BiggerPockets Real Estate Podcast - 817: 2 “Slam Dunk” Small Multifamily Deals in 2023 (and Where to Find Them) w/Dan Nelson and Jodi Gauthier

Episode Date: September 12, 2023

Small multifamily properties are one of the EASIEST ways to get into real estate investing. But, your market may be a little too pricey or lack the supply for you to invest in these “slam dunk” deals. So, where do you go? We’ve got two elite agents from the South and Midwest that can help YOU get your next killer deal in metro areas that are seeing STRONG demand, renter growth, and rising rents. To tell us about Chicago, the “we don’t actually love deep dish” city, is Dan Nelson. Dan was recently able to access a “private listing” that was severely underpriced. He brought this deal to a rookie client of his, who ended up making a MASSIVE amount of equity on closing. We’ll also chat with Jodi Gauthier, a Houston-based agent who secured a very lucrative seller-financed deal for her client, who couldn’t get a mortgage anywhere else. You might think these deals are too good to be true, ESPECIALLY in 2023’s housing market. But, we’re here to prove that as long as you’re in the right market, running the right numbers, with the right agent, you too can lock down these “slam dunk” small multifamily deals. In This Episode We Cover: Two housing markets with “slam dunk” small multifamily opportunities Metrics to watch BEFORE you invest in a market and how to know your home will appreciate What to do when you CAN’T find cash flow in your area (and whether or not cash flow is worth it) Seller financing and how to buy properties when you can’t get approved for a loan Questions to ask your agent to see whether or not they TRULY know what they’re doing 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 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 Davids's BiggerPockets Profile David's Instagram Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Hear Our Last “Elite Agent” Show Barbara Corcoran’s Wild Real Estate Tactics You’ll Want to Repeat Book Mentioned in the Show Long-Distance Real Estate Investing by David Greene Connect with Dan: Dan's BiggerPockets Profile Dan's Facebook Dan's Instagram Dan's LinkedIn Dan's TikTok Dan's Website Connect with Jodi: Jodi's BiggerPockets Profile Jodi's Facebook Jodi's Instagram Jodi's LinkedIn Jodi's Website Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-817 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 817. I started as a poker player. So negotiation is actually my favorite part of being a real estate agent. I love it. When you're thinking for yourself, like, what is this property worth and you're evaluating for yourself, you're looking at properties completely different than an agent that has never bought an investment property or maybe even hasn't bought a property themselves at all. They don't understand how to evaluate the property and where the price should be because they

don't know what it's like to have skin in the game and they don't know what it's like it's skin in the game over and over and over again. What's going on everyone is David Green, host of the biggest, the baddest and the best real estate podcast on the planet, aka the Bigger Pockets podcast. Welcome all of you. We've got a great show for you today. I'm joined by my co-host Rob Abo Solo, who's looking svelt, fit, trim, handsome, dark, well-dressed, well-manacured. Like, can you just slow down this glow up that we're all getting to experience in real life. Yes, I am now changing my title to co-host with the comost.

Yes. Yeah. So if you could start referring to me as that, that'd be awesome. This is a true marketer at heart because that's incredibly cheesy yet will still stick in my brain. Sticky Cheese, the Sticky Cheese method with Robert Obisolo Marketing Co. In today's show, you're going to hear all about two popular markets, Chicago and Houston, as well as agents that work in those markets that can give you the scoop on what to look for, what to avoid, and how to approach buying real estate there.

We talk a little bit about cash flow versus equity, identifying up and coming markets and the right approach to take in a challenging market. Rob, what do you think investors should keep an eye out for on today's show? Honestly, I think it's a really great educational episode for anyone that is new at working with real estate agents in general, because as you'll hear in today's episode, you're going to hear how they provided value, how they were able to save deals, how they were able to price properties. And it really is just nice to know that there are realtors out there that are really thinking about your deal from every angle. We talk about owner financing and how not all

realtors are down to have that conversation with the sellers and the importance of having someone that's willing to go at bat for you. That is true. Having the right agent in your quarter can make a huge difference in having a portfolio that scales or having a portfolio that fails. Today's quick tip of simple. Head over to Biggerpox.com slash agent finder to match with an investor-friendly agent now. It's fast, it's free, and it's easy. That's Biggerpock's.com slash agent finder. And I am on there too.

So hopefully you all go find me and click on my beautiful bald face so that we can get in touch. All right, let's get into today's show. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction? homes, 10% below market value in the best markets across the country without making real estate your second job. That's exactly what rent to retirement does. They're a full service, turnkey

investment company handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered with Bigger Pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in.

With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one. solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comps that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free

leads at PropStream.com slash BP. That's P-R-O-P-S-T-R-E-A. AM.com slash BP. Don't just dream about real estate. Make it happen with PropStream. 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 via a mobile app or desktop. It saves me time in tenant communication and keeps me organized for tax season. It's called

Rent Ready, and you can sign up for a six-month plan for just $1 with promo code BP 2025. Pro users get it for free because we believe in it. Just sign in through your pro account to get started. RentReady helps on-time rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out at rentready.com slash bigger pockets. That's rent-r-r-re-d-com slash bigger pockets. Dan and Jody, welcome to the show. So nice to have you two here today. We're going to get into some interesting markets, Houston and Chicago. We're going to run through each of these markets, and then we'll get into some recent deals that you two have helped close.

