Category: Uncategorized

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)

 

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.

In this article

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.

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

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.

 

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”:”256723″,”dailyImpressionCount”:”308″,”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”:”441810″,”dailyImpressionCount”:”198″,”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”:”152889″,”dailyImpressionCount”:”200″,”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”:”124524″,”dailyImpressionCount”:”210″,”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”:”115721″,”dailyImpressionCount”:”156″,”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”:”96504″,”dailyImpressionCount”:”149″,”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”:”51802″,”dailyImpressionCount”:”199″,”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”:”54431″,”dailyImpressionCount”:”178″,”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”:”55808″,”dailyImpressionCount”:”122″,”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”:”61158″,”dailyImpressionCount”:”125″,”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”:”50261″,”dailyImpressionCount”:”139″,”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”:”36601″,”dailyImpressionCount”:”139″,”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”:”37336″,”dailyImpressionCount”:”149″,”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”:”19368″,”dailyImpressionCount”:”155″,”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”:”22112″,”dailyImpressionCount”:”169″,”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”:”9443″,”dailyImpressionCount”:”184″,”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”:”13144″,”dailyImpressionCount”:”248″,”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”:”13801″,”dailyImpressionCount”:”260″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2334″}])” class=”sm:grid sm:grid-cols-2 sm:gap-8 lg:block”>

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”:”256723″,”dailyImpressionCount”:”308″,”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”:”441810″,”dailyImpressionCount”:”198″,”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”:”152889″,”dailyImpressionCount”:”200″,”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”:”124524″,”dailyImpressionCount”:”210″,”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”:”115721″,”dailyImpressionCount”:”156″,”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”:”96504″,”dailyImpressionCount”:”149″,”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”:”51802″,”dailyImpressionCount”:”199″,”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”:”54431″,”dailyImpressionCount”:”178″,”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”:”55808″,”dailyImpressionCount”:”122″,”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”:”61158″,”dailyImpressionCount”:”125″,”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”:”50261″,”dailyImpressionCount”:”139″,”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”:”36601″,”dailyImpressionCount”:”139″,”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”:”37336″,”dailyImpressionCount”:”149″,”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”:”19368″,”dailyImpressionCount”:”155″,”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”:”22112″,”dailyImpressionCount”:”169″,”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”:”9443″,”dailyImpressionCount”:”184″,”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”:”13144″,”dailyImpressionCount”:”248″,”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”:”13801″,”dailyImpressionCount”:”260″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2334″}])” class=”sm:grid sm:grid-cols-2 sm:gap-8 lg:block”>

Mindy:
Welcome to the BiggerPockets Money Podcast show number 339, where we interview billion dollar agent Pat Hiban, and talk about success as a real estate agent through hard work and tenacity.

Pat:
It’s a little secret that most agents don’t think about, but you build on a success up, not from the ground up. So if you sell a house in a certain neighborhood, you don’t want to go market a different neighborhood. You want to go to that exact neighborhood and be like, “I’m a neighborhood expert.”
People will hire people just because they sold one lousy house in the neighborhood and they think that they’re been around for 100 years and it’s their first listing, but they don’t know. They just have that social proof because this house sold.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and joining me today is my sensible pragmatic co-host Scott Trench.

Scott:
Put a straightforward introduction mate, Mindy.

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 in assets like real estate or start your own brokerage career, 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, today is an exciting day if you are a real estate agent, if you are interested in real estate, if you are thinking of becoming a real estate agent or if you’re just looking to generate a lot of money in a new career, as we talk to Pat Hiban.
Like I said earlier, he is a billion dollar agent. We are going to discuss what exactly this means. It’s actually pretty impressive. And get tips on how he became such a successful agent over the course of 20 years.

Scott:
Yeah. It’s a phenomenal journey. This is hustle. This is grit. This is not something that’s unrepeatable. This is something that if you’re willing to work hard and go through the grind and the slog of getting started in those early years, you can achieve at a certain point. It’s perhaps easier to achieve today than it was when he got started in his career track.

Mindy:
Yes. I am going to hit billion dollar agency before he did year wise, just because houses are way more expensive now. And I think that’s a good goal. Mindy Jensen billion dollar agent.
But yes, you hit the nail right on the head. This is super repeatable and this is work. Oh, did I just spoil it for everybody? Listen, because there’s way more information than just do it.

Scott:
No, I think you’re going to love this episode. Let’s bring him in, Mindy.

Mindy:
Pat Hiban is one of only a few residential real estate agents to ever hold the title of billion dollar agent. That’s billion with a B by the way. Selling more than 4,000 homes totaling more than $1 billion in volume.
So clearly he came from a long line of real estate magnets, right? That really wouldn’t make for a very interesting show now, would it?
In today’s show, we’re going to dive into just how he was able to become so successful with nothing other than his hard work to get him there.
Pat Hiban welcome to the BiggerPockets Money Podcast.

Pat:
Mindy, Scott, hey, it’s good to be here. Let’s have some fun.

Mindy:
Let’s have a lot of fun. Let’s talk real estate agency, specifically billion dollar agent. Now I’m not quite there yet. What does this mean? What do I have to get to be a billion dollar agent?

Pat:
Well, here’s the thing Mindy, it’s volume. So if you add up all the volume of all the houses that you sell and when it becomes a billion dollars, then you can label yourself a billion dollar agent.
Back when I first started, they had a club called a million dollar club and it was only the select. It was the top 20 in the zip code or the top 20 in your hometown were in the million dollar club, but eventually over time it became like a joke.
It’s like, damn, I sold three houses and I’m in the million dollar club. Nowadays you sell one house and you’re in the million dollar club.
So it’s the same thing probably that’s happening with billion dollar agent is that when I rung the bell, there was only a couple of us and it was such a buzzword.
And now there’s probably tons of them. There’s probably agents that have become billion dollar agents in a year somehow just by selling these Hollywood Hills homes.

Mindy:
Now that’s a true statement.

Scott:
So adjusting for inflation, you’re the first trillion dollar agent. One of the first trillion agents is where we’re at.

Pat:
Yeah, let’s mark that. Let’s make that official before someone else takes it.

Mindy:
Pat Hiban is the first trillion dollar agent when adjusted for inflation.

Scott:
Well. let’s start from the beginning. How did you get into this business? Was this the career path you had chosen for yourself as a kid coming out of high school, college? What did that look like and how did you get started on this journey?

Mindy:
He came from a long line of real estate magnets, Scott. I just said that.

Pat:
Yeah, no, that’s funny because a lot of people have thoughts nowadays of following their passion and going into knowing what they want to be.
And I was never that kid. I didn’t have any idea. Matter of fact, I went to two years of college without a major. I was undecided.
And then the guidance counselor called me in his office the end of my sophomore year. And it was like, “Son, you need to pick a major because you’re going to be a junior and you can’t be a junior without a major, because you’ve already got enough credits.”
I got all my credits and I said, “Well, I don’t want to be a five year student. So what can I do and get out on time?” And he said, “History or sociology.” He said, “History’s 10 classes, sociology’s nine classes.” I said, “I’ll take sociology.”
And I became a sociology major and that’s how I graduated. And so I really didn’t know. And even when I got out, I thought maybe I wanted to be a probation officer because that matched up with sociology, thought it was interesting.
But then I come to find out that they had a long waiting list of when they would hire. They weren’t really looking to hire. I was 21 years old when I graduated because I’m an October baby, so they didn’t want to hire me.
And they probably weren’t going to hire me plus it didn’t pay much money. And I had always had a chip on my shoulder of authority figures and I had always hated my bosses.
And so I really wanted to do something where I didn’t have a boss and lucky for me, I got turned down on a lot of sales jobs. I tried to get into sales and I just kept getting turned down. Couldn’t get a job.
And so believe it or not, I went where there was a barrier of least resistance and that was real estate sales because anybody could get their license and get into it and that’s what happened.
And I wasn’t a guy that’s like, “Oh, isn’t this a beautiful kitchen? And isn’t this a cool fireplace and look at this.” Never.
In my whole career as an agent, I probably said that once, but I hated myself for saying it. I just wasn’t that guy. I was more about these commissions are really fat. I’m making $2,500 of commission instead of $250 of commission like my friend the car salesman or $25 of commission like my friend who is selling printers or whatever.
And I just saw the money in it and I saw the freedom in it and that’s the truth.

Scott:
Awesome. And so how long did it take you from graduating college to deciding that you were going to get your license and begin that career path?

Pat:
Seven months. I tried a couple of things that didn’t work. I tried this time share type vacation sales thing and I wasn’t that good at it because it was very canned.
And it’s funny story. This is true. The guy who I was working for, when I left to become a real estate agent, says, “Well, if you can’t sell vacation packages, you’re not going to be able to sell real estate.”

Scott:
That proved true, of course.

Pat:
Yeah, yeah.

Scott:
What was your lifestyle during that period while you were figuring your way? Were you just were living really frugally? Was it tight? Was it hard? Were you finding your way?

Pat:
Well, yeah, so I’m from a family of five kids and all within five years of each other, it feels like, and my mom had a rule.
She had a six month rule. She was like, “If you go to college, you get six months when you get out. If you don’t go to college, you get six months before, you get 18 and a half and that’s it.”
And then you got to get the hell out. And so I lived at home for a little bit and then yeah, I found a place to rent. I had three other roommates.
I had this little tiny eight by eight room with three other roommates and I was a real estate agent out of that room, had a two door Toyota Celica.
I was bootstrapping it big time and got a couple sales to get a four door car so I could actually take people around and not have to meet me at houses.
That was the thing back then was putting people in your car, putting people in your back seat. You were like an Uber driver. I don’t think they like to do that anymore.

Scott:
Walk us through those first few sales. What were those like?

Pat:
That’s a great thing too. So my first year in real estate, I made 13,200 bucks and I still have the 10.99 for that. And I got rookie of the year.

Scott:
Million dollar agent.

Pat:
Yeah. Right. I think so, I think so. I think it was a million.

Mindy:
And what year was this?

Pat:
This was 1988 was my first full year. So all buyers, almost all buyers. I had one listing and guess who gave me the one listing? And I’ll never forget this.
My dad. My parents were divorced and my dad was living in a condo. A one bedroom, one bath condo, and then he got remarried and then moved out of town.
And he had it with another agent and he fired the other agent and gave it to me about halfway in my first year. And the funny thing is it sat on the market for seven months.
And to this day I’m grateful to my dad because he never harassed me and was like, “How come it’s not sold? What’s going on?”
And what happened was I ended up selling three other condos in the development because of that listing, because people would call on that listing.
I’d tell them it was priced at 54,900 and they’d be like, “That’s too much.” And I’d be like, “Oh there’s three other ones in the 40s. Do you want to look at those?” And it’d be like, “Yeah.”
And then I’d show them and sell them. Never told that to my dad either. But finally his sold after I sold out the rest of the condo development and then all the rest were just buyers I just picked up.
They used to have something called floor duty and basically what it was, where you volunteered to be a secretary. There was no secretary in the office.
You volunteered to be a secretary. You sorted the mail. You did all kinds of stuff like that. And then when someone called in and says, “How much is 123 Umpty Ump Street?” You said, “It’s 117, nine. Is that in your price range?”
And you basically tried to get them to come into the office and show them other houses. And I just basically just volunteered myself to sit there all the time and be the secretary and get paid leads for it.

Scott:
If you had to estimate, how many hours were you working per week in that time period? That first year, second year. Early years.

Pat:
So when I first started, I was substitute teaching. I think when I was getting my license, I was substitute teaching at like $50 a day.
And after I sold my first house, I think I quit substitute teaching. But after that I’d say probably 60. I don’t know. I don’t think I even kept track.
I had a girlfriend, my wife now, and I had friends, but not as many friends as I had in college. It went back to my old friends, so my high school friends.
So it wasn’t like I had stuff to do every night. I think I was pretty focused actually. I think I probably worked 60 hours a week and made 5 cents an hour or something.

Mindy:
Well, and let’s look at what we’ve got now versus what was happening back then. I wasn’t an agent in 1988, so I don’t know what commissions were.
Assuming they were around the same as 3% that we’re at right now. Your $54,000 condo for your dad netted you a whopping $1,600.

Pat:
Everybody was on a 50/50 split. It wasn’t even negotiable. You couldn’t even go and go be like, “Hey, can I get 55?” That was it. The broker was like, “Everybody’s on 50/50. If you don’t like it, leave.”
You go down the street, the brokerages were pretty much antitrust factory. They all conspired to go 50/50 and not higher.
And then interesting part of history. Then Re/Max came in and they dropped the bomb on that. They exploded that. And they were like, “Hey, we’re a 100%.” And everyone’s like, “What do you mean?”
And then only after maybe 10 years of Re/Max ruining that for the other brokers, then they started offering 60/40, 70/30, 80/20.

Scott:
Those who are not agents, what I think you’re saying Pat is that if you earned $1000 in commissions, your employing broker would take 50% of that.

Pat:
50%.

Scott:
So you would only get 500 after that. And you’re doing all the work and today that’s unfathomable. Most agents would never go for anything close to that at this point in time. But that’s what you’re saying is the reality back then.

Pat:
Yeah. That was the reality back then. And it’s come full circle today. It’s the same thing but with teams. So now the teams have become the broker.
The broker I worked for was called Grempler Realty and it was a lady named Mary Bell Grempler. And at the time she was probably my age now, but when I look back today, I think she’s probably 85 or something.
But she was probably in her 50s, but her name was Mary Bell Grempler and she had five offices and she had 20 agents in each office and that was it. And it was Grempler Realty and that’s the same thing as her having a team nowadays.

Mindy:
So being the broker would be the big money generator because I don’t want to belittle what she does, but she just sits there and waits for you to sell the house and then collects 50% of your commission.

Pat:
Right.

Mindy:
That’s why I didn’t get licensed for so long. I did not want to give up 50% of my commission. And now that there are different opportunities and different options, I did get my license.
But I am not making $1,600 when I sell a house. Now I’m making $16,000 when I sell a house. So I’m on your heels, Pat. I am a million dollar agent already.

Pat:
Yes. Congrats. Put that on your card.

Scott:
Walk us through what you think you did differently in those initial years to become a successful agent compared to your peers at that point in time?

Pat:
This is a great question. So first of all, like I said, my first year I had one listing. It was my dad’s condo and then probably 12 or 15 rentals and buyers, even sold a couple mobile homes. I was just junkyard dogging it.
In my second year, same thing, junkyard dogging it. Whatever I could get. If you gave me a lead, a scrap, I would hold on that thing and hound you.
And the funny thing, this very hard to find nowadays, but if you told me, “We’re going to move in a year and a half,” that was a great lead for me.
And I would call you every month religiously and just be like getting closer, getting closer, because it was the old adage buyers or liars and a year and a half meant nine months. So I’m going to keep calling them.
So two years I did pretty much all buyers and then everything changed in my third year because in my third year I took a program called Sweathogs by Floyd Wickman, he’s the father of Gino Wickman who created traction and all those books about the EOS system. That’s his dad.
So he created a course, which was a bootcamp. And he said, “Forget about all buyers. I only want you to be a listing agent.” And he said, “What I want you to do is go to the office and pick up the book.”
We had a book back then called a Criss Cross Directory and it basically had everybody’s name on every street and every phone number.
And you were allowed to cold call and just call them and ask them had they thought about buying or selling a house. And he had a script and he just pasted the script up on front of the desk.
And at the time I was 23 and I would just do what I was told and I did it and lo and behold, I got a couple of listings. And you had to go back to his class every week.
And if you didn’t get a listing at his class, you had to wear a dunce hat, sit in the corner and on the dunce hat, it said, no, but I will. That’s how hardcore this was.
And I think by the time the class was over, I had eight or nine listings. And then I realized that-

Scott:
You never had wear the dunce hat.

Pat:
I never wore the dunce hat. But I used to drive to class with four other agents from my office and they all had the dunce at because they wouldn’t do it. They just wouldn’t do it.
I’d get there at nine and I would just start calling and they would show up three or whatever and chat and they’d make five calls. I’d make it like 500.
And so what happened was I saw that if I was the listing agent, I was in control. I had a 1000, 10,000 other agents that worked for me suddenly, that were going to sell this listing for me.
All I had to do is put it in this cool thing called MLS, right? At the end of the day, we all know, and there’s a lot of agents who won’t admit this and everything’s going to sell if you price it right and put it in MLS.
And so I knew that. He taught me that. I got listings. Priced them right. Put them in MLS. All these other agents sold them for me.
Lo and behold, I think I made 24,000 my second year. My third year I made 83,000 and then my fourth year I went over $100,000.
And then every year after that I was a listing agent. I was always having way more commissions from listings and buyers and I just never went back. And I think that that was a huge lesson. And I think it’s a lesson that these agents don’t learn fast enough these days.

