How to Build a Rental Portfolio FAST Without Tons of Time or Money

this is the BiggerPockets podcast show seven seven eight and this book is really about our journey and how we built at our 10 million portfolio and we're able to quit our jobs right all right how do we work with the limited Capital that we have how do we work with the limited time that we have but also scale our assets really fast in three to five years as opposed to waiting 30 years and I think the question shouldn't be should I invest right now the question should really be how should I invest right now what's going on everyone it's David Green your host of the BiggerPockets real estate podcast you already know what time it is the biggest the best the baddest real estate podcast on the planet I'm joined today by my favorite co-host and good friend also incredibly handsome man today you guys got to check us out on YouTube if you're not and see what I'm talking about Rob Abba solo Rob good morning to you the top of the morning to you Dave listen today I'm feeling good uh I didn't tell you this but I I I know you know I'm not a morning person today I woke up at 4 30 30 I worked out at five I'm turning my life around and it feels good today's show is awesome we are joined by nitty and Pollock Shaw you may have recognized Pollock's name from previous BiggerPockets episode three six eight they are back today because they just wrote a book for Bigger Pockets the book is called accelerate your real estate build a hands offer into portfolio with the scale strategy where they have taken the Burr strategy that I wrote about and come up with a blueprint or green print as I like to call it to scale that to growing a very big portfolio and we get into a lot of very practical information on this topic Rob what were some of your favorite part you know we it to me this is a part two two Burr to the birth strategy because I mentioned this later in the episode I really like this because a lot of people do the Burr right they do single Burr double Burr triple Burr and then they're like how do I get to 20 or 30 or 40 or 50 we have a lot of investors that come into the show and say oh I did 100 last year and then you know a lot of people are like I mean that's cool but I can't even relate and so this is actually the systemized approach for how to scale your Burr business and get into some of those larger number deals every single year so very digestible and really the the Dream Team Duo here I'd say they had it down like everything the whole thing was just so masterfully orchestrated I'd say brilliant analysis there Rob brilliant thank you thank you before I bring in MIDI and Pollock today's quick tip is going to be brought to you by my tasty cinnamon roll of co-host Rob babasolo and you'll get that reference a little later but today's quick quick quick tip we call this the Alex hormozzi hack buy the digital and audiobook so that you retain the information better you can read the book and listen at the same time if you're like me in it you have to read a page five times to understand what you just read this is going to help you get through the book and I promise you this is a book that you want to purchase Oh in all also be sure to use promo code are 778 for a tasty little discount on said book over at biggerpockets.com are book very nicely done you've got that on the first try you did a good job with it you are really developing into quite the co-host that I must say thanks I appreciate it black and Edie welcome back to the Bigger Pockets podcast how are you two today great fantastic yeah thank you for having us well black we had you on the show back in February of 2020 what a time that was episode 368. I can't believe we have done that many episodes in that short of a period of time that's awesome you were just three years into your investing Journey then and you were focusing on the Burr method which we immediately connected on for obvious reasons can you quickly share for people who haven't listened to that episode what made you start investing yeah sure um Niti and I were both in corporate and we had great jobs we had slowly climbed the corporate ladder I was a mechanical engineer he worked in strategy and finance and I had climbed the corporate ladder for 17 years and then we decided to have kids we waited till our late 30s because that's what we were told you're supposed to do become financially stable and then have kids and then after we had kids we realized that the higher up you go the less time you have for your family to me it felt like a lie had been sold to me I felt like Society had conned me into this whole lifestyle that simply didn't work we were constantly stressed out um and and my resentment for that lifestyle started building and one day I told nithi I was like we have to change something this isn't working I'd never see the kids and it was just really difficult and after a lot of back and forth we decided we were going to become a single income family and I was gonna start making an impact towards building something for our family that I couldn't have otherwise having that full-time job well I appreciate you sharing that because I don't think that it is an easy conversation for most people we we always talk about it three years after it's happened when we've been so successful that we're on a podcast and then it gives us Impressions everyone listening like you know I just woke up one day and realized there's got to be more to life than this that bird chirping on my window is singing the wrong tune and we just walked into our boss and said you know I just got to do this for me and we broke up with our old life and the next thing we know our next partner walked into our life sparkling and it was wonderful that is not how this goes you you you go from fighting one battle to fighting a completely different Battle of getting your butt kicked you know rob you had a similar experience do you remember what that was like for you yeah I uh opened my zoom like I it was during the pandemic and I remember opening the computer and I had this speech for my bosses I was like listen here guys I'm never gonna work for a company again and then they like joined and I just started crying I was like and they're like is everything okay and I was like yeah I'm just quitting and they're like oh my goodness thank goodness and it was obvious to every person in my life best friends wife co-workers that it was time for me to quit but it wasn't so obvious to me which is always very funny in retrospect because it just made so much sense and I didn't see it there it's a very scary decision so a lot of respect to you for making that decision I think the big thing was I don't know I felt like a lot of women had paved the way for me to get to where I was in corporate and I felt like I was letting them down by quitting my job um but then knitty was pretty big on he's like you're not quitting your job to let them down you're quitting your job to build something else what has happened since the last time we spoke like I believe you were around 5 million in assets at that time what's it been like since uh 2020. so we've doubled our portfolio so we are 10 million in assets and I think six months after the podcast aired nidhi quit his job and he was able to retire and join the business full-time wow did you expect for nidi to or needy let me ask you were you expecting to quit six months after the podcast or did things just move so quickly that it sort of