Then we'll talk about what made those deals work, and all of our listeners can use these insider tips and secrets on their next deal, too. So we've done these before. They were a hit. We're going to be learning all about what is available in Houston and Chicago. Dan, we'll start with you a little bit about your background here. I understand you've been in real estate for 20 years. You've been an agent for five. You were full time in learning development and training agents, started flipping with dozens of houses being flipped over the years. Ten units total made up of single family and multi units. And you are a poker player who use

your winnings to start in real estate. Did I miss anything there? No, you got it. That's right. Awesome. All right. Jody, you've been in the game for 20 years. You own a boutique brokerage where you have 12 agents that work for you, a property management company with home design and remodeling, a little bit of everything. 22 single family homes, a couple commercial properties. You've got historic homes that have been converted into office space. You flipped 30 houses. And one of the agents on your team was an investor that you met through bigger pockets

and you helped them acquire their first few properties. They later became a full-time agent on your team and now you've got a full brokerage. Did I miss anything there in your story? I think that pretty much sums it up. Awesome. Well, it's nice to have you two here now that we have a little bit of background on you. let's get into your markets. Dan, I'll start with you. What are some of the long-term benefits to Chicago? Well, Chicago really didn't go through sort of the huge growth spurt that a lot of the other markets did.

We increased about 3%, 5%, depending on what part of the market we're in a year. And some of our areas are just now returning to pre-recession prices. So that tells you that while our prices have gone up, there's still a long way from what you've seen in the other markets. So there is incredible opportunity to appreciate, you know, price. And as you always say, there's going to be a lot of appreciation in rent as well. There you go. What about population shifts? What's the economic engine that's driving Chicago?

Yeah. So like every northern city, there's always people as they get older. They tend to move to warmer climates. But for the most part, our population has done really strong work. Now getting all the people that thought that they could live forever in Tahiti and work remotely, realizing they're going to have to go in the office. they're returning and we're starting to see all that happen. So there's a couple of things. Number one, we have major hubs here like McDonald's and Motorola and Allstate Grub,

Hub, and then United Airlines. And United Airlines is important because they have a hub here. And as part of that, there's a huge consultancy part of Chicago. So we have all the big companies like Deloitte, McKinsey, and Bain. And those people tend to be nomadic unless they take a full-time job that's going to last forever. Most of those people expect to be here for a short period of time, and that period of time is one to three years. That's what they expect. So they're going to be renters, even though they can easily afford properties. But companies like United, you know,

when you have a hub at United, you don't just have, you know, you think of people that, you know, the captains of the airlines, but you also have all the people that are just like getting the snacks to the cart. There's just tremendous opportunities. So whether it's white collar or blue collar. There's great paying jobs all over the city. But you're seeing a tenant base is what you're getting at. These are people that need to rent. Yes, exactly. And tell us, Dan, why should people consider Chicago? Well, Chicago is an extremely popular city to live in. We recently had the number one ranked restaurant. We have lots of world-class restaurants. It's the place that Improv lives. And it's the number two theater city in the United States. A lot of people move here.

when they graduate from college in the Midwest because it is the New York of the Midwest. There's endless opportunities. The public transportation system is incredible. You don't have to own a car here. But you can also own a car and find parking here. So it's a great combination of both. So there's a lot of reasons that people want to live here. So you'll always have people that want to live here to buy and to rent.

What would you say are the specific strategies that work best in the Chicago market? Anything works in Chicago. You know, when you think about short-term rental, Rob, I loved your at BP con this year was great. You talked about short-term rentals. Just creative ways of which you can do. And I think that helps you stand out because there is a lot of competition short-term rentals, but you should know that the city ordinance say that you do have to live in the property. So whether it's a multi-unit property or single-family home, you have to live in it.

So it's not something you can easily do out of state. So most people are moving to mid-term rentals. obviously I've flipped a lot of properties. It's really easy to flip in Chicago because not only do we have tons of distressed properties, Chicago is unique in that on the same street, you have a property that's $350,000, sitting next to a property that's $850,000 around the corner from a property that's $1.2 million. So those other properties make the appreciation happen very quickly if you make the right changes to property. But I think the bread and butter in Chicago, the thing that most people should focus on two to four unit properties. We have tons of them in Chicago, but they're getting torn down every day because as people are looking for places to build single family homes and convert into condos, those are the best ways to do it without having to build completely from scratch. So if you get into a two and four unit now, it's going to become more and more valuable because it doesn't make any financial sense to build them. They were built a long time ago when labor

and materials were cheap. And if you were going to spend that amount of money on a property now, you would build a single family home or you would build a high-end rentals or high-end condos. You would not build what's there today. And there's 1,200 for sale right now in the area. So there's lots of opportunity. Awesome, man. Well, thank you for the snapshot.

