”,”linkTitle”:”Form your LLC now”,”id”:”62e2b26eee2e2″,”impressionCount”:”38998″,”dailyImpressionCount”:”65″,”impressionLimit”:”80000″,”dailyImpressionLimit”:”2581″},{“sponsor”:”Marko Rubel “,”description”:”New Investor Program”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/DisplayAds_Kit_BiggerPockets_MR.png”,”imageAlt”:””,”title”:”Funding Problem\u2014Solved!”,”body”:”Get houses as low as 1% down, below-market interest rates, no bank hassles. Available on county-by-county basis.\r\n”,”linkURL”:”https:\/\/kit.realestatemoney.com\/start-bp\/?utm_medium=blog&utm_source=bigger-pockets&utm_campaign=kit”,”linkTitle”:”Check House Availability”,”id”:”62e32b6ebdfc7″,”impressionCount”:”39972″,”dailyImpressionCount”:”78″,”impressionLimit”:”200000″,”dailyImpressionLimit”:0},{“sponsor”:”Xome”,”description”:”Search & buy real estate”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/BiggerPocket_Logo_512x512.png”,”imageAlt”:””,”title”:”Real estate made simple.”,”body”:”Now, you can search, bid, and buy property all in one place\u2014whether you\u2019re a seasoned\r\npro or just starting out.”,”linkURL”:”https:\/\/www.xome.com?utm_medium=referral&utm_source=BiggerPockets&utm_campaign=B P&utm_term=Blog&utm_content=Sept22″,”linkTitle”:”Discover Xome\u00ae”,”id”:”62fe80a3f1190″,”impressionCount”:”22088″,”dailyImpressionCount”:”82″,”impressionLimit”:”50000″,”dailyImpressionLimit”:”1667″},{“sponsor”:”Follow Up Boss”,”description”:”Real estate CRM”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/FUB-Logo-512×512-transparent-bg.png”,”imageAlt”:””,”title”:”#1 CRM for top producers”,”body”:”Organize your leads & contacts, find opportunities, and automate follow up. Track everything and coach smarter!”,”linkURL”:”https:\/\/pages.followupboss.com\/bigger-pockets\/%20″,”linkTitle”:”30-Day Free Trial”,”id”:”630953c691886″,”impressionCount”:”24922″,”dailyImpressionCount”:”75″,”impressionLimit”:”150000″,”dailyImpressionLimit”:”1230″},{“sponsor”:”BatchLeads”,”description”:”Off-market home insights”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/image_6483441.jpg”,”imageAlt”:””,”title”:”Score off-market deals”,”body”:”Tired of working dead-end leads? Generate personalized leads, find cash buyers, and close more deals.”,”linkURL”:”https:\/\/batchleads.io\/?utm_source=biggerpockets&utm_medium=blog_ad&utm_campaign=bleads_3&utm_content=v1″,”linkTitle”:”Try for Free”,”id”:”6318ec1ac004d”,”impressionCount”:”12497″,”dailyImpressionCount”:”88″,”impressionLimit”:”50000″,”dailyImpressionLimit”:0},{“sponsor”:”BatchLeads”,”description”:”Property insights + tools”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/image_6483441.jpg”,”imageAlt”:””,”title”:”Beat the shifting market”,”body”:”Don\u0027t let market uncertainty define your business. Find off-market deals and cash buyers with a single tool.”,”linkURL”:”https:\/\/batchleads.io\/?utm_source=biggerpockets&utm_medium=blog_ad&utm_campaign=bleads_3&utm_content=v2″,”linkTitle”:”Try for Free”,”id”:”6318ec1ad8b7f”,”impressionCount”:”18105″,”dailyImpressionCount”:”170″,”impressionLimit”:”50000″,”dailyImpressionLimit”:0},{“sponsor”:”Walker & Dunlop”,”description”:”Loan Quotes in Minutes”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/WD-Square-Logo5.png”,”imageAlt”:””,”title”:”Skip the Bank”,”body”:”Financing $1M – $15M multifamily loans? Competitive terms, more certain execution, no strings to personal assets”,”linkURL”:”https:\/\/explore.walkerdunlop.com\/better-than-banks\/bigger-pockets\/blog\/quote”,”linkTitle”:”Learn More”,”id”:”6318ec1aeffc3″,”impressionCount”:”19309″,”dailyImpressionCount”:”169″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2334″}])” class=”sm:grid sm:grid-cols-2 sm:gap-8 lg:block”>

2022-09-30 15:34:13

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When Rental Property Investing Doesn’t Make Sense

Over the past two years, short-term rental investing has become a financial lifeline for those that are trying to make extra income. A small one or two-bedroom basement, garage apartment, or mother-in-law suite brings in enough cash flow for many to pay off a sizable amount of their mortgage. One such investor is Allen, who turned his low-interest rate primary residence into a lucrative short-term rental in the Portland, Maine area.

Allen is a vacation rental house hacker, leasing his garage apartment at a nightly rate for those visiting the area. Thanks to local laws, he’s unable to increase his nightly rates, but the silver lining means Allen has an almost fully-occupied, revenue-producing rental most of the time. He wants to build his short-term rental empire to even greater heights, but after looking at the math, Scott and Mindy aren’t so convinced that this is the right move.

With six figures in student debt and a moderate credit score weighing him down, Allen may be in a better position to do something else with his money. Scott and Mindy go through the numbers, calculations, and everything else you’d need to see whether or not another real estate investment is the right move for you. Even if you’re someone with a high income like Allen, you may be surprised by what Scott and Mindy propose.

Mindy:
Welcome to The BiggerPockets Money Podcast, Finance Friday edition, where we interview Allen and talk about short term rentals, credit scores, and student loan debt.

Scott:
The other big problem here is your credit score, which is not great right now. So the approach I like the best is to either, just pay down the debt or go good old fashioned index fund investing, instead of sticking all that cash in your bank account. Sit tight for a year or two. You’re going to generate $50,000, $100,000 in free cash flow over the next year, after tax, at the current rate that your life is going. And you’re going to be right back in the same position, but with a cleaner balance sheet at that point in time and a better credit score. And during that year, you can put together some really clear business plans for rental property investing, short term rentals, rent by the room, whatever makes sense in your local areas, that can produce that passive cash flow.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and with me as always, is my real estate loving cohost, Scott Trench. You’re supposed to say thanks.

Scott:
Oh, thanks. Go again. Sorry, I was not paying attention.

Mindy:
Are you new?

Scott:
Yes.

Mindy:
Let’s start over. Hello, hello, hello. My name is Mindy Jensen and with me as always, is my real estate loving cohost, Scott Trench.

Scott:
Ah, and with me as always, is the foundation of our real estate investing firm here.

Mindy:
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 are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments and assets like short term rentals on a lake, or start your own business. 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 am excited to talk to Allen today, because he has a very interesting financial situation. He makes bank, he makes a really great salary, but he has had some past financial mistakes and now has a bit of a debt scenario that he needs to contemplate paying off. And he also is interested in retiring early, which is why we’re talking to people here anyway. And he has a great home situation, where he is able to short-term rental a portion of his house, but if he moves out, he will not be able to do that anymore due to the short-term rental laws of his city. So he’s got some decisions to make, but the best part of his whole situation is that, his income is covered. He is making such a great income and that is one of the biggest problems that we see on this show is that, I want to do all these things but I don’t have any income. Well, he’s got that covered.

Scott:
I think Allen has a really strong set of financial fundamentals in his financial position, but that his goals are not really as well thought through as they could be, and his investment philosophy is not well rounded out. And then compounding that, is the fact that he’s stuck in a pretty good overall position, because of a couple of great decisions he’s made in the past, but that make it almost hard to go back on that. For example, his house is so great, his living situation is so great, how can he possibly leave that and go onto another housing situation? That lever of house hacking or scaling your portfolio through owner occupant strategies is not really available to him, because his current situation is so strong and he won’t be able to replicate it.

Mindy:
That is a problem that I think we’re going to see a lot of people facing in the next few years, just the next year, if you believe some of the reports that are coming out. But with interest rates rising, it’s going to be really hard to find a fantastic deal. And that doesn’t mean that there aren’t deals out there, that doesn’t mean that you can’t be buying real estate now, even with the high interest rates. It just means that finding a fantastic deal is going to be even harder than it was before.

Mindy:
So I am excited to bring in Allen, but before we do, my attorney makes me say that the contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott nor I, nor BiggerPockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate. Someday I will have that memorized, but today is not that day. Allen, welcome to the BiggerPockets Money Podcast. I’m so excited to talk to you today.

Allen:
Thanks, it’s great to be here. Excited to talk to you both.

Mindy:
I am excited to talk to you, because I see some easy wins and some research opportunities for you, right off the bat. So let’s jump in and review your finances. Easy win, huge, huge win that you’re having is your income. Your W2 income gives you approximately $12,000 to $18,000 a month, not a year, a month. Now that’s a huge swing, that’s an entire salary in some cases, swing. So I want to review that in a little bit, but let’s celebrate the fact that you are killing it in the income front. Not only that, but in addition to that, you bring in $2,000 to $4,000 a month as a short-term rental, primary house hack situation.

Mindy:
So that’s another bunch of money coming in. Awesome job. You have $120,000 in savings, which is fantastic. Now let’s look at your debts. You have $100,000 in student loan debts, which are currently deferred and I’m assuming you’re making no payments on, which is a smart decision. You saving the money, and then I’m assuming that you’re going to pay those off as soon as the deferment period ends, but of course we’ll get into that in a little bit.

Mindy:
You have a $290,000 mortgage at 3%, for 30 years. I’m hoping you’re not going to pay a dime more than you need to on that, because 3% is not the current mortgage rate right now and you have $300,000 to $400,000 in equity on this house. So that’s another celebration you bought well, hooray. For expenses, I have $500 a month in utilities, $105 in homeowner’s insurance, $450 a month in property taxes, $65 a month in car insurance and the rest of your average monthly expenses is $7,000. The research opportunity that I see immediately, is to break this down and into really, really small categories to see if there’s any place that you can cut some larger expenses out of. I have, wife’s retirement accounts as traditional IRA, $50,000, Roth IRA, $15,000. I see no, Allen’s retirement accounts. So that’s another thing that we’re going to discuss today, Allen. Can you give us a very brief overview of your money story?

Allen:
Absolutely. So my money story began, I guess we’ll put it in… We’ll start at college. Started in college, just going for a general bachelor’s degree, not really sure exactly what I wanted to do, so just changing my majors around and living off of my student loans essentially. And eventually, I started just working some odd jobs through my early 20s. I was a line cook at a restaurant where my wife and I met. Were working at a daycare making $9 an hour. So I really never made much more than $10 an hour for several years. And so, to supplement that I was using student loans to pay for my expenses and taking out credit cards and racking up bills on those, just to pay for my everyday life. And then I got my act together a little bit and went back to school and started in my career that I’m in now, where I started actually making decent money.

Allen:
I started off making about $30 an hour and working 36 hour weeks. And since COVID, I had an opportunity in healthcare, just because there’s been such a big need for my profession. I’ve been able to increase my hourly income from $30 an hour, to the most I was making recent was $125 an hour. So I’ve definitely really making a lot more money in this field than I ever thought that I would. So that’s where I’m at now. I’m making a lot more money, and because I’ve been making so much more money, I’ve been thinking a lot about where I really want my life to go financially. And I decided that I don’t really want to do the traditional work until I’m 65 thing. So I’m hoping to use this period where I’m making a lot of good W2 income, to try and propel myself into financial independent situation in the near future here.

Mindy:
Okay. And what are your goals for post-work life?

Allen:
Post-work, I would like to not really have to do too much more than just manage my Airbnbs, because the plan is to just get up as many short-term rentals as we can. So I really wouldn’t like to do too much more than whatever I have to do with property management companies. And then, use my free time from there to travel. My wife and I both love traveling a lot. We go places several times a year, so just traveling. And we’d like at some point to open up a farm sanctuary. So I guess that would become our jobs, our retirement jobs would be running something like that. So really, just the freedom to travel and then turn whatever hobbies and interests we have into somewhat of a career, maybe make a little bit of money from that as well.

Scott:
Awesome. So in a couple years, we want to be financially independent with a short-term rental empire that allows you to have a farm sanctuary as your full-time gig.

Allen:
Yeah, exactly.

Scott:
Love it. That’s clear. We can work with that. Is that within three to five years, seven years? What’s your ideal?

Allen:
Yeah, ideally three to five years. That’s my ambitious goal. I’ve given myself a 10 year deadline at the most, because I’d really like to spend no older than 40, I’d really like to continue working. So three to five years ideally, no more than 10. That’s what I’m working with right now.

Scott:
Awesome. Anything else we should know about your financial position?

Allen:
I guess I’ll go into my variable income, which I foresee potentially being a barrier in the future. Right now, the least amount I’m making is $90 bucks an hour. I’m currently making $90 an hour, but starting September I’m going to be going back up to the $125 an hour, but I’m not entirely certain how long I’m going to be making this rate of pay. I’ve currently been making this amount of money for almost two years, but I foresee that eventually going away, once hospital systems… I’m sure they’re trying to figure something out so they can get us back to our original pay rate.

Allen:
So I’m not counting on always having this kind of income. So that’s my biggest barrier. Before I started this new journey towards financial independence, I got a master’s in clinical research, so that was my backup plan. I can make about the same amount of money that I’m making now, in that field. So I could always switch over to that if I needed to. But currently I’m making the same I would, doing that, and I only have to work three days a week. So I’m going to stick with this as long as I can.

Scott:
Could you walk us through your house hack and how that operates? What part of it do you live in? How much are you renting other parts? How much would it rent for if you were to move out and make it a full-time, short-term rental? Can you do that with the laws in your region?

Allen:
Sure, yeah. So we have a house right outside of downtown Portland, Maine and it comes with a two bed, one bath apartment above the garage, and it’s detached. So our guests have their own driveway and their own outdoor area that’s fenced off. So it’s completely separate from our house. We live in the main house, so we’re not doing the complete reversal where we’d be living in the smaller area that I know some people do, to make a bit more money. But we’re giving ourselves the full house, and then just renting out the unit in the back. And the most we’re renting it for is $145 a night, which unfortunately we were rent capped. They’re treating us like we’re a long term rental. So we can only go up by a certain percent each year.

Allen:
I forget what that is exactly, but the main issue is, if we did move out, we would not be able to short-term rental this property full time, because Portland has a law that you can only short-term rental property if it’s owner occupied. So us, staying in our house right now with our low interest mortgage, renting this place out as often as we can, that’s making us a decent amount of money enough that my wife was able to quit her job. But moving forward we would have to find some other properties to short-term rental if we were to move out of this one.

Mindy:
Is that your plan, to move out of this? Or do you plan to retire here?

Allen:
Yeah, we plan on moving out. This is our first home. So we more got it because it had this unit in the back. So we’re like, “Well we want to live in this area and this apartment’s going to help us afford to do that.” But we do plan on moving. We’re not sure exactly where yet, but definitely not our forever home. So eventually, we’ll either sell this place and collect the equity to buy another home, or we might just keep it and turn it into a long term rental, just get, still a decent amount of income from that.

Scott:
When I observe your financial position, the things that jump out at the highest level, are your spending where, oh, we have $500 a month for utilities, a mortgage, property tax, and then $7,000 of other spending. And so, that I think is a really important lever here, to understand where that’s going. In months where you make $12,000, on the lower end of your income range, you’re probably saving almost nothing and your savings are probably coming from the months where you make the higher end of that range, to a large degree on the 12 to 18 K. And I think you should get to a place where, even in the lower months, you’re saving a good percentage of your income, 20 or 30%, and that will involve getting control over that $7,000. So I think that’s one key lever. And I think the second big lever is going to be your house.

Scott:
It sounds like you do not plan to stay in there long term, and that this house is going to have a very different economic profile for your family, the day after you move out, than while you’re living in it. While you live in it, it’s a money making machine and that will evaporate essentially, the day that you move out. And so, you got to figure out what to do with the equity in that house downstream. And then I think, third big point is what you’re doing with all this cash. You’re sitting in a lot of cash, but you don’t have a good way to deploy it right now.

Allen:
Yeah. I do want to add that, the $7,000 a month includes all of those other monthly expenses. So the mortgage and the utilities and all that is lumped in with that $7,000. So it’s not a $7,000 on top of that.

Scott:
Okay. So you do have a good, clear understanding of the household spending and [inaudible 00:15:24]. My mistake there, I apologize.

Allen:
Nope. That’s okay.

Mindy:
Do you know how the $7,000 breaks down? Or is it just, “Well, I know I spent less than $7,000, so I’m doing okay.”

Allen:
It was more like we were just looking at the general breakdown that our bank account homepage showed us for how much we spend every month, and we’re surprised by it. We’re like, “Oh wow, we’re spending $7,000 month. I had no idea we’re spending anywhere near that much.” So we’ve got our general monthly expenses with the mortgage and the utilities and everything, which we can’t control, but it’s not that bad. But then yeah, there’s another $4,000 that we’re spending a month. We don’t really tighten the belt too much. We definitely enjoy ourselves and we travel a lot. So a lot of that money is from travel, booking flights and hotels and whatnot. We also like to go out to eat a lot and we go to events. And so, we just have a very active, on the go lifestyle. So that’s generally where the meat of that $7,000 is going, is just our travel and excessive date nights, I guess.

Mindy:
Okay. So research opportunity number one is, travel points and travel rewards. Do you have a favorite airline? Do you have a favorite hotel? They have a credit card. I can almost guarantee that they have a credit card. I have a Hyatt credit card, I have a Southwest Airlines credit card, and I swipe on my Hyatt credit card for every purchase, because I can pay it off at the end of every month. If you’re not going to pay it off at the end of every month, don’t listen to anything I’m about to say. But assuming that you can, put all of your purchases on one card. This helps you track your spending, it helps you earn a lot of points. I have 60 something free hotel stays coming up, but all of the travel that I’m doing right now is for work. So I’m not using them for work.

Mindy:
I’m going to let work buy me hotel stays, at Hyatts, so I get more free hotel stays. So there’s a way to still travel, but not pay so much for your travel. There’s a way to still go out to eat, without paying so much for going out to eat, by maybe not going out to eat as much. Your local airline, your local airport may not have a ton of airline options. So find an airline that you can get a credit card for and start earning points on those to reduce your travel expenses. You just said something very telling, you said, “We had no idea we were spending $7,000 a month. We know we spend $3,000 for these fixed expenses, but we have no idea what that $4,000 is all about.”

Mindy:
I think that you need to track your spending really carefully for a couple of months, and you may start to see things that shock you or you may start to see things that you’re like, “Yeah, I’m okay with that.” And either way, you’ll at least know where the money’s going. Like Scott said, on an $18,000 month, spending $7,000, you still have $11,000 left over. That’s a lot. On a $12,000 a month, if you’re spending $7,000, that’s technically $5,000, but is that $12,000 in your pocket or 12,000 pretax?

Allen:
That is pretax, yeah.

Mindy:
Pretax. So that’s probably closer to the $7,000 that you’re spending. So like he said, it’s going to be a lot more difficult to save any money when that’s all that’s coming in and you’re spending it. So I definitely want to see some tracking of spending, just to see where it’s going and to make sure that what you’re spending on, is what you value.

Scott:
If you have a bucket of $7,000 in other spending, then I think spending is a big problem. If you’re spending $7,000 in total to fund your life, inclusive of your mortgage payment, utilities, all that kind of good stuff, then I think that there is some belt tightening you could do and I think it would be good to get control over it. But I think that you’re going to accumulate large amounts of cash, in a general sense here. So I think then, I would pivot to how badly and how fast do you want this goal? If you want it in three years, for example, then you got to buckle the belt and move into this unit above your garage and Airbnb out your main house, to get the much higher rents that would come with that.

Scott:
And then, start getting aggressive about the next things. If you want it in seven years, you can probably do exactly what you’re doing from a lifestyle perspective, and then just make some bigger moves there. And if you want it in 10 years, you could probably even increase a little bit and you’ll still get there if you’re able to do a couple of, again, those bigger money moves. Walk me through your short term rental income here. You said you’re locked in at a cap of $150 a night, right?

Allen:
Yes.

Scott:
$149 a night?

Allen:
$145.

Scott:
$145, and how many nights a year are you going to rent that thing out?

Allen:
So let’s see. So pretty much from, let’s say April through October, we’re pretty much booked every single night. Portland’s becoming more and more popular, so we’re booked pretty much every night, as long as we keep it open. Granted, my wife does do all the flipping herself. So when we go on vacations and stuff like that, we just close it down. We’re hoping to eventually find a good property manager that can take care of that for us while we’re out of town. But we’re very concerned about our reviews right now. We’re super hosts, we’ve got a 4.98% on Airbnb. So we don’t want to lose that.

Allen:
We’re concerned that a property manager might lose us some of those points. So I’d say, probably a good five, six months out of the year we’re booked every single night. And then during the off season, in the winter, still booked pretty much every weekend. So it’s better than we thought it would be where we live, just because there’s not too much to do where we are, but we get a lot of local tourists coming to stay with us as well. So that’s been good as well.

Scott:
What would the rates be if you could charge whatever you wanted?

Allen:
If we could charge whatever we wanted, I don’t think we would charge too much more than we’re charging right now. And we might go up to $200 bucks a night at some point during peak season, over the summer. But part of trying to make sure that we have good reviews and people are happy, is making sure that we’re charging a rate that people are happy paying. So we don’t want to overcharge them and make them feel like they’re getting ripped off. So we probably wouldn’t go up too much more than we’re charging right now, at maximum.

Scott:
What I’m trying to get at is, your city is conducting bad policy, taking money out of your pocket and putting it into the guest’s pocket who are from out of state, by capping that price. You cannot control that, but there’s always a blessing with every curse with this. The blessing should be that you are able to get a large amount of occupancy out of this, would be the logical leap I would make, and say, “Okay. My average is going to be $149 a night, but my minimum is going to be seven nights, during these periods of the year.” What games and research can you play throughout the year, so that you’re able to just fill it up to close to 100% occupancy, given the fact that you are artificially capped on your pricing? There should be an opportunity, I would think with that, with some wiggle room. And that would be the only lever that I think you can pull right now, given that you can’t increase price.

Allen:
Just try to fill it up every day.

Scott:
By considering minimum stay requirements. You cannot stay for the weekend, in the off season, you must stay for the week. So during the peak season, you have to fill up the entire block of days that I have available and these times. You cannot stay for these things. And I think that will help you with your scheduling as well. You’ll have fewer unit turn issues for your wife there.

Allen:
Yeah, that’s true. We did end up opening it to one night bookings, which ends up being a lot more work, as you said. But we had noticed when we, because we were originally doing I think, three or four night minimum stays, and then we had all of these little holes throughout the month. That when we opened it up to one night bookings, we went from having 25 nights booked, to having all 30 booked. So just filling in those holes by doing the one night bookings. Over the winter, I’m not sure if we would be able to fill it up for a full seven days, just because most people are just looking for a quick weekend getaway. So I don’t know if we restricted it to you have to stay for a week, if we would get more or less bookings. I’m not sure about that.

Scott:
Okay. What I’m hearing you say is, you feel reasonably optimized in the pricing strategy here and that this isn’t really a major level in your financial position, to get more income out of the current short-term rental. There may be tweaks but it’s not the meat of the journey here.

Allen:
Yeah, I think we’ve optimized the space that we have to work with, just because maybe if it was more of a niche property, people might be more inclined to book it for longer periods of time. But since it is just a unit above a garage, it’s mostly just people who are looking for a quick getaway here and there, and not booking for long periods of time. Granted, we haven’t tried putting the restriction on it to see, what we did if we did restricted to, you have to book it for the full week, to see what would happen there. So that’s definitely something that we could try out this winter.

Mindy:
Something to think about as you contemplate your decisions going forward is, it isn’t just, should I rent out both units long-term when we leave? You could find somebody to rent out the smaller unit as their long-term primary residence, and then they rent out the main unit as their short-term rental, which isn’t getting around the short-term rental laws. It is operating within the short-term rental laws. You’re not renting it out, because it’s not your primary residence, they’re renting it out because it’s their primary residence. And then, you work out some sort of split with them or some sort of higher rent for the whole property. That is an opportunity… Option to look into. I’m not sure exactly the laws, but it’s their primary residents when they’re renting there.

Allen:
Yeah, that’s interesting. I hadn’t thought of that.

Scott:
I think a big challenge for you is going to be, your goal is, you want to get a couple of more short-term rentals. Where do you want the short-term rental to be?

Allen:
Right now we’ve just been looking around our area, just because we know what the market’s like in areas close to us, and at least for the first couple properties, we want to try and manage it ourselves, just to get as much of that income for ourselves as possible. So for instance, right now we’re looking at getting a lake house, which that’s a big market, here in Maine. A lot of people come, rent lake houses over the summer and even over the winter to do ice fishing and snowmobiling and all that. And it’s also a type of property that we feel a little bit more comfortable, just with the way the laws are going, because it seems like everyone’s trying to restrict short-term rentals so much.

Allen:
Just all the neighboring towns as well are putting so many restrictions on short-term rentals, that we’re trying to look at just properties like lake houses that have always been in that market and we think might be less likely that they’ll end up putting restrictions on them in the future. So we’re looking for things like that, and also beach houses as well as another popular spot up here. But we would eventually like to branch out to other states as well. But like I said, for now it’s just easier to manage it in this area, because we know how the market works in each area.

Mindy:
Okay. One of the things that you said about your goals for post-five life is that you want to manage yourself, your short-term rentals, and you want to get as many as possible. And my first thought when I heard you say that is, you should lump your short-term rentals together, because then you can pull upon your current pool of contractors and cleaners and you know the laws and everything here, as opposed to, I’ve got one here and then one over here and one down here, and then you have to find people in every single area. So I don’t know where this lake house is, in relation to your current house. Could your current cleaner, well I guess your wife is your current cleaner, would she be able to go and clean this and turn it over, or would you have to hire somebody to do that?

Mindy:
Because that is the number one problem that I hear short-term rental proprietors, is that the right word for this? Short-term rental proprietors have is that. Hosts, thank you, Scott, that’s a better word. Is that they have a hard time finding cleaners, finding good cleaners, finding reliable cleaners or finding anybody at all to clean the property. And that’s one of the biggest issues that short-term rental tenants or guests, one of their biggest complaints is, “Oh the house wasn’t clean. The house wasn’t as clean as I wanted it to be. There was a hair here or there was schmutz there or whatever.” They get really upset when it’s not perfect.

Allen:
Yeah, exactly. That’s why we’re so afraid to have anyone other than my wife do it, because where that someone else’s version of clean won’t be our same version of clean. And even between me and my wife, whenever I flip the Airbnb for whatever reason, she’ll go double check my work and I’ve left a bunch of hairs in the tub still, that I’m like, “I swear I’ve gone over it three times.” But she’s got a different eye than I do. So yeah, we are trying to find a lake house that’s within an hour of us, so she can just do that herself as well. So we’re definitely looking for places within an hour so she can run over there in a reasonable amount of time and fix any issues and flip it herself without too much trouble.

Scott:
These properties, how much do they bring in?

Allen:
We’ve been looking for quite a while and we were initially starting looking for a place, hoping to find something that we liked around $350, but after about six months of looking for lake houses and striking out, it looks like we’re probably going to have to spend around $450 to $500 minimum, to look for what we’re looking for. Which would be probably a three bed, two bath lake house, that should be able over the summer, should be able to bring in probably $300, $350 a night.

Scott:
And how much annual income is that? You have a very seasonal business here, so what is it going to be on an annual basis?

Allen:
So we’re hoping that it should be able to bring in, if we’re looking at over the summer, we’re hoping it should be able to bring in at least at $7,000 to $10,000 a month over the summer. So we should be able to get a minimum of $50,000 a year on that. Then hopefully if we are able to rent it over the winter, which we’re not positive on how well that’s going to go, but we do see that they do pretty much get booked out a year in advance over the summer. And then in the winter, there’s definitely still more holes. So we’re going to have to play around with that a little bit more, to see how frequently people are coming out in the winter to book those. But I think if we made at least $7,000 to $10,000 a month over the summer, that would at least cover us enough to get us through the full year of mortgage payments and everything.

Scott:
I do not think that this is a winning formula for you to retire early and do this, based on those numbers. So let’s say you get $50,000 in annual short-term rental income from this property, and you’re buying a $500,000 property with $100,000 down, you’re not getting that loan for less than 6%, not in an investment property that’s not your primary. So that’s going to look at a 6% interest rate, you’re looking at about $2,400 a month before taxes and utilities. So that’s $30,000 in principle and interest right there. Plus you have taxes and utilities. What are taxes and utilities going to be in this location?

Allen:
This location will be, the taxes will be less than where we are now in Portland. It looks like they’re usually averaging about $3000 a year in property tax. Utilities, probably be pretty similar, probably would be about $500.

Scott:
So now we’re at $30,000, plus $3000 in taxes, plus $6,000 to $7,200 in utilities. That puts us at $40,000. And then how about insurance?

Allen:
Insurance, I’m not sure what we’d have to pay for home insurance on a lake house. I just know that we’re paying around $105 for our home, probably about the same.

Scott:
That’s $42,000 and that’s before you have to replace the roof for CapEx. That’s before you have to do any maintenance to the property outside of cleaning. The cleaning bill I would not include in the calculation, because I’d pass that to the guests, as a cleaning bill, but you’d still have to find somebody to do that. I do not think your wife would want to drive out an hour, multiple times a week, to clean the property for an $8,000 profit before maintenance and CapEx expenses. But these back of the napkin numbers don’t work for me at the highest level on this property, in a compelling way right now with this. And you contrast that to your current property, where you’re making $2,000 to $4,000 a month on a $1,500 mortgage payment.

Scott:
And you probably could do way better if you rented out the main house instead of the unit above the garage. You’ve got a much bigger winner there, probably because you bought many years ago and have a primary home mortgage on that at 3%. I think this is going to be the real crux of it is, do you have a viable short-term rental strategy here, in this location? And when you actually analyze those numbers all the way down the line, do you get to something compelling? Is for example, the $50,000 annual income estimate way low? Does that feel way lower or do you feel like you can get way more than that?

Allen:
That’s on the lower end. Again, this is just a very rough estimate on how much we’d be making, but that’s my estimate if, subtracting the off season months. So I think that’s about how much we would make during the spring, summer and fall, we’d be able to pull in that much money. And then, however much we’d be able to pull in on top of that over the winter, which I’m not really sure what the market’s like for that. We definitely would have to reduce our nightly rate and probably wouldn’t get rented out as much. So it might be a similar situation where we’re still getting rented pretty regularly, but only on the weekends and only for $200 a night. But yeah, I get what you’re saying.