had to happen that way so we had been planning this for the longest time right and um and and to what David said like it's such a difficult decision because it's once you're in your comfort zone like we've been incorporate I've been in corporate 15 years right and you're in this comfort zone of of getting the paycheck kind of knowing that you have a trajectory in in the corporate life that you work towards all your life right um and I remember uh you know coming home and telling Paulette that we need to get out of this comfort zone right I cannot if I think that I love my job which which I did I did like what I do except that when I looked at people who were 10 15 20 years ahead of being corporate they were nowhere close to Financial Freedom and I was like I don't want to do this for another 20 years and not be able to spend time with my kids and do things that I want to do and so I used to come back and tell her that I'm going to tell myself that I hate my job because you know you need something to compel you to make that change right otherwise it's status quo wealth is not in the status quo wealth is beyond that and so you know just you just have to keep motivating yourself that that's what you need so it took us to your question Rob like we've been planning that for three years ever since Paula quit her job we've been meaning for me to quit my job and it happened maybe a year or so sooner than we have thought which is which is great uh so it seems like you guys have made really great progress you've doubled your portfolio you've gone from 5 million to 10 million in assets tell us a little bit about your roles that each of you play in the business and uh are you guys complimentary to each other are you working on the same stuff break that down for us really quick so in some ways we are each other's business clones and we realized that early on and as we started working together more and more we started discovering that we were each good that almost everything in the business but we were really good at certain specific things and we realized that Niti was really good at strategy and he was the one who first found the bar strategy and he's really good at deciding which direction the business should go and I'm really good at systems and processes and Ops and so we have really narrowed it down to our genius zones now at this point um and and yeah it's I I feel like once we did that that's when we really started thriving in this relationship because you know working together as a couple is a whole different ball game nobody talks about it but yeah and it didn't happen like it takes time to figure that out right like we didn't know day one that that's that's what our roles were going to be initially we were like hey let's both be involved in everything right and that backfires pretty quickly because then you know nothing nothing gets done and so it took a while to get there right you're releasing a book called accelerate your real estate build a hands-off rental portfolio with the scale strategy what was it that inspired you to write that book where did the idea start from and how did it come to fruition yeah and so that's re this book is really about our journey and how we built at our 10 million dollar portfolio and we're able to quit our jobs right and I think when we first started there wasn't really a clear path of how we were going to do this we knew that we wanted to build wealth and build passive income uh and we knew we wanted to do the bar strategy right but when we started executing it we had to figure out what method of execution we wanted to that's right Implement right that's right and I think uh even before that again corporate uh you know we thought that we had this kind of path that was made for us but as Warren Buffett says right it's not sometimes how hard you roll the boat but it's about the boat that you're in so we knew that we had to leave the corporate boat and find something else if we wanted to do and that was the birth of like real estate and um you know how we selected sort of Buy and Hold investing in the bore strategy uh but then within that we said okay in in a few years we want to own enough assets that we don't have to do a a nine-to-five job but ultimately our goal was to be able to spend time with our family and spend time with our friends so we kind of reverse engineered that into saying all right how do we work with the limited Capital that we have how do we work with the limited time that we have but also scale our assets really fast in three to five years as opposed to waiting 30 years so that's what really inspired the the book and strategy and the framework that we came up with and about who had no money and had a lot of time on how to get into real estate and how to scale a portfolio or how to how to work towards it but there wasn't anything available to us on how we could execute the bar strategy with limited Capital limited time and still not creating another nine to five for ourselves yeah that's really cool so would you say that this book is is it obviously it's going to be centered around the the birth strategy but it's not necessarily A how to on how to execute the burst strategy from what I'm understanding it's more on the actual scaling of the operations is that is that right right so it's almost think of like the bar strategies or strategy that can be implemented 100 different ways right but the scale framework that we talk about in the book is a specific blueprint to execute the birth strategy right so it thinking through every step in the framework how do you put systems and processes and teams that really allow you to scale the business and treat it like a business rather than just a mom-and-pop investor awesome I feel like there needs to be a movement started that anytime we refer to a blueprint for Burr we call it a green print and also it all you heard it here first yes this is a green card a green print yes green print to scale oh you know what the book scale that I wrote is green this is getting even better it's a conspiracy all right we're gonna dive deep into some of this content from your book accelerate your real estate build a hands-off rental portfolio with a scale strategy but first can you run us through the scale strategy acronym and how it connects to Burr sure so uh so think of scale as uh one step for every step in the bore framework right so the by step in bar is uh scalable acquisition and deal analysis that's s in the scale framework so that's really about not just how you buy a property a lot of people get stuck in analysis paralysis but how do you identify the neighborhood how do you identify the property Avatar how do you build a deal pipeline so that makes it scalable next step in the bore framework is uh the rehab which is um construction without the DIY right and that's exactly what that means is a lot of people think that oh they have to do all the work and they have to go out there and do the tiling and do the kitchen and that's not that's not how you need to do it if you really want to scale you want to build a team that allows you to do the rehab no matter where you are even if you're investing in a different city or different state having a team that actually takes care of the rehab for you next step in the board process is the rent right which equates to adding cash flow and this is about how do you rehab the property in a way that attracts great tenants that allows you to do your cash out refi but also