BiggerPockets Real Estate Podcast - 772: Stop Looking for Perfect Properties, Search for These Instead

Episode Date: May 30, 2023

Real estate investing has changed a LOT over the past few years. For most people getting into rental property investing in the mid-2010s, profitable properties were plentiful, cash flow was almost automatic, and equity was flowing in the tens (if not hundreds) of thousands every year. Unfortunately, this real estate market is long gone. Now, there’s blood in the streets as new investors try to salvage sickly-looking deals that don’t cash flow and come with pathetic-looking profits. And maybe, just maybe, that’s why now is the best time to buy. Make no mistake, real estate investing isn’t easy, and just buying any house WON’T make you rich. But, the 2023 housing market has far more opportunity than most people think, and David Greene, Henry Washington, and Rob Abasolo are here to explain how. These three investors have been gobbling up rental properties as quickly as possible. And even with lower margins, slim cash flow, and limited equity, there is some method to their madness. If NOTHING you’re looking at is cash flowing and almost every home seems overpriced (especially with today’s mortgage rates), this is THE episode to tune into. In it, David, Henry, and Rob will detail how you can “create” a profitable property while the masses sit on the sidelines, as well as go over real, authentic deals they’re doing today to show you it isn’t impossible to invest in 2023.  In This Episode We Cover: How to analyze a real estate deal and what to do if none of the properties show a profit  The 2023 housing market and how things have changed over the past few years Investor expectations and why the times of “get rich quick” are long gone  How to build, buy, or force equity into your rentals so you get rich in the background Simple steps the average investor can do to make their real estate deals work  Renting vs. flipping and which exit to take in a volatile housing market  And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Hear Dave on the “On the Market” Podcast Subscribe to the “On The Market” YouTube Channel David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Rob's BiggerPockets Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Introduction to Real Estate Investment Analysis How To Analyze A Short-Term Rental In 2023 2023 Housing Market Outlook The Housing Market “Signals” That Predict Where We’re Headed in 2023 Connect with Henry: Henry's BiggerPockets Profile Henry's Instagram Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-772 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 772. The people buying now are the people who are buying in like 2009, right? Like those people were pumped that they bought in 2009. This is what it looks like. This is what it looks like to build its wealth. It's not pretty now, but I think it'll be beautiful in the long run. We're always going to be pumped that we bought now, like 10 years for now. And I say that constantly.

Tell me a person you know that bought a house 30 years ago that says I wish I never would have done it. So on everyone. This is David Green, joined by my fellow Avengers, Rob Abbasolo, and Henry, Washington with a special episode for you guys today. We're going to be talking about how to analyze deals in 2023 in the challenging market that we're in. And the reason that we are making the show is we actually received a one-star review on Apple Podcasts. And we wanted to share that with everyone so they can understand where we're coming from. The review was titled, It Used to Be My Favorite Podcast. And the reviewer says, I used to listen to the show religiously, but it feels like it gets

more negative with each new episode I listen to. And it makes real estate investing seem unattainable. Now, that was a bit of a bummer. However, we understand where the person's coming from, right? The one-star review may not have even been reflective of us. It could have just been frustration with the market, or it might be that we're shooting straight with everybody. We're sort of in a position here where we could tell you

that everything that glitters is gold and real estate is easy, and you should quit your job, and spend your whole day listening to us, replace your active income with passive income. But for those of you that are living in the real world, you've seen how unattainable that can actually feel. So the show is a reflection of what we're seeing in the market and we value integrity over money.

We're never going to tell you anything that we don't actually think will work. And it can feel like a bummer. We get it. So in today's show, we are going to be replying and responding directly to this concept that real estate feels unattainable and giving you some tips, techniques, and tricks that work in today's market as well as where expectations could be set and what we are all doing to make deals where other people are missing them.

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Before we get to the show, today's quick tip is brought to you by me. And it is change your expectations when it comes to real estate investing and stop looking at it only for a cash on cash return. We are going to talk about the internal rate of return. We're going to talk about tax savings. We're going to talk about adding equity, buying equity, converting equity. A lot of more high level stuff when it comes to real estate investing that the savvy investors are using to still get returns on their money outside of just a straight cash-on-catch return. So think about real estate a little bit differently, and I think after today's show, we will have helped you do that.

Anything you guys want to add before we get into it? Well, we'll uncover later that I'm not good at freestyling. So listen to the very end to understand this reference. But no. That is perfect. Let's get into it. Rob Elt, Henry Washington. Welcome to the Bigger Pockets podcast.

First and foremost, how are each of you today? Good. Good. Thanks for having me on, man. It's always been a dream to be on this show. Yeah, and I know you actually mean that today because you're not wearing a black pocket tee. You're wearing a white shirt.

That's right. Your camera lighting is brighter than usual. You have a bit of an angelic glow as we're recording here. New Year, new me, baby. Yes, wonderful. And Henry, back in the perp as always, I see, still looking cool. How are you today? I am fantastic, bud.

Happy to be here talking to my buddy Rob and David. Yeah, thank you for the also ran mention there. And if people don't understand what I'm talking about, go follow us on YouTube. You will see more than you are just hearing and all of this will make sense. Now, today's show is going to be a little different. We are venturing into territory that most podcasts are afraid to, but because I'm hosting this thing, and I fear no evil, we're going to get right into it and direct this. We received a review about the show, which I think bears repeating with everybody.

So this came from, it was a review title that was labeled used to be my favorite podcast. And the reviewer said, I used to listen to the show religiously, but it feels like it gets more negative. Each new episode I listen to. And it makes real estate investing seem unattainable. And the three of us kind of put our heads together there and thought like, this is probably a common theme. A lot of people are feeling that they started listening to BiggerPock's podcast. They started listening to Real Estate Investing online. And it was this really shiny, blustery object.

Like, hey, I don't know. Is blustery good? I'm even thinking luster. And I just added bluster. So opposite of bluster, lustry object, very appealing. And you're hearing all these stories of people that quit their job after six months or became multi-millionaires on the power of real estate investing. And people charge into this thing super excited about real estate investing.

And then they either get their clock cleaned or they can't find the deal that people explain that they got and they get discouraged and think it's something wrong with them. Or they buy bad deals because they're trying to figure out, well, if you just buy real estate, it's supposed to work. and then no one talks about it. No one jumps up and screams. I lost a lot of money making bad decisions. They just sort of slink into a hole of shame and sit there. And we want to just have an honest response to this that real estate is harder than I think it's ever been. So let's start off with you, Rob. What is your overall experience with the market now versus when you first started

investing? And when was that? Okay, I'm going to answer that. But before I do, I just want everyone at home to know that we read every single review and we take them all very serious. They when someone leaves us a five-star review, it makes our day when someone leaves us a one-star review, which is rare, but that's what happened here. It bumps us out. We want to make sure that the show relates to everybody. So going back to your question, David, what was it? I was talking about how you never listened to me. Yeah, sorry. That's on me. What was real estate like when you first started investing? and when was that? Okay, so I started investing in 2017, so around six years ago. And back then, I just, for me, it was the Wild West. I think true Wild West for short-term rentals in Airbnb

was probably like 2010 to 2014, really probably 2010 to 2017. Like you could have done anything and made money on Airbnb, but me getting in, that's when people started to sort of figure it out and figure out that you could actually make big money on it, right? Like at the beginning, it was sort of people just renting out a bed in their house and they were making like, you know, extra cash on the side. But 2017 is where people were like, oh, man, we could rent an apartment and then put it on Airbnb and make like two or three thousand bucks a month. And so at that time, it was really, really, really hard to fail.

