BiggerPockets Real Estate Podcast - 301: The Incredible Power of Long-Distance BRRRR Investing with Alex Felice

Episode Date: October 25, 2018

Looking to get started investing but don’t have millions of dollars and notice there’s not a lot of opportunity in your market? Well, this is the episode for you! Today’s guest is a long-distance investor who uses the BRRRR strategy to buy fixer-upper properties in other states, then refinances to use the money to buy more deals! Alex Felice shares his valuable insights on his criteria for analyzing deals, how he builds his out of state team, and why he’ll never look at a property in person! You won’t want to miss Alex’s strategies for overcoming the fear of investing long distance, as well as his plan for living broke on purpose and how he combines long-distance investing with the BRRRR method to build a portfolio that scales! Alex is a high-energy individual who is passionate about taking action and building the future he wants. Don’t miss your chance to learn from what he’s accomplished, and start making progress building your own portfolio now! In This Episode We Cover: Alexander’s back story and how he got into real estate Why live-in flip? His strategy of being broke on purpose How he learned about the BRRRR strategy Why he thinks being close to your property is a crutch The importance of “skills that scale”: networking and education How to complete a BRRRR in 8 weeks What delayed financing is How to know what a good deal looks like What “unicorn paralysis” is and how to avoid it His strategy in his own market How to think like an underwriter And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Landlord Forms Zillow Trulia How I Analyzed a Deal in 5 Minutes (& Bought it Before Anyone Else Could) (blog) The Secret to Unlocking Bank Financing The highest return on investment you can make – Best Investment Books(blog) Books Mentioned in this Show Rich Dad Poor Dad by Robert Kiyosaki Principles: Life and Work by Ray Dalio Sapiens: A Brief History of Humankind by Yuval Noah Harari Thinking, Fast and Slow by Daniel Khaneman Science in the Soul by Richard Dawkins The Demon Haunted World by Carl Sagan Factfulness by Hans Rosling Fire Round Questions Can someone explain BRRRR to me like I’m a second grader? What are some pro’s and con’s with buying investment properties out of state? I was just wondering, what questions should I ask potential real estate agents before I make them apart of my team? I am looking to purchase some property online sight unseen. Can you give me any tips for purchasing property like this? Do you focus on properties with little to no repairs? Tweetable Topics: “Live life broke and save a bunch of money.” (Tweet This!) “Being close to your property is a hindrance.” (Tweet This!) “The only point of the first deal is to get the second deal.” (Tweet This!) “As fast as you can, as slow as you need to, but don’t set your goals too small.” (Tweet This!) “You want to convince people that are better than you to deal with you.” (Tweet This!) Connect with Alexander Alexander’s BiggerPockets Profile Alexander’s Personal Blog Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 301. The geography doesn't matter. And if you are far away, it forces you to learn really important skills and talents that are incredibly valuable. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from Bigger's BiggerPockets.com. Your home for real estate investing online.

What's going on, everyone? This is Brandon, host of the Bigger Pockets podcast here with David Green. I was going to go with your middle name, but I couldn't remember it. So I was going to go with Lynn, David Lynn Green, because that's like everyone's middle name. But my audience. Not dudes. No, not very often. Usually you use my middle name as the man.

What happened with that? Well, you know, I don't want to lie to the audience. Okay. I see how this is going to be. All right. So Brandon. Let's up, David, man. What's going on?

What's going on? You know, it's funny, while we were recording today's podcast, which was like super high energy and a lot of good content and kind of creepy in a way, because this guy that I've never spoken to and says he never read my book, says word for word, everything that I preach about out of state investing. It's like, what are the odds that the two of us are doing the same thing and I've never met and we've come up with the same systems? Like, it just was very like, man, what are the odds that would be the case?

But it's also encouraging. Because that's what works, right? That's exactly what I'm getting at, right? Like we've both come to the same conclusion coming from different places because that's what works. So I like that he's definitely like encourages people in the same way that I do. So you guys are going to get a lot out of the show. He's also a Burr investor, which we are huge proponents of the Burr method. So he talks about that.

But as we're recording the podcast, I'm getting messages from a wholesaler who's like, I really need to move this property. I can reduce it of another like 20% can you buy it? So we're talking about real estate while I'm kind of negotiating a deal while we're recording because there's somebody else who wants to buy the house. But I think by next episode I'll have another housing contract to talk. about. And it was just cool because this is an out of estate property that will be used the Burr method. I should be able to finance 100% of my money out of it and you have a cashilling rental.

ancy fancy stuff. And speaking of Burr, that's exactly what we're talking about today. We've got Alex on the show. Alex Felice, I hope I'm saying that last name, right? I wish we'd forget to ask the guest how to pronounce their last names. I got to start doing that. Alex is a really awesome dude. He's been very involved in bigger pockets. He's very much a bigger pocket success story. He was sitting exactly where a lot of you are a few years ago. No properties. Trying to get into it. And really made some some big changes in his life and is now just crushing it with the birth strategy. You're going to learn all about that today.

He's got a really great personality, a lot of fun to talk to. So you guys are in for a treat. But before we get there, let's get to today's quick tip. All right, quick tip is very simple today. It's something that we talked about a while ago, but I want to just restate it. For those who don't know, Bigger Pockets actually has provided landlord forms for all 50 states. If you are a Bigger Pockets pro member, it's included in your pro membership. or you can buy them at, what's the word ad hoc?

That's the wrong word. Alicart. You can buy them all a cart. Maybe for your state. Anyway, go to biggerpockets.com slash LL forms. Are you laughing at my lack of doing with a thing? I love that you always do this with different words, housekeeping, house cleaning, ad hoc.

It's like Steve Carrell from the office, how he's always mixing up what he's trying to say. You're hilarious. That's my goal in life is to be like Michael Scott. You can buy them all the mode. All the Bode here at Bigger Pockets. Anyway, go to Biggerbockets.com. There's LL forms to check those out.

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700

a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you.

Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement.

Most investors spend all their time talking about their high-level returns. But that's not the number that actually matters. What actually matters is what you keep after taxes. And that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. Bam Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long-term approach.

This isn't about chasing hype or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash bam. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly.

That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. I don't want to waste any more time. You guys are going to love this show.

This thing is just a lot of fun and very, very motivating, very, informational. You will not be able to leave this show without knowing exactly what the birth strategy is how it works and how you can use it in your own life. So with that, let's get to the show. All right, Alex, welcome to the Bigger Pockets podcast. How are you doing, man? Very, very excited to be here. Thank you. Yeah.

So, all right. So people have been telling me forever about you. Let's go into your story and figure out, like, how did you get into real estate? Like, why real estate? Walk us through that beginning. Yeah. You know, I find that I was probably like a lot of people who I got into personal finance first because I was living my life tragically, irresponsibly, fiscally.

Living week to week, making bad decisions, you know, like a lot of people. I got sick of it after some really bad decisions and found personal finance. Well, started saving some money and I said to myself, I need to parlay this capital that I've saved into something that will make money passively. And I didn't want to start a business and I had no services to sell. And I'm really lazy. So it had to be passive. And I needed it to be tried and true because I didn't want to go figure something out that's

only going to work for a few years and then have to start over. So I had to be tried and true, passive. and I had to do it without a lot of capital. And if you write that on paper, there's nothing that would appear to work. And then I found real estate. And I, around 2014, I started listening to your podcast. And, you know, I burned that thing down in six episodes of the week while I was going to college. And I bought a house inside eight months with three grand.

We bought a foreclosure. We moved in. We house hacked it. 18 months later, it was worth, I pulled out 60 grand in cash. And I was, and I was hooked. All right. So tell us about that first deal. I mean, you, you was a, was a, do you say single family house that you bought?

Yeah, it was just a foreclosure. It was like 54,000. We, we FHA moved in. It was kind of dumpy enough that it was, you know, foreclosure distressed, but nice enough that the FHA would let us move in, which is kind of, kind of hard to find. But three grand later, we got a house for 54 grand and 18 months later to praise for 115. That's awesome. Where was that at?

Fayetteville, North Carolina, that's where I do all my, that's what I do all my, all my investing. It's a small town next to Fort Bragg, the biggest military base in that country. Yeah, cool. I was actually looking at a property out there like a year ago and I was running the numbers and I was negotiating and it didn't go through. But I don't know, maybe I should have done it. Sounds like a good market. No, you should have called me. I got you, I got you baby.

