BiggerPockets Real Estate Podcast - 589: 10 Actionable Steps Anyone Can Follow to Buy a Rental Property

Episode Date: March 29, 2022

Want to know how to buy a rental property? If rising home prices, rent prices, and fierce market competition have you struggling to get something under contract, your real estate saviors, David Greene and Rob Abasolo are here to help. In 2022’s hot housing market, it can seem almost impossible for new real estate investors to get their foot in the door. But, if you follow what the experts are doing, you may be able to lock up your next investment while other buyers are stuck in bidding wars. Whether you’re wondering how to buy your first rental property or your next rental property, David and Rob have answers for you. They’ve partnered up to buy luxury short-term rental properties in sunny Arizona, all while recording the exact steps they’re taking to land a deal. If you’re already investing in real estate, some of these steps may seem familiar to you, but the gems that David and Rob drop are rarely discussed (and incredibly helpful). So, if you’re ready to start your real estate investing journey, build wealth, rake in cash flow, and build passive income, you’re in the right place. David and Rob define their ten steps to investing success so you can spend less time analyzing deals and more time collecting rent checks. In This Episode We Cover: How to define your investment criteria so you can find deals that fit your needs Working with a partner and keeping the line of communication open Blocking off time so you (and your partners) can focus on crossing the finish line What to look for in a real estate agent and how to communicate to them what you want Writing your offer with multiple strategies in mind so you can beat the competition How to not become “emotionally attached” to deals that look too good to be true  And So Much More! Links from the Show BiggerPockets Forums BiggerPockets Youtube Channel Quickly find a local, investor-friendly real estate agent who can help you find, analyze, and close your next deal using the Agent Finder Dave Ramsey's Website Zoom BiggerPockets Podcast AirDNA Voice Notes Bump App Zillow DavidGreene Team Connect with Rob and David: Rob's Instagram David's BiggerPockets Profile David's Instagram Check the full show notes here: https://www.biggerpockets.com/blog/real-estate-589 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 589. What I look for is me. So I think I'm a good realtor because I buy a lot of real estate. So if you come to me and you say, David, I want to buy real estate. I'm not looking at it from perspective of a salesperson. I'm looking at it from the perspective of someone who wants to help build your wealth. I like to work with other realtors who also own real estate and who like real estate. They don't have to be a realtor.

They want to be a realtor. This is David Green, your host of the Bigger Pockets Real Estate podcast, here today with my co-host, Rob, Rob, Bill, Abys Solo. How's it going today, Rob? Oh, it's going good, man. Just in the throes of putting together offers and negotiations and renegotiations and triple renegotiations. But I think we're getting to some closure here, which I'm really excited to share with the audience

at home. Yes. If I'm going to use a jujitsu analogy, which I do too much of already, we've got our chokes sunk in, and we're just slowly, slowly. tightening it and this deal is about to submit to our plan. So on today's show, Rob and I are going to walk you through the 10 steps to make sure that you get a property under contract in 2022. So we actually have a rhythm, a pattern, a plan, if you will, of what we do to make sure that we are moving forward on our plan of getting a property under contract. And it's only been,

what do you think, Rob, like a month or two? How long do you think we've been going at it for? Eight weeks at this point. In six months, it'll be eight months. There you go. But only two months of actual focused, yeah, like looking to get a deal. And we're narrowing in on the one that we wanted the very most that we think is going to be awesome that we're super excited about. So we wanted to make a show that shared what we did to get to this point, right? Everyone always says, here's the deal I got. They hold it up there and they wave it in front of you and they say, look how cool I am. I got a good deal. And then you listen to go, oh, I wish I could get a good deal, but I'm just not as good as them and I kind of suck. And that's what we're trying to avoid.

Here's all the work that went into the after picture, right? No one ever shows you that. they just show you what the six-pack looks like. Well, this is what the actual workout routine look like to get to have a six-pack like Rob. So I'm very excited to be able to bring this to people today. This is a very practical show. If you write down these 10 steps and you and your partner or you yourself start executing them,

you will get to a point where your offer is accepted as well. Yeah, I think we talked about this on a previous show or, hey, maybe it's in a show that's coming after this one. But consistency is the number one most important factor to success. I think, especially in this game in this market. So many people that come to me and they're like, is it too late? Is it oversaturated? Is it so competitive?

What do I do? And I've heard you just say it time and time again that you don't find good deals. You make good deals. And that's kind of this deal that we've been working through. It really on the surface wasn't what we wanted. But we started laying out our terms. We've been very consistent about chipping away at the other side. And I think now, you know, after consistency and some tenacity, now we're finally getting

to a part where we're seeing progress. and it's by following this system that we've just been doing for years now, right? 10 assistancy, the word that Rob created on today's podcast. Hey, you heard it here first. It's actually going to be the first book that I write, 10 assistity. I like it. Brandon used to make up words and now Rob is doing the same thing. So we're really excited to bring this show to you, especially if you're someone who

knows that you want to take action. You just don't know what that should look like. This is what it should look like. For today's quick... it's going to be check out Bigger Pockets agent finder. If you go to the website, you can find their agent finder service, which will help find you a real estate agent that is familiar with the Bigger Pockets way through the actual site. When you're looking for an area that you want to invest in, like Rob and I did, you're going to need to find an agent. Now, we describe

on the show how we found ours, but you can also use bigger pockets to do it even easier. So I highly recommend that you check out their agent finder system and find an agent who understands investing in your needs today. I wish I would have heard that quick tip first before all the work that I went through, but duly noted, David. Yeah, it's funny how I say that on the podcast, but I didn't say it to you when I was asking you to go do something. I want people to take out their notepad, and I want them to write down verbatim everything

we say. No, create your system, honestly. I think that's a real important message from today. Go in, have a system, stick to it. You know, the more you can be disciplined about not straying away from your system, I think the more results you're going to achieve in the long run in your portfolio. I agree. And make sure that you're okay with tweaking that system. So whatever you create in the beginning is not going to be what you have in the end. It sort of evolves like everything else in life.