And I will totally like never say that me getting into this and kind of building what I built was because of any particular genius. It wasn't because I made the right decisions. It's just because I happened to get started when I got started. Not necessarily from a time standpoint, but I just started and figured it out relative to the market that I was in. And so I could really walk into any deal and have a large margin of error, right? The returns from 2017 to 2021 were pretty unreal. 2021 was the most money that anyone really ever made in this industry.

And then 2022 and 2023, that's when we started to see. the calibration in things hitting what I think is really back to normal. So a lot of people right now are sort of, they're a little nervous because they're like, oh my gosh, you're making way less money. Like overall, I would say most hosts are making between 15 to 30 percent less year over year on their properties. And that's a big hit, right? Like I can totally understand why anybody would be scared at that metric. But I think that that's a lot closer to what it was before 2020 and 2021. So when you sort of like evaluate everything, it does seem scary, but I just think that we're calibrating to like more realistic and normal returns. Does that make sense? Yeah, 2021 was the era

of steroids in baseball. There was an asterisk that year. It was the best you're ever going to see. Now that more people are getting into this, like you were saying, there's maybe 15 to 30 percent less returns per property. But that's because there's probably 15 to 30 percent more people that are getting in this, that that money is getting spread around four, which is how equilibrium works. And we have the option to tell you the truth, which is what we have bigger pockets believe is the right approach and all three of us that are on the show, is integrity is more valuable than money. I was just telling someone that earlier today. Or try to put some lipstick on that pig and sell you on a dream, get you all hyped up, get your advertising dollars,

and then watch you get destroyed when you realize, oh, it's a lot harder to hit that baseball when you're not on steroids. So I think that's one of the reasons 2021 was so good. And a lot of people do use that as their baseline, which would be a mistake. Henry, what about you? How long have you been investing? And what was it like when you started? And every time I do a show with Rob where we talk about our history and investing, it's so aligned. I also started in 2017. So I've been doing this for just about six years. And you know, when I look at what I was buying, back then, right? We were buying single families, small multifamilies. We were buying them at about, you know, a 30% to 40% discount. And we were either renting, mostly renting them. And then I would do

the occasional flip. And I was getting at about at that time, I was getting between five and seven percent interest. And so when you hear Rob talk about, you know, He feels like this is getting back to normal. That is exactly how I feel. I mean, now we've gone a little past normal on the interest rate side now because we're up above that six and seven percent, you know, for investors anyway, getting getting loans. But it has felt more like a reset than a, you know, a crash or, you know what some people are saying. And so, yeah, it's been it's been a reset. And I think there's a caveat to like my strategy versus Rob's short-term rental strategy.

And it's that I've always been trained to look off market. So I've been building, you know, systems and processes to help me find off market deals before I even knew that that's what I had to do. That's just how I learned this business. And so if my deal flow hasn't changed from then to now, I get the same amount of deals for the same amount of effort. because looking off market, you're more buying situations than you're buying houses. And there's always going to be a situation where people are willing or need to sell out a discount. So that hasn't changed.

But what has changed is kind of the disposition strategy, right? Because the market is going to reward you in some way, shape, or form. It's either going to reward you through appreciation, cash flow, or equity. And so when I first got it. started, I was holding a lot because it was fairly easy to cash flow. I could get deep discounts. I'm in a market where I can get fairly decent rents. And I'm in a market where the entry price, the purchase prices aren't through the roof. Right. I'm not into California or a Florida, Texas, New York. Right. And so being in Arkansas, I can get good entry prices. And so I was,

almost every deal would make sense from a rental perspective. So we kept a lot. But then 2021 hit. And I started doing the math on, well, yeah, I could rent this and make a few. hundred dollars a month net cash flow or I could sell it and make 90 grand. I just bought it, you know, six months ago, right? It was really hard to hold those. And so we were capitalizing on what the market, you know, in sports, David, we say you take what the defense gives you, right? The defense was saying, I'm going to give you a big bag of cash for this property. And it's going to take you 15 to 20 years of cash flow to even get close to the amount of money you're going to make if you sell it. And so we pivoted by selling a lot in 2021. And I use that as a time to trim the

fat in my portfolio, right? So I had properties that were cashed on a little bit that I didn't love, we would sell them. If I had properties that were more maintenance intensive than I had hoped, we would sell them because we could get paid for selling them in that market. And so now, I would say that the defense is telling us, well, you're not going to make a ton if you sell it, and your cash flow is going to be a little difficult, right? So now it's, we have to really pay attention to how we're analyzing the deals and then make a call. And mostly that call right now is, am I willing to make a little bit of cash flow or break even in hopes that when interest rates come down, that we get a bump in the market and appreciation goes up? Or do I flip it and make,

you know, 20, 30 grand? Right. So it's the same game, but it's the rule, the disposition gets a little different. That's a great way of looking at today's episode. We are talking about in today's market against today's defense, what is it giving you and how do you take advantage of it? And there are times when we're going to stick with like a basketball. analogy here, where you're playing and seen with a terrible defense and your goal is to score as much points as you can and get your starters out of the game. This was a Golden State Warriors for years. Like, Stefan Curry didn't even play the fourth quarter. And that was a, it gave them a better opportunity to have a better, longer season because they could rest their stars. They could score a lot

of points. Teams didn't know how to guard them. Then there's times where the market's going to give you a very difficult defense like now, where you feel like sometimes it almost might feel like it's impossible to score. Can you run the defense ragged for the whole shot? clock and you make them tired so that later in the game you have an opportunity. Can you get fouled and start to just try to get into the bonus? There's something that can be done. But if your expectation was, we're going to make three passes and get a wide open three-pointer by one of the best shooters in the world, and if that doesn't work, well, then basketball isn't working, you're not adapting well. And real estate is cyclical. Economic cycles are by definition,

cyclical. There are times where it's hard to buy real estate. There are times where it's easy. There are times where we printing a lot of money. There's times that we're in a session or a depression. There's going to be different defenses that we're going against. And I think your example there is really, really good. So let's use that as a jumping off point. Rob, what is your preferred method of investing? In terms of like which asset class? Yes, yes. Short-term rentals. I don't think any. Not much of a secret there, but it is starting to move a little bit into, I'm doing a lot more stuff this year, I think. And this will still feed into short-term rentals for sure, but I'm definitely like really heavying up in the sub two creative finance space.

Because for me, that's sort of the solution to, to all the problems that we're seeing right now with interest rates and everything. All right. So let's talk about expectations. What were they when you started and what are your expectations right now that you're investing in a tougher market? Yeah. Okay.

Cool. So here's one other thing that I wanted to say about all this is that like, I hate to even say this. Maybe we'll cut it out. But, like, I feel like the last five years, like, real estate sort of was like a get rich quick scheme. Like, everyone was making money. I would say in the short-term rental space specifically, your experience, yes. But, like, legitimately, you could make a lot of money.