All right. Actually, I will tell us a story. So I was listening to this podcast in the car on the way to college. after all my irresponsible life ended, I said, I got to go back to school. So I went to school for finance. And so people, my idea was, I'm going to go to school for finance to learn how to make money. And I did it because it's college. And they teach you how money works, but they don't really teach you how to make money. But I was listening to this podcast on the way to college back and forth. And I swear, that's where I got my real education. The podcast, listening to the podcast back and forth is what made me money, not actually going to

the commute was worth way more to me than the degree. That's awesome. That's awesome. I like that idea. You know, Zig Ziglar has that. I think it was Zig Zigger says it. Somebody says it, but I think it was Zig that said about how like you should turn your, you know,

vehicle into a mobile university. Like if you're sitting in traffic anyway, why not use that time instead of listening to rock music or, you know, country, why not listen to? Don't know that's going to help you that. So you did that. You listen to podcasts and kind of growing. And so that first deal, like what made you, I guess I'm curious. Why did you go the, the live, basically we call it a live and flip, right?

The house hacking of a live and flip. Why did you go that route instead of maybe just continue renting and go and, you know, invest in a rental property? Well, I was broke. I had five grand. And so if you want to buy a house with five grand, you got to move in it. So you can do FHA or VA, but you have to buy one that's distressed enough in it. That's a really tricky avenue, you know, specific.

Unicorn to find, but it's possible. And this was in 2014 where it was maybe a little bit easier than it is today. But I didn't plan it as good as it sounds now. It was kind of like, honestly, I was living in a condo and my girlfriend kept collecting dogs. And they kicked me out of my condo. And so I was like, I need to go by a house. So I bought this one. And I said, I think it's going to make some money.

And it did way better than I had expected. And so that was in 14 by 16. I bought my second actual rental because I had been saved. in cash for so long. And then I bought five cents. 16. That's awesome. Okay. So let's go to that. So what, so I want to walk through a lot of people are able to do the first deal, right? A lot of people can do, they can buy a house, maybe, you know, a house hack or a living flip or the combination of or whatever. You know, they can, they can do the first one where a lot of people get hung up is the second one. They say, well, I got the first, but now I don't have enough

down payment. I don't know how to get that second. So how did you pull off the second deal? I lived broke. After I figured out that I was broke, I started living broke on purpose and I saved a bunch of money. And it took me four or five years at a couple hundred bucks a month. Plus I cashed out that second property. And after four or five years, I had, I think I paid $68,000 for my first rental property, all in cash and rehab, $68 grand. And I think I had like $70,000 to my name.

And so there was no room for error, but. you know, you do what it takes. So I bought that house. We did a bur. Thank you for that, Brandon. We did a burr. I got all my money back six months later. And then I found out about delayed finance. And then I did four. I do it. It takes me eight weeks to do a bur now. Okay, we got to we got to unpack all of that. You just said. Okay. So I'm sorry. I know. No, it's good. This is awesome. Okay. So you, first of all, you said you did a, you did a birth. Those who don't know, it's by rehab, rent, refinance. Repeat, right? It's the idea where you buy a rental property, maybe for cash, maybe for like some kind of short term financing.

You fix it up, you rent it out, and then you go to a bank and you get a new loan that pays off whatever you use to buy it. If that totally confused everyone, just go to bigger pockets.com slash burr with four R's and you can read more about it. But so it's a strategy that David Green here loves and is actually writing a book on. It's a strategy I love. I've used a lot. And a strategy, Alex, you love and you've used now. So you, let me go back to that. So you bought this property.

How did you finance the property originally to buy it? Cash. Okay, so you bought it for essentially cash, right? So then you fixed it up. My own capital that I saved up. Perfect. You saved it up, bought the property, then went to a bank and got a refinance. Would you remember what it appraised for after you all got all fixed up and ready to go?

95,000. That's awesome. So then the bank gave you 70% or something? Yeah, they'll give you 75% for a single family. Yeah. 70% for two to four things. You got all your cash back. Yeah, I think when you say that, I run to that.

problem as well. Like people can get their first one because they have a little bit of capital and they can usually move in or do a fix and flip or live in flip. But you're right. You know, it drains a lot of capital and then you go slow. And I think that that comes back to this interesting principle that I talk to with real estate people all the time. And I say, I'm famous for saying real estate is easy. Real estate is super easy. And it is. Real estate transactions are really easy. What's hard is building a business. And building a business around doing this can be difficult because people say, well, I don't have enough money, but part of your business is raising capital and getting other people to invest in your common goals. So people, they want to do it themselves. They want to raise their

money. They want to spend their money. And it goes much slower than that. So when you do it that way. So building a business is hard. And that's really the part that I wish I had worked on much more from the start. And I could have gone a lot faster. I'm crushing it now. But I love, yeah. Go ahead, Brendan. Well, I was going to say I love that. We both love it. We love it a lot. Yeah.

Anyway, I just going to say that the concept of you're building the business, you're not just casually buying property. You're building the business. I think that's solid. But David, go ahead. You make a really good point about how, and I say the same thing all the time. And Alex and I have never met before this conversation right now. But it sounds like we're doing very similar stuff.

We're both using the bird strategy. We're both investing long distance. We're trying to maximize the efficiency with which we're building our portfolio. So even though I don't know, Alex, I can guarantee you, like, He's like, yep, that's exactly what's going on. He makes such a good point that you can get that first deal because you only have to put a little bit of money down if you do a live in flip and you buy it as a primary resident. Then you have to start putting big chunks of money down.

And unless you're making a ton of cash, you start to run out of money pretty quick. That's where we start to figure out the burst strategy because if you have big goals that you want to build a big portfolio, you've got to be able to refinance and get your money out so you can go invest it again? And it sounds like Alex, you've kind of figured that same thing out. Can you tell me what was the thought process like for you that you realize I need to learn how to Burr so I don't run out of money. And what were the skills that you had to develop to build to do this? I think everybody runs into this problem where they run out of their capital

and then you exactly like you said, what do I do next? Well, you go and figure it out. And the way I figured out was I asked everybody in the planet for alternative strategies forward to both teach me and to do it with me. And what I mean by that is like I didn't figure out the Burr method. I found a lender that knew how to do it. And then he helped provide options or opportunities or avenues for continued success. And so if you ever get stuck in a part of your process or part of your strategy, it's likely you, it's not a, it's never a money problem. It's a networking problem or maybe an education problem. You have to either learn more about the process or you have to go find people that can that know and can help. So when I really like that. Yeah,

when I got when I got when you got stuck. Yeah, when I got stuck, I said, well, I have I spent all my money and you know, it's funny. People love people who don't do real estate love to say, oh, wouldn't it be nice to pay my house off in cash? Well, the first time I paid that house off in cash, I felt awful because my bank account was drained and now all I had was $900 a month. That was worse. So I was like, I get a loan immediately. And you wait six months and it's uncomfortable.

So literally the discomfort of going slow, I am not a go slow guy. I don't like it. I don't like sitting still. So that right there just annoyed me enough where it's like I have to produce a solution here. Okay. So one of the problems that we hear people run into that are trying to do what you're doing is they just cannot get over this hurdle of buying a property they don't see. And you mentioned that you buy properties that you've never even seen.

What's your process like for how you can get over that emotional obstacle of I need to see a property before I buy it? Suck it up, Buttercup. That's the best answer I've ever heard. That's great. It's a big problem. Look, okay, I actually have a rant about this. Look, being close to your property, being physically, geographically close to your property is not a benefit. it is a hindrance.

It is a crutch. Well, because look, if your tenant doesn't pay and they live five miles down the street, I guarantee you you're not going to go down there and choke them out to get your money back. So being close provides you no actual benefit other than some seemingly important piece of mind that doesn't really exist. Being far, being close, you can't do anything. If you got squatters, you can't, that's not going to make a difference. The geography doesn't matter. And if you are far away, it forces you to learn really important skills and talents that are incredibly valuable.

Like managing a team, trusting people long distance, learning how to incentivize people for mutual gain. Like my team on the ground out there, I'm worthless without them. But the value was building the team and building the common goals and the culture that we have far more than, I mean, if I was close to the house, If you're close to the house, you end up doing everything yourself. And that's the wrong skill to learn if you want to grow. Yeah, I actually agree. In fact, I oftentimes tell people that my ability to do work. I mean, people have heard my story.

