BiggerPockets Real Estate Podcast - 396: Post-COVID-19 Investing and Landing Great Deals at Auctions with David Osborn and Aaron Amuchastegui

Episode Date: August 20, 2020

No one knows where the real estate market is headed next... but with an estimated 30 million Americans out of work, wouldn't you like to know how to buy foreclosed properties, step-by-step? That's what you'll learn today, from two investors who have completed over 1,000 deals each: David Osborn and Aaron Amuchastegui. They begin the show by sharing their thoughts on today's economy (hint: they've kept plenty of cash cash on hand), then walk us through their 5-step process for successfully bidding on foreclosed properties at auction. From building a list of properties, to lining up funding, to checking title and actually making your bid, you'll learn how David and Aaron (+ thousands of other investors) built serious wealth buying up distressed properties after the last big crash. This skill set is another tool to add to your tool belt, and whether there's another wave of foreclosures coming or not, you can use it to build serious wealth. For more, pick up a copy of David and Aaron's new book, Bidding to Buy: A Step-by-Step Guide to Investing in Real Estate Foreclosures. And check out the show notes at biggerpockets.com/show396 for a transcript and other resources. In This Episode We Cover: The impact of COVID-19 on various assets Why David Osborn is keeping a heavy cash position How the foreclosure process works (notice, etc.) What a foreclosure auction (sometimes called a "trustee sale") is The 5 Steps to buying at auction Why it's so important to drive by every property you plan to buy Aaron's first auction experience as a newbie How to deal with a lien on a property And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Podcast Keller Williams BiggerPockets Podcast 353: Turning $5K Into $5K/Month and Retiring at 40 with Tim Rhode GoBundance Auction.com Roddy's Foreclosure Listing Auction Texas BiggerPockets Analysis Calculators BiggerPockets Podcast 385: Once Homeless, Now Investing in an Expensive Market (With No Money of His Own) With Greg Gaudet Real Estate Rockstar Podcast BiggerPockets Money Podcast Real Estate Rookie Podcast BiggerPockets Business BiggerPockets Bookstore Check the full show notes here: https://www.biggerpockets.com/show396 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is The Bigger Pockets podcast, show 396. You have to fall in love with the problem because it's also going to discourage other people. It keeps people out of bidding in it. Anytime it's hard to do it, there's less competition. Anytime there's less competition, you're going to get a better deal. Anytime there's problems, as long as you have the solution to it, you can make a lot of money and have a ton of fun. 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 biggerpockets.com. Your home for real estate investing online. What's going on, everyone, it's Brandon Turner, host of the Bigger Pockets podcast,

here for another phenomenal show today. We just got finished interviewing these two gentlemen. It was so good. I just can't even explain it. But before I get into that and try to explain it, David Green, welcome to the show. How you doing, man? Thank you, Brandon.

Thank you for remembering that I'm, I appreciate that. I just have to talk and ramble for five minutes before I invite you to talk. So what's up, man? That's actually a nice thing that you do because it means that my words are more powerful when I actually speak. I just don't want people to like, you get it too quickly and like it'll hurt them. You know, it's kind of like, you don't appreciate it.

Well, yeah, it's like I give them like the base tan, but then your heat comes in and you don't burn them, right? Like, if we just like, it's like throwing a, you know, a Midwest person into the Hawaiian sun without sunscreen. Like I got it, you got to get in the base tan first. That's very wise that you, yeah, so you're just saying that I'm so intense that I can just burn. You burn people in a very good way. Burn people.

We should have a t-shirt for that. We're going to do that. We have the bird shirt. Now we're going to have the burn shirt. Get ready to get burned. That's my new shirt. All right. You can get it at biggerpockus.com slash shirt.

Seriously. Let's see where we're going to go. Let's go to today's quick. Tip. Today's quick tip is actually in relation to today's show. Today's show, we're interviewing two of my favorite people, two people that are mentors to me. I look up to a ton in every area of life, but especially real estate investing because they are rock stars.

It is Aaron Amuchis Stegi and David Osborne. David, of course, was a keynote speaker last year at BPCon. And they wrote a book. It's called Bidding to Buy a step-by-step guide to investing in real estate foreclosures. It is fantastic. I actually read, pretty much the entire thing this morning. I just got it in the mail a couple days ago. Reddit knew and I was going to do this interview today.

And it's so good. We'll talk about more of the reason why buying foreclosure is such a good idea and why it's something you need to learn. But even if you don't care about foreclosures at all, listen to today's show because the stuff we talk about today applies to getting deals in any way you're going to get deals. Like whether you're driving for dollars or you're going to do even MLS.

The principles are what matter today more than anything. Plus it's just a really fun show. So anyway, quick tip is go to biggerpockets.com slash auction book and then pick up a copy of this fitting to buy. You can get digital, audio, or physical, or all three, which is pretty awesome. So definitely check it out. These guys are stellar real estate investors. They each own hundreds of single family properties.

They're mentors to both Brandon and I in our investing business. I say an episode that David Osborne was the person that got me into real estate sales. He's the first person that introduced me. So you have so much to learn from listening to a conversation. And they're fun. It's always nice when you get to talk to smart people that make it fun. that aren't super dry. Have you ever found someone who's really smart,

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This is a paid advertisement. Here's a funny thing. I told the guys before got on, I was like, you guys, it's pretty simple concept, you know, buying an auction. Let's just keep this show to like 40 minutes. We'll be in and out. It'll be great show. You know, give people, like, this show was just like an hour and a half of just like fire.

So with that said, prepare to get burned. All right, Aaron, David, welcome back, both of you to the Bigger Pockets podcast. How are you guys doing? Great. That's awesome to be back. I said it's like getting the band back together. The last time the four of us got to hang out together was like in Austin, like it seems like centuries ago since the world was closed. I know.

Yeah, the world is definitely different today. And yeah, it's weird today. But it's changing. And this is actually why I wanted to bring you guys on the show and why we're doing what we're doing today. is because I don't know about you guys, but we don't know where the future's headed. We don't know what COVID's going to do to the world. But I have a strong suspicion and belief

that we are going to see a increase in the next couple years of foreclosures and things coming up. And I know you guys just wrote a book on that topic. So I wanted to kind of dive into that today. What do you guys think? I mean, before we can get into the actual show, what do you guys think of the future? I mean, where is it headed?

What's COVID going to do to real estate? I love to get your guys' opinion. It's such a great question, Brandon. You know, it's so unknown. I mean, in the last crash, which was 0,708 kind of ish, the government waited two years before they got, really ran the printing presses, right? So there was two years of pain and misery and terror and fear. And some of us went and bought assets in that time place. There was a lot of damage done to the economy.

And then the government stepped in, printed money, and everything we bought went to the moon because when you print a lot of money, most real assets go up in value. And so I think a lot of people, me included, were kind of expecting a similar playbook this time. but the government decided to print the entire GDP of Canada in like six months. And so who knows what's going to happen? I mean, my real estate companies had a terrible April and a poor May and then an average June and then the greatest July we've had in the history of the company. So ultimately, though, if I had to make a guess, I would guess that 2021 is going to be worse than 2020. Yeah.

What do you think? Yeah. I think I would definitely agree with that I think that 2021 will be worse than 2020. This has been the strangest, most bizarre thing. Because when this first hit in March, I, like, fire sold some properties. I put them on the market below what I thought because I said, hey, I want to sell these fast before the market crashes. Well, I was wrong because houses right now today are selling for more than they were selling

in March or April. I put a house on the market this last week and received five offers in a day. I thought it was going to sell for 120. I listed it for 140. And I got, like, multiple offers and sold it for 150. and it was like $120,000 house selling for $150. So that's bizarre, right? So you see there's different things that are making the market go boom.

Like David talked about, there's people, you know, there's people printing money and there isn't a whole lot of inventory still. The interesting thing that we're seeing when it comes like, do I think foreclosures are coming? I think there are more foreclosures coming. Some interesting stuff that we've seen this time. Like so right now, Texas will usually have 5,000 foreclosures every month that happen. And of those 2,000 actually sell.

Well, in the last six months, they've only been posting 1,500 a month and only like 50 a month sell. So there's already like 10,000, that are like have been vacant and abandoned since pre-COVID that are going to sell as soon as sales get turned back on. So all of a sudden, we're going to see this influx. And this month, for sure, we see more strange commercial foreclosures than we've ever seen. Like really famous bars and restaurants in Texas getting scheduled for foreclosure, like huge strip malls, you know, medical office buildings, storage unit complexes, like all, you know, an RV mobile home park. So I saw all these different things scheduled for foreclosure right now. And every time a business crashes, I mean, there's all sorts of things that that applies to.

So yet to be seen, the real estate market is a funny thing. I do think that the government's going to be a lot more proactive this time. But I just feel like it's going to get worse before it gets better. Well, and then on collections, too, it's been very high. Like, we certainly expect it and prepared for and we're tightening our belt for a dip in collections. I think between my fund and me, we've got 500 single family homes and collections haven't taken a blit. But it's got to be in my mind because everyone's getting an extra 600 bucks a week. Why would you, you're stuck at home, you get 2,400 extra a month or whatever. Why would you not pay your mortgage? Because why would you take even the smallest risks that you don't get to hang out in your house where, you know,

chilling, waiting for the economy to open up? So collections haven't gone down. My friends that have multifamily were the same. It's a real disconnect when you have 10 to 14 percent. unemployment and yet everyone's still paying their bills. And how long can the government do that? Maybe for another 10 years, maybe for another six months. I don't know. But as long as they keep giving everyone extra money, which they're trying to do again, I still think real estate in the long run is a great place to be. The one exception to what Aaron talked about, it seems like condos are hurting a little bit. I don't know if you guys have noticed that, but in the big cities. Massive. I had a condo in downtown Austin. I sold it immediately COVID hit. And there was only two units for sale

when I sold it. I got a full price offer, but I did price it, nine. 90,000 below what I would have pre-COVID, so 8% discount because I'm a real estate guy, so I understand you don't want to catch a falling knife. You want to be ahead of it. So I just went ahead and cut it. And now there's 28 units per sale in that same building. So I feel like I kind of dodged a bullet. Yeah. That is exactly what we see in the Bay Area. People are getting out of condos because they want a bigger. If you can't live in a busy inner city with restaurants and all the thriving life, when you get a condo, that's what you're paying for is location and you're giving up space. And now what's the point of being there if everything's shut down? So they're all

moving into the suburbs and those houses are having a ton of demand. You know, I want to ask you guys a question. I've said this. I want to see if you're on the same page. And this is really important for listeners. I think in 2010, we knew we were in a down market because prices of homes were dropping. There was a red arrow pointing down every month as prices went down. And now when you throw the stimulus into this, it's very hard to measure that. But it's possible that your property is losing value, but the price is not dropping because so much money is being printed that it's that the value of the money itself is less. And if you're waiting to see prices fall, you might never actually see that, but you could still be in a recession. And I think that

that's just, it's like another variable, another layer of complication that you have to be aware of when you're in the economy. So Dave, you recognize that the condo market could change. You got out quick. It could have been, though, that the prices of condos weren't actually going down. They were holding similar. They were holding the same. But all the single family homes were going up rapidly as all this money comes in the economy. How much do you guys think about that when you're making financial decisions about what to sell, what to buy? Yeah, well, so Dave, you bring up a real, David, you bring up a really good point, which is cash, you know, what's the value of cash? Because if your real estate is losing value, but actually going up on a numerical basis,

then cash is getting murdered. And I'm heavy cash right now, because the reason I did so well in the last downturn is I was heavy cash. And in a crash, in a real crisis, cash is king. But I don't know, you know, I do think about that a lot. I think about whether I should or shouldn't be in cash. And I'm earning zero on it, which means I'm probably losing three to five percent per year on it, maybe per month. I don't know. It depends if we're in Venezuela or America. But for my point of view, right now, I still think cash is the position to be in if, if, and I'm shocked at the stock market too. I'm sure you all are as well, that it's just gone up and up and up, but it has to be something with the printing of the Fed. So I'm going to be holding cash through about the first quarter or

six months of next year. And then if I'm wrong continuously, up until that point. And then I'll probably have to park it somewhere and get some low yield just to keep it growing. But it is worth noting that it's not as simple as it used to be. Hold your cash, wait for prices to jump back in. Now that we're actually adding money to the money supply, it's very hard to keep your finger on the pulse of what something's actually worth. It seems like the economics is no longer connected to reality.