Allen:
I guess it would be more of a luxury investment, because we definitely like the idea, because it’s something fun for us to utilize as well, but in terms of cash flow, we would definitely be restricted there, like you were saying. It is tough, because like I said, we are restricted so much on our ability to get short-term rentals in Portland. I’d love to get a multifamily here in Portland and Airbnb that out and that’d be perfect. But unfortunately, we’re definitely restricted on that. So we have been looking at neighboring towns that have little leaner laws on that, but we’re not sure if they would get as much tourism.

Scott:
What’s your credit score?

Allen:
It’s about 646 right now, I think is the higher one.

Scott:
Okay. So the interest rate on any loan that we’re talking about, would be even higher than what I just articulated. It’s not terrible, but it would definitely increase it by maybe 100 basis points there.

Allen:
Yeah, I was approved for a loan at 6.57%.

Mindy:
Was that an owner occupied loan or a investment loan?

Allen:
That’s just a standard owner occupied loan.

Mindy:
When you applied to be on the show, you shared some barriers that you have, the poor credit scores, student loan debt, which we mentioned at the beginning of the show and the variable income. Let’s explore the student loan debt. You currently have approximately $100,000, which is at 0% deferred by the government due to COVID. No payments due right now, but once it comes back into undeferrment or whatever that’s called, you’ll have $80,000 at approximately 5% and $20,000 at 6.5%. Scott’s magic theory of interest rates is that, if it’s five and under, you don’t pay it off early. If it’s seven and over, you do pay it off as fast as possible. And both of yours fall in the middle with, do what makes you feel comfortable. So we are of no help there whatsoever. You also have $120,000 in cash that, it sounds like you’re thinking about using for the down payment on a house. What is your plan for your student loans once they become payable again?

Allen:
The plan, well I’ve got my fingers crossed for some sort of forgiveness that may or may not come through. So I’m planning on paying them back when I have to, but there is currently a bill in congress to forgive student loan debt for frontline healthcare workers. So that would be great for me if that does end up going through. So I’ve got my fingers crossed for that. Sounds like Biden may have finally made a decision that would forgive $20,000 of what I currently have, but other than that, my plan would just be, I would just have to start making payments on those and I don’t know if I would pay too much more towards it at the 4.99% interest rate, and I might try and save the rest to still accumulate money for down payments. One of the things I was looking for guidance on was, do you think it’s smarter to pay the absolute minimum on that and just keep moving towards saving up for those down payments? Or would it be best to just get those off my plate entirely?

Scott:
I think we got to start with the end in mind here and zoom back out and say, your goal as you stated, was to in three to five years, retire early and have a farm essentially, here. And you wanted to use that with do that through short-term rentals. And I think that what I’ve uncovered in this is, that is really a wish right now. You don’t have a clear plan to buy those short-term rentals, and what would actually be profitable and how that would make money for you at this point in time. And that needs to be refined. You know you can do it, you know that short-term rentals can be a powerful wealth generator, but you don’t have, “Oh these are the properties I’ve identified. This is the cash flow I can generate throughout the year. This is what my expense profile looks like and this is the return, and this is how I’m going to operate it.”

Scott:
You have, “I kind of have this lake area, maybe my wife can drive out there and clean it a few times in between tenants.” It’s not a business plan right now. And so, I think you should reset what the goal is. I’m going to reframe it for the rest of the conversation today, with your permission of course, if you like this, but I want the most flexible financial position possible in three years from now, that affords me the best, the most amount of life options, among which might be this farm. Does that work for a repositioning standpoint?

Allen:
Yeah, sounds perfect.

Scott:
Okay. So I think if we start with that premise, then we can acknowledge and say, okay, here’s what you got going for you. You make a ton of money, you spend a lot less than you make and you’ve got a great house hack. Your problem is you’re stuck in that house hack, because there’s no conceivable living situation that you could replicate in the near future, that is as good as what you’ve currently got going from probably a lifestyle and cash flow perspective. You’ve got a really low interest rate mortgage, a tremendous amount of equity, which is also another problem.

Scott:
Most of your net worth is in this home equity and then in your wife’s retirement accounts, although you do have $120 K in cash. So you’ve got a flexible position, but yet you’re also stuck, which is a paradox. All of your debt that you have is in this quasi realm of, should I pay? It’s not really bad, it’s not really good, it’s in this quasi realm of, I probably can invest a little bit more. And so, you have all these shades of gray in your financial position that makes it really hard I think, to commit in any one direction. How’s that sound? Is this how you’re feeling about things?

Allen:
Yeah, that’s total nail on the head. For the past couple years, we’ve definitely just felt exactly as you said, stuck. We’re like, “Where do we go?” How can we get a good cash flowing property, where we’ve got the best setup right now, we don’t want to stay in this setup, but there’s not really any place for us to go that’s going to give us more net income than we’re getting at the moment. See, I definitely… What you were saying about getting a clear picture on actually getting a business plan for our short-term rentals as opposed to, yeah, we know short-term rentals are a good idea, but we definitely haven’t refined exactly how we’re going to execute the short-term rental plan and get the highest ROI on that.

Scott:
Let’s also acknowledge that, in spite of having all of this gray zone in, which can be frustrating because you don’t have any clear options, you also have many good options because of the strong fundamentals of your current position. You pay nothing to live, in fact you get paid a lot of money to live in your home, in your area. You make a tremendous amount of money. Your wife is able to operate this really, second job that is putting $2,000 to $4,000 a month in your pocket over the course of the year. And so, life is good there. I don’t think without a clear plan that’s super aggressive, you’re retiring in three years, or five years or seven years. You might, but you’d have to get something aggressive there. But you can have many hundreds of thousands, maybe even close to a million dollars in personal net worth and a position where things are more clear and stabilized.

Scott:
But you’re going to have to go down one of, I think a couple of routes. So the first route, option A that I would recommend is, just pay off the debt. You got $120,000 burning a hole in your pocket, in your bank account making 1.5%. And right now, you’re paying a higher percentage rate on various debt that will come out of deferment soon. Maybe you don’t pay all of it, maybe you pay some of it, but the debt is a guaranteed return, it’s pretty high interest. That’s an easy button. The second would be to, and I would say you spend what, $7,000 a month and that includes all your housing expenses and you get $2,000 to $4,000 of that back. So that’s $3,000 a month from your Airbnb. Really, you’re spending $4,000 a month. If you knock that down to $50,000, your savings, you’ve got a year of financial runway sitting in the bank account, net of your Airbnb income.

Scott:
That’s pretty good. A year is a lot. And you can take that $70,000 and invest it either, in a rental property or start putting it into some stocks there. The other big problem here is your credit score, which is not great right now. So I wonder, now that I’m talking through all of this, if the best approach I like the best is to either, just pay down the debt or go good old fashioned index fund investing, instead of sticking all that cash in your bank account. Sit tight for a year or two, you’re going to generate $50,000, $100,000 in free cash flow over the next year, after tax, at the current rate that your life is going, and you’re going to be right back in the same position but with a cleaner balance sheet at that point in time and a better credit score. And during that year, you can put together some really clear business plans for rental property investing, short-term rentals, rent by the room, whatever makes sense in your local areas that could produce that passive cash flow. That was a long rant. How does any of that sound?

Allen:
No, I like a lot of what you said there, because that was another question that I had was, I’ve been holding back from investing in index funds or stocks at all, played around with crypto a little bit, but I’d never really pulled the trigger on making those stock investments. And that’s been where I’ve been at and was looking for some clarity from you guys, if it is a better idea to put that money into short-term rentals or, like you were saying, it sounds like it might be a better idea to, like you said, clear the slate and put that money into some index funds and clean up my debt a little bit. I do definitely feel stuck in this gray area right now, so it would be nice to be able to just pull out of that instead of struggling to maybe get into a stronger financial position, but without a real clear plan for that.

Allen:
So I guess I’d like… I don’t know. I don’t really know too much about stock investing, so I don’t know what the best way to go around that would be. I opened up a Vanguard account, that’s about as far as I’ve gotten, but my wife, she has some retirement accounts set up back when she was working a W2 job. I mean I’ve been holding off on that and just taking as much money in my paycheck as I can, to just save for a down payment instead of putting anything towards stocks and getting a company match or anything like that. So that’s definitely something I’d like to look into.

Mindy:
I want to say that index fund investing is fantastic. I do it myself. I know that Scott does it. However, we are entering possibly, probably a period of volatility. So just because we suggest index fund investing, please be aware that there will most likely be some volatility coming up, but you’re not investing for tomorrow, you’re not going to take the money out in a week, you’re taking the money out down the road. And past performance is not indicative of future gains, but the stock market goes up and to the right, with a whole lot of little bumps and squiggles, but it goes up and to the right I firmly believe, which is why we sit here and talk about how investing in the stock market is such a great idea. You said you don’t know how to invest in the stock market and that’s valid.

Mindy:
There’s a lot of people who don’t know how to invest. This is something we should be teaching people in schools, and we’re not. And there’s this little book called The Simple Path to Wealth, where JL Collins comes in and tells you, this is how you do it. And you’ve, you’ve started with your Vanguard account, now you need to put some money in there, but that’s not all. Once you put the money in there, you have to tell the money where to go. So make sure you do that as well. I have heard some heartbreaking stories about people who put money in the account and then don’t do anything with it. It will just sit there as cash, generating $0. They thought it was invested, make sure that it is invested. Vanguard should be able to walk you through this. It should be pretty easy to do anyway.

Mindy:
But this book is called The Simple Path to Wealth. It’s by JL Collins. It’s available everywhere books are sold, including Amazon. It’s a wonderful book and I highly recommend getting that. We keep not talking directly about your credit score and I want to, not in a accusatory fashion, but in a helpful manner. When we were talking before we hit record, we asked you what your credit score is and how it is this 646 number. And you said that in your early 20s, you made some credit mistakes and you were late on payments and that is 35%. This is actually shocking. I have a article that I’m going to link to in our show notes, but 35% of your entire credit score is made up of on-time payments. So if you have a late payment that dings you, if you have several late payments, it really dings you.

Mindy:
30% of your credit score is how much you owe. If you have, and that’s more like credit utilization, if you have $1,900 on a credit card that has $2,000 limit, you’re basically using almost all of your limit. For some reason, this looks like a bigger issue than if you had that same $1,900 out on a card that had a $20,000 limit, then you’re doing great. The same $1,900, but when the credit limit is smaller, when you’re utilizing a higher percentage of your available credit, the FICO doesn’t like it and that dings your score. 15% is how long you’ve had your credit. So if you have a credit card that you’ve had open for a long time, keep it open. Every once in a while, charge something on it to make sure that it stays open, because that is your length of credit history.

Mindy:
My husband has a credit card for 25 years. We never use this card, but every once in a while he’ll go charge gas on it, and then go pay it so he doesn’t forget to pay it, just because that’s the card that he’s had opened the longest. 10% is your credit mix and 10% is new credit. But that 35% is your payment history, is the same as your credit mix, your length of credit history and your new credit all at once. So something that you can do to make sure that you’re making your payments on time, is to just schedule automatic pay. If you don’t want to do automatic pay, you can put it in your calendar as a calendar reminder. It’s so important to pay your bills on time. And I had late payments too, don’t get me wrong. The first time I got a mortgage, she was like, “What about this bill that you paid late one time?”

Mindy:
I’m like, “I don’t remember that. I don’t know.” But it was three or four years before that, she was still asking me about this. I’m like, “Why are you asking me about a bill that I paid 30 days late, one time, three years ago?” Another thing that’s really easy, because you have the income, I wouldn’t recommend this to anybody who was a little more paycheck to paycheck, but as soon as the bill arrives, write the check and send it off. If you’re a write a check kind of person, if you’re an online payment, as soon as you see it, go online and pay it, because you have the income, because you have the balance in your account. Just pay it and get it done with. And then, what does it matter, you’re missing that little float for three weeks or whatever? It’s better to pay the bill, than to have that little float. Does that make sense?

Allen:
Yeah. Absolutely.

Mindy:
So that’s for everybody.

Allen:
I have actually been doing that. I’ve been using credit cards the way you’re supposed to be, finally. But I have paid everything down except for, we’ve got the one card now that we earn miles on and we will max it out. So if it goes through Credit Karma at the wrong moment, it might drop the score a bit, but we do pay it off every month. We never carry a balance on it. So going forward, we should be good to go. But like I said, I still have those remarks on my account that are just going to stay there forever, I guess. I was hoping that once they paid them off that they were going to go away, but I guess they stay on regardless.

Mindy:
Oh, they stick around forever. One last thing, is there anybody in your life that has a really great credit score, that could add you to their credit card as an authorized user and you don’t have to ever take possession of the card to be an authorized user. You could just, when you’re added to their card, their good credit score morphs onto your card as well, or your score as well.

Allen:
Well I am on my mom’s card, which is good, because that gives me a much longer credit history also. I’ve thought about asking my in-laws maybe, because I know they have good credit scores, but just been too nervous to pop the question.

Scott:
Yeah.

Mindy:
Have your wife ask, see if she can get on theirs.

Allen:
Well yeah, I know she is on her father’s credit card, but I feel like maybe I should ask if I can get on there too. But yeah, got to work up the courage to ask, I guess.

Scott:
It sounds like there are some tactics here, but the real key is just time needs to pass for this credit score to rebound and to get back up in the 700s, and then eventually, 800s here, and lesson learned. We have some things there, but I don’t think it really changes the strategy at a high level. It just changes the interest rate you might get on an investment property loan. And I don’t know if rental property investing is a move for you right now, because I think there’s a deeper education and business planning issue you need to resolve first, to be very clear on what you would do if you were to pull the trigger and have that become really, really clear. So again, when I zoom out and look at your position at the highest level, you’re in such a strong fundamental position because of your income, fairly low relative spending, and then your house hack, that is a monster of investment for you.

Scott:
And I think you’re stuck in a good way, in your home for that, because I just can’t fathom how you would possibly reproduce that result right now, in a similar set of circumstances because you made some good decisions a few years ago. So I think you ride that and you do one of three things. One, I really like the Dave Ramsey style approach for you and just crushing your debt. And I know you have some question marks around student loan forgiveness and all that kind of stuff, but I think your income is super high and you’re not going to qualify for a lot of those programs. And you’re also taking a lot of power out of your life and giving it to somebody else, the government, over that decision. So I really like the Dave Ramsey approach as option A and I think that’s the easy button.

Scott:
You can feel really good just being like, “You know what? I’m going to pay down the debt and I’m going to rebuild my emergency cushion. And a year from now, I’ll have read 10 more books on investing in personal finance and I’ll be working with a clean slate, high income and a house hack and no debt.” That’s pretty good. No personal debt besides a home mortgage, which I think is a pretty good option. Item B would be to come up with an investing philosophy, which will likely center around what Mindy suggested, in The Simple Path to Wealth. That’s a book about index fund investing and why it’s just such a powerful, long-term way to generate wealth. I think that in 30 years, you’d be slightly richer if you went with a simple path to wealth on average, versus paying off debt in your range.

Scott:
But that it’s so close, that it’s almost immaterial, it’s a 1% spread on this, 1% to 3% spread with a lot more volatility of ups and downs to invest in stocks, rather than pay off debt at 6.5% Interest at this point in time. So that’s option two. And then option three, is to continue getting creative with real estate, which I think could be a really good option for you in about a year or two from now. And I think as your credit score improves and as you get more sophisticated in your business plans and your ambitions for what you want to invest in, why you think it will make a lot of money downstream, and you can articulate that more. I would not buy a vacation home as a, which I think is really one way to frame the strategy you came in with today, as an Airbnb rental.

Scott:
I think that a lot of people have this concept, “Oh, I’m going to buy a short-term rental and a place that I like to stay and that’ll be my second home.” That’s great if you’re already rich and you want to do that as a lifestyle maneuver. But I think that if you want to go and visit this beach house, the best way to do it is to invest your money in the highest income producing, best risk adjusted returns you can, and then spend it, renting from somebody else at the location with that. I think it’s usually going to be a much better economic decision, than trying to turn in really, your favorite, your hobby or the place you want to visit a little bit into an income generator. I think it’s going to be a lot more challenging for a lot of folks.

Scott:
Lake housing is a rental sport like boating, not something to own, unless you’re going to use it all the time, every weekend you’re going out there, maybe you have more cost effective option to buy at that point. Again, that first choice, I think debt repayment is the easy button and where I’d steer you, I think Dave Ramsey would be the phenomenal option here. Maybe index fund investing, and then third, real estate investing. But I’d really think about tackling real estate investing from a position of a better educational framework and when you have a better credit score, maybe a year or two from now, that’ll help you with the rates. What do you think about those as takeaways?

Allen:
Yeah, I’m very comfortable with the idea of educating myself more on the short-term rental front. It sounds like I might need to rethink where I’m going to invest. It sounds like I might not be in a good area for it necessarily, just because there are so many restrictions on short-term rentals. So I might need to do some research as to where I could be investing in that. I’d have to look outside of Portland. And then, it’s really just those really high upfront, $500,000 lake house rentals are the only places that people are going to be short-term rentaling and all in this area.

Scott:
Well let me just chime in here with one comment here, and it’s a lot. We have the same rules that you’ve got in your area, here in Denver, Colorado. People are like, “Oh, it’s a pain. You can’t rent. You can’t make money on short-term rentals unless you’re the owner/occupant.” That is a tremendous advantage. Right now, you have a $1,500 per month mortgage and you bring in $2000 to $4,000 per month and you have no competition, except for other homeowners in your area who have very similar properties. So you are benefiting from an incredible amount of pricing power and a squeeze on supply in your area. And you are the poster child for someone who is benefiting from this type of policy and it’s just this elite house hack. You’re stuck because other options to live are so terrible, compared to the incredible setup that you’ve described to us right now.

Scott:
It sounds like you live in a wonderful house and a prime location, that people pay very good money to vacation in, on your garage. I mean this is wonderful. So I think that’s the benefit. The problem is, you can’t scale it very easily, but that’s a trade off. And so, with one house hack, you’re almost set. You only need that, plus another $3,000 or $4,000 and you’re done. You could just live this lifestyle without having to work either of you, indefinitely with just well under a million dollars in net worth. I just wanted to chime in with that thought and say, that’s a powerful advantage. If you just think about how wonderfully your city is helping you, not hurting you, because of the short-term mental laws.

Allen:
Yeah, that’s true. I definitely wasn’t thinking about that, because we’re in a neighborhood where most people don’t have a little mother-in-law unit in this area. So if you want to stay in this area, we’re pretty much the only option. So that’s definitely a good point. Like you said, it’s hard to move on because we pretty much knocked it out of the park with our first spot, so we can’t really envision our next move, because it’s not going to be as good.

Scott:
So, all you can do next is accumulate cash and go with one of the three good investing alternatives. And your challenge is not that you’re doing anything wrong, it’s just that you have multiple options that are all about as good as one another and you got to pick one and there’s no right answer here. This funky gray zone. And so, I’m excited to see what you pick. I think the worst thing you can do, is just sit on a pile of cash indefinitely. You’ve got better uses for that cash right now, I think, then than letting it pile up in your bank account and you’re going to accumulate another %50,000 to $200,000 over the next 12 months, because of your strong fundamentals.

Allen:
Yeah, absolutely. Because it’s already been sitting there longer than I wanted it to. I was hoping to have invested it a while ago, but we’ve just been having a hard time pulling the trigger, which may have been a good thing because we might have…

Scott:
If you have a hard time pulling the trigger, I’d suggest that by years end, you go Dave Ramsey and pay off that debt. That’s an easy button. It’s not a bad choice. You’re not going to get crushed by doing that. There may be opportunity cost items, but at the very least you’re not getting hosed on the opportunity cost of not doing the other items, and arbitrage the end of high interest rate debt with your 1.5% APR in your savings account. Anything else we can help you with today? Has this been useful?

Allen:
It has. It’s actually been very useful. Especially… I guess I hadn’t really wrapped my head around the numbers for our current short-term rental plan, which you’ve definitely given me a ton to think about in terms of not pulling the trigger on a lake house, which definitely sounds less appealing to me now. So I’m definitely feeling more comfortable with the idea of repurposing my position financially in the next year and focusing on that, to still continue my short-term rental goals, but with better credit score, better understanding of the markets. Like you said earlier, just resetting what our goals are here and looking for that flexibility, but also breaking down the numbers more and getting an actual business plan instead of just lofty daydream of having the perfect lake house that’s making us tons of money when that’s not actually going to be the case. So lots of good info. I’m definitely going to dive into this.

Scott:
I love it. And one thing to think about is, you get a dumpy old warehouse that’s not very, very pretty to look at and that pays you the income, and you just spend that on the lake house. So it’s just, where’s the dollar coming from and what’s the net return? And just think of them as, this is a dollar printing machine. It doesn’t have to be a beautiful lake house on the thing. It could be the most efficient way to harvest cash and generate appreciation long-term. And then I’ll spend that on the way I want to for my lifestyle, long-term. And that’s where the investing philosophy will come in. I don’t know if it’s real estate, I don’t know if it’s stocks, I don’t know if it’s debt pay down long-term, but I know it’s likely one of those three. It could be something else, and you got to decide, I do think that real estate can be a great one, but I think that’s a right one for you to explore next year, when your credit scores eclipsing 750, 725.

Allen:
Yep. Gotcha. Definitely. And it is pretty still new to me. I’ve been doing a lot, listening to you guys and trying to learn more about investing in real estate, but it is still pretty new idea, because just a little under two years ago I was on the set path making $50,000, $60,000 a year and planning on retiring when I’m 65. So I only just changed my way of thinking in terms of investing for financial independence. So still definitely have to do a bit more research and get a more thorough understanding of all that.

Scott:
Love it. It’s the 500 hours of self education. On the other side of that, you feel very confident about what you’re going to do and how you’re going to invest and all that kind of stuff. But until then, it’s all overwhelming and there are a million ideas, but I don’t really know what I don’t know about all that. And the confidence will come, just keep learning passively, listening to podcasts, reading books, whatever, absorbing frameworks and it’ll get clearer for you within the next year, I promise.

Allen:
Yeah. T.

Mindy:
Thank you so much for your time today, Allen. This was very interesting and we will talk to you soon.

Allen:
All right, wonderful. Thank you so much.

Mindy:
Scott, that was Allen. I thought you had some very sound advice for him. I know that’s probably not what he wanted to hear, but I do like that you were able to show him mathematically, rather quickly, that the lake house might not be the best place for him to put his money right now.

Scott:
Yeah, I think that Allen’s central problem, we talked about this a little bit after the recording, is really just, he’s beginning his financial education to a large extent. He’s made some really good choices, he’s got some really good financial fundamentals in place, but he’s not yet sophisticated with his, for example, real estate investing philosophy and strategy and how he wants to go and do that and how to analyze the deals with all those things. And that the price of entry into real estate, as we’ve often said, is 500 hours of self education. And I think that lies ahead of Allen, before investing in real estate. And I think as part of that deal, spending the next year amassing those hours or that self education, he will also improve his credit score and be in position to do that, if he so chooses a year or two from now.

Scott:
And then, I do want to point out that Dave Meyer calls the problem with Allen’s housing situation, the lock in effect. And for Allen, it’s more pronounced than most, because he’s got bad credit. But this problem is this, Allen can’t recreate… Let’s pretend he didn’t have the Airbnb in his house. He has a 3% interest mortgage, he can’t sell that place and go move somewhere else. He’s going to forfeit his 3% mortgage, and then get a 6% mortgage, 6.5% Interest mortgage. That’s what he was quoted for his personal residence. That is a 350 basis point increase. That is over 100% increase in the interest rate for his primary residence, for Allen there. So he’s stuck, he’s got to stay in this house hack, because to move is going to totally change his financial position, or totally change the quality of his lifestyle in a general sense.

Scott:
I think a lot of people are going to experience that with their primary residences right now. And so, that’s an interesting dynamic of 2022 and the Federal Reserve’s intent was to do that. They don’t want people buying more real estate, because that creates inflation. So I think there’s going to be a lot of folks that are in for that and that’s going to be a challenge in terms of scaling portfolios now is, it’s going to be really hard to recreate success with those serial house hacks, especially if you’re in a place where Airbnb is only allowed for owner/occupiers. So an interesting set of conundrums there. And then lastly, one other point I wanted to make was around the choice between paying off debt, investing in stocks, and real estate investing. I think that for Allen, the choice between investing in stocks and paying down his debt, which is typically at a 5%, 6%, 6.5% Interest rate, I think it’s a coin flip.

Scott:
I think in 30 years, it’s going to be really hard to tell which would’ve been the better decision for him. And so, when you have a decision like that, that can lead to analysis paralysis and literally the coin flip decision making protocol might be a better way to make a decision like that, because at least you’re making a decision. Either one of those decisions, paying down debt or investing in stocks for the next 30 years and moving that in there, is probably a better bet than continuing to dump onto the pile of cash that he has sitting in the bank account.

Mindy:
Yeah, absolutely agree. And I like that, a coin flip. So, Allen, grab your quarter, flip a coin. Heads, it is, pay off the student loans once the deferment period comes up. And tails is, continue making the minimum payments once the deferment period comes up and invest your cash into the stock market. And just a bit of advice there if you are going to invest it, the amount that you’re going to invest, put it all in at once. Don’t try to dollar cost average your way in, just put it all in at one time. Michael Kitsis from episode 120 gave us that advice. He said, “Time in the market is better than trying to time the market.” So, Scott, a few things that a listener in a similar situation could do after listening to this episode is, number one, if you find yourself in a position where you are spending money but you don’t know where it’s going, track your expenses. Track your spending and see where your money’s going.

Mindy:
Track it super granularly, track it vaguely, but track it in real-time, to see where your money is going and make sure that’s where you want it to go. It’s super easy to spend, “Oh it’s only a dollar. Oh it’s only $20”. And then all of a sudden, only $20 has added up to an extra $1,000 a month that you didn’t really need to spend. If you find yourself spending a lot of money on travel, look into credit card rewards programs. Go to the Points Guy or NerdWallet and look for what is the best credit card for my specific situation.

Mindy:
If you’re flying a lot, look for an airline card that gives you the most rewards for your buck. If you’re staying in hotels a lot, look for a hotel cart that works for you. Self educate, like you said, Scott, educate yourself before you start investing in something. If you’re going to invest in the stock market, if you’re going to invest in index funds, The Simple Path to Wealth by JL Collins. I think you sold $80 pertrillion copies of that book, for a reason. It’s a really great book. And if you are going to invest in real estate, make sure that you have a good credit score. You will get the best rates, you will get the best rates on your loans when you have good credit. You’ll get better rates on everything when you have good credit.

Scott:
And I would say, whenever you’re thinking about buying a vacation home in a market that you like to visit, run away. Or do that after you are a multimillionaire and want to enjoy the property, outside of investing for financial reasons. I believe that is one of the lower probability ways to build wealth, is to invest in a vacation home, in a market that you would like to stay in. If you want do short-term rentals, invest in a short-term rental market that you think is the best long-term prospects that will make you the most money, and use the profits to stay in a vacation home in the market you want to go in. It’ll be a remarkable coincidence if those two are the same thing.

Mindy:
Absolutely. I have run the numbers in my desired vacation rental market and it does not make any sense for me to buy a house there.

Scott:
You’re not competing with investors in your market. You’re competing with people who are uber rich and want a place to stay whenever they’re going out there. It’s not a investment market. And those towns are experts at extracting money from the people who buy from out of state and who “Invest” from out of state.

Mindy:
That is a really good point, Scott.

Scott:
Not saying don’t invest in short term rentals. I’m saying, don’t do it in that market that you like to go with your family on every vacation, because it’s almost 95% of the time going to be a less lucrative option for you than alternatives.

Mindy:
Okay, Scott, that was a good point and we have gone very long this episode. Should we get out of here?

Scott:
Let’s do it.

Mindy:
We’ve come to the end of this episode of The BiggerPockets Money Podcast. He is Scott Trench, and I am Mindy Jensen saying, shine bright starlight.

 

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-30 15:03:20

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Why The Fed Is Rooting for a Housing Market Correction

The Federal Reserve has spent the past year or so fighting inflation as hard as they can. They’ve raised the federal funds rates, resulting in a stunted housing market, higher unemployment, and more economic uncertainty as the fear of a recession becomes more real by the second. Their end goal is simple: control the cost of goods and services to the best of their ability, and they’re doing anything and everything to get there.

Last week, Jerome Powell and the Federal Reserve made statements that foreshadow clear economic impact. No matter what line of work you’re in, how you’re investing, or whether or not you even pay attention to the economy, you will be affected. This war against inflation has caused some serious economic backlash, but the worst may be yet to come.

On this Friday episode of On The Market, Dave takes some time to decipher what Jerome Powell (Chair of the Fed) meant by his statements. What type of economic impact can you expect over the next coming months, and how will real estate investing, interest rates, and returns be affected by this news? If you’re a renter, homeowner, or still shopping the market, this news directly affects you.