I'm sure, like, I could fix up a house and I learned how to use a saw and a hammer and all that. My ability to do work hindered me in the same way that my insistence on doing only local stuff hindered me, right? Like, because I felt like I had to do it because I could do it. It was there, right? And so I didn't even think about investing in other areas. where I probably, I mean, to be honest, like I, I lived in an area where real estate worked, so why not just invest there? But when I think about it now, I lived in a very, very small area that, like,

capped me at the number of deals I could do because there just wasn't that much inventory to ever get any given time. Right? So I think you have a really, really good point there. Like, you're not going to drive over and choke the guy out for rent anyway. So why not build systems that allow you to get those things done without you having to be there? Yeah.

And that's a harder skill to learn, too. Like, you know, people get stuck, I think, with, I buy three houses. It's a lot of work. And then you kind of get stuck at three houses or four houses. And you're just managing those buildings. And there's nothing wrong with that. But for me, if I really want to scale this thing, then you need to learn the skills that scale. And fixing toilets doesn't scale.

What are the skills that scale? Your ability to attract good talent. Your ability to your ability to motivate people towards common goals. Your ability to delegate and build infrastructure. Your ability to create a culture around. your team. Really, it's the abilities that you need that scale are networking and education. I say these two all the time. I talk about them all the time. Those are two things. If you do those on mass, meet people that can help you get your goals and learn what it takes to get your goals

and do it every day obsessively. I mean, success is inevitable. That's really good. I think every single person needs to click that little button on their iPhone or whether they're listening to this podcast on where like rewinds it like 30 seconds and go back like two of those and then listen to what Alex just said again. Like those are a thing. Working in education. Yeah. Like that's so key, right? Again, we get so stuck on the principles of real estate sometimes, especially in the

beginning. And I know you have to learn them. You have to get good at them, right? How to analyze a deal. How to, you know, but would it be better to learn how to fix a toilet or learn how to find a great plumber that'll last through the next 20 years? Like, what skill would be better spent? Right.

And we talk about that a lot on the show. And I'm not saying a person should never change, you know, if that's all you can do is change a toilet, then fine. Maybe you should change a toilet. But there's a good chance that there's other skills that would serve you much better in the long term. So that's, yeah, that's so good. So that's how you scale a business is by getting those systems down.

So I want to go back. And on that note, you mentioned how you can do a burr. I think you said in eight weeks. You're down to eight weeks. Can we talk about that? Easy, baby. Easy. How do you do that?

Look, I have the luxury of being able to buy houses off the MLS. I also have a sick realtor. So she'll send me out. She'll, you know, we'll find a house, get the offer accepted, close in five days. Rehab takes three weeks, four weeks for a $20,000 rehab. Tend placement, my property manager is a monster. Again, like everything I do is a product of my fantastic team. And so I really couldn't do as much as I do without them.

So he finds a tenant in a blink. And so that whole thing takes six weeks. And then I go to a lender. and I use the delayed finance exception, which says you can finance your property inside of six months with Fannie Mae as long as you finance. This is an extremely misunderstood topic on the forums. They say you can finance what you buy it for, but that's not the rule. The rule is you can finance it for 100% of HUD. And that's very different. And so when I go to buy the house, when I close on the HUD, I put my rehab costs on there and pay for them in full along with insurance. So once the tenant

gets placed, I go to the lender and I say, hey, I want to underwrite this loan. I pay It's $66,000 all in. That's what it is on the HUD. As long as it's 75% or of LTV or 100% of HUD, which everyone's less. Hopefully it's less. I leave no money in the deal. I get out my entire amount. And my underwriting goes fast because I, well, I do commercial underwriting for a bank.

So I got the inside scoop. So, yeah, the last one took eight and a half weeks from the time I closed on the house, the time I had 100% of my funds back minus some hard closing cost, $1,200 or something. Okay, I need to dive in here. So delayed financing. We've only talked about it once before in the show. I can't remember what episode it was, but we talked about it before. And I had never even heard of it at that point.

So you're saying basically it's like the burr loan from the from family. You can actually, so normally, let me give some background. Normally when you do a burr property, you buy it and then you go and get a loan. The lender requires what's called seasoning. You have to wait six months, sometimes up to a year to get a new loan again once you buy a property. So the burr usually takes six months, maybe even 12 months. The delayed financing is an exception in that rule that allows you. you to refinance much, much quicker.

But I'm not sure what you're talking about. I've never heard this before, about 100% of a HUD. What do you mean by your repairs go on HUD? How does that work? So I talk about this all the time. I'm certainly nowhere near the only person that's figured it out, but it's incredibly misunderstood. And I try to, I try to, I'm on the forums all the time,

trying to help people out and they just think I'm crazy. But this really works. So when you go to closing your house, the HUD is your purchase price plus or minus maybe taxes. interim taxes. And so you pay $35,000 for the house, the HUD says $35,000, right? We all know this. Sure. Yes? Yes. So you close in the house, $35,000, the HUD says $35,000. So when you go to get the loan, even if you use delayed finance, they're going to say you can get 100% of HUD or 75% or whatever. So the house appraises for whatever, and I only paid $35,000. So you can only get

out $35,000. That's what everybody doesn't like about delayed finance. You can only get out which paid for the house. So what I started doing was when I got the HUD, I went to the title attorney and I just said, hey, I'm going to add some stuff to that. Do you care? No, we don't care. Why would we care? Why would the title attorney care what's on the HUD? They don't care. So here's an invoice for $20,000 for my contractor. Here's an invoice for $700 for my insurance. Can you add it to it? Sure. Now, the downside is you got to pay for it all up front. Okay. Yep. I don't have to get the, and they're going to escrow it to the insurance. They're going to escrow it to the contractor. And you can set it up so they do disbursements and

whatnot. But now the HUD says 66 grand. And so when I go to the lender, they're like, oh, 100% of HUD. We're done. We're cool. 66 grand. That's fascinating. So if I understand you right, Alex, you're paying your rehab costs into the escrow. You're closing. The cost of the house is going to the seller. Then the escrow company is keeping your rehab costs in escrow, which they then disperse to your contractor as they complete the work. Is that correct? That's the way you should do it. I don't do it that way. I pay my contract. in full up front. I don't care because him and I are so that's the power of having a great team. But yes, you can tell them escrowed out, you know, as I, as you tell them, they will

disperse it, no problem. Okay. So I never heard of that either. That's an awesome strategy. And now basically, you've got the, your HUD is showing a higher amount. So the bank will let you refinance more of your money back out, which is the whole point of burr, right? Yeah. And there's specifics here that work for me because generally my all in costs are 75%. or close to HUD. So if you had a place where you're, you had 65 grand in a house, but it was worth 150,

like, well, wait the six months, because that's a big chunk of money that you're not going to be able to get out. And vice versa, if you have a house that you have 65 grand into it and it's worth a hundred,

or you got 80 grand into it and it's worth a hundred. You're going to lose $10,000. Because it's LTV, 75% LTV or HUD, whichever one's lower. So you really want to make sure that your numbers line up before you purchase the property that your all in costs will be 675% of the ARV.

I just, it's fascinating to me that you and I have never met and what you're describing is everything I talk about in the book and our criteria is almost exactly the same. My target is I'm all in for 75% of ARV. So what you're describing like building a team, having other people do the work, that's in the book I wrote long distance investing. That's what we're talking about is how you build that team, how you develop these relationships, what you should be looking at.

for. You've done this a couple times now. For people who are just getting started, what's some practical advice you can give them for what they need to know in order to be able to start this. They are too focused on how much money they don't have and not focused enough on how much they don't know. So again, it comes back to education and networking. If you're having troubles to getting ahead or getting something put together, odds are you haven't met the right people yet. And I've spoken about this significantly on bigger pockets, how to find mentors. And And the BP resources fantastic to find people, local RIAs, learning, getting out and finding a guy like me who already does it and then will give you a lot of confidence.