But most veterans, I think, know and understand that all real estate is not get rich quick. It's like, get wealthy over time. And then there will be pockets within the timeline that, like, you can make a lot of money, right? And so for short-term rentals, that's what it was. and now you can still make really good money. Personally, I think so. I'll walk you through a deal in a second. I just think it's not like,

I don't think you're going to retire off of one property. And I personally, anecdotally, have never paid myself really for my short-term rental properties. So whether my portfolio makes 10K or 7K, it doesn't affect me too much because it all just goes back into all the properties that I'm buying. But all to say, these days, here's sort of like the cash on cash that I'm looking for. traditionally over the last five years, I was looking for like a 30 to 50% cash on cash return, which I don't even like putting that out there. This is not really something I would ever tell

anybody listening to this. Like, go get a 50%. It's ridiculous. It's just how it was. Well, let me jump in there. That's what you were getting because when you compared all the deals that you were looking at, the top, top, top deals could provide a 30 to 50% return. And because you had a really good deal funnel, you had a really good. analysis system. You are good at what you do. You are only buying the best deals which provided that. That does not mean the person who's brand new is going to step in and to use the basketball analogy, get the same wide open look that you're getting. Correct. Yes. Thank you for that. That's why I'm like, I don't even want to put it out there. But like, you know, we bought a like a chalet in

the Smoky Mountains. I think all in. We paid 50K for furnishings, down payment everything. We grossed 83,000 the first year profited like 58. I don't know. It was something like. like that, right? So that one was like a perfect deal. But these days, it's just not like that anymore. And I think a lot of people want to like sort of achieve that. But nowadays, I've really, I've tampered it more and more over the last year. At the beginning of last year, I was cool with like a 20 to 25 percent. I was settling for a 20 right now. A 15 percent cash on cash return is what I'm looking for when I very conservatively underwrite all my short term rental deals. And that's a really big change from when I started, right? Like, that's nowhere near the same return profile.

But I'm also really just patting my underwriting to just allow, like, I'm trying to make it, even if it is a, let's say, a 25 or a 30 percent. I'm purposely adding so much stuff in my underwriting to try to get it to a 15 percent. Just so I'm like, all right, doomsday scenario, can I get a 15 percent? If the answer is yes, I'll move forward with it. If it's less than that, I won't do it. All right. So you're still taking a cash flow heavy perspective where you want a cash on cash return of 15%. That's still the most important metric that you're looking at when you're analyzing deals. Okay. Well, there's more to it than that, David. I mean, look, I think you know when when you're analyzing a property, right, it's not just the cash flow. You have to look at the overall

ROI of the property. And that ROI is going to be calculated between cash flow, debt pay down, tax deductions and appreciation. So when you factor all those things in, it usually doubles roughly like your cash on cash, I believe. I'd have to look at my calculator. So am I okay with like me personally? Do as I say, not as I do. I'm fine with like a 10% like really at the end of the day. If it's the right property, right location, right value add, yeah. Yeah, because the ROI is going to be much higher than that if I ever sold it in like five to 10 years, right? But baseline, like if I were just looking at it from a cash on cash perspective, which I think nowadays I'm not, but for someone getting into it, I think a 15% is a pretty good

metric with the way interest rates are. Yeah, there's a good point in there. When you first start learning about real estate, we use ROI return on investment as the metric that we teach people to look at, which is in our world, really what we're saying is cash on cash return. That's the technical term for what we're describing. We say ROI, but the eye in ROI is investment. And we're talking about the return on the cash we put in the deal, not the overall investment, because it makes you money in other ways, too. The more accurate way of measuring your ROI is actually called the internal rate of return. IR.

That's something worth Googling. It's something to go onto bigger pockets and take a look at. This is a metric that syndicators use because they're looking at the return on a property if you own it for five years, seven years, 10 years. And they're including the cash on cash return that we just described, the loan pay down, the equity that you may have created by buying it undermarket value as well as the equity that you may have created by value add to the property. Increasing the rent amounts makes it worth more money when you go to exit. There's lots of ways real estate makes money.

Tax advantages. IRL really takes all of those into consideration. So when you hear someone like me say it's not all about cash flow, that doesn't mean cash flow doesn't matter. It means it is a piece of, it'd be like saying, well, it's not all about how well you can score. That doesn't mean scoring doesn't matter in sports. It's, there's more to it. That's obviously a part of it. So when it comes, Rob, to the deals you're looking at, where are you starting financially?

How do you tend to fund most of the deals you're buying? Over the last couple of years, we have been doing OPM, other people's money and working with individual investors. We have since switched to that. And now we're doing fundraising with Rob, El Capital. We haven't really launched it yet. But we're going to be doing a fund and working on more value ads because I think that that's where the real equity and appreciation will come in into play for 2020.

is taking like a dilapidated RV park, making it sprucing it up, making a lot nicer, doubling the income, getting a lot of value and basically forcing appreciation that way. That's kind of where I'm moving is out of single family acquisitions into much bigger developments and projects. All right, Henry, moving on to you here. When it comes to your expectations,

what is your approach right now to real estate investing in the stuff for market? Yeah. When we first started out back in 2017, I remember, you know, I was a big, bigger pockets, Brandon Turner guy. Nice, subtle dig there. Let's hear more about your ex. How she compares to me. You know, and so, you know, Brandon was the, you know, $100 a door after all expenses, right?

And so that's how I evaluated and determined if the rental property was going to make sense. I wanted a 7% to 10% cash on cash return. and I wanted $100 a door net cash flow. You're talking after expenses, after vacancy, after CAPEX. All the expenses, guys, not just the mortgage taxes insurance, but I'm, and I'm Uber conservative on my expenses numbers. I over budget for my expenses. Because then when I know I see $100 net cash flow, I'm probably going to make more than

that. But that's so that's how we were analyzing deals back then. And now things are a little different, but not much because back then I didn't have like the consistent deal flow that I have now, right? I was building those processes. Right. And so now as the processes are well established and I have great deal flow, I understand my market better and have some. There's some predictability with what I see coming in the door. I'm a little more greed is not the right word, but I want my numbers to be better.