So you don't need to have it perfect to get started, but you do need to have something. Something, yeah, that's right. Here's why savvy real estate investors are obsessed with bonus depreciation. It lets you take that rental property or commercial building you own and depreciate most of the cost against your income legally, 100% IRS compliant. That's instant cash flow improvement. Cost segregation guys is the number one firm nationwide, specializing in identifying these faster depreciating assets in your property. They've completed tens of thousands of studies across all 50 states from remote cabins to

apartment complexes. So if you own investment property, this is a no-brainer. So visit costsegregation guys.com slash BP for your free proposal and find out how much you could save this tax season. Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles. And the wild part is, it's just $12 a month. It handles rental screenings, rent collection, maintenance requests, and accounting, all in one platform

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or personal income statements needed. Simple, efficient, and tailored for investors like you. Imagine a lender that sees the gold mine in your property, not just the numbers on your paycheck. That's the host financial difference. And they're approved in 47 different states, so your next big deal could be just around the corner. Ready to unlock your property's true potential? visit hostfinancial.com. Don't let old school lending hold you back another day. That's hostfinancial.com. All right. Let's get into the show. Mr. Abasolo, so nice to have you joining me today. How are you? It's a Wednesday. I don't know when this is going to be released, but it's always a good day here whenever I'm recording a bigger pockets podcast. Yeah. And in addition to it being a good day because of the podcast,

we also have some potentially good news where you and I are very close to getting something in contract. you want to share a little bit about the background of where we are on this property we're trying to buy? We've really been working this one. I probably, in most other circumstances, would have not necessarily called it quits, but I don't know, maybe I would have because it was kind of one of those things where a lot of convoluted communication going on and disgruntled sellers with offers and everything like that.

So you and I approached a property that was $3.4 million in Arizona. and we put an offer in not too much under, but at around $3.25 million because it had been sitting on the market for six months, I think. And, you know, they effectively told us to kick rocks at first. You came in, you swooped in with an all-star strategy that we'll get into. I mean, it really worked out to the T. And now we're just kind of waiting to hear back on some of those final details. So we won't count our chickens yet. Right. But it is, it's looking pretty good. Yeah, and what we really want to do in today's show is we sort of want to share with everyone what the rhythm looks like of how we approached buying a property.

Because I think this will work for anybody. It doesn't have to be with a partner, but it does involve accountability, predictability, structure, and a plan. That's what we're trying to give you is if you look at the whole idea of being a real estate investor as a human body, this is a skeleton. This is what everything else sort of hangs off of. So we have 10 parts to this plan. And the first is that we have to determine the criteria.

So this could include finding an asset class, finding the area that you want to invest in, and then picking a price point. Now, in different episodes, we've talked about those things, so we don't want to get into them too deep. But I will share that our plan was that we wanted a short-term rental in a high appreciating market that we thought was going to be friendly towards short-term rentals. And we wanted to get into a price point that we felt would help remove some of the competition.

So we didn't want to be chasing after $400,000 houses because so many other people are there. we basically wanted to get into a price point where we felt like there's not a lot of other investors that are in the same arena as us because we frankly didn't want the competition. Is it anything you want to add to that, Rob, that you can think of? Well, yeah, we also wanted to just find a deal that was worth our time. Yes. You know, and that's really important because, you know, we've batted around dozens of properties at this point.

And, you know, you'll shoot something down. I'll shoot something down because we're just like, this doesn't excite me for this reason. So honestly, the best learning experience here is getting into a partnership with somebody that you haven't partnered up with before. And what you and I have really done is we've explained each other, like our respective philosophies in investing in why we do things a certain way. That way, whenever the partner shoots something down, you know, we can respect that decision because we understand where they're coming from. So it's been a really, really fun process. You know, I've done partnerships now. oh, I don't know, seven, eight times.

They've all worked out. I think if I remember it correctly, you know, you've typically shied away from partnerships. Is that right? Or you haven't done as many? You want to talk about why or maybe we can hold off into the very end? We don't want to spoil all the good stuff yet. Yeah, I'll give you the gist and then we can get into at the end.

The main reason I haven't got into partnerships is that most of the time, the assumption is we're cutting the work in half, but you actually end up doubling the work. Because what happens is everyone ends up doing their job and then they have to explain to everybody else why they did that job. and sort of satisfy the curiosity. So it ends up being more time. And a lot of the times we get into partnerships because we're afraid of doing it on our own,

which is a terrible reason. You actually want to get into a partnership because you know you have a very good skill set in one area, which you wouldn't have developed if you were afraid. You've already at that point that you've developed the skill set. You've taken action to a certain point and your partner has to. And the last is that the time element, like what you said, there has to be enough meat on the bone in this deal to justify all the work we're putting in in this partnership, which is why I've only done it on multifamily

properties that were bigger. I never did it on single family homes. I could get into the more later, but do you have any questions after hearing that? I knew that. I was just throwing you a softball, but I think that makes a lot of sense because honestly, I've done so many partnerships now. And one thing is when you partner up with so many people, it's very tough to kind of go big or go home with every single partner. And so if you're just going to partner with somebody on just one house, you're right, man, there's a lot of education, a lot of handholding if the other person is new to it. And then if you'll never actually end up doing any other partnering or any other houses, you know, flipping or anything like that, then it was just a lot of education for one deal,

whereas you and I are trying to cultivate something a little bit bigger. We're trying to go pretty big here. And so that's why we've sort of been really taking our time with you know, really understanding our viewpoints and everything like that. So very good point. Now, point number two out of our 10 steps here has to do with our viewpoint that we're forming. So Rob and I look at every deal that we evaluate through a matrix of five different areas. The first is the revenue that it creates or the return on our investment. So that's usually the first thing we look at is, hey, would this property cash flow and how much

would it cash flow? The next thing we look at is the equity, and that's either, are we getting it at a really good price? So there's equity built in. Or is this in an area where we can reasonably expect appreciation to be happening and why? That's where we start. The third is we look at debt. Like, how can we use debt on this property? Is debt a benefit to us?