The other thing is people don't know their market. That's a real big problem. You have to know, I bought, I analyzed my properties from MLS pictures and I've bought them without anybody walking through that house before I made money because I know the market so well. So when I look at a house, I know exactly what it's going to rent for, how much is going to take, it's going to take what the ARV is and I can do it in 10 seconds. And that's not because I'm smart. That's because I've been grinding out Zillow and Trulia analysis templates or practice

for years. So if you're unsure of capital or you're unsure where the capital's going to come from, you need to network. If you're unsure of what market to go in, you need to educate. And if you're unsure of what a good deal looks like, you're way behind the curve. If you don't know what a good deal looks like, you're not going to know how to spring on one when you see one. So you have to analyze, I analyze 10 deals a day. That's what I tell people. Just grind them out. Do them through the, do your underwriting, check them out. And so when the good one comes along, you're going to go, oh, yeah, that's the one.

I got that one. We can make a move. I love that. Yeah, if you don't know what a good deal looks like, even if one comes across your desk, you can't close. Yep. And you can't move forward. So if you know a good deal when you see one, then you can start making moves.

You know, this is something I tell people all the time when they're talking about, like, well, you know, I don't quite have the money to invest yet. I'm like, okay, well, analyze deals anyway. Get so good at knowing what a good deal is that everything else becomes easier, right? Because if you're, like, it doesn't take much. money to be able to run a number on. I mean, like, you might have a pro membership, right, cost in there. But if you, regardless, analyze deals, analyze deals, get so good at that, that everything else becomes easier, right? Yeah. Yeah. And you have to have the, you know,

you've got to practice. You got to prepare because when it comes time to make decisions in this business, you're going to learn real quick that you always make an imperfect decision. And that's something that doesn't, people don't like to hear that. Everybody on the, on the BP is looking for a unicorn deal, some 2% deal or some perfect deal. And I've never bought a perfect deal. I don't think it happens. So you have to be ready to make a deal that you look at and go, it's going to be good enough.

Well, if you're unsure and what a good deal even looks like, then you're never going to take a, that's how you get analysis paralysis. So you really got to know. And you got to spend a lot of time, you know, I call it obsessing. You got to speak a lot of time obsessing over this. Like I said, meeting people,

talking to people all the time. I spend hours on that website, on your website talking to people and learning still to this day for education and then networking. I'm always reaching out to people trying to find ways to meet them. I met Scott and Mindy last week at FinCon. And I've met a whole bunch of my really close real life friends from spending time on BP. And when you meet people that are doing well and they like you, they're going to take you along. Yeah.

So, yeah, I love that. A lot of it's relationships. Most of it is relationship. Solid. So Alex, You make such a great point because I see what I call perfect deal paralysis all the time. You get people that are like into it. They're on BP.

They're listening to the podcast. They're talking to my real estate. They're going to meetups. They're doing everything on paper they should be doing. But they can't quite pull that trigger. And it's so frustrating because you're doing all this work and you're not getting the payoff. And that's one of the reasons I love Burr because when I really dig into why people get perfect deal paralysis.

It's because they have fear of missing out. If I buy this deal, but a better one comes along, I'm going to miss out. And that's why I love burr, because if you're using the traditional method and you got 40 grand to put into a deal, if you buy A, but B is better, you missed out on B and you'll be kicking yourself. And if you know that before you actually pull the trigger, it keeps you from taking your shot. So people like, I don't know, should I go that market or this market, this house or that house, a duplex or a single family. When you burr, you can do A, then B. You do A, you get your money back. Then you can do B. And it takes all this pressure off of you to make the perfect deal. And instead, what you should start thinking is 30 years from now, am I going to be glad I bought this house or not, right? Not, well, should I buy it right now? I just don't know what if a better one comes along. Nobody looks back at a house they bought 30 year ago that has gone up in price times five and has paid off and is like, man, I wish I wouldn't have bought it. And I bought the one across the street. You know, like it just, you wouldn't even remember the house across the street. And that's the shift in thinking that you need. And that's what I love about both fur and long distance investing is it opens up doors so you can always be making move.

It doesn't matter where your market is. It doesn't matter where your market is in the market cycle. And it doesn't matter if a better deal is going to come along later. Do you have anything to add along those lines? Yeah, I love that comment because people do get, I call a unicorn paralysis where they're looking for the perfect deal. And, you know, I think people need to settle way more than they really are. Like if you're new, I don't care how good you think that deal is. Odds are your first deal is going to be junk.

It just is. And you're not going to know it until much later. Because you're going to look at the as you get better, they're going to look at the past and be like, oh, man, that deal. stressed about that deal, just like you said, David. And so think long term. Like, it doesn't have to be, I don't need 10 home runs. I don't need five home runs. I need 50 singles.

Yeah, I did a video called the Stack, right? You know, I talk about this all the time is like, your first deal is not going to make you rich. Your first deal is not going to give you freedom. Your first deal does nothing for you, really, but gives you knowledge and experience and credibility, right? Because the first deal, the whole point, the only point is to get the second deal. Because once you got the first, then you can get the second.

The only point of the second deal, really, is to get the third and then they get the fourth. And the thing that makes you wealthy is a, like you said, 50 singles that, but it's not going to happen if you never do the first one, right? So just, again, we're not saying buy a bad deal, but it doesn't have to be a home run. Don't buy a bad deal, but don't wait around, but get a good deal. Like, I made, on my last deal, I looked at it and I was like, man, I could have made five grand more in this deal if I bought it right.

Who cares? Yeah. Five grand. 10 grand. Like in 12 years. this is going to be irrelevant. Not to say that those aren't big amounts of money or that it's okay to lose that money or overspend.

It's just if you're going to make 20 grand, don't get mad that you didn't make 25. Like just take the profitable deal, get the experience, especially if you're new, because a lot of it is just, you know, jumping out of the airplane is really easy the second time. Right? It's the first one where you're like, oh, this is really scary. Oh, no, it's not. It's amazing and fun and easy. And do you jump?

Do you jump out of planes? A lot of thing you do. I was a paratrooper in the military. Yeah. 15 jump. A couple of Chinooks and Blackhawks. Yeah, I got stories. I can see in my mind's eye, I see Alex jumping out of a plane with a guitar and an amplifier playing stairway to heaven on the way down.

Like, right? And buying three houses before he hits the ground. Like he just, if you guys can see Alex right now, if you're not watching on YouTube, like he's a very high energy, positive, kind of an awesome guy. And he just dabbed. I've never seen a dab on BP before. We've got our first documented dab. Okay, Alex, I want to ask you, what do you look for in a deal? What catches your eyes?

So if somebody else wants to copy your system, which is very close to my system, what should they be looking for? Well, look, it's not going to work in every market. Every market's going to have small differences. In my market, I'm going to give you the real transparent, real transparent what I do. I look for a house that I can be all in for $65 grand. Whether I pay 55 and do 10 in rehab or whether I pay 30 and do 35 in rehab, I need to be all in at 65. It needs to rent for 850.

It needs to be worth 95. 90, 95. That's it. There's other small things. Like in my market, a lot of houses come with carports. And I hate carports. But I know if it's a 3-2, I can rent it for, say, 8-50. If I go to, if I make it a 4-2 and you convert that garage and cost me about $4,000 to do it,

I can rent it to Section 8 and I get a guaranteed $9.50 because it's a four bedroom. And so there's these really intricate, nuanced market conditions that you're going to have to learn about your own market. But what I basically look for is to be all in at 65 with a 25% equity and it rents. And it's going to give me a, I would call it a 1.5 price to rent ratio kind of in there. So you clearly know your market, right? Because I don't know anything about Fayetteville, but I can guarantee from what you just said, most of the houses are going to be appraising between 90 and 95, between 90 and 100,000 that you would be looking at, right? And you're going to be all in for the 65 number. You came up with that because you know when I go to refinance it,

I can get all my capital back maybe a little bit more. And you know that if they rent for 850, it's putting you right in the cash flow where you want to be. So what's beautiful about what Alex is doing is he's not wasting time analyzing every house on Zillow like the newbie is. He's filtering down to only the houses he knows are going to work. And then he's taking those ones and picking his best option, right? Out of everything I'm seeing at, here's my best option. If it means by criteria, I buy it. It's very similar what I'm doing. There's a reason that these patterns keep emerging in long distance investing that I do and Alex do it, though we never met. I look for all in for 75% of ARV. I want it to cash flow positively. So it needs to be around the 1%

rule. And I want it to be in a good neighborhood. I don't want to be in a D class neighborhood of war zone, anything like that. And if it makes sense, I'll buy it. Alex is in the same boat, but he knows exactly what those properties look like. So he spots it right away. If you can figure out in what market you want to be and to get a general idea of what the deals look like, man, it's so much easier to make a move without getting stuck in that unicorn or a perfect deal. Paralysis. Yeah. Unicorn.