Dave:
Hello, everyone, and welcome to On The Market. I am your host, Dave Meyer. And today, we are going to talk about big news in the investing world. Basically, what happened at the Federal Reserve meeting last week. If you haven’t heard yet, they raised rates, but of course, that was pretty widely expected and was not the big news. But what did happen on top of that headline news was really important and gives us probably the clearest picture yet that we have seen over the last couple of months of where the Fed is intending to go.
I’m not sure if everyone listening to this knows this, but on top of just raising the federal funds rate, which they did, 75 basis points, they also have a press conference, which is really closely followed by investors and nerds like me. And they also release something called the Summary of Economic Projections, where the Fed actually tells you where they think the economy is going and what they’re intending to do about it. And not a lot of people look at that, which I think they should because the Federal Reserve, as we talk about on the show all the time, the Federal Reserve sets the rules for the entire investing world, not just real estate investing, but the stock market and bonds as well. And if the Federal Reserve is telling you what they think is going to happen and what they intend to do about it, you should probably pay attention.
But I know not everyone wants to read through that. So I did, and I will tell you what’s in there and give you some of my opinion and some other analysis about what this Fed announcement means for real estate investors because they have been raising rates for the last couple of months. But, to me, this meeting was probably the most impactful for the future of the housing market, let’s say the next six, 12, 18 months, than any of the other meetings. And I’ll tell you why about that in a minute, but that’s why we’re going to do this show today. That’s why we’re going to go deep into this topic. So you’re definitely going to want to stick around for this. But first, we are going to take a real quick break.
All right, let’s just start with the obvious here, which is about interest rates. Basically, the Fed raised the federal funds rate, which, again, I just want to make this clear that the federal funds rate and what they are raising is not mortgage rates. It’s not really even a interest rate that impacts any consumer directly. It’s actually a short term interest rates that banks use to lend to one another. And this is wonky, but it basically sets like the baseline interest rate. And then, every other interest rate, like the yields on bonds, or what you pay for a mortgage, or a car loan, or credit cards are all in some way based on this federal funds rate. It’s basically the lowest interest rate. And everything else from there goes up based on risk, and reward, and all sorts of things like that.
So what happened was the Fed raised this federal funds rate 75 basis points. And if you don’t want to know what a basis point is, it’s just a weird way of saying 0.01%. So when I say 75 basis points, that basically means 0.75%. So it went from 2.5 to 3.25, that’s 70… Excuse me, sorry. It went from… Yeah, did I say that right? It went from 2.5 to 3.25. That’s 75 basis points. And so, that’s where it is now. And the federal funds rate is actually a range. So now it sits between three and 3.25%.
Now, that, again, was kind of obvious. People actually thought there might be 100 basis point hike after the most recent inflation report because that was so much higher than people were expecting. But the Fed decided to pursue a more predictable course, I would say, and just did the 75 basis point hike. That’s what people were expecting. They typically want to do something that’s not super out of line with the market’s expectation, and that’s what they did. Not a lot of news there.
But in addition to this immediate hike, we now know that rates… And this is the important part. We now know that rates will likely climb higher in the coming months, and actually, into next year, into 2023. And you might be wondering, how do I know this? How do I know what’s going to happen with rates? Well, the Fed just tells us this. It’s not rocket science. I’m not looking into a crystal ball. And like I said at the top of the show, they release something called the summary of economic projections. And after every meeting, they do this. And it tells you they put out expectations for inflation and economic growth. But what we’re looking at today is really what their expectations are for monetary policy. Basically, where are they going to set the federal funds rate.
And to me, the most important part of this entire summary of economic projections, at least for what we’re talking about today, is known as the dot plot. And the dot plot is basically a poll for every Fed official who’s at these meetings, and it asks each individual person where they think interest rates should be over the next couple of years. So they have a vote and they say, “Where do you think interest rates are going to be in 2022, 2023, 2024, 2025?” And they put it all on a dot plot. But the dot plot is a little bit confusing. I think for our purposes here today, it’s actually just easier to look at the median expectation. So, instead of looking at each individual expectation of each Fed official, let’s just take the average of what Fed officials think is coming over the next couple of years. And basically, what that shows is that the people who make this decision, that the Fed officials are the people who decide where the federal funds rates go, and they expect it to go up to 4.4% by the end of 2022.
Now, remember, we just experienced our third 75 basis point hike in a row. And it’s saying that we are still going to go about 125 more basis points by the end of the year. So that could be another 75 point hike and then a 50 point hike. There’s two more meetings this year. So that’s probably what will happen. I think that’s the most likely scenario. So going up significantly more by the end of 2022. And then the Fed thinks it’s going even higher in 2023. The median there is 4.6%, so not much higher. It sounds like the Fed is thinking that what they’re going to do is raise rates aggressively through the end of the year, and then a little bit more in 2023, but not much more.
If you’re wondering around the out years, 2024 and 2025, they do have it coming down to somewhere around 4% in 2024, and then dropping all the way down to below 3% in 2025.
Now, no one knows what’s going to happen, right? If you watch the press conference with Jerome Powell, he basically said he doesn’t know what’s going to happen. So I don’t put a lot of stock in what’s going on in 2024 and 2025. There’s just too many variables. That’s basically the Fed saying they want to get back eventually to what they would call a neutral interest rate. When interest rates are super low like they’ve been for most of the last 10 years, that’s known as easy money. We are now entering a territory where it’s tight money, where it’s hard to borrow. But the Fed has this vague concept of neutral where it’s just like the right amount so there’s not inflation, but there’s economic growth. And that’s what they think the 2.75, 3% rate is. And so, that’s where they want to get to eventually. But I think we should take very seriously what is happening and what they’re saying they’re going to do for the rest of this year and into next year.
So I don’t know what’s going to happen. No one does. But the only data that we have is that the Fed says they’re going to raise rates for the rest of this year and a little bit next year. And I’m going to take their word for it personally. I think that’s going to happen. And higher rates have really big implications for the housing market. But I just want to say it is important to note that when I am saying in this episode, high rates, I’m actually really just speaking relatively. And what I mean is they’re high in a relative context. They are high compared to everything that we have seen since the Great Recession. Since the Great Recession for the vast majority of the last 12 years, the federal funds rate has been at zero, right? It’s been at zero.
So, yes, what if we have a Fed funds rate now at 3.25 like we do, that is low compared to where we were for most of the last century. But what matters here is that it’s a shock to the system. It is still low in a historical context. But if you go from zero to three really quickly like we have, this can be pretty shocking to the economy. And I do think we’re going to see some shocks through the economy. So that’s what happened with the federal funds rate.
The second thing I want to talk about is about mortgage rates because that’s what really is going to impact the housing market directly. And as I said, the federal funds rate is not the mortgage rate. And I just want to explain what that means. So the Fed funds rate, like I said, impacts things like bonds. And most particularly what we want to think about here is the yield on the 10-year treasury bond. This is basically a bond that the US government puts out and they pay an interest rate on it. And yields, when the Fed funds rate goes up, yields on these bonds tend to rise for a lot of reasons I’m not going to get into today, but just know that that happens.
And the reason I’m mentioning this is because mortgage rates are super closely tied to yields for the 10-year treasury. And so, we are seeing yields go up all year and that’s why mortgage rates are going up. So just know that, that they’re mostly tied to bonds. And what you want to look at, if you are trying to predict where mortgage rates are going to go, is that bonds are what matters here, not really the Fed fund rates.
So, my analysis of what’s going on and based on this analysis is that mortgage rates are probably going to go up over the next couple months. I wouldn’t be surprised, let’s say, if we see mortgage rates enter the low sevens over the next couple of months, but I’m not expecting rates to just keep going up linearly. We’ve seen this really aggressive rise in mortgage rates, but I think that is going to slow down even despite this news that the Fed is going to raise rates into 2023. There are actually some analysts who thinks mortgage rates, even with this news, are going to go down next year. And let me explain why.
First and foremost, mortgage lenders, they are forward looking. It’s not like they’re sitting around being like, “Oh, the Fed is probably going to keep raising rates all of 2022, but I’m going to keep my mortgage rates that are dependent on bond yields, and everything else. I’m going to keep them low and wait to see what the Fed does.” No, that is absolutely not what they would do. That is too risky. It’s just bad business. And so, what they do is they base their mortgage rates based on where they think interest rates for bond yield, and the federal fund rates are going to be several years down the load. They want to be able to make money even when the Fed raises rates into the future.
And so, they have been pricing these Fed raises into mortgage rates all year. That’s why mortgage rates went up starting in June. They didn’t wait for the two 75 basis points hikes since we’ve had since June. They went up past six or near six back in June. And now, starting a couple months ago, in August, we were starting to see rates go up again. And that’s because people were anticipating what happened in this fed meeting. So it’s not like all of a sudden the Fed announces that they’re raising rates and mortgage brokers are like, “Oh, damn. We got to catch up. We got to raise rates.” They’ve already done this. They already did it. And so, now they’re, of course, going to adjust a little bit. Yields and bonds are going to adjust based on what the Fed said, but they have already been thinking about this and the adjustments are going to be smaller. And in these times of uncertainty, mortgage brokers are going to err on the side of caution and make rates go higher to cover their basis. They want to make sure that they have good rates even if the Fed keeps raising rates even higher and higher.
The second reason that I think that mortgage rates are not going to just keep skyrocketing is based on what I said before about the 10-year treasury. They are very, very closely correlated. For any other stats nurse out there, the correlation is near one. It is 0.98 from my analysis. So that just means, if you’re wondering what that means, is when one goes up, the other goes up, when one goes down, the other goes down. They’re very tied. They move in lockstep.
But, usually, in normal times, for the last 70 years or so, the spread between yields and mortgage rates, so the yield on a 10-year treasury and the mortgage rate is about 170 basis points or 1.7%. So mortgage rates are always higher than the bond yield. And the reason the spread exists is based on a bank’s business. If you are a bank and you have millions or billions of dollars to lend, you have to decide how to lend it to people. You can lend it to me as a home buyer or you can also lend it to the US government in the form of a bond. After all, that is what a bond is. You’re basically lending the US government money and they are going to pay you back with interest.
And so, if the bank is saying, “Hey, yields on the 20-year treasury are going up, so I can earn nearly 4% on a trend year treasury.” And the government bond is considered by pretty much everyone the safest investment in the entire world. The US government always pays them. They’ve never defaulted. They always pay. And so, it’s considered the safest investment. So if you go to a bank and you’re like, “Hey, you can earn 4% with virtually no risk,” the bank is like, “Yeah, that’s pretty good.” So then when I go and ask for a mortgage and I’m like, “Hey, can I get a mortgage?” They’re not going to lend to me at 4% because I’m not as credit worthy as the US government. So they’re going to charge a premium to me because even though I pay my mortgage every single month, I as an individual homeowner is, unfortunately, a bit less credit worthy than the US government. And so, they charge a premium. And that premium is usually 1.7%. So if a bond yield is about 4%, mortgage rate is about 1.7%.
But I did some analysis, and what’s going on right now is that the spread is actually higher than it is normally. It’s at 232 basis points, so about 2.3%. It’s normally at 1.7%. And that is because there’s all this uncertainty. We don’t know what’s going on with the Fed. We don’t know what’s going on with inflation. Are we in a recession? What’s going to happen? So, mortgage lenders, like I said, are bringing extra causes and they’re increasing the spread between mortgages and bond yields. And that’s probably going to stick around for a little while. But if the Fed holds their line and does what they say they’re going to do and inflation does start to come down, I think people will start to feel a little bit more comfortable. And the spread between bond yields and mortgages might start to come down.
Of course, bond yields could keep going up a lot more, but again, bond yields have largely priced in these Fed decisions. So those two things make me feel that, although I do expect rates to go up, they’re not going to go up like crazy because we could have some reversion to the mean with the spread between bonds and mortgages. And a lot of this has already been priced in for months.
That is why Mark Zandi… You may have heard of him. He works for Moody’s Analytics. He’s one of the most prominent economists in the world. And he expects, even after this week’s news, he expects the average rate for a 30-year fixed rate mortgage to be 5.5% in 2023. He actually thinks it’s going to come down. So that might happen. I don’t really know. I’m not an expert in bond yields. I’m not an expert in mortgage prices, but I do think these two things do suggest that, although they probably will go up, again, I wouldn’t be surprised if we get into the sevens, that we are probably not going to see this linear mortgage rate growth like we’ve seen over the first three quarters of this year continue throughout this year and into 2023.
Okay. So far we’ve talked about interest rates, mortgage rates. Now, let’s talk about the Feds focus because this, to me, was really telling what happened in the press conference afterwards. And nerds like me, economic reporters, finance people, all love the press conference because Jerome Powell, he gets up there, he reads some carefully prepared statement, and it’s all like a game. The Fed has an enormous responsibility in the world. They dictate so much of financial markets and economies, and they’re very careful about what they say. People count how many times he says recession. Or back when they were saying calling inflation transitory, they would count how many times he said transitory to try and understand what’s going to happen next. So people make this huge game out of it. It’s kind of ridiculous.
But the reason I think this it’s important to note right now is because the press conference yesterday, or two days ago… And again, this will come out a week from now, so you’ll hear this a week after, but I’m recording this two days after this news came out. Jerome Powell, he was pretty darn clear about what he is expecting, clearer than he usually is. And I think he said some things that were really noteworthy that tell us the Fed’s intention and where they’re going to go.
So, during the press conference, a Washington Post reporter, named Rachel Siegel, pointed out to Powell that the Fed’s own summary of economic projections… Remember, that’s that data that they just give out when they meet. They are predicting now that unemployment over the next two years is going to rise to 4.4%. And that is a rate at which typically brings about a recession. Remember, we are not technically in a recession. By many people’s definition of a recession, we are, but the National Bureau of Economic Research has not officially declared us in a recession yet. But this reporter was pointing out to Jerome Powell that the Fed is basically predicting a recession.
Here’s what the chairman said back. And I’m going to paraphrase briefly here, but he said, “We have always understood that restoring price stability,” which as an aside just means reducing inflation. So he says, “We have always understood that restoring price stability while achieving a relatively modest increase in unemployment and a soft landing would be very challenging. And we don’t know, no one knows whether this process will lead to a recession, or if so, how significant that recession would be.”
And I know that’s a lot of mumbo jumbo, but basically, what the Fed chairman, the guy in charge of the economy just said is, “We think that controlling inflation is going to bring about at least modest increases in unemployment and no one knows if it’s going to bring about a recession or how bad the recession would be.” He’s basically saying we need to bring down inflation and we don’t care if unemployment goes up a bit, and we don’t care if it goes into a recession because inflation is such a problem that we have to pursue this.
Now, today, I don’t want to get into a debate whether inflation or recession is more important. Everyone has their own opinion about that. I’m just want to tell you what he’s saying and my interpretation of that. So that’s basically what he’s saying is like, “We’re going for it. We’re sending it. We’re going to keep raising rates. Recession be damned. Rising unemployment be damned.” But I do think it is important to note that he was basically saying if unemployment starts to get really bad, that’s when they would back off. But 4.4%, which is a pretty good increase from where we are today, they are comfortable with that. So, no one knows, but that’s basically what they said.
As it relates to housing and the need for the housing market to cool off, Jerome Powell stated, and I quote, “What we need is supply and demand to get better aligned so that housing prices will go up at a reasonable level, at a reasonable pace, and that people can afford houses again. And I think we probably, in the housing market, have to go through a correction to get back to that price.” Okay. What does that mean? It means Gerald Powell is planning on a housing correction. And personally, I think that’s what they want. A big part of inflation has been shelter inflation, both in terms of rents and housing prices. And I think Powell and the Fed know that to get inflation under control, they need housing to go down. So he’s basically saying, “Yeah, I know. Housing market is probably going to cool and probably going to go negative at some point on a national basis, and we’re cool with that.” Basically, all told, the Fed is saying, “Yes, we are willing to risk a recession. Yes, we are willing to risk job losses. And yes, we are willing to see housing market correction in order to bring down inflation.”
If you just read the transcript and I recommend you do, we can put a link to it here, he wants this. This is how you bring down inflation, is you get prices to come down and you get people to stop spending money. So he wants a recession. He wants job losses. He wants a cooler housing market because that would bring inflation under control. Of course, the Fed could change their mind, but this press conference, he said, in very clear terms, that they’re going to hold the line inflation. They’re going to keep rates high there probably, even going to raise rates, even if this is going to cause all the things that I just said.
So that’s my interpretation of Jerome Powell’s speech, is he was not pulling any punches. He is not messing around. He is telling us all in very clear terms what to expect. And, to me, that is high rates, housing market cooling significantly, probably going negative in a lot of markets, not every market, but in a lot of markets. We’re probably going to see unemployment go up. And we are probably going to see a recession officially, even though we’re not officially in one yet.
All in all, everything we’ve talked about today, basically, why I wanted to make this show and why I think this is so significant is because over the course of this year, over the course of 2022, many investors have been hoping for a Fed “pivot.” And basically, a lot of investors had this theory that the Fed would raise rates up to a point where it would slow things down. The housing market would cool like it has been. Companies would probably be hiring less and things would start to cool off. But they wouldn’t risk a deep recession, or a lot of job losses, or huge crash in the housing market, and they would keep it around two and a half, 3% sort of that neutral Fed funds rate that I was talking about.
But, to me, this press conference just completely kills that theory about a pivot. The Fed is extremely careful. And they are very deliberate about what they say. And if they were keeping their options open for a pivot, they wouldn’t have said the stuff that Jerome Powell said yesterday. The data it shares, everything they said right now is that they’re going to stay aggressive in the fight against deflation even if it causes economic pain elsewhere in the economy. And that is what we should expect.
The most notable implication of all this is for housing prices. And we all know by now that as rates have risen over the last couple of months, demand in the housing market is starting to drop off, and prices, that is putting downward pressure on prices. We’ve talked about that a lot in the shows. Most recently, we are seeing a lot of West coast markets start to decline. Most haven’t yet, as of this recording, this is the end of September, have not yet declined year-over-year, but a few, San Francisco and San Jose, have. And that’s where we are.
That’s said, I think, over the course of this year, the housing market has actually held up surprisingly well to downward pressure. We’ve seen rates double. Yeah, we’re seeing prices come off their June highs and their down month-over-month, but year-over-year, almost every major market is up. And that is what I thought. The [inaudible 00:25:39] market is resilient. There are a lot of reasons, fundamental reasons why the housing market is resilient, even in the face of the rising rates that we’ve seen so far.
But now, knowing that a mortgage rates are going to stay high for the foreseeable future is going to be a much bigger test than what we’ve seen so far. Because, if there was a pivot and rates peaked and people could get adjusted to that and maybe come down a little bit, then the housing market, I think it was probably going to hold up pretty well and you could maybe have a decent year in 2023. But now, I mean if you were going to have a year and a half of mortgage rates above five and a half, maybe up to 7%, to me, that is going to put a lot more housing markets at risk for declines. And so, I think everyone needs to keep that in mind. 2023, right now, at least on a national level, is looking like a flat year at best, and is more likely a down year, even on a national level, is what I’m starting to think, by next summer. I don’t think it’s going to come in the next couple months, but I don’t know, I really don’t. These are just my musings that I’m sharing with you right now.
And the reason I say this is just because affordability in the housing market it’s just too low. We did a whole episode if you haven’t listened to that about affordability, but it’s at 40 year lows. That means it’s harder right now for the average American to buy the average priced home than it has been since the ’80s. And that’s not sustainable in my mind. And there’s basically two ways that we could improve affordability. One is rates start to come down because that makes homes more affordable. But we just got told that rates aren’t coming down. And so, the only other way for homes to become more affordable, other than massive wage growth, which we are not going to see, is that housing prices start to come down and make homes more affordable. And so, that’s why I think there’s going to be this sustained downward pressure on the housing market.
And I want to be clear that even given all of this news, I still do not think we are heading for a crash. And I define that as a declines at a national level of more than 20%. I don’t think that is going to happen. The credit quality is still good. Inventory is actually starting to level off. People who know more about this than I do, professional forecasters, think that, really, the downside, the biggest downside is somewhere around 10%, as in on a national level. We don’t know if that’s what’s going to happen, but it is worth noting that that’s what a lot of experts and people who forecast this stuff think.
The second implication other than housing prices is rent growth. And I think, if we do see a recession, if we see job loss, those things, combined with inflation are probably going to lessen demand for apartments. You see in these types of adverse economic conditions, people move in with their friends and their family, and that’s known as like household drop declining. The total number of households people occupy a housing unit could go down, and that lessens demand.
It’s worth noting that rent is pretty stable. It doesn’t really fall that much even during a recession, but I think rank growth is really going to start to come down. It already has in August. It was at 11% year-over-year, which is still really insane, but way lower than it’s been over the last couple of years. So I think that trend is going to continue.
And then, the third thing is that we could see increase foreclosures and evictions, but we’re still a good way off from that, right? If there’s a recession, we don’t know if it’s going to be a bad one. We don’t know what is entailed in that. And right now, the data shows that homeowners are paying their mortgages, renters are paying their rent. And so, I’m not immediately concerned about that, but it’s obviously something we’ll keep an eye on over the course of the next year to make sure that if we see something that changes, I will certainly let you know.
So, that’s what I got for you today. I just want to say that I personally am still investing. I do think that there are opportunities that are going to come over the next couple of months. We’re going to be working on some more shows about how to invest in 2023, different strategies that are going to work, different strategies to avoid, opportunities that might present themselves. So definitely stay tuned for that. We’re going to have a lot more 2023 planning content on this podcast over the next couple of months, but that’s what I have for you today. Hopefully, you guys understand this.
If you’re interested in this, I do recommend at least watch the press conference with Jerome Powell and see what he was talking about. You can look at the summary of economic projections and look at some of the data that the Fed is sharing with you. These are things that you should know if you’re an investor, if you’re risking large amounts of your money and the Fed is this active and they have so much control over what happens. If you were me, I would learn as much as I can.
Thank you all so much for listening. I really appreciate it. If you want to give me any feedback about this show, have any thoughts, you can do that on Instagram where I’m at, thedatadeli. If not, appreciate you all being here. I’ll see you next time.
On The Market is Created by me, Dave Meyer and Kalin Bennett. Produced by Kalin Bennett, editing by Joel Esparza and Onyx Media. Copywriting by Nate Weintraub. And a very special thanks to the entire Bigger Pockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-30 06:02:50

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10 Units in 3 Years and Giving Back While Getting Ahead

Reaching financial freedom doesn’t mean grinding away for decades to finally retire. It may only take a couple of deals for you to create enough traction to quit your W2 or go full-time into investing. But what if you have a family and children to support? Surely there’s no way to hit quick financial independence with those responsibilities? If you’re still not persuaded, hear Zasha Smith’s story.

Zasha was working sixty-hour weeks, sometimes every day of the week, as a civil engineer. She knew that continuing down this career path would lead to long days, even longer nights, and time away from her children. After a quick Google search on how to get rich,” she stumbled upon real estate investing. After her first successful home flip and her first rental property purchase, she gave her resignation, and the rest is history.

Now, she’s got a portfolio capable of providing her a financially free lifestyle, with ten units acquired in just three years. Mind you, this all happened during the events of 2020, meaning Zasha deserves even more credit! She’s currently using her wealth to give back to the community, with plans to build affordable housing throughout her home state of Hawaii. Her “give back, get ahead” mentality is surely working, and it’s something all real estate investors should try.

David:
This is the BiggerPockets podcast, show 668.

Zasha:
I feel like educating people on what exactly it is we do as real estate investors is very important. We’re not out there buying deals for really low price points and then reselling it for really high without doing any work in between. A lot of times people don’t know we buy homes that are incomplete distress. They might have abandoned cars in the front, people might be in some financial situation that they can’t get out of, and we are providing different solution.

David:
What is going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast. Here today with my co-host Rob Abasolo. If I sound a little different, you’re not crazy. Today I’m recording from Scottsdale, so I don’t have my normal audio and video equipment. I’m here in the casita of the house that Rob and I built because I freaking love this place and love being in the area. We’re recording the podcast. I’m in Scottsdale. Rob’s at his normal place, but we’re going to have to keep this intro short because somebody has to go to Austin, Texas with his wife because they’re lazy and don’t want to work.

Rob:
That’s true. Listen, listen, we have two children. They’re one in two and a half and we have never vacated. I think that’s how you can, we’ve never vacationed away from them ever. This is going to be our first. We’re going to leave tonight, leave Thursday, we’re going to be back on Friday. We’re scared. We have faith in my parents to pull this off, but to be honest, I’ve been sweating bullets thinking about it, but it’s going to be okay because I’m going to try to relax, which is something I never do.

David:
Today we have an awesome episode for you. We bring in Zasha Smith who is investwithzasha on Instagram. Sort of has a little connection to Brian and Turner out there in Maui. She’s a Maui investor and you want to make sure you listen all the way to the end, because we tell a very funny story of how Zasha took a deal right out of Brandon’s grasp. Recently I’ve become addicted to these horrible short videos on Instagram, which might also be on TikTok of crazy animals in Africa doing insane things. You’ll see like a lion come steal food away from a hyena or a crocodile, take food out of another crocodile’s mouth. And that was what reminded me of with this deal that Zasha talks about, is that Brandon thought that he had it and then boom, at the last minute she got it and she tells us exactly how so you can do it too.
Zasha is passionate about giving back while building wealth, and I love it because she doesn’t have it’s me or you. I have to get ahead or I can help you get ahead. She’s getting ahead while helping others and she does it in several ways. She does it by providing affordable housing to her local community. She does it by providing mentorship and knowledge through the partnerships she’s in and the masterminds that she attends. And she often approaches how to put a deal together in a way that works for everybody with a lot of integrity. If you’re somebody with a strong conscious that wants to find financial freedom, but you worry that doing that is going to make you a bad person, today is a fantastic show for how you can put that to ease and see a path that you can take that helps other people while helping yourself. Rob, what were your favorite parts of today’s show?

Rob:
Well, typically I would add in how the community aspect was great and how she’s questioned it on the content. But my wife did just text me and she said, don’t dilly-dally, you have to pack. I’m just going to say everything that you said was actually my favorite part. It was really nice to honestly legitimately hear the human side of real estate. I think that’s something that is very important for people to learn. Again, we’re all chasing cash flow. We all want that, but she really tells a story about how it’s like human first, right? Be personal with people and treat them like people. And if you do that, you can have really great success in this field.

David:
I want to get a t-shirt made that says chase excellence, not cash flow. The cash flow will follow.

Rob:
How about don’t dilly-dally, chase excellence. We’ll workshop it.

David:
I was actually going to make a reference to your use of dilly-dally, because it’s equally parts impressive and embarrassing that you were able to work that into show. Rob the 28 year old guy going on 77 every time we record. Before we bring in Zasha, today’s quick tip is, consider making real estate your job. There’s so many ways that you can make money in real estate other than just owning it and getting cash flow. You can flip houses, you can work for somebody else. Zasha has an acquisition manager that works for her, who is the hero in the deal that she took from Brandon. You can be a real estate agent, a loan officer, a title officer, a construction person, a bookkeeper. There are so many ways that you can make a living through real estate and the reason that I’m advising you to do it is you want the life that rob lives.
You want to be able to get in a car with your wife and take off to Austin and go to other places and not be thinking the whole time, oh my gosh, I’m using all my PTO. This trip is costing so much money, we can’t stop and get corn nuts on the way because we’re spending all of our money in gas. What you want to be thinking is, I’m going to take a trip and on this trip I’m going to make more money in real estate than I spent to go on it, so I get paid to take a trip. Real estate offers that flexibility.

Rob:
I don’t want brag, okay? I’ve tried to be as humble as I can here, but we are actually taking a bus to Austin, Texas. It’s Vonlane and apparently it’s nice, I don’t know.

David:
I gave you too much credit by saying this.

Rob:
Well you said we’re getting in the car and going. We’re actually taking a bus that apparently serves food and drink. I don’t know, I’ve never heard of it before, but should be fun.

David:
Just want to remind you, ask yourself the question, how can you make an impact as you build your wealth? It makes the journey a lot more fun as well as satisfying in the end. All right, enough of listening to me yak. Let’s bring in Zasha. And Zasha Smith, welcome to the BiggerPockets podcast. This has been a long time coming, so glad to have you today.

Zasha:
Aloha, everybody.

Rob:
Aloha.

David:
For those of you who don’t know, you can follow Zasha on Instagram at, is it investwithzasha? Is that the handle?

Zasha:
Yeah.

David:
Zasha and I have been aware of each other through online things. I think we met briefly in Maui one time and now we get to have her on the show. Zasha, can you tell us how you got started in real estate?

Zasha:
Well, I feel like I’m just the average person who was working there, W2. I had been working as a civil engineer for 10 years and I was working 60 to 70 hour weeks, going in on Saturdays. I seen my boss going in on Sundays and thought to myself, this is going to be my life. I’m now going to be working seven days a week on a 40 hour a week salary. I wanted a change. And so I basically started Googling something silly like, how to get rich and quit your job or what is the top way to build wealth? I found out that majority of the people that had been coming up had some sort of stake in real estate.
And so from there I stumbled upon BiggerPockets, started listening to the podcast, going on the website, connecting with other investors, started attending meetups and really gained that confidence to know that I could buy a rental property, because I live in Maui, Hawaii where the medium home price is over a million dollars. I never thought of owning anything else but my own home. And so that opened up my mind to see that there were other ways to buy these properties. I didn’t just have to qualify using my job or using my income, there are other ways to leverage debt. And so from there I just started buying properties.

Rob:
Okay, that’s awesome. Can you tell us a little bit about what your portfolio looks like today and then just a little bit of that trajectory over time as well?

Zasha:
Right now I have 10 rentals. I have nine long term and one short term, all here on Maui. It averages about $10,000 a month. It’s not $1,000 each property. My short term rental brings in about 3,500 to 4,000 a month, which basically makes up my nine other long term rentals net cash flow, which that ranges between 500 to 1,000 depending on the type of loan that I have on those rentals. And then I also do a lot of fixed and flip. So right now I have six projects going on. One is here on Maui, there’s one on another island, and then the rest are between Arizona, Georgia, Florida. I’ve been partnering as a way to scale the flipping business and have that active income versus trying to do everything myself. In the beginning I think I was a typical investor who was very hands on.
I was working my W2. I bought my first flip, which is a condo here in Maui and I was just using logic at that point. I found it on the MLS, it was listed at 300. I think I was using Zillow at that point. Contacted a realtor who was also an investor and said, hey, what are things selling for in this area? And he said, well, there’s a comp that just sold for 450. So I thought to myself, well, it can’t be that much of a difference between what it takes to fix it up and actually make money. And so that’s my indirect way of getting into real estate without overthinking it. Because I think a lot of first time investors get into that analysis paralysis. But for me it was just thinking logically and then taking action and using the resources that I already had in my circle and basically using the MLS which is available to everyone if you have access to the internet as far as Zillow, Redfin, and those other public sites.
And then from there I bought my first rental. I inherited a tenant, but initially I think it was cash flowing net 300. I bought that also off the MLS, used a conventional loan, and went through the process of trying to find them another place, trying to raise the rent, did it on my own, self managed. I found it to be very rewarding in the end because I was willing to work with them until they were able to qualify for affordable housing and buy a house of their own, versus just kicking them out from the start, giving them the 45 day notice. Even though I now cash flow between eight to $900 a month, it was more so helping these people get to the next step as well.

Rob:
That’s amazing. Can you remind us just for reference, when was that very first deal? How long ago was that?

Zasha:
It was in 2019.

Rob:
Oh wow. So really you’ve built a great portfolio in a few years here. And that very first deal that you were talking about, that was a flip, is that the one that you sold and then you went into a long term rental?

Zasha:
Yes.

Rob:
Awesome. I think this is the question, right? Everyone always says, how do I get started? When you’re getting into your flip, obviously as someone that, you were saying you were going based on the logic and you’re like, all right, it shouldn’t cost that much more to fix it and then make a profit here. Was this all self-funded, getting started? How did you actually get into that very first deal?

Zasha:
That was also used, and this is not advice for anybody getting started, using a conventional loan. I had no idea that you couldn’t use it to flip properties. I qualified-

Rob:
Okay, got it.

Zasha:
… using a conventional loan and then used my own funds for the rehab. It was about 30 grand. That was manageable for us. I was the typical person going to Lowe’s on my lunch break, meeting contractors after work, paying them cash, just doing all the things they tell you not to do. If you’re getting started, definitely look into hard money or private money or something else, because after that point moving forward, when we sold the condo, my lender was like, hey, you said this is going to be a rental? And I was like, yeah, that was the initial plan. However, we pivoted into selling it short term and after that he didn’t give me any more loans.