I'm a little more picky, right? And so for me, we are looking at if I'm going to buy a single and hold it as a rental, I want my singles to pay me like a multi. And so I want $2 to $300 net cash flow per door on a single, on a multi. I'll take 100 to 200 net cash flow per door. I would like a 10% cash on cash return. But if it's a multi, it doesn't have to give me a 10% cash. on cash return because the multis are just so much more beneficial, both from a cash flow

perspective, also from a tax perspective, and then from a value perspective, the value of those goes up faster. Well, the friends are going up by $100 a year and you've got three doors versus one door. That exponentially starts to become more valuable over time. Is that what you're getting at? Absolutely. Yes. So the analysis as far as how I do it hasn't changed, but what I'm looking for, what I'm willing

to take on a property has changed. And I would say that that's what everything was up until, you know, 2023 and the interest rates going the way they are because those high interest rates are eating up that cash flow. And so it is a whole lot more difficult to find those properties where I'm going to get, you know, $2, $300, $400, $500 net cash flow per door because I'm paying so much more for the money to buy that property. And so the, you know, the game's a little different right now. I am willing to take less cash flow if the property is in a neighborhood that I feel like is going to appreciate, especially if that property is a multifamily again for those for those same reasons because the golden days, you know, Rob's golden days, we had ours too, right before these interest rates, the golden days where you could buy something as long as you were getting it at a 30%

discount is if you stuck a tenant in it, you were going to cash flow. And it just doesn't work like that anymore. And so we do find ourselves making decisions on, do I keep this property and, you know, essentially break even. Or do I sell this and make a smaller profit than I would typically like to? And those are deals I wouldn't even have considered. Because the defense didn't make you back when you started. It was the 15 to 30 percent cash on cash return that Rob's talking about,

the two or $300 per door that Henry's talking about. those were, if you probably took a super nerdy approach and you looked at the statistical, what's the, what's the word, the standard deviation. And you looked at every deal you compared, these were in the upper echelon of deals. And so that's what you'd go for. You're comparing the deal you can get to the deal you've seen before. And you're looking for the one you've seen before. In today's market, there aren't those amazing cash flow numbers that we're seeing because

there's so much competition for these assets. Now it almost becomes, is it better to get my 7% return that Henry said or nothing? Before it was, is it better to get 7% or wait for a 10 to 12%? Right? And going back to the basketball analogy here, when you first get the ball, the first thing you look at is, can I get all the way of the rim? Right. There's nobody in there. I can beat my guy at the dribble.

It's a layup. That's, of course, that's a 30% ROI. You're going to take that every time. But as defenses get better, that's not an option. They have a seven foot Rudy Gobert in there who's waiting for you. and that's not going to happen anymore. You can't beat your guy after the dribble? Now it starts to say, okay, can I come off of a screen and hit a jump shot?

It's going to be tougher, but it's better than a shot clock violation and not getting anything off. That's what we're describing in these situations. And if you take the expectation from five years ago and you apply it to the market you're in now, you're never going to shoot the ball. You're going to have shot clock violations over and over and over and you're going to lose the game by virtue of not taking a shot. Or Rudy Gobert is going to throw it back in your face. Yeah, that's the other thing.

That's like the loss, right? Like you just, you tried to go after that great deal and you got sucked into buying a $40,000 property in a terrible neighborhood that you never should have bought because the cash on cash return looked great. When it comes to financing, Henry, what's your financing strategy right now? Yeah, absolutely. So back in, I would say from 2017 on until about six months ago, my financing strategy was using commercial loans from small local banks.

I built relationships with small local banks and I could take down deals if I had to put my, If I had to put money in from a down payment perspective, the benefit to the small local banks is I could bring that money from somewhere else. So I was either taking equity from another property and using a line of credit to pay those. Or sometimes I would borrow the down payments from other investors and pay them an interest, high interest for doing that. So, yeah, I would or sometimes I would get the owner to carry back the down payments, right? And so we'd owner finance at least a down payment portion. And that's how we were taking deals down. But as interest rates have gone up and has the end, there's been tightening amongst banks and lending and the criteria has been a little more strict for them.

And it's harder to make deals cash flow. Part of the reason small local banks want to invest in our loan to real estate investors is because they can buy great deals that have great cash flow. And as we stated, that's not always the case. And so it's been tougher to get the local banks to loan on on deals if the numbers aren't fantastic. And so now we've shifted and we're typically taking down deals with private or hard money at a higher interest rate. And then we'll refinance them with either a small local bank or a non-QM product. And still, that allows me to take down deals without having to put a ton of my capital in them. But it's a more expensive route to take because the interest is higher.

Plus you're basically closing the loan twice. But it's a way we found to be successful because we're still very, we're still very, very, very strict on our underwriting. Now, with the, I don't know the right word to use here, the decreased expectations on mostly the cash on cash return from real estate, are each of you buying less real estate now or are you buying the same amount or more? I'll start with you, Henry. I am buying, I would say the same to more.

Actually, I would say more. We're doing more flips this year than we've done in any year. And last year, I bought more doors in one year than I'd ever purchased. So we're doing more. Rob. I am doing more. Yeah, I want to do more. Like, I'm really addicted to creative finance sub two right now.

People have been sending me deals. And I'm just like, yeah, why not? So, yeah, it's my goal. I mean, I want to take down a lot this year. I want this to be the biggest year that I operate in. And the reason that it's actually been working out relatively well so far, is that, you know, I guess there's that, I don't know, was it Buffett buffet. Is that his name, Warren Buffet?

No, I'm just kidding. Warren Buffett, he was talking, said like, when there's blood in the streets, oh, gosh, I don't want to mess this up. When the tide goes down, you see who's been swimming naked. Is that? No, no. It's, okay, I know for sure he said this. He was like, when people are scared by when people are.

Oh, what you're describing is when others are fearful, be greedy. when others agree to be fearful. Oh, see, and that's why we pay the big bucks, David. Okay. So with that one specifically, everyone is so scared to get into real estate right now so I can actually make offers and get them accepted. And it's a beautiful thing. The property that I'm buying in Denver right now, it's a triple dome home.

It was on Zillow Gone Wild. They got 25,000 likes on it. Traditionally, I would have had to have, like, offered 200K over that, like a year ago. And today, I mean, I offered a little bit over just because I knew that there was another, offer and I wanted it. I think I offered 25K over and I got it. And I was like, wow, this feels good. It feels good to actually like only be competing with one other person versus 20 other people. And so for me, I'm like, I'm coming in like, oh yeah, everyone's scared. Give this one to me, baby. But on top of that with creative finance and sub two, yeah, man,

I'm just going to be picking up as much as I possibly can because if you can assume someone else's mortgage and get like a 3% interest rate, I mean, literally almost any deal works. It's like, It's really quite a magical thing. So useless fact here. You mentioned blood in the streets. Did you know the high heel shoes were originally created for men to wear that were butchers for walking around in the butcher shop so that they would not get blood all over the bottom of their shoes?

Wow, I had no idea. I did not know that. I was wondering why he kept a pair of, yeah, a pair of high heels in your car. It's a secret to these calf muscles, actually. It's like I'm always walking down a hill at all times. It's also why we never let the camera go below my waist when we're recording. I'm not sure if they got off. audience is ready for that. I just got an image of strong hairy calves in high heels right now.

It's a great way to describe it. I put a, on my Instagram story the other day, I put a little meme that had like, like, 25-year-old guy that works his calves out seven days a week in the gym and they're like kind of skinny. And it's like 42-year-old dad of three kids. Oh, man. It's like, yes, like massive thighs for it. And it's so true. I don't understand. Yes. All right. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship

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Moving on here. Now, Rob, I understand you have a deal in mind that we are going to break down for all the people joining us on this podcast to hear how deals are being analyzed. So first off, tell me like, where is this deal? What is it? Is it your triple dome deal? that you just mentioned. It is. It is. So it's in Castle Rock, which is about 15, 20 minutes away south of Denver. It's in between Denver and Colorado Springs. And it's beside the Rocky Mountains

and Breckenridge. So it's kind of like in this little spot that's really cool. You should call this the castorly rock. Yes. Right? As your like Airbnb name because we always give stupid names to Airbnb properties. Do you know what that is from Rob? Yes. But for everyone at home, You don't know what that is. Henry, would you like to share it? That is the goat reference, the Game of Thrones. Yes, it's a location in Game of Thrones called Castorly Rock. And so, like, you would get a lot of, like, people would recognize that and book it.