Scott:
So let me pull out two things I’m noticing here. One is hustle. I’m going to make 500 calls compared to the other folks in the team.
And the other, you have not said this, but I’d be interested if this is true. Is this idea of funnels or control of your numbers, right?
You’re not making 500 calls just just to hustle, right? You’re making 500 calls because you believe that if I make 100 calls, X percent will turn into a lead. X percent will turn into a listing. X percent will turn into a commission.
Are those two hypotheses true on my end? Are those again dropping what we just said?

Pat:
Yeah, but we didn’t even calculate the numbers back then. Basically his rule was call until you get an appointment. And so literally I could call until one, and if I got an appointment at one, then I’d be done. If I didn’t get an appointment, I’d have to keep calling.
And the funny thing about that is it worked. He had these things called fair trades. And what a fair trade is is something that I’m going to offer you to come over and tell you what your house is worth.
So I’m going to give you a trade. So I’m going to give you a net sheet of all the Maryland closing costs down to the penny that are going to show you not only what you would sell for, but what you would actually net after your mortgage is paid off, all the transfer taxes, doc stamps, blah, blah, blah, blah, blah, blah.
And a lot of people don’t understand that. So that’s a fair trade or you give them a detailed list of everything they need to do to fix up their home to get it ready for sale. So they don’t put a nickel in unless they get a dime back out.
Would you like that list? A market analysis is a list. What you can get. There’s like 10 fair trades that you could offer. And the whole idea was just to keep offering these people fair trades until they let you come over and then your day would be done.
But the chances are they weren’t going to let you come over if they were never thinking about selling, at least thinking about selling.
And man, even if they just sort of thinking about selling, usually meant they’re going to move some point in the future. I got their name, number, they’ve met me, they know me. I’m an agent that they know now.
And if I’m calling them every month saying, “Hey, how you doing?” They ended up using me just because I’m that guy they know.
And also I was willing to come over and meet with them and give them one of these fair trades. Does that make sense?

Scott:
That’s awesome. I love it. So there wasn’t really a funnel. I was wrong about that. It was more, I’m going to call until I get an appointment. How many days did you go without getting an appointment?

Pat:
Yeah. The only thing we kept track of is the names and numbers of the leads. And a check mark next to people I’ve already called so I don’t call them again.

Scott:
What’s the latest you had to stay before you got an appointment with this method?

Pat:
I don’t remember. I’m sure there were days where I didn’t get one, but his thing was you had to get one within a week. So I doubt there was a week where I got seven of them.
But I think by the time it was all said and done, there were probably weeks where I had multiple appointments and then he would honor the people who got multiple listings and multiple listing appointments.
It was good old fashioned sales motivation and it worked very well for me at such a young age. I ended up taking that bootcamp every year for the next four years.
So Dianna Kokoszka from Keller Williams was in it. And then she eventually created BOLD, which some say is a copycat off of it.
But it’s like everything in American business is a copycat off of something else. So let’s say eventually merged into BOLD, if you’ve heard about that? And that’s the idea behind it.

Mindy:
Okay. So I’ve been an agent for, I think eight years now, but I’ve been investing in real estate for 20 years. I feel pretty entrenched in real estate in general. I work at BiggerPockets.
I have a comment about this because what I’m hearing you say is that you did the work. What I’m not hearing you say is that so many agents, what is the stat? Like 90% of agents today won’t be around in two years because they’re not making any money. It’s not working for them.
There’s this huge misconception that being a real estate agent is super easy. You go and get your license and then just bam people come at you with all of their listings. You’re just going to sell all of your friends’ houses.
How many real estate agents do you know? Maybe not you Pat, you don’t count because you know so many real estate agents, but the people that are listening, in your daily life how many agents do you know?
You have to choose among your friends, which of my 15 real estate agent friends would I list my house with? No, you don’t. You have to go to the one that is the best.
And Pat is the best because he puts in the work. His coworkers would call five people and get five no’s and stop and getting a no sucks, right, Pat?
When people are like, “Don’t ever call me again.” That doesn’t feel awesome when you pick up the phone and you’re like, “Hey, I’d like to talk to you about selling your house,” and they’re swearing at you or stop calling me or slam the phone down. I remember the 80s, you had to slam the phone down and it hurt your ear.
But you’re doing the work. And that is across the board. If you want to succeed, you have to do the work. Whatever it is you want to succeed at, if you’re not going to do the work, then you’re not going to succeed. It doesn’t just fall into your lap. That’s not how life goes.

Pat:
I think everybody these days is, I shouldn’t say everybody, but I think there’s a problem nowadays where everyone’s delusional in the sense that they think that everybody knows them.
Literally I meet agents that have sold 10 houses and they think that everyone knows them. They talk about their reputation. Like you don’t have a reputation.
The guy that sold a 100 houses last year, probably doesn’t even have a reputation, there’s no such thing. Reputations come and go so fast.
Everyone might see it on social media. They look at social media for three seconds at a time. You’re one of a 1000 people that they might look at on social media.
And there’s a couple agents I know now that have done really well with social media, I’m sure you guys have probably interviewed them.
But they have to have the same mindset I had. You have to think, “I don’t care what anybody thinks what I’m doing at any time. I could be looking whatever, in any way, shape or form and I don’t care. I’m just going to fill myself all the time.”
And that’s what tends to work for them, not someone who always has to think about rejection. Just someone who’s only thinking about being on social media constantly, just like I was always thinking about calling and getting a listing appointment.

Scott:
Yeah. I think there’s this concept of a grind that accompanies any level of success really in any profession. This years long slog of consistent repeated action with the winning formula and you just continue it over.
And that is what drives success. Not your reputation like to your point, which if you stop doing it for a few years, you’re out.
You have to restart over with something else almost entirely. It’s really hard to get that engine turning back on again I think for a lot of folks once they stop it or leave it.
Well, let me test that. Did this slog, this grind, this pattern of success continue after year four? What did the next few years look like after that?

Pat:
So, yeah, that’s a great question too. I think I’ve reached a point where I remember Re/Max had this thing called, because I eventually went to Long and Foster.
My course of my career jumped ship, like five or six times, like most agents. But I remember being at Re/Max. I had a broker, her name was Leslie Rock.
And they had this club called, I think it was Platinum Club. It was where you earned 250,000 in commissions. And for three years in a row, I made the Platinum Club.
But it was like 257, 258, 258.5 or something. And she noticed it. I didn’t notice it. I just figured, oh, I made Platinum Club again, whatever.
She noticed it. And she sat me down. She said, “Do you realize that you’ve come within a couple of thousand dollars three years in a row? This is uncanny.”
And I said, “I didn’t even notice.” And then she goes, “Well, what are we going to do to get you out of this rut to get you to the next level?”
And I found that the way to do that was leverage i.e building a team, things like that. And it was good timing for me because I was married at the time. I’m just making this up, I think of my daughters were like two and four or something.
And so I needed to start spending more time at home anyways and it all came together. And then I just started building a team and that’s where all that started. Then I leveraged. Then I started hiring buyer agents to take away the buyers from me. And then the rest is history.

Scott:
Awesome. That first year you put together a team, many agents I know who start their team find that their income, the take home pay, goes down that first year or at least in the first few months because they’re giving away the commission to the team member to a large degree.
Did you find the same was true for you? And how’d you overcome that mentally if so?

Pat:
Well, I’ll tell you what’s guaranteed to go down and that’s your profit margin. So your margin is going to drop significantly.
Now the question is, again, do you care that your margin goes down? You really only care if you’re adjusted gross income on your tax return goes down, right? Because at the end of the day, it’s your EBITDA, right? It’s what you’re left with.
And there’s different opinions. This is a true story. I have two good friends. One, guy’s a broker. An independent broker in Florida. I think he has 150 agents. Every agent’s on a 100% split. And he makes $595 a transaction.
Most of his money is coming from mortgage and title and he makes a lot of money off mortgage and title because his agents use the mortgage and title company.
He doesn’t care what his margin is. He doesn’t care what his margin per deal is, because it’s nothing, right? It’s basically zip. He loses money on the deal.
I know another guy who does a lot of high end houses and he only has two people on his team. It’s a highly focused team and his philosophy is keep it small and keep it all.
And he makes 90% of every deal after all his expenses are paid, right? And he’s selling a couple million dollar houses. He just told me he sold an $8 million house. So that’s like 240 grand. He’ll probably keep 220 of it.
But he does all the work, but he’s okay with that hustle part of it. He’s addicted to his phone, but he knows that’s part of the deal. He’s very professional about it.
So I don’t think either of them are wrong. And if I compared their tax returns, they might be similar. But my point is you just have to know what your game is and not go back and forth.
I think a lot of agents try to go back and forth a lot and try to say, “Well, I want to make a lot per deal, but I also want to pay my agents high split and have a million agents.” Well probably is not going to work like that. Did I make sense?

Scott:
Absolutely. Volume or rate, right? What we want is the total amount of profit at the end of the day. And you can increase volume. You can increase rate. In perfect world you can do both, but not always.

Mindy:
Pat, you just made a really good point. You said your friend who said, “Keep it small and keep it all,” is addicted to his phone.
And that’s a side that we haven’t talked about yet about being a real estate agent where if you’re going to be successful, unless you’re going to spread that out amongst your team, you’re going to give up a lot.
You’re going to give up nights and weekends because that’s when your clients can see houses because they have a job and they have a family themselves.
And you’re going to be on your phone all the time. Now that we have pocket phones, we are always available and you don’t get time off.
And even when you’re on vacation, you don’t get time off. And if you want to sell a house, go on vacation because that’s when it sells.

Pat:
That’s another weird thing to talk about because when I was veering off from being addicted to real estate sales and I was addicted to real estate sales, it was an all consuming job.
For me, it consumed me and that’s what made me good was I was consumed by it. I didn’t want to lose that deal. I had to take that call. I had to show that house because at that time it was eight grand or 10 grand or whatever and now it’s 16 grand, like you said.
How do you turn down a $16,000 cash phone call, right? If all they want you to do is bring them to a builder model and sign them in. You have to say yes. It’s so hard.
So it was easier to spin off I think when I was spinning off. Now everyone’s addicted to their phone. You can sit there Mindy and say, “Oh yeah, he’s addicted to his phone.”
Well, guess what? My wife isn’t a real estate, but she’s addicted to her phone. My kids are addicted to their phones. Everyone’s addicted to their phones. If you’re going to do that, we might as well not be false prophets, right? Who’s not addicted to their phones?
So the question is, are you going to be addicted to your phone for something that’s going to make money? Are you going to be addicted to your phone for TikTok or something that’s just going to serve you no purpose at all? What are you replacing it with?
Unless you’re leaving your phone in your car or you’re locking your phone in your safe, which some people do or you’re just turning it off, but let’s just be real, right?

Mindy:
That’s true.

Scott:
Let’s hear about the next phase. You start a team here and I imagine you’re still working long hours, but at some point you part ways with this business.
And can you walk us through that shift and why you left being an agent and how you thought about investing as part of that journey?

Pat:
So I started investing, I think that first year when I became a listing agent, I was like 23 years old. That’s when I bought my first house. I house hacked it. I rented it to two nannies from India, the basement. And I rented to my buddy from elementary school, bedroom upstairs.
And then eventually I kicked them out and my wife moved in and then we moved out to something bigger and had kids. And then I kept that as a rental and then I bought another rental in her name.
And this was all when my salary wasn’t looking good or whatever, let’s just say my tax return wasn’t looking great. But then I stopped and I think that was a mistake.
There was probably about 10 years in the 90s where the real estate market did not really change. It didn’t get worse. It didn’t get better. Real estate investing was not a thing. BiggerPockets would’ve had no chance.
There was only five guys around that invested in real estate. It wasn’t a respected asset class. It would’ve been like maybe gold is now. You meet somebody on a plane, “What do you do?” “I invest. I buy and sell gold.” That’s boring, right?
That’s how real estate was. Nobody bought and sold. Nobody did it. And so I could have bought 10 houses. I could have bought 10 houses at the exact same price for 10 years. The same house on the same street didn’t change 10 years, but I didn’t.
So I put all my money in the stock market like everyone else, it ran up in the 2000s. I remember the day I became a millionaire. I put this in the book, Six Steps to Seven Figures.
My wife and I took a picture. Our Microsoft money account went over a million dollars and went to $1,000,012. She said, “Where do you want to go to dinner?” I said, “I don’t care so long as it doesn’t cost more than $12.”

Scott:
And what year was this?

Pat:
It’s a true story. That was 1999, maybe I think.

Scott:
Awesome.

Pat:
Yeah. And so we ate at home. We had cheese steak subs and Budweiser, and then the market crashed and I was margined out. Which means you borrow money.
I had a $1.2 million in value, but I borrowed like 70% of that. So I had more stocks than that. Some would say that’s how a lot of real estate investors are now. Just in real estate versus in stocks, but real estate doesn’t move downwards as fast as stocks do, obviously.
My $1.2 million went all the way to 300 grand in a one year. And I don’t think that would happen in real estate, it wouldn’t. Never has.
So anyways, so then I just said, “Screw the stock market. I’m going to buy more houses.” And I started buying rentals at University of Maryland College Park.
I bought seven houses. I had a mentor and there were these houses for sale for 150,000. And they would rent for 2,400 a month to college kids because they were coming out of the dorms.
And of course the dorms always charge astronomical amounts. He looked at the numbers and he said, “Wow, those are great numbers.” It’s like the 2% rule instead of the 1% rule. He said, “I’d buy 10 of them.”
So literally I bought seven of them within a year and a half. And then I started just buying other houses, bought some in Baltimore City and rented them Section Eight housing.
And then at some point I decided to start buying commercial real estate and I bought a shopping center and I met a couple other guys and we started buying multi-family projects before anybody was syndicating.
I think we bought three of them and then we bought a fourth and then we decided to syndicate and it was like pulling teeth. It was calling people and FedExing them a brochure and getting on phone calls for hours with people who want to invest 50 grand in your apartment complex.
Of course, now we have an email list and I think the last one we did, we sold out in 12 minutes or something ridiculous. But anyways, that was about 10 years ago. That was more than 10 years ago. And now I have about 2000 doors of apartments.
And so anyways, telling stories that are sort of related to your question. But around 2010, I think I just got sick of it, Scott. But what happened was everything changed.
It’s important to pay attention, I think what I’m saying here, because a lot of agents lately have been asking me what they should really look for to determine when things have actually changed in this real estate market.
And I tend to say the number of units, that’s what changed for me. The number of units and what the number of units means is the number of settlements, doesn’t matter. The number of buyers, number of sellers, whatever, it’s the number of settlements.
Doesn’t matter the days on the market, what percentage the prices drop, it’s the number of units because I think we were averaging like 45 settlements a month and we had a certain amount of bills to pay.
And I started profiting at, let’s say 40, right? So the last five sales were all profit to me. Well, I remember one month I went from 40 some sales all the way down to 16 the same year. In May I sold 42, let’s say, and then in June I sold 16 and it didn’t get much better.
And it was hard and we were shoveling water out of the boat. And then basically in 2010 I went to my most loyalest agent and long time guy, Mike Sloan, that was with me and I said, “Hey, you want to take over? I’m done.”
And he said yes. And he took over. And that was the beginning of my mental process where after that I just checked out.

Scott:
So the catalyst was overwhelming amount of work, but also just this boom and bust from your business in terms of settlements and just getting tired of that probably tons of hours and the emotional turmoil and anxiety about that part of the business. Is that right?

Pat:
Yeah. It was just terrible. It would’ve been being at the best part of your life and then there’s a shooting or something. And I turn on the lights and the cops come and the fire department come. It was just bad.
So I had a really high profit because it was all me. I was responsible for everything. There was no partners or anything in it. I heard a great statement not too long ago. They said, “Capitalism without bankruptcy is Christianity without hell.”
And it was like that. I had gotten the fruits of capitalism and I was making a ton of money, more than any money I had made in my life. I had a mortgage company, a title company, everything I touched turned to gold.
And then all of a sudden the downside of capitalism happened and I was responsible for it all. So I wanted to get out of there as soon as possible.
And I liken it to going to Vegas and winning at craps and pulling all the money to myself and running up to my hotel room and putting it under the bed and watching a movie.
I just wanted to take all the winnings and get out. I didn’t want to wait for the market to come back. Does that make sense?

Scott:
Yeah. It sounds like you had a big boom up until the housing crash, well, a year or two into the housing crash, but it eventually started catching up with your business and just was a miserable experience running a real estate business in that time period with lower transaction volume and all that the other stuff.

Pat:
Yeah. It might be more better for my ego to say, “Oh yeah, well, I quit at the top.” But it really wasn’t like that. The universe was coming to me and it wasn’t fun anymore.
I wasn’t as excited. I didn’t like coming to work. I tell a story. It was probably before everything crashed but this is when I knew the writing was on the wall that I was eventually going to get out, was I went on a listing appointment with actually Mike Sloan my partner at the time and fell asleep.

Scott:
Oh my gosh.

Mindy:
Oh my.

Scott:
Were you showcasing the bed? Did that help?