When the government jumps in like they are, all the global governments are too, there's just everything we were taught in school and college and what makes street smart sense to us doesn't seem to apply. Yeah, I like to use the analogy. I've said it on the show before, but I'll say it again. Now it's like, I feel like we're, you know, like the Roadrunner cartoons where like Wiley Coyote is chasing the roadrunner and they run off the cliff and like Wiley Coyote is just

like standing there in open space and he doesn't realize it until you, and when he looks down, that's when he falls, right? We are as a society over the cliff right now. There's nothing underneath us. We just don't know it yet. And so we may just, we may just keep running across and land on another mountaintop, another cliff on the other side and be fine if we get through this COVID thing and they're able to support us, you know, little clouds upon, you know, on the way across. But or we may just fall.

But this is why this show is so important. It's because, I mean, let's be honest, like, the world could crash. I mean, real estate could crash. We can see huge property prices plunge. We can see foreclosures rise and just go crazy. And there's going to be a tremendous amount of opportunity for investors. Or we may just continue this crazy competitive world that we're in right now of real estate and foreclosures and and buying at auction is still a really good because you got to because not many people are doing it right it's not like it's not like it's common to just call up a real estate agent and finding deal so regardless of what the world does this topic is like going to be incredibly important over the next few years do you guys agree absolutely and real

estate is the space to be regardless because if if things just keep inflating real estate inflates rents inflate if things get bad and you've got real estate with not too much leverage and you've got a good tenant in there that's got a good job, you know, and you find the right ones by doing credit checks, you're still getting paid and you still get to hold on for the long term. So regardless, real estate is the safest place to be. Yeah, totally agreed. All right. Well, with that, let's get to today's show.

That was a long intro. It was a good show already. That was that bad right now. We could wrap it up right here. But I want to go into your other story. For those who haven't listened to your episodes before, you guys have both been on the show before. Can you give a quick, just, you know, one minute introduction, who you are, how you got into

real estate, and then kind of your relation to this whole auction. foreclosure thing maybe. I'd love to kind of get a story on that. Sure, I'll go first. My background is real estate for my dad was a killer. He was a green bray and my mom was a realtor. So I had a choice that I want to go kill people or become a realtor and I chose real estate. So I got into real estate as a sales agent in 1994, sold for three years at Keller Williams, a fast growing company, started opening brokerages, built the largest Keller Williams brokerage group in the country. We sell about 12 billion in real estate, my partner, Smokie Garrett from Dallas and I. And we've got a great team of agents, like 5,000 agents who we served, who are amazing,

and we're the number one in Dallas, Fort Worth. And so then also along that journey, because I love real estate and there's so much in real estate, started investing in single family rentals in 1995, saw a huge opportunity in the last crash and probably bought and sold close to 1,000 homes, kept 101 single family homes in my portfolio. And then I also started private equity fund a few years ago to invest in single family rentals. We now have just over 400 homes in that. and then bought multifamily and industrial and retail and office the whole bit, everything you could think of doing in real estate, but primarily residential real estate.

And when you're buying residential real estate, you're looking for an edge and foreclosures is a great place to find an edge. Awesome. Yeah. So the, and, you know, my story.

Would you like to follow that up? Yeah, I'm just, I'm just here, right? Let's just go to the next question. If we're going to compare resumes, I'll just go to question three and see if I do any better.

I grew up in a family that was a, like construction type real estate type company. So my dad was a custom home builder. He built really, really nice houses. And so, and he would buy lots and subdivide him and try to do subdivisions. That was in the early 80s, though. So subdivisions didn't perform well in the 80s. Interest rates were 15%. And if you made a bet in real estate back, then it didn't do very well. So what he became really good at was custom home building. So I knew I wanted to be a builder. I went to school down at Cal Poly, San Luis Vispo in construction management. But this was also at like the height of the housing boom. So I went down there to try to learn construction,

and moved back up to this small town in Oregon. And then I saw it down in Southern California, houses were like flying off the shelves, right? People were spending a few hundred thousand to build a house and they'd sell it for 600,000, 700,000. It was just crazy. And I got really fascinated with the business of that side of real estate, like, you know, buying a property, adding value, you know, selling it and flipping it when I graduated in 2005. It was like the height of the housing boom. I got to, I got to be a director of operations for a home builder that was doing really well. and that was an unrealistic expectation of what was going to happen in life. I was getting paid six figures straight out of college.

We were golfing three days a week as fast as we would build the houses they would sell. You know, somewhere in their 2007, 2008 market starts to crash. Absolute blood in the streets, you know, we get put out of business. And we spend like a year just trying to do all sorts of different stuff. My wife was a waitress working nights. We were trying all these different businesses. We started trying to buy REOs. Areos were impossible to buy because we were like late.

If you started trying to buy REOs like six months after the crash, you were too late because they already knew which agents they were selling it to, which guys they were putting it to as the flippers. And when you say REO, what does that mean for those? So yeah, so an REO is a foreclosure that is a normal one that you would see on the MLS. So, you know, you'd see a realtor sign in the yard. It would say REO. And that means that the bank foreclosed on it.

So the person there stopped making their payment. It went to an auction. Nobody bought it. And it became a foreclosure. And so then an agent could go get those as a listing. and back in 2009, they would price them for like $50,000 below what they were worth. There was spray paint on the walls. There was concrete. They were bad. And the bank would say, hey, we're not going to do anything to them. We'll just put them on the market and list them.

Somewhere in there, we discovered that the way to actually get houses was go where people weren't. So buying on the MLS from an agent, there was a lot of competition in that business. You know, and we talk a little bit in the book about that, but we talk more about how to get it in the processes earlier. We talk about like buying upstream. So if you buy it by the time it gets to the MLS, it's already missed a couple stages that we could have bought it before. And when you get to the MLS stage, a lot of people were trying to buy those. We kept trying to start different businesses, and we discovered how to buy on the courthouse steps at auction. We had to figure out some systems that really helped us get that advantage. And I flipped a thousand houses over the next few year period in California.

That went really, really well, but I didn't buy any single family rentals at the time like David. So in 2013, 2014, when it was no longer hard to do, all these big hedge funds came into the business, we got put out of business. We had heavy, heavy overhead employees. And by not being able to buy houses, we still, we lost money, not from not buying bad houses, but because I had a company at that time. 2015, I got to start again. I shifted gears, started doing foreclosures. This time started buying rentals along the way too. And so now have built that, have 350 rentals, you know, close to Austin, Texas and still love going to auction. It's still my favorite way to buy houses. I've never been good at like when somebody says, hey, give us your best and final offer.

I'm never good at blindly offering against myself because I'm very optimistic and very aggressive. I like to say, like, what's the least amount of money I could possibly make? The cool thing about foreclosures is you bid against other people and you have this maximum that you say, oh, I'll pay up to 150, but you might only have to pay 120 because you're bidding head to head with people in a live auction. I love live open auctions that people can see. I'm good at that. I'm not good at blind auctions against it. That's cool.

All right. So give us an idea. So you guys wrote a book. We'll talk a little bit later. It's called bidding to buy a step-by-step guide to invest in real estate foreclosure. So I want to go into some of the basics. Like what is a foreclosure? How does that process work?

Like how does somebody get foreclosed on? Like, can you get just either one of you just give a kind of overview of what that world looks like and where you step in to buy these properties? Yeah, sure. So to buy a house, most people buy a house by getting a loan on it. Right. So if they're going to buy a house for $100,000, they get an FHA loan. They're going to get a, you know, they're going to get a $97,000 loan.

If they're going to get a conventional loan and put 10 or 20 percent, down, they're still going to get a loan for 90 or 80. So most people that buy houses out there, they don't just have buckets of cash. They get a loan to buy that house. And every month, they're supposed to make a payment for that. So the different states have different guidelines. So like in California, for example, when someone stops making their payment, they get a notice from the bank that it's like a 90-day notice. It says, hey, you didn't pay your mortgage this month. If you keep this up for the next 90 days, 90 days from now, we're going to have a foreclosure auction. You're going to get foreclosed on. Same process in Texas. But when they stopped making payments in Texas,

Texas, it's a 21-day notice. It says, hey, you missed your payment. We're going to foreclose on you 21 days from now. So in California, in California, if you stop making your payment, 90 days later is the auction. In Texas, if you stop making your payment, your house can go to auction as soon as like just three weeks away. There's states that do judicial foreclosures where judges, they actually have to go present to a judge first and say, am I allowed to foreclose on this or not. There's also non-judicial foreclosures where they're quicker. They don't have to go before a judge. They just have to send the notice and say, hey, somebody didn't pay. So at that stage, when someone has stopped making payments and they've gotten a notice from their bank, we call that a pre-foreclosure. I guess it's somebody in

trouble. They've stopped making their payments. They knew they stopped making their payments. And they have started the process to be foreclosed on to lose their house. So that's pre-foreclosure stage. They stopped making their payments and the bank has put them on notice. And there's some of us that would just target just pre-foreclosures, right? Like they get that public data list and they direct mail them or whatever. Yeah. And it's a great lead. It's a, it's a, lot like buying a vacant house. Like people talk about driving for dollars. Like, oh, you go drive by the houses that are really, really beat up. And that person probably wants to sell. Oh, you drive by one where someone has stopped mowing their lawn. They don't care. Pre-foreclosure is like that. We call them like a

motivated seller, but they're being forced to sell. Like they're motivated in the sense that they don't necessarily want to sell or lose their house, but they aren't able to keep it. And so, yeah, so a lot of people will target that pre-foreclosure notice because it's somebody that they're trouble and like 90% of the foreclosures right now actually have equity. So what's really unique about that person with the $90,000 loan that they're not paying, their house is probably worth $120 now, but they don't necessarily know what to do. They kind of put their head in the sand. A lot of time when you're calling the pre-foreclosure to the, yeah, so that's a unique lead all to itself. Somebody it's in trouble, doesn't necessarily know what to do. Huge opportunity for investors,

real estate agents to find somebody at that stage. Then the next step that happens is a foreclosure auction. So they call that the trusty sale. A lot of times that is on the corporate. courthouse steps where you're standing outside on the steps. People are bringing cashier's checks in their pocket and they're bidding against an auctioneer. So that's a live trustee sale. Sometimes it's in a hotel where they're doing it. Sometimes it's on the steps of the house. And some of the countries in the or some of the states in the east are like that where they actually hold the auction at the houses themselves. So we call that the courthouse step auction. They'll say the opening bid is now, you know, $100,000. That lender, if they have $100,000 loan on it,

They could decide to have the opening bid be 100,000 plus any of their legal fees. So they could say, all right, opening bid, 107,000. Or that lender could decide to have the opening bid be 50 or 60 or 70. They can't make it 150. They're restricted by how high they can go based on what's in there, but they can make it as low. They can say the opening bid's even a dollar if they want. So the lender chooses the amount that they're going to start the bidding at. So you said?