I think you should go with that. Okay, that's cool. Triple Dome has a good ring to it also, but what do you like about that location? Okay, so like I said, it's in between like a lot of different areas. So my buying criteria in general is buying near national parks. state parks, eclectic towns, and vacation destinations. Those are my four buckets. And this one is sort of in between all of them, right? So it's in between Denver, which is a really big metropolitan area, and the regulations in Denver are pretty strict. So I already feel like the overall competition is on

the lower end because it's so hard to get a functional Airbnb in Denver. But it's also near Breckenridge, and it's also near the Rocky Mountains. So that's State Park, sorry, National Park. But then there's also a state park. It's called Rocksboro State Park that's right next to Castle Rock. And then an eclectic town, I mean, I would really classify this one as that, but Boulder's north of Denver. That's kind of eclectic. That's near Castle Rock as well. So it's sort of in this like this booming little spot where like I have so many target markets of people that are going to be going through Castle Rock just to get to some of these areas that I told you. So from a location standpoint, it checks the boxes. It's also a very unique stay. If you're on YouTube, we're be rolling all of this for you to see. It's a beautiful home. And what's really special about it is that it's got 360 degree views of mountains everywhere. And everyone has gone crazy about this house on the internet, like the Zillogon Wild. Comments are really, really crazy. So I just feel like it's going to be a really, really amazing portfolio piece for my direct booking website, Neke Sleeps. I think it's going to be a very

Instagramable experience. And so this is one of those. like, if I build it, they'll come type of things. It's already been built, but I'm going to be building the brand and everything like that. So I think this one to me has a lot of potential, but I was a little bit, you know, there are some ways that I underwrote this to kind of like make sure that it fit my criteria. All right. So how much are you buying this for and how is the deal structured? Okay. So it is a conventional loan. It is a 5.99% interest rate actually, which is not bad. I had to pay about $8,000 worth of points to get it down to that rate. So I'm really happy with it. It was a million dollars and I bid a million 25. I would have probably gotten it

for a million, but someone else made an offer and we got the intel that it was over asking. So I just went, I was like, man, I don't know how much over asking was. I'm going to go a million 25 and I beat them. So I guess they went over like 10,000 or something like that. I'm not really sure. And I am putting unfortunately 30% down because I had to do that to get it to not be a jumbo loan. So that I could, basically, it's what I could qualify for conventionally. You know, to the banks, I'm a poor man, even though I have successful businesses, but I haven't had successful businesses for two tax years. So, you know, I still have to kind of like cobble together finances to get it all approved.

But I'll be putting down 30%. I'm hoping to squeak out a 15% cash on cash return on this particular property. All right. And then was there a subject to element to it? No, not on this one. This is just a straight per. I saw it. I was like, I want.

this house, I'm going to buy it and I made the offer and somehow got it. Now, if you had professional property management 20, 25% with this deal still pencil. Technically, yes. This would, this would be much closer to, oh, actually, no, yeah, it would still be an 11%. The way that I've underwritten it, I think I'm going to make a 20% cash on cash return. And with a 20% management fee, it would be an 11.7% cash on cash return. Now, if this ends up being, you know, kind of middle of the road, so if I get this to a 15% cash on cash return like I was thinking in a management company, right? Let's imagine. Let's assume that Blue Jems isn't doing this for free for me. Then it would still be a 7.5% cash on cash return. So it would still work. I would, you know, it would,

it would not, it would cash flow. I think this deal would still cash flow, $2,500 a month. And what were you adjusting on your calculator there? determine if it would work. My management fee. So you asked if I had a professional manager in it at 20%. That's what I'm putting in to see how it changes cash flow and it would bring me down to a 7%. But if I remove that, then I go up to a 16.2%. So from 7% to 16% by eliminating the management. So there's a point there for everyone listening who is running their deals saying I don't want to be, I want passive income. I don't want to be a short term rental operator. That could be why. you're seeing your competition moving on deals and buying them and you're not because that one number

made it from a pretty solid deal to a most people are passing on a 7% return. Like it's a little bit more elbow grease. You're going to have to put into these deals in many cases. Rob's one of the best in the business when it comes to these. So the odds of somebody else getting a deal this good and having the vision to feel confident that it's going to work are going to be lower than it would be with Rob. So part of what we're describing here is that with real estate becoming tougher. The passive element of it is passing away, right? Maybe there's a plan words we could get into that. Like, there's passive has passed. Ooh, is that our thumbnail title? Yeah. Passive is dead. Because real estate is cyclical. There probably will come a time where it will go back to what it was

like before. We don't know when that's going to be. But it was much easier to get these returns and just hand a property manager to manage it than what it is right now. I want to say that you're absolutely right on this. And everyone at home, re-listen to that part, right? Because a lot of us are getting into real estate. Let's just say short-term rentals, because that's what we're talking about for me specifically. You're going to buy like 10 properties and then 20 and then 30, like eventually like me, I have 35 right now. And you will no longer be able to self-management, manage those properties.

You're going to have to give them up. I started my property management company, right? Like I went into Blue Gems because I was like, I need a solution for this. But the everyday operator, you will have to give that over. to a management company, and the moment you do that, it will shrink your returns dramatically. So that's a really good point, David. I mean, that's like something that people don't think about. If you're good at this, you're going to be very successful.

You're going to scale up like that. And then you're going to have a management problem, meaning you're going to have to pay someone to manage everything. My advice, not that anyone asks for it, is if you're going to get into this asset class, expect to manage it yourself for three to five years, do a very good job, rents increase over time, revenue increases over time, your reviews increase over time, your systems get better, then you've earned the right to hand it over to a property manager. Now, they can take over and it becomes passive. You just can't have the expectation of starting

it for day one. And that's sort of a theme that we're seeing throughout today's show I'm noticing is you're just extending your horizon from when you expect that jackpot. Henry had mentioned several deals like right off the bat, we're buying them at 70% of what they're worth. We're getting this kind of cash flow. I could either get rid of it, make a bunch of money or keep it and make some money, but I had options. It's slowly moving into, I can still make the same money, but I'm not making it right off the bat. I'm having to extend. And I think that's a good advice for people to extend their expectations.

Now, Henry, same question to you. You have a deal picked out here? So, yes, I have a deal. So, you know, we're moving from the amazing place of Castorly Rock to Sleepy Hollow, my little town of Bentonville. And, yeah, so I'm buying a single family home. And it is, I'm buying it for I know that what is a discount. but I am in the position of trying to figure out which exit strategy is going to make the most sense,

given the current market conditions. And so I think it's a good deal to talk about, right? So I'm paying $170,000 for it. It's going to need some work in order for it to either be flipped or be long-term rented or be short-term rented. And so I am literally in the decision process right now trying to figure out which one of those exit strategies we're going to do. Now, I'm buying it regardless of, like this is a purchase, regardless of exit strategy, but this is that analysis that we're talking about trying to figure out what's the best strategy given the market and your current financial situation.