And before we move on to Jody here, just wanted your take on the pizza. Yay or nay? I'm a huge fan of deep dish pizza, but you should know that true Chicagoans don't actually think that's their pizza. They have a different style called pub pizza, which is actually cracker thin. That's what they think is their pizza. So the people that think that deep dish is Chicago or local pizza, it's really people that transplanted here that fell in local. Oh, interesting. But I love it all. Yeah, I did not know that. I'm a New York sliced guy, but occasionally I do like to eat lasagna. And, you know, that's where the deep dish comes in. But yeah, that's right. I got to try

that. Well, thanks, fan. I appreciate it. So Jody, I'm going to ask you the same question. Can you tell us a little bit about some of the long-term benefits of investing in Houston? Sure, absolutely. So I think some of the long-term benefits, I mean, we've got a very favorable tax environment here in Texas, both for investors, property owners, as well as businesses. We've got good steady appreciation over the years. It's a very landlord-friendly state, and we've got a very strong rental demand here in Houston. I know it has, we've got, we We've just had a 19% increase in rental properties over the last year, 3% increase in price. I think our average rental price now is about 2350.

And so it makes it a very lucrative location for investors to look at long-term buy-in holds. And what are some of the population shifts in Houston and some of the economic engines in the area? Yes, so Houston is the fourth largest city. Personally, I've experienced a ton of hours. out of state people moving into Houston. I think the statistics are we've had about 85,000 newcomers to Houston over the past year, two thirds of those being people moving from other states. I think on an average over the past several decades, Houston has seen an increase of about 2% population. Some of the big economic sectors in Houston, of course, everyone knows us for oil and gas. However,

There's a huge health care. We've got the number one largest bed center in the area. So that's a big driving factor there. We've also got aerospace and biomedical research, tons of job opportunities in Houston. Yeah, yeah, for sure. Oil and gas is a big one, NASA, like you said. And then overall, not specific to Houston, but we also have Whataburger and Buckees here. And that's just an overall economic driver for Texas in general. Other than those two amazing things, why should people consider Houston? Well, I think they should consider Houston based on a couple of, you know, what we've discussed in regards to our population, our good long-term appreciation rates. We've got a vibrant art and food scene, which is very important. Low cost of living. Houston's a very diverse community. And did you

mention that the average rent in Houston is about $2,300? Yes. Okay. About $2,300. in Houston, yes, that is about a 3% increase from last year. Single-family homes have jumped 19% year-over-year with the average lease price climbing 3%, which is now at 2363, which is a record high. There's also been a total of 4,396 leases were signed compared to 3,690 in July, which is the highest volume of single-family leases that have ever been recorded in Houston history. So we have a very very... strong rental market. The demand is there. It is. I mean, I grew up in Houston from like zero to 18, right? I feel like it's just such a different city like 10 years later, which I guess you could say about really any city, but being from here and actually returning, it is just kind of crazy

how much development. And honestly, yeah, it is the real estate seems to be growing at all times. The rent prices definitely seem to be so much higher every single year. What strategies are currently working here? I see. I've got a lot of clients that are interested in the long-term buy-and-holds. Of course, with interest rates increasing the way that they are, it is a little more difficult to cash flow, but I've got a lot of investors focused on more long-term appreciation. And so some of the metro areas in Houston areas that have very good school districts, I have noticed I've got a lot of clients that are interested in that for the long-term appreciation aspect. I think Houston is such a diverse area. It's so large that you can really focus on multiple different strategies just based on

what the investor's goals are. So I'm seeing a lot of newer investors that are purchasing properties, house hacking, or inside the loop, possibly looking at properties with garage apartments, doing short-term rentals there in order to offset those mortgage payments and be able to get in oftentimes with a little less than the typical 20, 25% down payment for investment properties of owner occupying them. So I think there's multiple strategies. Of course, we also have older homes. So doing the Burr strategy over the past few months, I'd say the majority of my clients are looking for the long-term buy-in holds and small multifamily anywhere from two to four units. And we're having great success there. And then when you said the loop, what do you mean by the loop? I'm sorry,

inside the 610 loop. So that's more inner city. And then you're going to have, you know, there's three loops in Houston. And you're going to have the 610 loop and then the Beltway, which is a little more suburban and far out, which used to be considered far out, is the Grand Parkway loop where you've got all the more suburban areas. And those are some of the areas that are really good for long-term buy-and-hold, good appreciation, great school districts. Very cool. So I want to ask each of you a question that doesn't get brought up a lot in real estate, but I think it's a question that needs to be asked.

The last decade, we've primarily invested for cash flow. Podcasts have described cash flow as the reason to invest. This has been the right motivation is you should invest your money to get cash flow. And if appreciation happens or if rents go up, so much the better. but you need to really rely on cash flow. And Jody, as you mentioned, rates have got up, but prices really haven't gone down. Supply and demand is out of whack right now. There's still much more demand than supply.

