How to Buy a Rental Property in 10 Steps (Anyone Can Do It!)

this is the biggerpockets podcast show 589. we only want to actually put our efforts of pursuing the properties that we have a reasonable chance of getting so part of this is experience but the other part of this is just working the system that we have where we know all right realtor we need you to go find out can we get the property what price would realistically get it at they'll bring that information back to us we will then kick in and say okay at that price would this work how much equity we looking at through the prism how much equity being there how much risk would be in there how much revenue would we expect and if they if they have nothing then we go look for a different property this is david green your host of the bigger pockets real estate podcast here today with my co-host rob robelt abasolo how's it going today rob oh it's going good man just in the throes of putting together offers and negotiations and renegotiations and triple renegotiations but i think i think we're getting to i think we're getting to some closure here which i'm really excited to share with the audience at home yes i if i'm going to use a jiu jitsu analogy which i do too much of already we've got our choke sunk in and we're just slowly slowly tightening it and this deal is about to submit to our plan so on today's show rob and i are going to walk you through the 10 steps to make sure that you get a property under contract in 2022. so we actually have a rhythm a pattern a plan if you will of what we do to make sure that we are moving forward on our plan of getting a property under contract and it's only been what do you think rob like a month or two how long do you think we've been going at it for oh man probably about eight months at this point sorry no sorry eight weeks at this point in six months it'll be eight months there you go but only only two months of actual two months focused yeah like looking to get a deal and we're narrowing in on the one that we wanted the very most that we think is going to be awesome that we're super excited about so we wanted to make a show that shared what we did to get to this point right everyone always says here's the deal i got they hold it up there and they wave it in front of you and they say look how cool i am i got a good deal and then you listen to go oh i wish i could get a good deal but i'm just not as good as them and i kind of suck and right that's what we're trying to avoid here's all the work that went into the after picture right no one ever shows you that they just show you what the six pack looks like well this is what the actual workout routine looked like to get to have a six pack like rob so i'm very excited to be able to bring this to people today this is a very practical show if you write down these 10 steps and you and your partner or you yourself start executing them you will get to a point where your offer is accepted as well yeah i think we talked about this on a previous show or hey maybe it's a show that's coming after after this one but consistency is the number one most like important factor to success i think especially in this game in this market everyone you know i have so many people that come to me and they're like is it too late is it oversaturated is it so competitive what do i do and i've heard you just say it time and time again that you know you don't you don't uh find good deals you make good deals and that's kind of this this deal that we've been working through it really on the surface wasn't what we wanted but we started laying out our terms we've been very consistent about chipping away at the other side and i think now you know after some consistence and some sorry some consistency and some tenacity now we're finally getting to a part where we're seeing progress and it's by following this system that we've just been doing for years now right 10 assistancy the word that rob created on today's podcast hey you heard it here first it's actually going to be the first book that i write tennessee i like it brandon used to make up words and now rob is doing the same thing so we are really excited to bring this show to you especially if you're someone who knows that you want to take action you just don't know what that should look like this is what it should look like for today's quick tip it's going to be check out bigger pockets agent finder if you go to the website you can find their agent finder service which will help find you a real estate agent that is familiar with the bigger pockets way through the actual site when you're looking for an area that you want to invest in like rob and i did you're going to need to find an agent now we described on the show how we found ours but you can also use bigger pockets to do it even easier so i highly recommend that you check out their agent finder system and find an agent who understands investing and your needs today yeah i wish i wish i would have heard that that quick tip first before all the work that i went through but uh yeah duly noted david yeah it's funny how i say that on the podcast but i didn't say it to you when i was asking you to go do something i want people to take out their notepad and i want them to write down verbatim everything we say no uh right create your system honestly i think that's i think that's the real important message from message from today go in have a system stick to it you know the more you can be disciplined about not straying away from your system i think the more results you're going to achieve in the long run in your portfolio i agree and make sure that you're okay with tweaking that system so whatever you create in the beginning is not going to be what you have in the end it sort of evolves like everything else in life so you don't have need to have it perfect to get started but you do need to have something something yeah that's right all right let's get into the show mr abasolo so nice to have you joining me today how are you i'm doing well man i'm doing well we're uh it's a wednesday i don't know when this is gonna be released but it's always a good day here whenever i'm recording a bigger pockets podcast yeah and in addition to it being a good day because of the podcast we also have some potentially good news where you and i are very close to getting something in contract you want to share a little bit about the background of where we are on this property we're trying to buy yeah man so this we really been working this one you know uh i i probably in in most other circumstances would have not necessarily called it quits