And so I'm in a position where I can put about $40,000 in it and I can flip it. I can put maybe $50,000,000 in it and short term rent it. Or I can put about $30,000 in it and make it. a rental, right? And if we, if we rent it out, I could probably get, I could probably get 1800 a month. And so I would be in the neighborhood of breaking even if I did that. Now, there's the reason I would consider breaking even for this is because Bentonville is just such a strong market with Walmart headquartered there. And, um, and though, even though it wouldn't cash flow right now, I'm going to get a big bump in appreciation because Walmart's building their brand new home office facility.

They've got to bring people here. It's still a tourist destination for mountain bikers right now. There's not a ton of hotels. And so people need places to stay if I wanted to do a short-term rental. And so that like the, and I think once interest rates go down, it's going to force more people into the market and it's going to force the values up. Right. And so there are situations where I'm ready to, where I'm willing to break even, because of what my, you know, analysis tells me about what could be coming in the future, right?

And that is not something every new investor is going to be able to do. It's going to involve you being an expert in your market and understanding what's coming and doing the research, right, to make those kinds of decisions. And so right now, I am leaning towards going ahead and selling it. And the reason I'm leaning towards going ahead and selling it is because I have. a pipeline of deals. There are more deals coming. I'm not, I don't have a shortage of deals to buy. And so, uh, this one, I, I don't love the short, the long term rental cash flow numbers. And I'm not confident. I'm not, I'm not super confident in the short term rental numbers because of the specific neighborhood that this, uh, home is in. I don't know that it would produce the returns that my

other short term rentals in Bentonville will. And so I'm not, I'm not super comfortable with it. So I'm doing some research talking to my Airbnb property manager, seeing how, what's his confidence level on what he thinks we can rent it for. I think, I think if we did a short term rental, we, we'd push that monthly income up to about anywhere between $2,000 and $3,000 a month. So it could be great. It could not work out well. And so what I am confident in with 100% certainty is that I can put $40,000 into it and sell it for, and sell it for $210,000. no sweat. And so that is, sorry, not 210. I said 210. It's not two 10. Tell it for $275,000. No sweat. Right. And so that is the, that the, that is the strategy I am absolutely the most confident in. And in this market, you're getting punished for making mistakes. And so I'm probably going to lean toward the thing I'm the most confident in. There's a couple points I think worth highlighting there as well. And some of this comes from James Dainard.

Well, Jimmy made a point on the state of the market podcast that I thought was really good and worth repeating here. Jimmy had mentioned that the ROI, if you're looking at cash on cash return, is nominal or non-existent in a lot of deals. However, he flips a lot of houses. And the return on his investment when he looks at flipping can be incredible, right? He could get 20, 30, 40, 50 percent return on the money that he put in a deal, especially if he's leveraging other people's money on a flip. Now, that's not passive income. That's active income. Okay, so we usually don't compare these two options because when you keep real estate and

you get $100,000 in equity, you still made $200,000 at that time. You just didn't make it in the form of cash flow, which can be misleading. And what that had me thinking about is so many people are listening to us. They want our lives because they don't like the job they have. Henry, you at one point were doing corporate real estate for Walmart. Rob, you were doing professional voice acting and marketing and overall debauchery. But the thing we, I was a cop, right? I was sleeping like three hours a night on a good night, just looking for every day.

I woke up like, when's the next time I can sleep? I was just obsessed with like, when can I get sleep? We didn't like the lives we had. Real estate gave us a better life. If you're in that position, it has been previously, uh, sort of like spoken to you that, that the evangelist for real estate would say, if you get enough cash flow, you can replace your active income

with passive income, you can quit your job, you can move on to something better. That is what is becoming very hard. However, if you quit your job and got into flipping houses and you made $75,000 a year flipping two different homes,

okay, that could be a job you like more than the one you don't like. It doesn't evolve you sitting in commute traffic. You can work from home, your schedule becomes more flexible. Now, there's some downsides to that. You're taking a little bit more risk.

There might be a learning curve in the beginning. But if you're somebody who's really good with real estate, you're a Henry, you're looking at deals all the time. And you're like, this thing just doesn't add up right now for cash flow. But I could make $45,000 flipping the contract to somebody else or fixing and flipping and moving into something different. You do have an opportunity to get the ROI you would need to replace your job doing this. It's a different way of looking at these opportunities.

And it's forcing yourself to stop looking at it. only cash on cash return. It's looking at many ways that real estate can benefit you that will open up these opportunities. What's say each of you to this, what I'm sort of now just deeming the new approach to looking at real estate investing. I agree. I think we got to get back into the habit of saying, hey, real estate is a long, long game. And sometimes there will be good years. Sometimes there will be more normal years like now. But at the end of the day, it's like you're just pushing the ball forward. Like I was thinking about this as Henry was saying it earlier, the golden years. Hey, yeah, these were the golden years. But I genuinely think not to be to,

you know, Andy from the office. But I do think that like 20, 30 years from now, we're going to look at now and be like, these are the golden years. Like, this is it. Because we're all good at what we do and we're all going to continue to crush it every single year because we love doing this. Absolutely. I couldn't agree more. I tell my students this all the time. I'm like, look, investing is about buying something for less than it's worth, adding value to it, and then capitalizing on its new value, right? Even in the stock market, right? You want to buy when a stock is down, hold it until it goes up, right? And then you've made a return on your investment. This is when the wealth is built, guys. This is what it looks like, right? You have opportunity

to buy. And though you're not going to make money immediately, I think, for the people who are actively right now, five years from now, even. The people buying now are the people who are buying in like 2009, right? Like those people were pumped that they bought in 2009. So this is what it looks like. This is what it looks like to build its wealth. It's not pretty now, but I think it'll be beautiful in the long run. We're always going to be pumped that we bought now like 10 years from now. That's, and I say that constantly. Tell me a person you know that bought a house 30 years ago that says I wish I never would have done it. Yeah. Well, do you remember we had Janice on like a month ago. And she was like, yeah, I bought my first house in L.A. for 180,000 or something like that.

And we were like, what? In 2004? Like, we were so, like, perplexed by this. Tell me a person who bought a house 30 years ago that remembers what was in the inspection report and how stressful it was. Right. Yeah, that's true. But also tell me a person that bought that house 30 years ago that thought that they were getting a great deal and they were buying it for less than what it's worth. Most people believe they're overpaying for real estate at the time they buy it. We always think we could have got the deal better. It's time that really creates the wealth in real estate. And we sabotage this when we're like, I need to get a, I need to get a dunk four seconds into the shot clock before I put some work in and breaking down the defense or move the ball

around. Now, Henry, you made a great point. Real estate is about buying something for less than it's worth, making it worth more, and then capitalizing on that. So from my framework, I would call that buying equity, forcing equity, and then having an extra strategy. Now, the extra strategy could be holding it as a rental. It could be selling it and turning the equity that you created in that deal into cash, putting that cash back into the next deal. There's lots of ways we can do it. But on the, from the perspective of how do we make something a good deal if it doesn't start as a good deal? I'm going to ask each of you, what advice do you have for taking a deal like Rob's Castle Rock property that other people passed on and making it a good deal? And then Henry, I'll ask you the same thing.