So cash flow has been largely eaten up in a lot of markets, but prices haven't come down to fix that. What are your thoughts? We'll start with you, Jody, on if a buyer is not going to get cash flow, are there certain markets they can focus on within Houston where you think rents will go up, so eventually they will. Do you think that there's a strategy where they should be okay with breaking even if they believe the property values are going to increase? Or do you think that investors should just stop buying properties unless they cash flow really strong? I believe, I think if a property makes sense,

and especially buying in some of the areas that I had mentioned, some of the suburban areas where you've got steady appreciation. And I think it's always a good idea to buy if you can have someone else cover your mortgage and help build equity. And so I would suggest some of the areas, some of the suburban areas, I'd say like Katie, Cyprus, you've got, the school districts are the driving factor. You've got a lot of people moving from out of state, specifically looking for those areas, wanting their kids in good schools. And so you're going to have long-term renters, good steady appreciation on average about 7% per year. So I am seeing a lot of investors now that are diversifying their portfolios,

and they are perfectly fine with breaking even and focusing on areas that have good long-term appreciation. That is something that we assist in guiding our clients and showing them the statistics in specific areas and giving them their feedback of which areas are ideal for that. Houston is a really interesting city in that it is like 80 cities all clustered around one big city. It feels like every suburb of Houston is just its own little metropolitan area. Like Cyprus, for example, I think that's a really great booming area in Houston. But like five years ago, it didn't look like that. It was just fields. And you drive by Cyprus now, and it really is its own living, breathing city. I agree, though. I think a lot of those cash flow opportunities,

I think do tend to come from some of the suburban areas. It's kind of interesting how it is seemingly tougher to break even. I'm actually working on a seller finance deal in Houston right now at the moment, and it loses money. And the seller proposed the terms to me. I said, hey, this loses money. And he's like, well, you know, the thing is with real estate investing, sometimes you got to lose money, but you understand that you're building equity over time.

And I was like, well, yes. But I don't like to walk into deals where I'm losing money automatically. So we're trying to work out terms to break even, but it definitely gets tougher in Houston specifically because the property taxes in Texas seem to be pretty high. Dan, what about you? What are your thoughts on investors that are having a hard time finding cash flow in the Chicago market? Do you think that there is an argument to be made for taking maybe a delayed gratification approach if the fundamentals are strong and you believe you're going to have rent and price growth

that it's okay to invest in those markets? or are you like, hey, man, cash flow till I die. That's the only reason to invest. If you can't find it, just don't buy. I'm really glad that you brought this question up. And you guys had a great interview recently with Barbara Cochran, where she talked about she doesn't worry about she expects to overpay for properties. And she's thinking long term. You know, when you think about year one of a rental property, I just don't think it makes any sense.

Real estate to me is a long-term process. And I just don't think it's that hard. You buy a property, your tenant pays down your mortgage. And eventually, you're going to make a lot of money. You know, if you're not making a lot in the beginning or even breaking even or a little below it, eventually you will. The rents will go up. The price you're paying for the mortgage will stay the same. You know, as somebody that invested in properties, not knowing what he was doing in the beginning, you know, I started before.

I even knew about bigger pockets. We didn't know what we were doing it. And, you know, here we are years later. Our properties are two or three times what we paid for them. And, you know, we're cash flowing in every day. thing. I just think if you focus on short term today, like that was a strategy for 20 years ago. That's not the strategy for today. That's a great point. Like what worked before doesn't always work now. And let's give a disclaimer. Rob made a good point. This does not mean by a property that bleeds two

grand a month, hoping that it goes up. That is not what we're saying. We are talking about if fundamentals are strong, businesses are moving into the area. There is not enough supply for the demand that you see. Let's assume Cyprus. I know nothing about it, but hypothetically speaking, this is an area everybody wants to move into. The school scores are high. Wages are higher in Cyprus than they are outside of it. You have every reason to believe that this area is going to grow at a faster pace than the others around it. But wages haven't gone up to the point where the tenants can afford to pay enough for the rent to keep, to make a cash flow. There is an argument to be made, I think, that buying in better areas will make you more money over time, but they may not

crush it right away. That is not to say buying an war zone and hoping that rents go up is a good strategy. I just, I want to clarify that because it seems like there's always someone, no matter how much I try to make this clear that finds a way to be confused and accuses me of saying, David Green said cash flow doesn't matter and we shouldn't even analyze properties and you shouldn't even look at it. That's definitely not what we're getting into. But I do think that some of the better markets like what we're talking about today have more competition for the homes, which drives the prices up, which does sort of eat up a lot of the cash flow, unless you find that unicorn that we're always looking for.

People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the business. built, the property management, and the details, so you don't have to. In some cases, investors even

receive 50 to 75% of their down payment back at closing, and there are interest rates as low as 3.75%. They've been trusted partners with BiggerPockets for over a decade, and if you want to learn more, visit BiggerPockets.com slash retirement. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStrae, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution.

That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI power. insights and coms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M.com slash BP.

Don't just dream about real estate. Make it happen with PropStream. The rise of the tech savvy investors here. You don't need a huge team or tons of overhead to manage rental properties. Just the right tools. So I want to tell you about how I use rent-ready to get ahead. For landlords who treat their time like capital and recognize the cost of sweat equity, this tool gives you everything you need to scale. Rent collection, tenant screening, maintenance accounting,

so that you're organized come tax season, and you can run numbers in preparation for future deals. And more. All in one platform via a mobile app or desktop. Modern landlords don't just own property. They optimize it. Rent-ready will keep you organized, running leaner, and ready to grow. Start with Rent Ready.