Yeah. Okay. I didn't know that. Now, and back in 2009, when the foreclosure crisis first, started. It was totally random. They never really knew. They weren't trying to maximize stuff. Now they've gotten much smarter. They're actually priced houses to see if they want to sell the house. They'll actually see, you know, maybe this one's underwater. They're going to discount it 30 grand because they really want it sold. Or there was a fire or something else. They used to not pay much attention. Now they're paying

attention. They're trying to actually, you know, if they want to sell the house, they lower it to what they think the highest amount is that it'll sell for still. And if they don't want to sell the house and they think they want to fix it and sell it on the MLS, they'll do it for that $110,000 amount. So that's the auction stage. If somebody buys it, if you show up with checks and you buy it, you are the new owner of that property. Now, there's different stages that takes a few weeks to get your deed, but now you buy it. If nobody buys it at that stage, then they say it goes back to the bank, right? So the nobody bid on it. They said opening bid is $106,000. Everyone's like, oh, that house is only over the hundred. Nobody wants it. They'll say sold,

back to the bank. Now it becomes an REO. So REO stands for real estate owned. That can mean like people owning all sorts of stuff, but it had become the term that people talked about for bank-owned houses. There's like an accounting term that banks would use, right? This is on our asset books as real estate we own. Yeah, absolutely. And other people have used REO as their notes too, like it's as our assets, but it just became the slang of this is a bank-owned foreclosure. And the, so nobody bids on it. Now it becomes an REO. And the banks have two ways to really get rid of it at that point. They listed on MLS. They hire a local agent that goes and does open houses and sells it like you would see a lot of transactions. Or now there's also a common way

they hire these auction houses that are a lot like auction.com and some other websites where they're saying, hey, nobody bid on it at auction. Let's just try to sell it online now. And so those are, those are kind of the three stages of pre-foreclosure. You can buy a house pre-foreclosure. At that time, you're buying it direct from the owner. People are like, I want to call the lender. Well, until the house actually sells an auction, that previous owner still owns it. They can pay their loan back that day. They could pay the loan back 10 minutes before auction and the house is still theirs. And then there's the auction.

And at that point, if nobody buys it and it goes to the lender, then it becomes that REO state. Beautiful. So when you're trying to buy it in the pre-foreclosure stage, I've often heard this called like the notice of default. It's probably different for every state. But at some point, the bank is required to tell the owner and the public, hey, this house is falling behind. It's going to go to auction. That's actually how I got my start in real estate was Tim Road, who we've had on this podcast. he's another Go Abundance member,

hired me to go knock on those people's doors and say as like an 18-year-old kid, hey, you're going to lose your house. Do you want to sell it to us before that happens? Which was obviously. And at that point, I was not the David I am now. I was very shy, very skinny. It was a hard job for me to have.

That was my exposure to real estate. And then he would buy them before they were foreclosed. So it was a win-win for the people. You're going to lose everything. At least sell it to us. Save your credit. Maybe get a little bit of money. then the courthouse steps would be what you're describing of.

If no one buys it, it goes to that point. That's where you're got to pay all cash. We'll ask you guys a little bit more about what are some of the areas that you want to tread lightly. I know you may not always get title insurance. You're probably not going to get a home inspection. Things that most investors are expecting don't happen there. And if it doesn't sell, then it goes to be REO. You could buy it on the MLS through a realtor at that stage.

And I like Aaron that you pointed out, it's not 2009 anymore. There was a time where if it was REO that basically, meant fire sale. You got a screaming good deal. The bank didn't know what they were doing with it. The asset managers of the banks were clueless when it came to real estate, but they got hammered at that time and they've learned. They've adapted, you know, like the Matrix, the machines have figured out how to come back. So you're not always going to get a screaming good deal in the same way. Sometimes, at least in my market, that REO inventory is no different than all the other houses that are on the MLS. So I'm looking forward to listening to you guys share with us a little bit about what

strategies you're using at each stage to be able to find deal. Well, first off, just to jump in real quick, what a beautiful way to get broken into real estate, man, knocking on doors. I was a shy kid, too, man. My first job was walking through skyscrapers, walking right past the no solicitation sign and trying to sell them, not copiers, but computer systems. It's such a great way to develop a thick skin and skill. Oh, God, yeah.

Tim's a great guy, and what a blessing for him to have made you do that early. That's the very nice way to say. As long as no one shot you, I guess. Tim Road was the one that brought me into this. Oh, yeah, I was closely getting shot several times. Like, they're opening the door with, like, pit bulls coming out. Because they're just being harassed by creditors all the time. They don't know the difference between you and anyone else.

The minute you say real estate comes out of your mouth, you're the enemy. But the key distinction is you're doing them a favor, though. You said that, David. You said, like, you're actually, if you can catch them, you're doing them a favor because they're about to lose everything. Most of them are completely head in the sand, angry. Like you said, they got their pit bulls, but they're not taking out. action to save any of their equity. And if you catch them at that stage and say they got 50 grand

in equity and you give them a check for 25 grand, you made 25, they made 25 they probably would never have had. And it saves them from doing stupid stuff, which people do is like tear stuff apart and break up the house. And then they just lose even more. Yep. Their credit gets Tamara. They can't buy the house again. That's a very good point. What I learned at that stage was this theory that I have of you don't argue with an angry person. You just, you get in a fight where both of you were just throwing crazy punches. When they're mad, you just cover up and absorb every punch without getting knocked out. And once they're done, that's where you can say, I'm not here to take your house. I'm here to stop you from the other guy taking it from you. And you and I are on the same side. And then everything

opens up. They'll actually listen to you. And I know I'm going to take it away with wisdom again, but I got one more thing to add. Sometimes we go in and pre-foreclosed by the house and pre-foreclosure and then sell it back to that individual. So they don't even have to move out. They stay in. They don't lose all their equity and they get to reclaim their house because we're kind acquiters. We're not ruthless acquisitors. Grady real estate investors selling people their houses that banks were going to take. Yeah, for people that don't know, Dave Osborne here is actually the one that brought me into Keller Williams to become a real estate agent. So Tim Road got me into real estate. Dave got me into selling real estate. And that's like my whole little world right here through. And we've all been

in all of you ever since, man. You've been just crushing it. Thanks, man. So I want to jump in real quick. with a story. I want to pull a story out of it. I think it was Aaron. This is your story in the book about your very first foreclosure auction that you went to live and there's something about a skateboard in there. Do you mind sharing that? Because I know people are going to read the book anyway, but I just love this story. Yeah, it's really the epitome of like risk versus reward and, you know, why there's, you know, MLS is easy. You see it online. You get title insurance. Your person goes and makes the offer. And when you're doing that, there's like 30 other people that are going to look at it too. It's like supply demand. Right. So less people buy on the courthouse.

steps because it is a little carrier, right? But the, but you hope to get a better deal. Our very first auction we went to, so we had started, we had made hundreds of offers direct to agents for Arias. We couldn't figure out. And we'd make an offer like five seconds after got listed. We kept trying to, and they'd be like, sorry, it's already sold. And we're like, what do you mean? We made a 10,000 over asking within two seconds of you listening it. And we couldn't figure out how we got in. And we just kept, like, beaten our heads. And there was, at that time, there was a company that just come out, foreclosure radar out in California. And they had like an ad.

I don't even know where we saw because there wasn't social media when we were doing it. But it was, they were selling, you know, foreclosure lists. And one of the guys that I worked with the at that time, you know, the home building company, he owned this house like right next door to one that had come up on there. And he was like, wow, my condos were, I think it was like 220. This thing was, you know, he said, if we can actually get it for that 140,000 that it's scheduled for auction, this would be a great deal. And we were kind of like, I don't know if this is really going to work out or not.

I don't really know how this is all going to work. We were pretty skeptical. I mean, we had been working really hard to break into this industry after getting, you know, crushed in the new homes. So we started researching those houses. And there was a few quick steps that I'll jump into. We started, you know, going and reading the foreclosure postings. We're like, well, how does this work?

There was no classes at the time. No one teaching you. We went and watched the foreclosure auction. There was three bidders there. And they did not want us to be there. they weren't trying to talk to us. You'd ask them questions. They would ignore you. You'd flat out, like, talk to them like I'm talking to here, and they would act like they don't hear you. They would be shunning, they do not want to teach people how to do this. So then we went in and we started just reading

the foreclosure notices by searching the owner's name and going, all right, how does this work? What, you know, what houses are there, what loans are there? We read through the loans. And in the actual loan document, it says, if you haven't paid, then this is what the process is. And then there was that notice of default and the notice of trustee sale that got recorded, that David Green talked about that says, on this day, there will be an auction, and this is going to be the opening bid for it. It's going to go to sale.

So we show up there, and there is a guy who cruises up in a skateboard, and he pulls a laptop. His name is Eddie. I mean, he became a great friend of mine, but at that time, we didn't know Eddie from anybody, and he comes up on the skateboard, pulls his laptop out of his backpack, and sets it on top of the trash can

in front of the county building down in Sacramento. And all of my NorCal people, you guys know Eddie, and you love Eddie, and you've seen him kind of in there. So he comes up, puts his laptop on the trash can, and he starts selling houses. And he's reading addresses. And man, he was like the auctioneer, like what you would see.

He would sell him quick. He would, you know, do a name. One, two, three, Main Street, opening a bit $100,000 going once going twice, because he wanted to get in and out of there. He wasn't, he didn't get paid more if it sold or not. He got paid the same. So he wanted no one to buy it. So he could get in and out of there really, really quick.

Our house comes up. And he says, going once going twice. And the guy that I work was, excuse me. And like, stopped him. And he goes, yes? Because by then, they had seen us show up like a couple days in a row. They weren't talking to us. And he goes, we want to bid on that?