You mentioned creative financing. That's one way, I think right off the bat that like you said, if you get something in a 3% interest rate, everything works, right? Yeah. Yeah, I mean, I think, I think, I think about that for a second. Go to Henry first. No, I'm just kidding. No, he could do that. I don't mind.

Rob is not a freestyle rapper. I will tell you guys that right now. No, no, I am. No, you're not. Well, I was trying to think of, I'm trying to, yes, listen. You had to open your computer and pull up an analysis. That is the opposite of freestyle. He's like 25 takes.

Well, you were asking me to take you through the numbers, I was. Go home, get to the lab, grab a pencil, make it suspenseful, and come back and hit us with an earful. Did you just hit us with an eight-mile battle rap scene? Yes, because that's something Rob doesn't do. Henry, on the other hand, he belongs in a cipher. Rob, I feel that that deal was already good, so you're like, how do you make it work? And I'm like, I did. But you bought a deal other people didn't see.

So you saw something in it that made that deal work for you. What do you think that was? You mentioned the experience. You mentioned creating a, unique way of marketing the property. There are things you're doing that other people that just said run the numbers on AirDNA doesn't work past it. Yes, it doesn't work on AirDNA at all. I think AirDNA has this one at like $60,000. I think it's going to gross between 175 and $200,000. So the way that I made this work for myself is I just said a little bit of prospecting, right? When you look at the market

analysis, there are no unique dome homes. There are no unique homes at all in this area. And so so many people would look at this deal and pass on it because it's scary. There are no numbers to support this. Where I'm coming in, I'm saying, like, I'm going to be the pioneer in this space specifically. I will be the comp that people look to copy, basically, for the rest of time. So Aardine is comparing this to a track house that looks like all the other houses around it. Exactly. But what I know is that a unique property can basically demand a 300% premium on a typical property. So whereas a typical property might only get 100 bucks a night, this would get 300 bucks. tonight on the opposite end of it. Now, really, this property will get $700 to $1,000 a night, I think,

whereas most people running the numbers think that it would get like $250. So it works for no one else, but it works for me because I know I know what I have here. But experience is the reason that I know that. See, Henry, my job is to bring the greatness out of Rob that's there that he doesn't know he has, right? So, Rob, I'm going to lead you back to some more greatness. What about the hotel that you bought that was being used as a traditional hotel that you are turning into a series of short-term rentals. Did you make something there? Yeah, same thing. That one was a basically that one was approached to me.

Someone approached me that. They're like, hey, do you want to buy my hotel? And he gave us a really good interest rate. I think we got it for like 2.75%, 3%. But the entire hotel needed a remodel. And I think, I want to say that the owner had already started to remodel. But it just was so much work that he was like, you know, I'm just going to sell it to someone that can actually like finish out the job.

He sold it to us. And so we're getting to basically capture the opportunity of remodeling an entire hotel. Granted, it's a lot of work, right? It's active, just like you said. But the opposite side of it is that this like hotel will be worth like double or triple what we paid for it. So you're adding value through a rehab. You're adding value through putting each of those hotels on Airbnb, VRBO, not just a traditional hotel that someone's going to have to look up in the yellow pages.

And you're adding value in this case through. seller financing. Correct. Right? That is a great example of you made a deal by those things that other people would have just looked at it, saw the cash or cash return said, nope, or saw that it need too much work and passed on it. Yep, yep.

Wow. Wow. I'm so smart. Thanks, David. I told you. There's greatness in you, Rob. I just got to pull it out of you. I just got to be willing to freestyle a little bit.

Yeah. And you got to go through mom's spaghetti to get there. But that's okay. We're all going to do that together. Henry, to you. What are some ways that you've been able to make deals instead of just looking for deals? Yeah, I can totally freestyle. That's why I were blacks.

You can't see the mom's spaghetti on my shirt. So part of the ways that I make deals are through not looking through one exit strategy lens. So I have learned the exit strategies of a flix and flipper. I've learned the exit strategies of a buy and hold renter. I've learned the exit strategies of a short term, short term rental. And that allows me to look at a deal from multiple perspectives. And so I'm not just looking like, hey, this doesn't meet my cash on cash return or my cash full numbers as a rental and pass on it, right? It allows me to look at a deal from multiple angles and see how I can monetize that.

So like with the deal we talked about, I know that I can make money on it at least three ways. There could be a fourth. I could probably assign that contract to somebody as well if I wanted to, right? And so I can make deals just by being educated and versed in multiple exit strategies. The other way that I think somebody who's new who may not feel that that's something that they can do is you can make deals by being creative with what you're looking for. And you can do this even on the market. And I still do this. I will look at deals.

And I am looking specifically for how can I add value. Why can I add the most value with spending the least amount of money? Right. And so when I'm looking at. for a deal. Like if I'm looking and I can't find a duplex anywhere or a multifamily anywhere, then I'm going to start looking at single families that I can easily turn into a duplex or a multifamily, either by converting a garage or by converting like an exterior building that already has. So some of these houses that you'll find, they've got a shed with plumbing and

electrical in it. Well, it's not that hard to convert that into a living space, right? Because you've got the foundation and you've got some of the structure. Garages are an easy way. Sometimes you can split up a house, especially if it's a split wing house, meaning that the master bedrooms on one side of the house and the other bedrooms in the bathroom are on another, it's fairly easy to turn one side of that into a unit and another side into a unit. Now, it takes some creativity, it's going to take some money, some of those things, but you can make a deal and add max value with doing a little bit of work. What I've typically done in the flip space is find houses that have, and we talked about this on a previous episode, is find how,

that have like sunrooms or big rooms that aren't technically heated and cooled square footage. And this works for garages as well. You can take an HVAC return and pop it into that room. And now that space is heated and cooled. All you've got to do is add the flooring, insulate the walls. And now you've got an additional room. And rooms are going to add value. And so just because you can look at a deal and it's at its current state and say,

this deal doesn't pencil, but will it pencil if you add a bedroom? Will it pencil if you add a bedroom and a bathroom under the same roof and how inexpensively can you do that? I just converted a laundry room for a house into a bathroom, which included the laundry in the bathroom. The house was on a crawl space. It cost me about $5,000 to do that. But now instead of a three-bed, one-bath house, I have a three-bed-two-bath house, which allowed me to take the bathroom that was a hall bath and close off the doorway to that hall bathroom and then open a doorway from one of the bedrooms into that hall bathroom. And now I created a primary suite because I added a bathroom in the laundry room because the laundry room was oversized.

Right. And so I was able to sell that property for about $30,000, $35,000 more than I would have without that extra bathroom because there was more demand for it and because it was a, there were two bathrooms and a primary suite. It's a much more desirable property, and it costs me five grand to do that. That's a great, great advice. People should go back and listen to that again. If you're trying to figure out to make these things work, you're hearing it here.