Rob and I believe that in this environment, borrowing more money, especially if it's at a rate lower than inflation is a good strategy. If you're a Dave Ramsey fan, well, you're probably not listening to us talk about real estate using debt if you're a Dave Ramsey fan. So I don't worry about that, but we look at debt when it's used wisely and prudently as a good thing. The next thing we look at is time. Like, would this property take all of our time? Even if the revenue looks great, that revenue stops looking great if it's a 30 hour a week job to manage this property to get that 60% ROI. And then the last thing is risk. Like how much risk are we taking on in order to buy this deal? So every time we have a property

that we're going to analyze. We look at it through these five, so I call them prisms, right? Like, imagine like holding glasses up to your face and you're looking through those glasses at the property. And like, what are you seeing when you put on that different lens? Is there anything you want to add on to that, Rob? I mean, for the most part, I think kind of in the price point that we're in, risk is sort of the big one for me personally, because most of the actual properties that I've purchased, I would say cost between, well, $165,000 from my tiny house, all the way up to $624,000 for my house in LA. So now we're looking at properties that are at a minimum, $2 million, $3 million. And that right there places a whole new level of skepticism and

critical thinking and scrutiny for every single deal. But the strategies that we've learned our whole career, they still apply the same. You've got to be willing to take a risk every so often. And I have my whole experience. I have my whole life here of always being strategic to rely on and really take a bet on myself that I can figure anything out. If I have a little bit of confidence in myself, there's never been a time where I didn't succeed at what I do in this space. And I know you probably feel the same way. And so when you really just kind of walk yourself back from all that, it's not as risky as it feels that way. It feels that way. It is, obviously. But it does feel that way. It does.

Yeah. Now, it's important to highlight when you're doing this, like as Rob and I do it, when you put on your risk goggles and you look at the deal through the prism of risk, you're going to see risk. What you're not doing is just looking at all your deals with risk goggles and saying, oh, I found risk. Don't do it. Risk is going to be there.

Instead, what you're doing is you're looking at where the risk is and determining, do I have a plan that will mitigate if something goes wrong in that area? That's what's key about this whole thing. So you can imagine looking at a three and a half minute. million residential property is going to involve some significant areas of risk. We're going to be renting out for a lot of money per night. That could change. What if we can't get whatever, $1,500, $2,000 a night for this property?

You're going to have a lot more expenses associated with an estate this big. You are going to have the fact that if there is a decrease in the market, these properties could get, they'd be very hard to sell. People still need to buy starter homes, even when the market drops. They don't have to buy luxury homes. So what we do is we sit here and we say, all right, here's where we have risk. How are we going to mitigate it? What is our plan?

We come up with a contingency for every area that we can see when we put on our risk goggles. And there's very practical things, right? We're going to be borrowing some money to buy this place and to fix it up. Well, we're going to keep a ridiculously large amount of money in reserves so that even if something goes wrong, we have like three years of reserve set aside that we can pay somebody back. That is an example of how we look at risk. We see where it is, but we put a plan in place and we keep moving forward. And you can do that for everything.

If you've got your ROI goggles on, how can I improve the ROI on this property? Is there a place where I can make it go higher? As far as the appreciation and equity, there's no appreciation here. Well, that means that I need to get this property with more equity built in. Or there's no equity in this deal. We're going to be paying at the top of the market. Well, is the market continuing to move up? Because that can grow equity, right?

It's not, is it or isn't it there? It's where is it missing and what is our plan for how we're going to improve it. And so that's just what I wanted to highlight is we look at every deal through these lenses, but there is no perfect deal. Every deal will have something or in every one of these areas will have something that you don't like. Your job is the investors to figure that out. Anything you want to add for you, move on to number three? Yeah, I just want to talk about the a little bit of the discipline here that just between you and I and like what actually we do on a weekly basis because we are pretty consistent. I don't think we've missed a week yet, but we basically

meet every single week. Same time, unless we, you know, there's something comes up and we have to just move it, move it to the next day or something like that. But we meet every single week. We, most of the time, I would say 80% of the time, or maybe 90% of the time, we zoom, which I think is important to me. Well, first of all, like I'm ADHD. So when I'm on the phone, I just know that it's going to be so much easier for me to walk around and look at, you know, the dust on my doorframe or like on my fan or start making my bed. I always make the bed when I'm on the phone. Like I'll remake it. I'll take the sheets off and make it several times. So, like being on Zoom really forces me to like be there, be in the moment, give my time to,

because, you know, our time is valuable. And so you want to respect your partner's time and everything like that. And we've been really consistent about that. And I think that has really, even if we don't have something to present, we're still excited to meet, I think. Yeah. So that brings us to number three, which is that we meet weekly to review what we got going on. And this is incredibly important.

I really, really want to just pound this point. If you are an investor and you committed to getting your first deal, maybe you got Brandon Turner's Intention Journal. Maybe you attended a webinar where we talked about how to get your first property. Or maybe you just heard on this podcast, you said, I want to do this. My philosophy is, if it is not in my calendar, it does not exist. If I'm going to go have dinner at my mom's house or I'm going to my niece's birthday party, it has to be in my calendar. If I don't put it in my calendar, it doesn't exist and there's no way I can guarantee I'm going to be there. And if I do put it in my calendar, I can't schedule anything else for that time. That's what I love about it is I block off the big

things first and everything else goes around it. So you are not going to have success finding a property if you're new and you're not used of this. If you don't block time off to do the things that you need to do. And Rob and I block a time off every week where we're going to meet and review the properties that we are considering. Now, Rob, I just want to thank you for being incredibly gracious because the reason we don't meet 100% of time on Zoom is 100% David.