David:
Well, that’s okay, we’re here for you if that’s what you need. I guess because people don’t realize this, but if you buy a house with a loan or you refinance a house, sorry, if you sell a house that was bought within six months of getting the loan, the lender has to pay back all of the money that they made, but they don’t get compensated for all the time that they put into it. So that’s why people can get a little salty if you end up selling a house or refinancing within the six month timeframe. Little quick tip for everybody out there who may wonder, why did my lender ghost me and get so mad? I don’t understand, I made the right move. They don’t ever want to tell you that, but that’s should what it is.
I am fascinated by an element of your story, Zasha, where you hear everyone talk about wanting to do what you’re doing. There’s people that listen to podcasts, there’s people that see this online, they follow the people taking the action, but they don’t actually get out there and do it. What was it about your personal story that gave you the drive to take action where other people think about it and talk about it but they don’t be about it?

Zasha:
Definitely I think growing up in low income housing and just having that perseverance throughout my life to look for something better, look for a way to give back or help people that were in my position helps to drive me to get to that next level. And so even while I was working my W2, I always thought about what it would be like to have more. I’m getting into this engineering job to be able to live in an expensive market, but is that the only reason why I’m working? Is it to build wealth for my family but have no time with them? I was trying to find that balance or that median in order to be able to basically live a life of perseverance and make an impact at the end of the day. And whether that be to my family or my community, I was trying to find that way to pivot into that from the engineering job.

Rob:
Well first of all, I guess I want some clarity here. Are you still working your W2 job? Are you still in the field of engineering?

Zasha:
After I bought my first flip and my first rental in 2019, at the end I ended up joining a mentorship and then quit right away in January of 2020, right before the pandemic. I don’t know if it was universal timing that said, hey, I’m going to give you the hardest year to try to get into investing and you’re going to run with it or you’re going to fail. It was definitely a challenge getting started. In 2020 I had bought my first multifamily and my whole goal was to wholetail it. I ended up having to pivot because the person who was going to buy it, he shut down his office. He was going to buy it, he was a doctor and going to use it for his nursing staff.
And so during the pandemic shut down and I was forced to keep it. However, that’s one of my best deals yet. I’m cash flowing probably about almost $4,000, and it’s a fourplex. Majority of the people who live there have Section 8 HUD or some sort of rental assistance. It’s a very fulfilling property to have as well. And every time I go past it, I just am happy that I learned to have different exit strategies. So quick tip for everyone, if you’re getting started or if you’re looking at a deal, always look for multiple exit strategies that you could use just in case one doesn’t work out.

Rob:
You mentioned it’s a fulfilling property. Why is that?

Zasha:
I feel like it’s come full circle. Because I came from low income housing, I’m now able to help these people who have low income or maybe fell on hard times and are accepting assistance, because it does take a little extra paperwork working with government offices. And on my part, sometimes I have to wait till the fifth or the 10th of the month to get paid. You have to be willing to wait a little bit longer and put in a little bit extra work to work with these affordable rental assistance programs.

Rob:
Is this something that you, because obviously it relates back to your upbringing and everything on that kind of stuff. Is this Section 8 component of real estate, is this your way of giving back? Is that a big driver for you? Is it something that’s very familiar to you and you want to help others in the way that you were helped when you were growing up? Tell us a little bit about that, because I think it’s really important. I think it sounds like there is purpose behind your story and I’d love to hear that, because I think a lot of us will lose sight of why we’re even doing this in the first place.

Zasha:
When I was growing up in the low income housing, it just taught me very much to be humble, but also to strive for a better life. I know things happen to people in their lives, whether it be death, whether it be some sort of health condition that falls upon them or they get fired from their job and now they don’t have any income. I understand how it can happen to people. And people always are asking me, what do you do to prevent yourself from, I’ve heard all this bad things about Section 8 that they’ll trash your house? I say, they’re like any other renter, you have to vet them. So run your background checks with them, check their credit score, talk to their current employers and previous employers and same for their landlords. If you vet your tenants correctly, then everything should fall in place.
Of course it’s not a hundred proof, but at the same time give them a chance like everyone else and vet them but also stick to your standards. One thing that I do differently with my tenants on Section 8, is I let them know, hey, I understand where you’re coming from. This is my property. If anything happens to it, it directly affects my family. I am hoping that we’ve built enough rapport with each other that you understand where I’m coming from. I’m going to be a great landlord to you if you be a great tenant to me. We’re working together on this. So it’s more so of us working together that will help them sustain a place to live.
Because a lot of people here don’t accept Section 8 and it’s for that exact reason, is they’re worried about drugs, they’re worried about nonpayment, they’re worried about them trashing the home and everything like that. But I don’t look at that first, I look at that after I vet a few of them.

David:
A lot of us came from backgrounds where we didn’t have everything we wanted and the drive to get ahead often comes from pain in our past and everyone has some form of pain they can tap into. It’s not like it’s unique just to you. But then I’ve noticed that while your past can be the fuel that can help you overcome the obstacles to get the future you want, like what you’re describing, there’s also traits that sometimes we develop in our past that do not help us when we’re getting to the next level. I feel like a lot of successful people have to navigate the waters of, what do I hang onto from my past? What do I have to let go of to think differently? Can you explain a little bit about what your specific journey was like with how you reconciled those two things?

Zasha:
I definitely am still working through a lot of things I think I went through during my childhood and then also during my young adult years. But I think I still struggle with that as far as using that as my drive. But now where do I go now that I’ve kind of made it to a level where I don’t have to worry? I’ve reached my financial independence number, I don’t really have to build a bigger portfolio. How do I keep myself driven to wake up every morning and definitely move forward with my journey? It’s definitely something that I’ve always struggled with. However, I feel like I just think about the amount of people that I can help and that has helped push me forward as far as being the driver for me now. So every person that I get to help on their journey, help them even start to think differently.
Because a lot of this I found is your mindset. I never really thought about it until last year. I went through Steve Rosenberg’s mastermind, and he was really heavy on mindset. I didn’t know how much that affected me. I thought I could just do one deal at a time, but he taught me to open up my mind and be like, hey, why don’t you shoot for these bigger goals? I’m like, oh well, I want to know that I can achieve things. And so he really got me to think bigger. I think a lot of people are stuck in that. They’re just looking right directly in front of them instead of ahead. And so I think that helps drive me, is helping other people to see the bigger picture.

Rob:
I love that. It’s a really honest answer and I’m honestly really glad that you said you’re still working through it, because I’m honestly in a similar place. My parents are immigrants from Mexico and they are a lot of what drives me and that is a big part of my story, and people are like, Well why do you still keep working? You don’t need to work. Haven’t you figured it out? You seem like you haven’t figured it out. But I’m like, I don’t know, I’m still working through all this. I just want everybody to be taken care of. But then I have this complex where I’m like, well I want to keep helping people. That’s a big part of my platform as well. And so mindset is definitely something that is constantly evolving for me.
I know that you’re really big into this like you just talked about, but you’re also really big into masterminds and getting help that way and evolving your mindset. What are your thoughts on investing in that type of thing and getting help that way versus learning the hard way?

Zasha:
I feel like if you have a lot of time, definitely go through all these things. You can go through all these things on your own. However, if you’re looking to scale and really cut your learning curve, going to masterminds, being a part of mentorships, going to events will help give you the network and connections that you need in order to get to your goals quicker. For me, I always try to, the biggest tips I can give people is to make connections, whether that be going to virtual or online meetups, whether that be going to paying money and investing in yourself for these programs, it definitely comes back tenfold. Even for me I just went to the Maui Mastermind this last week, met millionaires and billionaires and people making a lot of money, but was also able to connect with them on a personal human level and be like, look, these are things we’re all struggling with and we need to be able to help each other.
I was definitely the smallest fish in the room, but I also had the largest social media following. So you’d be surprised on how many people came up to me asking me about that component. So really think about too how you can add value to other people when you’re going to these meetups or when you’re making connections, think of something you’re good at and how you can use that as a platform for you to help them and in turn they’ll remember you.

Rob:
You know what, I’m so the smallest fish in the pond and I love that. There is so much to gain from being the smallest fish in the pond. Because once you are the biggest fish in the pond, it’s very hard to find anyone that can help you in teaching. So for me, I like surrounding myself by people that are much smarter. There is always the stigma of education and mentorship and masterminds, but I’m just like, no, not really. You want to surround yourself with people that have similar goals, because I think personally there is just nothing more inspiring than being in a room full of people that are as on fire as you are or even more on fire.
I just actually was talking about a similar thing, Zasha, where I was in a room at a conference one time in the green room, in a room full of millionaires and billionaires, and it was so crazy because they were just regular people. I think that’s the crazy thing, because you elevate these people to be super brilliant computers basically. And then you talk to them and you’re like, man, you’re just a regular person and you figured it out and you’re smart. And you’re like, I’m smart too, I think I can figure this out. And I think it’s unlocking that. Right? Are you still a part of masterminds and mentorships or is that something that you continually invest in?

Zasha:
Yes. Every year I try to at least go to four different events. I am a part of a few mentorships and Ryan Pineda’s Future Flipper program is how I started my journey there. The first mentorship I ever joined. I was very hesitant at the time. It was $10,000 to join. I was like, but I could learn all this stuff on YouTube or I could do this on myself using BiggerPockets. It was hard for me to dish it over, but it also gave me more motivation to make sure I made the most out of this program. I was going to come out of it with achieving my goals and just connecting with as many people and making those personal connections as I could, because I was like, oh my gosh, this is a lot of money for me, going from doing it all myself to now dishing out all this money. It makes you motivated to make the most use of whatever program you’re in, especially if it’s a lot of money to you, then why would you waste it?

Rob:
Big time. That’s honestly what it all boils down to. There is so much free content out there, right? There’s the podcast, there’s the YouTube side of it. I think what really the core nugget of it is always, can you take action and is there something that you can do to take action that will really fuel you and really set you on fire to pursue these goals. I know you started scaling up from where you started to now. Can we start talking about, you said that you started partnering up with people, you live in Hawaii and then you said you had a place in Arizona that you’re flipping and then another place somewhere else, how does that all work? Why are you partnering up with people to scale? What is that strategy?

Zasha:
Basically my goal is not to build a big wholesaling or flipping team. I want to essentially split roles by partnering. Right? Majority of the time I do equity split. So whether it’s 50, 50, 70, 30, depending on if I’m the capital partner, capital raiser, or they need me to qualify for the loan because they’ve never done a rehab loan, say they own a few rentals or they need me to manage the contractors or walk them through escrow process. Or they are experienced investors and they say, Zasha, it’s Wednesday and I need $300,000. If you can raise this or bring this by Friday, I’ll give you some equity in this deal. I think there’s a lot of value in being that person that they can come to. And also I never wanted, flipping was never my goal. My goal is the passive income. But along the way, if there’s opportunities to make some active income along the way, then I’m more than willing to do that, and also helping other people get started.
Of course these are people that I’ve connected with, known for a while, met through mentorships or we have connection with each other to hold each other accountable. I’m not partnering with random people, just to be clear, but they’re bringing some sort of value or deal. I’m checking with my network maybe in that area or in that state, in that market, and being like, Hey, this person brought this deal. Is it good or not? They have the CMA from the realtor, they have the contractor bids, so they have all the details of the deal in place in order for me to make an easy decision.

David:
I was just about to ask you, how do you choose the partner you’re going to get with? Because the concept of partnering is very different than the practice of partnering. It sounds like you’re meeting them through these same groups that we’re talking about.

Zasha:
Majority of them I’ve either met through mentorships or my community. And of course each partnership is different. You could have all these numbers align. However, once you start working with them, you’ll see their personality or morals, integrity, where their decisions lie, and then you can decide if you want to continue working with them or not. I think it’s very important, one, whenever you’re thinking about a partnership, to talk about communication, to see where they’re at as far as what decisions they’re going to make or how they would think about a certain situation. And then, two, definitely getting something written down on black and white, what your role is and what their role is and what the expectations are.
Because I think that’s something that’s overlooked, and you’re like, yeah, this would be a good idea for us to partner. However, once you get in it, you thought that person was supposed to do something and they didn’t, however nothing’s written down, then it’s harder to keep each other accountable.

David:
I’ve noticed one of the big hesitations, and to be frank, I was the same way. I didn’t want to join GoBundance because at the time it was like $6,000 a year and I don’t want to spend the money, I don’t have to do that. I can read a book to learn it. I had that mindset for a very long time. But then when I joined GoBundance, I got put in touch with a person who got me a line of credit at a bank in North Florida, that ended up leading to 35 properties that I bought that they finance that I wouldn’t have been able to normally do. And through that process I learned a whole bunch. I wrote the BRRRR book, I taught people about BRRRR. Now every partner that works with me in a deal gets all of the knowledge that I gained from everything I did, brought into what they’re doing.
Like Rob was just talking about a deal we bought, he got to watch me kind of teach our realtor how to negotiate it. And now everything that I know goes into Rob’s head. Rob now applies that to all the deals he does. It builds this exponential momentum when you get around the right people, because everything that they’ve learned and spent money to invest in you get. I didn’t just pay $6,000 to join GoBundance. I paid $6,000 to get access to the hundreds of thousands of dollars of money the other members had spent developing their mindset, learning things. And partnerships sort of function in that way in that same way too. Do you mind sharing with us some of the things that you’ve learned from partners that you’ve brought in, so you didn’t just give up 50% of the equity, but what you gained from the other person and how that helped your business?

Zasha:
Majority of the time I’m the one teaching someone else or helping to bring these newbies up to their first deal. In 2020 I had partnered with someone or became an accountability partner with someone and helped walk them through their first wholesale deal, helped walk them through a first flip partnership together and then now they’re off and doing it on their own. That experience in itself helped this person take off on their own. If you think about, it’s getting to do deals together, but also having someone to walk you through, getting their connections if it’s their contractors, their escrow company, seeing who they use for their lenders, getting access to them and then also having that safety net if anything were to go sideways you know how to get through and problem solve and find a solution.
I think that’s the biggest key takeaway when you’re partnering, is that you get to leverage each other as far as finding a solution for that deal and making it happen.

Rob:
I’ve done a few partnerships. I want to ask you first, maybe I’ll give an example here, but are there any things that you’ve learned the hard way through a partnership? Was there ever a moment where you’re like, probably won’t do that again? It doesn’t necessarily reflect badly on the partnership you have now, but just a learning that you can apply for future partnership.

Zasha:
When partnering it’s very, very important for you to define your roles. And for me, I always thought partnering with contractors would be the greatest idea, because that’s most of the time the biggest headache as far as dealing with projects, is the renovation. I’ve partnered with a few contractors that didn’t really work out because they don’t understand the investing aspect. They see us purchasing a house at 600,000, we’re selling at a million, but we’re also putting 200,000 into the renovation. We’re also paying money costs. There’s a lot of costs that go into these projects that people don’t really understand that. It’s not the sell price minus the purchase price and the renovation, there’s a lot of costs in between.
And so even when you’re partnering with people that are let’s say contractors in the deal, they’re putting their sweat equity in, that’s how they’re contributing to the partnership. But there’s so many other moving parts that they may not understand and no matter how much you try to explain to some people it doesn’t register. And so at the end of the day, they might feel like they’re getting the short end of the stick and vice versa. That’s what I talked about in the beginning, is being very clear on the roles and who’s doing what, so everybody’s on the same page. But at the same time some people think that what they’re bringing to the deal might be worth more than what you are bringing to the deal.
And so that’s what I’ve learned from partnering with other contractors, is that it doesn’t always pan out the way that they really think it is. And once they realize, oh my gosh, you’re not making that much money, then they decide not to do any further deals with you and then vice versa.

Rob:
Totally fair. I’ve been in this situation where we did very clearly lay out roles and expectations and so that partnership has always worked out super, super well. But the one thing that I’ve realized with a lot of the partnerships that I started in, is I just didn’t future proof myself. I didn’t really plan for the future because it was a really good deal at the time. And I was like, great, I’m going to do all the sweat equity, I’m going to do all the work. And at that time it was great, it was gravy. But now with the way that my portfolio has grown and where I’m moving to in real estate, some of those roles and responsibilities really just don’t make as much sense for me. And I just didn’t have the foresight to really know, hey, in two years from now, if I’m successful at this, I’m going to be super busy. I should probably think about that.
And so that’s one thing I always try to tell people, is that exact thing. Because really if any tension ever starts to build up, if you’re not super clear about those roles, if one set of partners believe that they’re doing more work than the other, it can be a little bit tougher to maneuver all the way through. I know that you’ve been doing this a bit and I also wanted to ask a little bit about the mentorship versus partnership component of it. Are you ever going into a partnership specifically with the intention of mentoring? Is that just part of the job? Is that something that you’re doing less now that you’re a more seasoned and experienced investor?

Zasha:
Yes. In the beginning when I first started partnering, because I’d never partnered before, I had done maybe about seven or eight deals before I ever started partnering. For me too, the first partnerships that I had, I didn’t really know what I was doing or how it was supposed to be. And so I took the spot of more so mentoring people into being comfortable investing. Now it’s very clear roles, I bring the capital or I qualify for the capital, I’m the one making the monthly payments, whether it be holding costs, utilities, that sort of stuff, turning on the utilities, coordinating with escrow. And then you are the one who’s the boots on the ground coordinating with the contractor, making sure the timeline and the schedule is on par with where we’re supposed to be.
It’s very clearly defined roles, and if they ever want to know anything about what I’m doing, I definitely share that with them, but not necessarily take them through every single step just because I have way too many deals going on to be doing that with every single person.

Rob:
Obviously that makes a lot more sense getting started and you’re working in. And just for the record, I don’t think that there is any bad partnership when you’re getting started, specifically because you will learn so much. I think the benefit is education. A lot of people they’ll see deals that I’ve done and they’ll say, well, hey, I know that you partnered up with somebody and you gave 50% equity and they got 50 and they put up all the money, I want that too. And I’m like, well, hold on, hold on, hold on little one, you can’t always demand 50% when you’re getting started, especially if you don’t have a track record of an investor comes to you and says, hey, I’ll front the money, I’ll do the financing, but you’re only going to get 25% or 15%.
I’m totally fine for a new investor to take something like that, because it’s the experience of working with an investor and with a partner that’s valuable in your first deal more than the cash flow that you’ll ever make.

Zasha:
I totally agree. Especially when you come at it from a humbling experience. I have a lot of people who want to intern with me, hey, I’ll do this for free. But essentially too you have to think about what are you good at and what value can you bring to this experienced person? Because they probably have VAs ready to do things, they already have systems and processes in place. How can you add value instead of making them work harder to figure out, okay, what are you good at? Where can I fit you into my business? You got to make it easier for that person, but also think about the amount of experience you’re going to get or comfortability and confidence in yourself if you see somebody else doing it, know exactly their process and how they’re making it through this business. You can be a fly on the wall or help them do paperwork or something like that and just be around. That’s extremely valuable.
I wish I had somebody when I first started getting into this business like that, but I didn’t know what I didn’t know. I went to these meetups and I thought everybody was doing their own deals. Especially when you go to competitive lead generation, like going to the courthouse steps, going to auctions, everybody has the mindset of, it’s me against you. Right? That’s the mindset that I had coming in, was everybody was to each their own. And recently after joining mentorships, it really opened my eyes to the power of collaboration and having an abundance mindset. If you can win and I can win, why don’t we work together?
If you have a strength and I can help you with something that the deal needs such as capital, why don’t we work together, do our individual roles, and then we can both make money. If you’re trying to do this whole entire business on your own, you will quickly get burnt out or you will quickly find out that in order to scale you need other people.

Rob:
The abundance mindset, someone wants told me you get nothing out of being competitive with a friend or a partner. There’s enough out there for everybody. I think as soon as I heard that, it just unlocked this like, and I was like, oh man, it’s so true. Because a lot of people, on YouTube I talk about all the stuff that I do. I talk about how much money that those investments make. I talk about markets and I’ve had so many people that are like, are you crazy? Why would you give away all your secrets? Now you’re just creating your own competition. And I’m like, there’s millions of homes in the United States, I think I’ll be okay. I think it benefits people to learn and do it the right way because there’s a little bit of integrity that we have to teach people on how to do this, how to do this the right way, how to real estate correctly, if you will.

David:
Zasha, I think that the mindset work you’ve done has clearly had a very significant impact on how successful you are. It looks like every time I follow you, you’re exponentially increasing how successful things are starting to fall into place. I can see that that investment is starting to pay off. Talk to our community, tell us, what exactly are you doing? What does your day look like as far as how things are structured? And what type of stuff catches your attention, you go, I like that person, or I like that situation, I like that setup, I’m going to put more attention into this, versus the just amount of stuff that hits you in a day that you realize that isn’t worth my time and attention?

Zasha:
What has completely changed my life I feel is a morning routine, because I have a family, I’m a mom, I’m a wife, and I’m also an investor, it is very easy to get run down by the day. So waking up early, I wake up at 4:30 in the morning, then quickly I just jump out of bed and start working out, get that done. Write my affirmations. That gives me confidence going into the day. And then I write down the top three things that I got to get done to help me stay focused. Now, this isn’t always happen, there are days where I take breaks, however, for majority of the time I try to stay consistent with that. And then from there I go into Asana. I use that for my team as far as my social marketing team, my investment team, my VAs, we all coordinate in that platform and figure out, okay, what are these tasks that I need to do for that day? Get that done.
And then from there, if there’s any new deals or new leads that come in, then I evaluate that, see if that’s a market that I want to get into, a strategy I want to use, or maybe it’s potential for long term cash flow. And so recently I’ve been really getting into RV parks, and so I’m entering into a partnership that they live in that area, they already have properties in that area and they want to partner with somebody to bring capital. And so that is where I’m seeing my role as far as an investor goal, is to not necessarily focus on a specific strategy, but focus on a specific role in a deal. And so that’s what my role is going to be moving forward.
I’m trying to see if I can start a fund because it is hard once you sell a property, give the funds back to your private investors and then all of a sudden you contact them for another deal and then the money’s gone or they’ve used it for something else or they decided to renovate their bathroom and their house. I’ve been finding that getting into other bigger, higher level strategies has been the way that I have to go now.

Rob:
That’s really cool. Is that your method for scaling? Because obviously you were doing a lot of the flips, you’re partnering in that capacity, but now you’re looking at RV parks. I’m doing something very similar here. Are you doing that, A, because it’s a really cool, I think RV parks are fascinating, but B, is this just your path towards scaling?

Zasha:
Yes. It’s one of the paths. Last year I bought my first short term rental and it has made almost just as much as nine of my long-term combined. It just opened my eyes to the possibilities of doing these more hospitality sort of investments versus the long-term. I’m still going to do the long-term investments, but it’s been harder. I feel like everyone now it’s a bit more of a struggle to find deals. So if I can get into these hospitality RV parks or Airbnbs that can essentially make the deal still work without it having to be a long term investment, then I’m going to jump into those. I don’t know if that was a good explanation for that, but-

Rob:
No, it’s really good.

Zasha:
… that’s definitely what I’m thinking about. The path to me is being that person, figuring out what role, but not really concentrating on the strategy. I’m still open to bigger multi-unit apartment buildings and other strategies. It’s just focusing on what is my role, what value can I bring to that deal that will benefit everyone.

Rob:
Well it sounds like you’re out there, you’re teaching people in the community, obviously you’re very active on social media, you’re getting information out there and you’re effectively mentoring the masses, so that they often say that you are as good as your reputation. It looks like you’re killing it basically. I wanted to ask, from your perspective, what are you doing in your life and your role in your real estate career to impact the local community?

Zasha:
I feel like educating people on what exactly it is we do as real estate investors is very important. We’re not out there buying deals for really low price points and then reselling it for really high without doing any work in between. A lot of times people don’t know we buy homes that are in complete distress. They might have abandoned cars in the front, people might be in some sort of financial situation that they can’t get out of, and we are providing different solutions. And a lot of times we put hundreds of thousands of dollars into renovating these homes and then of course selling them for a profit. However, when you own a home, you get to choose who you sell it to, so you could potentially sell it to a first time home buyer.
You don’t always have to go for the highest price or the person that has the most money or is coming in for cash, you can choose to work with someone who you feel will bring value to that community. And that’s how I found a lot of people when I do buy these homes, ask me or while we’re in renovation phase, come up and say, hey, we would love for you to put a local family in there because this is the vibe of the community and we want them to contribute and not just move here and then find another place, move out. There’s different ways where you can have an impact without compromising your morals or integrity and also adding value to the community.
And then as well for the rental side, for long term, you can choose a Section 8 tenant versus someone willing to pay a couple hundred dollars more if you’re at the regular rental rate. It all depends on your financial goals and your financial situation. However, I’m at a place where that’s important to me, so it may take a little bit more footwork working with the HUD offices, it may take a little bit more time to get their rents in on time, but I’m willing to work through that in order to keep with my goal in making an impact on the community and adding value.

Rob:
Do you think you’ll continue investing in affordable housing as you continue to develop your real estate portfolio and your career and everything?

Zasha:
That’s definitely my goal, especially being from Hawaii and it being so expensive, I knew that when I was going through high school that I had to go to college and in order to move home, I had to be a doctor, a lawyer, an engineer to be able to afford to live here. And so with that in mind, I definitely want to build an affordable housing project or have affordable housing subdivision here in some sort of capacity. But I know along the way I still have to build wealth and make connections and have that in my, I guess, tool chest in order to do these bigger line items, do these bigger, I guess, envisions of projects.

Rob:
That’s awesome. That’s impact. Again, that comes down to purpose. I think a lot of people, I think if you just always focus on the financials and the money, that’s fine. Obviously you can have a successful career doing that. Doesn’t necessarily mean it’s going to be fulfilling. Right? It’s really encouraging to hear that you’re out there doing this. I’m curious, I know you probably work with a lot of potential sellers, what’s your process for working with different potential sellers out there?

Zasha:
Anything found off market when I’m working direct with the homeowners, I ask them, hey, a lot of times it’s referrals. So people refer me to other people. I’m huge on reputation, especially being from a small community on a small island. How you do one thing is how you do everything. And so when I approached them, I ask them, hey, have you talked to a realtor yet? Have you thought about getting a personal loan? If they’re in some sort of financial situation. Have you talked to your family members? Can they help you? Do you need me to mediate that conversation? I have a network of lenders and of realtors and other people in this business that might be able to help you.
And then if you want to work with me, I’m always the last option. I want to know that you’ve explored everything and I am the reason why you need to sell to me, not just because you know wanting the cash offer. I want to know that not necessarily I’m the last resort, but you’ve checked all the boxes before you came to me.

Rob:
Well, that’s cool. That’s something you don’t hear every day, genuinely. You want to, hey, I want to be the last resort, right? That’s really cool that you’re actually helping people through that process. Again, it’s a human element. Real estate you’re dealing with humans every day. You got to treat people like people. It’s the only way that you’re going to have a fulfilling successful career. Again, I guess you could do it without doing all that and be successful, but it’s like, do you want to make money or do you want to make money and be fulfilled? Why not do that? You can have both. You can have both in this industry, and I think that’s something that people always lose sight of.

Zasha:
When I feel like this is a lot of relationship based, whether it be working with other investors, whether it be working with sellers or other people, the escrow company and the title company, it’s all about relationship and trust. And so my biggest deal for example, came from me partnering with a seller. I had no idea that that was even a thing that you could do as far as being creative with it until I found out later on through mentorships. But the seller actually wanted to partner with me and said, hey, well we get a little bit more money if we hold the loan and then you do the renovations and then we sell it. And so that was an instance. That was my biggest deal honestly, was they had brought this partnership aspect to me. And then now it’s called, a lot of people refer to it as innovation, where the sellers still own the property, they hold it, and then you bring renovation funds.
We had agreed on a price of about 450. I brought 200,000 in private lending funds. We fixed it up and it sold for about 975. And so I had let them know, hey, initially the ARV was eight 50 and now the market has gone way high and now we’re able to sell it for 975. Are you okay with the initial amount that we agreed on? Because if it went the other way and it went down, you would still get that money, and they were fine with it. They are definitely a different type of people. It all depends on the relationship you have with the owner, especially when you’re getting creative like that and you don’t own the home, so you don’t have that much control. However, if your relationship is good with the owner, then that’s a different way to make it work in an expensive market and also partner with sellers.

David:
In your method of making sure that you are giving back more than you ever take, you have three things you’re focusing on. And that would be partnering, which is giving mentorship to people through deals. So you’re sort of pouring into the individuals that are learning the game that we’re playing here. Investing with integrity, which is giving without expectations. And then providing affordable housing for people that are not aware of how the game works, but still need somewhere to live that’s affordable. Right?

Zasha:
Definitely.

David:
I think that’s wonderful.

Zasha:
I want to build wealth and then make an impact too. I think that’s the underlying-

David:
Same time?

Zasha:
Yes. And you don’t have to be perfect, and that’s what I’m saying, is that you can use your resources to go through things. I think there’s been people throughout my life who have given me the insight or courage or confidence to be able, I had no idea about finances or loans or debt other than buying my own home. But as far as investing and doing all these things, it was just people along the way. Maybe lenders, the title company. I had no idea how to partner with sellers until I went through the escrow company. I said, is this a real thing? And so they helped get the legal paperwork together. They said as long as you and the seller are on that same page, then we can draft up whatever legal documentation you need.
I never really thought of that before. I always thought to traditional investors buy things with cash. They use hard or private money, and that’s the only ways. Again, it’s just asking people along the way, being curious. Right? And so I think that’s helped add a lot to my journey as well and helped me scale, because I’m not afraid to ask questions.

David:
This has been very good Zasha, a ton of actual, easily repeatable content that people could follow. I’m going to move us on the next segment of our show is the world famous deal deep dive. In this segment of the show, Rob and I are going to fire questions directly at you one by one and learn about a particular deal that you’ve done. Question number one, what type of property is it?

Zasha:
It’s a single family.

Rob:
Awesome. Question number two, how did you find it?

Zasha:
Driving for dollars with another accountability partner.

David:
This is starting to sound familiar. Question number three, how much was it?

Zasha:
375,000.

Rob:
Question number four, how did you negotiate it?

Zasha:
I had an acquisitions person negotiate the deal and they actually had the house, owned it free and clear, had a few liens on it, but were able to walk them down because they had previously talked to a realtor who said they had to clean up a bunch of the items that were on the property. They didn’t want to do that, so they were open to working with an investor, taking it as is.

David:
Awesome. How did you fund this deal?

Zasha:
All private money.

Rob:
What’d you end up doing with it?