Pat:
No.

Scott:
At the listing.

Pat:
It’s one of those ones, you know how you kick the curb thing? I don’t know. I think I had some pasta for lunch. This lady, it was really hot in her house. It was like 3:30 in the afternoon. It was prime nap time.
And I kicked a leg of the table and she was like, “You fell asleep.” And I go, “Whoa.” I went to the bathroom and put water on my face.
And then I came back out and I did it again. It was like you catch yourself. Sometimes if you’re driving and you catch yourself.

Scott:
Did you get listing?

Pat:
No, no. I didn’t even call, I didn’t even follow up. I’m like, “I’m not following up.” I was like, “I lost that one.” And that was the last appointment I ever went on. And that was when I’m like, “It’s just not fun anymore for me.”

Scott:
Well, one more thing here on this. So this is a great catalyst for leaving the business. How’d you set up the rest of your portfolio to transition this day and night I’m in, I’m out. And what did life look like before and after?

Pat:
The technical answer is obviously you want your expenses to be paid by the passive income of your real estate. Now the tricky part that no one talks about, David Greene brings it up, but a lot of people don’t talk about is when you’re doing single family homes, a lot of times it’s inconsistent.
You could have one of these great single families and then the next thing you need a new roof and new air conditioning and in the next three years you don’t make a profit.
So I had a bunch of single families at the time and I was just starting to get into commercial, but I think more than anything is I just had faith in myself.
I wouldn’t say that I had this perfect balanced portfolio that paid every bill. I think I had been through the stress of having a lot of things that I signed personally come off the books for me.
I signed for a big lease. I signed for a copier that it was like $5,000 a month just for this massive copier that we did postcards with and stuff. We had a bunch of vehicles that I had signed for.
And so coming off of that, just not having that liability, was a big relief. But I did have some passive income, but more than anything, I just had faith in myself.
I knew that whatever I chose to do it would work itself out and I’d figure it out. And that’s all I can really say is I just had faith. I just had faith in a universe and faith in myself.

Scott:
I love that. You think about people today who are thinking about, I just want to walk away with that and they think their portfolio is going to generate these returns.
Where’s it going to come from? If you have a stock market portfolio, you have a million bucks in there, you’re going to get 2% dividend yield on a good day. So that’s 20 grand a year on that.
And if you have a rental property portfolio of single family homes at a five or six cap rate, absolutely, you’re going to have that same problem.
Even if you have a million bucks there, that’s supposedly 50, 60 grand a year on paper. But when account for CapEx, which is not included in these cap rates, that’s going to eat up your cash flow and is to a significant degree each year.
So what can you do here? I think you got to know what you want in your life. You need to have ideally I think a strong cash position. Did you have some cash set aside like a significant emergency reserve when you walked away?

Pat:
Yeah, I did. I’ve always been a numbers guy. My mom was a math teacher and my mom is 88 years old and she logs into her Merrill Lynch account every day.
It’s something that she does. I inherited it from her. I’ve always been a saver. I’m just obsessed with money. I’m constantly moving money around.
And I think it served me in that I think about it so much that I do sell stuff. And a lot of people they don’t sell, they don’t cash out and then they just go up and down with the markets.
And I’m always like if you had a bunch of furniture in your house and you moved it around every month, it sounds crazy, but I have a lot of capital events.
I just sold a shopping center. I just sold an apartment complex we have in Georgia and we bought another one in Florida. I’m just constantly doing stuff like that.
But what comes when you do that is you have to pay attention to all your numbers. So I’m always updating my numbers and I’m always logging into all my different accounts and looking. So yeah, I did have a couple million bucks to answer the question.

Scott:
Let me ask you a question about this concept of selling. One of the things I think that people struggle with. So I’ll use myself as an example.
I have five properties here in Denver. They’ve done very well. They’ve gone up. Like you mentioned earlier, I’m leveraged probably similar to the way that you were leveraged on your margin portfolio that you said earlier with probably 60/40 debt to equity on those properties.
But here’s my problem, if I sell, which you could say, “Hey, I would love to reposition some of that.” But then I’ve got to swap my low interest rate mortgage for a much higher interest rate mortgage, or I got to trade out of that to essentially a HELOC or something that has a big balloon payment or a very short amortization period in the commercial space with that.
So do you think that it’s a little easier for folks that once you get past that level of residential investing into the commercial world, that the buying and selling component of that really becomes more of a manageable game than the long term I’m going to buy this with a 30 year mortgage set and forget it approach in the single family or small multi-family space.

Pat:
I think you’re correct. One of the things I did, which I write down as one of my mistakes, is I had a whole bunch of those mortgages per house, Fannie Mae mortgages on a bunch of the houses that I had.
And then I paid them all off. This was probably right around at the time we were talking, probably the worst time to do it, probably like 2011, ’12, whatever. I thought whatever, I’m going to pay everything off. So I paid everything off.
And then couple years later, things started coming back. I wanted money to invest, but I couldn’t get them because they were all in LLCs.
So I ended up getting a commercial note that I’ve had to refinance several times and it’s always at like five point something else and a five year balloon.
So anyways, if your properties are all on those Fannie Mae 30 year mortgages, those are the ones that probably you should just keep forever.
Because there’ll come a time when you won’t be able to get, not only that rate, you won’t be able to get something for 30 years, especially if you decide to put it in an LLC, then you’re really screwed.
Because then the next time you go around, you have to get a commercial loan because your LLC doesn’t make enough money to qualify. Does that make sense?

Scott:
It is hard to trade real estate right now. People are stuck because of what I just described. And I would love to be a seller in some of these places, but then I’m either going to have to pay this huge capital gain and then redeploy the assets, something else I’m going to get way worse debt terms on than my Fannie Mae 30 year fixed rate mortgage.

Pat:
Yeah. And the more real estate that you own, the more cost segregation and depreciation that you get, and suddenly your tax returns become so bad that you can’t qualify for a regular Fannie Mae mortgage anyways.
That happened to me for three years in a row. I was buying so many apartments and stuff and so much new real estate that it ruined my income and no one would give me a loan.

Scott:
So for those listening, what Pat is saying here is, Pat was clearly a real estate professional. So that means that losses, depreciation, for example, on rental properties can count against active income.
So he could buy rental properties and lose a 100,000, $200,000 in depreciation in a year. Not only that, but when you buy an apartment complex and start moving into the bigger assets, cost segregation allows you to do bonus depreciation.
This is a topic we’ve covered in various videos in the BiggerPockets YouTube channel. So you might have hundreds of thousands of dollars in losses and actually be getting tax credits as a real estate professional in those periods.
You got to be careful because you’re going to pay it all back on the back end whenever you go to sell those properties, unless you continue the game of 1031 exchanging and continuing to buy new assets in perpetuity. But it’s a really powerful tax benefit.
Now that’s not true, that does not apply if you are a accountant or a lawyer or something like that and you’re not a real estate professional, then you’re only getting passive losses, which are still valuable, but have slightly different connotations there. But that’s an awesome tidbit.

Mindy:
I want to clarify what Scott is saying. Real estate professional. Each one of those words is capitalized. This is an actual thing.
I think it’s what? A tax designation. This is something there’s a lot you have to do to qualify to be a real estate professional.
Basically you can’t have a full-time job if you are a real estate professional. Lots of hoops to jump through, but it can be very, very, very beneficial when it comes to tax time.
So if you think you’re a real estate professional, talk to your accountant, who will most likely slap you down and say, “No, you’re not.”
But if you are yay. Because yeah, I work at BiggerPockets. I’m a real estate agent. I have rentals. Why don’t I qualify? And they’re like, “Here’s 17 reasons why you don’t qualify.”

Pat:
Get a different accountant. It’s the best thing in the United States tax system. It’s a reason why Donald Trump’s tax returns show that he didn’t pay any taxes because he is a real estate mogul.

Scott:
Yeah. This is a cheat code here. And Pat, let me ask you this as a direct question with this. Do you think that your wealth accumulation began exploding when you started purchasing these rental properties and taking advantage of these depreciation benefits to shield that active income from taxes?

Pat:
Yeah, yeah, absolutely. I’ve just been so fortunate. I’m a real estate agent since I was 21 years old. So it was never a question whether I qualified for that designation and it’s just so awesome.
People don’t understand it. How could you not have to pay that much in taxes? That’s just the way it is. It’s all legal. Yeah.

Scott:
Especially when your net worth gets a little bit bigger, a couple multiples of your annual income. I bet you’re able to purchase properties and essentially offset nearly all of the active income you’re generating as a real estate agent. Even in that 250 plus range with that.
So we build a business and you grind it out for those first 10 years to build that net worth and that portfolio, and then these advantages begin just coming in to help scale that portfolio to the next level with that, as you’re able to shield that active income from taxes with these.
So I think real estate professional status is a great opportunity to explore for folks like Mindy, folks like at and folks that are thinking about leaving their full-time job, but have a big real estate portfolio and intend to buy more because of the depreciation offsetting your active income.

Pat:
Yeah.

Scott:
So Pat, you’ve recently brought two books into the BiggerPockets family here in the last 30 days, which is pretty remarkable.
So not only are you a successful real estate agent, investor, family man, general life success story, but you’re now a published author a couple times over.
Why did you bring those books into the BiggerPockets family? And can you tell us a little bit about them?

Pat:
Absolutely. Yeah. You guys, you’re a dream come true for me for both of these books. I’m good friends with Matt Faircloth, he’s a member of GoBundance.
And Tim Rhode and I were talking to him about our newest idea of a book at that time, The Quitter’s Manifesto. And he’s like, “Well, hey, let me introduce you to the BiggerPockets family.”
And his wife has a book with you and she really enjoys it. And of course, we know Aaron Amuchastegui and David Osborn, and a bunch of other authors that you guys publish.
And so we were like, “Yeah, let’s investigate it.” And so let me tell you a little bit about that book. First of all, around that same time, say 2010 when I gave my business over to Mike Sloan, I met a guy named Tim Rhode who had retired at 40 years old.
And I met him and I asked him what he did for a living. And he said, “I ski.” And I said, “What?” And he used to be a top agent himself. And he basically taught me how to remove this identity that we grow.
If you’re a doctor, a lawyer or a real estate agent, you grow an identity. I grew an identity. I was a local celebrity in my town and I had a huge identity that I eventually just gave up on or gave away or walked away from.
And he taught me how to do that. And so when I started hearing about the great resignation and all these people quitting their jobs in COVID, I called him and I say, “Hey Tim, you were my mentor. I’m your mentee. We both quit our occupations right in the middle of where we probably shouldn’t have in most people’s minds. Let’s write a book about it.”
And as we talked about it, we decided to write a very tactical book, not a strategic book that is encouraging people to quit, but a book that’s only made for people who’ve already decided to quit and just don’t know the steps to go through to do it. And that’s The Quitter’s Manifesto.

Scott:
Awesome. Could you give us a quick highlight of some of those key steps for folks who are interested in learning more?

Pat:
Yeah, absolutely. So basically we’ve set the book up Scott like this. So we know that quitting is terrifying. The reason that most people don’t quit is because they’re scared. It’s like going to a cliff and looking over the cliff.
If you took 1000 people to a cliff and they all looked over the cliff, one guy would jump off, one guy or one girl would jump off, and create a parachute on the way down. That’s what you call entrepreneur, right? The other 999 might take a selfie and run and say, “It’s scary.”
So we said, “Okay, what’s going to get those people to not run away from this scary, scary, scary cliff?” And so we thought of it like a circus where we would teach them how to build a safety net, like a trapeze artist has at a circus.
So a trapeze artist grabs a bar and swings to the next bar and swings to the next bar and swings to the next bar. And if they fall, they land on a safety net.
Well, the book Quitter’s Manifesto is basically a whole bunch of trapeze bars that the reader can grab onto one by one. And we teach them how to build a financial safety net at the bottom. So if they drop they land on the safety net.
So now that they’ve got the trapeze bars and the safety net, they can go ahead and move forward. And the steps range from building a quitting team, which is a group of people that we actually give you little outlines in the book so you could build a team to quit with.
People that are going to help you quit all the way up to something called a soul sucking meter, which is basically a decision making meter that helps you decide whether or not you’re ready to quit or not.
And the book’s done, so far it’s done extremely well, and we’re very excited about it.

Scott:
Awesome. Well, it’s a great read. We’re very excited to have this in the BiggerPockets line up and look forward to sharing this with as many people as possible.
Pat, that’s not the only book that you’ve written. I mentioned several books here. Can you tell us a little bit about Six Steps to Seven Figures as well?

Pat:
Yeah, absolutely. So that’s a real exciting one. So in 2011, after I essentially decided to get out of the real estate business, I decided to write a book and it went through several versions.
And I sat down with Gary Keller at Keller Williams Realty who’s written so many best sellers. The ONE Thing among many other real estate books.
And he looked at everything that I wrote and he’s like, “Pat, the only thing people are really going to buy that’s real important to them are what they really want is your story.”
Kind of like how the three of us just chatted, but put it in a book and stories like that. And he said, “You got a ton of stories.”
So I sat down and I put him in a huge book that was chronological like year one, year two, year three. And then he said, “It’s too long. You got to make it more of an airplane read.”
It went from 400 pages to 200 pages and I was able to put it into six steps. Six simple steps that any real estate agent could do where you could go from selling no houses to selling 500 plus houses a year.
And that actually went on to make the New York Times bestseller list and made the USA Today best sellers and Washington Post bestseller list. And that was a very exciting journey.
And then about a decade passed and it was a classic, but it wasn’t killing it like it did when it was on the bestseller list, of course.
And so you guys came to me and you said, “Hey, why don’t we do a remake?” So I said, “Okay, what would that take?” So we decided what it would take is a chapter about how I quit, the steps that I took after I made a million dollars, what steps did I take to actually get out of the business?
Because the worst thing to see is an 87 year old woman knocking on FSBO doors, still in the business. We want agents to eventually get out of the business and quit and retire.
So what it took to quit and another chapter about what I’m doing now and what I’ve done since I’ve quit. So I took a couple of months and I put my nose to the grindstone and I wrote two new chapters, two and a half new chapters.
And I brought them to two BiggerPockets publishing and they read them. They said, “Man, this is great.” And we packaged together and now we have Six Steps to Seven Figures new and improved with two new chapters and it’s very exciting.

Scott:
Awesome. And we’re obviously incredibly excited about both of these books. Could you give us a quick rundown for those who have not read Six Steps to Seven Figures, what those six steps are for folks that are brand new to the title?

Pat:
Sure. The first step is basically it’s a firm. Most people come out with really big goals and I learned early on to come out with little goals.
A little goal would be what we were talking earlier, rather than be the agent of the year, or rather than sell a million dollars, it’s call until you get an appointment or make 50 calls a day or five calls a day or whatever that is.
The second step will be track, which goes to what you said, which is track that which is measured grows. And there’s a million different ways you can track. And I go through different ways I’ve tracked things as an agent over the past 25 years or so as an agent.
The next one is mentors and masterminds, which is basically find people who have proven themselves in the real estate business and just copy them. It’s just copying other agents, which I did my whole career.
And then the next chapter is act, right? And act just means take action on. Act is a difference between everyone else that took that class and me. I actually took action on it and they didn’t, right?

Scott:
The dunce hat or no dunce hat.

Pat:
Exactly, exactly. And then the fifth chapter is build and build is most people’s favorite, believe it or not. It’s a little secret that most agents don’t think about, but it’s you build on a success up, not from the ground up.
So if you sell a house in a certain neighborhood, you don’t want to go market a different neighborhood. You want to go to that exact neighborhood and be like, “I’m a neighborhood expert.”
People will hire people just because they sold one lousy house in the neighborhood and they think that they’re been around for 100 years and it’s their first listing, but they don’t know. They just have that social proof because this house sold.
And you could do that with school teachers. I tell how I did it with school teachers, how I did it with police officers, how I did it with million dollar homes, just taking one success and then building and saying, “Oh, I sold house to Officer Jenkins, Officer Smith and Officer Pinckney.” And they’re like, “Oh, really? You’re my agent.” Boom. So build.
And then the last chapter is invest, which just basically talks about everything you guys talk about at BiggerPockets, which is just as you make more money, don’t just spend more money on watches and bigger houses and more cars and more things.
Keep your expenses similar and save. Do like my mom does and save money, count money, make your goal. This is how much money I have today. This is how much I want to have at the end of the year. That should be your goal rather than I want to have three Rolex watches. And those are the six steps.

Scott:
Well, it’s a fantastic book. We’re very grateful that you’ve decided to publish with BiggerPockets and look forward to sharing it with as many people as possible.

Pat:
My pleasure, I’m excited.

Mindy:
Like I said before, I’ve been an agent for a while. I’ve been involved in real estate for a long time and I started reading the book to prepare for this show.
And I’m reading and I’m like, “Okay, okay. What am I really going to learn?” I could not turn the pages fast enough. It doesn’t matter how much time you have been an agent.
If you’re a new agent, if you’re an older agent, if you think you know everything like me, you’re going to learn so much from this book. It’s like a masterclass in being a successful real estate agent. I really loved that book.