He goes, okay, would you like to do a penny over? And we go, yeah. He goes, okay, a penny over. One's going twice sold. And he grabs the cashier's checks out of our hand. The moment he did that, the other three guys that were there, they go, oh, my gosh. We're already terrified. We're like, does this even work?

What's going to happen? And they like start laughing and like sign. and they're like, oh my God, we can't believe you guys bought that. We're like, we just lost. At that time, we didn't have any money, really. We had like the $150,000 that came out was from like partners from the company. You know, we had just, you know, we were trying to rebuild all sorts of stuff. So we start filling out the paperwork with this guy.

And the, and we're asking all sorts of questions. You know, so do we know this is the first? He's like, that's not my job. And he starts, and he keeps filling out this piece of paper on this, you know, it's a pink sheet of paper is the receipt that we get. And then he hands it to us. And he goes, what address do you want? the deed sent to? Where do you want their receipt sent to? And, you know, so at that time,

let's say we bid 140. We had to give 150,000 checks. He's like, where do you want the refund to go? So we're filling that out. And so he hands us back this sheet and it says, TS number at the top. You know, we gave them a $50,000 check, a $50,000 check. And there's like a receipt. And it says, they owe us $10,000 back and they're going to send the deed and the refund to that address and our vesting. And we're like, okay, can you put the address on here? And he goes, well, no, that's not our job. Like, we're not guaranteeing any address. It's just, that's the loan that we just did.

And we're like, oh, like, what do you mean? Right? And he goes, no. So there it is. He finishes his auction. We're like looking at this receipt, figuring out, like, what's going on? And he skateboards off with our cashier's checks, with our life savings at the time. And yeah, and so now we've got this receipt and we're going, is anything actually

going to happen? Because every time we asked a question, nobody there was trying to make us feel better. Everything they answered made us feel worse about the decision we had made. The long story short, two very long weeks later, we get a deed in the mail. And it says, all right, here's the trustee's deed. And there's a noted in that says, you have to go record this. Then we go to the courthouse office. We record it.

We get it back. We ask the title company to now do a title search on it. Three days later, they give us back our title search. And it says, lo and behold, we own the house free and clear. And, man, it was a crazy experience. It was crazy beginner's luck. We sold the house for, you know, $50 or $60,000 more than we had bought it for. we were off to the races and over the next three weeks we went all the time we didn't get to bid on a single house

like we had gotten so beginner's luck and we and we hadn't figured out a system yet at that time but that first auction was it was crazy nerve-wracking and definitely like God's purpose I guess because if if we hadn't bought a house that first time we had to realize a couple weeks later this was too difficult and would have tried a different business did they ever tell you why they all gasped when you bought the property they did so on the foreclosure radar notice it says loan position one or two, and it said two. But that didn't make any sense to me because when I looked at it, there was a $25,000 loan and a $150,000 loan. And the data service at the time, it put it in the reverse order. So the $25,000 loan was actually recorded first. But when I went and read the loan

document on it, it said this loan is subordinate to this $150,000 loan. So they were recorded in the wrong order. And the only way you figure that out was by actually reading it. And it was that beginner's luck that we read it all because we were so scared of everything. They just saw like, oh, it's a second. We're not going to bid on it. So they thought for sure that we lost the money. So they thought you bought the right to the second position lien, but the first lien holder could control the foreclosure and you would never be able to get the money. Is that what you're saying? Yeah. So if you buy a, in California, it was very common for somebody to get a first and a second, maybe even a third loan on a house, right? When you buy a house in foreclosure, whatever is recorded

after that goes away. So if there's a $100,000 loan and a $50,000 loan and you buy the foreclosure on the 50, you still have to pay off the $100,000 to get free and clear. Because that was before. Yeah, because that was recorded before. So they call it lien priority, right? In real estate, there's a lot of lien priority. That's what title companies do for us, though. And in foreclosures, you don't get that benefit. So yes, they thought that we were buying a second that we actually weren't going to own it or we were also going to have to pay off that other loan. And if we had to pay off that other loan, it was no longer a profitable. It's extra $150,000. that you would have had to pay off.

Yeah. Exactly. Let me jump in here for a minute. I have a question. Like, how does somebody know? And I know you covered this in the book, but just those who don't read it. How do you know if there's a lien on a property? Because, I mean, that probably terrifies most people thinking right now is what if I paid

$100 grand for a lien? And then there was another one I didn't know about it wiped me out. I just lost all my money or, you know, like that's the danger, one of the big dangers of buying foreclosures, right? So how do you know that kind of stuff? Yeah, a lot of them get wiped out at foreclosure, right? It's just some that don't, right? So ideally in a foreclosure, it clears out most of the liens. Aaron, what are the kinds that don't get wiped out? A lien that's in a higher position doesn't get wiped out, right?

So if there's two loans recorded at the same time, those are the scary ones. Those are when we've seen people actually lose hundreds of thousands of dollars in the moment, but people are scared of most of them. Federal tax liens don't go away. A state tax liens do. So a federal tax lien, and a federal tax lien can go away in like 120 days, but it makes it to where you have to take longer. There's a lien called a UCC filing. So that could be a county lien. That could be if somebody adds solar panels or a water heater or things like that. Those are the sorts of liens that are added after the fact that are superior no matter what. Now, sometimes those are really small. A UCC lien in Texas most of the time is a water softener.

So after you buy it, it's a $1,500 lien you're going to have to pay off. Recently I bought a house. Last year we bought a house that had a UCC lien on it. We didn't know how much it was. we assumed it was $1,500, and it was actually for new siding, and it was for all new siding on the house. So we ended up having to pay like $15,000 or $20,000 after the fact for that one. So UCC liens will survive, loans that are in a superior position will survive, and anything that's like a county or a city thing. So if somebody stops mowing their lawn, the county or

or city will lean them, water liens, utility liens, things like that. Okay. That makes sense. So, and then can you, you just go to the county, you sit there and look in their file cabinets for, like, what liens are there? Do you hire a person for that? Yeah, it's way easier now than it used to be. Most counties, you can actually look online. But it used to be, we would go to the county courthouse, the morning of auction, and you start typing in the name of the owners. And when you do that, you type in the names of all the owners on the property. So if it's a husband and wife, you want to type in both their names, you might see a document somewhere along the line that a son was one of the members of title and you start adding more names. You search their names at that county,

and it'll have those things in there. And there's some really interesting things. You'll see marriage certificates. You'll see death certificates. You'll see, here's a lien. You'll see a federal tax lien. Then you might see another document that's, oh, they paid off their federal tax lien and it's gone. But it is as simple and complicated as that. You go to the recorder's office, you look up their name, you look up the property, and you read a whole bunch of documents and you're trying to, if there's 20 documents to read, you actually look at them all and you're going to assume that one, you know, and it could be at the end of it. None of them are actually liens. But that's how you go find them. But also you can get a title search, right? Aaron, you can get a title overview, right?

Yeah, absolutely. So when you're buying it on MLS, it's really easy to get a title search. Those take three days. If you're trying to buy at foreclosure, you know, five years ago, there was no way to get. Now some title companies will do quick searches for you. They just don't insure them, right? So they'll look through it and they'll say, hey, we think this is a first position and we've seen these liens on it. But they're trying to do 100 files in a period of a day. Normally you pay a couple thousand dollars for it. Now you're paying 20 apiece. So they'll say, we did our best job in a five-minute search, but it's not going to be perfect. But yeah, people start to have, I try to teach everybody how to do it themselves and get a title

company to do it. And the ones that you really like at the end, you're just kind of double-checking. Nobody's going to care about it as much as you are unless you're paying them. So if you get to pay a company for a title search, they're going to do a great, great job. But for pre-foreclosures, you can't get a real title. And then also if it's a second or a third lien or a contractor lien without the UCC, all that gets wiped out. And then if it's the federal lien, if it's the government lien, they only get to exercise that by buying the property. So let's say they owe the IRS money and there's a lien on their property. You don't have to pay the IRS the IRS just has a certain amount of days to acquire the property themselves and pay you off as the lien holder.

Is that correct, Aaron? Absolutely. Yeah. So if you want to sell it in less than 120 days, you pay the 50 grand. There may be some case where it's maybe a really small IRS lien that it's better to pay that and flip it. Or if you wait 120 days, if the IRS hasn't really, you got to you then, then you can sell it, 120 days after the time your deed was reported, that then gets wiped. Can we briefly define what lien is for the people listening that haven't heard that phrase before?

Yeah, so it's like when you get a car, right, you get a loan on your car, there's a lien on your car. And if you don't pay that, they can repo the car. And if you try to sell it, they make you pay it off. Same with a house. So you can talk about that loan. So a loan is the type of a lien.

It's saying somebody loaned you the money and you can't buy a house for $100,000, get a $90,000 loan on it, sell to somebody else for $100 without paying off your lien. So the reason they call it a lien is they record it against the property. So it says, yes, you own it, but you still owe somebody that 90,000. And that lien can become all sorts of things. Banks will give people loans and they'll put second liens on houses.

You can get a business loan and get a lien on your house. Or the things like the water heater and other stuff, if you don't pay your state taxes, if you don't pay your federal taxes, companies want to figure out what you own and put liens on. Bail bondsmen. In California, you'll see a lot of bail bondsman liens on houses. I had a contractor once steal like five grand for me. I paid him five grand to do windows and he walked off with the money and never ordered him and just stole it, right?

But I think I was like a local guy. So I went to my attorney. He walked me through how to do a small claims thing. I mean, he just walked me through this whole thing. We put a small claim, went to a small claim court, obviously one. Put a $5,000 lien on his house, like on his primary residence where he actually owned. And then like four years later, I get this or three years later, I get this random call from a title company saying, hey, somebody owes you money and they're selling their house and they can't sell it unless you sign off.

So we're going to be paying you back now. And I ended up getting paid back that and interest and everything. Brandon, I had the same thing. I was a lawnmower kid and this guy sniffed me for a bunch of mulch. So I took him to Small Claims Corp, won like a $400 or $500 settlement. Forgot all about it. And then like four years later, I just got a check in the mail for 500 bucks. I was like, oh, I got you back.

Yeah, exactly. It's like, how it was great. So a lien is when someone is owed money and a property or something is used as collateral. So that person didn't have the money to pay Dave for the mulch. So Dave put a lien on his house, because only a judge can put the judgment against that property. I suppose it was some form of a mechanics lien. And then when the house sells,

the title company has to go pay back the lien holders before the owner of the property gets the rest of the money, correct? Yeah, they won't let you sell it. It'll be held up until you sign a release. In my case, the guy wrote me a hot check. So it was very easy. I just took, I won immediately, and they put the hot check on his house.