Zasha:
I ended up keeping it using the BRRRR strategy, getting all my money back out, paying back the private lender and essentially just wanting to add another building to the property, it’s called an Ohana. That is our goal right now. We ended up splitting the single family into a duplex. It was a two story, so we split that and then now we’re going to build another duplex on the same property.

David:
An Ohana unit if you haven’t heard of it, is what they call an ADU in Hawaii, it means family. It would be like if you wanted your mom and your dad or your mother-in-law to live in your property, you’d build them in Ohana unit. My last question, what was the outcome on this deal?

Zasha:
We have multiple exit strategies for the deal. And so right now we have two renters living in it. One renter actually is church member of Brandon Turner, which his wife’s best friend lives right next door. And then also on the bottom unit is a lady who is waiting for her Hawaiian homeland’s home to be built up country.

Rob:
Awesome. What lessons did you learn from this deal?

Zasha:
Be quick to act. This deal was actually, when we were driving for dollars, we’d seen it, we got the deal and decided that we’re going to mail them, we’re going to leave our cards there and then eventually coordinated buying the property. After that, whenever I buy a property, this is a good tip for those who are just starting out or maybe seasoned investors, something you never heard about. I give my card to each and every neighbor that is around that area to let them know, hey, if you see something suspicious, please let me know. Or if my contractors have parked in your area or are making too much noise, you can always call me. I’m the new owner of the home and I definitely am trying to add value to your area and also to your home.
And so it was funny because the lady next door, I guess was Brandon Turner’s wife’s best friend and she ended up calling Brandon and saying, hey, do you know this girl Zasha Smith? She just bought this house. And so he messaged me and he said that he was actually looking at that house for a while. They drive past it almost every week. He had been meaning to knock on the door, been meaning to contact the owner, but just didn’t get around to it. I end up getting the house and now have, it’s renting right now for around $6,000 a month. The mortgage on it is about $500,000 a month, $500,000, and we pay about $2,300 a month for the mortgage. And so it ended up being a really good deal and recently just appraised for a little over a million dollars. And so he was a little sour about that.

David:
Everybody listening, go message Brandon on Instagram and tell him to listen to this episode’s deal deep dive and let him see to the victor the spoils. All right, I actually have one last question, I was wrong. Last question from me. In this deal, who was the hero on your team?

Zasha:
Definitely my acquisitions person. It happened to be, she had been wanting to invest and start her investing career, had been in a mentorship but never took action. And so we became accountability partners, because even as a seasoned investor, it’s nice to get out there and be reminded of the different ways you can find deals, not only through cold calling or texting, especially if you haven’t door knocked in a while or you haven’t driven around the neighborhood to go look for deals. And so she had coordinated contact with him, coordinated closing the deal, and I walked her through the steps of the title company, escrow and all of that. Tereva Jacobson is definitely the hero of this deal.

David:
Thank you for that. And be sure to check out the BiggerPockets marketplace where you can find your next hero to help you on your next deal. All right, we’re going to move on to the next segment of the show, famous for. Question number one, what is your favorite real estate book?

Zasha:
Of course, I’m going to say BRRRR Strategy by David Greene. I feel like, don’t reinvent the wheel, right? If it’s working for other people, then just do the same thing.

David:
There you go. That’s a way to bring a little bit of cold.

Rob:
Got to say, I agree. I agree.

David:
Rob agrees because that’s the only real estate book he ever read, which I actually am not mad about, because if he’s only going to have read one, I’m happy that it’s mine.

Rob:
That’s right. It’s also the best real estate book I’ve ever read, so very important. Number two, what’s your favorite business book?

Zasha:
The all so common, Rich Dad Poor Dad by Robert Kiyosaki.

Rob:
Awesome. Question number three, what are some of your hobbies when you’re not building your real estate empire?

Zasha:
Hanging out with my kids, definitely number one. But number two, I just started spear fishing, and so I oftentimes like everybody else get caught up in working, building wealth, looking for the next best thing, investing in other deals and you can’t take me away from my laptop or my computer. So reminding myself to go to the beach, me and my husband started a new hobby of spear fishing together and that has not only got me out of my own way as far as taking a break mentally from work, but then also built our relationship closer.

David:
I’ve always thought that looked like a blast.

Zasha:
It’s really fun.

Rob:
Not for the fish.

David:
I guess the sphere comes out as a blast, so there’s probably a pun in there somewhere. All right. Question number four-

Rob:
That’s right. It is a blast for them technically.

David:
Right. What sets apart successful investors from those who give up, fail or never get started?

Zasha:
Surrounding themselves by like-minded people or people who are ahead of them and also helping other people. And so this is what I try to put forth, especially through social media, educating other people and letting them know that just because people are ahead of you or doing all these great things, doesn’t mean that you can’t. And so putting out little tips like that, connecting with people. Also I had mentioned to you guys before this episode, that you can instantly connect with people on social media. There is a power of providing value through there, that people don’t even realize. I connected with David Greene, with Brandon Turner, I messaged Rob a few times, I don’t know if he’s seen, it might be in his hidden messages.

Rob:
It might be. That’s right. Hey, that’s a call back.

Zasha:
But it’s definitely a way to connect with people that I never even realized had initial power to it. I think if you’re just starting out, of course don’t blast people, but find a way to add value. You can instantly connect on social media, and I know that we all post and add value. So really take in what people are giving out for free and what’s working for them.

Rob:
Awesome. Well, first of all, let me just say that I followed you and I sent you a message and I haven’t heard back from you. I did send that message like 30 minutes ago while we were on the podcast, but it is there. Can you tell us more where people can find you on the internet if they want to learn more about you, connect with you and all that good stuff?

Zasha:
On BiggerPockets, definitely that’s where I keep a profile of all my deals that I have going on now at Zasha Smith is my handle name on there. And then also on Instagram at investwithzasha, where I have a big platform, always down to help. I have people helping me with my messages to get started and guide you on the biggest path. I always speak about BiggerPockets, so it is an honor to be here and be on this podcast and add value, being comfortable being uncomfortable, and just know that you guys are not alone in this journey. It is very hard for me being a civil engineer for 10 years behind the desk to put myself out there and often connect, but I’ve found it to be the most valuable and most rewarding part of this journey and making an impact.

Rob:
That’s so cool. Well, David, what about you man? Where can people find out more with you, connected to you, all that good stuff?

David:
Go follow me at davidgreene24. Very easy screen name to remember, also very boring. I’m pretty much everywhere. And then on YouTube, I’m at David Greene Real Estate, also very boring and very easy. But got a social media company that’s been putting out posts and I try to put new stuff. So when I’m out here in Scottsdale, I try to post things showing what’s going on behind the scenes and I’m doing more of what’s happening in the personal world. Zasha, I think you do a really good job of that actually, I want to mention it. You don’t just post, look at this house, look at this deal, look what I did. There’s like a kind of a mix of this is who I am as a person and this is who I am as an investor, which probably isn’t a coincidence because as you said, you want to give back and you want to build wealth and that comes across with the way that you’re posting. So make sure you go follow, investwithzasha as well as me. And then Rob, where can people find you?

Rob:
You can find me on the You Tubes at Robuilt and then Instagram Robuilt as well. And TikTok, you want me to do funny dances. You want to see me do funny dances? I’ll do it. All right. On the TikTok at Robuilto. I also do them on Instagram every so often. Catch me dancing. They’re not good, but I will dance. I’m not ashamed.

David:
Do you do the robot? Is that where Robuilt comes from?

Rob:
I don’t do the robot. No I don’t. But I just had a video pop off of me conducting a choir and that one was my best performing video ever. Fake choir, not a real choir. Go watch it, it’s funny.

David:
I saw it. It was very intense. I’ve never seen that intense side of you until I saw that.

Rob:
Well, hey, the beast exists within, you just got to let it go.

David:
Don’t let that flower shirt fool you. There’s a beast behind that cloth. Zasha, any last words before we let you get out of here?

Zasha:
Definitely I think the overarching theme is giving back, building wealth, but also making an impact. And if there’s any way that you can make an impact on your community, definitely try to do that. Whether it’s your time or money, just remembering where you came from or that other people don’t have it as good as you and trying to help them elevate.

David:
Thank you for that very much. This has been a great podcast and I hope everybody listening takes that to heart. You can actually win bigger and do better when you help other people along the way. It is not us versus everybody else, it can be us with everybody else working together. Thank you for spreading that message, Zasha. I completely second it. This is David Greene for Rob the beast behind the flower shirt, Abasolo, signing off.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-29 06:02:18

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3 Ways to Boost Short-Term Rental Bookings Any Time of Year

15% ROI”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/05\/large_Extra_large_logo-1.jpg”,”imageAlt”:””,”title”:”SFR, MF & New Builds!”,”body”:”Invest in the best markets to maximize Cash Flow, Appreciation & Equity with a team of professional investors!”,”linkURL”:”https:\/\/renttoretirement.com\/”,”linkTitle”:”Contact us to learn more!”,”id”:”60b8f8de7b0c5″,”impressionCount”:”258714″,”dailyImpressionCount”:”134″,”impressionLimit”:”350000″,”dailyImpressionLimit”:”1040″},{“sponsor”:”The Entrust Group”,”description”:”Self-Directed IRAs”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/11\/TEG-Logo-512×512-1.png”,”imageAlt”:””,”title”:”Spring Into investing”,”body”:”Using your retirement funds. Get your step-by-step guide and learn how to use an old 401(k) or existing IRA to invest in real estate.\r\n”,”linkURL”:”https:\/\/www.theentrustgroup.com\/real-estate-ira-report-bp-awareness-lp?utm_campaign=5%20Steps%20to%20Investing%20in%20Real%20Estate%20with%20a%20SDIRA%20Report&utm_source=Bigger_Pockets&utm_medium=April_2022_Blog_Ads”,”linkTitle”:”Get Your Free Download”,”id”:”61952968628d5″,”impressionCount”:”444267″,”dailyImpressionCount”:”92″,”impressionLimit”:”600000″,”dailyImpressionLimit”:0},{“sponsor”:”Walker & Dunlop”,”description”:” Apartment lending. Simplified.”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/03\/WDStacked512.jpg”,”imageAlt”:””,”title”:”Multifamily Property Financing”,”body”:”Are you leaving money on the table? Get the Insider\u0027s Guide.”,”linkURL”:”https:\/\/explore.walkerdunlop.com\/sbl-financing-guide-bp-blog-ad”,”linkTitle”:”Download Now.”,”id”:”6232000fc6ed3″,”impressionCount”:”154804″,”dailyImpressionCount”:”66″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”6500″},{“sponsor”:”SimpliSafe Home Security”,”description”:”Trusted by 4M+ Americans”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/yard_sign_100x100.png”,”imageAlt”:””,”title”:”Security that saves you $”,”body”:”24\/7 protection against break-ins, floods, and fires. SimpliSafe users may even save up to 15%\r\non home insurance.”,”linkURL”:”https:\/\/simplisafe.com\/pockets?utm_medium=podcast&utm_source=biggerpockets&utm_campa ign=2022_blogpost”,”linkTitle”:”Protect your asset today!”,”id”:”624347af8d01a”,”impressionCount”:”126587″,”dailyImpressionCount”:”94″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2222″},{“sponsor”:”Delta Build Services, Inc.”,”description”:”New Construction in SWFL!”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Image-4-14-22-at-11.59-AM.jpg”,”imageAlt”:””,”title”:”Build To Rent”,”body”:”Tired of the Money Pits and aging \u201cturnkey\u201d properties? Invest with confidence, Build To\r\nRent is the way to go!”,”linkURL”:”https:\/\/deltabuildservicesinc.com\/floor-plans-elevations”,”linkTitle”:”Look at our floor plans!”,”id”:”6258570a45e3e”,”impressionCount”:”117486″,”dailyImpressionCount”:”74″,”impressionLimit”:”160000″,”dailyImpressionLimit”:”2163″},{“sponsor”:”RentRedi”,”description”:”Choose The Right Tenant”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/05\/rentredi-logo-512×512-1.png”,”imageAlt”:””,”title”:”Best App for Rentals”,”body”:”Protect your rental property investment. 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Available on county-by-county basis.\r\n”,”linkURL”:”https:\/\/kit.realestatemoney.com\/start-bp\/?utm_medium=blog&utm_source=bigger-pockets&utm_campaign=kit”,”linkTitle”:”Check House Availability”,”id”:”62e32b6ebdfc7″,”impressionCount”:”38838″,”dailyImpressionCount”:”62″,”impressionLimit”:”200000″,”dailyImpressionLimit”:0},{“sponsor”:”Xome”,”description”:”Search & buy real estate”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/BiggerPocket_Logo_512x512.png”,”imageAlt”:””,”title”:”Real estate made simple.”,”body”:”Now, you can search, bid, and buy property all in one place\u2014whether you\u2019re a seasoned\r\npro or just starting out.”,”linkURL”:”https:\/\/www.xome.com?utm_medium=referral&utm_source=BiggerPockets&utm_campaign=B P&utm_term=Blog&utm_content=Sept22″,”linkTitle”:”Discover Xome\u00ae”,”id”:”62fe80a3f1190″,”impressionCount”:”20812″,”dailyImpressionCount”:”68″,”impressionLimit”:”50000″,”dailyImpressionLimit”:”1667″},{“sponsor”:”Follow Up Boss”,”description”:”Real estate CRM”,”imageURL”:”https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/FUB-Logo-512×512-transparent-bg.png”,”imageAlt”:””,”title”:”#1 CRM for top producers”,”body”:”Organize your leads & contacts, find opportunities, and automate follow up. 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2022-09-28 17:35:05

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From Corporate Cog to 10-Unit Landlord in Just 2 Years!

If you’re hesitant to start your real estate investing journey, ask yourself this—where would you be now if you started ten years ago, and where could you be in ten years if you started today? As today’s guest, Brandon Rush, said, “everything you enjoy today, is the result of something you did five to ten years ago.” Brandon currently has three multi-family homes with a total of ten units. 

Brandon started his investing journey when he couldn’t see the light at the end of the tunnel with his W-2. He couldn’t imagine himself working a nine-to-five until sixty-five, so he decided to take his future into his own hands and started house hacking. After two years of hard work and planning, he was able to quit his W-2 a month ago to be a full-time real estate agent.

Brandon’s success is not without sacrifice. He moved out of his single-family home and moved an hour away from work for his first house hack. And, of course, after his first house hack, he moved to his second house hack! Moving required Brandon and his wife to get rid of most of their things and travel lightly. Although moving and getting rid of material things can be difficult, for Brandon, getting rid of clutter helped clear his mind and reinforced the idea that he was on the right path. Brandon is confident in his investing choices because he surrounds himself with like-minded people, has built an investor-friendly network, and knows that all his decisions now will benefit his future self.

Ashley:
This is Real Estate Rookie Episode 221.

Brandon:
Just realizing life is one big lagging effect. Everything that you have today is a result of what you did five, 10 years ago. So you’re not going to get anything immediately, so start taking small actions to make a difference in your life five, 10 years from now. Just suck it up, realize it’s not going to be easy, or it could be fun, but it’s not going to be easy to get where we are if you want to put in the time. Not to say we’ve fully made it, but I personally think we’ve done really well.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie podcast, where every week twice a week we bring you the inspiration, information, and amazing stories you need to hear to kickstart your investing journey. And I oftentimes like to start our episodes with some kind reviews the other listeners have left for us, so this review comes from Maryanne. And Maryanne says, “Great show,” all caps, exclamation marks, and goes on to say, “I really enjoy the show. After listening to a few episodes, I was totally hooked. It has great direction. It deals with very instructive and interesting topics. I really love this program.” So Maryanne, we appreciate you.
And for all of you that are listening and have listened, if you haven’t yet, please do leave an honest rating and review on whatever platform it is you’re listening to. The more reviews we get, the more folks we can help and help them kickstart their investing journey.
So with that out of the way Ashley Kehr, let’s get into some boring banter. Let me know what’s going on in your life these days.

Ashley:
Well first of all, I want to say thank you to everyone that has left us a great review. It really does warm our hearts and make us feel so happy and motivate us to bring you guys even more great content. So thank you to everyone who has taken the time to leave a review for us, we appreciate it.
So we are actually recording this the end of June, so this is not going to air for a while. So I feel like things are going to change so much over the summer, but Tony is going overseas for a while so we’ve had to stock up on our recordings. I’m going to a lake house this summer for a weekend. Tony’s traveling the world. So Tony, back to you.

Tony:
Yeah. So we actually take off, I think we have one more recording and then I’ll be gone for almost two weeks. We’re going to Italy for the first time. My son graduated from junior high, we thought it’ll be a cool trip to take before he starts high school. So we’re landing in Rome, then we’re going to Venice, and then we’re finished off in the Amalfi Coast area. So we’ll see a little bit of everything in Italy. It’ll be fun.

Ashley:
I’ve already sent some stills and some headshot so I can be photoshopped into every family group photo on this trip.

Tony:
Yeah, Ashley’s going to be photoshopped along with us everywhere we go.

Ashley:
Well, today we have Brandon Rush on the show. Brandon is a house hacker currently out of Connecticut, and he is going to talk to you guys about how he did his research and how he got started into house hacking. But most importantly, why he chose house hacking. We’ll go into the numbers of how he made it work and how it has benefited him and his wife and completely changed their lives.

Tony:
And Brandon lives in Portland, which is not Portland, Oregon, or Portland, Maine. I just learned today there’s a Portland, Connecticut, but he’s got a really cool story about how he was willing to move almost an hour away and then pretty much just upend his life to start his real estate investing journey.
And everyone always talks about the units and there’s a lot of sexiness around how big your portfolio is, but people always often overlook the hard work that goes into getting there. And I thought Brandon did a really good job of highlighting some of the sacrifice his wife has made to put themselves in a position so that he actually just recently left his job a month ago. And that’s because of the sacrifice he was willing to make.

Ashley:
Brandon, welcome to the show. Thank you so much for joining us. Can you tell us a little bit about yourself and how you got started in real estate?

Brandon:
Yeah, sure. So name is Brandon Rush. Actually, I currently reside in Portland. Connecticut. Started out life in New York City in Queens, New York. Long story short, lived a fun life growing up, very active, sports all over the place. Very somewhat early entrepreneurial skills that I had within myself, such as shoveling snow, packing bags, doing whatever I can to make a dollar without having asked my parents for it was my thing when I was a kid, and that carried over through life.
Started IT career. Typical thing, went to school, started IT career, did that for about 12 years. And kind of the summary of it, my wife and I decided at one point that we found out about real estate, dug into the books like everyone else, bigger pockets went deep and decided that house hacking was how we’re going to start. So it all got started with that first house hack in Connecticut, and since then we acquired a few more properties and here we are now house hacking in our fourth family here in Portland.

Ashley:
Brandon, before we go too much further, can you just tell us what those other properties are and just a brief overview of your portfolio?

Brandon:
Sure. So currently my wife and I, we own three multis, two triplexes and a quad. All three are located in Connecticut, and we’ve house hacked two of them, so a total of 10 units.

Ashley:
Well first of off, congratulations. That’s amazing. I want to know why did you choose house hacking? Why was that the first real estate strategy that you’re going to do? What made you make that decision?

Tony:
And Brandon if you can, for those that aren’t familiar with house hacking, just define that phrase for us as well?

Brandon:
Sure, for sure. So house hacking is basically using your residents to make money. It could be either renting out rooms to other individuals. It could be as we’re doing, renting out multi-families, renting out the other apartments. It could also be utilizing the space that you have in your yard for storage or space in your … It’s really just utilizing the space that you have to make money.
And how we got started with house hacking, what made us decide, it was really a numbers thing to be honest. When we first got started out, I read a book by Chip and Joanna Gaines, and that’s kind of how it got started. I believe it was called Magnolia Story, and that kind of got me started with buying properties. Chip was talking about buying properties on a street. And I said, “This is very interesting. I think this is going to be how we do it.”
And deep down inside. I’ve been looking up a way out of the rat race to be honest, that was really my motivation. And it just clicked. Once I read that book, I ran back home and just started running the numbers. And then I started getting deeper into Rich Dad Poor Dad, the book on house hacking. And then once you do the numbers and once you realize it’s so much cheaper just to just multi-family house hack or house hack in general than to own a single family. So that’s kind of how we got started, sorry it’s a little bit all over the place, but yeah.

Ashley:
No, that’s great. I just love to hear as to why people make the decision as to what strategy they’re going to start with.

Brandon:
Sure.

Ashley:
So with your house hacking, what was the first property that you purchased and what did that look like? Did you have any kind of analysis paralysis? Was it like okay day one, we’re doing this, we’re buying a duplex, and day two you have the duplex?

Brandon:
Yeah, sure. So to be honest, it took us about eight months from beginning to end to acquire that first multifamily. It first started actually, to kind of take it back, we owned a single family prior to moving into our triplex. So we lived in a single family for three years. So the first hurdle was us coming to terms that we need to get out of this house and sell it. The second part was us then deciding where we’re going to move. That was hard because of the market we were in. It was Upper Fairfield County, Connecticut, so it’s relatively expensive and we were looking at cash flow numbers and they didn’t quite work for what we wanted to do. But we were committed. We had to do something. There was no stopping us.
So we decided we’re going to move an hour away and commute back and forth to work at that point in a three family. In terms of numbers, after that the properties got significantly cheaper. The first property was listed for $223,000. I think they did that just to get prices running. This is 2020. We offered $286,000 for it. We didn’t get it at first, but we followed up with our agent and said, “Hey, could you check back in?” And turns out we were able to get that property after a month or two after they went under contract with someone else, so we lucked out just by following up. And that was our first house hack $223,000, $286,000 offer, got accepted, and the rest is history.

Tony:
So if I can dive in a little bit Brandon, so you guys, you’re saying a lot of things but I feel like you’re kind of glossing over some of the sacrifices that you guys made, right?

Brandon:
Yeah.

Tony:
So you move an hour away. You decide to do this house hack. You give up this single family space that’s just yours. Talk us through why you felt that was the right decision and how you were able to overcome any, I don’t know, hesitation you guys might have felt with up heaving this life that you’ve already built, this house you already had and going ahead. That’s a big sacrifice, so just walk us through your psyche in that moment.

Brandon:
I would say for me, it was a bit easier. For my wife, not as much, but she came to terms. A lot of it is just thinking about if we had started 10 years ago, where would we be now? That always circles back in my head. If you had done this 10 years ago, where would you be? And I reminded myself 10 years from now, if you don’t do this, what’s going to be the excuse for not starting?
And it was really as simple as that. And you look at the path in life. All right, my options are to sit here, stay in my W2, continue to make money. It’s great, but where’s the end of the tunnel on this? And I didn’t see the end of the tunnel for me personally, me working to 65 and retiring off of that just was not an option. So we said you know what? Age is not a factor. We’re just going to do this now. And we will reap the rewards of this in 10 years, whatever it may be. So let’s just get started now. And that’s really what it was, is just me pushing myself and just moving forward.

Tony:
Yeah Brandon, that’s really amazing man. And I think so many people who have the idea of wanting to become a real estate investor, they’re not always willing to make maybe the sacrifices that are necessary to really kickstart that journey that they want to go on. But for you, I don’t want to say … I guess the idea of being this kind of corporate slave for the next 30, 40 years was impetus enough to make you make that decision. So can you tell us right now Brandon, what are you doing for work? Are you still working in a W2 job? What does your day to day look like on the work side?

Brandon:
All right. So I don’t want to go too deep into it, but long story short, I left my full-time role of 13 years in IT a little over a month ago actually. So now I’m a full-time real estate agent.

Tony:
Congratulations.

Brandon:
Yeah. Thank you.

Ashley:
Yeah, that’s awesome Brandon.

Brandon:
And I would say 90% of it comes from what we decided two years ago that allowed me to be in this position. Now, if I had stayed with the house, with the car payment, it would’ve just been too heavy to afford to do what we’re doing now. So I want to say we’ve reached financial freedom level 0.5 is where we are now based on the changes that we made. And this is honestly with us making less money. It’s crazy, we’ve making less money, but we’ve made sacrifices that it just balances out. It’s all numbers, and we’re in a much better place than we were two years ago.

Tony:
Brandon, one other thing you mentioned that I really want to drill down on that I thought was really insightful. You said you and your wife kept saying, “What if we had started 10 years ago, how different would things be?” And I think that’s a question that a lot of people ask, a lot of adults will ask that question like, “Man, why didn’t I start this 10 years ago?”
But on the flip side you said, “Well, where will we be if we don’t start today 10 years from now?” And I think flipping the question around that way, it was just really cool because it kind of eliminates all the beating yourself up for not doing it. And it’s like, “Okay, but today is today. We still have the next 10 years, let’s make the most of it.” So man, I really, really love your frame of mind there.
So one other sacrifice I want to point out, and you kind of glossed over this as well, you said that you guys have had three different house hacks.

Brandon:
Two house hacks. Sorry. We bought one in between. I’m sorry, we bought one investment property out.

Tony:
Okay. Oh, gotcha. Okay, so one of them was an investment property. The other two were house hacks.

Brandon:
Right.

Tony:
Still, that’s a lot of moving, right, because you guys had your single family house, then you went to your first house hack, then you went to your second house hack. Talk us through picking up and packing and moving your life. I mean how much time is in between those moves and what has that been like?

Brandon:
Yeah. So one thing we learned quickly is having a single family, you collect a lot of junk. Just straight up, it’s junk. So it’s funny. One of our last pictures before we left our single family was us sitting with our little outdoor table with our two seats because that’s all we had left to eat dinner on.
And it’s really about traveling lightly to be honest. A lot of people, one of the hesitations they’ll have with house hacking is, “What am I going to do with all this stuff?” And we realized that quickly, we have so much stuff. And to make our lives easy, we literally just put it on the lawn, posted in Facebook Marketplace, anything worth under 50 bucks we just gave it away, which was a lot of our stuff.
And we sold a lot, and we purchased a lot of lightweight furniture to make it easier for the moves, or the moves. And yeah, so we just knew … Having a lot of stuff, it makes it mentally heavy on you when you have lots of just stuff to think about, and we had a lot to think about at the time. So getting rid of stuff kind of freed up our minds to think about the bigger picture and where we were going with our lives.

Ashley:
Brandon, now that you’ve invested a little bit, you are in a sense financially free, what would be some advice that you would give to someone who is you on day one, somebody who wants to have what you have, be able to leave their W2 job, house hack, have an investment property? What would be your action items, things that they can do today to prepare themselves to get to your point maybe even faster than you did?

Brandon:
Sure. I would say start to surround yourselves with like-minded individuals. One of the biggest challenges with doing what I do is talking to people who don’t understand the reason why we’re doing it. You will easily get talked about to anyone you walk down the street and say what you’re doing, “Oh my God, how do you deal with tenants? I can never live with tenants.” And it’s just mumbles, but these same people are the ones that are in severe debt and barely making it but they don’t want to give up these small comforts that they have. So I would say one, surround yourself with like-minded individuals.
Another I would say is delayed gratification, like just realize in life, life is one big lagging effect. Everything that you have today is a result of what you did five, 10 years ago. So you’re not going to get anything immediately, so start taking small actions to make a difference in your life five, 10 years from now. Just suck it up, realize it’s not going to be easy, or it could be fun, but it’s not going to be easy to get where we are if you want to put in the time. Not to say we’ve fully made it, but I personally think we’ve done really well.
And the last tip I would have is watch your finances. A lot of times … We’re very diligent with our finances on a monthly basis, and we literally have family meetings and we look at where are we this month? How come we’re down five grand or up five grand, what made that change? And I forgot what the term is, but what you track, you … You know the term. Basically, if you track it-

Tony:
Yeah, yeah.

Brandon:
Yeah, you know the term, but it gets better if you track your expenses. You realize that there’s something you’re doing that’s bringing them down or there’s something you’re doing that’s bringing them up and maybe you need to do more of that, whatever that may be. So definitely the third one I’d say is track your expenses.

Tony:
Brandon, one of the things you mentioned was that it’s hard to find people that understand what you’re doing and why you’re doing it, especially the idea of living with tenants. And for me when I think about house hacking, that’s always one of my biggest concerns is living next door to my tenant, what kind of quality of life am I signing myself up for? So have you been self-managing your units? And if so, walk us through what that journey’s been like for you and maybe some of the lessons you learned there as well.

Brandon:
Yeah. So probably one of the most interesting parts of house hacking, also in classy neighborhoods which is where we started, so it’s definitely a fun dynamic. I would say … I’m trying to think where we start with that.
You’re living with your tenants, you have to have expectations right from the start. The first thing is they’re renters, they’re not going to care for your property the way you care for it. That’s one thing I learned quickly. There’s trash here, there’s trash in the back yard. There’s their friends hanging out. You have to realize these people don’t own this place, and you also have to realize the class of neighborhood you’re in. A lot of it’s a rental market, like where we are, so that’s one thing I would say. I wouldn’t say lower your expectations, but this is not going to be your single family you had or we had where you can walk and say hi to your neighbors, it’s a different dynamic.

Ashley:
Do they know you’re the owner, the tenants?

Brandon:
Yeah. You know, I live on the edge, I’m kind of a risky person so I just straight up say, “I’m the owner,” and end of conversation. “I’ll see you later.” It’s just one of the things I never really thought too much about. Maybe when we grow more, I will hopefully have to stop saying that because I won’t be house hacking at some point, but right now it’s just one of those things I just don’t want to think much about. So I just tell them, “I’m the owner.”
And I also feel like having that relationship with them does help. You being responsible, speaking with them, treating them not necessarily like a friend but like a client of yours that you’re respectful of and giving them what they need, it creates a different level of care for the property as well. A lot of my tenants, they care for the property as if it is truly their property, so I never really have problems with just destruction or anything like that.
I have a really good relationship with my tenants. They do talk a lot when we show up. I give them their time.

Tony:
Can you talk us through that? So you say they talk a lot. Well, I guess first let me ask this Brandon. Were they inherited tenants?

Brandon:
I would say about half of my tenants that I have now were inherited and half were not, half were new that we brought in.

Tony:
Okay. So the ones that you inherited, can you walk us through that initial conversation? Like you say, “Hi, I’m Brandon. I’m the new owner,” and where does the conversation go from there?