maximize the rent that you get right um and then a lot of people talk about managing properties and getting tenant phone calls and having the system certain processes and teams to really be able to deal with it as you scale your properties uh and as you even if you're investing out of state again or out of out of the um you know in a city that you don't live in next is the refiner refinance thank you refinance is uh leverage and Commercial financing and this is I think by far the most critical piece um off the scale framework right which is understanding commercial finance a lot of people can't scale because they don't understand how to do the short-term financing how do the long-term commercial Finance uh and you know how do you get past the 10 loan limit if you do conventional loans and things like that which commercial financing allows you to do it truly allows you to scale so that's a very important part of the process and the last is the repeat which is exponential growth right an exponential growth is all about treating this like a business putting the systems and processes in teams in place in every step of the process that truly allows you to scale uh fast and and you know focusing on the the 20 of the things that give you 80 of the results I love this I love this and I love that there is a part two to Burr if you will because we have so many people come onto the show and effectively you know a lot of the times they might have already done 50 Burrs or a hundred Burrs and it's really hard for a lot of the listeners to relate on how one goes from two to twenty or two to 40 and so I think that this process really really lays it out for people that want to go to that 10th or that 20th or 30th birth so I'm excited to dive into that yeah and to that point Rob like you know know in my mind it's as hard to do two rehabs at the same time as it is to do 10 properties at the same time the difference is the skill right that you how do you go from two to ten and that's what the scale framework is about wow wow okay so on this topic there are a lot of people out there right now complaining that Burr is really gotten harder than ever but it seems like you're actively investing this way right now right so what would you say some of the benefits are to the current market that we're in yeah absolutely and can I start with uh uh you know take a step back and say this this question has been asked by investors since 2015 since we started investing we were asking the same question everybody's asking me is it a good time to invest should I be investing right now and I think the question shouldn't be should I invest right now the question should really be how should I invest right now right because every Market has its pros and cons back when we started investing deals were easy to find the interest rates were low-ish uh but it was very difficult Define lenders right we Pollock had to call 100 lenders to be able to find a lender so you know that was one challenge that you need to solve for as an investor to be able to invest in that market then fast forward to when covet hit right um lumber prices were went through the roof uh contractors were really really hard to find because there's so much money in the in the market and there's deals were really hard to find right there's 10 cash hours for offers for every deal that you're trying to get and so that was that was a challenging Market too um but you know again as an investor you figured out how to find the right deal how to build a deal pipeline to be able to navigate that market but at the same time lending was easier right we'd never seen 30 or fixed loans in commercial in the commercial world before covet hit there were like maybe a few lenders offering that but after covert everybody started offering those 30-year fixed commercial loans because it got much easier to borrow money there was a lot of money in the market yeah and fast forward to now where uh the interest rates are an all-time high but guess what the positives in this market are that it's a lot easier to find deals than it was even a couple of years back there's less competition in a lot of markets it's easier to find contractors as a new investor because there's lesser money in the market so there's there's lesser construction projects happening so you're likely to find the contractor easily and lumber prices and um some other material prices have stabilized right so there's a lot of a lot of positives to this Market you just got to figure out how you're going to tackle a high interest rate and and that's it so every Market has its unique challenges that you need yeah yeah it almost sounds like you're saying probably in a lot nicer than what I'm about to say but people always find a reason to complain about the market that they're in right like you're totally right when interest rates were low everyone was like oh it's so competitive and oversaturated now interest rates are high but competition is low because no one wants to do this and now everyone's like oh the interest rates are high I don't want to do it but most of the investors that I know in my community and my network everyone is still you know the the experienced people are still investing in real estate because they're good at it they just they just do it consistently and I think that's probably the mindset that you have to take like we'll have listeners that get really mad at past episodes they're like you used to tell us to invest and now the economy is this and you're shifting you know your Viewpoint I'm like yeah we are shifting our Viewpoint that's exactly what we're doing because the economy has shifted so we must shift how we invest and how we look at different things this is one of those things as Educators in the space like shifting is the most important thing we can do because the conditions change every single day absolutely and you know as investors it's our job to figure out what the challenges are in the market and how to get around them and what the opportunities are in the market and how to take advantage of them and it's going to be changing constantly and if that's that's a skill that as an investor we have to develop that's a part of growth as an investor how to work with a changing Market absolutely I mean David I know you you've sort of shifted your strategy I'm certainly shifting my strategy uh so many so many different ways I mean primarily I was a short-term rental investor still am I just invest completely differently I don't buy the same kind of houses anymore I don't buy in the same locations I don't buy with the same types of loans I'm doing a lot of creative Finance or sub 2 deals because that's the best way to get a return for me so ultimately I think you have to know how to adapt to whatever Market you're in it's always been that way like we were just saying it's hard to believe but in 2010 which everyone refers to as Golden Era man if I could go back to 2020 out about every house that there was I I'm just waiting for the next time that happens the funny thing is at that time everyone thought you were fool if you bought real estate you were being criticized you were being mocked there was contractors that were dying for work that would take jobs at cost just to keep their guys fed it wasn't is there a cash flow deal it was of all the cash flow deals which one's going to get me the most for the least amount of work so we're like all right I can get a 25 cash on cash return with this one and all I