It's me every time. It's like, ah, I'm stuck. I'm not going to make it back to the office. Can we do this on phone? And you're very cool about that. but it is important that you do the meeting in a structured way, right? So we like ours on Zoom because we can share our screens. We can go over the properties that we're reviewing.

Now, what's happening is Rob and his partner are showing me the properties that they've looked at throughout the week that they think they have the best chance with and saying, hey, David, here's what we like about them. Here's what we're not sure about. Here's what our thinking is, what's your opinion. And then I will weigh in with my perspective based on, you know, the experience that I have with real estate. and they'll learn from what I'm thinking and I'll learn from what they're thinking and what we end up coming up with as a list of questions on every property.

Now, some of them we just dismiss, right? Maybe during this, we realize they're an HOA that doesn't allow for short-term rentals. That's happened a few times where they only let you do it six months out of the year. Those get thrown out. Other ones we say, yeah, this would work, but we need to figure out these things. And in that meeting is when we determine what we would need to know. This is why it's so important you have the meeting. So we have our list of properties.

We then get our list of questions. now we've got our work set out for the next week. And that would lead us to step number four, which is delegating tasks. Rob will say, hey, David, here's what we need from you. Can your lending team solve this problem? Can you tell me what you think? Do you know a realtor in this area that can help us answer this question? And I'll do the same thing.

I'll say, Rob, can you look this one up on AirDNA and tell me what you think? Can you look at a comp that would show maybe the ransom be higher than what AirDNA is giving us? We will delegate the task that we have on an individual. property. And then that's what we'll work at for the following week until we meet again. Anything you want to add there, Rob? No, no. I think we can move into number five because this really sets the tone and, you know, the communication for the entire week. And number five here is communicate throughout the week for follow up. So this would be text messages, emails, voice notes. I actually really like voice notes. We send a lot of those. The only thing I don't like

about them is when you send them, if you don't hit keep, they erase. And all of your nuggets, all of the golden nuggets that you send me, they're gone. They're gone after. I listened to it one time. But it's really nice because we may not be in a scenario where we can take a phone call. You know, I've got like two kids and all that. You might be in meetings and everything like that. But we can relay some pretty nuanced things that are very hard to relay via text message. We send emails. This is where we're kind of introducing each other. Like if you're introducing me to a realtor that you're connected with or if you're introducing me to someone on your lending team, this is where I can then pick up the communication and drive that ball forward a bit.

Yeah, that's important. So if you're working with a partner, like what we just mentioned in step number four when we're delegating tasks. Okay, Rob, you're going to work on this and I'm going to work on this. You don't want to just get stuck and then say, oh, I don't know what to do. I'll wait until the end of the week and we'll discuss it. You just lost five days of possible productivity. Instead, Rob's going to say, hey, this is what they're saying. What do you think? Or I'm going to be like, hey, I'm stuck on if this is worth it. Can you look this part out for me? I need help accomplishing my part and you can help me with it. And that's when this communication happens. The voice notes, they're powerful. It sounds simple, but there's time.

when you've received a text that was, you know, like three feet long and you just think I'm not even going to read that. That's something that should have been a voice note. My entire inbox, I'm like, no. Exactly right. And then there's other times where you get that phone call and you're like, I just don't have time to take this call. So the voice sounds like the perfect medium between the two. And if you don't have a partner, this is something that you need to be working on yourself. If you're meeting every week with yourself to review where you're at on every property, make sure you're working throughout the week to get the answers to the questions

that you needed so that when the week comes, you actually have information to be able to move forward. This is the structure that's so important is we're treating it sort of like it's a job, not just like it's a hobby. I'd like to squash a bug here, just something that I've really been wondering since the day I met you, and I just want confirmation on if this is like an urban legend or if it's true. When I first met you, when I did the bigger pockets podcast, like six months ago, I was like, oh, yeah, I'll shoot you a text. And then you're like, man, I've got 1,200 unread texts right now.

I was curious. Do you actually have 1,200 texts? Because I think about that every single time I text to you. It's more now. In fact, what happened is I need a new iPhone because you hit a certain point where it stops displaying the number on your little text thing. Like it doesn't even tell you how many unread text messages you have. I hit that.

So that's one of the things I say to human beings. If you take the same road everybody else is taken, you're probably not going to get there, right? Like, Rob, you know, text me. And if you don't hear back, you don't take it personal. You're like, all right, I need to email his assistant Krista and get time on David's calendar. And then boom, you've got all my attention. And I use that hack all the time. Like, if I'm trying to get a hold of somebody who's over 30 years old and they're really busy,

I send them a message on Facebook Messenger because nobody else uses that other than 30-year-olds or older, right? So like, if you look at my Facebook Messenger, I have like two or three unread messages. If you look at my text, I have a million. So that's just a little quick tip for everybody there is find the road less traveled. tip. Okay, it's good to know. All right. Well, I always send the gentle, just I write bump.

Anytime I hear back, bump. Just a little friendly reminder. Yeah, everybody who's listening, if you're in my life and you text me, just bump me all the time. I don't get upset about it. I'm never going to say, why are you bumping me? I know I need bumps. I need to get bumped all over the place. It's really hard to get a hold of me, and I'm aware of that.