Brandon:
Sure. So I grabbed all the information from the previous owner, phone numbers, their leases and whatnot. And it started with a phone call from me personally saying, “Hey, this is Brandon Rush. I’m the new owner. I’m going to be onsite next week. I could be there whenever you’re there. I’d love to meet with you just to introduce myself and go over,” not the ground rules but I always say things in a nice way but, “Just the ground rules of how things are going to operate moving forward.”
And generally, they’ll be okay. When you meet with them, they’re a bit hesitant. They’re very quiet. They kind of don’t know what to expect. I think a lot of them think we’re just going to tell them, “Hey, I’m kicking you out,” or, “I’m raising your rent $3,000,” but it was really none of that.
And it’s just in a respectful but authoritative way I tell them, “This is what’s going on. I have purchased the property, I’m the new owner. This is how you contact me. This will be your new rent,” assuming that they were a month-to-month, “This will be your new rent moving forward. I’ll give you a month or two to think about it.” I never want to make it so immediate and scary to them that they feel like they have to run away from it, so I give them a little bit of time.
And I tell them, “We’re going to sign a new lease,” so I never really talk about rules too much because a lot of that will be in the lease. I just kind of set general expectations to keep the place safe and to let them know where they could reach me, and I leave it at that.
Really it’s when we get to the lease is where we get down to business and we say, “These are the rules, so you’re signing or you’re not signing.”

Ashley:
How do you keep the tenants from knocking on your bedroom window saying, “My toilet is not working.”

Tony:
Not even on the door, but on the bedroom window.

Ashley:
The bedroom window. I remember we had a guest on a long time ago that bought a mobile home park and it had an apartment complex on it. And he was moving into one of the units, and the person that owned it previously had lived there. And the tenants would come knock on his window if they had a maintenance request. That was the old owner’s procedure, so he had to train the tenants to not do that for him. But Brandon, how do you prevent that and do you have a procedure in place that they know to follow so it doesn’t come to that?

Brandon:
Yeah. So we do use … You asked the question before. So for our property management, we do use Tenant Cloud as our property management platform. But the way I eliminate that is I set expectations from the start. I say, “These are the ways to communicate with me only. It’s either through a text message or a voicemail. Please do not knock on my door. I am not going to answer the door. If I do answer the door and you’re there, I’m going to close the door and text you and say, “Please text me your problem.” And they get it from the start.
And if they do do it, which I actually have never had anyone … Maybe one time, there was an emergency and someone did knock on the door, which was warranted. But you just set the expectations from the start, and you stick to them. If they do it, you don’t just give up and just walk downstairs and help them out.

Tony:
Brandon, I always wonder with the house hacks about creating the lease agreement because I feel like if it’s a property where I’m sharing walls with tenants, I feel like I would be even more strict with what my lease is and how I’m screening these tenants, so two questions for you. Did you create your own lease or did you find something floating online or maybe from bigger pockets? And then B, what was your tenant screening process like to make sure you weren’t living next to maniacs?

Brandon:
Yeah. So I guess the first part with the lease, so my lease is basically a mishmash of my own personal what I want because you’re the boss so you can … I mean within the law. So a lot of it is what do we want, so if there’s any kind of parking restrictions, we want to give ourselves more spots or anything like that, we put that in first. And then after that, I have a pretty good network so I’ve reached out and said, “Hey, could you send me a lease?” [inaudible 00:22:52] property management sent me theirs, this person sent me theirs. I kind of took time to mesh it up to what makes the most sense and what’s fair and also relatively strict at the same time that would eliminate any kind of problems?
And then I passed it to an attorney to review it, just to make sure that it’s legit and I’m not breaking any laws. And that’s how we did it. And I’m sorry, what was your second question? I’m sorry about that.

Tony:
No, no, that’s totally fine because one more followup on the lease agreement. So you mentioned the additional parking spaces that you’d like. Are there any other things you’ve added in that have made it easier for you as the landlord?

Brandon:
I would say anything that could make my life easier, like methods of payment. I only allow payment electronically or through personal check. There’s no cash, there’s no money orders. I would say quiet hours, things like that within the law, after 9:00 or 10:00, whatever the law is. Things like that, things that make me and my wife comfortable living there and make our lives easy is really what I’m trying to put in the lease.

Tony:
Trying to accomplish. So then the followup question was what’s your screening process? How are you making sure you don’t have Jack Nicholson from … What’s the movie where he went crazy? What can’t I think of it right now? The Shining, moving in next to you.

Brandon:
To speak on that, the first thing is unfortunately we’re all crazy. You never know who’s going to walk in the door. They could have the best credit. So it kind of sucks, but you can still vet to hopefully eliminate that.
I would say, again, Bigger Pockets, listen to podcasts. I’ve kind of collected all these different criteria that others have used, such as three times the rent is what you bring in monthly. That’s definitely a big one. Credit scores? A lot of times in my criteria I put preferable, not necessarily required, just to cover myself because a lot of times in classy neighborhoods, you won’t get somebody with 650 credit score but they may fall into that 625 or a 600.
And it’s all the general stuff. Landlord checks from previous landlords, verification of income is definitely what I require. And a lot of it is just visually watching the tenants as they’re walking through your … That’s one of my criteria, I don’t know if that’s illegal or not but I do it. And it’s not discriminating, it’s just seeing the vibe when they do open houses. So I only allow people to apply if they come through my open house, and you just want to watch out for the ones that are just very needy right from the start and they’re just like, “Oh, what about this? What about this? Oh, that’s ugly.” This is not going to work because you’re going to be a super needy tenant and I just don’t have time.

Ashley:
Brandon, are you rehabbing any of these properties, or are they pretty much turnkey that you’re purchasing?

Brandon:
All have been relatively turnkey. We have one that … I’d say they’re all early 1900s houses, so they’re not renovated so there’s still small rehab that we’ve had to do like turn a unit, but nothing significant. We kind of knew what we were getting into from the start with a lot of these properties, and they’re small projects like replacement of deck boards and replacement of doors and things like that that we’ve kind of hired out little by little over time but nothing significant.

Tony:
Got you. So one other thing I want to hit Brandon, and you’ve mentioned this a couple times, is how your network has played a role. You talked about getting your lease, you leaned on some other investors and there’s some people in your life you can’t talk to about why you’re doing this house hacking but you have other investors that know why and can see it. So I’m just curious what steps have you taken to kind of build your network?

Brandon:
Yeah. It all started honestly with I would say my local REIA. When we were back in our single family, we started out by driving an hour out to those meetings once a month and just getting submerged in the business and how it all works. And from there, I just realized your network is your net worth as they say. So started to collect cards from these people, and then realizing even from the start I have this problem, I need an attorney. Oh, I have this attorney’s card from this meetup I went to, I could reach out.
And it clicked with me just start networking like crazy because all the resources you need are all out there. You just got to be out there, and after a while it’ll become so easy that all you have to do is … I label all my contacts like agent, lawyer, plumber. So literally I just jump in my contacts and say, “Oh, I got a leak, plumber,” in my contacts. You get five of them, knock it out, and it just becomes so easy after you know so many people.

Ashley:
Can you just say what a REIA meetup is and how would someone find one?

Brandon:
Got it. So REIA, I believe it stands for Real Estate … Oh my God, I should know what REIA stands for. Real Estate IA, I don’t know.

Ashley:
Investment Association?

Brandon:
There we go, sorry. I just …

Ashley:
I don’t know, I’m guessing. I’ve heard of REIA, but I don’t know for sure.

Brandon:
That sounds about right. I’ve never actually from the start … But yeah, so REIA is a local organization, definitely every state I believe has a REIA and then there may be small localities that have REIAs as well. But a REIA is an organization that basically teaches you about real estate, provides the fundamentals on real estate, provides the network opportunities on real estate, within your market. So it’s very common to have REIAs of 50 to 100 people, it’s one of the most common meetup platforms or organizations you should have in your localities wherever you are.

Ashley:
Okay, awesome. I want to get into our deal review, so do you have a property that you want to share with us?

Brandon:
Sure. Honestly, I think the first one is probably the best. It’ll always be the best.

Ashley:
Okay. Well, I’m going to ask you some rapid fire questions, and then we can kind of go into the story of it. So what type of property was this?

Brandon:
So this was a three family in New Britain, Connecticut.

Ashley:
And what was the strategy you were using with it?

Brandon:
Just use our savings. Go 20% down and live in it. It was really straightforward for this one. We had to find a property that we could live in, that was the hardest part because there were no properties at the time when COVID kicked in.

Ashley:
And the plan was to hold this property, even after you were no longer living in it?

Brandon:
Correct, yeah. The plan was to live in it for one year and move on to the next.

Ashley:
And what was the purchase price?

Brandon:
The purchase was $286,000.

Ashley:
Okay, and did you do any rehab, put any money into it?

Brandon:
We did have to turn one unit. We did it ourselves, so it was cheap money-wise but it was very expensive time-wise.

Ashley:
Yeah. And did you go and get this property refinanced at all, or have you cut the original loan on it with the 20% down?

Brandon:
Yeah, so we haven’t pulled a refinance, but we did pull a HELOC. A buddy of mine through my network said, “Hey, your property probably appreciated a bit over the last year and a half. You should consider a HELOC while you can.” It turns out there was I think a little over 40 or 50 grand in equity in the property, and we now have a HELOC. So yeah.

Ashley:
Well, do you want to kind of go into the story, starting off with how you actually found the deal?

Brandon:
Sure. It was an MLS deal actually, so no off-market, nothing special. Just my wife and I looking every day at the realtor.com alerts that come in. And this one popped up. I think for us, leaving the single family it would’ve been hard for us to take a property that needed a significant amount of work. So the balance was finding something that needed not a lot of work that was still relatively nice to live in.
So we did find a property that was relatively nice to live in on the MLS. It was a three bed … I mean it’s a triplex, but our specific apartment that we were in was a three bed, one bath so it gave us the space that we needed to kind of feel like it’s kind of a home instead of a one bed crunched in the corner. So it was a triplex that we basically found on the MLS, paid 286 for it. Yeah, three beds per floor. That was the first purchase.

Ashley:
How was your excitement the day you closed on that? Making this transition, going from single family to house hacking and you already know you are just going to accelerate your financial freedom, what was that like for you and your wife?

Brandon:
It was exciting. Knowing that next month, that $1,500 mortgage we were paying is pretty much gone was like I don’t care what else happens, we are saving 1,500 bucks a month now. To me, it’s like freedom. It was freedom immediately. It’s the most free I felt in my life in a long time without the weight of these obligations of a mortgage and all the other stuff that comes with a house.
And then I would say a little bit of that quickly went away with realizing there’s people living here with us that we have to kind of manage, so we forgot about that part. But it all worked out. It all worked out.

Ashley:
Hey, I would manage two tenants for 1,500 bucks a month.

Brandon:
Yeah, exactly.

Tony:
One followup question to that Brandon. In terms of choosing the right property, what does your analysis process look like? And what was it about this specific triplex that made you say okay this house is worth $280,000?

Brandon:
Sure. So the analysis involved Bigger Pockets Calculator. I still to this day have 100s of them at this point done. That was probably number 101 because they say do 100 before you get into it.

Tony:
Yeah.

Brandon:
Based on comps is how we came up to our valuation of the property. We looked at what other triplexes in that area sold for roughly, and we kind of stuck to our numbers. We offered maybe six grand over what others appraised for, we felt it was worth just to kind of give us an edge, and it worked.
And the other part of the valuation was what the rents would bring in for that property. And looking at what the rents were bringing in, we weren’t too concerned with we’re going to cash flow $2,000, $3,000, whatever dollars. We were more concerned with how do we get rid of that $1,500 mortgage that we’re paying every month, and also making sure the property’s covered once we leave. Those were our two main criteria. And this property did that and a little bit more. Once you ran the numbers truly, $82 a month we were profiting and netting.

Tony:
There you go.

Brandon:
I can’t complain.

Tony:
So was this one of the properties where you inherited tenants, or did you have to go out and screen folks to fill those other two units?

Brandon:
On this property, we inherited tenants. Today, we actually have two new tenants in that building, one still remaining that’s inherited. But we had to bring in two new tenants since having that building. We had an issue with one of the tenants. It was COVID, not paying, low income tenant, couldn’t afford to keep up. And we worked it out. That was the first tenant who left, and we were able to go through the process like we talked about with vetting a new tenant and bringing a new tenant in. And after we left, we were able to bring a new tenant into our unit.

Ashley:
Brandon, knowing what you know now, what would you have done differently negotiating with that tenant that stopped paying? Or would you have done the exact same thing, and what was that process?

Brandon:
Honestly, I think I would’ve done the exact same thing I did, which was when you get into these situations you can’t fight it because your control is limited. The options are very limited. Someone who can’t pay rent, you can’t force them to pay rent, so the next best case is how can work with them to get them out in a very nice way versus a forceful way, which a lot of people would kind of go that route.
What we did basically is rental assistance. Through my network, I put it out there and said, “Hey, I’m having trouble with a tenant who’s not paying. What would you guys do?” And right away someone said, “There’s a rental assistance program in Connecticut. You should apply and work with the tenant.” And we got paid out four months of advance rent. And at the end of that four months, I worked with her in that case and she left on month four, so everything worked out.

Ashley:
Did you have an agreement for that where she knew that she was going to be leaving at the end of four months, or was that something you guys had worked out at the end of those four months?

Brandon:
It was a whole situation, and this is where I’m glancing over what really went on. I would say it was a bit of me pushing in a nice way like, “All right. You can’t afford to live here. Bad things may happen to you if you stay here, not physically but I may have to evict you.”

Ashley:
An eviction.

Brandon:
Yeah.

Ashley:
Yeah, yeah.

Brandon:
She had a social worker, so I started working with the social worker to kind of see what route we can go to get her out. Are there any programs for people having the issues that she was having? And month four, she just said, “I’m leaving.” And I was like, “Holy crap.” I don’t know exactly what I did, but I think just the continuing conversation. I had just let it go and not said anything for four months, then we definitely would’ve been sitting here … That’s one of those things that make you quit landlording. It was rough, but it all worked out.

Tony:
Ashley I wanted to ask you, I know we’ve chatted about this on the show before, but did any of your tenants stop paying during COVID?

Ashley:
Oh yeah. I had a couple, and then the other investor that I do asset management for, he did the same thing. Our property management company applied for these rental assistance programs that were available because of COVID. The problem was that they only paid back rent, and it was you had to apply and then you wouldn’t get funded for three months. So by that time, another three months had gone by of them not paying rent, and then … Yeah. So we’ve gotten paid for the people that haven’t paid, but then the whole thing would start again.
And I think there’s been two programs that have come out, so I’ve gotten two lump sum payments from each of these programs. But there has been one tenant that hasn’t paid since March 2020 and had been relying on these programs, and so we’re actually in the middle of the eviction for them finally because it’s only maybe been six months since evictions have been allowed in New York State. So just a huge backlog of evictions that are being processed.

Tony:
Man. Yeah, I had to evict all of my short-term rental tenants too, so I totally feel you.

Ashley:
Stab to the heart.

Tony:
Wait, so Brandon, I want to go back to your deal if we can finish things off here. I want to talk through the numbers just a little bit. So you initially bought it with three units.

Brandon:
Correct.

Tony:
You were living in one of them.

Brandon:
Correct.

Tony:
You were profiting like 82 bucks a month.

Brandon:
Yes.

Tony:
What does that property look like now that you’ve moved on to your second house hack?

Brandon:
Yeah, sure. So since then, obviously COVID has resulted in rent increases. We have paying tenants now, good paying tenants in that property. So now I would say a true net after expenses on that property, we probably pull about $900 to $1,000 a month after all expenses. Net is hard to explain because when you get into real estate, you realize you have your up month, you have your down months, and that number fluctuates. But yeah, I’d say roughly around $1,000 is what it’s netting.

Ashley:
That’s awesome.

Brandon:
Yeah.

Ashley:
Great job on that.

Tony:
Yeah. I’m trying to do the math really quickly. So say you’re netting even on the low end 900 bucks a month, and you do that over 12 months, that’s almost 11,000 bucks. And you said you put down what, 20% on this property?

Brandon:
Yes, I believe it was around 60-something.

Tony:
Okay, so divide that by 60, and you’re at almost a 20% cash on cash return, which is phenomenal, right, for a long-term rental. So congratulations man, that’s amazing.

Brandon:
Yeah, thank you. Thank you. I didn’t expect that, but things just worked out. They just started to go.

Tony:
So if I can ask one followup question to that. So the house hack that you’re in right now, is that one the threeplex or the fourplex?

Brandon:
Four family.

Tony:
So that one’s a four family, so can you just really quickly walk us through the numbers on that one, like how much you’ll think you’ll cash flow on that property per month?

Brandon:
Yeah, sure. So this was more of … Somebody in my REIA mentioned, “Don’t get I want unit-itis,” and it basically means don’t rush to get units, which is what we did to this property. So long story short, we paid I want to say about 425 on this property. On this one, we don’t necessarily live for … I guess you could you say live for free, but we still really truly factor in expenses so we’re paying a couple hundred bucks out of pocket on this property. But it’s a much more expensive property in a much better neighborhood than where we were before, so with better neighborhoods comes more expensive properties. But yeah, that’s where we are right now.

Ashley:
What would your unit rent for? So if you were going to rent the unit you’re living in right now, what would it rent for?

Brandon:
I would say somewhere between $1,200 to $1,300 a month.

Ashley:
And you’re living there for a couple hundred?

Brandon:
Yep, oh yeah.

Ashley:
Awesome.

Brandon:
Yeah. And in the end to be honest, the other units kind of cover that rent anyway, but we still pay it because it’s numbers. I’m very black and white like this is what this property demands, this is what we must pay. I don’t care about how the other properties are performing, but it all works out.

Ashley:
Do you have a certain buy box or criteria for the properties that you’re purchasing?

Brandon:
It’s changed since we first started. When we first started, it was all cash flow. We want cash flow, we want cash flow. But as I’ve become a seasoned investor or learning, we’re thinking more the big picture long-term, so for us it’s more of being able to acquire properties for little to no down money. And I would prefer a more turnkey property that doesn’t need a ton of repairs. The cash flow may not be there now on them, but again I’m thinking 10 years from now honestly with everything that we purchase.
We put ourselves in a place where our living expenses are so low that we don’t need to chase after a ton of cash flow. Would it be nice? Definitely, but I’m more concerned with just acquiring properties over the next 10, 15 years.

Ashley:
I want to take us to our mindset segment Brandon, so are there any expectations you had getting into real estate that now that you are an investor you realized are not even reality?

Brandon:
Yes. I would I don’t know if it’s necessarily mindset, but cash flow. It’s not what you think it is. As a beginning investor, especially buying older properties you realize that a lot of that is absorbed through old property stuff. Old pipes, leaky roofs, all that stuff. So I would say cash flow is definitely one of those things that it’s not as real as it seems, so just be careful getting into real estate thinking that you’re going to cash flow significantly because you may not when you really factor in the true cost of ownership of a property.

Ashley:
That’s such a good point. I completely agree with you, yeah.

Tony:
All right Brandon, I want to take us to our next segment, which is our Rookie Request Line. So for all of you that are listening, if you’d like to get your question featured on the show, you can give us a call at 888-5ROOKIE and we might pick your question for the show. So Brandon, are you ready for today’s question?

Brandon:
I’m ready.

Tony:
So today’s question is from Alex, who’s in the San Francisco Bay area. And Alex says, “I have about $350,000 for a down payment for a small multi-family, which is barely enough to really cover a down payment in the Bay Area. I was thinking about house hacking, but my question is should I go that route and find something to house hack here in the Bay Area, or maybe go a cheaper route and rent and use that money to invest out of state where my money might go a little further. Thank you so much.” What are your thoughts on that Brandon?

Brandon:
Good question, good question. I would say do both to be honest. It’s very feasible to do both. Assuming this is his first purchase, buy a house hack with a low down payment. Lower your expenses. Don’t start with trying to acquire 100 units. Start by lowering your living expenses. And then go from there because at that point, you have a property, you are an investor. It’s not like you’re just doing it and lowering expenses. It’s two-sided, you save expenses and you get a property whether it’s a single or a multi-family.
And then from there, you can then save all that money you were paying in rent or on the mortgage and then reinvest that somewhere else into another state. So at least in the meantime you’re looking for cheap while you’re banking so much more than you would if you weren’t. And then give yourself six months, a year, come up with your future plan, and then buy property out of state.

Ashley:
Yeah. I think Brandon you have a very valid point is it doesn’t mean that you can’t do both, maybe just doing one first and then the other. And either one you do will be a good opportunity for you to get into the next one. And I think that Alex, you should look at the numbers on each of these scenarios.
So if you do a house hack, how much will you be saving compared to paying rent? And then also look at if you buy out of state, how much cash flow are you going to get? So which number is higher? Are you going to be saving $2,000 a month if you house hack, but are you going to be making $2,000 a month in cash flow if you buy an out of state property with that same dollar amount? So I think look at those scenarios too.
And if you get appreciation, take that into factor too. The Bay Area, you may get more appreciation than if you’re going and buying these cash flowing duplexes in Detroit too. So I think it’s important to not just take into account the cash flow, but also appreciation too.
Okay Brandon, now onto the toughest part of the interview, the Rookie Exam. What is one actionable thing rookies should do after listening to this episode?

Brandon:
I would say if you currently don’t have properties and you’re a rookie and you have nothing yet, think about what your life would look like if you didn’t have to pay your current rent? Or if you do have a property, a single family, you have a mortgage, what would your life look like? How much more would that add on to what’s possible for you? And then take action from there.
Really just explore your finances after that and see how much of a difference it would make. It would allow you to buy that first investment property just like we just talked about. It would allow for a lot, even if you don’t want to move so fast it would just free you up and allow for mental freedom to think about your next steps.

Tony:
Next question for you Brandon. What is one tool, software app, or system that you use in your business?

Brandon:
My wife and I, we use Tenant Cloud for our property management currently.

Ashley:
Okay. And where do you plan on being in five years?

Brandon:
That is a good question. I would say we may be in a single family, I’m not sure yet. My life is so dynamic, I just kind of go with the flow at this point. Still acquiring properties. We may not necessarily be in the multi-family space because as I’m learning, there’s multiple streams of different types of income you can have. So definitely being in a place of multiple streams of income. We’re exploring the Airbnb route now for our next house hack, so we’ll see how that goes. If we enjoy that, we may go that route. So I’d say having at least two to three streams of income is kind of where we want to head moving forward into the future.

Ashley:
That’s awesome. And I don’t think we asked this, but is your wife in a W2 job right now?

Brandon:
She still is, yes. She still is.

Ashley:
Yeah, so maybe she’s the next one …

Brandon:
I’m telling her like-

Ashley:
-To get out of her job in five years? Yeah.

Brandon:
Definitely, for sure. For sure.

Ashley:
Yeah, yeah. Awesome. Okay, well before we end the show, I want to give a shout out to this week’s Rookie Rockstar, who is Ryan Burnham. He just closed on a fourplex in Minnesota on Friday, and it is house hack number two. Three and a half percent down for the down payment at 4.625% on the mortgage. And the total income is going to be $2,680 to $2,700 monthly, and that includes the coin-operated laundry that is on premise. So Ryan said, “Living almost for free in one of the units.” Congratulations Ryan, that’s really awesome, and thank you so much for sharing.
If you guys want to be featured as our Rookie Rockstar, make sure you join our Real Estate Rookie Facebook group, and leave your win for us on there. Or you can also message Tony or I on Instagram at @welcomerentals or @tonyjrobinson.
So Brandon, thank you so much. We’ve appreciated you coming on her and sharing your house hacking journey. Can you please let everyone know where they can reach out to you and find out some more information about you?

Brandon:
Sure. I would say the best place to reach me is probably Facebook, I believe my tag is rushdpi, R-U-S-H-D as in dog-P as in Paul-I as in the letter I. Yeah, just hit me there. My website is dartmouthpi.com, so dartmouthpi.com, and you can message me through there. That’s probably it.

Ashley:
Okay, well thank you so much. We really enjoyed having you, and we can’t wait to see your journey across the next five years and beyond, so thank you for joining us. I’m Ashley, @welcomerentals, and he’s Tony, @tonyjrobinson on Instagram, and we will be back on Saturday with the Rookie Reply.
If you guys loved this episode, please leave us a five star review on your favorite podcast platform, and we’ll see you guys next time.

Speaker 4:
(singing)

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-28 06:02:33

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Canadian Housing Market Outlook: Fall 2022

RE/MAX Canada Network expects Canadian housing market prices to decrease 2.2 per cent this fall

  • RE/MAX brokers and agents anticipate prices in the Canadian housing market to ease by 2.2 per cent this fall, due to high inflation, rising interest rates and economic uncertainty
  • Rising interest rates have prompted 44 per cent of Canadians to temporarily shelf their home-buying aspirations, while 34 per cent say they won’t hold on purchasing a home for the foreseeable future
  • Recession worries have impelled 41 per cent of Canadians to wait to purchase/sell their home in fall 2022

Toronto, ON and Kelowna, BC, September 28, 2022 – RE/MAX brokers and agents are anticipating the national average residential sale price in the Canadian housing market to decline 2.2 per cent in the final months of the year (September-December), according to RE/MAX’s 2022 Fall Canadian Housing Market Outlook Report. This market moderation comes on the heels of rising interest rates, record-high inflation and broader global and economic uncertainties that have impacted consumer confidence and market activity. Bucking the downward trend, six out of 30 Canadian housing markets analyzed are likely to experience modest price appreciation between 1.5 and seven per cent. Meanwhile, RE/MAX brokers and agents expect a decline in sales this fall, in 24 out of 30 markets surveyed.

In a survey of RE/MAX brokers and agents, 22 out of 30 said rising interest rates have affected activity in their local residential market this year, with some indicating that this has been the biggest factor impacting homebuyer and seller confidence – a trend that is likely to continue for the remainder of 2022. These insights are supported by a new Leger survey commissioned by RE/MAX Canada, which reveals that 44 per cent of Canadians agree that rising interest rates are compelling them to hold on buying a property this fall, while 34 per cent say they won’t hold.

“While we are still facing significant housing supply shortages across the Canadian housing market, many regions are experiencing softer sales activity given recent interest rate hikes. This provides some reprieve from the unprecedented demand and unsustainable price increases we’ve seen across Canada through 2021 and in early 2022,” says Christopher Alexander, President at RE/MAX Canada. “However, the current lull in the market is only temporary. Until housing supply increases, these ‘boom’ and ‘bust’ cycles will likely be a recurring event.”

Despite the fact that nearly half of Canadians are waiting to buy or sell a home, we’re confident that as economic conditions improve by mid-2023, activity will resume,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Timing the market for short-term investment is extremely difficult and rarely successful. But as a long-term investment, the Canadian housing market continues to yield solid returns. If someone needs to buy or sell, regardless of those cyclical peaks and valleys, being informed and working with an experienced real estate professional can help consumers clarify some of those unknowns and make the best decision possible.”

Regional Canadian Housing Market Trends

RE/MAX brokers and agents in Canada were asked to provide an analysis of their local market this fall and share their estimated outlook for the remaining months of 2022 (September-December).

Western Canada and the Prairies

In regions such as Vancouver, BC, Victoria, BC, Kelowna, BC, and Edmonton, AB, RE/MAX brokers reported rising interest rates as a factor impacting local market activity, resulting in softening consumer confidence, fewer multiple offers from buyers, and a shift toward more balanced conditions between buyers and sellers. In all regions analyzed in Western Canada and the Prairies, with the exception of Calgary, AB and Edmonton, AB, the average residential sale price is expected to decline between zero and 6.5 per cent.

In Calgary, AB, interest rate hikes and recession worries have not had a notable effect on the market, due to the region’s relative affordability. As such, a modest three-per-cent price increase is expected through the remainder of the year. In Edmonton, AB, rising interest rates have had the greatest impact on homes priced from $500,000 to $1,000,000, while those priced at $400,000 or less are still relatively affordable and a good entry point into the market, despite the current economic climate. Edmonton is likely to experience a modest price increase of 1.5 per cent for the remainder of the year. In both Vancouver, BC and Edmonton, AB, demand for luxury properties has remained stable, with interest rate hikes having a minimal impact on this segment of the market. This is expected to continue into the fall months. Low inventory remains a pressing concern in Kelowna, BC, Victoria, BC, Vancouver, BC and Calgary, AB, and is expected to place upward pressure on home prices in 2023 and beyond. In contrast, recent commercial and industrial developments have eased inventory concerns in Winnipeg, MB for the time being.

Ontario

Much like other provinces across the country, Ontario has not been immune to the impacts of rising interest rates. Many markets including Oakville, Windsor, Barrie, Durham, Kingston and Kitchener-Waterloo, anticipate – and in some cases already experiencing – a reduction in the number of units sold over the coming months. Apart from Oakville and Muskoka, average residential sale prices in Ontario are likely to remain steady or decrease between two to 10 per cent in the fall months.

Similar to Western Canada, the luxury market has remained resilient and in-demand among buyers in Oakville, despite rising interest rates and a looming recession – a contributing factor to the modest two-per-cent average residential sale price increase expected in Oakville this fall. Muskoka continues to attract homebuyers to the area, while simultaneously, many sellers are eager to sell before year-end. Given a steady stream of demand, Muskoka is expected to experience a modest five-per-cent increase in average residential sale price this fall. In Peterborough, interest rate hikes and the subsequent effects on the stress test have eroded affordability in the area, which is the main factor contributing to the seven-per-cent decrease in average residential sale price expected in the coming months. The return of conditional offers has been a prevalent trend across the province, including in Kingston, Kitchener-Waterloo, Muskoka and Peterborough. Echoing many regions across Canada, Durham, London, Sudbury, Ottawa, the Lakelands and the Greater Toronto housing market are expected to regain balance in 2023, albeit with low inventory continuing to place upward pressure on prices. As one of the more affordable markets in Ontario, Thunder Bay is unlikely to experience any significant fluctuations in average residential sale prices this fall.

Atlantic Canada*

Similar to Western Canada and Ontario, economic factors such as rising interest rates and a possible recession have contributed to decelerated home-buying activity in the region. Charlottetown, PEI experienced immediate impacts as interest rates rose, with the number of sale transactions reduced by almost half on a month-over-month basis, particularly among properties in the $500,000 to $1,000,000 price range. Despite these circumstances, Atlantic Canada continues to attract out-of-province buyers due to its affordability, relative to the rest of Canada. The majority of Atlantic Canada housing markets analyzed are expected to experience modest price increases through the end of 2022, including Halifax, NS (+1.5%), Moncton, NB (+6%) and St. John’s, NL (+7%). The outlier is Charlottetown, PEI, where average residential sale price is expected to decline by two per cent in the fall months.

Housing affordability continues to attract buyers in Moncton, who have been able to leverage the recent decrease in demand to negotiate with sellers and include conditions on purchases. Meanwhile in St. John’s, NL, economic pressure from rising interest rates has resulted in extended rent periods by would-be buyers, despite this region anticipating an increase of seven per cent in average residential sale prices. The trend has been further exacerbated by low housing inventory. However, recent “green” government announcements and initiatives are anticipated to boost the local economy and in tandem, the housing market. In spite of concerns over supply falling short of demand, Charlottetown, PEI is expected to regain more balance in 2023. However, inflation coupled with the increased cost of living will likely result in a moderate two-per-cent decline in average residential sale prices through the end of 2022.