The defense is tough, but that doesn't mean you can't win. It's got to take a different approach. Last question to each of you. We are what I would call professional investors, professional real estate people. This is what we do full time. We look for deals. Henry, you mentioned that you have a very big funnel that you've created, that you're looking at stuff.

Rob has an entire network. He's talking about having Rob Capital that he's going to be creating. You each have audiences of people that follow you that can bring you deals, right? We have this platform that not everyone has. For the person who is not a professional investor that wants to make money through real estate, but they're not leaving their day job anytime soon or their skill set would not work in the environment that we operate in. What advice do you have for that person to build wealth through real estate and what

expectations are reasonable for them in this market. Yeah. So here's two things. I think you need to be, education is vastly important more now than ever so before. Right. And so I talked about educating myself on multiple exit strategies. I think everyone needs to be doing that. You can't be so laser focused on one strategy because you're probably leaving opportunities on the table. And then you have to, For every investor, focus on what's the lowest common denominator in real estate. It's always going to be a deal. You've got to have a good deal. Right.

Now, we talked about ways that you can make something that isn't a good deal at face value look like a good deal or become a good deal based on how you can creatively add value to that property. But you've got to be able to know what does a good deal look like in your market. And then you've got to pick a way to find those good deals. All three of us, we have a way that we like. to find our good deals and we kind of go all in on whatever that strategy is. So I can't tell, you know, every random investor, which strategy they should use or what's the best strategy.

It's really, they all work. But you've got to, A, know what a good deal is for you. And then you have to pick a strategy to know how to go find it. And I think the better you get at analyzing and underwriting and looking for those deals, the easier it's going to become to monetize those deals. in the future. And so I'm not going to give you the traditional answer of go house hack. That's a great way to go, you know, make money in this market. I think that educate yourself on as many strategies as you can find a way to find good deals. I just happen to find my way is looking off

market, right? Rob has his way. David has his way. But you've got the more you do it, the more deals you analyze, the more deals you underwrite, you're going to be able to start finding those diamonds in the rough, finding those gems or creating or making, the value. And so I just help, I just want people to be able to focus on one to two strategies of finding deals and then you just go all in. I call it relentless consistency in pursuing that strategy until it yields results. Rob, what about you? Average person not quitting their day job wants to make money through real estate. What approach should they take and what expectation should they have? I think that for me, I'm, I always say this, like you got to throw darts at the wall,

right? And I think you've got to try a few things. I like the idea of going all in. I did pretty early on. I think you've got to try a few things before you go all in, though. You know what I mean? I think if you, let's say that you want to try flipping houses and you try that and you're not very good at it, maybe you don't go all in because that may not be the thing that you should be going all in on. But if you try flipping a house, if you try wholesaling, if you try house hacking, maybe a little bit of short-term rentals, I think it's at that point you can say, man, I didn't realize this, but I'm really good at wholesaling. That's when you go all in, right? I think you have to be willing to try a few things and not be so locked into the thing that you think you want because very rarely is that the thing that actually works out.

So that's kind of like my general approach for getting into this is like try a little bit of everything. Some of these things are free. You can, Henry, how much would it cost? If I wanted to get started wholesaling today, how much money would I need to get started? To get started wholesale? You can get hard started wholesaling for free. He's just going to spend a lot of time. Okay.

Perfect. Low stakes. So is that what we're saying? Someone who's working their day job, they don't want to be in. real estate professionally should start at wholesaling? Not necessarily. I'm just giving an example here. Try a few things because everyone thinks that real estate is high stakes. Like not every aspect of real estate. There are ways that you can try your hand at real estate. That's not like the riskiest investment of your life, right? That's what I'm saying. And then in terms of like what expectations

should they have, I think the expectations that they should have is that they're probably going to be working 80 hours a week for a while. Like, you know, the network that you're talking about that I have, the network that Henry has. That is a network that we have built because we were working like 80, 90 hour weeks for so many years. I didn't quit my job, dude, until like two years ago, man. Like, you know what I mean? Like, I've only had this magical network for two years. And it's just because, like, you know, like I put in the work. But before that, I was working, I was going, taking calls in between meetings. I was like leaving work to go, like, do a contractor call. Whatever. I was doing so much stuff at work, taking.

calls at nights, missing dinners, doing all that type of stuff. So I think the expectation is there's still a lot of work that you have to do. It will never be an easy route to get started. But dang it, is it worth it? Yeah. You know, I think to add a little bit more color to that, you know, I do, I still believe it. But a good deal is the is the best way to go. And so finding that good deal. But I think part of the reason that people are struggling with figuring out how to be a lucrative investor in this market is more about like how much of that work are you willing to put in because anybody can do this right now. You can go and you can get on the MLS in your local market and you can pull a list of properties that have been listed 30 days longer than the average days

on market in your market. Right. And you can get a list and you can go down that list and say you just only pull single families and you can go down the list. You can analyze every single one of those properties and figure out what's the number that this deal would work for me, right? And so if you know you want to buy rentals, you can go analyze each deal and say, all right, for me to get my 7% cash on cash return and $100 a door, then I have to be able to buy this property that's listed for $350,000, for $125,000. That's the number that works. And then you know what you do? You submit that offer, right? If you did that for every single property listed for 30 days longer than the average days on market and every expired listing in your market and you did that relentlessly consistently for the next 90 days, you'd probably land a deal. But nobody wants to put in that kind of work.

People don't want to go do that work. That's a time-consuming endeavor. You've got to analyze a ton of deals. You've got to make a ton of uncomfortable offers. You've got to convince an agent to make those uncomfortable offers for you and then convince them why it's a good idea for them to do it. right? So you really have to ask yourself, am I willing to put in the kind of work it's going to take for me to be successful in this kind of a market? Because you can go find a deal. You just got to be willing to get uncomfortable. And that's what people don't like doing. Boom, baby. But I will say,

I do want to plug that in one of the previous episodes, we talked about, Henry talked about buying deeper. And so we're going to do an episode on how to get off market properties. Henry will take us through his strategy. So respond to the poll. If you want to hear how we find off market deals, leave a comment on YouTube, and we're going to work on it for you all right. Rob, where can people find out more about you? Rob built on YouTube and Instagram. Henry? Instagram. I'm at the Henry Washington on Instagram. And I am David Green 24 with an E at the end of Green. Do you guys have your blue checks yet? Oh yeah, baby. You know I do. Make sure it's got a blue check because we have a lot of fake people that are mimicking us trying to take your money through

scams of a crypto nature. We don't want you to fall for that. So I'm David Green 24. on YouTube and on pretty much all social media. Send us a DM if you have any questions. And if you like the show, if you like the straight shooting, if you like the no BS, no fluff, we're giving it to you like it is and we're giving you examples of what we're doing to make deals work. Would you please go leave us a review on Apple Podcasts? And let us know what you think about the show.

All right, I'm going to get you guys out of here. Thanks so much for joining me. We went into overtime today, sticking with the basketball analogy. But we hope you gave you guys a great game. This is David Green for Henry Reletless Pursuit Washington. And Rob, the pop-a-doc of Freestyles on the solo. Signing down. Thank you all for listening to the Bigger Pockets Real Estate podcast.

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