but i don't know maybe i would have because it was kind of one of those things where a lot of convoluted communication going on and uh you know disgruntled sellers with offers and everything like that so you and i approached the property that was 3.4 million dollars in arizona and we put an offer in not too much under but at around 3.25 million dollars because it had been sitting on the market for six months i think and you know they effectively told us to to kick rocks at first you came in you swooped in with the an all-star strategy that we'll we'll get into i mean it really worked out to the t and uh now we're we're just kind of waiting to hear back on some of those final details so we won't uh you know we won't count our chickens yet right but it is it's looking pretty good yeah and what we really want to do in today's show is we sort of want to share with everyone what the rhythm looks like of how we approached buying a property because i think this will work for anybody it doesn't have to be with a partner but it does involve accountability predictability structure and a plan that's what we're trying to give you is if you look at the whole idea of being a real estate investor as a human body this is a skeleton this is what everything else sort of hangs off of so we have um 10 parts to this plan and the first is that we have to determine the criteria so this could include finding an asset class finding the area that you want to invest in and then picking a price point now in different episodes we've talked about those things so we don't want to get into them too deep but i will share that our plan was that we wanted a short term rental in a high appreciating market that we thought was going to be friendly towards short-term rentals and we wanted to get into a price point that we felt would help remove some of the competition so we didn't want to be chasing after 400 000 houses because so many other people are there we basically wanted to get into a price point where we felt like there's not a lot of other investors that are uh in the same arena as us because we frankly didn't want the competition is it anything you want to add to that rob that you can think of well yeah we also wanted to just find a deal that was worth our time yes you know and that that's really important because you know we've added around dozens of properties at this point and you know you'll shoot something down i'll shoot something down because we're just like this doesn't excite me for this reason so honestly the best learning experience here is getting into a partnership with somebody that you haven't partnered up with before and what you and i have really done is we've explained each other like our respective philosophies in investing in why we do things a certain way that way whenever the partner shoots something down there you know we can respect that decision because we understand where they're coming from so it's it's been a really really fun uh process you know i've done partnerships now oh i don't know seven eight times they've all worked out um t i think if i remember correctly you know you've typically shied away from partnerships is that right or you haven't you haven't done as many yeah you want to talk about about why or maybe we can hold off until the very end we don't want to spoil all the good stuff yet yeah i'll give you the gist and then we can get into at the end the re the main reason i haven't got into partnerships is that most of the time the assumption is we're cutting the work in half but you actually end up doubling the work because what happens is everyone ends up doing their job and then they have to explain to everybody else why they did that job and sort of satisfy the curiosity so it ends up being more time and a lot of the times we get into partnerships because we're afraid of doing it on our own which is a terrible reason you actually want to get into a partnership because you know you have a very good skill set in one area which you wouldn't have developed if you were afraid you've already at that point that you've developed the skill set you've taken action to a certain point and your partner has to and the last is that the time element like what you said there has to be enough meat on the bone in this deal to justify all the work we're putting in in this partnership which is why i've only done it on multi-family properties that were bigger i never did it on single family homes um anything and then i could i could get into the more later but do you have any questions after hearing that no that's uh that i knew that i was just throwing you a softball but i think that i think that makes i think that makes a lot of sense because honestly i've done so many partnerships now and one one thing is when you partner up with so many people it's very tough to kind of go big or go home with every single partner and so if you're just gonna partner with somebody on just one house you're right man there's a lot of education a lot of hand-holding if the other person is new to it and then if you'll never actually end up doing any other partnering or any other houses you know flipping or anything like that then it was just a lot of education for one deal whereas you and i are trying to cultivate something a little bit bigger we're trying to go go pretty big here and so that's why we've sort of been really taking our time with you know really understanding our viewpoints and everything like that so yeah that's my thought too very good point now uh point number two out of our ten steps here has to do with our viewpoint that we're forming so rob and i look at every deal that we evaluate through a matrix of five different areas the first is the revenue that it creates or the return on our investment so that's usually the first thing we look at is like with this property cash flow and how much would it cash flow the next thing we look at is the equity and that's either are we getting it at a really good price so there's equity built in or is this an area where we can reasonably expect appreciation to be happening and why that's where we start the third is we look at debt like how can we use debt on this property is debt a benefit to us rob and i believe that in this environment borrowing more money especially if it's at a rate lower than inflation is a good strategy if you're a dave ramsey fan well you're probably not listening to us talk about real estate using debt if you're a dave ramsey fan so i don't worry about that we look at debt when it's used wisely and uh prudently that's a good thing the next thing we look at is time like would