gotta do is paint it that one I gotta do some drywall and paint that's too much work right but there was no money yes yeah you couldn't raise money to buy houses we hadn't increased our money supply by 80 percent at that time yeah tell me this because I was not investing in 2010 uh I'm sure you guys all were I I have to imagine that in retrospect it seems like oh my gosh I wish I could go back to 2010 when the times were good but was real estate that obvious like of a of a good place to be in 2010 I gotta imagine it was still scary coming right off of 2008 just like you said right like most investors were probably terrified to get into real estate except for the people that have probably been investing their whole life yeah and you know this is an advice a piece of advice that we got from a mantra that we had when we first started investing right and he had been through multiple Cycles including the 2008 crash and the first piece of advice that he gave us was don't invest for appreciation invest for cash flow right and uh that's how he'd survive the 2008 crash because he was not investing just for in markets fair was going up and he was able to survive the crash because he was Cash flowing on all the properties that's the best part about long-term Buy and Hold rental real estate is it the cash flow allows you to survive uh periods of downturn periods of recession lady I'm so glad you said that you don't know how much heat I've been taking from the real estate investing Community for making that statement I mean I'm hated in certain circles that consider me a heretic because I've shared my opinion cash flow is not intended to make you wealthy residential real estate was never built for the purpose of creating cash flow it does eventually do that and at certain Market Cycles when the market is really low you can get into cash flow earlier in the economic cycle of owning it than at other times right so for instance any property that you buy in a decent area is going to cash flow in 15 years maybe even in 10 years it's not normal that it does the first year you buy it that is that was a unusual phenomena we experienced for so long like you said Rob in 2010 because prices were so low but as investors we've gotten addicted to this like all that we think is I have to get cash flow so I can quit my job so I can get a girlfriend so my dog will like me so that my mom will finally respect me all the things in life we want we think cash flow is going to fix that problem but those that have owned real estate for a while understand the perspective I have which is that it is a defensive metric it is designed to stop foreclosure just to keep the property alive and over time the appreciation that comes from inflation and the loan pay down and the value that you add to the real estate do create massive wealth that will dwarf what most people would make in a W-2 it's just so hard to get that through to the people who show up saying I want cash flow for immediate gratification and they want to fix things is that a similar experience to what you've had oh it's that's so true David right which is you know you what what we talk about is you need to stack assets like pancakes right in your initial years of investing first two three four years of investing you're just buying assets and yes you need to positively cash flow so that you can see through periods of downturn and they're not it's not burning a hole in your pocket uh you need to positively cash flow but don't think that I'm just gonna get to 10 houses and I just need that cash flow and I can retire in two years that's not the way to think about it it actually puts a lot of investors in that scarcity mindset I've noticed because then you're worried about your fifty dollars a month changes my cash flow if I just do this one thing and I tell them like there are four four advantages to owning Buy and Hold long-term Buy and Hold rentals cash flow is just one of them there's appreciation Debt Pay down and what was that tax benefit and tax benefits thank you and then with the bar strategy now we have forced appreciation right cash flow is just a very small part of it and when you start focusing so much on cash flow now I see investors get into this hyperscarcity mindset where they're like trying to focus on that additional twenty dollars a month instead of thinking that if I just own this property for 10 years I'm gonna make a hundred grand why why am I worried so much about that additional 20 a month and in in that uh that I was reading that book um the psychology of money and he talked about how Warren Buffett he he was always focused on longevity he wasn't focused on making that short-term gain right like he always talks about how people who are able to withstand ups and downs in the market yeah there you go one of my favorite books and he talks about how like if you're able to hold on to your assets during ups and downs whatever you need to do to make that happen longevity is what's gonna win yeah thank you for sharing that this is gold everybody listen to this again it's different than what you've been told but my opinion of why that is is most of us hear about real estate investing for the first time from a guru selling a course and the fastest way to get someone to pay a hundred thousand dollars to learn how to do something is to convince them that if they give you that hundred thousand dollars you will in you will solve a problem for them no one else can like getting cash flow to quit your job from here we're gonna go through each of the individual steps in the skill strategy and for each one we're gonna ask you about two things the first is what myths hold investors back at each stage and the second will be the tactics that you've learned that will help investors take action so let's start with number one the scalable Acquisitions of deal analysis by what is the myth here yes so so the myth uh you know one of the challenges that I often see people get caught up in when thinking about buy is they say they're getting caught up in analysis paralysis right that's the terms you hear hear a lot and a lot of times they they say that they don't they're not finding deals because they're so focused on deals they're they just start looking at deals every deal that comes to them whether it's a single family or a duplex or a quad Plex or uh you know a a flip or a burp sometimes make people make that mistake what they really should be doing so that's kind of the the wrong way to do it right what they really should be doing is figuring out where they should be investing first what city what market and why what neighborhood are you going to be investing in so pick the neighborhood first pick the ideal property Avatar which is really what your property should look like first before you start looking at deals that way you can eliminate eighty percent of the deals that don't even apply to you right you're like all right I this this deal may be good for somebody else but it's not good for me and so knowing that that property Avatar knowing which property you're gonna buy helps you hone in on properties that are the right fit for you and helps you move faster and get those properties under contract and we learned this from experience right we it took us one whole year to get our first bar deal on the contract because we were looking in the wrong neighborhood and we were trying to make it work and what we say now is figure out what neighborhood this strategy Works in