Like decision making is a talent that is that you really have to work on. And I don't know how to teach that. Unfortunately, I don't really have any good advice for that. But decision making, being able to make a decision good or bad is incredibly valuable to be able to make one quick. And like I said, for better or for worse. But not being able to make a decision, not being able to pull the trigger, that is a hinder. because as you get better, you have to make harder decisions that involve more people that's going to involve their livelihood.

Now, you know, my business takes up probably a good portion of my property managing contractors lively their portfolio. And so you got to be able to make good decisions. You got to make fast decisions. And you're going to have to start doing it with a lot of responsibility in your back. So I don't know how to teach that. But yeah, once you find out some of that's works, you got to be able to pull the trigger. And I think a lot of that comes back to what we talk about, like analyze the properties,

learn the market, build a team. And if you, you know what really a position that turned me around was I was just starting to get into this and I found a deal. It was 50 grand. It had a tenant. It was renting for 800 bucks a month. And a wholesaler came up to me and said, look, just give me a $1,000 fee and you can have this house.

It's done. And at the time, now I look back and go, steal. Perfect. But now at the time, I was really scared. And so this is what helped me get over analysis paralysis forever. I called a BP friend of mine who invest in my area and I said, hey, I'm scared to take this house down. What do you think about it?

and a week later he closed on it. And he's making money on it. And so it wasn't a perfect deal, but he took it down like a, in a cocaine heartbeat. I mean, he took it down. And so I looked at it.

I said, dude, I just, I was like, I just, I missed that deal out of fear. That's all it was. It was a good deal.

I knew it in my gut. And I missed it out of fear. And never again will that happen. So maybe that'll have to happen to you, but. I wrote an article for bigger pockets about how I analyzed and bought a deal five minutes. And it's, I mean, it's exactly what you just said. I don't, it's weird that it's like this yin and gang thing going on where we are very different personalities, but we're doing the

exact same thing. Yeah, we should date. Let's go. Where do you want to go? Well, I, all right. So I want to, I want to ask about something kind of random, but you mentioned you are an underwriter for business. What is that for commercial loans? Yeah, for SBA, actually. All right. So let's, let's talk about that for a minute. What is SBA? What is that, As long as we have you on the show, I'd love to know more. What is that? What kind of loans do you underwrite? Yeah, well, I'll ask more questions after that.

Yeah, well, back to when I went to school for finance, I said, I went to school with finance because I wanted to learn how to make money, or at least how money worked. And I started working at a bank because I was in a small town without any real finance opportunities. And then when I moved to Las Vegas, two years ago, I wanted to do more. I knew I could do more. And so I got into this underwriting department. And it's SBA is small business administration.

It's loans that they give to, it's only for owner occupied businesses. but it's basically for new startups, people that want to start a business that can't go to a traditional bank and get funding because they're in this risk pool where it's like, you know, I know you want to start a new subway franchise, but you've never run one and you don't have that much capital. So the big banks aren't going to deal with you.

But the SBA will come in and say, we can help you with a franchise. We'll let you do a smaller down payment. And they mitigate risk in different ways to get startups going. So I mostly deal with actual owner occupied businesses, restaurants, some franchise stuff. Do you guys have a nothing bun cake? I don't know if you ever heard of that. We do a whole slew of them. Tropical smoothies, small stuff, but then we also do big stuff. A lot of local businesses in Las Vegas are done through the SBA. And it really, underwriting is,

it's been a fantastic learning experience for me because when you do single family underwriting, it's basically just doing the cash flow analysis. But it doesn't really mitigate, doesn't really show how to mitigate risk. And so what I do is I look at these $5 million loans and you, You got to go through all the collateral and all the relationships and make sure that everybody can mitigate, we can mitigate risk in a bunch of different ways. And we can explain how the loan is going to get done. And then it doesn't work for passive multifamily. SBA won't do passive investments. But man, what you learn by?

Look, I get the advantage of every day somebody sends me in a tax return for their business. I get to look at their business credit report and then their personal tax returns and their personal credit reports. And I put this whole thing together in a story to see how this business is running, why it's good, why it's bad. where it's and to paint a picture of trending. And it doesn't have direct impact on what I specifically do, but the knowledge of how a bank looks at a deal is incredibly useful. Yeah, I argue all the time because I used to work at a bank. I wasn't the underwriter,

but I was like the front guy that took the loan apps and stuff for you and people wanted a home equity line of credit or whatever. And what I realized is that underwriters, for the most part, like you're kind of painting a picture of what does this look like? With a lot of it is if you can think like an underwriter thinks, rather than thinking how the front salesperson, Because a salesperson is designed to say one thing. Yes.

Get the application. Yes, we can do that loan, right? Yes. The power is in the underwriter. Like, you are the one that actually makes the decision, not, you know, some front-end banker who or whatever who's saying, yeah, I can do anything, right? So, like, learn how an underwriter thinks. And with real estate, it's not that complicated.

I mean, like, the rules are fairly standard, straightforward. You know, like there's debt to income. There's loan to value. You can find those things out and then underwrite your own deals. And so, again, I just encourage people, like, look into that. How does an underwriter think? If you guys want to know more about that, go to biggerpockets.com slash bank financing. I put together an ebook a couple years ago on how a bank thinks, how an underwriter processes.

So again, bigger pockets. com slash bank financing. It's free. There's nothing. There's not like a paid book or anything. On that note, I'm wondering, can somebody, as far as you know, use an SBA loan to, like, build a fund for like flipping houses or maybe for Burt? You cannot do any of that. Flipping is, well, banks, banks do not like flipping these days.

Not to say that they won't do it. And I'm sure I'm going to get, you know, email saying that I'm wrong. But banks in general, especially in Las Vegas, are wacky about flipping because, well, because banks are really, they're filled with really conservative, you know, scared, scared people on purpose, on purpose, because we don't want to, we don't want to misspend money. So, but the rule of SBA is that it can't be passive. So you can't do it for a multifamily apartment, unfortunately. which you can do with SBA is self-storage. So if you want to do a self-storage, big loan with value ad, you can get construction built in and you can do it low-down payments,

10 or 15% sometimes. And if you're a veteran, you get some discount benefits here and there. SBA is a fantastic program for people who want to start a business, not passive, but don't either have a lot of capital or have a really good understanding of how to embark on that adventure because SBA will help build a business plan for you. That's cool.

So it's a fantastic program. I kind of lucked into it, but I love it. Very cool. Yeah, I just want to make sure we covered that because I hear a lot of good things about SBA loans. Not necessarily with real estate, but just friends of mine who are entrepreneurs. And I know there's a lot of entrepreneurs listening to our show who have businesses. Yeah, definitely check out SBA. So, all right, last question before we move on to like the deep dive and stuff.

I'm wondering, what does your future look like? Where do you see yourself headed with real estate? Yeah, so I had the same plan that I think a lot of people on the site have, which is I want to buy 10 houses, maybe do it over 10 years, and then retire. And I bought seven in two years and blew that idea straight out of the water. So what it taught me was, you know, go as slow as, go as fast as you can, as slow as you need to, but don't set your goals too small. That was really a, before I ever bought a house, I didn't think I could do it. Before I went to college, I never thought I could do it.

I bought three houses real quick. And I was like, man, maybe I'm better at this than I had given myself credit for. or maybe I'm just setting my self expectations too low. So now that I have, I'm about to close on my seventh rental and I started helping other people buy houses through consulting and whatnot. And so what we talked about earlier, like building a business is hard. Real estate transactions are easy. And they've gotten really easy.

And I've gotten bored. So we are actually, we started looking at a 68 unit that I don't think will close. But the plan is I want to buy a small multi, 30 or 40 units so that I can get my feet wet to go by a 250 something, something big. I just always, you know, I say this all the time. The answer to every business problem is scale bigger. So I'm going to scale as big as I can. I like that.