He may have got pulled over for a ticket. Either way, I got paid. It was great. So, but most liens aren't. And just because Aaron is now scared all the listeners, Aaron, how many homes actually have a lien on it? Like, I mean, I would bet it's what, one in 10 maybe that has this kind of an issue? Yeah, the, it is a small percentage. It is like a 5 to 10 percent where there's any significance. And really, it doesn't stop us from buying them. It's just one of the steps to price it in. Right? A $1,500 lien shouldn't stop you

from buying the house. Brandon and David's two examples. That's like the best reason. that liens exists. It's when people deserve to be paid something and they're not. But if those two houses would have been foreclosed on, the bank gets their money first. They do the loan. So if they would have been more money paid off, then David and Brandon would have got paid off. But liens aren't a reason to not buy foreclosures. You need to do your research and be prepared because that first house we bought, everybody thought there was a first position lien on it that was going to take us out of that. We made a lot of money. And if we hadn't done our research and prepared it. So yes, it's only a small percentage to actually have it. But you should do your research and then just price it in. It's just like when

you find out a house needs a new roof, you want to pay $10,000 less for it. If you find out there's a $10,000 lien on it, you just want to pay $10,000 less from it. You don't let it stop you from buying the house. And we show everyone in the book how to do all that research. Yeah. And so I want to encourage people like at this point, some people are probably listening is going, oh, I don't understand this. This is confusing. What's a lien? How do I do? I don't even know to go. I don't go to the courthouse. So here's just the advice I have. And I know all four of us talk about this stuff all the time. Like, if things are hard and you just go and stop because they're hard, like, you just never achieve any level of success and anything. Like, David Osborne

here, when you started your fund, like, like, you had no idea how to start a fun. Like, it was like, I don't know. I'm going to figure it out. And you start, you start asking questions and asking people who know more than you and like reading books on it. And like the same thing, I did it with my fun. And David, you did it when you became a real estate agent. And Aaron, like when you, I mean, every step of your journey, you, that's what you do. Right. So I just encourage people, don't listen to us get confused and say I'm not going to do it. Just start driving forward. Like drive through the fog and you can always see a little bit more if you just keep driving.

If it's when you pull over in the fog is when you stop moving. Well, the genius of what you said is the winning formula is just take action. And don't be too terrified. We all have fear. But the people who get to the other side to the financial freedom take action in spite of the fear. And even if you do have a lien or a bad experience like I've had before where I lost money on the home, it's usually not a binary outcome. You put down $150,000 in checks.

maybe you get back 140. It's not like you're out of the game. You've got a $10,000 on less. Does that make sense? So you're absolutely right, Brian. Don't get over scared from what we're saying. You just got to move forward and take action. The biggest thing to get from it, too, is the reason that less people buy foreclosures is they get scared of all that stuff.

The goal of our book was to actually say, hey, this process seems scary. There's less people doing it, but there's actually a very simple setup. There's like our simple five steps that will take this process that seems really scary and stops so many people from doing it. It makes it actually very simple where you can take that risk and make the risk really, really small compared to the reward. That's so good. So I want to actually go through those five steps here in just a second. But before I do, just in case people want to dig in deeper or they want to go buy the digital copy. I know we have physical and digital copies of the book fitting to buy.

But before we go into that, let me just mention what the book is real quick, just so people know it's called bin, and bidding to buy a step-by-step guy to invest in in real stuff. state foreclosures. You can get it, but going to biggerpockets.com slash auction book. Again, biggerpockets.com slash auction book. I think it's like the audiobooks, maybe 15 bucks, e-books, 15 bucks, and you get the physical one for 25. I would recommend getting what's called the ultimate edition. You get everything all included, plus a bunch of cool bonus stuff, including like a Q&A webinar with you guys, like a US map detailing state by state foreclosure laws, worksheets, checklists, templates, all sorts of really cool stuff.

So I just want to throw that out there. If anybody's interested in getting this book, I think you should. It's one of those like, you know, know, even if you buy one property ever from the lessons you learn in the book, it's going to pay for itself 100 times over. So pick it up today during this kind of launch period where we kind of have a special pricing again, biggerpockets.com slash auction book. Anything you guys want to add to that before we move on to the five steps? No, I think the, again, we love foreclosures. We love the auction process and we love how simple it actually is, but how complicated it appears to everybody else. So the real goal of it was to take it and simplify it and make it to where anybody can do it.

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Again, that's biggerpockets.com slash dominion. All right. Well, with that, let's get to the five steps that you guys outlined in the book on how to buy at auction. Step number one. What do you got? So step number one. And I'm pulling at my phone too because at different times, they're the five steps we always do. Sometimes we shift them in order.

So the first thing we go into the book is how to create your list. Right. So there's plenty of states where you can actually just buy the list. You can buy it from a service provider online or there's different companies out there. So there's a company called like auction.com and people will say, oh, I don't need to buy a list. I can see it on their website. Well, they have like 25% of them because they're actually a trustee. And there's another website that might show you some.

Or there's a company like what I talked about at the beginning, like foreclosure radar out in California or Paddock out in Arizona, where you can buy these lists, but you can also go, like make the list yourself. Is that what Roddies is? Like, you know you own Roddy. It's like, what is that? Yeah. So our Roddy company is out in Texas. So the, so foreclosure listing service, it's FLS online.com. If somebody wants to buy a house at auction in Texas, they can either go make the list themselves. Now in the book, we teach you how to go to the courthouse, get those recorders documents, combine it with tax records and things, and make your own spreadsheet. So you can learn how to make your list for free or you can buy it.

You can buy it from, if you're in Texas, you can buy it. Our Roddy's list that, you know, again, FLS online or in other states, you can buy the list, but you can also make it. The reason people buy it instead is it takes you like three or four hours to actually make your list for your county or you can go pay 40 bucks and somebody can give you the list. And so some people are like, hey, my time's worth more than that. I'm going to go buy the list. All right.

When you say list, can you explain what that means? It's just a list of all the foreclosures that are coming up. Is that it? All the pre-foreclosures. Yeah. Yeah. All the pre-foreclclos. these are all the people that have stopped making their payment and now they're scheduled for auction.

When you see the recorded document at the courthouse, it's going to say, this person, here's the legal description, here's the loan. It doesn't say what year they were built, how much they're worth, how many beds and bathrooms there are. It doesn't even say the address usually. So you take that document and then you start piecing it together and it's this treasure hunt to get all the info. So then you can actually have your spreadsheet or your list because that's where it's going to start. You get your list and then you need something to filter. with some people only want to buy new houses, some people only want to buy old houses,

some people want to buy a certain amount. That's why it's, you have to kind of make your list first. Yeah, that's why you buy a list too. So keep in mind, there's services almost in every major city, which will just sell you the list. So instead of just taking the loan number, figuring out the address, throwing out the year built and all the rest of it, that's what Roddy report is. There's more than just us. That's what foreclosure radar is. You just buy the list and then you don't have to do all that work. It's all done for you. That's cool. Yep. And it makes it to where you could target it. So now you've seen instead of seeing a recorded document, now it's actually like an address with your thing. You go, all right, so these are the houses that I want to look at. So that's

step one. Step one is finding your list and filtering it to go, hey, here's the target of houses scheduled for the next option. Cool. All right. I like it. So you get your list together and then what do next? Step two is the drive by. This is the thing that I'd say everybody has to do. We recently wrote one of the blog posts on this because you have to go to the property physically and see it. even if it's just from the driveway, you learn a lot of information from driving by the house and looking at it. Now, we'll also knock on the door. We'll go talk to owners. We'll try to figure out what we can find on that. But it's really important to go see the actual property. I went to an El Paso auction a year or two ago, and everyone there bidding had like Google Maps up on their laptops.

And so they hadn't gone and seen any of the properties. They were just looking at Google Maps for the quality of it. Oh, the opening bids 100,000. Oh, this house looks like a good house. But they aren't thinking about is the houses burned down. Houses get knocked down. Somebody that's occupied and has five cars in the driveway, you're going to want to pay more than not. So the drive by is actually physically going to the house and finding out everything you can about because you're going to learn more about the neighborhood, everything. I've told the story before, but I'll say it again, that I once went to an auction. It was a tax sale auction. So all the people didn't pay their taxes. And I'm saying, I just wanted to learn how it did. I didn't even want to bid anything. I just wanted to

learn how it worked. And I remember there was like this couple in front of me. a young couple, young 20s, maybe like 18, 19, 20, and their grandpa was there. Grandpa was in probably 60 to 70s and grandpa was there to buy his kids a house or his grandkids a house. And so they waited for their property to come, you know, waited for different things. And I don't know, halfway through the auction. Finally, they find this property. And I look it up on the assessor's page as it's coming up because I was just doing that

following along. And there's a picture of a nice looking, very simple house there. And Grandpa then bids, I think he got it for, I don't know, $50,000 or $60,000. And I thought, that's a really good deal. They got a good kid, good, good, grandkids. And, you know, from the picture on the assessor's thing, and they were all excited, I mean, hugging grandpa. And it was a really emotional time.

And then I went and drove by the property afterwards. I was like, man, they got a, they got a good deal. And I want to go see how nice the houses. And there was no house there. It was burned down. It was gone completely. And I don't think they realized it. I don't think, you know, because that property itself was worth maybe 15 grand for the lot.

I mean, it wasn't in a great area. Yeah, that's, that's why you drive by, Brandon. Yep. Yeah, that's exactly. And the risk you run is you drive by on Tuesday and then the auction on Wednesday and it burns down Tuesday night. You still bought whatever you bought. The drive-by also also tells you whether there are people living in it or not, which is a big deal. Because if there's no one in it, it's yours, you get to move in, go to work and do it. And if they're still living there,

you've got to get them out one way or another. It's your problem. It could be burned on the inside. Yeah, a friend of mine owns like 350 homes in Denton, Texas. And what he'll do is he'll take the list. And if there's 500 homes on it, he'll just take the hundred that he's interested in and he'll drive by all 100. What Aaron and I have done in the past as a team, and what we did in our company, is we'd hire retired cops and just ask them to drive by. Maybe put a hang on the door and maybe even just knock on the door if they feel up to it and just say, hey, just see whether you can get a pre-foreclosure opportunity, but at least make sure the house is there, make sure the air conditioner's there.

Is it damaged? Is it spray painted? What's going on? It's not that it's time-consuming, but very straightforward. I love the retired cop thing. That's easy to leverage. That's very easy to get someone else, some hungry real estate investor that can go take some videos and pictures and send it to you and even someone else in your team can review the pictures and videos. It doesn't even have to be you necessarily. But it would be a big mistake to just roll the dice and say,

well, I hope that that house is still there and that the air conditioner is stolen. Yeah. Those scary examples are, again, why most people won't come to auction, right? They'll hear about the house that burnt down. They'll hear about, you know, the stuff that had the six cars and they'll hear about all that. And they'll say, no, we're not saying don't buy, you know, we're saying that that can easily be mitigated. Very inexpensive. You hire a good person like the retired cops. They go look at the properties and now that big, that big scary thing. And again, if it's missing the AC or it isn't bad,

you could decide, do I still want to buy this? And if so, I'm just going to make sure I buy it for less. Just your price. That's exactly right. Well, and there's also some wins. And I was thinking this earlier when Brandon asked, I didn't say it. There are also some amazing wins that happen. You get really lucky. For instance, once there were six condos connected and we bought four of them at foreclosure, just all four. And so we got four foreclosures. I think we paid $100,000. 35 apiece. So we then go out there and find there's two more connected. They were also in foreclosure, but with different banks. And then we found out there was no homeowners association. This was in Seattle or Washington, I guess, just north of Seattle. Well, then it turns out that

that you cannot sell the other two without a homeowners association document together. You can't put that document together without our four homes. And so we just called the two banks and say, hey, we're willing to pay you 150. We didn't gouge it. We could have been ruthless. We were. We try to always be win-win and fair to move things along. They're probably worth 180 at that time. And maybe it was $1.45 we offered. But both banks, once they understood the situation, they said, yes. They sold them both to us cash for $1.45.