this property take all of our time even if the revenue looks great that revenue stops looking great if it's a 30 hour a week job to manage this property to get that 60 roi and then the last thing is risk like how much risk are we taking on in order to buy this deal so every time we have a property that we're going to analyze we look at it through these five so i call them prisms right like imagine like holding glasses up to your face and you're looking through those glasses at the property like what are you seeing when you put on that different lens is there anything you want to add on to that rob i mean for the most part i think kind of in the price point that we're in risk is sort of the big one for me personally because most of the actual properties that i've purchased i would say cost between well 165 thousand dollars for my tiny house all the way up to 624 000 for my house in la so now we're looking at properties that are at a minimum 2 million 3 million dollars and that right there places a whole new level of you know uh you know skepticism and critical thinking and scrutiny for every single deal but you know the strategies that we've learned our whole career they still apply the same you just you got to be willing to to take a risk every so often and i have my whole experience i have my whole life here of of always being strategic to rely on and really take a bet on myself that i can figure anything out if i have a little bit of confidence in myself there's never been a time where i where i didn't succeed at what i do in this space and i know you probably feel the same way and so when you really just kind of walk yourself back from all that it it's not it's not as risky as it might it feels that it is obviously yeah but it does feel that way it does that's exactly right now it's important to highlight when you're doing this like as rob and i do it it's not when you put on your risk goggles and you look at the deal through the the prism of risk you're gonna see risk what you're not doing is just looking at all your deals with risk goggles and saying oh i found risk don't do it risk is going to be there instead what you're doing is you're looking at where the risk is and determining do i have a plan that will mitigate if something goes wrong in that area that's what's key about this whole thing so you can imagine looking at a three and a half million dollar residential property is going to involve some significant areas of risk we're going to be renting it out for a lot of money per night that could change what if we can't get whatever 1500 2 000 a night for this property you're going to have a lot more expenses associated with an estate this big um you are going to have the fact that if there is a decrease in the market these properties could get they'd be very hard to sell because you're not people still need to buy starter homes even when the market drops they don't have to buy luxury homes so what we do is we sit here and we say all right here's the where we have risk how are we going to mitigate it what is our plan we come up with a contingency for every area that we can see when we put on our risk goggles and there's very practical things right we're going to be borrowing some money to to buy this place and to fix it up well we're going to keep a ridiculously large amount of money in reserves so that even if something goes wrong we have like three years of reserve set aside that we can pay somebody back that is an example of how we look at risk we see where it is but we put a plan in place we keep moving forward and you could do that for everything if you've got your roi goggles on how can i improve the roi on this property is there a place where i can make it go higher as far as depreciation and equity there's no appreciation here well that means that i need to get this property with more equity built in or there's no equity in this deal we're going to be paying at the top of the market well is the market continuing to move up because that can grow equity right it's not is it or isn't it there it's where is it missing and what is our plan for how we're going to improve it and so that's just what i wanted to highlight is we look at every deal through these lenses but there is no perfect deal every deal will have something or in every one of these areas will have something that you don't like your job as the investors to figure that out anything you want to add for you move on to number three yeah i just want to talk about the a little bit of the discipline here that just between you and i and like what actually we do on a weekly basis because we are pretty consistent i don't think i don't think we've missed a week yet but we basically meet every single week same time unless we you know there's something comes up and we have to just move it move it to the next day or something like that but we meet every single week we most of the time i would say eighty percent of the time or maybe ninety percent of the time we zoom which i think is important to me well you know first of all like i'm adhd so when i'm on the phone i just know that it's gonna be so much easier for me to walk around and look at you know the dust on my door frame or like on my fan and start making my bed i always make the bed when i'm on the phone like i i'll remake it i'll take the sheets off and make it several times so like being on zoom really forces me to like be there be in the moment give my my time to because you know our time is valuable and so you want to respect your partner's time and everything like that and we've been really consistent about that and i think that has really even if we don't have something to present we're still excited to meet i think yeah so that brings us to number three which is that we meet weekly to review what we got going on and this is incredibly important i really really want to just pound this point if you are an investor and you committed to getting your first deal maybe you got brandon turner's intention journal maybe you attended a webinar where we talked about how to get your first property or maybe you just heard on this podcast you said i wanna do this my philosophy is if it is not in my calendar it does not exist if i'm gonna go have dinner at my mom's house or i'm going to my niece's birthday party it has to be in my calendar if i don't put it in my calendar it doesn't exist and there's no way i can guarantee i'm going to be there and if i do put it in my calendar i can't schedule anything else for that time that's what i love about it is i block off the big things first and everything else goes around it so