I like that. Well, cool. All right. I want to switch. Yeah, it's just solid. Like I'm even like writing down notes that I'm going to make little Instagram quote cards later. Like David just wrote here as fast as you can, as slow as you need to, but don't

set your goals too small. Like that's like Instagram glory right there. All right. So I want to shift gears here, though, a little bit and head over to the deal, a deep dive. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio.

check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. Fundrise Fund this and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multi-family real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues. Bam Capital builds its investment with that reality in mind. They are focused on solid operators, tax efficiency, and long-term performance. For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more

at biggerpockets.com slash bam. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builder's

risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings,

basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS-compliant strategy that lets you accelerate depreciation, on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost segregation guys is the go-to firm, having done over 12,000 of these studies with 500 million in total depreciation identified. Head to Costsegregationguise.com slash BP to get a free proposal and see your potential tax savings. All right, let's get to the deep dive. This is a part of the show, I should say, where we dive

deep into one particular deal that you've recently done to learn the good, bad, the ugly, what went right, what were wrong, whatever, about the property. So we're going to ask you a number of questions about it. For the first one, though, it's just, you have a deal in mind, correct? Yes. All right. So first of all, what kind of property was it? I mean, what are we talking about here? I found this property online. I had seen it only from the MLS pictures, and they were tragic. There was a deck in the back that you couldn't see because it was growth like over the house. It was so, it was out of control. It even had growth coming through. not the windows, but the walls.

And I looked at this house and I was like, there's not a single redeeming quality about this house. I must have it. But I knew the area, I knew the market, and I knew that it was scarier. I knew it was scaring people off for a reason. They were fearful of it, not that it wouldn't make money. Sure.

All right. And you said you found it. You said MLS, right? Yeah, MLS. It was 36 grand or so. And I knew it should have been worth 100. And I knew it looked worse than it really was. Does it make sense?

It does. Yeah, yeah, yeah, it makes perfect sense. I love looking for those properties that look worse than they really are. Yeah, and it was on the market for like 70 days.

So I knew everybody was just scared of it, which those are my favorite ones, the ones that every, you know, if you're fearful of it, I'm going to come in and write a check. All right, there you go.

All right, Alex, now how did you negotiate this deal? Well, this one, I was very fortunate. It was on MLS and it was on there for, I want to say 90 days or something.

And I just, I low-balled them a little bit. I don't, I'm not a big lowballer kind of guy. I'm more like just pay and get it done. So I lowballed them a little bit. I think I paid 36 grand for that house. And everybody that I told that to thought I was out of my mind.

Do you remember what they, what were they asking for? Do you remember? Probably not much more than that. I want to say 40. Okay. Something like that. Yeah. All right.

And now a lot of people are listening to this going like, that's just crazy. Yeah, I have my car for that, right? So, I mean, every market is a little bit different. And if, like, we always say, like, either go to a market. where, you know, if you want to buy cheaper property, go to a market where you can buy them or figure out what works in your market. But don't use that as excuses. Yeah, if you have houses in your market that don't work, you have a, you're looking at it as an obstacle when it's an advantage because now you get to go pick a market that does work. And you get to pick it out of all the markets.

I also want to add in there. You all, you often hear us say you shouldn't buy $30,000 houses, right? Like you could get in trouble with these. There's a difference between, that's a house with a $30,000 A.RV. These are houses he's buying for 40,000, but the ARV is going to be 90 to 100,000, completely different concepts. So don't hear that low number and just be like, oh, I was told, don't go buy these pigs. It's not the same philosophy. Yeah, the other thing is with those cheap houses, you get in my market, if I buy a house that rents for $6.50 a month or less, I can't get a property manager to show up because the quality tenant changes. And that's going to be different for every market. And so I see that all the time. People buy, you know, a duplex for 80 grand,

or a quadplex for 90 grand. And I'm like, I don't know what you're thinking, but I know it's going to be trouble when they rent for $500 a month. The number might work on a cash to price ratio type analysis. But you're not thinking of what it takes to actually put somebody boots on the ground and go deal with the person that only wants to pay $500 a month. Everybody, every landlord probably has dealt with the tenant that doesn't want to pay the full rent, but they'll trade you some food stamps for the remainder.

And so you don't want to, you don't want, not that you don't want that tenant, but you know, you have to, you have to calculate those troubles. And when you get that $30,000 house and you just see it on paper, it's not going to work out the same in real life. Yeah, I totally agree. How'd you fund it? Cash. Oh, this is perfect.

Actually, so I was waiting on a, I was waiting on a checkback from a refy for a previous house. So when I put the bid in, I was like, look, I can afford to buy this house, but I can't afford pretty much anything else until the money comes in. And then even then I'd have just enough. Well, between the time I closed and this, I had an HVAC go out and it cost me like $8,000. So I did not have enough money to do this project. And then the bid came in and said I got the offer accepted.

So I had an offer for a house that I really wanted, but I couldn't pay for it. And nobody had seen the house yet. The contractor hadn't seen the house. I hadn't been inspected. Nobody's seen it. And so I called, I just made phone calls until I could find somebody to loan me $25,000. And I found a guy on BP who I'd helped buy a house. And I said, hey, man, give me $25 grand.

I'll pay back to you in 60 days because I'm waiting on this refi. I'll pay you just an obscene amount of interest, like annualized. Yeah. Right. Whatever. And he loaned me $25,000. I closed in the house and I made a bunch of money. That's awesome.

So if you get stuck, like the money is not the problem. It made me very nervous. I don't mean to sound that I was confident about it or that I had it lined up. It was like, you have this house now. You have this offer accepted. What are you going to do about it? And you grind. You go and beg, borrow and steal from your friends and you make sure that the deal is good.

I showed him the deal. He's like, yeah, that's going to make money. No problem. Let's go. And I painted back, I think, in 60 days. Very cool. Very cool. All right.

What did you do with the property then after that? So I bought that house with the growth and everything without getting it with my rehab contractor, didn't even look at it. So I had really, I was guessing what it was going to cost to rehab. And I had to borrow money to pay for it. So I love this story because in my head, I felt incredibly, I was nervous, but I knew it was going to work out. whereas everybody else thought I was a lunatic, which is what you want.

That's where you really want to be. And so, yeah, we rehabbed it. We ended up putting in a bunch. We did HVAC and new roof. We built a whole new deck. We did a new driveway. It cost me, yeah, I mean, right around 30 grand, 31, somewhere then. So I ended up being all in at 68.

And then it appraised for 95 or 105. And the lady that lives in it as happy as can be. What's the rent on that? 900. Yeah, that's awesome. It's greater than 1% rule. You're at like what 1.3, 1.4 or somewhere in there. You've got.

Yeah, 1.4 is about what I get. Yeah. Yeah, that's fantastic. Which is why you're confident and comfortable to go and buy a deal like this without getting all the specifics. You don't need to know the exact rent. You don't need to run the numbers precisely. You can do it without getting a bid from your contractor because you've done enough of

these deals that you have a really good understanding of how it's going to turn out. And you're going to do really good or are going to do pretty good. but it was enough to move forward. So that's why you want to know your stuff. That was only my third deal, actually. And it was my first long distance deal. But again, it comes down to, I looked at that house and I said, ah, worst case scenario, I'll make 15 grand.

Well, then do it. I mean, what are you waiting for? Just do it. Because I can use the 15 grand. And then the next one I'll feel more confident. The next one I might make 50 grand. You know, like I'm not worried about one. I'm worried about, you know, 1,200.

How do I get to 1,200? So what was the outcome with this one? it took me a little longer to refi that one because the spread ended up being bigger. What was it? The spread ended up being bigger. I didn't want to do it in the delayed financing. So I took the six months and got an extra five or six grand out of it, I think. But I still own that house.

Cool. And lessons learned. Kind of overall, what did you learn on this thing? Be fearless. You can solve problems in a pinch if you take the problem on. You can't solve a problem that you have not. no skin in the game with. Like, if you're like, I need to go raise money, well, then go get a deal that you

actually have to raise money for. Because if you just go ask somebody, hey, can I have 20 grand in case I need it? Can you pledge it to me in case something comes up that I need it? You're going to get yeses. And then when the time comes, you're going to get noes. What you really need is to put yourself in a position to have to figure a problem out. Like actual skin in the game. Are you losing sleep?