So we ended up getting six. And today they're worth, what are they worth today? $200 apiece, at least probably $250 apiece. So that's $1.4 million. And we paid way less than that. And that's an example of a win. So sometimes you get the chips falling in your favor as well. Did you get to go make your own HOA?

That's always been a dream of mine. You know, we haven't done it. We can. We just, we're all cash. So we never put leverage on it. So I should, but we haven't created the HOA yet. Who hasn't fantasized about getting rid of their current HOA and just been making their own? Starting over. It's like a real estate agent. Yeah, like a real estate investor fantasy. We just haven't done it because I think it's like 40 or 50 Gs. It's not cheap to create. I want to be the guy that makes other people's HOAs. That seems like a dream job. Like that's the biggest racket in the world. Just got to get on the right side of it. Especially if it's 50 Gs to do it. There are there are a lot. of wins that happen with those drives though, right? Like you may talk to the neighbor and they're like, oh, yeah, it's occupied, but those people are moving out this weekend. Yeah. And I thought about that when Dave was talking. It's you guys are putting yourselves in, it's kind of like in football where your teammates

making the tackle and you have the choice where he might get away, I should run over there and help or I'll, you know, I'll just trust that's going to go. Well, it's the players that are always going to the ball that get the fumble when it squirts out, that make the huge plays that help their team win. And by putting yourselves in those situations, talking to the neighbors, asking what's going on, getting the inside scoop, you will come across these deals. It's a really, really big component that successful people do is they put themselves around the ball and good things to happen. It's actually kind of fun too. It's almost like driving by your potential. It's like treasure hunting in a

way. It's like a treasure hunt. You're going to look at 50 homes. It's a treasure hunt. That's cool. Well, this would probably be a good time to bring up just the other downside of buying foreclosures, you know, at auction is you don't, you typically get inside the property. I mean, if I go buy a property that David Green here has listed for sale, I schedule an appointment with my agent, I go walk through the property. Pre foreclosure, I'm talking with the sellers. They bring me into their house, sit at their kitchen table. I get to look at everything. But that middle one where I'm buying it at auction, we don't typically get to go into a property.

Is that right? And how do you overcome that? Yeah, you're just trying to find out as much as you can. And it totally is a treasure hunt. You start with your list of 100, like David said, and you filter it. And so now it's down to like 80 or 90. And then you drive all 80 or 90. And after that, you're like, here's the 40 winners that we're going to go after. And it could be that like, here's one that we went to and it's occupied and nobody answered.

We know nothing about the inside. We're just not going to do that one. That could be one that comes off the list. The ways that you mitigate that is the knocking on the door. Is the asking the neighbor? Like, hey, what do you know? Neighbors know all sorts of stuff, right? They know if parties have been happening there every night or not. They know if the people are thinking about moving. It's also sometimes you get up there and there's a for sale sign in the yard. there's sticky notices all over the front door, so it's obvious that it's vacant. And I'd be lying if I said I didn't, I didn't peek in some windows, right? If you didn't, you know, when the yard's a foot tall. And, you know, I always tell people you want to be sure that you're, if a police officer pulls up, that you're going to be comfortable explaining what

happens. If he says, hey, what are you doing back there? Like, well, it's scheduled for foreclosure next week. I looked at the notices on there. Nobody's been here. I asked the neighbors. I just want to see if there was anything here yet or not, you know, and you may get in trouble and you may not be, but I tell people you try to get as much information as you can, but be comfortable, willing to say that. You can see a lot from looking in the windows, from asking neighbors, from things like that. You just do your best to mitigate as much as you can. You're not going to eliminate risk. You're going to reduce it and then quantify it. If you can see inside and you see it stainless appliances and it's super nice and really easy to comp, you may tell yourself,

I need a lower profit margin on this because it's low risk. If you can't see inside, it's boarded up and it could be gutted inside or it could be great, you're going to say, I need a bit at a higher profit margin because there's more risk. You're also looking at the major construction pieces. So does the roof look okay? Does the siding look okay? Is there a pool or isn't there a pool? Is the air conditioner intact?

Because as Aaron said, all you're doing is notching the property up or down on what you're willing to bid. And if the roof looks like crap and you figure you've got to spend $15,000, on the roof, you're going to have to drop that price a little bit. If the roof looks like they had a hailstorm recently, you got a brand new roof, then you get to factor that in as well. So that's what when we pay people to drive by, we have to take pictures of as much as possible.

generally knock on the door as well, see if anyone answers, and if no one does try to peer through a window. Yeah, that's good stuff. That exterior stuff, too, is a huge dollar amount, right? If a foundation is sinking and you see it, you're like, okay, that's a $10,000 or $20,000 thing you can see. If the roof is sinking and it not only needs replaced, but like David's comment about the major structural,

major structural is such a high percentage of what your total cost could be that even the drive by quickly from outside, you can see if it needs to be adjusted 10 or 20 grand. Yeah, and people don't typically have a beautiful outside and then a disaster inside or disaster. They kind of, you know, like everything kind of generally matches. Like, if the outside looks pretty good, the inside's probably about the same. Yeah, very seldom do you see a nicely manicured yard perfect on the outside, but it's been gutted on the inside.

Yeah. Right. Yeah. All right. Well, moving on to number three. So number one was get the list. Number two was drive by. Then what do you do?

Three is the property analysis part. Now, part of it you're learning what you did before. So now you've seen the neighborhood. You've seen the house. And that analysis says, what can this house sell for? How much construction? construction money, is it going to cost me to get it ready? And how much profit do I want to try to see the actual house? Now, we go into a lot of the stages of the book on how to comp the

houses inside that. So we talk about looking at it on Google Maps, seeing if it has a pool, seeing if it backs up to the yard. You know, you guys, I mean, bigger pockets has so many resources if you're going to buy a house to flip it. That's the stuff we're doing in that analysis part. How much is it going to sell for? What's the construction going to cost? What's the sort of profit we want for that thing. Cool. All right, number four. Before, you know, and we spent maybe more time than we needed at the beginning. This was the title review. I think the reason it is everybody always talks about that. Do we go into detail in the book about how people can go research the title and you're trying to do a couple different

things. You're trying to figure out what position loan is this. And really, if you're reading our book to get started, I recommend you only buy first position liens. There's a way to buy second and still make money out of it. But if you're going to buy it at auction, you buy first position liens only. So one, you're trying to make sure it's a first position lien. And then two, you're trying to see, are there any other liens that are either going to delay me from selling it, like a federal tax lien, or one that I'm going to have to pay off, like a UCC, just so you kind of add it to your construction. If you were going to spend $10,000 in construction, and now you've got a $5,000 UCC lien, you're going to act like you have $15,000 to spend for construction.

So that's the step forward is the title review. Make sure you're buying a first. And if there's any, it's also checking property taxes. Property taxes are a really easy thing to check. Do they owe money on their property taxes or not, and it's very common for a pre-foreclosure or foreclosure to also have a year of back property taxes. So that takes you 10 seconds to check. This county, do they owe taxes or not? That's part of that title review. Hey, just a quick tip that I did on my first foreclosure I ever bought. A similar story to showing up to the auction, having no idea what I was doing, not a single other person showed up. I was the only one there. And it was a funny, you know, a bit of penny over. But similar. But what I then did is, well, before that, I had to do the title

review and I didn't know what I was doing there, you know, with the title. I didn't really know, but I bought a number of properties in my area. So I simply called up like my favorite title company employee that I'd work with a number of times and just said, hey, I'm new at this. I'm going to buy this property. And he like called me back like an hour later. Like, yeah, I did a little bit of research. I looked into this and this seems fine for here. Here's what I found. So anyway, just to throw that out there, if you are an experienced investor, you just haven't done auctions, but you've worked with title companies or attorneys a lot, just your relationship with them might get you pretty far through that title review. Great point. Yeah, that's a great.

I think that's a lot of what David has been able to do when he jumps into that. Yeah, I mean, that's why the team, the whole team comes in there, right? So it's the same thing on valuation. If you know, very commonly we'll just look with a Google search, what's for sale near there, call the realtor that's got it sold and say, hey, you know, I'm thinking of selling my house, which is this address. What do you think it's worth roughly? It's 1,500 square feet.

I don't want an official BPO. We might give you the listing. What's it worth? And they'll tell you over the phone, well, I think that house is worth this. Or sometimes they'll know, oh, that's Johnny. He's in a lot of trouble. Are you guys buying that from foreclosure? or sometimes they'll say you're the eighth guy that's called me.

But either way, using people and having a great team and people that you support and that support you. And if it's like, if you do see a foundation issue or a bad roof and you've got a good relationship with a roofer, you can always send your buddy the roof around, say, hey, what would this roof cost? Now, you want to not overkill the list because you're going to end up with, like, as Aaron said, 40 homes maybe, but only 10 or 15 of them will go to auction because what happens is a good number of people like cure their auction, like right before it happens so they don't actually get foreclosed on. But yeah, there's a use your title company, buddy, use your realtor buddy, use your construction buddies. And there's a lot of resources you can use that don't cost

you any money to get you better info. That's so good. So good. It's, and it's a great point to add on there. One of the things that gets people the most discouraged is they spend hours on one property. They fall in love with that property. And we say that this is like fishing instead of hunting, right? You've just got to be fishing all day. And if you fish all day, you're going to catch one of the fish. You can't look down and go, I want that fish. Yeah. Right. If you see 10 fish in the pond, you can't like chase one fish because there's a decent chance that you had other nine you could have caught. And so yeah, you got to be, you got to have a wide net. You spend a few hours on one and they're the ones that cure it. People are like, oh, this sucks. So yeah, it's cast a big net.

That's such a good point. I mean, that's just true in real estate in general, the matter whether you're doing auctions or whether you're doing, I mean, anything. Like people get so focused on the deal rather than the process or rather than the funnel, as I like to talk about on the show here. It's like, what is your, what's your lead source that's going to bring you 20 leads a week that you can then analyze and then make offers every single week consistently. Instead of like, I'm going to go find that house over there, I'm going to go buy that one. And then it doesn't work out and you get discouraged and you give up because they're focused on the wrong thing. They're focused on a deal, not the system.