So thank you, Rob, for your patience there. Go to the day. I need to get bumped everywhere. If you own a large or complex rental property, congrats. And I'm also sorry. One day you're building a portfolio. The next, you're reconciling six accounts, five states, four LLCs, three partners, two property managers, and running your portfolio starts to feel like running a median size accounting firm. And if you got into this to get your time back, that's not ideal.

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Again, that's biggerpockets.com slash dominion. If you think property management is expensive, try mismanaging a vacancy or an eviction or a maintenance issue that turns into a five-figure problem because no one caught it early. That's expensive. A good property manager isn't overhead. Their protection against small mistakes turning into big losses,

and that matters more than ever in this economy. That's why I like Mind. Unlike other property managers, Mind manages your property like an investment. They obsessively measure the things that matter for your bottom line. Things like occupancy, delinquency, and net promoter score, and they have the results to prove it. Go to mine.co slash show me to see how mine performs and get your first month free, which is much cheaper than learning the hard way. All right, cool. So moving on to number six. This one is receiving information from your realtor. This is really, man, this is big because we get so amped up and, you know, step five here texting. I'll text you bangers all week and be like, dude, check out this house.

It's going to gross $250,000. And then we get all excited and we're like, oh, what if we do like a hot tub and, oh, a golf card and a basketball court? And we get all excited. But it's kind of one of those things where, you know, I'm usually better about this. But on some of these luxury properties, one cannot help but get excited at certain properties because they're like dream properties. then you talk to your realtor and your realtor's like, oh, yeah, that isn't an HOA. And they will not allow short-term rentals. And you're like, no, I spent three hours combing this out.

Happens all the time. Everyone does this. This is where experience has led me to sort of being able to direct in these situations better than someone who's not experienced by my own properties. And frankly, the thousands of houses that we've helped our clients by, I had to learn how to do the same thing. You don't want to get too emotionally connected or put too much time in. into a property that you don't have a good chance of getting.

So when we first look at them, it's easy to just want to run as far down the path as you can get, even in your mind of, oh, I can do this and I can do this, and I love it and I have to have it. And as a realtor, I've learned, if that house has been on the market for two days, don't do that. There's 30 other people that are doing the same thing. And you know what? It kind of goes down that. Don't take the road that everyone else is taking, right?

Like if you're trying to text me, that's not the best method. You don't want to look at houses that everybody is looking at, especially if you're to put all that time into it. So it's important is that you identify, is this a property that would work for what we want? You go through your matrix, which for us is these five prisms that we look at. And then we say, do we have a chance of getting it? So oftentimes the first step is having our realtor call the listing agent and saying, how many offers do you have and where do we actually have to be? And if the listing agent plays this dumb game of, I don't know, highest and best, that's like one of my pet peeves is this little parrot on the shoulder of a pirate that just says highest and best and they

call themselves a realtor. That is not selling a house. If your listing agent is doing that, they are not earning you money. They need to be aggressively trying to get a good offer from the other side. But if we get that and they're like, oh yeah, they just set highest and best and they just don't really care, we're probably not going to go after that property. Okay, let everybody else have it. That's why we went after the one we're talking about now that had been on market 190 days or whatever it was because they weren't getting a ton of action and we knew that we had a better chance of putting time into it. So that's huge. Well, you know, I've actually got a new policy now. Whenever, whenever a realtor says highest and best,

I actually submit lowest and worst. So I'll submit an offer for $2 and see what they say. Put that in your pipe and smoke it. Highest and best. That's really good. So a lot of what the conversation involves around in the beginning is something that actually should be happening in the due diligence phase. Okay. That's why you have an inspection period. And it's just, it's easy to not be disciplined and to do all that up front and call it work. And this is how you get your heart broke, right? Like, you try to date too many people that aren't interested in you. You're just going to get tired of the rejection and stop dating and become like a cat person, right? That's not what we want to do. We only want to actually put our efforts of pursuing the properties that we have a reasonable chance of getting. So part of this is experienced, but the other part of this is just working the system that we have where we know, all right, realtor, we need you to go find out, can we get the property? What price would realistically get it at, they'll bring that information back to us. We will then kick in and say, okay, at that price, would this work? How much equity, we look at it through the prism, how much

equity be in there, how much risk would be in there, how much revenue would we expect? And if they have nothing, then we go look for a different property. Well, yeah, I mean, like, let's talk about that a little bit because there's obviously the communication, not just the communication, but the actual selection of your realtor. Yes. It's so important. So can we talk about what do we look for in a realtor, what kind of questions do we ask? Like, how do we even choose ours? I would like to tell that story in a second. Yeah. So I'll start and then I'll let you tell our specific story. I'll start with a general. What I look for is me. So I think I'm a good realtor because I buy a lot of real estate. So if you come to me and you say, David, I want to buy real estate. I'm not looking at it from

perspective of a salesperson. I'm looking at it from the perspective of someone who wants to help build your wealth. I like to work with other realtors who also own real estate and who like real estate. They don't have to be a realtor. They want to be a realtor. Now, that means they're going to be picky about their clients. So you actually have to be on your A game to get them to work with you. And a lot of people don't like that. They want the realtor. The answers their call right away that they can boss around. I don't like that. If I can boss around my realtor and I haven't proven why I should, they're probably not that great. So what I tend to look for when I'm going into a market is what is our strategy. That's why the number one thing that we talked about

was determine your criteria. What asset class, what area and what price point? Because you want a realtor who works in that area, owns in that area, sells in that price point, and understands that asset class. That's actually what you're going to look for. So we kind of talked about that, Rob, and I connected you with a couple people. And then with this specific issue, we had a bunch of questions. And I said, hey, we need to find a person that is an expert in this asset class. Why don't you call the brokerages in the area and ask who their luxury specialist is and then find out if he has these questions. And I shouldn't have been surprised. You completely hit it out of the park on like your first try. You came back with a rock star. So tell me what you actually did to make that happen.