first before you deep dive into finding the right deal and nitty looks at hundreds of deals every week for our community and what we find is first if we help them narrow down the neighborhood before we even get them to look at a deal that accelerates the success rate because you're not looking at deals all over the country you're not looking at all different kinds of deals now you've narrowed it down to the point where you're so focused that it's very easy to spot a good deal when it comes absolutely I call that in Long Distance real estate investing a Target Rich environment you're kind of starting with the end in mind if you're looking for cash flowing real estate it's going to need to be somewhere close to the one percent rule looking at luxury real estate isn't going to make any sense because then you'll complain that the Burr method doesn't work as opposed to I'm looking in the wrong area before Rob moves us on to the next phase which is construction the skills I just want to ask you two briefly there is a lot of criticism right now that people say bird doesn't work but when I ask them why they always say after you pull your money out it does it cash flow and my thought is well then it wouldn't cash up you just bought it traditionally either the problem is that it you're looking at properties that don't hit price to rent ratios that you need is that a similar experience for you too on why you see people struggling with the bur method right now yeah and I think part of it is also they don't uh understand because a lot of people don't understand commercial financing well there's so many things that you can do so many different terms that you can get for commercial for long-term commercial financing that allows you to maybe uh you know for example there's instead of a 30 year fix fixed you could get a seven year arm arm yeah right and that gives you slightly lower interest rate instead of doing a 25-year amortization see if you can find a third year amortization right so there's all these tactics that you can do to increase your cash flow short term if that's what your goal is but here's what I tell people don't worry about the short-term cash flow because guess what your rent is always going to go up every year you can increase your rents every year and in the next two or three years when the industries come back down again because insulation will be down that's that's the idea and then you can go and refinance and lower your monthly payment and that drastic increase your cash flow again and you're gonna feel like I'm reading your mind whoever's saying that their property doesn't cash flow at the end and bar doesn't work it's because you're looking in a neighborhood where you should be flipping properties not boring if you can cash out but not cash flow that's a great neighborhood to flip that's not a good neighborhood to borrow because that's not a good rental market you need to figure out what's a good Market where you can cash out and you can cash flow at the same time wow yeah it's an excellent tip okay so take us through construction that scales rehab in the in the Burr acronym what are the myths here and what are the tactics so the biggest myth for Rehab uh it from all the investors that we talk to is people think that they need to do a lot of the work themselves or be the job site or go to Home Depot and pick all the materials and hire you know hire their own subcontractors right that's a that's a big yeah issue that we see and the this the real way to scale a portfolio is figure out how you're gonna scale this and how you're going to scale your construction part without being at the job site every single day because you cannot be at 10 20 different properties on a daily basis and and the key is to find a good general contractor right if you have a good general contractor who has their team and all you're doing is overseeing them right and another mistake that we see a lot of investors make when it comes to rehab is that they'll let when they hire a general contractor they'll just let the general contractor run the entire project decide what rehab needs to be done and almost telling the investor what what what is going to happen in the rehab it should be the other way around as an investor you should be in complete control of what needs to get rehabbed and why and we talk about the Goldilocks zone right which is what kind of rehab are you going to do to get the maximum amount of arv without going overboard and over rehabbing and as an investor it's your job to tell your contractor how to do that and what that's going to look like and contractors are creatives right they're creatives they're going to find Creative Solutions for whatever dollar amount you give them but don't expect them to watch your dollar amount so don't expect them to keep everything on track when it comes to the numbers you are in charge of that and so we find that a lot of investors get into this adversarial mindset when it comes to their relationships with their contractor it's not about that it's about developing the skill of how you're going to learn to work with that contractor that's a whole different skill set that you need to develop as a new investor it's such a good point and one of the hard lessons I had to learn when I was first dealing with contractors was and this isn't a bad thing but they're the goggles that they look at a situation from are wildly different than the goggles that I look at it from which you want if you think about it you want the contractor to see it differently they look at the work that needs to be done whether it's framing something or repairing plumbing and their goggles if they're good are what's the right way to do it I don't want to cut Corners I don't want to go uh the easy route I don't want to do what's easier for me I want to do it the right way so this is going to last for 25 years well often the right way is seven times more expensive than the cheaper way so when you compound that by the 11 different things you have them doing they go in there and spend a lot of your money but they don't they're not doing it to rip you off their integrity feels like this is the way it should be done I do things the right way which is why you have to pay a lot of attention to the numbers that they're giving you and what they're saying to do because frequently they will explain why it's so expensive I will understand their perspective and say well do we really have to run the plumbing from from here all the way to the air can't we just take out this one little section and oh yeah I guess we could do that that'd be fine because the rest of it's okay and it literally went from a 12 000 job to a twenty five hundred dollar job because I just asked the right question and I think so many people are afraid to do that because they assume the contractor is trying to rip them off the contractor is trying to get them to spend more money they don't understand that the contractor is afraid to propose the cheapest option because it makes them look like they're the the unlicensed person that's shady and doing it on the side that they all can't stand has that been a similar experience for you too yeah for their service they're going to show you all the services they offer they're gonna give you the breadth of the projects that they can do for you that doesn't mean you have to hire them for all of those things it's the same thing with the contractor right he's going to show you all of the things he