Scott:
Where can people find out more about you, Pat?

Pat:
Here’s the thing. This is funny. So I have a new website it’s called hiban.com. It’s the same website I used to have my real estate houses on and I just had it updated. So just go to hiban.com and everything’s on there.

Scott:
Awesome. Thank you so much for coming on today, Pat. It’s a pleasure to talk with you and we’re very grateful for you joining the BiggerPockets publishing world.

Pat:
Thanks guys. I really had a lot of fun. And to me, this is enjoyable. I’ve been talking about The Quitter’s Manifesto for like 25 podcasts in a row, so to do this was very refreshing.
And if either of you guys are ever on vacation or sick or you need a stand in, reach out to me, I love talking. So I’d love to help out if I can, if you need me to.

Mindy:
Okay, Pat, this was a delight to talk to you today. Thank you so much for joining us. I had such a good time talking to you, listening to your story and getting this personal masterclass on being a successful agent.
Okay, Scott, that was Pat Hiban, billion dollar agent. I think that that cannot be stressed enough because that is really impressive when you’re selling $50,000 houses.
His book Six Steps to Seven Figures was, I’m not kidding, I could not stop turning the pages. I could not. I really do think I know everything.
And then I read this book. I’m like, “Oh, I could be doing that. I could be doing that. I am doing that. I could be doing that. I could be doing that.”
It’s just a fantastic book if you want to be a successful real estate agent. It’s literally the step by step how to. I did it. You could do it too.

Scott:
Yeah. That’s awesome. And so is Quitter’s Manifesto. It’s just a step by step guide to overcoming a lot of those challenges that surround the idea of actually leaving your profession.
We build up this concept of financial freedom for so long in our minds and build up these portfolios. But it’s really not even about the portfolio.
When you talk across hundreds of people I’ve communicated with and I know that you’ve met as well, that are struggling with early retirement in a non-financial sense, not just in the context of their portfolio allocations and the cash position and those types of things we like to talk about here at BP Money.

Mindy:
Right. Carl struggled. We had hit our number. We had doubled our number and then he is like, “Oh, I don’t know. I don’t know.” It’s hard. What if syndrome really does hit everybody. So yeah, that’s an excellent book as well.

Scott:
I do want to call out two great nuggets we got from today’s show that I really thought were powerful. One was the concept he’s talking about buying and selling, right?
And most of the time when we talk about building wealth here at BiggerPockets, it’s in the context of buying and why is that? Because the vast majority of people who are interested in this business are getting into it, right?
I’m building my first 100,000 grand in net worth, my first million, my first whatever, 10,000. And I need to use that net worth to buy in investments and begin investing and accumulating assets.
And he was talking about how not enough people talk about selling. And I think that’s a great point. When you have a large portfolio and you’ve got a big business asset allocation, redeploying your capital, all that stuff makes a lot of sense.
But it’s also very hard for investors like us, us being all of the people who are listening and myself included, who invest in single family or small multi-family real estate with 30 year fixed rate Fannie Mae mortgages.
How do you trade out of one of those properties? And I’ve been looking at this and thinking about this with my own portfolio. If I sell, I have to pay significant capital gains taxes, or I have to 1031 exchange, which involves me swapping my great mortgage for a worse one, most likely.
Or if I cash out and refinance, I’m doing the exact same thing and taking out my great mortgage and replacing it with a much worse one.
I’ve talked to some accountants recently and heard about creative things like selling your existing portfolio and then doing a cost segregation analysis on the new purchase to offset most of the capital gains taxes.
But I think that there are not a lot of great options right now for real estate investors who have 30 year mortgages on single family rentals or small multi-family investments other than to hold on for dear life and just continue holding.
I’d be really interested if other folks had opinions on that that were contrary to that and wanted to discuss those. So I’d love how you think about selling and trading real estate and accounting for the tax challenges, which are good problems for all of us who have been investing for a long period of time. But I think that’s an really interesting point there.

Mindy:
Absolutely. And I will post this in our Facebook group, which can be found at facebook.com/groups/bpmoney. So please join the conversation.
How do you think about selling properties and reinvesting your assets into higher cost and higher interest rate investments? Honestly, Scott, my thought is why do you have to sell?

Scott:
I don’t but I just thought about it in the context of trading that real estate. And it’s like if I wanted to sell, I would have to really believe in my alternative investment because I’m going to be giving up a lot in order to do that in the form of paying taxes right now and exchanging my great mortgage for a much higher one.
So if I want to avoid the taxes, I’d have to really believe in the next piece of real estate over and above my existing portfolio.
So I’m not going to sell. I’m happy with my current portfolio, but it’s a challenge for I think a lot of folks there who have experienced that appreciation and don’t have an alternative to deploy it into.
So the second big point though, was the real estate professional status. Real estate professional status again is a tax designation that says that if you are a real estate professional, for example, a real estate agent.
And you would do that as your full-time or primary job, work a certain number of hours at it, then you can use the depreciation from a rental property, the passive losses that real estate often produces to offset earned income.
And that can be a major tax benefit when deployed appropriately. And that advantage compounds considerably for real estate investors, when their portfolios begin to balloon to multiples of their annual income because you may be able to offset all of your earned income or a huge percentage of it with that depreciation.
So a really, really super powerful tax benefit and interesting concept there for folks to explore. And I’m sure there’s going to be a great discussion around that as well.

Mindy:
And we will post that question in the BiggerPockets Money Podcast Facebook group as well. Facebook.com/group/bpmoney.
Okay, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
From episode 339 of the BiggerPockets Money Podcast. He is Scott Trench and I am Mindy Jensen saying thank you for listening.

 

Dave:
Hey, what’s going on, everyone. Welcome to On The Market. I’m your host, Dave Meyer, and I am joined today by the full On The Market panel. We have Jamil, Kathy, Henry, and James joining us. How’s everyone doing?

Kathy:
Fantastic.

Henry:
Awesome.

Dave:
Well, great. Thank you all for being here. We’re going to repeat a show that we tried a couple of months ago that was really popular, and basically, we gave homework, again, to each of the co-hosts here, and asked them to bring us the story that is most interesting to them about today’s housing market. And given everything that is going on in the economy, there is probably many to choose from, I imagine. I think we have some really interesting stories that show different sides to the housing market and different angles that you should be thinking about for your own investing. With that, let’s just jump into this. James, let’s start with you. What story did you bring for us this week?

James:
This is a really interesting story that I found, and over the last year we’ve heard all about… Actually, last three to four years, we’ve heard about Wall Street buying up all the single family housing and what’s that been doing for inventory, and the amount of money they’ve been spending. This article is titled, “Real estate experts see a big selloff in coming as treasure yields close in on cap rates.” And what that means is, what they’re talking about, is the treasury yield has increased dramatically over the last 12 months. It is now up to a 3.7% return, whereas with the demand of single family housing, the cap rates have fallen also dramatically since 2014, and they’ve gone from 5.4% down to 4.4%. What they’re saying is the margins have been compressed, just like we’re all seeing, or we’ve seen the last 24 months. To get into a deal you had to buy on a slimmer margin.
What this article is talking about is this could be the major pullback and that real estate was not… or, Wall Street was not built for real estate. They want to work money, they want to get that stable return, but now they have easier investments that they can put it in. What it’s saying is Wall Street is going to lose its appetite because it takes a lot more work, takes a lot more staff, whereas they can just go put their money in the treasury yield and just make almost the same return. This could be the end of the hedge funds deploying massive amounts of money.
The other thing I thought was interesting was it talks about how as banks… A lot of these hedge funds are financed by banks and these banks could do margin calls, forcing inventory into the market, which with the amount of homes that these companies have bought could really increase it. There’s been a lot of talk about how, “These homes will never be seen again, they’ve been swallowed up by these hedge funds,” but that could be actually the change is the hedge funds have banks, they got to report to the banks, and at the end of the day, they have to do what they say. That’s where we could see some increased inventory.
It’s a very interesting concept of… Real estate returns have gone down so much that the banks are going to go somewhere else and we could be seeing some more inventory hit the market because they got to clean up their books.

Dave:
Yeah, just to clarify that for everyone, basically what this article and James are saying is that in the past, the yield on U.S. treasuries, which is considered by many, the safest investment in the world, was extremely low and unattractive. That forced investors, including hedge funds and private equity firms to invest in things like real estate, for many of them for the first time, and dumped money into the stock market, into the equities market that helped inflate prices there.
But as the Fed raises interest rates and bond yields start to rise, the spread between what is the safest investment in the world and real estate is getting smaller and smaller and smaller. That means that maybe these funds don’t want to take the risk of buying single family homes or investing in multi-family properties, and instead say, “You know what? I’m going to give it to the U.S. government. They’ve never defaulted on a loan. I would rather just get my 4%, even though that’s less than inflation, because there’s a lot less work,” like James said. What do the rest of you guys think about this story?

Jamil:
Well, right off the hop, I feel like we’re missing a piece of the conversation, or whoever wrote the article is not talking about what happens when rates actually do start to come down a little bit? Then also, are we just not taking into consideration any appreciation? Is it just a piece that doesn’t exist? Again, over time we know that things will stabilize. We understand that rates will eventually come down. There is not a big, hidden inventory of real estate that is going to magically appear. These builders haven’t been just shadow building houses that are just going to end up in the market someday that’s going to flood the market with inventory. That’s not happening.
My opinion is that I think that this is a great comparison, the treasury yield and cap rates being very similar to each other, but I think that they’re missing variables to this conversation. I think that in order to make their argument, they purposely left out those variables. That’s just my thoughts.

Kathy:
It’s a really interesting concept though moving forward that will… As cap rates get lower and lower, especially in commercial real estate, is it just a easier bet to go into treasury something? Right now the yield is 3.4%. There’s some cap rates that are below that.

Jamil:
True.

Kathy:
Again, there are other reasons to be in real estate, like the loan pay down, and like Jamil was saying, there’s other reasons besides just that cap rate that people like to be in real estate.

James:
Yeah. There’s the depreciation, that tax benefit. What this is really targeting is the single family housing space, not the large apartment. What it’s saying is that real estate’s always been an alternative investment. Because the amount of hedge fund money that has been put in it is actually starting to level out to where it’s actually tied to Wall Street in the stock market more, but this could be the big exit, which is great for investors. We can get back to buying things normally, and this is actually going to create a huge buying opportunity for people that want to stay in the game.

Henry:
Yeah. I think it’s great news for that first time home buyer or that person that was struggling to find something that they truly wanted to buy over the past six months to a year. In those popular markets where people are looking is where you’re going to potentially see some of these homes come back on the market. That’s a positive thing for the first time home buyer. I don’t think it’s a huge deal from an investor’s standpoint. There’s still opportunities out there whether this happens or not from the investor’s point of view and there’s still not enough inventory around the country in many cities. So even with that, it’s probably still a drop in the bucket compared to what we would need to solve the inventory issues.

Dave:
And just to remember, we had John Burns on the show recently who was talking about how much institutional investors really even impact the larger housing market. On a national level, it’s not very big, but of course, if you live in one of those markets like Charlotte or Atlanta, where they’ve been buying up crazy, this will have a much bigger impact. All right, James. Great story. I’ll give you an A. Great.

Kathy:
The pressure’s on.

Dave:
Oh boy. No, I need to inspire you for next time. This is a B plus. I can’t be giving out As on my first grade.

James:
Wow.

Dave:
All right. Well, let’s keep on the idea of rates here. Kathy, it sounds like you have some Federal Reserve rate wonkiness to bring to us. Is that right?

Kathy:
Yeah. I mean, I always want to focus on the Federal Reserve because at the end of the day they are the ones manipulating everything. If we’re not paying attention to what they’re doing and ahead of it, that’s where you can get caught off guard. That’s why I did that On The Market YouTube video with me on the beach, comparing what the Fed is doing in creating money or taking it out of the system to the tides.
This article, it’s from Bloomberg, and the title of it is, “The Fed is about to go full throttle on QT, but fear not”. What’s QT? It’s Quantitative Tightening. It’s a Fed action. Quantitative easing is when they’re stimulating the market and tightening is the opposite. That’s what we knew was happening all year. The interesting thing about this article, it’s a really technical article. I still think it’s super important for people to try their best to understand what the heck the Fed is doing. So read it, even if it’s boring and confusing. I’ll just read some of the subtitles in it.
A glut of cash. Institutions have more cash than they know what to do with, so they’re parking their money at the Fed. That’s all you really need to know right now is money is still sloshing around. Like my, On The Market, YouTube video, it’s still this tsunami of money circulating. The way that affects real estate investors, if you use that analogy, it’s like those beachfront homes, they’re going to be more at risk than the ones that are a little bit on higher ground. And yet, some of those beachfront properties are built for going through different cycles and other ones aren’t. Literally, where I live every year we were out surfing and there was wood in the water because certain properties patios… decks went out into the ocean when the high tide got there.
Certain properties are going to be affected. Certain areas are going to be affected when this much money is flooded into the market. There’s going to be damage. There’s going to absolutely be damage as the Fed pulls that money back out. That is what is happening. It’s been happening all year. The Fed flooded the market. When I say flooded, I was just looking up these stats… In March, of 2020, there was $15.4 trillion circulating in the Fred M2, look that up. Today, just two and a half years later, it’s $21 trillion still. So still today we’re $6 trillion, more money sloshing around even today with all this tightening going, all this pulling money back out with raising rates. We’re not there. There’s still too much money circulating. That’s why we keep seeing job growth. That’s why we keep seeing inflation. This is the story that isn’t told.
You’re not going to find this in this article and that’s confusing to me. It’s like, “Wait, the Fed created the flood.” Now they’re pulling it back. And they’re like, “Oh, we don’t know what happened,” but they did it. To compare this again, to our last show, when we talked about how does this compare to 2008? This shocked me. I just looked this up today. In 2007, right in December. Right before 2008, when things really fell apart, there was seven… Are you ready, guys? This is crazy. $7.4 trillion in circulation at that time.
At the peak of the market last time, there was $7.4 trillion in circulation. Today, there’s three times that… $21 trillion sloshing around, not knowing where to go. The Fed is doing this reverse repo where they’re having the banks put it back in as they’re tapering. It’s just all a manipulated game. It’s all going to affect markets differently. That’s why from my real estate strategy, I stay out of the headline cities. We’re in the little areas that nobody talks about, the hedge funds aren’t going in there. We just stay in the little real estate that’s on higher ground, I guess you could say-

Henry:
Arkansas, not looking so bad now folks.

Dave:
It’s interesting because last week… We’re recording this in the middle of September, the Fed came out and… Excuse me, inflation data came out and showed that it ticked back up a little bit, at least for core inflation. It seems Kathy, that all this money sloshing around, that’s an indication that what the Fed is doing in terms of raising rates so far, hasn’t really had an impact on monetary supply yet… or ever.

Kathy:
So far, there does seem to be too much money circulating, but the mortgage rates that’s what’s affecting the housing market, obviously. Again, for those in shock or upset about it, just remember last year at this time, the headline news was, “Oh my gosh, home prices are out of control. They’re going up too fast and there’s nothing to buy and there’s 90 people at an open house.” That wasn’t good. Where we are today is a better place than that. Some markets will see price declines because prices just went up. I mean, in some markets, we know this 30, 40% not sustainable. Those markets are going to feel a pullback. Then again, Arkansas, maybe not. We’ll see. It’s all about taking cover in times when things are changing so rapidly and being in those stable markets where all this sloshing around, isn’t really happening, where it’s just the fundamentals.

James:
Well, one thing that I’ve been hearing, we’re a brokerage shop and we work with a lot of different investors. Like Kathy said, some people might not like this. The Fed definitely printed just way too much money, but we all reaped a lot of benefit over the last 18 months as investors. Our rents are up, our profits were up and as they correct this, they went way overboard. They’re going to probably have to go way overboard the other way to fix this. Right now people are locking up because they’re so afraid of where that tidal wave could come back the other way. At the end of the day, you can always just adapt. As they’re correcting… I mean, when they infuse that much money, we pivoted how we are buying to keep… to stay in the game.
As the Fed corrects, it’s just really important that you’re reading these articles that Kathy put together because you can read it and then just adapt your plan on the way out the door and just really pay attention to what they’re doing. But with that inflation’s ticking back up, I do think the Fed’s going to keep hammering on this. I mean, unemployment’s still at an all time low. We might see the same way they reacted to COVID, we might see it to inflation in the unemployment and people just need to prepare, find higher ground, like you said.