Now you're, now you're ready to go actually solve a problem. When there's nothing on the line, you have no real incentive. That sounds like branded during his 1031 exchange to try to buy his apartment. Yeah. Stress. Like the last day. A few questions for you, Alex, about this deal. What is it cash selling a month right now approximately?

Yeah, about 300 bucks. My expense ratio is really low, 42%. And I attribute 100% of that to how great my property manager and contractor is. We do a bunch of CAPEX up front. And so he knows, like, you know, don't put chandeliers in the kid's bedroom. like do a bunch of CAPEX up front so there's not a lot of maintenance afterwards and we never have vacancy. And so over time, these things, they let you cash flow more than the paper would say. And so, yeah, a lot of times you do your cash flow analysis and you come out to $100 a door.

And it's like, yeah, but if you don't have any maintenance or very low maintenance for the year and no vacancy, you're going to do better than you project if you're projecting conservative. And what did you leave in this deal? How much of your capital did you leave in it? As little as possible. I think I took out, you can take out 100% of what you put in minus like hard, like the loan costs. So probably nine, nine hundred bucks or something.

Okay. So I'm just going to give you an example. I don't even know how to calculate ROI on that number. Like it's going to be almost. I call it infinite. Yeah, it's basically infinite ROI. Right.

So for people that would criticize, well, you didn't even know what you were doing or you didn't know how this was going to end up. That was reckless. He ended up with an infinite ROI because he left almost a, nothing in this deal and $300 of free cash flow plus all the tax benefits, plus the no cap X, plus the loan pay down, everything else that comes with real estate. That's what Burr will do for you. It creates this incredible bold attitude of I don't need to know everything because it's so

efficient. I'm always going to come out on top. Yeah. I mean, it's like I say you don't need to get home runs. But if you do Burr and you take all your money out, it's a home run. Yeah. If you make $100 a month, it's like how much, how much free income do you need before you start getting excited? How much? And so 300 bucks a month. or $100 a month, people say that's nothing. I'm like, yeah, again, but get 15 of them. And you only need one set of cash. I'm still spending my initial 70 grand, right?

It's just, I mean, if I can do it. It's your recycling the capital. That's great. Love it, love it. All right, dude, well, let's move on to the next segment of the show, which we refer to as our fire round. It's time for the fire round. All right, let's get to today's fire round.

This is the segment of the show where we go through questions that are users on the Bigger Pockets forums have actually asked. So I know, Alex, you're in the forums anyway, so maybe you've even seen these. But we're going to fire them at you right now. First one, I like this one. This is, I've done a lot of reading about Burr, and I think I've got some sort of mental block. I just can't get how it works. Can you explain it to me like I'm a second grader?

No. All right, moving on. It's actually, look, it's easy to do this on paper. It's easy to see it on paper. but it is a little bit hard to explain talking and through. But here's basically what it is. And I'll try to use as easy numbers as possible. If you buy a house all in for 65 grand, that's cash.

Okay, cash gone. And then it's worth, let's use even easy numbers. You buy it, you're all in it for 75. You go to get it appraised and it's worth 100. The bank is going to give you 75 grand of cash. and they're going to give you a loan for your for the same amount. And so you started with 75 grand. You ended with 75 grand and a $75,000 loan.

You traded no difference in net worth. It's just you traded non-liquidity for liquidity. And you have the 25% equity left over and the cash flow left over. And the tenant is going to take 30 years to pay that bank off plus you a little bit. It's people make it seem it's new. and it sounds something, it's not like something you run into in regular life, so it sounds way more complex than it is,

but it's so freaking simple. They even let a knucklehead like me do it. There you go. It's like, if I'm going to go second grader, I would say like, you have a Snickers bar in front of you and you want to, you know,

you buy us. I have no idea how I do. I need to work on that. No, I have a pretty good one. Okay, let's hear. People get hung up.

I think the problem is you get hung up on this idea that you, you get alone when you buy something. Like that's stuck in their, head. Like I have to get a loan to buy a house to buy a car to buy a thing. The whole idea of a refinance is completely different because you're not getting a loan to buy it. You already have it, right? But when you get a loan to buy something, the bank doesn't care that you're buying it. All they care is that they're giving you a percentage of what it's worth because they want to be able to take it back from you if you don't pay and they want to get their money back. So if you had a car

that was paid off, you could go to a place that gives car loans and say, I have a car and I want to take out a loan. And they'll say, we'll give you 75% of what the car is worth. Here's the Kelly Bluebook value, that would be the equivalent of an appraisal. We'll let you borrow 75% of what the blue book value is, right? If you can, for whatever reason, people get it with a car, but they don't understand when you just say house. It changes everything, right? So if you bought and fixed up that car for less than $7,500, you'd get all that money back when it appraised if the car was worth $10,000. That's understanding Burr. And what Alex is saying is that if you don't do that, you still have the net worth, but it's stuck in equity in the property where it doesn't help you. If you refine,

that you take that money out of equity and turn it into cash that you put in your pocket, which you then can use to go buy your next car or your next house or whatever your investment of choices. Yeah, the other thing I think people get jammed up with with house loans is they don't think in terms of loan to value, the thing in terms of down payment. And that's a mistake. And so they say, well, how much down payment do I need? And you don't want to think this way at all. What you always want to think of is what's the LTV for the product that I can get. Can I get a 75% LTV product? Well, then I need 25% equity, whether that, that comes from your down payment or your purchase, your ability to negotiate a house.

If you can buy a retail house for 25%, you don't need any down payment and you can move right in. But that doesn't happen that often. But that's how you should think. So when I say, you know, you're going to get a 75% loan, it's no different than when you get a 97% FHA loan. If you could buy a house with three and a half percent equity, you wouldn't need any, you wouldn't need to put anything down either. And so I think people get a little jammed up in that regard with the down payment,

you know, that psyche of it. All right. All right, good. All right. Next question. What are some pros and cons with buying investment properties out of state? Well, the pros are if you live in a state or you live in an area that is not working for what you want to do, then the pro is you don't have to, you don't, you have a unlimited opportunity to find a better area. The con is, it seems harder. That's it. All right.

All right. Good. I like that. Next one. What team members are important for investing out of state? Property manager. Most important. I would say, and I'm going to say this in no order because these people are incredibly important to me.

Property manager, realtor, lender, contractor. Not in that order. Not in that order. Isn't that your core four that you always talk about? That's exactly right. And that's what Alex said. never read my book and we've never talked. He just listened to the same four people that I've said, if you have those people, you can do it. That's all you need. Besties. Yeah. You have to have those,

you have to have those four people and you, here's the thing. When you're going to call these people long distance, you're going to run into a lot of people who suck. Backed. And you're going to have to burn through a lot of them. And when you're new, you don't know they suck that you think they're good because they tell you they're good. And they don't even know they're bad. So you're going to have to run through a lot of these people, but you really want people that are smarter than you to do this. You don't want people that are,

you want to convince people that are better than you to deal with you. That's really the goal so they can bring you up. You don't want to go find somebody it's like, I want to be a contractor

and you like, I want to be a realtor. We should start this at the same time. It's like, no, you're doing too much. You need to find somebody that can help you not learn with you.

So find people that are good, spend a lot of time, networking, reaching out to people. Bigger Pocket is a fantastic research for this because you can search by both location and keywords.

You know, broker, loan broker, Charlotte, North Carolina. I call those rock stars. You find a rock star, they'll change your life. They're top producer. They know what they're doing. They're smarter than you. And then you bring them value. They bring you value.

That's the best relationship. And they know the rock stars. That's rock stars. No rock stars. Dude, are you sure you didn't read my book? Alex, you swear. Are you sure you didn't read my diary? All right.