Yeah, never fall in love with something that doesn't love you back is one of my favorite quotes of all time. Don't fall in love with a house, a deal, anything. There's always another deal. There's always another house. Just keep fishing. Yeah, fish don't love. So don't love them. It tastes good, though. All right. Number five, what's the fifth step in the process? The fifth step is the most fun part. It's actually going to auction. Right. Like that is the, if you guys are thinking about, you know, going to, you know, getting involved in foreclosure auctions, go to a foreclosure auction and go watch it. It is fascinating, right?

And if it's in Texas, it's going to be at the courthouse on the first Tuesday of every month. If it's in California, it's every day. I think if it's in Colorado, it's once a week. But you want to go and it's also busy. So, you know, there's a couple websites out there like auction.com. They have 20% of the postings anywhere. So if you live somewhere, go there. you'll get to see when the most popular auction day is, go and watch it. It's fascinating. People are listen to headsets. There's bidders coming out. The auctioneers, some of them are trying to sell it for a lot. Some of them are trying to sneak in and out. So it is the most bizarre thing. You show up at auction day. And in most states, you have to pay 100% of the funds in cashier's checks that day.

So if it's a $300,000 house, you need to give them at least $300,000 in cashier's checks that day that you're going to sign over. And so the, and you kind of use it like a wallet. So you don't just bring a 300,000, $100,000 cashier's check because what if you get the house for $250 and you're waiting for that balance? So you bring some $100,000 checks, some $50,000 checks, some $20,000 checks. We've got a lot of members at Roddy's that when they first sign up. They're like, wait, we all have to bring. That means there's like $50 million in checks at that auction. You're like, yes, that's exactly right.

It's a baffling, strangely archaic method, but it is still handing somebody checks. In Arizona, I think you only pay either $10,000 or 10% the day of auction and the next day, you wire the balance. There's some states where you can wire the funds. Most non-judicial states, though, it's checks at the time of auction. And you're going to go, when you show up an auction, you've got your list. You have your list of how much you're going to pay. And that's really, really important because people really like winning. And so if you don't know that your max bid is $100,000 for this house and you start bidding against somebody else, there's a decent chance that you just want to win. And so I've seen people plan to pay $100 and pay $120. They just don't want to go

home empty-handed. You want to have your list. If it's your first one, bring a friend with you and tell your friend, like, don't let me pay more than what's on this list. Because it's, it's an exciting, fun, fascinating thing, and it's really easy to get caught up in that moment. So, you want to show up with your list of houses and your cashier's checks and be ready to go. Yeah. In Hawaii, we have, you know, I bought actually two foreclosure condos this year. I got great deals on both of them. And they both came, I guess they both came from the exact thing we're talking about today. So they does work. A big shout to my partner, Greg, for that. Because Greg is awesome and he helps us work through that. But we in Hawaii have 30 days. And I think it's

30 days. You put 10% down day of auction in cashier's checks and then you have 30 days to get the deal, which means you can actually legitimately get bank financing on foreclosures here, which I don't know any other state that does that. Yeah, 10% down day of and then you have 30 days to close. The one time that Hawaiian time works out in your favor. Exactly. That's the one. Yeah. It's because of Hawaiian time. Actually, they're like, nobody's going to bring enough money on No, it's better than that. No one that the oxen even pays attention to what's going on for the first two weeks. It's actually better than that.

I said, I said 30 days. I think that's minimum. So actually what the rule is, it's minimum 30 days or whenever, I think that, I bet the legal thing says this, whenever the Hawaiians get around to it. Like, that's pretty much how it goes. So like contingent on surf conditions basically. Contingent on surf contingency. Exactly.

So there's a surf contingency. So we waited for, what, four months for one of ours to close. And they just keep your 10% at however long they want to. and someday they will file the paperwork and get it to you. And if you know somebody in the county, your brother's cousins in there, you can maybe get it done quicker. It's the weirdest thing.

That's great. Your partner, Greg, is pretty brilliant too. I know one of those deals, there was a title issue. And he was able to find the prior, I was talking to him about it. He was able to find the prior owner and actually get her to give him a copy of the payoff

on the second or something. It's like a thing. So he had a few weeks and he made sure that he went. So most people, I think you got it for a deal, because everybody else was totally scared of that title issue. He solved it ahead of time and you guys got it. I think that was a deal where we actually, yeah, I mean, I won't go to a death,

but we, I think it was seven days from the time we closed to the time we flipped it and re-had it sold. It was like seven days total that we owned that property for, nine days. It was insane because we did all this work up front, lined up everything. So day one, we were in there. And that's actually the nice thing about that time. Like we already knew we owned it. Like they, we owned it.

We just couldn't take possession. Yeah. So we had all the time to plan and it was awesome. That's awesome. Yeah. we should go by and fly up. One of the United States I've never bought it. David and I are ready to partner with you guys on your next foreclosure out there.

We are in. Yeah, it is a weird market. The other thing you should know is when you go to the courthouse step, there's all these regulars there. So there's a bunch of guys, like Aaron said earlier, that go all the time. This is all they do. And they're not friendly. They're not trying to give you their secrets.

They're trying to brush you away. And there's like usually five or six of them. And they're, you know, or more. And they just, that's it. Those are the men. And they usually have hundreds of properties. And they ignore them. They won't be nice to you.

Don't be discouraged by them. Just stick with your game plan. And don't get caught in a bidding war either because I have a friend who went for the first time. And his limit was 125. He went all the way up to 1.45. And he got the right to rehab and flip a property for like minus $1,000. So you just want to whatever your number is, you got to stay at that number. And if someone else bids above it, you let them have it.

And the other thing you can do, people need to know this either. You can't go to those other four regular bidders and say, hey, don't bid on this one. and I won't bid on the next one because that'll put you in jail. That's illegal. There was some of that going on. There was a group, I think, in Oakland that had little hand signals of who would bid and who wouldn't bid. Really? And they busted them all in a couple of money.

So that's not an auction rule that's an actual state or federal law. Yeah, it's like cartel or collusion or, you know, it's like, yeah, it's a federal law. It's against the law. In theory, you're stealing from the owner. Like you're defrauding the bank and the previous owner. if it's supposed to sell for what the market would bear. That's very good to know. Because if these things are as competitive as you're saying

and you go in there and do something stupid like that, you can be sure everybody's going to say, really, say that again and go turn you in. Yeah, I was working through a group in like somewhere else, Chicago or something. And I'm on the phone with this guy and he found me a few deals and I wanted to buy more with him. So he was representing me and he said, on the phone with a banker, he said, hey, by the way, in addition to the purchase price,

I need $5,000 extra. And I said, what's that for? He goes, I got to pay off the other guys not to bid. And I'm like, are you kidding me? I said, I'm out of this conversation. It's such crap. I know you've done well for me. But up to this point, we can never do business again.

And we never did. But it was the most ironic thing that he must have just not known it was illegal to say it in front of a banker. The banker must have not known it was illegal. But, you know, I'm not going to do that. Every once in a while as a cop, you do see someone that comes up and completely incriminates themselves, having no idea that what they're saying is wildly illegal. And you kind of look at it.

It probably seems logical to them. Yeah, it's logical. We pay that not to bed and they pay us not to bed. Sorry I was jaywalking. I got those meth in my pockets. It was slowing me down. I don't want to wait for the crosswalk to go to the little man walking because I'm high and time speeds up when I'm on there.

If you guys want to listen to Greg's story, we actually had him on the Bigger Pockets podcast. It's episode 385. That's the realtor that Brandon uses. Agent that I are not even a realtor, just partner. Yeah, he's awesome. Greg.

All right. Well, with that said, we got to start wrapping this thing up. This has been phenomenal. I want to kind of add, and we'll go a famous four here in just a second. But I'm curious, Jeffine's just like final, just words of advice for people who are like, you know, I'm going to do it. I'm going to try to master the foreclosure game to get some good deals because it's kind of hard to find in my market right now. What would you?

My advice is always the same. And I want Aaron to finish because he's so much more knowledgeable. I've done a lot, but he's done masses. First off, I'm the poster boy for success in this space because if I can do it, anybody can do it. Second off, just it's so cool to buy homes at auction. The guys that I know that have built a bunch of wealth buying homes at auction are not, you know, MBAs from Harvard, they're not like the guys that are going to design the next iPhone. They're just regular people with a little savvy, a little moxie, and a lot of persistence and tenacity.

And so just feel hopeful. There's going to be a, I believe there's going to be a ton of foreclosures coming up in the future. There's just a lot of, whenever there's economic pain, there's foreclosures. and you should just be prepared, take action, have a game plan, follow the five steps, and use the resources of bigger pockets to get out there and start building your wealth through foreclosures. Awesome, man. Yeah.

And if I was adding to that, it is, there's nothing like it. Buying houses at auction, it is that rush of, like, strategic gambling and making sure you do your homework on it. And it's very fast-paced. You make an offer on MLS for a house that you're hoping to have be a flip. you might hear back in a few days and five days and 10 days. This is instantaneous. You get instant feedback. You get the instant rush, the instant reward. When you unlock that door for the first time, it's an instant, yes, we got a great house or, oh man, we paid too much for this thing. It is a very

fast-paced version of real estate, which we all love. A couple little tips about it. We recently had, we had a member sign up like three months ago, getting our list out in Texas. And he was just focusing on pre-foreclosures. So he was going out and door-nobes. And he was going out and door-nobes. and door knocking, and he sent us an email day before yesterday. He said, hey, I just closed my first assignment deal. I just made 10,000 bucks on it, and I want you guys to know. Like, we had done some coaching calls with him. So he had invested like 700 bucks for leads, went in door knock. He made 10,000 bucks three months later by door knocking, making a deal with somebody and selling out somebody else. Talk about win, win, win, win. The owner gets to keep some of their equity.

The guy that meets them gets some of it. And then a different investor got to buy it from him. So winners are made in it every day. The other caveat to it, I bought a house my very first time at auction and then it took me weeks and weeks and weeks of weeks of pain and heartache of falling in love with a house and missing it. With auction and maybe real estate in life, I say you have to fall in love with the problem. It's really easy for people to go, man, I drove all hundred of these houses and only 10 of them went to sale. That sucks. If somebody's only driving 10, there's a chance that all 10 of them don't go to sale and it gets discouraging. You have to fall in love with the problem and you have to say, if this was easy, everybody would do it. And think of the problem as that's how it

gets narrowed down. That's why my system is going to work and the people that aren't following my system aren't going to win. Like you have to fall in love with the problem because it's also going to discourage other people. It keeps people out of bidding in it. Anytime it's hard and to do it, there's less competition. Anytime there's less competition, you're going to get a better deal. Anytime there's problems, as long as you have the solution to it, you can make a lot of money and have a ton of fun. Amen. Mike drop right there. That's great. All right. Let's move on to the last segment of the show. It's our. All right, it's time for our famous four.