Kathy:
Yeah. James, when I say, be careful of the sloshy markets, obviously your market and Jamil’s, in Phoenix, these are markets that really saw a lot of population growth, a lot of people moving there, and a lot of bidding up. That’s still in play. The difference is now those people are getting better deals. In some of these hot markets, if people are still just dying to go to Phoenix, because it’s still cheaper than California or the same with Seattle, they’re still… It’s a better deal for them-

Dave:
I actually just wrote an article for BiggerPockets about this last week, how those markets are looking the most to bubblicious, to use Jamil’s terms, but they’re also, they became really hot for a good reason. It’s because there’s a lot of economic and population growth in those cities. They do offer really good long-term prospects for investing, but not in my opinion, at current market rates. If you can buy below market rates, it still could be a good long-term investment, as long as you’re not buying and catching a falling knife, as they say.
Jamil, that’s actually a great transition because your homework assignment came in and you wanted to talk about housing markets that are at risk. Is that right?

Jamil:
Absolutely. We had the opportunity to speak to Rick Sharga before, from ATTOM data, and he just released an article that I found fascinating because he was talking about the most vulnerable housing markets in our current situation. For me, and for anybody listening to this, I think this is super important to pay attention to because look, as real estate investors, we have to continue. We have to create opportunity. We have to look for where the opportunity is. We have to be like Kathy and we have to follow our instincts based off of not trendy things, not what looks attractive and what the headlines are talking about, but where the fundamentals are, where are we finding opportunity? Where are we finding real return? I think Rick gives us some significant insight into this.
What they’re talking about is the most vulnerable housing markets right now in the United States, 13 out of the 50 most vulnerable markets were in inland California. These are the variables that he’s looking at to determine that. He’s looking at affordability, he’s looking at percentage of unemployment, and he is also looking at the percentage of your total income that’s being used on housing. When you look at a market like Stockton, California, right now, the unemployment is 7% and it’s dramatically higher than the national average, but they’re also way higher. They’re also using over 33% of their total income to pay for housing over there.
You also couple that with not the greatest employment opportunities, you have a vulnerable market. I think that when you see that information, it gives you insight as to where you should be placing your funds if you are getting into real estate right now, especially for long-term buy and hold.
What I also found interesting where the other two markets that he found extremely vulnerable and that was in Illinois and New Jersey New York. There was significant vulnerabilities again, just based off of affordability, unemployment percentage and the percentage of income that is used on housing. Illinois actually being number two, many of the counties over there having significant affordability issues as well as unemployment. I think it’s very important to pay attention to that data when you’re looking at where you’re going to be purchasing.
I have to hand it to Henry because Henry has been beating the drum of Arkansas for quite some time and we should have all been bobbing our heads to the rhythm. Absolutely. The least vulnerable markets right now that Rick Sharga believes are great investment opportunities are in the south, in the Midwest, specifically Arkansas. When you’re looking at these opportunities, you got to ask, why? Well, again, affordability is very good over there. You can still get an incredible home, an incredible single family opportunity for well below the median price point of the primary markets that we’ve been talking about, like Southern California… coastal Southern California, and Phoenix, for instance, as well as the Midwest. There’s some significant opportunity for you as a buy and hold investor to find great deals, great long-term buys in the south and in the Midwest markets.
For me, as an investor who is looking to place capital, who is looking for opportunities for cash flow and possible appreciation over the next four to… 5 to 10 years, I am absolutely going to be taking Henry out on a date and to see if I can get him to sell me some great deals in Arkansas.

Henry:
When Rick says it, everybody wants to listen now, but when Henry says it everybody’s got their earmuffs on. All right.

James:
What a great opportunity though, with these bubble markets. These are really expensive, high appreciating markets that have good stability and a lot of good economy behind it. The good thing about it is they also over correct. This is going to be a huge buying opportunity just like March of COVID. The thing about those markets is that the demographics of those buyers a lot of times, there’s a lot of tech, a lot of wealth. They confuse themselves and they’re looking for that ultimate timing. They always want to time the market, which is impossible. You can read and try to prepare and trend right with it, but you can’t time it. What it does is it locks everyone up.
I mean, we bought three homes last week for pricing that I have not seen since 2016 and the opportunities are there. That’s why I actually started researching the bubble markets because those are the… Go where no one else wants to go. That’s where you’re going to create the most amount of wealth.

Dave:
All right. Anything else before we move on to Henry’s story for the week?

Jamil:
Wait, what did I get? You graded James. You didn’t tell me what my grade was.

Kathy:
I didn’t get a grade either. Yeah [inaudible 00:21:23]-

Dave:
Jamil, I’m going to give you a B minus for no reason at all. I honestly just made that up.

Jamil:
Fair.

Dave:
I don’t know. I just want to inspire you to do even better next time, even though that was a very good story. Kathy, I don’t know. I’m going to give you a C plus, because I’m just being a tough grader. I don’t know. These are based on absolutely nothing.

Jamil:
Damn, man.

Kathy:
That was my GPA, so I’m good with it.

Dave:
All right, Henry. See if you can win this game of completely arbitrary grades that I’m giving people.

Henry:
All right. My article, I just wanted to bring it back to rents. I think we’re hearing a lot about housing market conditions in terms of what it’s like to buy. Should you buy? We’re talking a lot about interest rates and that such. There’s a lot of investors, there are a lot of people who already bought. We’re in this world of landlording and rents. I pulled this article from CNN Business and it says, “U.S. rents are at a record high for the 17th month in a row.” I thought it was interesting from the perspective of, I wanted to hear your guys’ opinion on where you think rents are going to go.
Essentially, the gist of that article is saying that rents hit a new record high, so average rent, $1879 a month. That’s 12% up from a year previously. When it dives into some of the ancillary numbers you’re looking at when landlords are doing a new lease, they are increasing rents on average of about $300 a month. When landlords are doing a renewal with a current tenant rents are going up an average of $160 a month. That’s pretty significant. The article does go on to say that, “Rent prices are expected to cool,” but when it says cool, it’s really just talking about the percentage growth year over year might cool off, but not necessarily that your rents are going to come down.
For me, it’s hard to see the forest through the trees. It’s hard for me to understand when, and if, rents do come down. I mean, traditionally rents don’t come down. We know that rents go up following housing prices rising. Rents trail behind it. In what situations do rents tend to come down? And I’m looking at this situation… Speaking from a landlord’s perspective, some of the things that are causing rents to go up are supplies… Supplies are harder to get, and cost more because of inflation. If you cost is a landlord, if somebody moves out and I have to renovate a place, even just small stuff, paint floors, making it fresh again… That’s more expensive now than it was a year ago. If I have to pay for that, we as investors are looking for, “What’s my return on my investment? How do I recoup the money that I’m spending?” That results in rent increases.
You’ve also got, labor’s more expensive. It costs me more in materials and in labor to update a place. It also is costing people more sometimes with property management. Property managers are raising their rates because they have to keep staff and it’s hard. I mean, there’s job openings everywhere. It’s hard to keep good people working. They’re having to pay more, which means they’re passing those costs on the landlords. Where do we see that break?
It’s good news, and from the perspective of, if you own properties, you should be able to get a solid return on your investment, but not great news for people who need to rent. Then as interest rates continue to rise, we are expected to see potentially another interest rate hike tomorrow… As interest rates continue to rise, home sales cool, which means less people are buying. They still have to live somewhere, so they have to rent. That also indicates that rent prices are going to increase.
I’m interested to hear what you guys think about rents in your areas, or if you own property, what you’re seeing as far as rent increasing and what do you expect?

Jamil:
Well, I’ve got a question because right now the writing on the wall says stability, in terms of where we’re going to hang out where we are in pricing for rent. I don’t believe it’s going to decrease anytime soon, but how do we account for the fact that there are layoffs coming, that people are in certain industries being let go from their positions? Talent is going to be on sale very soon.
Secondly, I think that this supply chain problems that we’ve been seeing will end up finding resolution. The kink in the hose can’t stay forever. We’re all staring at the hose. We all know where the kink is and the kink will relax itself. That will find a way out. Then in these markets where we have the vulnerability that we were talking about, where pricing could absolutely decline and people like James are going to come in and buy houses at prices that they paid in 2016, that investor is going to be inclined to decrease rent, to get that property filled up as quickly as possible so that their return is being generated faster than normal. Will there be ultimately a result where rent may dip because of these factors starting to normalize?

Dave:
I think realistically in some markets it could come down a little bit, but it’s really obviously everything going to be market specific, but just like with everything, the only way that prices come down is if there’s an increase in supplier reduction in demand and there’s not going to be… I think, the increases in supplier are going to slow down a lot. We’re already seeing pretty significant decreases in construction although, multi-family construction is much more resilient than single-family home construction. Demand, right now, is still strong because to your point, Jamil, there haven’t really been mass layoffs yet, which is good, but there… that is possible over the coming couple years.
I’m not seeing right now anyway where we’re going to see a huge glut of supply. I don’t really see that happening over the next couple of months on a national level. Demand could fall if there’s a really bad recession and then there’s a contraction in households. Basically, people move in with their friends or family and there’s a contraction in the total number of households that would reduce demand… It still seems, right now, that we’re not really that close to that. Of course, that could change. To me, I don’t really see broad rent drops on a national level, at least in the next six months or so.

Kathy:
Yeah. I couldn’t agree more. I was going to say the same thing when you started talking, it’s all about supply and demand. There is new supply coming on and Phoenix is one of those areas that’s under careful watch. There’s 19,000 units coming online in Phoenix, in single family. There is new supply coming and I would keep an eye on that. That’s one of the great data points from John Burns Real Estate Consulting. I’ve been following him for 20 years. He comes out with that data of where the new supply is coming online and where permits and starts are above job creation. That’s a metric we’ve got to pay attention to. It’s not just supply right now, but what’s coming. Yeah. Just be aware, 19,000 units. Jamil, I think you mentioned last time that that could get absorbed, right? I don’t remember your stats, but there’s a shortage, so-

Jamil:
I think it was one house for every 320 people or some crazy stat like that. There’s still a tremendous lack… tremendous shortage of inventory. It’s going to be very interesting to see what’s coming around the corner.

James:
There is one unknown factor though that we have not seen before, which is the short term rental supply. There’s a substantial amount of inventory that was bought on that. I do know as the recession starts, things are cooling down. Those are not renting up as much. Those people might have to get those to market to pay because at the end of the day, they got to get those things filled and that could be an extra… It could be an extra form of supply coming our way that we’re not really expecting that aren’t currently in our market right now because they got taken by a different side. I do think we’re going to see more supply on that side.

Jamil:
James, any idea how many houses were absorbed in the last five years and taken from actual residences and turned into short term rentals? Dave, what do you got?

Dave:
Just know the total Airbnb supply is about 1.3 million units, which is about 1% of the total market.

James:
I think it matters to where?

Dave:
It’s very localized. Just like everything, it’s localized. Look at a vacation rental area, it’s going to be a significant amount.

James:
Then there’s been some cities that have been turned into vacation rental areas that maybe shouldn’t have been in the first place. I think those are the markets that the STRs could affect the most. Tahoe is always going to be a vacation rental market because it’s all way around. It’s those artificially inflated or created STR markets.

Dave:
I totally think that the hot short-term rental markets over the last couple years are going get hammered over the next couple years. We saw second home demand just go crazy for a while during the pandemic. That, combined with the boom in short-term rental investing, created huge demand in those places and it’s falling off. To your point James, if demand for vacation rentals from the guests perspective starts to come down, revenue’s going to fall. That could create honestly, maybe forced selling. I don’t see forced selling happening in a lot of markets, but that is one that potentially could.

James:
That’s where I think the foreclosures are coming. It’s going to be a wave of investment property.

Dave:
Yeah. I’m with you. All right. Well, I’ll give you my story and then you can all give me an F or whatever grade you want to give because I’ve just been a [inaudible 00:32:05] about it.

Jamil:
What about Henry? What did he get?

Dave:
Henry, you’re going to get a B, I don’t really know why, but it was pretty good. All right. My story is about new listings. I don’t know if you guys have been following this, but it’s something I’m really watching. Our friend Logan Mohtashami and HousingWire’s been highlighting a lot. New listings, just if you don’t know, is basically the amount of new homes that reach the market, which is a really interesting thing that we’ve been watching. We’ve been talking about ‘the lock-in effect’ over the last couple of months and whether people were going to sell their houses into a declining market where interest rates are much higher. It seems like the answer is a very hard, “No,” right now. We’re seeing that new listings have declined 18% year over year. They always start to decline after the summer, but it’s going down more dramatically and sooner than it normally would.
This, to me, has pretty big implications for what happens in the housing market, because we’re seeing rising interest rates deplete affordability, which takes demand out of the market. If people just aren’t going to sell their homes, that takes supply out of the market at the same time. It offsets at least some of the declines in demand. To me, is fascinating to see this all play out, because I don’t know if we’ve ever been in a situation like this where we might be entering a recession and the Fed is raising rates. People just don’t want to sell their house and it could lead to really low inventory.
Again, it’s all localized, but we’re seeing in some markets inventory, which is going up pretty rapidly, stabilized and start to level off in a couple of markets because fewer and fewer people are selling their homes. To me, it’s probably a backstop. I do think we’re going to see prices decline in a lot of markets, but this is a backstop on top of good lending practices that prevent it from being like a crash scenario that I know some people forecast that we’re about to see.

Jamil:
I love that story, Dave, and I’ve been monitoring it in Phoenix as well, specifically. Just for our own fix and flip business model because we are… We’re always looking at whether or not it makes sense for us to deploy more capital into more and more projects. I believe that this provides us at least some reprieve with respect to what we could see in the next six months for the inventory that we’re currently working on, that when we come and bring that inventory to the market, will we be able to sell at least a decent enough speed for it to continue to make sense? As hard as it is to say this, this is a silver lining, as you mentioned a backstop from creating a crash scenario. This is somewhat good news for me.

Henry:
I think too. I mean, yes, new listings are down. In my local market we’ve started to flatten out a little bit. It’s not necessarily down, but I think too, people are people, and they don’t always just sell because it’s the best financial decision. I think what we’re seeing is interest rates just don’t feel normalized yet. It’s still changing all the time. It’s supposed to go up again. Until it sits constant for a little bit people aren’t going to just feel like, “Okay, well this is just what the new normal is.” And then they start moving forward. Because there’s so much change, I think people are just sitting tight and saying, “Well, I don’t want to sell yet because I got to go buy something. That rate keeps going up and if I don’t have to sell, then I’ll just sit tight.” They’re being more conscious because they’re seeing the news and seeing the fluctuation.
I think, if interest rates level out for any sustainable period of time, that it’ll just be what they are and people will get accustomed to it. Then you’ll start to see a little more moving in the housing too-

Dave:
Just for reference for Jamil. I’m looking at the data right now. In July, there was 9,300 new listings in Phoenix. That dropped to 7,300 by August. In one month, that’s an enormous fall off. That is the level it was at basically in April, 2020… The toilet paper month where no one was leaving their house. That’s what we’re back at to right now. It’s just crazy if it falls again that… I don’t know if it will fall again, but that was pretty wild to see. I’m just curious if we’ll keep going.

James:
Yeah. I think part of that though is too, the absorption rates down so much is people aren’t seeing the sales go through so they don’t want to list their house. We’re in this transition period where they don’t have to sell yet or they don’t have the need or maybe they didn’t get laid off. They’re trying to still figure it out. Then a lot of people just, they already have FOMO. They go, “I missed it.” I think that’s why we’ve seen a sudden drop in listings because the inventory, whereas new listings are down, at least in our market, inventory is up 58% in the last month. It would jump to 58% and that’s just because there’s less transactions going on and it’s slowly back filling in. I also think it’s because people are just confused. They’re like, “Well, if I list today, I just lost X amount of dollars,” and that’s how they’re thinking. So yes, they may lock in, but there is one factor on that I keep watching is I read some report that 71% of people that bought their homes in the last 18 months are unhappy with their purchase.

Jamil:
Yeah. Regretted it.

Dave:
Really?

Jamil:
Yep.

Dave:
Whoa.

Kathy:
They didn’t get to do inspections.

James:
No, no inspections. They didn’t get to review the neighborhood. We saw it on our side. We sold 240 listings last year and it was nuts and people did not get to think about it. One thing that is always something I’m watching is that American consumers, they have gotten used to just going, “I don’t like this anymore. I’m just going to walk away.” That is a mindset. That’s where I do think the lock-in effect could not be, because if they just don’t like it, they don’t like it. I mean, if you are living in a house that you’re unhappy in, that causes lots of problems… That causes problems that you can’t even put data points on. It just makes the household unhappy.
Those are things that you got to watch because now they can’t sell because the values are devalued. They may have a good payment. They may have a good rate, but they’re not happy where they live and they’re underwater. That’s what we’re really watching is where’s the absorption rate? What are these new listings coming on? I think, the Fed gets done doing what they’re doing, that will increase.

Dave:
All right. Anyone have any last thoughts on any of the stories today, before we move to our crowdsource section?

Jamil:
Dave, I give you an A minus, just so you-

Dave:
Wow. You’re just sucking up to me, Jamil. I think I got an F because that wasn’t even a news story. I just looked at a-

Jamil:
No, no I was sucking up. I was absolutely sucking up. Yeah.