you are not going to have success finding a property if you're new and you're not used to this if you don't block time off to do the things that you need to do and rob and i block a time off every week where we're going to meet and review the properties that we are considering now rob i just want to thank you for being incredibly gracious because the reason we don't meet a hundred percent of time on zoom is a hundred percent david i'm if it's me every time that's like ah i'm stuck i'm not gonna make it back to the office can we do this on phone and you're very cool about that but it is important that you do the meeting in a structured way right so we like ours on zoom because we can share our screens we can go over the properties that we're reviewing now what's happening is rob and uh his partner are showing me the properties that they've looked at throughout the week that they think they have the best chance with and saying hey david here's what we like about them here's what we're not sure about here's what our thinking is what's your opinion and i will weigh in with my perspective based on you know the experience that i have with real estate and they'll learn from what i'm thinking and i'll learn from what they're thinking and what we end up coming up with is a list of questions on every property now some of them we just dismiss right maybe during this we realize they're an hoa that doesn't allow for short-term rentals that's happened a few times where they only let you do it six months out of the year those get thrown out other ones we say yeah this would work but we need to figure out these things and in that meeting is when we determine what we would need to know this is why it's so important you have the meeting so we have our list of properties we then get our list of questions now we've got our work set out for the next week and that would lead us to step number four which is delegating tasks rob will say hey david here's what we need from you can your lending team solve this problem can uh you tell me what you think do you know a realtor in this area that could help us answer this question and i'll do the same thing i'll say rob can you look this one up on air dna and tell me what you think can you look at a comp that would show maybe the rents will be higher than what error dna is giving us we will delegate the tasks that we have on an individual property and then that's what we'll work at for the following week until we meet again anything you want to add there rob no no i think we can move into number five because this really sets the the tone and you know the communication for the entire week and number five here is communicate throughout the week for follow-up so this would be text messages emails voice notes i actually really like voice notes we send a lot of those the only thing i don't like about them is when you send them if you don't hit keep they erase yes that's annoying all of your nuggets all of the golden nuggets that you send me they're gone they're gone after i listened to it one time but it's really nice because we may not be in a scenario where we can take a phone call you know like two kids in it you know all that you might be in meetings and everything like that but we can relay some pretty nuanced things that are very hard to to relay via text message we send emails this is where we're kind of introducing each other like if you're introducing me to a realtor that you're connected with or if you're introducing me to someone on your lending team this is where i can then pick up the communication and drive that ball forward a bit yeah that's important so if you're working with a partner like what we just mentioned in step number uh four when we're delegating tasks okay rob you're gonna work on this and i'm gonna work on this you don't wanna just get stuck and then say well i don't know what to do i'll wait until the end of the week and we'll discuss it you just lost five days of of uh possible productivity instead rob's gonna say hey this is what they're saying what do you think or i'm gonna be like hey i'm stuck on if this is worth it can you look this part up for me i need help accomplishing my part and you can help me with it and that's when this this communication happens the voice notes they're they're powerful it sounds simple but there's times when you've received a text that was you know like three feet long and you just think i'm not even going to read that that's something that should have been about my inbox yeah my entire inbox i'm like no exactly right and then there's other times where you get that phone call and you're like i just don't have time to take this call so the voice sounds like the perfect medium between the two and if you don't have a partner this is something that you need to be working on yourself if you're meeting every week with yourself to review where you're at on every property make sure you're working throughout the week to get the answers to the questions that you needed so that when the week comes you actually have information to be able to move forward this is the structure that's so important is we're treating it sort of like it's a job not just like it's a hobby i'd like to i'd like to squash a bug here just you know i want to air out something that i've really been wondering since the the day i met you and i just want confirmation on if this is like an urban legend or if it's true uh when i when i first met you when i did the bigger pockets podcast like six months ago i was like oh yeah i'll shoot you a text and then you're like man i've got 1200 under unread text right now i was curious is do you actually have 1200 unread text because i think about that every single time i text you it's more now in fact what happened is i need a new iphone because you hit a certain point where it stops displaying the number on your little text thing like it doesn't even tell you how many unread text messages you have i hit that so that's one of the things i say to human beings if you take the same road everybody else is taken you're probably not gonna get there right like rob you know text me and if you don't hear back you don't take it personal you're like all right i need to email his assistant krista and get time on david's calendar and then boom you've got all my attention um and i i use that hack all the time like if i'm trying to get a hold of somebody who's over 30 years old and they're really busy i send them a message on facebook messenger because nobody else uses that other than 30 year olds or older right so like i if you look at my facebook messenger i have like