can do for you for your project that doesn't mean you have to do all of them you have to decide which and and you know we talk about how if you think of your rental as a product think of the two customers that you're producing that product for one is your tenant of course that's your end customer make sure it's a it's a space that's comfortable that's appealing to your tenants they can pay you the rent that you want but also the appraiser you want to make sure that in the bar strategy at the end of the day the amount that the property appraises for is gonna determine the cash out amount that you're gonna get and so you're also rehabbing it for the appraiser now if you're rehabbing it to the point where you get a super high appraisal but then you're not gonna cash flow it's not gonna help your project because now you don't have an asset now you have a liability I think that's to to what David you said earlier which is anytime somebody goes over a project like you know you're early on in the rehab project and your contractor comes and tells you hey this is we just found this surprise this came up and surprises always happen on on rehab projects right The price came up and now it's gonna cost you five thousand more dollars to fix that thing uh your immediate reaction shouldn't be okay that's fine it should be okay but our budget is still our budget where can we find the five thousand dollars where we can cut down on other things so we can spend it on this right and that's those are kind of conversations that you need to have with your contractor because they're there to help you they're a part of your team right if you treat them as a part of your team and pick their brains they can get creative and help you if you tell them that's the that's our end goal they'll help you get there yeah that makes a lot of sense so earlier you mentioned thinking about the tenants you're running to how does that play into the question you ask at the adding cash flow stage right and adding cash flow stage is the A and the scale acronym oh yeah so so for adding adding cash flow it's really you know to Pollock's Point kind of thinking back of what the property needs to look like what's going to get you the best rent right so this is where you do your comp analysis to say what are the properties are rendering for in your area this is and you pick a range of say it's 15 to 1700 or whatever it's renting for per month properties that are similar to your properties and say okay if I do this this and this I can rent it for 1700 because that's what this other property is renting for but if I if I don't put for instance central air maybe I'll rent it 1500 and that becomes again a a question that you need to ask your GC and put it on your numbers to see if your budget can support that if not then don't then 1500 may still cash flow right so you're what you're trying to do is is make sure you get enough cash flow but also that your uh cash out doesn't get impacted negatively and one of the other myths I think that people have when it comes to that adding cash flow piece is they think that if you become a landlord you're automatically going to answer those late night tenant phone calls and almost everyone we talk to says that they're afraid of getting a plumbing phone call in the middle of the night and guess what you can put the right systems and processes in place and build the right team to not have to answer that call and still keep your tenants happy and still get them the service that you want to provide them and so it's all about building it like a business and figuring out how you can provide the same level of service without being a part of that process on a day-to-day basis could you give an example of a system or a process you could put into place for a plumbing issue that happens at night one of the things that we've uh done is uh We've assigned categories to the kind of problems that can occur and it's yellow it's green yellow red right you know that if something's green it doesn't have to be addressed immediately if you know that if it's yellow let's get back to them within 24 hours you know that if it's red then it does need something that needs to be addressed uh immediately see first of all it's all about understanding what is an immediate issue versus what's not because to a tenant it may seem like it's all immediate but it it may not be and then when it is in fact an immediate issue have you can us you can hire an answering service and you can give them a list of vendors to contact when a specific issue occurs and then build your that's all about building your team how do you build your team so that the right vendor can be contacted in case of an emergency and there are services that will provide emergency contacts you just have to find them you have to interview them within your neighborhood and find them and to add that the best part of all of this all of this is that you don't need to have any full-time employees we have zero full-time employees right and that's you can just Outsource all of this there's services for everything these days you can hire a contractor you can hire an agency you can like there's just so many options for you as an investor and I highly if you haven't heard someone else talking about that the other day that they have a ton of property and no employees because they they contract out all of the work and the argument against that is usually what you pay a little bit more than if you were just to hire a person and their case was I save so much time not training not dealing with the human beings drama not I need a day off for today or I can't work or they're in a bad mood because their team lost in the playoffs so they give bad service that you you sort of avoid a lot of the headaches that come for managing people I frequently said if Notorious B.I.G was still alive he would have written the song more people more problems because as as bad as this is to say it often does come down to people can be the best but they can also be the worst part of running a business whereas we know that we can count on ourselves that's frequently what stops people from scaling like you said is they don't want to have to take on new human beings that they can't control well if you're Contracting out to some other company that's already got that problem solved you could avoid that so I think that's really wise counsel moving on to the L leverage and Commercial financing let's get straight to the tactics on this face what steps should investors take to optimize their financing so number one we we love hard money lending we think it's a really good option for new investors to leverage their money up front number one you can start with 25k and they can lend you the rest of the acquisition construction money but also a hardware lender can be like that big brother slash big sister looking over your project because they are putting their money into your project they're not gonna lend to you unless the numbers actually work and they also don't um give you the funds for construction unless they send an inspector out who's going to take a look at the work that's been done and then they're going to give you the funds as you progress through your project so now you have another set of eyes and ears looking over your project so we highly recommend new investors consider hard money for short term do you want to get into the long term yeah and and same thing with the with the for the back end the long-term financing