All right, man. So I woke up. I went out to my front door. I took out my yellow pages. You know, I found it. I was like, all right. And I flipped all the way over to the S's and found Sotheby's. I mean, we all know that Sotheby's is obviously like one of the more luxe places out there. And so I called them up. And it was like the receptionist of the. the place and I, and I was like, listen here, Bob, Rob Bill and David Green are looking for a luxury house. I was like, do you have, excuse me, do you have anybody that might be able to help us, please? And so they were like asking. And I was like, look, it's really important to me that they know short-term rentals because I already know short-term rentals. And so if they don't know,

I'm going to know that they don't know. And so she was like, okay, okay, great. And so she actually ended up patching me through to two people. They were like partners. I think they partner up on selling houses and everything like that. And I talked to the guy. He was super. super nice. I mean, really, really nice. And I started kind of, you know, interrogating him a bit and being like, well, what a short-term rental mean to you? And, you know, we kind of went back and forth. And it was pretty clear that he, it wasn't his wheelhouse. But that's okay. We talked it through. And I was like, hey, man, you know, honestly, I appreciate your time. But I need someone that can help me accurately estimate how much we're going to gross on a property like this because, you know,

it's three million dollars. And he's like, you know what? I know a guy. And I was like, You do? He's like, I know a guy. He doesn't work here. He actually works at a, you know, at a competing brokerage. And he's really great. This guy knows everything there is to know about short-term rentals. He owns five luxury short-term rentals. He owns a property management company that manages 70. This is going to be the guy. And I was like, hey, I just want to say thank you because you just gave over a $3 million lead to a competitor. And I know he's your friend, but that's super nice of you to do. And that's what he did. And I called the guy and, you know, I talked to this new realtor.

And he was schooling me, man. He knew everything there was to know about luxury. And like his insight throughout this whole process has been so, so helpful for us because now I can run my comps and I can go back to him and say, hey, am I off here? I have calculated $47,559 and $49.49. Is that right? And he's like, yeah, that's pretty close. Or actually in this neighborhood, it's off because of this, this and this and this. And so there's a little bit of a of a synergy there that I get to work with.

and it wasn't necessarily easy to get to that realtor. There was a little bit of work involved, but now it's going to dramatically affect us moving forward because now we got the best of the best. And that perfectly highlights step number six. Receive information from your realtor. If you know your asset class, your area, and your price point, you can go to the realtor and say,

what do you think we need to do to get these properties? What should be aware from? And that's some of the stuff he provided because he owns these things. One of the concerns I had was, yeah, We're being told this is the revenue it's going to get in a night. That seems really high. How can we verify that? Well, he happens to own properties, and he actually said,

you're probably going to get more than that. You're more than okay on this one. Avoid these ones. So we got information from the realtor that helped us to develop the strategy that we used to move forward. And number seven, the next step would be communicating what we need to that realtor. So that's where you say, here's what I want you to look up. here's a question that we're stuck with.

Can you ask someone else in your office if they know what to do in these situations? That is also very important is that after your weekly meeting and the tasks are delegated that you go communicate with your agent and say, here's what I need to know. Is that something you can help me with? Or is that not something you can help me with very clearly? Well, we also want them to go in and sort of suss the situation, if you will, right? So if this property's been sitting for one, two, three, four, five, six, seven months, we kind of want to know why.

and we want to know if the sellers are at all motivated, why hasn't it sold? Has it fallen in escrow, or has it fallen out of escrow? And, you know, go in and do a little bit of recon. Run some recon on the property, get back to us and let us know why. And usually they'll go in and they'll talk to the listing agent. And that property that's been on the market for six months, that listing agent might say, oh, yeah, hey, by the way, the seller is super motivated between you and I. Let's get this done. That's not exactly how it worked out for us. But that's really important to have A realtor that can play the game a bit. I think that's going to work out in your favor whenever you're really going back and forth in

negotiations. Yeah. And I'll probably highlight here before we move on that when you're telling your realtor, here's what we need. A big piece of it should be is telling them to call the listing agent and find out, if we wrote an offer today at this price, would it be taken? Like, just don't waste your time in a hot market. If there's 14 other people that want that house and you're insistent on having very strict

criteria. It's great to have strict criteria. That's why the first step is you should figure it out. But if the property isn't going to work for that, don't try to make it work. Just move on from it and find a house or a property where it's still going to work for you and they're more motivated. Yeah, it's been really interesting because we tend to only look at properties that have been listed for a while because we're just so tired of competing. It's, you know, it's why compete with 100 people when we can go find the diamond in the rough that's been listed for a while and see if we can make that one work. And for the most part, I think most of our options have been things that have been sitting for a bit at that higher price point, which is really great for us, because we see where we can

add value to the property. And we know that we can maybe come in a little bit lower. And if we can't come in a little bit lower, maybe we can start asking for things like seller credits. That's exactly right. Now, I use this strategy on the David Green team with all of our clients. As I tell people, stop chasing the house that's been on the market for two or three days. You're going to get your heart broke or you're going to grossly go over asking price. but of course it's tempting, but it says it's only $800,000 on Zillow, why can't I get it for that price? Go work a miracle. But this is the strategy that I use for myself. We're looking at one here that been on the market 190 days. I have an offer out on one yesterday that was sitting on the market

at 2.4 and sat there until it expired. And we got a hold of the seller's off market. And I'm now trying to put a deal together with them because their motivation level is different after their house sat and expired. I only go after properties that I think the seller wants to sell it just as much as I want to buy it. If I want to buy it more than they want to sell it, they're going to get a lot of other buyers and they're going to sell it for more. So be disciplined in how much time you spend on a property. The first thing you should be looking at after it matches your criteria, which for us are those five things, is do I have a chance of getting it? If the answer is no, don't put any more time into it. Wait until it falls off the market or it sits there for longer.