About the 2022 RE/MAX Canada Fall Outlook Report

The 2022 RE/MAX Canada Fall Outlook Report includes data and insights from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on market activity and local developments. Average sale price is reflective of all property types in a region and varies depending on the region. When referring to “fall” this includes the months of September 2022-December 2022. *Insights/figures in Atlantic Canada were gathered prior to Hurricane Fiona. Regional summaries with additional broker insights can be found at the RE/MAX Canada blog.

About Leger
Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,522 Canadians was completed between September 16 and 18, 2022, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.

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. RE/MAX Canada refers to RE/MAX of Western Canada (1998), LLC and RE/MAX Ontario-Atlantic Canada, Inc., and RE/MAX Promotions, Inc., each of which are affiliates of RE/MAX, LLC. 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.

Forward looking statements
This report includes “forward-looking statements” within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “believe,” “intend,” “expect,” “estimate,” “plan,” “outlook,” “project,” and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding housing market conditions and the Company’s results of operations, performance and growth. Forward-looking statements should not be read as guarantees of future performance or results. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include (1) the global COVID-19 pandemic, which has impacted the Company and continues to pose significant and widespread risks to the Company’s business, the Company’s ability to successfully close the anticipated reacquisition and to integrate the reacquired regions into its business, (3) changes in the real estate market or interest rates and availability of financing, (4) changes in business and economic activity in general, (5) the Company’s ability to attract and retain quality franchisees, (6) the Company’s franchisees’ ability to recruit and retain real estate agents and mortgage loan originators, (7) changes in laws and regulations, (8) the Company’s ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (9) the Company’s ability to implement its technology initiatives, and (10) fluctuations in foreign currency exchange rates, and those risks and uncertainties described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company’s website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

2022-09-28 05:00:37

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How to Maximize Your Real Estate Portfolio

Investing in real estate is a great way to generate passive income, build long-term wealth, and diversify your portfolio. However, there is no such thing as a one size fits all approach to real estate investing. However, this article will outline some of the tried and true methods savvy investors use to increase cash flow and maximize their returns. 

Choosing The Right Market 

Find good cash flow

Passive income is one of the most appealing benefits of a real estate investment. To generate passive income from your property, you will need to find a solid cash flow market. Cash flow is the profit collected from monthly rent after subtracting all monthly operating expenses. 

Ideally, you want a market that offers both positive cash flow and high appreciation to reap the most ROI. However, desirable markets are highly sought after by investors, which means you have to be proactive in your search. Learning to look for areas with the ingredients for strong growth potential will allow you to stay a step ahead of the competition. 

Look into other markets

Many people prefer to shop close to home when purchasing an investment property. However, limiting yourself to a single market also means limiting your earning potential. Real estate markets vary widely from state to state and even from neighborhood to neighborhood. It’s sometimes necessary to look beyond your geographical boundaries to find a more favorable market. 

Don’t let the idea of investing remotely intimidate you. Thanks to the abundance of online resources, it’s easier than ever to purchase and manage an investment property remotely. There are a number of apps that allow you to tour properties and have face-to-face meetings without ever having to leave your home or office. 

Stick to a strategy

Determining cash flow potential requires more than simply crunching numbers. First and foremost, you want to lay out a strategy and set incremental goals that align with your long-term vision. A well-defined plan will ensure a more calculated approach to decisions and mitigate the risk of costly mistakes. 

Do your research

Due diligence is the fundamental difference between gambling your money and investing it. Proper due diligence focuses on both the macro and microeconomic factors. 

Always start with focusing on the macroeconomics of your target area. This is the “big picture” stuff, such as population growth, employment rate, property taxes, and government policies. By assessing the macroeconomics, you get a better understanding of whether a market is worth looking into further. 

After assessing the macro, it’s time to zoom in on a neighborhood or small region. Consider the various elements that could impact the area’s desirability, such as demographics, median household income, proximity to recreation, jobs, shopping, and anything that could impact the quality of life of those living and working in that area. 

Assessing all the complexities that affect your target market can seem daunting and time-consuming. Fortunately, much of the information is readily available online. Nearly every city has a website with comprehensive plans, ordinances, special projects, and zoning information. Other online resources, such as social media and community bulletin boards (such as Nextdoor.com), can provide an insider perspective from locals in the area.

Another resource is local real estate agents. An experienced agent familiar with your target area can offer valuable insight that may not be available online. They can also connect you to local businesses and tools you may need. 

Looking for an investor-friendly real estate agent? Match with one here!

Consider Multifamily Investing

Although multifamily properties often come with a higher price tag than single-family properties, they are more likely to produce a high ROI. If you want to generate passive income from your rental property, multifamily is by far your best bet. 

What is a multifamily property?

A multifamily property is any residential property containing multiple units occupied by separate individual households. A unit must provide at least one full bathroom and a kitchen. Units can be contained within a single structure (duplex, triplex) or several buildings within the same complex (apartments, townhomes, condos). The word “family” in this context refers to any household, which includes single tenants, couples, roommates, etc. 

It is important to note that a single-family home occupied by multiple tenants does not constitute multifamily housing. Although it may technically house multiple families, it would still be considered a single-family home by definition. 

Pros and Cons of Multifamily Properties

Multifamily properties are excellent investments for many reasons. However, as with any investment, multifamily properties are not for everyone. Here are a few of the pros and cons.

Pros

Consistent Cash Flow – Multifamily properties are known for generating reliable cash flow and higher rental income compared to single-family properties. 

Tax Breaks – Several tax incentives are available for multifamily properties. Depreciation and operation costs, such as maintenance, property management fees, utilities, advertising, and insurance are considered tax deductions. 

Financing – A multifamily property will likely come with a more significant price tag but believe it or not; it’s a lot easier to find a bank to front the bill. Lenders consider multifamily properties a low-risk investment because of their consistent and predictable cash flow, even during periods of high inflation and recession.

Cons

Competition – Multifamily properties are highly sought after. Steep competition in a favorable market can drive up the already high price tag on properties. Inflated markets can create a substantial hurdle for new investors trying to enter the multifamily property market. 

Cost – Multifamily properties require a significant upfront cost, substantially more than a single-family home. Many banks require a 20% downpayment to finance a multifamily property, which can be a major barrier for investors low on capital.

Demanding  With more tenants comes more responsibility. Taking care of all of the property’s needs, as well as the tenants’ needs, is a full-time job. This is why many landlords choose to outsource the management and maintenance duties to property managers, which come with their own set of costs. 

All in all, if you have the resources to cover the high upfront costs and the ability to outsource some of the responsibilities, a multifamily property is a great way to generate passive income and increase your ROI. 

Skip The Fixer-Upper 

Thanks to popular home renovation T.V. shows, many people think property investment is about finding a dumpy fixer-upper and magically transforming it into a dream home. Don’t get me wrong. It is possible to turn a profit on a fixer-upper. However, the trash to treasure approach isn’t practical when it comes to maximizing earning potential. 

Reality vs. expectation

An obvious appeal to purchasing a fixer-upper as an investment is bargain pricing. It is common for properties that need substantial work to be priced under market value. The initial discount is meant to make up for the cost of repairs and updates that the property will need. 

However, it’s easy to underestimate the full magnitude of the project. This is especially true if you do not have the experience or guidance of an expert to help you make informed decisions. Time and time again, fixer-upper projects are abandoned because buyers find themself in over their heads. 

A little sweat equity goes a long way

Choosing a property that needs major renovations may not be your best choice when it comes to maximizing your ROI, but that doesn’t mean you should avoid renovations altogether. Rather than looking for a diamond in the rough, try finding a property that just needs a little facelift. Sweat equity can increase the value of your property and may even increase your monthly rent. Here are a few minor upgrades that can greatly impact your return:

  • Updated light fixtures
  • New hardware on cabinets
  • A fresh coat of paint
  • Add a kitchen backsplash
  • Upgrade sink and bath fixtures
  • Modern and durable flooring
  • Spiff up the Landscaping 

Consult a professional

Having experience with property renovation can be an added benefit when it comes to deciding what property to invest your time in. However, if you don’t have the expertise to make an informed decision, your best bet is to ask a professional. It is better to pay a small fee for a professional opinion than to find yourself in over your head after closing. 

When it comes time to start your renovation projects, it’s essential to know your limitations. Although DIY projects can save you money in the short term, if you don’t have the experience or skill to carry out the tasks properly, it can end up costing more than it’s worth. 

Keep your personal preferences at home

Putting together the design elements for your property must be done with your potential tenants in mind. Style elements should be neutral and versatile. Although it is possible to incorporate certain unique or creative design features, this should be done with caution and perhaps with professional guidance. 

Conclusion

No matter if you are a seasoned landlord or you’re just starting out on your journey, real estate investment is a reliable way to increase wealth and generate additional income. By staying informed on various markets and property types, you open the door to endless opportunities. With calculated risks and intentional action, you will be able to get the most out of your real estate investments.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-27 21:31:52

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How to Get Any Seller to Accept Your Offer in 24 Hours (or Less!)

Investment properties are hard to find—unless you use the tips Jonathan Greene mentions in today’s episode. If you’re like most real estate investors, you know that in 2022, it can feel like you’re constantly getting nickeled and dimed over every aspect of your offer. The seller wants more money, a quicker closing, refuses to give seller concessions, and acts like their often outdated, structurally unsound property is worth as much as their neighbors’ new construction down the street.

How do you negotiate with these sellers to actually get the deal done at a price that won’t destroy your future profits? Or, maybe a better question to ask is, how do you find deals already on the market, with desperate sellers waiting to accept any offer that comes their way? What if you’re a brand new real estate investor, still looking for your first rental property? How do you get on the same wavelength as a tough seller?

Jonathan Greene is known around the BiggerPockets forums as a millionaire mentor. He left his career as a criminal prosecutor to start profiting from investment properties. Now, he runs an agent team that has built seriously strong negotiation tactics, and Jonathan still invests heavily on the side. He’s walked away from more deals than he can count. But, he’s also won deals that other investors would have no chance at acquiring. Want to repeat how Jonathan did it? You’ll hear it all in this episode!

David:
This is the BiggerPockets podcast show 667.

Jonathan:
One of the things that I’m so intent on with new investors, which I’m sure you guys will agree is if you buy your first property and then you’re going to buy your second property before that first property is at max value, meaning like you fixed everything that’s going to be a high number later. You’re going to eventually get caught on all of them. And if you do that, when there’s a market downturn, you’re going to lose them all.
So, I like people to really fix up that first property. It doesn’t have to be perfect. If you know that HVAC is going to break, you know there’s a big cost coming and you can’t go buy another property, because you’re going to get caught on both of them and not be able to pay for repairs on either at that time.

David:
What’s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, coming at you today from Scottsdale Arizona, where I’m hanging out at the property that Rob and I bought and getting ready for a retreat to cook some other investors. And I got to say it is gorgeous out here as I say every time I’m here and we brought you a gorgeous show. Today, we bring back Jonathan Greene, my long-lost cousin, who we had on episode 584. And we had such a good time that we brought him back for more.
Jonathan is a real estate agent and investor who buys houses for himself to flip, also invest in commercial property. And more importantly, helps other people like you build wealth through real estate. And in today’s show, we talk about the different ways Jonathan does that. A big portion of it is negotiating, how he negotiates for his clients, how you can negotiate for yourself, what is happening in a negotiation, behind the scenes, as well as how to find on-market properties with motivated sellers, how to approach each deal, how to look at a house and see the things that other people are missing and more.
I had a great time today. Rob, what were some of your favorite parts of the show?

Rob:
All of the things you just said. You took all my points, I had them already. And I was like, “Dang it, those were all my favorite points too.”

David:
Yeah. I basically say all the best parts. And then, I give you two seconds to think of what you’re going to say after I just said them.

Rob:
All right. Well, I have something. I also liked that this was a, I mean, I guess this is what you said, dang it, is a negotiation master class. We hear everybody’s point of view here where negotiations are a fickle, fickle beast, because if you’re really, really good at negotiating, then you got to know when to take and then when to give back. You don’t want to nick away at a negotiation so much so that the seller is going to try to get out of every deal that you think that won the battle on. Because you can always lose the war.
So, really fun to talk through all the different, I don’t know, processes and deals that we’ve all gone through. And honestly, it’s always nice to have Mr. Greene back and honestly, I think it’s just a beautiful thing to see too long-lost cousins, reunite and chat and chum it up and chop it out on the pod. Honestly, it brings joy to my heart.

David:
I just thought of an analogy that could fit for the negotiation tension that you’re describing. You don’t want to go too hard. You don’t want to go too soft. It’s to do with fishing. So, when I was a kid, my dad would take me fishing and I would always ask like, because I’m just always in a rush to do everything, “Why can’t I just overpower the fish and just reel it in when it’s on the line?” And he would say, “Because if the fish is swimming away and you are trying to reel in, the line will snap and you’ll lose the fish altogether. At the same time, if you don’t reel in and keep the line tense and there’s too much slack in the line, the hook can come out of the fish’s mouth.”
So, fishermen, when they get a fish on are playing this game where they’re trying to keep tension on the line so the hook doesn’t come out, but not so much the line breaks and negotiating is a lot like that. You want to get every single dollar out of that deal that you can, but you don’t want to push it so far that you actually lose the deal altogether and that fish gets away. What do you think, Rob? How did I do?

Rob:
That’s actually really quite masterful. I was like, “All right, it’s going to be a pretty good analogy.” But that is exactly… dude, you have coached me. You have helped me master this art more than you could ever know. I appreciate it. That’s a good analogy right there. I’m honestly surprised it wasn’t a jujitsu analogy, but fishing, that’s good. That’s left field for me.

David:
I was just thinking all of our hunter, fisherman audiences is screaming in their pickup truck right now. It’s about time. I don’t know about that jujitsu stuff, but I understood that.

Rob:
Oh, that’s good.

David:
Well, we are going to get to the show very quickly. Before we do, today’s quick tip. Consider using the BiggerPockets agent finder to find an agent for yourself, to help with negotiating. Now, when you’re doing this, I recommend looking for an agent that is also an investor, not just an investor-friendly agent, but an agent that owns property in that area that you’re trying to go. Even if they’re not the smoothest, they don’t have the nicest car, their headshot doesn’t look the best. If they own property in the area, they usually have a big advantage over an agent that only represents other clients. Part of the reason that you want to use a high-volume agent is they have a lot of experience. That’s what you’re really going for.
But if your agent has that experience through buying houses for themselves, they don’t have to sell 400 houses a year to get it, so BiggerPockets can help you with their agent finder feature. And the cool thing is the agent will probably be familiar with a lot of the same vernacular and vocabulary that you are using, because they’re in the BiggerPockets ecosystem as well.
Rob, BPCON is coming up. It is only a couple of weeks away. How excited are you for this big event?

Rob:
I’m really, really, really excited. I thought it was going to be like 1000 person conference. And then, I found out it was like a 2000 person conference. And then, I found out that I think we’re sold out. It’s going to be a packed house. So, please approach us. Take selfies with us. Give David a big hug. That’s his favorite thing. He just likes hugging everybody. And come say hi and let’s chat for a bit.

David:
Wow, Rob. Okay. You said a very nice thing about me in the show. So, I’m going to let that slide, but the people will do that. You’ll see me fighting my way through the crowds with people being dragged behind me as they got a leg. And they’re like, “Rob said to love you because no one else does, David, and I need you to know you are loved.”

Rob:
It’s going to be a perfect opportunity for you to finally put that Brazilian jujitsu to use.

David:
That’s hilarious. I’m going to be like John Snow fighting through incredible White Walkers using jujitsu. All right. Without any more ado, let’s bring in Jonathan, and let’s learn something. Jonathan Greene, previous guest on episode 584 of the BiggerPockets podcast, and you did such a good job we had you back on. Welcome and good morning to you.

Jonathan:
Good morning to you guys. Thanks for having me back. I’m excited to be here again.

David:
So, if you haven’t listened to our last show, please go back and check out episode 584, where we got into some really good nuanced conversation with Jonathan about investing over a long period of time, having a sustainable career and really doing real estate, what I would call “the right way”, looking at every property uniquely and trying to figure out what is the highest and best use of this property. What is the story, this property tells, what’s the vision for how you’ll execute it? And one of the concepts that we got into was this idea that real estate is part art and part science.
Now, we all understand the science part. That’s writing numbers using a spreadsheet, calculating things, analyzing, trying to project, but there’s a whole other part of real estate that is more art. And that was fascinating. And we’d like to expand on that with you today, if you don’t mind, Jonathan.

Jonathan:
Yeah. I’d love that. I definitely have a background in negotiation as a prosecutor, so it’ll be interesting to let everybody know what I do in terms of analysis and in terms of my hardline negotiation long term, which I know you guys are familiar with too. So, yeah. I’m excited to get into these topics as well.

David:
Why don’t we start with that? Can you explain how the negotiation element of real estate fits into the art side of the equation?

Jonathan:
Yeah. So, I was a prosecutor for eight years and a criminal defense attorney for two. And I was always doing real estate my whole life, but when I transitioned to real estate as both an agent and more of a full-time investor, I started to look back at my negotiation techniques as a prosecutor. And obviously, you’re familiar, David, with some of these from your background as a police officer and, Rob, obviously in investing, we use these all the time.
But one of the things I think that was most important for me is when I’m negotiating in a real estate deal, the first thing I think of is, well, nobody’s going to prison and there’s no victims, so why am I getting so worked up over this when I spent eight to 10 years, either sending people to prison or trying to make sure they didn’t go there. So, it takes the edge off of it a little bit for me.
And I’ve always had one deal to the next attitude. But I think that incorporating what I know and then using principles from someone like Chris Voss, it really helps me figure out where the pain points in the deal. And a lot of that to me is listening to what the other side’s saying so that I can use the leverage that I have to combat what they’re talking about.
And I think that’s what a lot of new investors miss. They’re just trying to do a dialogue, but they’re missing the points.

Rob:
Do you feel like you were somewhat of a master negotiator coming out of the gate, or do you think that this is a skill that even as someone that was really experienced in your field, it really is something that you have to develop over time? Obviously, some people are going to be more naturally gifted at it, but is art of negotiation, if you will, is that something that anyone can master?

Jonathan:
Yes, definitely. And it’s a great question. And I did come out thinking I would be better than others and I was wrong. My negotiating skills were great, but I was still negotiating like I did as a prosecutor when I started, which is hardline, hardline, and making sure I’m drawing lines in the sand and then pulling, which we’ll talk about later in terms of my offers. But I think I was a little bit, if I’m negotiating that way as if somebody’s life is at stake, they’re going to be really off put on the other side. It’s going to come off as too aggressive.
So, I did have to back down the way I did. And I do think by learning from other people, how they negotiate, and again, reading books, listening to podcasts is definitely a way you can figure out. But like I said, I think each deal is different. So, the way that you negotiate with each person is completely different based on what they’re telling you. And if you’re not listing, you’re going to lose the whole negotiation before you start.

Rob:
100%. I’ve always found that the more hard line you are on it, typically it does not go your way. It’s a game you have to play. And I think this is where egos and pride can get in the way a lot of the time, because you’ll want to drive the car here, but then your realtor who might have a little bit more experience or a little bit more know-how will try to guide you. And you’re like, “Well, hey, let me do it my way.” So, I think this is an equally important aspect of negotiation.
And I’m also wanting to know when you’re working with the realtor on your end, do you feel like that’s truly… is it a negotiation partnership that you should probably see eye to eye with your realtor? Or do you make it so that your realtor takes your lead?

Jonathan:
Yeah. David knows this well, because I’ve been licensed for almost eight, 10 years now, but the one thing I remember when I was not licensed and I was agent, I didn’t think they were being hard enough as I wanted to be because they were trying to protect their relationships. I didn’t really understand that then. Some people try to get me to lowball as an agent and that’s not my thing, so I’m not going to do it. But yeah, I do think that it’s a cooperative partnership. The most important thing I think is if you’re an investor and you’re working with an investor-friendly agent, that agent is there to do the negotiations the way that you want, not the way that they want.
And that was a hard lesson for me to learn. And I definitely a couple of times overstep because I was negotiating hard the way that I thought would work, but they weren’t comfortable with it. And look, most regular home buyers aren’t ready for that. Investors are usually more ready, but they’re not ready for the level that I would do on my own. And I have to recognize that. So, I do think it’s a full partnership and you have to be clear on how you want to get to the deal and then take advice or not.

David:
That is a great point, Jonathan. You can err on either side. You can have an agent that wants to make the client more money than the client wants. So, they’re out there, working the deal they would for themselves. We’re going to get every dollar and if they don’t want it, there’s another house. We’ll go find that one. And sometimes your clients are like, “No, I want that house. I don’t need the extra $1,200.” And then, on the other hand, you’ll get clients that don’t really understand and through no fault of their own, the leverage in deals where you sometimes get a deal at such a great price that the seller realizes halfway through the escrow. I’m giving this thing away, you’re not getting another dime.
And if you do push it, you try to put some leverage on them, the whole thing will snap. So then, sometimes as an agent, you’re trying to protect your client. You don’t want to just come out and say, “You’ve already gotten more than you are going to get.” You’d be very happy because now they feel like you’re not on their side. But sometimes that whole, it doesn’t hurt to ask thing, is not true. Sometimes it does hurt to ask.

Jonathan:
Yeah, I agree with that. I have issues with clients only if I haven’t fully educated them along the way, or if they’re just not going to be compliant to like what you said. I like things to be a good deal for everyone, which doesn’t mean I’m not adequately representing my client as an agent. But to me again, based on my background where it was extremely adversarial, someone’s going to prison or they’re not. Really the best deals we all know are ones where everybody gets along. Because if you don’t and it’s adversarial, you may get through a deal, but everyone’s just going to be trying to screw each other, the whole deal over $1000 or leaving stuff in the house.
So, it’s sometimes hard to get one side, whether it be seller or buyer, to understand that, look, if we don’t all work together, we’re never going to get through this deal. And I think that’s part of where my negotiation tactics changed, where I had to say, “Listen, I need to build my relationships with everybody on the other side. And that includes if I’m an investor, I can’t be too hard. But as an agent, I have to work with the buyer as well.”

Rob:
This is so true. There’s always that phrase. You may win the battle but you’ll lose the war. And this happens all the time when you’re actually negotiating the deal, you keep chipping away, keep chipping away. If I’m a buyer, I just keep chipping away and chipping away at that seller, hoping that they give into the negotiation tactics. And if I’m successful, then the first thing I want to do is like, “Oh my, God, I’m the greatest I did it. I negotiated the heck out of this,” but then they start getting other offers because we’re in this crazy, crazy market. And then, when they have four offers that are above asking, a couple of weeks after we’re in the process.
The moment I start making any more demands, then they start not giving in because they’ve already given everything that they can give. And the moment I try to get my way, then they’re just trying to get out of the deal because maybe I’ll lose my escrow money, but B, they might even just get a better offer than the one that I gave them. This has happened so many times.
So, I think that there really is a fine line to walk there and just making sure that both sides can win. Obviously, you want to win a little bit more, but you don’t want to take it all, I personally feel.

Jonathan:
Yeah. I think if you look at the way deals are structured, like if you’re in an attorney state, you’re going to go through attorney review, that’s going to be a little game of ping pong. But then, we go to where all deals go to die, home inspection. And if you get too hardball in home inspection, that’s where everything goes wrong because someone’s trying to get a credit for doorknobs when you should just be focused on major things. So, like I said, my job, I think as an agent and a counselor for investors is to get them fully prepared before they make an offer.
So, we make tons of videos, tons of content to just make sure that they understand we’re not going on a fishing expedition because the deals that die are because someone’s just asking for too much, or you already know that the seller’s going to be unreasonable. And if it’s fully as is, you need to make sure that your buyer investor knows as is means as is. And I don’t want to go in and make an offer with already the understanding, but I can get out of it if I don’t like it, because we’re saying we’re buying it as is.
And I think that’s where there’s just a lot of nuance in that. And we all have to understand it’s going to be a long-term negotiation. Like you said, it will come back to haunt you later if you press them too early.

David:
I can give you a story of how that just happened to me. I had a deal where we got it a ridiculously good price. And then, after that, I came back and I got even more credits and I knew the seller was getting tense, but I didn’t know how bad it was. And then, I hit a point where we couldn’t get an appraiser out there in time for the appraisal contingency. They were all backed up. So, we needed an extension of two or three days on the appraisal contingency. And they said no. And they had the right to blow up the entire deal, which they were incentivized to do because they had felt screwed at every single step and just thought I was taking advantage. And there is no taking advantage in real estate.
The contract is what the contract is. You get what you get, but their perception matters in the way they’re going to make decisions. And so, I had to pay $2500 to get a three-day extension on my appraisal because otherwise, I was going to lose the whole deal. Now, when you look at, I think I got that house for about $250,000 less than it appraised for, so the 2500 didn’t really matter. But it’s an example of how you can see.
Getting too much on one side and imbalancing the equation can absolutely cause the whole deal to topple and then everyone loses. The sellers got to go back on the market. I’d be out my inspection money, my appraisal money, and all the time that I put into it.

Jonathan:
Yeah. That’s a great example of you knowing when to stop pushing. And I think that’s what some investors don’t. They just want to keep, like, you’re up to 50, relax. I myself as an investor try to give something back. We just closed a property yesterday, my business partner and I Jenny, and we have to redo an entire septic. We put that in. We knew that was going to be part of it, but they didn’t want to even get the certificate of occupancy. And we said, “Well, we’ll pay for it and we’ll put up the smoke detectors, but you’re going to sit there when they come.”
And these are little negotiations that helped us as other little things. Like you said, David, you get into it. Something happens the day before, they couldn’t get a freeze authorization on a HELOC. And we have our demo crews set up and we said, “Well, can we still get in?” And we really, really massage that deal on our end. But I do think like you said, you can get to that point and you have to make a tough decision on when to stop.

Rob:
So, Jonathan, obviously, you are analyzing deals left and right all the time, all over the country, doing deals, galore over here, deal city. That’s what I’m going to nickname you right now. So, can you tell me a little bit about your buy box, if you have one, or is everything the buy box? Help us understand what your buying criteria is.

Jonathan:
Yeah. During the pandemic, I really sold off most everything on purpose to just hold and wait and stockpile the gunpowder as we say, waiting for maybe the next six months to 12 months to see what I think is going to be better leverage for me. And I had a bunch of old properties, but for me, I think the thing that I’ve transitioned to this year and the way that I describe it is I’m always looking for assets. So, I like a lot of different things. I’m interested in self-storage. I’m interested in main street commercial, which we talked about in 584. I like flipping, I buy and hold.
I like Airbnb, but I am always looking for markets where I think there’s appreciation. So, I’ve always been an appreciation investor. I don’t really care about flow. I like it, but I’m not banking my history on the cash flow because I don’t have to use as much leverage. So, I think locally, I know all the markets. So, I’m looking for what I think is a project that I’ll enjoy honestly first. And then, I’m hard running the metrics to see if they work for me. And then, when I’m looking at outward deals for myself in other areas, I’m looking for growing areas that can support that investment proposition.
So, if I’m doing Airbnb, which obviously you guys have great experience with, I’m going to go through areas where I think the regulations are either loosening or never coming so I don’t put myself at a disadvantage. And then, for metro areas, I’ve always said the same thing. I don’t like hot areas, because I feel like I’ve missed the big money. So, I take the hot areas, look three towns out and see if that’s a town that’s going to come up and if they’re starting to do flips in that area.
So, I think because I’ve had most every asset class, I’m never looking for something specific, but I do like some oddities. I love two-bedroom, single families. I think they’re really a good asset because you can buy them for much cheaper than a three-bedroom in a lot of markets, but they’re going to rent out at almost the same amount as a three-bedroom because of the tenancy. And I just think those are smart buys everywhere, during the pandemic that the prices went up a little too high, but that was a big mark.
And again, that’s not a viable opportunity for a lot because families aren’t going to mostly move into a two-bedroom. So, you have a unique house that becomes a very good rental in my opinion, as just like one oddity that I like.

Rob:
Sure. So, you mentioned something that would probably be very confusing to most new investors, but you said when you’re looking at properties and you’re analyzing them, you said, “Well, hey, if the cash flow is there, that’s great. I’m not as concerned with that.” Why is that? What does that mean? Because I know a lot of people, they’re getting into real estate for cash flow. They want monthly cash flow that they can use to supplement their mortgage or their W-2 income or whatever that means. So, why is that not something that’s a direct focus for you at this moment?

Jonathan:
I’m going to explain something that I know everybody needs to hear and they probably don’t want to hear. Cash flow can go away quicker than you’ve ever seen anything in your life. So, if you hear everybody banking on 10 houses and they’re all making $100 a month in cash flow, all you need is one furnace to break in one of your 10 units. And you’re not going to make cash flow for six months. The furnace going to be eight grand. So, to me, I just never focused on that as an entity, I like it but I always want appreciation because to me, appreciation is a present.
It’s like a windfall later that you didn’t expect. I like both, but I’m not greedy. So, I think that the lure for cash flow, if somebody says, “I want to build up a portfolio with X cash flow so I can scale out of my nine to five,” that’s highly dependent on the types of properties that you buy. And new investors are maybe buying C-minus houses to start off with. Those don’t cash flow. You may think they’re going to cash flow until everything starts breaking and then you’re in trouble.
So, one of the things that I’m so intent on with new investors, which I’m sure you guys will agree is if you buy your first property and then you’re going to buy your second property before that first property is at max value, meaning you fixed everything that’s going to be a high number later. You’re going to eventually get caught on all of them. And if you do that when there’s a market downturn, you’re going to lose them all.
So, I like people to really fix up that first property. Doesn’t have to be perfect. If you know that HVAC is going to break, you know there’s a big cost coming and you can’t go buy another property because you’re going to get caught on both of them and not be able to pay for repairs on either at that time.

Rob:
Agree, 100%. I think I have still to this day, not really paid myself from the cash flows of my property. I always just reinvest them. And I think you’re right. I think appreciation, that is the thing that I’ve realized, I’m like, “Oh, my gosh, this is really where the wealth is created.” I know you have a philosophy that’s like, you will either make money on a deal or you will make money on a deal. Do you think you could maybe walk us through what that means? Because obviously, that’s like, well, what do you mean by that?