right using commercial financing for that as well and this is where uh that question comes up these days of well the convention on the conventional side there's a 12-month seasoning period well there is no seasoning period on the commercial side maybe some banks will let you do it within six months uh seasoning and there's some banks you pay a little bit for premium but they'll let you refinance even before the six months are up so there's so many advantages to using commercial financing both for the front-end short term and for the back and long term and one other additional piece that I would say is that we always tell people always always buy your investment properties under an LLC and not in your personal name for multiple reasons one it gives you access to commercial financing which you typically wouldn't if you bought in your personal name and two from a liability perspective right in case lawsuits happen your all your assets are are not um you know at stake here now I'm not saying don't buy a second home in your personal name that's fine but don't scale with it right don't think that I can buy five or six we did that that's how we started off right we buy we bought a few in a personal name and we're like no well let's refinance it into LLC no it's funny I'm laughing because you sort of like just answered the number one question in real estate I mean we talk about YouTube comments Instagram do I need an LLC do it and they get people get so hung up on the LLC question and I feel like the answer is usually pretty easy if it's a commercial property you need to buy it under an LLC or if it like an investment loan it's usually going to go under your LLC and then if it's a personal or like conventional that's typically going to go personal name and then a lot of people just will like transfer it over to their LLC but yeah I agree I mean I think I'm glad you put a little bit of clarification there because I do think that hangs a lot of people up from both starting and scaling and you're if you you're building a business why would you do anything in your personal name this is a business we're working on right you're building a scalable business go get your LLC and you know that that that's a simple way to answer that to to LLC or not to LLC that is the problem question to quote Shakespeare yeah you also mentioned something that gets passed over which is that you're using commercial lending to buy Residential Properties this comes up when people don't understand that as an option because they say exactly what you said well there's a seasoning period I gotta wait six months to get my money out now I gotta wait 12 months to get my money out bird doesn't work or what do you do once you get to 10 properties now you can't get into it right and the answer is pretty obvious is you're going to get commercial financing at some point when you're doing this what were some of the hurdles that you two had to go through to get comfortable with the fact that you may not get super low rate 30-year fixed rate terms on every single property like people get used to in residential real estate you know it's funny when we first started investing uh when we did the first few bars we got a really high interest rate because at that time it was hard to obtain financing especially under llc's the weren't enough lenders and so we got interest rates as high as six or seven percent oh those are hey those are dreamy interest rates at this moment by the way yeah right it seemed high at that time yeah yeah and and it seemed it still seemed high at the time and now that the interest rates are a little bit on the high side uh it can be a bit of a sticker shop for people right but but again it goes back to there is so many things you can do to bring the interest rates a bit lower right things like getting a higher amortization maybe even getting a lower LTV so instead of getting a 75 LTV if you're very concerned about cash flow to a 70 LTV so you're gonna cash flow a bit higher right and and there's so many uh things you can do if you understand commercial financing which is why I'll say education is important when it comes to financing and you always use the word levers right like whatever we're doing deal nidhi always talks about hey what are the levers I can pull to make this deal work say we know what the interest rates are right now and that's a constraint we already have now what are the other levels levels that we have the flexibility to pull for example can I negotiate harder on that property can I do the construction in a smaller amount and so what you realize is whatever your constraints are those are your constraints where do you have the flexibility pull those levers and if the deal works it works if it doesn't it doesn't well I man I got so many questions but that's okay we're on to our last one here it's called exponential growth and this is as it relates to the repeat you've already kind of started to to talk us through this concept but what would you say is the biggest myth with exponential growth the final letter in the scale acronym I think repeat and the exponential growth comes from Building Systems and processes and teams throughout every step in the bird process right so picking the right neighborhood where you can scale building a deal pipeline that allows deals to come to you that are the right fit for you uh you know having a team in the rehab phase that does all the work for you that you just oversee even if you're investing out of state maybe hiring a property management company for when you're renting out Properties or even if you're renting it yourself follow the systems and processes and teams same thing with when it comes to refinance having a bank of lenders having these relationships with the lenders at any time you want to refinance a property they're willing to do it for you and guess what the more loans you do with banks the better terms you get uh there was a time when we first started out when we had to bring twenty five thirty thousand dollars uh to the table to close in a single family deal right now we bring twelve thousand dollars to the table because we have more experience and so everything scales and all all the efficiency efficiencies that you get as you scale uh exponential growth happens as a result of that and you want to treat it like a business throughout right and there's different steps that you can take as you're building your portfolio to focus on the 20 of the things that really give you eighty percent of the results for example when am I analyzing a deal and if I find a good deal guess what that just made me ten thousand more dollars because I was able to buy it for cheaper um so that's a ten thousand dollar an hour job for me as opposed to going to the job site and you know putting tiles in the bathroom myself right which I could easily Outsource how to sweet and we followed uh the framework can you automate can you eliminate um can you delegate can you delegate and then if none of that's possible then you do it and you have to learn what your method of Outsourcing is we had to learn it as I'm an engineer my method of Outsourcing is I have to do it all once for myself to understand it then I build a step-by-step process and then I Outsource it nidi came into the business and he's like why would you ever learn to do something that you're gonna Outsource anyway and I had a light bulb moment and now we've changed the way we Outsource things if we're gonna Outsource