The same four questions we ask every guest every week. And you guys have been on the show before I know, so you may have given your answers. Maybe they've changed, maybe not. But before we ask you these four questions, let's hear what's going on around the Bigger Pockets Podcast Network this week. This week on the Bigger Pockets Money podcast, Scott and I sat down with Varnoos Torabi from So Money. Farnoose shared how she turned financial mistakes in college into a career teaching people

how to better manage their own finances. She also talks about the tips she used to get herself out of debt and how she negotiated a huge raise whenever she changed jobs. It is a fantastic episode. Okay, Brandon, David, now it's back to the famous four. All right. So make sure you guys check out some of the shows in the Bigger Pockets, Podcast Network, the business show, you know, obviously our real estate show, the new rookie show, the money show. I was going to say the finance show. The finance show called BP Money.

All good stuff. And of course, Aaron and what's the podcast? I know we're going to give a chance to tell you about it in a second, but what's Real Estate Rock Stars, right? And the Real Estate Rock Stars podcast. We just want to be like your little brother focused on real estate. We like it. We like it.

All right. Now, let's get to the famous for question number one. Do each of you have, what's your current favorite or a notable real estate related book? I would be bidding to buy. This is a pretty book. Just recently put out by Aaron. Mitchestagy and David Hobbsborn. There you go.

All right. Everybody think. Man, it's going to be rich dad, poor dad, forever. You know, even though, you know, there's, it just, it changes trajectory. And I guess I just like to think about all the old stuff. I've read plenty of great books since then. Bigger Pockets puts out a bunch. The David's wealth can't wait.

There's a lot of fun ones out there. Burr. Burr is a good one. Burr is a good one. Burr is everybody's favorite. The, but yeah, it's, but always back to, you know, Robert Kiyosaki, a rich Dad, poor dad. It changed my life for sure.

Awesome. All right. How about your favorite business books? Yeah, that's a great question. The E-Mith is probably one that I was just thinking about the other day. And early in my career, that one was phenomenal. E-O-S and traction are similar, but the E-Mith was a phenomenal book for me early on. Can you share how E-Mith shaped your philosophy on?

Yeah, it's so liberating, man, because a lot of us that are entrepreneurs are hardworking and we want to make stuff happening. We live in this vision all the time. We're always trying to move, but we have this problem of us starting more stuff. than we ever can keep up with. And the concept of the e-myth is like there's technicians, managers and entrepreneurs. Probably today we call it visionaries and integrators in those other books. But most of us are visionary, so we're running around creating stuff like crazy. And no one is like following through and filling up all the details. And that's where your technicians and

your managers follow up behind you. And if you don't have those guys on your team, you're going to be in constant chaos and constant pain. And if you have great integrators or great technicians and managers, you can build a massive empire because there are people coming up behind you that got your back and take care of all the nitty-gritty details that visionary entrepreneurs tend to let fall through the cracks. Awesome. That's probably the best short description of the E-Mith I've ever heard. That needs to be like an Instagram clip right there.

Anyway, that's awesome. Yeah, I need to go read that one again. Mine is less, the four-hour work week changed the way that I looked at work. It changed the way, like, you shouldn't, like, you should always be trying to accomplish something when you work. And when I first was working, that wasn't, you know, you'd be going to the office for eight to 10 hours and it was kind of like the whole lifestyle of it. You'd have moments of working and moments of and moments of socializing. And that was the first time, the first time I read four-hour work week,

it changed the way that I thought about work and productivity and focus in the workplace. And so I think that's a, that's a great one. Did it change the way that you looked at homeschool education as well? Absolutely. If we get to, if we get to plug our five-hour school week book, it was, you know, when we came up with that for homeschooling, which now it's, it's like we came out with that a few years early, because that has absolutely blown up through COVID. It's the same thing. If you can, you know, when you focus on stuff, you get more work done. And when you try to get stuff done really quickly, you can.

It works in business. It works in education. It works in all sorts of stuff. The hard thing, Aaron's my business partner. And now I've, there's only four hours a week when I can actually catch him working. He's a great partner. I'm very proud of it. He does amazing work.

But I have to make sure it's in that four hour window and I'm never sure where it is. Exactly. The funny thing is when I first did the four hour work week, really was that. Now it's just like, I feel like I'm getting 180 hours worth of work done every week in my 40 hours. So we're working around the clock right now, but we're way efficient at it. I have the same problem with Brandon. He's four hours a week on any form of like technology. He doesn't answer his phone. I have to write him letters and smoke signals. Trying to get a carrier pigeon. They can make it all the way to Hawaii.

It is Hawaii. None of them have made it so far. Well, I just got out of quarantine. I had 14 days of quarantine. I couldn't leave my house. So I'm not going to be home anymore because I don't want to be in my house anymore. So it's wonderful to be out in the real world. All right. Next question. Next question. What are some of your hobbies? Not as good at golf. Yeah, I was going to say golf, but David has almost always beat me at it, but it is my most fun challenge to go try to do. This morning, I was on the fourth hole with my wife. We play early and fast in Colorado where we're at. And two black bears, two cubs, mid-sized cubs, were frolicking around in the fairway and wrestling and play fighting with each other. It was the most magical thing. I both eat the hole though,

so I was disappointing. So please tell me you went and picked up the bears. It was like posing, selfie style with them. Well, they're bigger than me. I did video and I'll send you the video right after. I would like to see it. But what's funny is I ran back to my cart to get my phone and the one bear started running after me because they say never run from a bear. And so my wife pointed that out to me, I grabbed the phone and ran back towards it. And of course, as soon as I moved towards it, it stopped chasing me and then kind of thought better of it. But it was for a moment there, I thought Running to my car wasn't the brightest idea ever. But yeah, they were bigger than me.

They were just still young. It was fun. It was a great day, magical. Dude, that is crazy. That does not happen every day when you're golfing. I like golf and triathlon training are my only two hobbies. I don't think I mentioned that back when I ran my half Iron Man. So Aaron and I actually did it together.

And we ran the last, what, like five miles or I don't know what I was 10 miles together. And it was so much better than doing it alone. So I appreciate you teach me how to swim. and bike and run. He sent me the, he sent me, he invited me to Brandon. He sent me the training schedule. I was like, yeah, I'll do it. Then he sent me the training schedule.

And I said, no, I won't. No, I won't. Yeah, David was supposed to be doing that one with us. You know what Brandon really taught me with that one was humility. Because I had trained really, really hard. And I was teaching Brandon to swim. We came out to Hawaii early and bike and everything. And his very first one, right, he beats me.

He's got a quicker time than me on it. He actually started after me, even though we finished together. And if he hadn't caught me, I would have had a slower time because I was like getting lazy at the end and wanting to walk a little bit. And he got up behind me. And Brandon trained for like eight weeks, right? And he's the most unathletic. You're a freak of nature, Brandon. It makes no sense.

Brandon is a freak. I went into that saying, I hope Brandon finishes today. I'm not feeling very confident for him. And he beat me. He wiped, he totally wiped the floor with me. I was super impressed. I think you were just nice and waiting for me. You were waiting for me because you knew how lonely I was.

Did it feel like you like you lost? like you lost to one of those those like dancing balloon band that the car dealerships put out in front of the wacky inflatable arm man yeah that's exactly right you ran a triathlon with one of those it was a it was a strange feeling i mean i was i was praying the whole time that brandon finished and then when he caught up and beat me i was like huh i was praying too hard and you know what he probably made you feel good the whole time that's why we all love brand it was awesome it was a ton of fun it was a lot of fun so thank you all right last question of the day. What do you each believe sets apart successful real estate investors from

everyone else who give up or they fail or they just never get started in the first place? I would jump in and say that's what I said before, the falling in love with the problem part. Like, you have to, I do not do good with competing against big groups of people. I like to find the loophole. I like to find the niche. I like to find the way where there's going to be the least amount of people competing against me. And then it's the concept of fishing. It is it is not a it's not a short-term game. This is the long game. It has cast a big net. And if you, if you're at a ton of offers, you'll get one. If you go after a bunch of houses, you'll get one. If you knock on a whole bunch of doors like David Green did, you'll get 99 people that pull guns on

you, then you'll get one person that you get to deal with. Like there's, it is, you fall in love with the problem and the, and you play that long game. And it's, it's like fishing, not hunting. And I'll, and that's great. And I'll pick you back on top and just say persistence and tenacity. I think that's the number one trait to develop. My mom and dad, bought three properties when I was in high school, and they had a partner with them. It was through the 80s crash. The partner flaked out, bailed out, couldn't make the payment. So my folks ended up with these three homes. They bought for 60 grand apiece that were like in crack alley and, you know, just terrible parts of town. But they never quit. They held them together. They kept them rented.

They survived. And, you know, it might have taken a long time because they bought it the worst possible time, but 20 years later, they sold them for 120 grand a piece. Kept one. They still have one. It's probably worth 250. And it was only because, unlike their partner who fell by the wayside and broke and couldn't hang in there, my folks who didn't do much more real estate, but that was their exposure to it, they just hung in there. They made it work. They made the payments. They fixed up stuff themselves. They used their hammers and saws. They cleaned up after their own tenants. And 20 years later, they doubled the value of the equity they'd put in that home and kept one still that's worth 250,000. So persistence, tenacity, and just not quitting. Right now, I have a property I bought

that we're over in and we've overpaid for it and it overdeveloped. I have a partner. It was a partner's fault, not mine, but responsibility is important too. But we're going to hang in onto that property and we're going to rent it. And I know that in 10 years, it's in a good location. So I know in 10 years will be made whole again. And it's going to cash flow barely for the interim 10 years. And really, I'm doing that for him.

I'd sell it and cut my losses, but we'll work it out together. And if you can hang in long enough and be persistent and tenacious, you'll always win. Real estate is such a forgiving asset class. You know, we say it a lot. If you're patient enough, absolutely. Fed keeps printing this money. Don't wait to buy real estate, buy real estate and wait. There you go, man.

That's awesome. All right, this has been fantastic, guys. Can you tell us where people can find out more about each of you? Colorado? You can come to the fair. No, David Osborne. I am David Osborne.com is my Instagram, and Davidosbore.com is my website. Yeah, and this is, I have to say thanks to get you guys.

This has been absolutely fun. You were like some of my three favorite people in the world. just to chat with. So our short podcast interview went long, but hopefully we got to provide a lot of value as we got to just talk and have fun together and share secrets. Instagram is the best way right now. So it's Aaron Amuchastagi. At Aaron Amuchastegi on there, I've got a link to all of our foreclosure resources and all sorts of other ways and message me on there and I'll message you back. And it's been great. Awesome, guys. We'll put links to all that stuff in the show notes, of course, biggerpockets.com.

So show 396 of it all right there. And I think that's all. got. So thank you guys for joining us today. Again, you guys are two people I look up to in the real estate space and just in the fatherhood space and in the entrepreneurship space and every space there is like a ton. So thank you guys for coming on the show today. Thank you, Brandon. Thank you, David. You guys are awesome. And Aaron, I love you, brother. Thanks guys. This is great. Thank you, both. This is David Green for Brandon, the triathlete freak Turner. Signing up. You're listening to Bigger Pockets Radio. Simplifying real estate for investors large and small. If you're here looking to learn about real estate investing

without all the hype, you're in the right place. Be sure to 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 Calicoe 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.com. The content of this podcast is for informational purposes only. All host and participant opinions

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