Visit RentReady.com slash Bigger Pockets. That's rent, R-E-D-I-com slash bigger pockets, and use code BP 2025 to get Rent Ready's six-month plan for a dollar. New Year, Clean Slate, and maybe a vacancy that needs to get filled fast, that's where a veil comes in. With Avail, rental listings can be published to 24 top rental sites with one click, completely free. That includes places renters are already searching, like Realtor.com, Apartments.com, Redfin, and more. No copying and pasting. No juggling multiple platforms, just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co slash bigger pockets. That's A-V-A-I-L.com slash

bigger pockets. Let's move on a little bit here. Each of you has a deal that you've done. Jody, I'm going to start with you. Tell us about the last resort. So this was a property that one of my buyers located. It had been in contract previously. Typically, when I see that, I like to reach out to the listing agent, get some background information, see if they have any current inspections on the property, just try and figure out any insight that I can get that would be beneficial for my borrower going in. Got under contract. I think we negotiated after reviewing the inspection report. So she had a good idea of knowing what issues were going on with the property, which it was pretty much renovated, not many issues at all. We were able to negotiate about 20K price reduction and got

into contract. Everything was going smoothly. She opted to have another inspection report done. We negotiated a few repairs there during the option period. Moving towards closing about three days prior to her financing contingency found out that the lender had miscalculated her monthly incomes. Let me backtrack a little bit. This was, she's self-employed, so this was a stated income loan. So found out she wasn't able to get approved at this point. She had already sold her home in Austin, packed up and moved to an Airbnb waiting for closing in Houston. So we went to every other lender. I've got a good resource of lenders that I've worked with over the years. And basically everyone said, no, you know, they didn't even know why the first lender approved her. The funds just aren't

there. She's not going to be able to get approved. that initial lender had suggested going in with basically private money lender or hard money lender. Her rate was just jumped up to 12%. It wasn't going to make sense. I sat down with her, said, look, I know you really want this property, but you've got to take emotions out of it, you know, put your investor cap on. It doesn't make sense. Her intention was to occupy one side of the property and short-term rental the other.

it was still with that interest rate going to make it very difficult for her to cash flow anything. So as a last resort, I reached out to the listing agent, was able to negotiate with her and the seller agreed to seller financing with some pretty favorable terms. The terms were actually about 2% lower than the initial rate that she was going to go with, with the stated income loan. So we were able to negotiate that. Another hurdle came up that found out there were open permits on the property. And the contractor that had done the renovations walked off, seller couldn't get a hold of them.

And if anyone knows, working with permitting in the city can be difficult at times. So at that point, we stepped in our, I also have a construction design remodeling company, got my project manager in. They were able to go to the city, pull some strings with some people they know. And we were able to get those permits passed. And we actually closed on that deal about two weeks ago. And she has had it leased out on short-term rental for the past two weeks. She's had full vacancy. So it was a deal gone south that had many hurdles.

But, you know, we were able to shift gears with needed and use our resources. to actually get a more profitable deal for the investor as opposed to what she was initially going in at. You had me at pulled some strings with the city to get the permits approved. You just became my go-to Houston real estate agent. Congratulations, Jody. You've skipped to the front of the line. Well, it is hard to do. But at the end of the day, you know, I mean, what we've learned and we've learned in many municipalities

and working with permitting, it ultimately, they just want the job done right. And if you do it right and you do it the first time and you follow it. the guidelines. It's not that difficult. So we've got a good reputation working with many of the cities and they know if we're on the job that it's going to be done right the first time. And so not necessarily, you know, no money under the table, anything like that, but just, you know, representing our clients to the best of our ability and getting the job done. And when you said that she was, or that she was booked full occupancy, what do you mean by that? Do you mean that she listed on Airbnb and every night was just getting booked by guests? Yes, yes, for two weeks.

she has. She can't believe it. She's a newer short-term rental or Airbnb host. She had her last property in Austin and she said she had about 50% vacancy there. So she's new and she's been booked for the past two weeks. So she's super excited about that. Cool. Very fun. Well, how did you find the deal? It was on MLS. And as I mentioned, you know, in this market, just, well, given the past year market, you had to be a little more creative to find deals. So, I always like to kind of look at properties that have fallen out of contract. You know, oftentimes you've got sellers that are motivated. They may be in contract for something else. And so when I see that something's fallen out of contract, I like to jump on those and, you know,

try and get it locked up as quick as possible for my clients. Awesome. And how did you help with the due diligence, the team building and some of those other aspects within the deal? At first, I assisted in, you know, recommending our inspectors, lining that up. As I mentioned, our contracting company came in and they were able to get the permits cleared, which the seller was unable to do. I also got her in touch with an attorney that was able to structure the owner financing terms and draw up the paperwork. Also connected her with the property management company that she hasn't employed yet because she's been doing the management herself for the short term rental, but that she would possibly, in acquiring her next one or other properties,

she would help utilize. And you sort of talked about it with some of the connections that you were helping to make, but were there any other ways that you demonstrated value to your client? I believe just not giving up and, you know, being persevering over the hurdles that we encountered. Many people would just kind of walk away, but ultimately, I mean, I make a connection with all of my clients and at this point of the transaction, you know, I wasn't giving up and I was making sure that she was going to be able to get this closed no matter what. So I think thinking outside of the box, such as owner financing, that that's something that I would say retail agent may not consider. But as an investor myself, I know that where there's a will, there's a way and you don't know

unless you ask. So first, suggesting it and then putting in touch with the correct people that were able to structure the deal and get it closed. I think that's the way that we were able to turn tables on what could have been an ugly situation. and made it profitable for both her and the seller. In general, because I agree, I think any realtor that is willing to go to bat on the owner financing side, an amazing, amazing trait and characteristic, do you feel like in general, like most realtors are pretty, not anti, but won't really ever take that to the seller? Absolutely. I think most realtors just because they don't necessarily understand it.