Dave:
All right. Well, now Jamil has won today. He gets an A plus. The rest of you have failed. We’re going to take a quick break, but we’ll be right back with some questions from the BiggerPockets forums.
All right, welcome back to On The Market. Today, we’re going to answer one question from the BiggerPockets forums. If you want to ask questions to the panel, go to the BiggerPockets forums. We have an On The Market forum specifically go ask questions there. You can even ask questions to a specific host or panelist. This one we’re going to be first directed at James. Then I want to get everyone’s opinion about this. It comes from Jennifer Sovia, from Seattle.
She says, “Hey, there I rent in Kirkland and I’ve been considering a house hack in the great Oak Seattle or Portland area. I see the market shifting and feel like I should wait until Q1. I was considering wholesaling and flipping in these markets too, but due to the cyclical…” Wow, I can’t say that word. “Due to the cyclical nature. It makes me cautious. I know James Dainard does well here, but I don’t have his experience or capital,” Jennifer, that makes two of us. “Any advice on these markets. Thank you,” James, what advice do you have for Jennifer?

James:
Right now, if you’re really looking to get into a property, don’t be over cautious because what we have seen is in Kirkland is actually the biggest prime example of this is because the market has transitioned, we’ve seen a lot of transactions just fall through the table. Builders locked up. Lot of tech population are locking up. In Kirkland alone, we saw a 32% appreciation in March alone. We’ve seen that pull way back down 28%. There’s this big pullback to where you can actually get into a property to where we’ve already seen the most biggest drop in that. We’ve seen about a 30% drop off peak in Kirkland alone. With rates going up, if you want to wait till next quarter, your rate’s going to be a point and a half higher, which is going to be another 15% on your affordability. I don’t project that the rates are going to… that the pricing’s… We’ve already seen that massive drop.
If you wait, it’s going to be, I think Kirkland especially is going to be at more of a trickle drop or any of these markets. If you wait too long, you’re just going to pay more anyways with your interest rate. As you’re looking at these expensive markets, or in the Pacific Northwest, look at what they were doing and how big of a drop it was. Those are the overcorrection drops. If you’ve seen a more of a steady one like in Capitol Hill is another great neighborhood in Washington, that did not appreciate at the same rate that Kirkland did. It just had a little bit of a different vibe to it. It was more of a steady growth during COVID. That’s not really coming down as hard either. It’s just kind of steadily sitting there.
If you’re looking at these expensive markets, look at how much it dropped off peak, and that will tell you when to buy or not to buy at the same time. In addition to, in a lot of these older, expensive markets, there are a lot of elder sellers that actually… Or sellers in general, that owe very little or nothing on there. If you’re looking to get into your first deal, they’re actually… They may have felt like they missed the selling window, at this point. If you’re low on capital, you can talk to them about carrying the note, carrying some paper and getting that deal done and people are a lot more open to it now.

Dave:
All right. Thanks, James. Appreciate that on Jennifer’s behalf. I do want to ask the rest of you about the general gist of this question. Henry, it seems like this question is sort of asking one, should I time the market? Two, is house hacking cyclical in the way that Jennifer presumes wholesaling and flipping is? Don’t worry, Jamil, I will give you an option to respond to that.

Henry:
I don’t know if I call house hacking cyclical. It’s just the numbers. It’s all numbers. It’s all numbers no matter which way you look at it, right? If you’re worried about whether you should get in now or not, the question really is, should I get in now at market rates? I think that’s what she’s asking. My answer to that would be, no. Right? Your biggest buffer to conditions changing is to be able to buy with some sort of a cushion. If you can figure out ways to find those off market deals from the people that need to sell, not want to sell… It sounds like based on what James said, there’s probably some opportunities out there on the MLS right now. If I were that person, I would go pull anything that’s been listed longer than the average days on market for that area. I would analyze them and start making offers at what you feel like you would like to get into that property for. Under market value offers where you feel like you can make money.
If you make 25 offers, you’re probably hear 24, “No’s,” but maybe you get one person that wants to negotiate with you. Then you land yourself a deal that you get under market value. Now you’re in it with some cushion and then if prices do come down 10, 15, 20%, well, you’ve got some cushion. If your plan is to hold it for the long-term, none of that’s really going to matter. You’ll still be able to make money through that.
It’s just about how you get into a property and if you’re going to house hack, man. Yeah. Even better, even better. Now you can still take that same method of making the offer that makes sense to you, even if it’s not what they’re asking. If you land something and then house hack it and now you don’t have to pay to live there… That sounds like a phenomenal strategy to me.

Dave:
Yeah. Absolutely. Especially with house hacking, you have to factor in the cost of renting against waiting as well. Kathy, I’m curious, I get this question all the time where people are like, “Why don’t I just wait to the market bottoms? And even if interest rates are higher and you are paying more, I’ll just wait for rates to go down and then I’ll refinance. Then I’ll have a house that I bought at a lower price. Then at some time in the future, get a lower rate?” What do you think about that strategy?

Kathy:
Everything depends on what you’re trying to achieve. Are you buying hold? Are you flipping? Are you living in house hacking? What are you trying to do? And start from there. If six months ago, let’s just give an example with Jamil’s very open process of the multifamily that he was going to pay almost double for and today, it’s half the price. Should the buyer today not buy that? Obviously the buyer today is getting a screaming deal. There are opportunities out there and I don’t worry. I don’t care what the interest rate is. I really don’t. I care what the deal is and what the cash flow is and the fundamentals of it. Again, I started investing when it was 9%… the interest rate. Yes, eventually rates went down and we got to refine the deal was even better, but it was good then when we first purchased and if it stayed at 9%, we would’ve been okay.
Again, I don’t care what the interest rate is. I personally think the interest rate is right where it needs to be and should be. 5/6%. This is not a bad rate. What’s bad is how high prices went because rates were so low for too long. If they stayed low, it would be a big mess… a bigger mess. If you could find a deal that makes sense at a 6% rate, get it. Depending on what you’re trying to achieve. If you’re trying to get cash flow and it cash flows at 6%, the fundamentals are there still. Your tenant is paying down your loan for you over time. Look it up. Look at pricing over time. It goes up. It goes up over time because like I said, there’s three times the money circulating now then 14 years ago, that’s weird.
That is not something I think is going to change course. I think the Fed is addicted to creating money. Politicians like it. They like to spend money. Constituents like the politicians to spend money on them as we’ve seen. I don’t think this is going to change. I think inflation is here to stay. Inflation is not new. Again, just go look at the last 40 years it’s been here. We just maybe don’t see it as well.
Again, make sure you know exactly what you’re trying to achieve and stick with those fundamentals because we’re seeing better cash flow now than we did six months ago. When I sound positive to people who don’t like it, when I sound positive, got to understand what I’m looking for, which is, “Oh my gosh, I have more options and I have better cash flow. I don’t care what the rate is. I really don’t.” I’m buying in areas where there’s massive job growth and diversification of jobs and they’re jobs of the future. These are chip manufacturing areas where $53 billion just came in. These are jobs of the future where factories are coming in and being built. They’re not going away. Anyway, just know your goal and stick with it.

Dave:
Always timeless advice. Thank you, Kathy. Jamil, there’s a question in here or in the question, Jennifer basically says that wholesaling and flipping are cyclical. Two different strategies, but I know you have experience with both. So can you share with us like, are they cyclical? And if so, how do you balance the cyclicality right now?

Jamil:
Absolutely. Jennifer, great opportunity to clear something up for you. I believe there’s an inaccuracy in your concept of what wholesaling and how it works. Yes, pricing is fluctuating and things are happening, but I absolutely crush it when the market is going up and when the market is going down. The fact is that in wholesale, what we are doing is we are looking for potential wherever it lies right now. If pricing is going down, if we’re making adjustments, we’re making adjustments, but there’s still buyers out there ready, willing, and able to take a deal. I just did a wholesale transaction where there was no other wholesaler was willing to pay what I was about to pay and I was able to still make a substantial assignment fee. I almost don’t want to say it because it’s so high, but it was an incredible deal and it’s happening in today’s market.
What I want to say to you, Jennifer, is I believe personally, a lot of times we will trick ourselves into finding a reason not to take action, not to get started, not to do the thing. Please don’t let that happen to you. Please don’t let the facts that interest rates are a little higher than they were last year stop you from taking action in learning a technique or a tool that will create massive opportunity for you in your life, financial freedom in your life for you, your family, and all of the people that you care about. Please don’t let this be a reason why you do not take action. It sounds to me like this is just like analysis paralysis and not a real reason not to go.

Dave:
It sounds like everyone thinks basically house hacking is probably not cyclical. Something that you could do and pretty much in any market, I agree. Wholesaling, I’ve never done it, but Jamil, I’m taking your word for it and trust that what you’re talking about. She did ask about flipping though, which I’m curious about. Not all of you flip, but Jamil, James, Henry, you all do, right? Kathy, do you flip houses?

Kathy:
Well, we flip to investors, right? We’re looking for the cash flow. Yes.

Dave:
What do you guys think just quickly? We only have a few minutes left here. As a newbie, I know you are all experienced, but as a newbie, would you be flipping houses in this market?

James:
I was flipping in 2008.

Jamil:
Wow. I would pause on that for me personally, I would wait just a little while to see where things were before I would jump into fixing and flipping and I would stick to wholesale.

James:
It depends on your appetite for risk. We were new in 2008 when the market crashed to flipping, but we didn’t have a choice and we had to figure it out. When the markets get hard, your job as an investor is to figure it out and meet with the right people, build the right team around you. The harder it is, the more rewarding it’s going to be. Get to work, build the right team around you. I mean, yes, flipping is very risky. I bought three last week. I bought them right. As long as you’re buying, right, and you can do your analysis right at the same time, you can get into the market.
It’s honestly the best time to learn. This is when you’re going to learn how to do the hard work and you’re going to make more money this way. I mean, to be honest, wholesaling and flipping are cyclical. If there is no demand from flippers, wholesaling becomes very hard as well. It’s all supply and demand. Right now, what you’re seeing is a lot of the flippers were newer investors that exited the market because they got a little nervous, but it allows the buy in opportunities to resume on normal math, not fake math of what the Fed’s controlling at that point.

Jamil:
Fake math. Love it.

Henry:
I think the latter part of what you said, James is spot on, right? It’s about the deal. My advice would be, not to worry about your exit. You need to worry about your entry point. If you can enter the deal at the right price, if you want to flip it, you’ll be able to. If you want to wholesale it, you’ll be able to. If you want to whole tail it, you’ll be able to. If you want to Airbnb it or short or long-term rent it, you’ll have the option and you’ll have more options, the better you buy that deal.
If you focus your efforts, your time, your attention, your energy on becoming a master of your market and understanding what good deals are and then understanding how to go out there and get ahold of those good deals, you can… Your exit strategy won’t matter. You’ll be able to do whatever you want.

Dave:
All right. Well, thank you all for answering Jennifer’s question. This is a great question. We got a lot of good debate and discussion out of it. Thank you, Jennifer. Again, anyone who wants to ask these kind of questions, you can do that on the BiggerPockets forums. Thank you, Henry, Jamil, James, Kathy, for joining us today for this episode. This was a lot of fun. You guys really all got A’s. I was just trying to be a hard [inaudible 00:53:42] for a little while, but you did it a great job.
And honestly, we’ve done the show format twice now and would love to hear from people in the YouTube comments or on Instagram, what you think about this format? I think it’s a lot of fun. I learn a lot every time we do this and would love to get everyone’s feedback. Thank you all so much for listening and we’ll see you again next time, On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett, editing by Joel Asparza and Onyx Media, copywriting by Nate Weintraub. And a very special thanks to the entire BiggerPockets team.
The content on the show, On The Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

 

David:
This is the BiggerPockets Podcast, show 666. In basketball, we had this concept called a four point swing. So imagine that you’re on a fast break, you got a wide open layup. You miss it. The other team gets the rebound, they throw the ball the other side, and then they get an open layup. It’s not that they score two points. It’s that you lost two points and they score two points equally, a four point swing. That’s like the worst thing that can happen. The same is true if you don’t house hack. Not only are you not raising rents on your tenants, but you are having them raised on you. That doubles the impact of the power of real estate, but it’s working against you. When you own the asset, you’re getting the four point swing in your favor. Hey, everyone, this is David Green, your host of the BiggerPockets Real Estate Podcast, here today with a Seeing Green episode.
If you haven’t heard one of these before, on these episodes we take questions from you, the BiggerPockets community, and have me answer them with my experience with investing in real estate. I try to teach, I try to share, and I try to give advice to the people who are submitting questions so that they could grow their wealth in real estate, similar to how I was able to do for myself and get out of that job you hate and into a life you love. Today’s show’s pretty awesome. I bring some clarity to house hacking in an expensive market. This is a question that comes up all the time. People don’t quite understand the right way to house hack or how it could be so powerful. I get to kind of expand on that point and give some really good advice to one of our listeners who is in Sacramento, California, and having a hard time finding a deal that works.
We talk about what to consider when you are an agent and you are also trying to wholesale or wholetail a deal, the right way to get into that. And then we talk about scaling using DSCR products. So DSCR products are loans that take into account the income from the property, very much like commercial property is evaluated, not the income of the borrower. And I come up with kind of an entire plan for a firefighter who’s trying to scale their portfolio, but concerned about pre-payment penalties. All that and more on today’s show.
Before we get into it, today’s quick tip is we’re nearing the end of September, which means right around the corner is October. And October, from a realtor’s perspective, is when the market starts to slow. We find less buyers are active in the market during the winter months, especially during the holidays. Let’s say you’ve been sitting on the fence. Let’s say you want to buy a primary residence, but you’re tired of being outbid because every house gets so much attention. Now is the time that I would recommend you reach out to your agent and you put a search together and you start looking again.
There are going to be a lot less buyers for every existing house than there was before, which means you have less competition, which means if you’re buying, that’s good for you. If you’re selling, you may want to wait until springtime when there’s more buyers that are looking and you’re more likely to get multiple offers, unless you need the equity now so you can go reinvest it into the slower market.
As an investor myself, I totally take advantages of seasonal fluctuations. I do not think that that’s urban legend. I’ve seen from my experience it’s very true. I often tell the David Green Team clients, “If you want to get top dollar, let’s wait till spring. If you want to get the best deal possible, let start looking for you in the wintertime.” And I increase my own buying during the wintertime. And if I’m going to sell, I try to wait till spring. So just wanted to pass that along to you so you could take advantage as well. Okay. Let’s get to our first video.

Jessica:
Hello. My name’s Jessica and I live in Dayton, Ohio. I’m a relatively new listener, but I love the Seeing Green episodes the most. So, David, I’m really hoping you can help me with this question. We are looking to get into the real estate investment market. Both work full time. Our home has really appreciated, and so we took out a home equity fixed loan for about $53,000 in hopes that we could then have money to put down towards a rental property. We’re finding that a lot of the homes that are within our price range, which we’re trying to stay as close to $100,000 as possible, which in this market, in the Dayton area, isn’t unheard of, but it’s definitely difficult.
Our realtor mentioned that another client she’s been working with recently started Airbnb their property as a long-term extended stay Airbnb. She said they had a lot of success renting it out to families who are looking to move, but who haven’t secured a new home yet and need a place to live for a couple of months. Or, the other thing that is really, really popular around here, we have several large healthcare organizations in the area and they’re growing. They’re massively growing. So that’s booming. My thought too is what stops us from using a long-term, turning it into an extended stay short-term rental? I haven’t heard you guys talk a lot about that. I don’t know what your guys’ thoughts are. It seems that the profit is a lot easier to get a property to cash flow in today’s market using that strategy. And so I just was curious what your thoughts were on that.