if the answer is yes, then you can dig in with a little bit more due diligence. Yeah, if you're excited about a prop, just a rule of thumb, if you see a property, you pop up on Zillow and you're super excited at how beautiful it is and you're even more excited at the price point, you're probably not going to snag it for that price point. It's pretty rare. All right. Step number eight is actually writing an offer. So we're going to do a show in the future with a lot more detail about this, but just let's

focus on this deal that you and I are working on that we're probably going to have in contract today. Can you share a little bit about the offer that we wrote what we asked for and why? Yeah, so I alluded to this a little bit at the beginning of the show, but this house was on the market for, I think, just under six months by a couple days. It was listed at 3.4, and we made an offer with a couple of interesting contingencies. So we came in at $3.25 million, so about $150,000 less than asking. But then we also asked for a $75,000 credit to be applied towards. closing costs and other things like that. So really, when you start mathing it out, this property, the offer is closer to 3.175 million.

And then we also asked for all the furnishings to be included as well. They weren't necessarily all my favorite furnishings, not necessarily things that I would choose. But they were pretty good. They were good enough for this property. And I was like, I'm happy with 90% of this stuff. And so when you factor that in, I mean, that stuff could be anywhere from, you know, $35,000 to $50,000.

And that's really important for us, especially in the short-term game where, you know, cash on cash is a really important metric in our matrix, right? And so if we can save $75,000 in costs and we can save $50,000 on furniture, yeah, we've just saved over $100,000 in cash. And so our cash on cash, our ROI really starts going through the roof. Was there anything else on that offer that? Oh, yeah. And then we also asked for a 60-day close. A 60-day closed because we wanted more time to be able to raise money. And then we asked for a home warranty that would cover anything that might break in the property. But I want to highlight here is that price is not the only thing that matters. Most people get stuck on price. They think they

won or they lost based on the price. This property, from what we've seen so far, we have to do inspection still, appears to be turnkey. We're not going to have to spend hardly any money in fixing this thing up. And now that we've taken out our closing costs, and we're actually able to buy down our rate with that $75,000 credit and get it to be a cheaper monthly payment, and we don't have to furnish it. Even if we paid more than someone else, our cash on cash return would be much higher than theirs and we would have more capital by another house. That's the thing is we structure the deal so that we have minimal money in it while still keeping incredibly big reserve so that it's not risky and getting to borrow the majority of the money at a lower interest rate.

Now, people get really good deals on properties, but they need a ton of work and then they dump a bunch of money into it and then they got to borrow money from somebody else, like a hard money lender at 12%. And so even though the price was better, what they actually end up spending per month ends up higher. So it's not only about the price. And that was one of the ways that we're able to work this deal out to work for us, where the other people who were looking at that property probably just got stuck on the price and couldn't see past it. I mean, yeah, literally you and me, just with the credit and the furniture, you get to keep $60,000 in your pocket.

I get to keep $60,000 in my pocket. Not only that, buying that rate down, you know, that's not necessarily a big deal on a $300,000 house. But on a $3.25 million house, buying down a half a percentage point, that's a pretty significant difference, not just in the monthly, but in the actual interest that we're paying on that property, like over time, over the life of that loan. That's exactly right. So that's one strategy that we use on the David Green team that we brought into this one was a lot of the time, if you got to deal with the seller and they're willing to take 500 grand, it might be better to give them $520 with a $20,000 closing cost credit

that you can use to cover your closing cost to fix the house up to buy down your rate. Because when money is cheap like this, borrowing more of it is less expensive than when rates are higher. Another thing, moving on to number nine, actually offer strategies. Like, well, our strategy with this deal is when we first submitted that offer, they said, no, they told us to go, you said kick rocks. I think maybe pound sand might be more appropriate because it's in the desert, right, surrounded by sand and Scottsdale.

So they told us to go pound stand. And we said, that's fine. this is normal, right? My experience as an agent, I understood that the sellers were in an emotional place. They received our offer as kick in the pants. Like, this to them was like an insult that it was lower. And if your house has been on the market for six months and it's not selling, you have some unrealistic expectations.

They should have already dropped the price. So here's what we said to the realtor. Ignore them for a couple days. Then we want you to go back to them. And this is what I would do if I was the buyer's agent representing us, is I would say, hey, my clients are going to buy this house if I tell them to buy it. They rely on what I'm saying. They don't really understand whether they should buy this one or another one. They told me to go find them a deal that works for their numbers and that's my job. So if I tell them that this is

the one that's going to work for their numbers, they're going to do it. But the numbers need to be right here. Listing agent, what do we have to do to make this work? And we are going to put the onus on that agent to go work on her own clients and say, guys, what do you need to feel good about this deal. That is different than what most agents will do, which is they'll protect their own ego at the expense of yours. So what they'll do is they'll say, you know, I got a lot of clients. I don't really need this sale, but my clients really want the house. You know, what do we got to do here? That doesn't work. You want it to be the opposite. You want your agent to say, I want to put this deal together. Tell me what has to happen in order to do it. My clients will listen to whatever I tell

them. That's literally what I say to the agent on the other side. And what happens is it now gets the listing agent to go to her clients and be an advocate for us. She's or he is going to go say, listen, we got an offer here. We haven't got anything else. I think this is our best shot. What do you guys need to feel good about this deal? And then she's going to go back to our agent and say, here's what they said. And he's going to say, oh, the numbers won't work at that. Like, what can we do to get him to this point instead? And we let the agent sort of whittle down the sellers until they got to the point where they were good with us. Now, I knew if this house has been on the market for six months, that there's a very good chance that they're not going to

maintain their resolve to keep going. That was one of the things that Rob really liked about it. He's like, dude, this one's been on the market for a long time. There's not a lot of houses that are at this price point. There's not a lot of buyers that are looking at this price point. They can't move on with their life until they sell it. And that's what you want to remember is when it's been there for a long time, when that offer comes in, their knee jerk responses, no, most of the time. But then what happens is their thoughts start going into what else could we use this money to buy? If we got rid of this thing, we could go buy that house in the Caribbean or we could buy that multifamily property that we could use to retire.