and I think a lot don't want to come to their seller and propose something that they don't understand or can't educate them on. So I have encountered many that do not want to. And then as I educate them on how it can be most beneficial to their seller as well as the buyer, I've been pleasantly surprised that others will. Just I believe that they need to be educated at first and know how it can help all parties involved. Awesome. Well, keep fighting the good. Now I know who to go to for all my owner finance deals.

All right, Dan, let's talk some Chicago real estate. By the way, how can you have an accent? Why is it that I go to cities? I just got back from Boston. I was there for the UFC fights. Like 20% of the people had an absolute iconic Boston accent like you hear in movies. Then 80% of them just sounded normal. How does that happen?

I was not born in Chicago. I actually was born in Indiana. So I have an Indiana accent. Okay, you are off the hook. What about everybody else that lives in a big city but doesn't have the exit. Well, you know, it really depends on the community you're from. You know, you mentioned this about Houston, but Chicago is really, it is really a collection of neighborhoods. And there are neighborhoods and you live and work in that neighborhood and everybody sounds the same. And then,

you know, in a different neighborhood, they sound completely differently. Like, we have Polish neighborhoods where people only speaks Polish and we have lots of neighborhoods where people only speak Spanish. And then we have lots of neighborhood where people sound like, you know, Saturday Night Lives Kid. That is a sound answer. I threw it at you out of no. and you gave a very good explanation. You also highlighted what I should have thought about, which is not everybody that lives there was born there and grew up in grade school. So there could be some transplants that I should have thought about.

But the Saturday Night Live Skid is exactly right. It was actually my first time visiting the East Coast. And I kept thinking every time I would talk to someone with a really thick accent, like they're pretending to be a character out of a movie in Boston. There's no way that they actually talk like this all the time. And then I eventually realized, oh no, like it really is that. accurate. They don't like ours. The letter R gets dropped out of everything they say. They're just not fans of the eye. All right. So tell me about Logan Square. So I had a client that had called me up from the agent finder on bigger pockets.

And I talked to him, got a sense of what he wanted to do and got him qualified with a lender that works with multi-unit properties and felt really good about him. And very rarely, but every now and then I find something on the private listing, which is just absolute slim. lamb dunk. And so I called him up and I said, we should do this. People don't know private listing or listings that you can't see on Zill or Redfin that only brokers that know how to access them and make them available to their client can show them. So I called him up. And, you know, so many people that are listening to this podcast are listening for years and are afraid to buy something. And I found that when I offered him that, that he was suddenly like dragging his feet and nervous because it was the first thing I was showing him. And I said,

trust me, this is an absolute great deal. He looked at it and he loved it. They had redone the whole thing. But, you know, David, as you know, a lot of the people that sell multi-unit properties have no business doing it. They don't know how to price them. They don't know what they're doing it. And he just listed it way below market. But because it hadn't in the public market yet, there wasn't much competition. So I'm begging this guy to get the offer in and he's thinking and thinking. And finally we get it in and they said, oh, we just got another offer that's much higher than that. And so we're going to go that way. So we lost out in it. And then he, spent the next day going through, looking at his numbers and going, oh, my God, I really screwed

up, didn't I? I said, yeah, you really missed out on something. And I don't tell people this, but when there's a multiple offer situation, I don't tell them because I don't get their hopes up. I'm always calling that agent, saying, listen, if anything's going wrong with this deal, give me a call. We're going to get this done. It'll be a sure thing. Because a lot of people, when they bid over asking price, once they do that, then they start to regret it and they have second thoughts about it, and then they start renegotiating the price. And so that was happening. He called me up and he said, is your buyer ready to go? And I was like, I hope so. And I said, yes, absolutely. I called him up. And by then he was really excited for the deal. We got it under

contract. And everything looked great. So this is a unique property. It was a two-unit property in Logan Square. And Logan Square is a neighborhood that is appreciating like crazy. There's great restaurants and bars and breweries. People want to live there. And so there's lots of opportunity. if you get a property there to find renters. But what was unique about this property was there was a top floor and then the bottom floor had, or the bottom unit had two floors. And the people that lived in it were brother and sister. And in order to give themselves privacy, where the stairs were, they put a piece of drywall

to separate them. So they had privacy. And so when the appraiser came by, he said this is not a two-unit property. It's a property that has like two pieces that are. aren't connected and he couldn't understand. All we'd just take down a piece of drywall and it'd be fine. So he did not appraise at value. So I had just promised this agent that we could get this done and now suddenly it's not appraising.