David:
All right. Thank you, Jessica, for that question. Also, please give your dog a high five or a high paw for me. We saw a little cameo there in the back, very cute. Wanted to get into show business, I see, and it worked. Also, thanks for saying the Seeing Green is your favorite of the BiggerPockets Podcast. I appreciate that. Mostly because I’m hearing your Seeing Green.
All right, let’s get into your question. I like it. You’re talking about I think what you call them more extended stay short-term rentals. There’s all kinds of names. I typically refer to them as mid-term rentals. If you’ve never heard of these before, basically mid-term rentals is something to have on your radar because I think that this is sort of the next wave, the next common trend. There’s always a trend in real estate that people do really well with, this is the next one.
I’ve got 13 units that I’m working on rehabbing right now to bring online. And when that happens, I will have more information for you guys about how to run them efficiently, how to run them productively. I’ll be able to bring all the education that I can. If I talked about it right now, the problem is I would be speculating. I’d be telling you what I think works and what I’m planning on happening, but I don’t have the data yet to support it. I don’t like to talk until I know for sure, it’s just my personality, so keep an eye on that.
The reason mid-term rentals have sort of become popular and are becoming popular is because many areas are outlying short-term rentals. And when they say you can’t do short-term rentals, they’re typically putting a limit on how long someone can stay in the place as the minimum amount of time. They’ll say they got to be there 30 days or more. You can’t rent your unit out for less than 30 days. This is the case in many parts of Hawaii, where I own real estate, where Brandon lives. And then other municipalities are sort of adopting this because the neighbors don’t like these people coming in for two days and throwing big parties and kind of bringing a bad name on short-term rentals.
Because there’s moratoriums put in place and laws being changed that force someone to stay in a rental for 30 days or more, you’re seeing a lot of people that are owning real estate are getting into catering to people that would stay somewhere for that long. And who is that going to be? Traveling professionals like nurses or corporate executives, people that are maybe moving near a hospital, because they have a sick family member that’s going to be there for a long period of time and they want to be close by, somebody taking a temp job sometimes. Maybe someone who’s moving to an area, but isn’t sure if they want to buy or if they want to rent. Sometimes you take a job somewhere and you don’t know if you want to buy a house. Well, you don’t want to pay the expensive rate of a short-term rental, you don’t want to live in a hotel.
So you’ve got these medium-term rentals, which is what I’m calling. I’ve also heard them called long shorts, extended stay short-term rentals was the phrase that you came up with there. And that’s what we’re doing is they’re furnished just like a short-term rental. They operate just like a short-term rental, but you don’t charge as much because you’re not renting them out nightly. And they’re a little bit less work. On the spectrum of tons of work versus very little work, tons of work tends to have higher profit margins. Maybe I’d look at short-term rentals are the very, very end where you get the most profit but the most work.
Long-term rentals or traditional rentals are on the other side, the least amount of work and the least profit. And mid-term are right there in the middle. I’d like to be able to tell you more about it. I don’t know for sure. I’m anticipating it’s going to be very good. I’ve got three properties that are all in California that I currently bought. And two of them are BRRRRs and one of them is not. But I still had to do a rehab to basically get the houses ready to be in really good shape so that I can rent them out to traveling professionals.
I think in areas like California, that allow ADUs… We have a lot in California where you were not allowed to restrict homeowner’s ability to have an ADU. Cities can’t say you can’t build an ADU. We’re actually allowed to have up to three: a regular house, an ADU and a junior ADU. Of course there’s permitting and code requirements you have to follow, but this is a great market for something like that because you can turn one property into three different units and rent them out to traveling professionals and get much more rent than traditional rentals.
Now, before I get into the details I can’t share, because I don’t know yet, I do want to bring this up as a point to be aware of. I would anticipate that you knew that short-term rentals weren’t going to last because the neighbors complain. If you were paying attention, you would have anticipated, like I did, that medium term rentals would be the next phase. My guess here, and I don’t know this, this is me trying to put on my crystal ball, which looks a lot like my head, is that you’re going to start to see a lot of tenants that start complaining that there are no places left that are affordable to rent. Because all of the real estate investors that we’re using existing inventory that they own to rent to traditional rentals, long-term, many of them have moved into short-term and now you’re going to see them getting into medium term, which means of the rentals that were out there, there’s less supply for long-term tenants and they’re going to start complaining.
When that happens, you typically see politicians pass laws either at the federal state or local levels that restrict your ability to use rentals maybe as a medium-term or short-term. So again, there is no quick answer to real estate. You always have to be adapting. You need to be listening to podcasts like this and staying ahead of the information curve so you don’t get stuck with an asset that you can’t use the way you intended.
I would expect some backlash from the tenant pool that had been renters for a long time as they see their ability to find places to rent is diminishing and the rents are going up on those significantly, because the supply is restrained. So to sum up what I just said, I think the future is mid-term rentals. I think after that, you’re going to see laws that are passed that force landlords to rent their places out as long-term rentals. And that if we don’t build some more freaking houses in some of the busiest areas, this is going to constantly come back to make investors look bad. And it looks like you had a follow-up to your original question that I missed. So we’re going to air it now, and I will reply.

Jessica:
The other thought that I have, that I wanted to throw by you guys and see what you thought, we have several friends who are also interested in getting into the game. Accumulatively, we could probably put money down on a very nice or multi-home property and do a long-term rental that way. And we have friends who have a little bit more experience than we do, who are interested in partnering, but honestly… And it sounds great. We’re very interested. We trust these guys. They have more experience, so we would love to learn from them. I don’t know where to start with the partnership.
What kinds of things should a person be considering when partnering on a real estate investment? I guess I’m just curious, is there a contract template or how have you guys done that in the past to make everybody feel secure in the plan? You guys talk a lot about partnering and so I know you have these answers. I think it’s one of those things that when you’re a newbie, you have no idea where to start. But when you’ve done it a few times, you don’t realize the little details that the newbies are wondering. I’d love to know your thoughts. We can’t wait to hear what you think about these things. Thank you so much.

David:
When it comes to partnerships, first off let me say everybody at BiggerPockets, all the different hosts and personalities and advisors, we all have a different perspective on this. And a lot of that comes down to different personalities, different business goals, different perspectives. There is no right or wrong answer. There is a right or wrong answer for you. Now this may come as a surprise, even though I do talk about partnerships, I tend to err towards not being in favor of them. In fact, I have people that reach out to me about partnerships and it just always seems to go wrong whenever I take that road. I recently did one with someone that I didn’t know and something came up right after the partnership that caused me to question how much I can trust this person, but I’ve already got the money and the deal. I don’t really love that.
Other times I’ve partnered with somebody and they’ve wanted… They’re fascinated by real estate. They have a million questions and I’m more like, “I want less time put. That deal’s already done. Let it sit. Let’s look at the next one.” So we have different goals. If I do partner, there’s a couple rules of thumb. The deal has to be big enough that it makes sense. I’m typically only going to partner on very expensive residential real estate or multi-family real estate. I don’t want to partner on a smaller deal because instead of the work getting cut in half, you just have to do all the work twice, as both sides want a say and some control over how things go down and it’s not worth my time if it’s not a big deal.
Or, the deal has to be something I’m getting in and out of, I would definitely partner on a flip. I would definitely partner on if it was like a big deal and a BRRRR where I thought I could go in, get my money out and be okay. Those are some of the qualifications that I would say I have when I’m going to partner with somebody else. The right reason to do it is because you have complimentary skill sets. Somebody’s great at finding deals, someone’s great at managing deals. Somebody has construction contacts, the other person has management experience.
The wrong reason is for emotional ones. You don’t want to partner with someone just because you’re afraid to do it on your own. I know what you asked for was tactical stuff to make sure you’re doing in a partnership. What I’m going to say is you’re probably better off, if this isn’t a very big deal, to do it on your own without the partner, because I haven’t had the person yet who came back and said, “This deal I did with a partner went well.” I’ve always heard it didn’t go well and then they’re not partnering on future deals. The only exception is if you are going to partner in a company, and that company is going to own several properties, and this is someone you’ve known for a long time and you trust.
In that case, the tactical advice I’ll give you is spell out in the operating agreement exactly who will be responsibility for which parts of the managing it. Talk with that person about how long they’re okay having their money and their equity in this partnership. Some people are letting it ride for 40 years, other people want to get that money in and out in six months or two years, and you will have conflict with your partner if you’re not on the same page as far as the time horizon of the velocity of that money, how soon you want to see it returned to you.
Thank you for reaching out. This is also a really good question to put in the forums and see what different people on BiggerPockets have to say about partnerships that they’ve had that went well or went poorly. Last pieces of advice that I will give you, take all the questions that you’re asking me right now, put them in a Google document and sit down with your partner and say, “Here’s what my questions are. How do you think we should handle each of these things?” And then see how many things you’re on the same page with the partner. It’s way better to ask more questions than less.
And then finally you can search BiggerPockets for partnerships. We’ve done episodes with Rob and I talking about the house that we bought in Scottsdale together. Tony and Ashley on the Rookie Podcast have done several episodes on partnerships. There’s much more available to you than I could possibly answer on an episode like this. If you go to BiggerPockets and search both the forums and the podcast for partnerships, let us know what you find.
All right, our next question comes from Tommy C. in Georgia. Tommy says, “I’m a real estate broker in Georgia and an investor. My favorite people to represent our other investors. I’ve grown my business like crazy over the last five years. I did 27 million last year and over 160 transactions. The first quarter, I’m already at 63 transactions and 8 million in sales. My question is, how do I grow a team of agents that want to work with investors to help me serve more clients? What should I look for in those agents? Currently I’m struggling to get to everyone. I don’t want let anyone down, but there’s not enough time in the day. Any thoughts? Thanks.”
Well, Tommy, a very similar problem to what I have run into, is you have a whole bunch of people that want your help, because there’s not very many people that understand how to help clients build wealth of real estate. There’s tons of agents that will help you find a cute kitchen or be near the school district that you want. There’s not many that understand the way that money is built within real estate. Once you get good at that, you start to find that there are more clients coming your way than you have time in the day, which is definitely the case because you look like you’re doing awesome.
The problem is the reason all those clients are coming to you is because there’s not many people that could do what you do, which is the irony in your inability to grow because you can’t find agents that can help those people because there’s not as many people they can do what you can do. I’ve had several different ways I’ve tried to approach this problem. They’ve all been serviceable. None have been amazing. One way is I’ve tried to train agents how to do what I do. The problem with that is you’ll often spend a ton of your time and energy training the agents instead of helping the clients, and then those agents either won’t get it figured out or they will get the information and leave. This happens all the time.
Another one is that they will understand the information, but they won’t have the same work ethic or integrity that you do. They will know how to run the numbers, they’ll know how to find the houses, but they treat the clients like a transaction. You’re just a number I’m here to get you in and out the clients don’t like how that feels, you lose your future business. The reality is it is very difficult to grow real estate sales team. One of the hardest things that there is to grow, and that’s because the people that you’re hiring tend to have different motivations. They just want to get paid more. They want someone to teach them. They want someone to hold their hand. They want someone to help them grow. Then you have, which is you want them to treat your clients as if it’s their own.
There is no easy way around this, and this is why most of the advice that I give to the investors and the buyers is quit expecting your agent to be able to do everything you need them to do. You almost have to train your agent. If the people that you work with know how to run numbers, know how to figure out the ARV and they can just tell the agent what they need and the agent could go and gets it, that’s typically the best situation for all parties involved. I wish I had an easy answer to give you, but I’m in the same boat. We constantly hire agents train them and then they leave. Or it was harder to make money than what they thought they were going to make.
Now I’m in California where one, even if we have the information, people trying to buy the best houses that are getting tons of competition, get out bid. It’s very frustrating. I think in Georgia, where your price-to-rent ratio is a little more solid, finding cash flowing deals is probably a little bit easier for you. In fact, I like your model so much I’m actually going across the country, I just got back from traveling for 30 days, and meeting with different agents to try to find David Green Team expansion agents in the markets that cash flow strong, so when people come to me and want to buy investment property, I can say, “Boom, I’ve already got this person that I’ve trained.” It might be worth you and I having a talk at some point in the future.
But that’s really the challenge that you’re having, is that we have to figure out a way to serve our clients. That’s the ultimate goal. And doing that is something you’ve done well, that’s why you’ve grown the brokerage so big. Finding the people that are going to have the same level of care that you do is very challenging. So, my ultimate or my last response for you would be probably focus a little bit less on the knowledge they already have and focus on the integrity of the person that you’re hiring. You can always teach them the knowledge, but you can’t change their character. And focus on hiring agents that also own property.
It’s part of why you work so well with investors, is you are an investor. You understand when you’re looking at the deal what you would be doing for yourself, so you know how to help the clients. If you find agents that also own real estate, they are much more likely to be looking at that opportunity for the client from the lens that they would be looking at it themselves. And we always do better when we’re thinking about what benefits us than when we’re thinking about what benefits other people. If you can get those interests aligned, that will help. Thank you for your question. Let us know how that goes.
All right. We’ve had some great questions so far and I want to thank everyone for submitting them. Please take a minute to make sure to like, comment and subscribe to the YouTube channel if you’re listening to us on YouTube. I got all dressed up for you guys today. What do you think about the clothes that I’m wearing on today’s show? Here are some comments from our previous episodes I’d like to share with you.
Matheus Chaves says, “Thank you, David Green. I listen every day to your podcast.” Well, first off, thank you for thinking it’s my podcast, but I’m really just a humble servant of the podcast itself. “I’m finally going to get myself into real estate and this was the show that gave me the final push.” Okay, that makes me feel good. I’m very glad to hear that I helped you get over that hump. Have very low expectations for your first deal, slightly lower expectations on your second deal. By your third deal, you can expect to be doing pretty good. And by the fourth, fifth and sixth deal, you’ll probably be good at it. That’s the best piece of advice I could give you.
Next comment comes from Rea Vera. “I love the long answers. Love David with and without the others, the entire show with all of his personalities is incredible.” Well thank you for that. I’ve often wondered if I need to keep my answers shorter or if I should go on the longer stream of consciousness so you guys can kind of understand the logic behind why I give the answer. Glad to hear that you like it when I take a little bit more time and effort to answer the questions.
Tim Kauflin says, “What happened to the green background? How am I supposed to know that this is really Seeing Green?” Funny you say that, Tim, sometimes I forget to change the light that’s behind my head because I am so excited to start sharing information with all of our audience. Today’s shows was one of those shows. And because I saw this comment, I went back and rerecorded everything with the green light instead of the blue. That’s one of the telltale signs that it’s a Seeing Green episode. A few other telltale signs you can know, it says Seeing Green in the title, there’s no other podcast host with me, and it’s me playing videos and listening to them and commenting on those videos. If you don’t see the green light, or you’re listening to this on iTunes or Spotify or Stitcher and you don’t see the background, you can still feel assured that you’re listening to the Seeing Green episode if it fits any of those qualifications. And lastly, if you’re seeing me, you’re already seeing Green, so it doesn’t matter what color the light is.
Angelo comments, “Thank you for reading my question, Dave, very much appreciated. Even missing fine detail, like we all do, your points come across crystal clear, great skill that you have. I like the longer form answers, the creative ideas on how to approach all of the questions people have. You take time to answer, give examples and provide analogies.” Well, thank you for that, Angelo. I’m glad that you like it. Make sure you subscribe to this channel so you get notified when we put out future Seeing Green episodes.
And our last comment comes from Karl Hackman. “I love your content and the way you break it down so anyone can understand. Would love if you would show your book collection, favorite book.” So bit of an Easter egg there. I’ve got my book collection right here. However, they’re too blurry for you to actually read, because I’m doing that cool thing that YouTubers do where we’re in focus but what is behind us is not. So you can’t really see what those books are. However, if you want to actually submit a question on Seeing Green and say, “David, what are some of your favorite books that are behind you?” Maybe I’ll take a minute and make a segment where I pull those books out and show them to the camera so you can all see what some of my favorite books are.
All right, are these questions and are these comments resonating with you? Do you have situations that are similar and you’d like me to answer? I need to know. Tell me in the comments. Tell me what type of stuff you’d like us to cover, what we can change to make the show better, what you didn’t like about or what your favorite parts are. Or, just say something really funny, because I read them and so does the staff at BiggerPockets, and we love to see what you guys are thinking. The comments section is the best way to get your point of view across, so please go there and leave comments and hopefully we read one of them in a future show.
All right, let’s get to our next question from Shaun Nichols.

Shaun:
Hey David, thank you so much for taking this question. Essentially, my question boils down to what tips tricks or pitfalls do I need to watch out for when wholetailing or essentially working as an iBuyer? I’m a real estate agent and investor in the Columbia, South Carolina markets. And I actually work with an investor who runs an iBuyer program. And essentially what we do is I go in as his local rep and make an offer on a property, 100% of market value, no repairs, no showings, all that good stuff, for like a 12% fee plus the 6% realtor fee. Or, we give them the option, “Hey, you can either sell it to my investor, or I can put it on the market for you at just a 6% fee and he’s willing to do it for any property under $1 million.”
Essentially I’m wanting to do the same thing. I’m wanting to be able to go in and tell a client or a potential client, “Hey, I’m willing to buy your house at 100% of market value, as is, for a 12% fee. Or, I’ll list your property for a 6% fee,” and give them both options to see whatever works for them. If they do decide to sell the property to me, I’m just planning on putting it right back on the market for the exact same price that they sold it to me for.
What things do I need to be watching out for with this? Obviously it’s going to take a lot of cash, a lot of capital, to be able to do something like this, especially if you’re planning on buying the house in cash. But I’d love your opinion on things I need to watch out for. Obviously, I don’t want to be like Zillow and go in and offer what this estimate is and go broke. So any advice or feedback you can provide me, I’d really appreciate it. Thanks. Talk to you soon.