Okay. This is a little too creepy. I'm just going to keep moving on. I'm looking to purchase some property online site unseen. Can you give me any tips for purchase. property like this? If you're sure it's a deal, do it. If you're unsure it's a deal, you need to find,

you need to practice more so that you can be sure. If it's a deal, buy it. That's, if you don't know if it's a deal, then you then you are working on the wrong problem. You need to educate more. You need to know, you need to know if it's a deal. And if you're close, ask somebody that knows, right? If you have a deal and it's in David's area and you're like,

hey man, is this a deal? And he's a deal. going to say, eh, no, that's not a deal. And this is why. And then you can correct for the future. But if you have a deal and you're unsure if it's a deal, you need more information. If you're sure it's a deal and you're just scared, suck it up, Buttercup. There you go. Okay, I got it. Go ahead. Oh, I was going to say, in the car business, I used to sell cars and I'd mess with people. They'd be like, oh, you know, I'm too scared. The payments are too high. And I'd say,

yeah, I know the payments are too high. Lean hard. The forms are in triplicate. Do it anyway. Do it anyway. All right, question for you. That's not in the fire around, but I'm just curious. What's with the background behind you? For those not on, not watching this on YouTube, you got a lot of really bright, awesome pictures behind you.

What is that? Here's some really good blanket advice. If you want to be happy in life, you need three hobbies. One to keep you in shape. One to make you money. One to keep you creative. A few years ago,

I started photography. I'm not a creative guy, but it's been fun. So when I started doing the YouTube and stuff like that, I wanted something that was visually appealing. I wanted to build a set. I am a production quality fiend

about my work. And there's a billion people on YouTube that have their office in the background. So I have a nice photo printer and I printed out pictures that are my life, my dog, cars, Las Vegas, Grand Canyon, Red Rock Canyon, friends that drive cars. Yeah, so I just put them up because it creates some visual appealing, visual aesthetics, and it's me. Yep. And I'm all about me, baby. I love it. Love it. All right. Well, more about you. Let's shift gears here one last time and head over to

Famous Four. All right. Let's get to the Famous Four. These are the same four questions we ask every guest every week and we're going to see what you've got to say. I know you've heard these before because you've listened to the show. I think you said earlier, I've listened to every episode three times. So, first one, what is your favorite real estate related book? Rich dad, poor dad, baby. All right. Good answer. Look, that book I read 10 years before I bought a house. That book is not a book that you read to learn real estate. That is a book you read to get your mind right.

I hate that it's been said so many times, but it really is. That's the one that changed everything for me. Okay. What is your favorite business book? I am a heavy reader of nonfiction, but very rarely do I like business books. Ray Dalio has a good one. If I could recommend one book that everybody in the planet should read is a new one by Yuval Noah Harari that's Sapiens. It's not a business book, but it is a book about humanity.

And it will, it provided me provides massive perspective. I don't read a lot of business books, but I do read a lot. And I have a reading list on my website. If anybody you ever want to see, I read hard nonfiction science culture and history. Wow. Give us another couple examples of what do you mean by that? Nonfiction that's not business. Like, what are some books that you've been reading?

Oh my God. This is my favorite question. I read Thinking Fast and Slow by Daniel Kenyman. That's a book that teaches you how your brain works, and it is brilliant because it's not working the way you think. I read a lot of Richard Dawkins, hard science by evolutionary biology. I just reread Stephen Hawking's book,

The Demon Haunted World by Carl Sagan. That's an old one. I'm trying to think. Factfulness by Hans Rawling. That's a book about why the world is doing way better than people think. I'm trying to think some other ones. Well, that's good. We'll encourage people to go to your website and check it out, which I'll ask you about in just a second.

But before we do that, David, you got the next question. I was going to take it. Yes. You mentioned what your three hobbies are. Can you just reiterate very quickly what they are? You said one for staying in shape, being creative, and what was your other one? Making money. Making money.

So what are three hobbies that you do for each of those? Oh, well, photography for creativity, real estate for making money. And I have been a, I've been powerlifting for. 15 years. There we go. Awesome. Nice. And it really, that that small, that small advice really works. I, it really, if you think about it that way, like just spend your time doing three things you like every day, those three hobbies. And if you can find one that makes you some money, which shouldn't be that hard. If you can do that, man, life gets so easy. You know, I saw that advice recently, the same, the habit thing. And then I added one, I added one to it and I threw up on

my Instagram. And I said also, if you can find a hobby, now it could be a duplicate of the one other ones, but find one that I build you, builds relationships, right? I think hobbies are great. Find one that can build, you can either do with somebody else or find a hobby you can do with someone else, family, friends, whatever. Like, I think just, yeah, hobbies with people are just so key, I think, because our happiness is typically based on our community. So, yeah, I love that stuff.

Agreed. And this is a relationship. Well, look, you know, my photography didn't get good until I started hanging out with other photographers. Yeah. My powerlifting didn't get good until I started going to the powerlifting gym. And so, yeah, I mean, I agree with that. I should probably amend that.

Three hobbies, and you have to include other people in them. Cool. I love it. I love it. All right. Last question. For me, anyway, what sets apart successful real estate investors from all those who give up, fail, or never get started?

Obsession. Obsession. Obsession, obsession, obsession. I have been thinking about this for five years. Actually, I wrote an article I want to send you, Brandon, called the Famous Four. I have been pining over this question for five years. And I wrote a long form article about it. And I sent it to Mindy today, actually.

Five years ago, I was listening to this podcast and I heard that question. I said, ooh, I need to answer that. And arrogantly, I said, oh, inevitably, I'll be on that podcast and I need to give my perfect answer. Funny how things work. Funny how things work out. Well, obsession is the answer. But I wrote this long thing about how you come to that answer. Like, at first, I thought it was networking and education.

That's what the difference between those who succeed and those don't. And then I spent a lot of time going through all the old podcast. as I mentioned, and I wrote everyone's answer and put them into graphs to see which ones show up most. And, you know, tenacity, all these types of answers, take action, be fearless, all these types of answers. And they all seemed really incomplete to me. So I've been pining over this, this exact question for like four or five years. And I wrote and I've written about it. And I really think the reason I've been successful and many other people can be described by their obsession with what they want to get done. And learning about this question and trying to

answer this question and being obsessed with it really led me to a lot of success. Being obsessed about real estate, it leads you to success. The gym, you know, I'm a good power lifter. I lift a lot of weight. It doesn't come by just showing it to the gym. You got to get obsessed. And so I think whatever you're obsessed over, whatever you think, breathe, talk, and live about will happen. Ralph Waldo Emerson has this great quote. A man is what he thinks about every day. Or a man is what he thinks about all day long. And so if you just, if you're trying to do real estate or trying to find a way to get started

and you're doing it casually or part time, it's going to be much harder. Like turn your life into a obsession machine about whatever is you want to accomplish. And it is inevitable that you will succeed. Love it. Love it. Love it. All right. Last question of the day, David Green. Where can people find out more about you?

Broke is a choice. dot com. It's a website. It's just my personal website, but I put my thoughts, all my deals. You can get a contact with me there. I put my book lists. I spend a lot of time on bigger pockets. So between if you reach out to me on bigger pockets or you find me on Broke as achoice.com, I reach out and talk to people all the time. Hit me up. Happy to help. Very cool. Very cool. All right, dude, but this has been a ton of fun. So thank you so much for coming on the show. Like seriously, I think people are going to love this. Oh, my absolute pleasure. You know, I love this community. I have been involved deeply

this community for four or five years. I know there's other people that look at this community and want to be a part of it. And I can just say like just, just obsessed. Just stay on that website, talk to people, reach out. And I'm so thankful to be here and be able to get back to the community that's given so much for me. That's awesome. That's awesome. Well, thank you very much. And everyone else, of course, check out the show notes at biggerpockets.com slash show 306. You can jump in there, ask Alex questions. You can comment on his amazing hair or you could just, you know, get involved in the conversation. Like, again, like Alex is such a bigger pocket success story.

So I love having these stories because like on the podcast, right? Like this is somebody who did exactly what we're saying you should do. Network, educate yourself. Get involved. Talk. Like, don't just listen to the words we're saying on the podcast, but go put it in the action, in the action, right? Alex heard about house hacking and how that can be a good way to start.

Boom, did it. Right? He heard about bird. Did it. Right. Took action. So I want to recommend everyone do that as well. And, uh, you know, we'll see you back here again next week.

If anybody has, again, anything jump into the show notes. And I just get involved. BiggerPockets. If you don't have a free account, go make a free account, BiggerPockets.com. And that's all I got. So David Green, you want to say anything to take us out? Thank you very much, Alex. This was a great show. This is David Green for Brandon, the Real Estate God Turner. Signing off. You're listening to Bigger Pockets Radio. Simplifying Real Estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join

Join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content.

And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.