Jonathan:
Yeah. It was funny. We were talking about it before. So, the way that I look at it, I’m never going to buy a bad deal. I don’t think I’ve ever in my life bought a bad deal. I’ve had losses on real estate. They were all my fault or the market conditions. But I buy really smart because I use analysis and what I would call asset hunting and what we were talking about, art more than science. I know based on my history, what the repair costs are in five minutes, barring a sewer inspection and stuff that’s underground. So, when I look at a deal, I’m much more relaxed because I think I’m either going to make some money, which is the make money or I’m going to make a lot of money.
And when I build my spreadsheet to start, I put it at the lowest possible ARV that if I did everything wrong, I’m still going to get this. And then, usually, I make 50 to 150 more than that. And I like not even adjusting the spreadsheet till we start seeing the comps later and we start seeing our repair costs. And that way, what I’ve always called the spread, my spread is either growing bigger for me because I’m cautious about that. So, I go into every deal knowing I’m going to make money. It’s just a matter of how much.
So, even when everything goes wrong like it has, okay, I break even. And then, I consider it like, well, now I get the deposit money back. So, there’s no loss in it for me. If I can get the deposit back money, even on a break-even, I wish I made more money, but at least I have the deposit money and then I just go get another property.

Rob:
Totally. And plus, if you’re a long-term holder of your property too, then eventually you will make that money. It is obviously very possible to lose money in real estate, but if you’re actually holding it for a long time and you’re investing consistently and you’re building up a portfolio, you may have a few stragglers that aren’t really crushing it for you, but overall your portfolio over time should be able to carry that slack. And I know you’ve been doing this for a bit.
I’m curious as someone who is not Greene in the industry, but really quite the seasoned pro, do you still get any level of analysis paralysis, or do you just feel like, you can really take on any deal that comes your way?

Jonathan:
Well, I don’t want to take on any deal, but I have absolutely zero analysis paralysis and I think it goes back to my history in working for the government. We have 300 cases on our table at a time. You have to make decisions on things right away. So, even with my team on market and off market, I’ve always been somebody who can make decisions and not really worry about it. If it turns out I was wrong, which all of us have the investments that we cherish that we didn’t get, I’m okay with admitting I was wrong.

David:
Jonathan, on that note, do you have a form of a buy box? I’m sure someone with your experience doesn’t hold to just one buy box. You can look at every deal and see something. But is there maybe like 60%, 70% of your deals overall have these things in common that you look for that you can share with us?

Jonathan:
Yeah. Right now, I like flipping, but I took a break during the pandemic because the deals just weren’t good enough. And I think the restraint is one of my strengths. I don’t have to buy something, I like to buy something. So, to me, when I’m looking at flips, which is my entity that I like, it’s always about what somebody else doesn’t see that I can see, which I know we did actually talk about in 584 as well. I think that you guys were talking about the property that you might be at now. I think that I understand the spread better because I’m looking for things like the property I just bought, there’s a septic issue.
So, I know that traditional home buyers aren’t going to buy that. They’re not going to pay 30 grand for septic. So, how am I going to leverage that? So, my buy box includes towns that I think have a big upswing. The price point is not a big part of the buy box. It’s more the spread and how much I can see. And what I found is, we used to be doing, we did a lot of formula deals like that were 300 buy-ins, 60 reno and then 60 profit, which was good. But now we want more profit. So, I did 465 buy-in, 180 reno, but I made 200 profit. So, as we scale into buying in the 400 to 500 range, if we do it the right way and we’re identifying the properties the same way our scale to profit is so much more. And then, we’ll move that even further. If you’re buying in my areas in the 600 range, you’re going to put in 2250 and get out in the 12, 14 range.
So, I think that’s part of the analysis too, but that’s really what I look for right now. And I’m always looking at that hybrid commercial properties because I just think commercial is where it’s at now. There’s so much available that the leverage is huge to buy commercial with commercial mortgages if you want.

David:
So, you’ve got a different buy box for the different assets that you look at. If this is a flip, you said, I want to be right around 400 to 500 with hopefully less than 200 in construction. I want to profit on 150 to 200. Those are gross numbers that someone else can look at and say, “Okay, I can try to find something that fits within that.” And it cuts down on the hesitation of what should I do and the overthinking. And then, like you said, in commercial, I want to be in commercial, I want to be buying it for less than what it’s worth right now because I think the market is soft and I can go in there and get a better deal. So, maybe 20% under market value, you’re going to be excited.
That still functions as a buy box. It doesn’t have to be this much price per square footage in this part of town with this is owning. Sometimes, it’s just the amount of meat on the bone is what you start with. And then, you figure it out from there. So, in your opinion, you work with a lot of new investors. You’re very active on the BiggerPockets forums, helping with people. Why do you think that just the generic standard newbie who stumbles upon this podcast is really excited, likes everything they’re hearing?
Their dreams are flying out of their head. You could see it happening of everything they want to do in life, but they’re stuck in analysis paralysis when it comes to getting started buying their first deal. What do you think is causing that in that demographic I just described?

Jonathan:
So, I’m 100% sure that this is the reason every single time. There may be other factors, but this is it. They haven’t seen enough homes. Most of them haven’t seen any homes when they’re in analysis paralysis or then it just becomes, I’ve seen one or two, and I’ll grant you that it is very hard as a new investor to get a realtor if you’re not licensed to just show you a bunch of homes when you’re barely qualified or using an FHA. A lot of realtors aren’t going to do it. But unless you’ve seen 15 or 20 homes, I don’t know how you’re making offers on homes.
You don’t know anything and you’re going to lose money because you can’t rely on just the realtor that you just met to make sure that they have your best interest at heart. They want to make a good commission so they’re going to tell you, and I’m telling you, I run a team of 40 agents. This is not all agents, but this is common. They want you to pay the most or they may want to tell you, you want to get a property. And if you’re desperate for a property, that agent’s going to become desperate for the commission.
So, desperation is what will kill you, but not seeing enough homes every single time, every time I’m in the forums. And somebody says, “Oh, analysis paralysis. I don’t know what mentor to use.” Or I’ve been researching and running the numbers on so many homes. I ran 100 deals this week and I said, “How many did you see?” And they always say zero. And that to me is everything because we’re talking art versus science and art is, I need to be in the house, I need to understand how a house is constructed.
I need to understand where to look, always in the basement, what I can see, everything else that’s cosmetic. You need to find the things that are going to cost you money or later, which are the hard things to find. And I think if you’re not looking at homes, you’re just not trying hard enough to be completely honest.

David:
What about when you’re looking at a home, starter, brand new, okay, I know I need to go look at homes. Give me a playbook of overall what you think they should be looking for. And then, Rob, I’m going to throw the same question to you.

Jonathan:
Yeah. Again, I look at this question as me being the agent as a guide for a new investor, a new home buyer. I’m going to take them through every single thing that I see in the house. I’m not going to say, this is the kitchen, this is the living room. They know that. I’m going to immediately start what I call future casting, which is helping them prepare for the future. So, if I see something in the ceiling, you guys know this, you see an evidence of a leak in the ceiling. The first thing I’m going to say is, “Hey, look, you see that discoloration on the ceiling, that looks like a leak. But most times, people repair the leak in the ceiling and then they just never paint over it because they’re lazy.
So, I know that looks like an issue, but later it may not be an issue so don’t get too worked up over that.” And I’ll do that through the whole house. But my biggest focus is away from cosmetic issues and onto all the serious issues. Like in New Jersey, a lot of 1900s, 1850-type homes. So, we see a lot of sloping. I can tell the sloping right away. And then, the first question is like, look, sometimes this is settling. And sometimes this is a foundation issue.
In five minutes, when we’re in the basement, we’re going to look at the beams and the structure and see if there really is an issue. And if not, it might not be a structural issue. Can these be repaired? Yes, but they’re not really for first-time novices. And then, we spend a majority of our time, honestly, in the basement where they’re bored because everybody likes to look at the cool cosmetic stuff, but I’m opening every door. I open the electric panel. I’m looking, showing them the hot water heater. If there’s a permit, how old is it? How old is this furnace? Is there any knob-and-tube in here?
And again, a lot of that will fly over their head at the beginning. But then, again, if you’re doing 15 showings before you make an offer, by the time you get to five and then 10 showings, you’re really going to start to understand the lingo. And then, that’s the exact reason why you don’t fall into analysis paralysis because you feel confidence.
Confident people don’t have analysis paralysis because they’re able to go through the data. We probably mind the same amount of data, but like you said, I just know what I want and I’m looking for assets. And if that asset is attractive to me, I’m going to try to buy it but only at the price that I want to buy it for.

David:
Rob, same question. What do you think people should look for when they’re walking a house?

Rob:
When they’re walking a house, oh, man. I guess it depends on the situation, of course, but for me, I think a lot of people tend to… especially in the Airbnb short-term rental space, people are walking it and seeing it for what it isn’t versus what it is. And so, I am always very understanding of what the house is for the price that I’m getting. And so, I understand a lot of the times if I’m buying a house that maybe is a little bit more on the affordable side, a little bit cheaper, and it’s not completely remodeled. What I’m trying to come in and see and analyze is, can I make this place sparkle?
Can I give it a little razzle-dazzle, if you will, with design, with furniture, with furnishings, with the staging? Obviously, what I like it to have, a remodeled bathroom and a remodeled kitchen, sure. But for me, I want to know, can I make a space shine in photographs? Can I really look at a lot of the characters and save a lot of it? Because a lot of people will come in and remodel the character out of homes. And for me, I’m always like, “Oh, that’s such a shame.” But I am doing a lot of long-distance relationships, not really. That’s not true.
I’m doing a lot of long-distance investing. My wife would probably be like, “Excuse me?” I’m doing a lot of long-distance investing. And so, for me, I’m always coaching my realtors to be very thorough with their videos that they’re sending back to me. And I always brief them. I’m like, “Hey, I need you to be very critical of every tiny little thing that you see in the house. I want it to be as if the seller was there in the room, watching you giving me this tour, they would be angry at how petty you were being about all the little things.” And it’s not because I’m using those things to make my decision.
I just really want to know and understand how a house feels. Is there a sag in the floor? Are there walls in a room that are inconsistent? Meaning, some have textured drywall and then another wall is completely smooth. Are there popcorn ceilings? Are the fans updated? Does it smell in there? And I’m really trying to understand the cosmetics because with short-term rentals specifically, I’m not trying to come in and renovate the place. I like to spend less than $15,000 on renovations.
Our Scottsdale place is an exception to this. But typically when I’m going out and buying houses, I like to stay between the $5000 to $10,000 range specifically when I’m buying a house. And so, I just want to make sure that, of all the things that I need to fix up there, it’s very easy cosmetic because I just don’t have six months to renovate a place and then carry out an entire burster, if you will, a burden into an STR.
Because I like to cash flow as quickly as I can on a short-term rental. So, it’s going to depend on the asset class and everything of course, but for me, for where I am in my portfolio, time is everything. And so, I just want to make sure that what I’m buying is not going to require a much heavier lift than maybe swapping out some floors or painting a house.

Jonathan:
Yeah. I just have one follow-up on that, Rob, because I think he made a great point that I know there’s a lot of wholesalers listing and this is really important. When Rob was saying what he wants his realtors to do in the other areas to really find all the things, you hit it perfectly. You want the things that the seller would be annoyed that you’re focusing on. And if you want to be a good wholesaler and you want to turn that into being an investor, you have to take photos of all of that stuff. The best wholesalers are ones that could present us a whole picture as out-of-state or in-state buyers and show us all the things that are wrong with it.
I know what the rest of it is, but if I take the time to drive 45 minutes to something I think is a good deal and then you didn’t show me the structure and there’s 100,000 in structural issues, you just wasted my time and I’m never going to look again. So, Rob’s coaching his realtors to be better, but I think what’s missing, and what we talked about a little bit, it’s more like transparency. If you want to be good at it, you’re never going to win hiding this stuff. Because all of us who are investors, just tell me exactly what it is.
If I know I can trust you, then I’m going to look for it. And I think you can train out-of-state realtors and boots on the ground to look better for you if they’re just looking in the right places.

David:
In your opinion, what are some of the data points that a new investor should know when looking at properties?

Jonathan:
Yeah, the ARV is obviously the most important because you want to know what your biggest potential is if you’re a flip or even if you’re a long-term investor. So, it’s always repair costs really in the middle. And I think that the hardest thing is that almost nobody knows repair costs and it’s very, very hard to learn because you don’t know if people are even giving you the right prices. So, the truth is repair costs only come with experience. And the best way to do that is make friends who are flipping, find out what they paid for to remove a wall, find out what they paid for a full sewer redo. It’s just the really only understandable way to get it.
Obviously, you’re going to look at your taxes and if you’re buying multifamily, you’re going to look at what the insurance and the rent role is for sure. But again, I think that people focus a little too hard sometimes on the numbers and they miss the asset like Rob was saying before. You want to see what’s unique about this property. I love to buy properties that other people don’t understand how they can best use them. Like you said about the one that you bought in California, David, I think.
There’s oddities out there and people just don’t know what to do with them. But understanding the block values I think is really important. One thing I do is always send and look at all the homes’ values on the block. And I think that gives you an idea because you don’t want to be the most expensive house on the block. You want to be safely in the middle and then help them raise that upwards.

Rob:
So, the MLS is one of those places, obviously, we’re going to be going and looking for a deal that is the main place to get deals and there’s going to be houses on MLS popping up every single day. What advice do you have for people that are actually trying to hone in on a specific deal from the MLS? Is that, A, the only place to get a deal or is that where you’re sourcing most of your deals these days?

Jonathan:
Yeah. I buy a lot on the MLS. I’m licensed and run a big team, so I’m always on there. We buy most of our deals on the MLS just because the wholesalers in my area, their prices are too high and we’re not going to pay the spread on that. So, my best tip for MLS, if you’re licensed is this, and if you’re not, tell your agent to look for this, it’s called back on market or BOM. They’re absolutely the gold mine of all properties. People focus on expireds and FSBOs and I don’t really love those, especially now. But back on market means that a house was under contract. They had an agreement and it failed and there’s three different times when a back on market fails.
And it’s very important to identify how many days it was under. This is why. If the deal fails within the first three days, it’s always cold feet. Buyer got cold feet, something happened. They backed out. That’s not a big deal. You don’t know what’s wrong. If it’s about seven to 10 days, it’s always an inspection issue. So, if they say after seven or 10 days that, “Oh, the buyer got cold feet,” it’s probably not true. They did the home inspection. Something happened. One party didn’t agree. So, that raises my eye. But as an investor, I’m excited because I know that that’s going to turn off other first-time home buyers and will help investors.
And then, if you see 30 days or more, that’s always going to be a mortgage failure, commitment didn’t come in. They couldn’t get the mortgage. And those are exceptional deals for buyers, investors because the seller was right at the door, ready to close and ready to get a big pile of cash. And at the last second, the mortgage failed. So, a lot of times, if you just offer what they offered, you can pop right into the deal, everything, paperwork, all set, you can hop on the title and close those deals really quickly. So, back on market is definitely my jam for the MLS.

Rob:
Yeah. I can relate to this one. And honestly, we’re talking about negotiation. We’ll probably get into this here in a second, but David is really quite the negotiator. Most people probably assume this, but I got to see the masterclass in person, I guess, well, virtually on the phone when we bought our Scottsdale place, because the property that we bought out there was on the market for 90 days. And I think it probably fell out of escrow. And we came in with a very aggressive offer. I think it was initially offered at 3.4 and then I think we offered 3,000,050, something like that. So, it was a relatively large reduction.
Plus I think we asked for, I think it was like a $75,000 closing credit and they said, no. They told us to kick rocks. And so, David was like, “Hey, it’s been on the market for 90 days. They’ve fallen out of escrow.” He was like, “Let’s give it a week. Let’s not even respond to them for a week. And we’ll just say, okay, hey, we’ll walk away.” And we did. And we did what he called putting them on ice, if you will. And so, he was like, “Here’s exactly what’s going to happen.” They are going to be annoyed that we came in with this low offer and then they’re going to start perusing Zillow.
And they’re going to start seeing what they could buy with $3 million if they had that large pile of cash. And then, after about a week, they’re going to come back and they’re going to say, “We’re willing to do this deal.” And I was like, “Okay, sure, Mr. Greene, listen, let’s be realistic. They’re probably not going to go with that.” And then, literally, the week later, they were like, “All right, we’ll do it under these terms.” And it was like a slight markup from our initial deal. And I was like, jaw dropped. I was like, “Wow, that is crazy.”
And you’re right, I think this moment comes with the seller where they have this big pile of cash presented to them, and then it goes away. And then, now they start feeling a little bit desperate and that’s what happened here. They probably started looking at what they could buy, where they could retire. What could they do with $3 million? It’s a life-changing amount of money. And that way, when we actually came in with a more reasonable offer, they said, “Yeah, sure. We’ll do it.” And that to me, I was like, “Okay, David Greene is exactly who he says he is, a pro negotiator. It’s true.”

David:
Yeah. You want a Greene negotiating for you. Jonathan was a form of a negotiator in his previous career. Now, he’s negotiating now. And this is one of the reasons why you always hear people say, “You got to get off market. You get all this creative stuff,” And you do see incredible deals come off market. But they come from people with incredible skills that spend an incredible lot of money and time trying to get those deals.
You always forget to work that into the equation that that wholesaler that got that great deal might have spent $120,000 in six months of time to get that opportunity where those of us that are operating on the MLS, just find the soft spots. Man, we can just go in there, grab a fish and come right out with it.
So, since you’re Greene and you’re clearly a great negotiator, what are the skills that you think make someone a great negotiator and how can people start with honing their own skills?

Jonathan:
Good negotiation to me comes from confidence. We talked about it when we were talking about seeing houses and if you don’t have the confidence in your numbers or what you’ve looked at and what the ARV is, you’re going to be a poor negotiator. And the only way that you can attribute or move your confidence to the next level and get that same confidence on the other side with the person you’re trying to buy the house from is by building the relationships. So, I’ve found over the years that the more that I just build one-on-one relationships with sellers, especially when it’s only me in the game, I can soft play that for a year because I’m not in a hurry.
And that usually leads to windfall properties later. Traditionally, my agents, my investor friends always think it’s funny, because I’ll call people for a year and maybe only four or five times will I ever talk about the house. And they always say the same thing, the clients will always say, “Hey, you didn’t even ask me about the house. I’m not ready to sell it. I said, “I know. That’s why I didn’t ask. I figure you’d call me when you’re ready to sell and just tell me what your price is and what I’m doing in terms of negotiation,” as I always want them to lay the price on the table first and never me. Because if I lay the price on the table, what if it’s too high?
What if they were willing to accept less? So, you’ll never ever once in the history, have I ever made an offer first unless it’s in a traditional setting. If it’s off market, I’m always telling them, “Tell me what your number is. If I like your number, I’ll just pay it. I don’t want to negotiate back and forth. That’s boring. If you give me a reasonable number, I’ll buy your house.” And then, they give me a stupid number and I just leave. And I think to be a good negotiator, and I’m sure we’ll talk about this more is you have to be able to walk away.
And that’s the thing that I think the best, that I don’t want the deal, I’d like it, I don’t need the deal. And I like walking away because just like you were just talking about in David’s masterclass on negotiation, sometimes you put an offer down and their ego gets in the way. And they need a week to go lick their wounds and feel bad about themselves and come to the realization that they were never going to get what they thought. And you just don’t bother them during that week.
You just leave them alone and that you wait for them to call you back. And I did the same as you were saying, Rob, was going to happen with David. I won a contest with my best friend and partner in flipping, Jenny, because I did the same thing. I said, “I guarantee you what’s going to happen is they’re going to go take the second offer that’s not ours that’s going to be a market buyer. They’re going to do inspections. It’s going to fail. And then, they’re going to come crawling back. And they did.
But I told them when they came crawling back, that my offer was going to be 10,000 less and they came crawling back. And then, they said, “Well, we want the first offer.” I said, “That’s not how it works. I told you that if you went and used my offer to leverage another, it’s going to be less.” And so, then they walked away again with ego and then it took another three weeks. And then, they crawled back to say, “Okay, we’ll take it now.” And they still tried to ask for more, but we ended up buying that house. And that one, I think I made 200.

Rob:
So, if I’m understanding your route here, Jonathan, just to clarify for me, because you say, “Hey, give me your number. If I like it, I’m going to pay for it.” And then, if they give you a dumb number, you’re like, “Yeah, okay. It’s not even worth it.” If it’s in the wheelhouse, if it’s at least in the wheelhouse, will you negotiate it if it’s maybe a little high but it’s not stupid? You’ll be like, “All right, let’s work through this.” But if they’re so highly-priced and it’s a really dumb number, that’s not even worth nickel and diming them down to the price that you actually want. Is that about right?

Jonathan:
Yeah. I wouldn’t say that I’m mean, but I don’t like to have my time wasted. My time is pretty valuable. So, if I go out there and I have a good conversation and then they throw me a price, I know it’s worth 450 and they say they want 700. I just say, “This was a waste of my time, but thanks, please don’t call me again.” And I just leave. They will call obsessively over weeks and I’ll never answer and never contact them again. But yeah, if they’re in the ballpark, my first question always is how did you arrive at that number? And it’s always, “I just pulled it out of the air.”
So, I’m already prepared with all the comps and I know what’s sold in the neighborhood and what the repair value is. So then, when I say that, “That’s okay, but where did you come from?” And they say, “Nothing.” And I said, “Well, let me tell you where I got my number that I’m looking for.” And then, that’s when I use my number against them. I usually don’t go off my number much. I mean, look, if someone’s nice and they’re negotiating fairly and they want like $5,000, I don’t care at all. That $5,000 is not breaking my renovation.
But I’ll be very clear if I give you what you’re asking for, you’re going to sign right now. We’re going to go into attorney review. There’s no you get me to agree and then use it to leverage other offers. That makes me walk away every time. And again, the strength of negotiating is not letting people screw you around because you’re desperate for the property.

David:
You hit on another good point. And it’s that you need to make room for the emotions when you’re negotiating that when we as the investor come in and we say, “This is our number that works. It’s very logical, rationale. We’re operating out of our neocortex.” The seller is probably light years away from understanding the deal from our perspective at that point. They still have these pie-in-the-sky dreams. My neighbor’s house sold for this much. Well, I need this much because I have to go do whatever. And they think that their needs somehow equates to their asset that they own.
And time does a nice job of marinating emotions. The knee-jerk response, a lot of sellers will give you will change over three to four days of not sleeping so well, because they’re not sure what’s going to go down. So, I love your method that you have this number in your firm and that if they come back to you again later, it’s going to be a little worse. They come back to you again later, it’s going to be a little worse. It eliminates them feeling like they’re in a position to jerk you around. You’re actually the prize. You have the money, you can get them out of this problem that they have, and they’re going to need to play by your rules.
One of the things I’ve heard you mentioning is just urgency in the situation. Can you briefly describe how urgency in your offer makes you more effective?

Jonathan:
Yeah, it’s what you said. And I don’t use it every time. I use it when I think the other side is trying to play games. I’ll put a 24-hour window, but I love to tell people what the number is going down to so that they’re very clear on the terms. So, if I say my offer’s 480 today, if you don’t answer within 24 hours, the offer’s 470. If you ask me after that, the offer’s 460 and I won’t negotiate it. So, these are the terms, you don’t have to like them. You can never call me again. But if you call me after 24 hours, you’re not getting the same offer. There’s no excuses, I had to do this or that.
I don’t care about that because I’m just trying to buy at the right price. And the way that I always describe it to people is this. I’m pushing a pile of money on the table over to you. And most of my offers are cash. So, I’m really pushing a pile of money on… it’s sitting in front of you. If you want it, take it right now. If you don’t want it and you ask me to push the money back, I’m going to push a little bit less back next time because you’re wasting my time.
I’d like to come to a fair agreement, but also, this is just how it works. And again, they may be emotional and I am okay with understanding that, but I’m an investor. I’m not here to hurt your feelings but I’m also not here to waste my time.

Rob:
This reminds me of that iconic scene in the cinematic masterpiece Dodgeball when Ben Stiller is like, “Have you ever seen $50,000 in person?” And he opens a big briefcase and it’s just $100 bills that’s like an inch tall. You should try that. I hear that that actually works all the time too, actually bringing that to the table. It’s got to be in a silver briefcase though.

Jonathan:
I’m doing to work on that.

Rob:
Awesome. So, I got to say urgency for sure is one of those things that, oh, I love to use it and I hate when it’s used against me, because it works, in this market, especially. When you’re talking about looking at MLS deals and they’re like, “All offers due by Monday, end of day.” And it’s like Saturday morning and the house was just listed and I’m just like, “Oh, come on. I can’t even eat my breakfast. I got to go analyze a deal right now.” But it works. It really does work. When there’s a deadline, it causes you to mobilize. It causes you to put pressure on the realtor, it causes you to contact your loan officer and really get all that going.
I can definitely see how that’s a negotiation tactic that can work. That’s something that you do on a personal level, but even as someone who’s representing people as a real estate agent and with your team and everything like that, are there any other types of urgency tactics or strategies that you’re using on a grander level?

Jonathan:
Yeah. It’s really modified because in a seller’s market, you have to know who has the leverage. So, if I’m representing buyers in a seller’s market, I have to know that they have the leverage. And I can’t say, if my clients are like, “Well, I want them to respond by tomorrow.” You’re like, “Look, that doesn’t work right now. You don’t have the control.” So, what you want to do is find out everything that the seller needs and make sure you incorporate that into your offer, whether or not you’re the highest price is whatever you’re willing to do on price. But I always find out if there’s no guidelines, everything that the seller wants, closing date, what things are important, if they need a use and occupancy.
And so, my offers always have everything that’s a seller requested. So, even if it’s less, I’m using that as a tactic. So, on urgency, if they need to close earlier, I’m making sure my clients can close earlier. If they’re doing it on some other level, I’m just trying to match what they want. But I think we’ve been two years in a very, very hot seller’s market. So, it’s very hard as a buyer to use urgency. And I think people try to overuse it and not understand who really has the control, which is sellers. It’s changing now. And I think it’s going to be real nice for us who’ve been wanting to use it and now can use it again.
But you have to remember that, similar to what David said before about maybe they just are emotionally attached. Sellers are still thinking that the prices from three months ago are valid, we have to slowly show them that it’s not by letting them sit on the market a little. And like we said, nothing more than days on market to get a seller start to come around to your offer. And sometimes you can just be nice. And sometimes I use the reverse urgency, which is, look, if you want to use my offer to leverage other offers, go for it, but nobody’s going to close the deal quicker and easier than I am.
So, I’ll leave it out there for a week. But if I don’t hear from you in a week, I’m never going to offer it again.” So, that’s it. I use it modified and that’s to put pressure on, but also be like, “Hey, I’ll give you a week.” So, there’s different versions. Like I said, I’ve used it to hardline, in situations before and now I’m learning to really listen to who’s on the other side, including agent, seller, what they need and then leverage that as best as I can. And if I can use some type of urgency, I will, but it’s been tough when sellers are in control.

Rob:
Yeah. Awesome, man. Well, as we close out, I didn’t want to end the podcast without talking briefly about your 25 Malvern negotiation in Verona. Can you tell us a little bit about that story and all the juicy details there?

Jonathan:
That’s the one that I actually was talking about, but the dynamic was so interesting because it was between not just the agents. Agents had an ego. The sellers were a little bit crazy and they had an ego. So, it was listed for like 599. And it sat on the market for maybe 30 days. We went and saw it. I made an offer of 465 and they were appalled. I mean, just appalled. And this was a good offer or maybe it was. I might have offered higher. I think I offered maybe 475 at the time. And they said, “Oh, well we have other people interested.” And I said,” Who else is interested?” And they said, “Oh, regular first-time buyers.”
And I said, “Come on.” I said the house needs 40,000 in structural minimum. And remember, most real estate agents have no idea about anything renovations. It definitely needed 40,000 in structural. I said, “You’re going to get to inspection. It’s going to fall out.” And then just like you said with David, they said, “No, our client is offended by what you said.” And I said, “Well, I’ll leave it open for today. And then if not, I’m going down to 465.” And that’s when they got even more offended. They ended up taking the other offer. They did the inspections, it went exactly how I said.
And two weeks later again, they called back. And it’s what I was saying before, I said, “Look, it’s 465.” And they were then again, incensed that I wouldn’t give them the 475 that I originally did. So, I said, “Okay, well call me in three weeks when it doesn’t sell again.” And it didn’t sell for three weeks and there were co-agents on the transaction. So, the one that I was dealing with the whole time never called me back, but his wife called me back and said, “Can you please give us the 465?” And I said, “Sure.”
And I made about 180 or 200 on that. And it was a tough renovation, but I was right about the structural. And I was right because I did my due diligence and most people aren’t doing their due diligence.

David:
You were also right with how you foresaw it falling out of contract if they went with the other buyer. And it’s half satisfying and half frustrating when you can see exactly how it’s going to play out and you can’t just get the other side to skip ahead and do it. You have to wait for the painful dominoes to fall before it finally comes to where you knew it was going to come in the first place. But that’s why you want an agent like Jonathan representing you. Because when you’re thinking, “No, no, no, let’s give them the number they want.”
Nope, let’s hang on. Let’s do it this way. And if somehow it does get through inspection, there’s another house we’re going to find. And you just keep that steady pressure. And eventually, you will take these deals down.
Thank you very much, Jonathan. I really appreciate not just for being with us on the podcast today, but for the work you’re putting in on the BiggerPockets forums and helping fight the good fight of others building wealth through real estate every day. Did you have any last words before we let you get out of here?

Jonathan:
No, I always appreciate being on. It’s always a pleasure to talk to you guys. And I was just going to pub my new podcast when you’re ready.

David:
Yeah, yeah. Let’s hear about it. Where can people fight out about you?

Jonathan:
Yeah, spurred on by years of listening to BiggerPockets and loving this, I started my own podcast. It’s called Zen and the Art of Real Estate Investing. As of today, when we’re recording, the ninth episode came out this morning, but it’s about the mindful approach to real estate. And we’ve talked about a lot of that and that includes these type of negotiation techniques, because I think that investors can get so much overwhelm of information.
You can get like 50% say yes, 50% say no, but if you’re mindful about the way that you approach real estate, which is really all the three of us have talked about on this podcast. I think that you’ll just find it a lot easier to get through. If you approach mindful, you’re going to have less analysis paralysis, because you’re going to do the work to get to the right parts.
But again, thanks so much for having me on. I always appreciate being on BiggerPockets. I’ve been around the site for so long and I still enjoy being in the forums, answering questions and taking inbox messages, and returning them when I can.

David:
Well, thank you for what you do. And, Rob, thank you for being here with me today. This was a great show. I appreciate you sharing the wisdom that you did, Jonathan, and we hope to see you again. I’ll let you guys get out of here. This is David Greene for Rob, cool as cucumber, Abasolo. Signing off.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

2022-09-27 06:02:26

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