David:
All right. Thank you, Sean. A few things that you are indeed going to need to look out for. The first is you’re blurring the line pretty significantly here between the fiduciary duty of a licensed real estate agent and the non-fiduciary duty of buying a house for yourself. I would have a long and well thought out conversation with your broker to find out what forms they would need you to get signed, to where it was disclosed to the person when you’re acting in the capacity of an agent and when you’re buying it for yourself. One angry family member could get you in a lot of hot water with a lawsuit when you buy grandma’s house for what ends up being a discount and they feel like you could have sold it for more on the open market. And even though you explained this to them, in your opinion, they thought that as a licensed real estate agent you were telling them that the iBuyer option was her best option.
This can happen. This is one of the reasons that wholesaling is, in some ways, considered to be illegal in a lot of different markets. It’s especially troublesome the person’s a licensed agent. Now, I understand how frustrating this is, because as a licensed agent, there’s a bazillion hoops that they make you jump through. And then as a wholesaler, it’s the Wild West, you could do whatever you want. Personally, I think that there needs to be some legislation passed to bring some clarity on this because it’s not fair that people who play the game fairly and go get their real estate license have so much more restrictions, so much more regulation and so much more exposure to being sued than the person who doesn’t have their license, isn’t representing the client is just going there to buy the house for themselves.
But as the way it stands now, in many areas, you are able to do both. So talking to your broker to make sure you don’t get in trouble with the state or the governing board over your license would be the first thing that you should do. Having disclosures to fill out would be another thing for you to consider. Now the third piece would just be your personal exposure. If you’re going in and you’re paying fair market value for houses, like what the iBuyer person you work for is doing, or if you’re trying to get them at lower priced houses, but you don’t have cash, you actually have to think about you’re taking on some risk.
If you’re going to borrow money from a hard money lender, if you are going to borrow private money, if you’re going to take out a HELOC. Where’s this cash going to come from? Because if you try to refinance out of these houses that you buy, you’re only going to probably pull 75 to 80% of the value of the home out. That’s about the LTV that you’re going to get. If you use cash to buy the property for 100% of the appraise value, and then you go get a loan on it, you’re still going to be stuck with 20 to 25% of the money you borrowed from the hard money lender that you can’t get out when you go to refinance into conventional loan. Which means that you probably have to be buying them at 20 to 25% under market value to not run out of capital, which now puts you back in the tricky spot where you’re offering them significantly less to buy it yourself versus if you go sell it and put it on the market.
I don’t know for sure, and I can’t give you legal advice, but here’s what my gut is thinking if I was in your spot. I would find a different license person to refer business to when you find a person that wants to sell it and put it on the market and focus more on buying the houses that you want to buy yourself, than trying to do both and sort of remove yourself from that legal problem that you can run into when you’re trying to act in two different capacities. Thank you for your question and let us know how that goes.
And our next question comes from Tony Spencer. Tony asks about scaling using DSCR loans. If you haven’t heard of these DSCR, stands for Debt Service Coverage Ratio. And it’s a fancy way of saying a loan that is based off income that the property makes, not income that the borrower makes themselves. “Hello, David, I wanted to ask you a question about scaling a portfolio, specifically investing in short-term rentals. My understanding is that a DSCR loan has a five year prepay penalty.” I’ll say most of them do, Tony. A five year prepay penalty means if you refinance or sell that loan or pay it off in any way within five years, you typically are going to receive a penalty and money that you have to pay back to the lender because they gave you that loan expecting to receive interest on it for at least five years.
“Right now I’m BRRRRing an investment property with about 400,000 in equity once it’s done. My debt-to-income ratio is now maxed, so a DSCR loan for my first out-of-state short-term rental makes the most sense.” Like I said earlier, DSCR loans take into consideration the income from the property, not the income from the borrower. So if Tony’s debt-to-income ratio is maxed out and he can’t get a loan with his own income, he still can with the property’s income. “But then how do I buy the next few deals after that? I’m sure I can just save up the cash for another down payment, but that could easily take two to three years. Is it possible to do a HELOC on a DSCR property or do I just bite the bullet and pay the penalty once I’ve got the equity needed? I do have roughly 750,000 in equity in my primary residence, but my wife and I are really not comfortable pulling that out.”
“Another possibility I’ve considered is some type of partnership deal, but that is totally foreign to me. And that’s definitely not my preference. Side note, I’m basically working two jobs right now, a full-time 24-hour shifts as a firefighter, and remodeling an investment property on my days off. In addition to that, I’ve got a one-year-old and a three-year-old at home, but I still make sure to schedule time to listen to this podcast and interact with the BP community. That’s how much value represents me. It’s such an amazing platform and source of information.” Amazing. Well, Tony, thank you. And let me just give a shout out to your fire department. I don’t know the name of it, but if you guys are working with Tony and you listen to this, thank you for the service that you do. I hope all you firefighters out there are eating healthy food and getting workouts with weights and getting to sleep at work like us police officers never got to.
All right, now let’s get to your actual question here, how do you keep buying properties when there’s a pre-payment penalty and you have to use the DSCR loans? Well, the first thing I would say here is you can usually avoid the pre-payment penalty if you pay more upfront for the loan. So if you increase your closing costs, usually a couple points, you can have that prepayment penalty waived. If not, yeah, you might just have to pay it. When you go to refinance. It’s better than not getting a deal at all if your personal debt to income ratio is maxed out. Another thing you could do is use these DSCR loans while it paying down your own debt and increasing your income so that you can use your DTI to get a conventional loan when it’s clear, and use DSCR loans for whatever periods of time it’s not.
Is it possible to do a HELOC on a DSCR property? It’s possible to do a HELOC on any property. It doesn’t really matter what loan you get against the property, because the bank giving the HELOC is just concerned with the equity that you have in the property. They don’t care what type of loan you have in first position. A HELOC is a second position loan basically, that’s qualified based off of your ability to make the payment and the equity that is in the house, so they end up in second position to the first. In that case, your problem isn’t going to be because it’s a DSCR loan. Your problem is going to be because HELOCs are notoriously difficult to get on investment property. They are much easier to get on a primary residence, which is why it would make more sense for you to pull it out of your primary. But then you say that your wife and I are not really comfortable pulling it out.
Here’s my question to your wife and you, does it matter if you’re pulling the equity out of your primary residents versus the investment property? Are you planning on not making the payment for either one? If you’re a firefighter, I’m assuming that means that you can work overtime if you end up in some kind of financial jam and you have to pay back the loan that you took out. So if you’re going to take a HELOC on investment property, why wouldn’t you just take a HELOC on your primary residence? You’re going to get a better rate and it’ll be easier. In my mind, it doesn’t really make a difference which asset you take the HELOC out against, especially if you have so much equity in your primary.
Let’s go worst case scenario. Let’s say you take the HELOC on your primary and someone steals your money, you buy the worst deal ever, aliens come and take your house and fly away with it and you have no collateral. Something crazy happens. Well, you didn’t borrow against the whole 750,000 that you had in your primary. You probably didn’t need that much cash. So worst, worst, worst case scenario, you can’t work overtime and pay back that money over a longer period of time, you can’t afford the payment. You sell your house, because it still has a lot of equity. You pay off all the debt you have. You and your wife go house [inaudible 00:33:18], get a smaller house. Okay? That’s not ideal, but that’s not bad for a worse case scenario when you could be buying more real estate with the money that came from that, growing a portfolio that will pay your mortgage for you and your HELOC for you with the rental income that comes in.
I’d probably have the conversation about why are we afraid about taking a HELOC on our primary? See if you can get to the bottom of where those fears come from, and maybe look at that differently. And then yeah, you’re probably going to have to use DSCR loans until your DTI is changed. And that’s okay. If you got to pay a prepayment penalty, that’s okay. If you don’t want to pay the prepayment penalty, get the loan in the beginning and pay to not have it. You’re going to have to pay a little bit more upfront. Thanks for that question. And I hope work goes well and you stay safe out there, brother.
Next question comes from Chris Roberts in Chattanooga it’s funny. I was just in Chattanooga not too long ago flying out of their airport. “Hi, David. BP has become sort of therapy hour for me lately and I appreciate it. I’ve spent my life in the food industry and need to be doing something different. My wife and I bought a second home to fix up, got a HELOC on our primary residence to finance the rehab. And now I’m trying to figure out if we should sell the primary when we’re moved in, walk away after the HELOC is paid back with maybe 15,000, or keep it and rent it out. That’ll give me about 450 a month in cash flow, considering the HELOC payment in this equation and then the journey could start. I’m also a real estate agent here and love working on project homes. I’m just feeling a little lost in the direction to take with my life, but feel like BP could be a part of it. Thanks for all you offer. And Rob is awesome to, Chris.”
All right, Chris, I think I can actually make this question very simple for you. You took out of HELOC on your primary. You used that to buy the second house you’re fixing up and now you’re trying to figure out, should you pay off the HELOC or should you sell your home and use the proceeds to pay it off and walk away with about $15,000? The question that you got to ask yourself is would you rather have your house you have now, or would you rather have $15,000 in cash? Now when I say the house you have now, what I’m referring to is the house with the HELOC against it. When you consider keeping the house, it looks like you’re saying that you could rent it out for $450 a month extra, that’s the cash flow you’re going to make after your primary mortgage is paid and your HELOC is paid. So now the question becomes even more simple. Would I rather have $450 a month or would I rather have $15,000 in the bank?
Let’s do a little calculation to see what kind of a return 450 is on 15,000. We’re going to take 450 times 12, which is 5,400 divide that by 15,000 and that’s a 36% return on that money. Do you think you can sell that house, take 15 grand and get more than a 36% return on the money? Probably not. Makes it pretty clear that you need to keep that house as a rental property, rent it out and go buy a different house to live in. I especially like that idea because now you get to use an FHA loan or a primary residence loan, somewhere between three and a half to 5% down, to get your next house, which means you don’t need a ton of capital to do it. And that house could become your next rental property after you’re done living there. You are in a great position. You shouldn’t feel bad at all. Well done my friend, keep going.

JD:
Hi David. My question is about the three or 5% down. You’ve mentioned several times that your suggestion is to take great funding, put three or 5% down, house hack, and then just rinse and repeat that. My question lies in the fact that I live in California. I live in Sacramento and properties are quite expensive out here, like 400,000 easy. I hate where I live, so it doesn’t do me any good to buy something super cheap just to end up in a crummy neighborhood like where I’m currently living. I’m looking to purchase something in a nicer neighborhood. You’re 500,000, 600,000. If I want to house hack or create a situation where I can generate some income, then it’s definitely going to be in the higher price point.
I don’t understand how I can make this work according to your suggestion, because putting three or 5% down makes the mortgage unpayable. Can you give an example or give some specifics on how I can make this work in my California market? That would be awesome. Thank you.”

David:
All right. Thank you, JD. Now I understand that you actually had a little bit of trouble getting acknowledgement for the video submission that you put in here. I can see that you are very eager to make some progress, so a few words of suggestion for you. One, if you ever have a question like this, that you feel is very urgent and you need answered, please consider in addition to spinning it to us here at biggerpockets.com/David, go to the BiggerPockets forums and ask it there. Also, I have an agent on my team. He’s been interviewed on the BiggerPockets, money show. He’s been on the BiggerPockets YouTube general, Kyle Rankie, he and Brandon Turner are my two best friends. He works in the Sacramento market. You should reach out to him. He would be happy to help you with this question because we know that market very well.
Now I’m really glad you asked this question because it gives me each chance to clarify a few things for you. You said that it’s very difficult to find a property that will generate income as a house hack when you’re only putting three and a half to 5% down. That is right. It’s notoriously difficult, almost impossible most of the time. Here’s where I think you got confused. House hacking is not meant to generate income. House hacking is meant to save money that you were spending on rent. It’s not something that you should be approaching thinking, “How much money am I going to make?” It’s something you should be approaching with the idea of how much money can I save.
So for instance, if rent in Sacramento where you’re living is $2,500 a month and we can get you a house hack that after your tenant pays you rent, you’re only paying 500 a month or a thousand a month, you’re actually saving 1500 to $2000 a month. Now you’re not making anything because you’re still coming out of pocket somewhere between 500 to 1000, but that is significantly less than what your rent would be. Now you may say, “Well, I’m living in a house. I’m not paying rent.” That’s true, but you have a mortgage still. If you’re able to move out of the one you’re in, if you own it, rent it to someone else, break even or make some cash flow on that and then drop the payment that you are making of maybe 2,500 a month or 3000 a month, down to the 500 to $1000 a month that you’re coming out of pocket to house hack, you’re saving money and you’re adding an additional property to your portfolio.
Now I’m really glad that you submitted this question and we selected it specifically because I need to highlight I’m always telling people to house hack. But the assumption is I should be able to live in a property which takes up one of the units that would normally be rented, put very little money down, three and a half to 5% instead of 20%, and still have it cash flow. And this is why house hackers get so frustrated. In some markets that might work. If you’re in the South, if you’re in the Midwest, if you’re in a place with very low price-to-rent ratios and it’s a fourplex or a triplex, you might be able to house hack and still make a little bit of money. But if you’re in expensive market like California, Sacramento, Northern California, the value is not that you’re making money every month. The value is that you’re owning real estate that’s going to go up in value. The rents are going to be going up in value. The price of the asset’s going to be going up in value. And most importantly, the rent that your landlord is charging you isn’t happening anymore because when you’re renting, your rents go up every year.
Just like when you own the home and you get to increase the rents every year, when you don’t own the home, the rents get increased on you. In basketball, we had this concept called a four point swing. Imagine that you’re on a fast break, you’ve got a wide open layup. You miss it. The other team gets the rebound, the throw the ball the other side and then they get an open layup. It’s not that they scored two points, it’s that you lost four points and they scored two points, equaling a four point swing. That’s like the worst thing that can happen.
The same is true of you don’t house hack, not only are you not raising rents on your tenants, but you’re having them raised on you. That doubles the impact of the power of real estate but it’s working against you. When you own the asset, you’re getting the four point swing in your favor. You’re getting to increase the rents every year and you’re not having them increased on you at the same time that the value of your asset is going up over time, and you’re adding another home to your portfolio. What I’m getting at here is house hacking is incredibly powerful, but it doesn’t work if you’re trying to force it to cash flow. Don’t just think about making money every month, think about the money you’re saving and doing this.
And the last piece of advice I’ll give, if you go make $500 in cash flow investing out of state somewhere else, that’s going to be taxed. Let’s say you get to keep 350 out of that $500. Okay? If you save $500 in rent, it’s not taxed. You’re actually keeping the full 500. So you’re only taxed on money you earn, you’re not taxed on money you save. And this is why I constantly tell people that are trying to build wealth, “Start with what you’re spending. Start by spending less. Start by decreasing the amount of money you spend all the time, because you’re not getting taxed on what you save. It has a bigger impact.” Okay?
If you want to actually make 500 bucks, maybe you have to earn 700 because you are only going to keep a percentage of it. So saving 500 in rent is the equivalent of making $700 in an out-of-state market, which is very difficult to do. Hope that helps answer your question. Thank you for your patience and working with this and get on those BiggerPockets, forums and ask more questions there. All right. I am very glad we got another episode of Seeing Green on the books.
I went pretty quickly here, but that let me bring more value to you by answering more questions. Hope you guys enjoyed this. And I hope that if you’d like to be considered to be on this show, please go to BiggerPockets.com/David and submit your question. Also, if you’re not following us on YouTube, please do that there where you can like, comment and subscribe and we can see what you have to say about the show.
If you’d like to follow me on social media, I’m @DavidGreen24. You can find me there. But your best chance of getting ahold of me is to submit a question here through BiggerPockets and hopefully be on the podcast yourself. Thanks again for giving me your attention and for coming here to get your information about wealth building through real estate. I appreciate that I am the one that gets to lead you through this journey. Thank you for your support and we’ll catch you on the next episode.

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”:”254893″,”dailyImpressionCount”:”578″,”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”:”440698″,”dailyImpressionCount”:”319″,”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”:”151770″,”dailyImpressionCount”:”318″,”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”:”123305″,”dailyImpressionCount”:”387″,”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”:”114798″,”dailyImpressionCount”:”282″,”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”:”95563″,”dailyImpressionCount”:”313″,”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”:”50722″,”dailyImpressionCount”:”309″,”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”:”53385″,”dailyImpressionCount”:”314″,”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”:”55102″,”dailyImpressionCount”:”206″,”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”:”60453″,”dailyImpressionCount”:”195″,”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”:”49521″,”dailyImpressionCount”:”236″,”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”:”35815″,”dailyImpressionCount”:”240″,”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”:”36561″,”dailyImpressionCount”:”227″,”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”:”18508″,”dailyImpressionCount”:”244″,”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”:”21204″,”dailyImpressionCount”:”236″,”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”:”8458″,”dailyImpressionCount”:”319″,”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”:”11158″,”dailyImpressionCount”:”479″,”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”:”11716″,”dailyImpressionCount”:”518″,”impressionLimit”:”200000″,”dailyImpressionLimit”:”2334″}])” class=”sm:grid sm:grid-cols-2 sm:gap-8 lg:block”>