But fortunately, the lender I worked with is really creative and we came with an idea and we went back and I said, look, can you get the seller to take the drywall down? We'll redo our loan so we get another appraiser out because usually if you send the same appraiser out, he's going to no matter what you do, it's not going to appraise above value. So they had to at cost take down the appraiser out. the drywall, clean it all up, make it look great. We sent out another appraiser and a nice twist of fate. It praised at $60,000 above what he was paying for it. And he got it. He got $60,000 of equity from moving in and it's cash flowing from day one. He's really excited. You said something earlier,

I don't want to skip over. There is a psychological condition where if you are paying less than the asking price, you think you're getting a good deal. And if you're paying more than the asking price, you think you're getting a bad deal. And it drives me nuts because it's like, tell me you're an amateur without telling me you're an amateur. It's you use the list price to make your decision on the value of the property. It does happen where a house is listed low and writing an aggressive or over-asking price offer is the smartest thing you could do to lock it up before they get a lot of other offers and realize they listed at low. So it probably happened as you were speaking to that listing agent, your guy was kind of sniffing at the bait, but he hadn't actually bit on the worm yet,

you were trying to get him comfortable with going in strong and like playing the other, the listing agent, like, hang in there, hang in there, hang in there. Come on, buddy, we got to do this. And then someone else called and the agent, the listing agent told them, oh, I got another buyer. And his guy was like, oh, hell no, I'm buying that thing now. Came in 20 grand higher. He gets the great deal. Your client wishes that he had.

I just want to sort of co-sign on what you're saying here, that it's, It is not inherently bad. Your agent is not ripping you off if they ask you to pay over asking price or I should say they recommend that you do that because sometimes properties are priced low. Sometimes they're going to get seven offers and the new baseline for what the seller expects. It goes from the 600,000 asking price to 650 because that's where the offers have come in at. And had you paid 610 in the beginning, it would have looked like a good deal. Have you experienced that as well, especially with some of the small multifamily?

David, yeah, that's absolutely the bane in my life. is I always tell people it's not the price of the property. It's the starting price. So sometimes the starting price is too high and sometimes it's too low. And you know, you can use the data to figure that out. It's not hard to figure that out. I can tell usually if a property's going to go the first weekend. So do you want the property at the valuation you put it or do you want it at the valuation that some agent who may not even know what they're doing listed the property at? Yeah, I totally agree. There's another point there where when you're selling your house, because I know a lot of our listeners at some point we'll need to sell a house with an agent. There is a temptation to choose the

agent that says, I want to list it at whatever the highest price is. It feels safer. Like, well, this person said 700, but this person said 800. I'm going to go with the 800. And then it sits there for four months, not selling, and it becomes stale product, and nobody's seeing it in the searches, and the showings dry up, and you have to drop it to 700. And then you get offers at $6.50 because it's been there for four months and nobody wants it at that price. And it's your own fault because you went with the agent that told you what you wanted to hear versus the agent that said, let's list it at 700, try to get several offers. And now my skill as a negotiator will play. And I will push those offers up to 750 versus let's price it at 800 and maybe someone to write an offer at 750.

It just doesn't work that way. That's another thing I want to highlight. The skill of the agent you choose plays a huge role in how much money you make. But most clients, and I think you probably can both agree, have no idea if they got really. ripped off or if they won. All they know is what their agent tells them. You both negotiated against other agents that did a terrible job and you knew it and you knew they cost your clients money because you knew you made your client's money. In order for one side to make money, somebody had to lose it. That's the way that it works. And I'm sure those agents never go and tell their clients, I screwed up.

I listed your house too high. I got too greedy. I went on vacation for three agents and didn't want to answer my phone. And so the buyer that we had moved on somewhere else, whatever the case was, they say, oh, those buyers are just jerking you around. It's just very, be very careful who you choose as your agent and make sure they have a lot of integrity because they can color how that went down, however they choose to, and you won't be privy to that information. As investors yourself, I'm assuming that each of you have a different perspective when it comes to this.

So I know, Dan, we're still kind of wrapping up on your deal here, but do you have experience with selling real estate where you feel like your experience as an investor is helping? helping your clients because you can shoot straight with them where other agents that don't own their own rentals that need that deal to pay their mortgage, feel pressure to tell them what they want to hear. Yeah, you know, you mentioned the beginning. I started as a poker player. So negotiation is actually my favorite part of being a real estate agent.

I love it. And some agents don't. Like they can't sleep at night going through the negotiation process. But yeah, when you when you're thinking for yourself, like what is this property worth and you're evaluating it for yourself? you're looking at properties completely different than an agent that has never bought an investment property or maybe even hasn't bought a property themselves at all. They don't understand how to value the property and where the price should be because they don't know what it's like to have skin in the game and they don't know what it's like to have skin in the game over and over and over again. Jody, how about you?

Have you seen experiences like this? Yes, absolutely. For example, I had a property. I had someone that called us that an investor wanting to do a full rehab on a property. and they called in our design remodeling company. And one of my sales people went out to do the bid. They realized, hey, this person probably doesn't need to put in $80,000 to sell the property. They consulted with me.