it just Outsource it right and that saves so much time that we can focus now consistently on the business itself as opposed to trying to learn all these things that we were going to Outsource to begin with that's a that's a great tip right there I think that's a understated tip because I'll tell you I am the the my worst enemy on on delegation because I like to master something before I pass it off but recently I've kind of come to to terms with the fact that it's such a relief to delegate things out like I just delegated out something yesterday that was like a billing an invoicing thing I'm always behind on billing and I just delegated it out to my payroll person it took me an hour to create the the loom and to write out the process and sending it to him and then I was like oh my gosh I will never have to deal with this again and it's such a relief so I I think you're 100 right delegate away if it's something that you have no intention on ever doing ever again just give it away there's nothing wrong with that just wasted time right write that down if it's something you're going to eventually delegate don't bother learning how to do it yeah learn how to delegate and it's so hard to take your spouse's advice on the way you've been running your business the greatest tip of all it's easy it's easy for me to take advice I just I just do what she tells me that is a great well it worked with your suit today you're looking fresh my man you are looking fresh man I that's actually such a powerful statement it's so hard to take advice from your your spouse or because I'm not married but I remember what it was like with my parents where they would tell you to do something and you don't know anything and then my Dad's friend would tell me the exact same thing I'm like that guy's really smart I'm gonna listen to exactly what he just said so now when I have to talk to one of my employees I stopped talking to them I go to another employee and I say will you tell so and so that he would do really well if he would do this instead and I just sneak it in there like a piece of broccoli inside the macaroni and cheese to a three-year-old so they don't know what I'm feeding him so this is kind of like like whenever you say a joke but I say it louder and then everyone laughs and then they laugh because they think Rob is funny and they think that I'm scary that's exactly right they're like when David it says it he's a cop and it scares me but Rob's fun and handsome looking like a reverse cinnamon roll over there I love everything that he says that's yes that's exactly right Rob has become my microphone and I we actually had to learn how to listen to each other from a business coach we were um talking to a business coach and then I said something like I said um we have a rule now that you know I have this shiny object thing I want to run after a lot of different projects but we have a rule now if needy doesn't approve I'm not allowed to take on any projects because I get myself in trouble and the business coach could see things way more clearly than either of us and he said well yeah his strategy in the business right and I was like oh I guess you're right I should give my spouse credit for what they're amazing at it's uh we call that veto power it's good to have someone in your life that has veto power you have that gives you the freedom to have crazy amazing creative ideas without restricting yourself and you don't have to worry about if it's a good idea or not you just run with it this is how Brandon Turner and I often operated he would just have the craziest stuff and he had complete freedom to think that way but then I had veto power I could like dude that's insane we're not doing it or ooh there might be something on to that let's go deeper and see where you go when you try to measure yourself and be creative your brain fights it goes start stop start stop and you start to get nuts so I I love that idea of somebody is the idea person the innovator somebody else who is the strategy person or the executor that brings some balance to the force especially when it's in a relationship I just I love seeing a couple like YouTube working together through the challenges of relationship and business but making it work as a single entity with different strengths I mean that's amazing amazing there's so many takeaways from today's show I love what you've done with the bur method where you've actually systemized how it can be scaled I love some of the advice that you gave when it comes to contractors and using them as consultants and I love the idea of cash out or cash flow it could go either way so when you're buying your properties make sure it works for each ride what were some of your favorite Parts uh you know what I I'm like really starting to close a loop on this delegation thing but I think just like you said hearing someone else who's done it much better than me if I clicked and that's it I'm delegating everything so moving on from this episode you might see someone else behind the Mac the mic but just know that behind the scenes I'm feeding them all of the crispy knowledge nuggets that you're going to be hearing it's the AI version it looks like we created a monster here that's exactly right we don't even know if this is Rob that we're talking to maybe that's why it's tan looks so good it's actually a filter hey I I am chat GPT all right well thank you very much uh nidian Pollock it was wonderful having you back on the show and hearing how your business has doubled since 2020 so if you want your business to double go check out their book where can people find it uh so it's the biggerpockets.com AR ebook all right you heard that folks head over to www.biggerpockets.com a-r-e for accelerate your real estate book A.R.E book and since you're a loyal listener of the podcast and we love you which is why you should go give us a five star review uh anywhere that you listen to your podcast we are going to give you a coupon to get a discount for free the show coupon for being a listener is a r e 778 because this is episode 778 so go get your coupon and buy your book at the same time and learn how you can double your portfolio just like this couple did it was so great to see you too again where can people find out more about you so you can find me on Instagram at openspaces women and you can find me at on Instagram at re wealth blueprint maybe you're going to be greenprint at some point Rob how about you you can find me at Raw built on YouTube and on Instagram what about you you can find me at davidgreen24 on Instagram Facebook Twitter all of it or David green24.com if you're old-fashioned and like websites all right I'm gonna let you guys get out of here because I'm sure you've got more deals to put together and rehabs to oversee this is David Green for Rob the reverse cinnamon roll album solo signing out [Music] thank you

Channel: BiggerPockets

Views: 104,714

Keywords: rental portfolio, how to build a rental portfolio, real estate portfolio, rental property portfolio, my real estate portfolio, invest in real estate, real estate investing for beginners, income property, investment property, passive income, cash flow, real estate business, build wealth, how to become a millionaire, become a millionaire, make a million dollars, brrrr, brrrr strategy, brrrr method, brrrr real estate, buy rehab, refinance, biggerpockets, biggerpockets podcast

Id: 6A0CIYKLdQ0

Length: 56min 7sec (3367 seconds)

Published: Tue Jun 13 2023