Like all that stuff starts moving through their head and it slowly weakens their resolve to hang on. And lo and behold, about a week, maybe a week and a half later, a realtor came back to us and said, yeah, they're willing to accept your terms. They just ask for a few little things to be different. Yeah, I'll actually want to point out the phrase that I, you know, that he put out there. And I think he said putting them on ice.

He's like, oh, yeah, I call that putting them on ice. And so that's basically, that's ignoring them for a little bit. and then, well, coming in strong and saying, hey, I want to put this together. And then that realtor came back and said, highest and best, whatever. And then he was like, okay, then he put him on ice for, I don't know, however long, several days. And then he came back and then he's like, hey, I really want this for my clients.

They're not going to go for it. I'm the decision maker here. I've comped it out. The numbers have to be here. And yeah, they accepted most of the terms and we're kind of working through what that means. But all in all, a pretty, I called you that the morning he told me that. He sent me a text and he said, call me. And I was like, oh, okay, this is, this is always my favorite text from a realtor.

And then he was like, all right, hey, they didn't really counter your counter after they had let it expire. And I called. And I was like, man, David's going to be so happy about this. Because it worked out exactly how you called it, man. I mean, it was like pretty funny. Like, exactly how you called it. I guess, hey, man, I guess you know what you're talking about. Well, thanks.

Rob. This is David Green Team Penn. I'm holding up here. That's where I learned it, right? So that's why we wanted to share this because most of our listeners won't have the experience that I do being in these situations. And they wouldn't have understood this is a strategy that will work. So I wanted to make sure we conveyed that because it did.

It worked awesome. The last thing, step number 10 is have several irons in the fire. And this is what we do. So we never get too in love with this deal while we had it on ice when they rejected our offer. And we said, hey, just let them chill for a minute, let them think about it. We didn't just sit around crossing our fingers and feeling tempted. to adjust our standard. We went out and looked for other homes.

And let our realtor tell their realtor, hey, these guys have me looking for other properties. If you guys don't want to put this together, they're going to find something else. I'm going to find them something. Let you be the thing that I find them. But you got to be willing to keep looking. You cannot fall in love with any one deal. So we sort of set that one off to the side and we kept evaluating other properties.

We kept meeting every week. We kept bringing new properties into this perspective that we had. So we never fell in love with one property. and this will help you in two ways. One is it will stop you from falling in love with the property you should not be in love with. Two is if that property is really good and you just don't want to accept it, when you see everything else is not as good, it will make it more clear that that's the right property to go for.

So this is what we do to make sure that we protect ourselves in those two ways. Anything you want to add there, Rob? No, I think that's, you know, obviously I very much overanalyze every deal. And I think your advice to me, because in this market, it's crazy. We're just lucky to get an offer accepted period. but your advice was like, hey, stop being a sniper and start throwing grenades. And I was like, all right, all right. I'm going to ease up a little bit on every single criteria.

And so, yeah, then I just started. I was like, okay, I'm just going to look at all of the other prisms in the matrix, I guess, if you will. And I'm just going to cash flows there, but I'm just going to really start evaluating deals on all those other points and, you know, start looking at dozens of deals. And I'm like, all right, these, we have all of these to fall back on right now if this one doesn't work out. Right.

We call that the call of duty strategy, right? You don't win at call of duty by just hiding. in one little spot and waiting. You kind of have to go out there and go crazy. Now, once it's in contract, we will go into sniper mode. That is when we look down the scope at every little single fine-tuned detail to make sure we like the deal. It's not appropriate to do that before you even have it in contract.

That's how you'll just burn yourself out. It's too hard to look from a scope if you're trying to see the whole field. So that's what we're getting at there. I forgot about that. It's a really good analogy that you brought into this. Yeah. Well, hey, it was just yours. I'm just throwing it back out there.

But, yeah, we'll get into that. that whole strategy of the actual due diligence of a luxury property in a different episode. But, you know, this pretty good synopsis on everything we've been going through for the past, what, eight weeks or so? Yeah, that's exactly right. And I really believe this method works. I do it with when I partner with someone, this is how I do it. And when I was in like super buying mode, this was a strategy that I had set up when I was

buying three to five deals a month and I was using the birth strategy is I'd meet with my realtor every week. We would discuss these things. I had a prism that I looked to every property through. I would look at the list and say, here's what I need to know. Now, it's obviously more fun and better to do it with a partner like Rob, who understands this asset class because he's done it a ton. And I don't really have to teach as much as Rob is bringing value.

That's what you want your partner to feel like. Is there angles that you don't see and they know stuff that you don't know yet? And Rob's really experienced with this. So that makes it a lot more fun and easy. But the system's the same. And that's what we're trying to say. The 10 things that you need to do if you are serious about wanting to get a property under contract.

So thank you for joining me here, Rob. I'm going to let you get going, but I'm going to give you the last word. Oh, wow, so much pressure. I guess, hey, the personal note here, I'll let you know what the realtor says. He's going to be getting back to me here in the next hour or so. So the ultimate cliffhanger for everybody listening at home. So if it works out, great. We'll start our series of due diligence, like we said.

And if it doesn't work out, that's fine. We have other irons in the fire. We'll talk about them in our next meeting. We win either way. So thank you very much. This is David Green for Rob Call of Duty, Yaba Solo, signing off. Thank you all for listening to the Bigger Pockets Real Estate podcast.

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