And they had multiple other agents that told them, yes, they need to put granite countertops in. They need to change the floors. They need to put in a roof. And when my salesperson came in and said, hey, I want you to look at this property. They want to do a full remodel. I don't think it's necessary. I evaluated it, looked at the comp, and said, absolutely not. It's not necessary.

Put some paint on the walls and the property is going to sell. There's no inventory in the neighborhood right now. So I put my investor cap on thinking, no reason to go in and spend all of this money to maybe make a $20,000 difference because the home's not going to appraise if not. So absolutely, I think many times as an investor, we put that cap on and think how we're going to save our client's money as opposed to making it the most beautiful home in the neighborhood and making our marketing collateral look good. Yeah, there's a lot of people don't realize agents don't get training and what they're supposed to do. A lot of it is just whatever occurs to them is the right

way to think about it. It's sort of the Wild West. And that's why choosing your agent wisely is so important. One of the things that I'll do, just like you said, Jody, someone will say, hey, I want to sell my house and I'll look at it. It's not updated, right? It's got the green shag carpet, the white tile, brown grout linoleum, the oak cabinets, wallpaper with sunflowers. Just your typical, this is not going to show well. And I don't assume that they need to go spend $100,000 to upgrade their house because they may only get $100,000 back if they do that, but they spend three months going through this really annoying rehab that ruins their life. I just look and see, well, how many actives versus pendings do we have? When there's nine active properties for sale and one or two pending, there are two

many homes for the buyers that are out there looking. And so we are going to have to do something to improve the condition of this property if we even want a chance versus there's one property active and nine pending. There's so many buyers out there looking for these properties that you don't have to do anything. They're going to pay almost the same price because they have no other option. And that little thing, I swear, agents don't even think about it. Like they just go and look up comps and they get a price and they say, here you go. They don't call the other agents and ask them, how many showings are you getting on your listing? They don't call the agents of pending properties and say, what did you go under contract for? How many offers did you get? Like, that's

really the only way I found to get a snapshot of what's going on in the market is to talk to the agents that have pending homes for sale and ask them, how many offers came in, how aggressive were they? Would you price it at the same price? Would you go higher? Would you go lower? But that one little thing will make such a big difference when you're giving information to your clients. So all of our listeners as you're going to choose your agent. Hopefully you're using the bigger pockets agent finder to do so. Ask questions like that. See if the agent, when you say, what do you do to sell a home? How do you make sure I know I'm pricing it correctly? If they, you just get a, um, well, we look at comps, probably not the agent you want selling your home. And the same goes for buying

a house. You want to be asking them similar questions to what you hear Rob and I asking on today's show of Dan and Jody, because you could tell from their answers. They know their market. They know what's going on. They know where the opportunities are. They know what to help you avoid. And that's what you're really looking for, especially if you're investing in a market you're not familiar with. And if you like more information to how to do that, check out long distance real estate investing, where I explain the process for doing so. And having the right agent is a crucial piece in that puzzle. Dan, Jody, thank you so much for being here. I really appreciate you guys. Jody, if people want to find out more about you, if they want to reach out, where can they find you? So I can be found on this isliven.com.

there's no G at the end. And on Instagram and Facebook, this is living underscore properties. All right. And how about you, Dan? Dan loves houses everywhere, including my website. Nice. Is it like Dan, like heart for loves? No.

That would have been great. Rob, how about you? Where can people find you? You can find me over on YouTube and Instagram at Robbilt, R-O-B-B-I-L-T. Did you give up on TikTok because someone stole Rob-Bilt over there? No, I'm still on TikTok. TikTok, but you get the good good over at, on Instagram. There you go.

You're only giving us the best version of Rob, not the mediocre. That's right. That's right. The weird stuff is on TikTok, but the good stuff, Instagram. You can find me, yeah, like, if you want to get the best of Rob, it's like the very end of the buffet. Don't eat early. Avoid the TikTok.

Wait to get to the end. That's where you're going to find the most expensive items. Don't fill up on all the mac and cheese that they put out early. You find me at David Green 24.com or at David Green 24 on Instagram or your favorite social media. Thanks again, both of you really enjoyed having you here. Rob, anything you want to say before we get out of here? No, no. Thank you for your time. And maybe I'll be investing in Chicago and more in Houston with y'all. So thanks. We appreciate it. Thank you. I really enjoyed it. Thank you all so much. I really appreciate it. Thanks for the opportunity.

This is David Green for Rob, end of the buffet, Abas Solo. Signing off. Is there any cheese you don't think is great if we're being honest here? Blue cheese like crumbles, not a fan, but I like blue cheese dressing for my wings. So you like rotten cheese in its liquid form, not in its solid? Well, when you put it that way, it doesn't really change anything, but it does make me feel worse. Well, if you like blue cheese, you should check out some green cheese. And you're going to hear more of that coming up now. Green cheese, that was your nickname back in prison, right? Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes,

10% below market value, and the best markets across the country without making real estate your second job? That's exactly what rent-to-retirement does. They're a full-service, turnkey investment company handling everything for you. In some cases, investors get 50 to 75% of their down payment back at closing, plus interest rates as low as 3.75%. They've partnered with bigger pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit biggerpockets.com slash retirement to learn more.