two or three unread messages if you look at my text i have a million so that's just a little quick tip for everybody there is find the road less traveled okay it's good to know all right well i always send the the gentle just a right bump anytime anytime i hear back bump uh just just a little friendly reminder yeah everybody who's listening if you're in my life and you text me just bump me all the time i don't get upset about it i'm never gonna say why are you bumping me i'm like i know i need bumps like i need to get bumped all over the place it's really hard to get a hold of me and i'm aware of that so thank you rob for your patience there code of the day i need to get bumped everywhere all right cool there it is moving on to number six uh this one is receiving information from your realtor uh this is really man this is big because we get so amped up and you know step five here texting i'll text you bangers all week and be like dude check out this house it's gonna gross 250 000 and we get all excited we're like oh what if we do like a hot tub and oh a golf cart and a basketball court and we get all excited but it's kind of one of those things where you know i i'm usually better about this but on some of these luxury properties one cannot help but get excited at certain properties because they're like dream properties and you talk to your realtor and your realtor is like oh yeah that isn't an hoa and they will not allow short-term rentals and you're like no i spent three hours comping this out happens all the time everyone does this this is where experience has led me to sort of being able to direct in these situations better than someone who's not experienced by my own properties and frankly the thousands of houses that we've helped our clients buy i had to learn how to do the same thing you don't want to get too emotionally connected or put too much time into a property that you don't have a good chance of getting so when we first look at them it's easy to just want to run as far down the path as you can get even in your mind of oh i can do this and i can do this and i love it i have to have it and as a realtor i've learned if that house has been on the market for two days don't do that there's 30 other people that are doing the same thing and you know what it kind of goes down that don't take the road that everyone else is taking right like if you're trying to text me that's not the best method you don't want to look at houses that everybody is looking at especially if you're going to put all that time into it so it's important is that you identify is this a property that would work for what we want you go through your your matrix which for us is these five prisms that we look at and then we say do we have a chance of getting it so often times the first step is having our realtor call the listing agent and saying how many offers do you have and where do we actually have to be and if the listing agent plays this dumb game of i don't know highest and best that's like one of my pet peeves is this little parrot on the shoulder of a pirate that just says highest and best and they call themselves a realtor that is not selling a house if your listing agent is doing that they are not earning you money they need to be aggressively trying to get a good offer from the other side um but if we get that and they're like oh yeah they just said highest and best and they just don't really care we're probably not going to go after that property okay let everybody else have it that's why we went after the one we're talking about now that been on market 190 days or whatever it was because they weren't getting a ton of action and we knew that we had a better chance of putting time into it so that's huge well you know i've actually got a new policy now whenever uh whenever a realtor says highest and best i actually submit lowest and worst so i'll submit an offer for two dollars put that in your pipe and smoke it right highest and best that's really good so um a lot of what the conversation involves around in the beginning is something that actually should be happening in the due diligence phase okay that's why you have an inspection period and it's just it's easy to not be disciplined and to do all that up front and call it work and this is how you get your heart broke right like you try to date too many people that aren't interested in you you're just going to get tired of the rejection and stop dating and become a cat person right that's not what we want to do we only want to actually put our efforts of pursuing the properties that we have a reasonable chance of getting so part of this is experience but the other part of this is just working the system that we have where we know all right realtor we need you to go find out can we get the property what price would realistically get it at they'll bring that information back to us we will then kick in and say okay at that price would this work how much equity would we look at through the prism how much equity being there how much risk would be in there how much revenue would we expect and if they if they have nothing then we go look for a different property well yeah i mean like let's let's talk about that a little bit because there's obviously the communication well not just the communication but the actual selection of your realtor is so important so can we talk about what what do we look for in a realtor what kind of questions do we ask like how do we even choose ours i i would like to tell that story in a second yeah so i'll start and then i'll let you tell our specific story i'll start with a general what i look for is me so like i think i'm a good realtor because i buy a lot of real estate so if you come to me and you say david i want to buy real estate i'm not looking at it from perspective of a salesperson i'm looking at it from the perspective of someone who wants to help build your wealth um so i like to work with other realtors who also own real estate and who like real estate they don't have to be a realtor they they want to be a realtor now that means they're going to be picky about their clients so you actually have to be on your a game to get them to work with you and a lot of people don't like that they want the realtor that answers their call right away that they can boss around i don't like that if i can boss around my realtor and i haven't proven why i should they're probably not that great so what i tend to look for when i'm going into a market is what is our strategy that's why the number one thing that we talked about was determine your criteria what asset class what area and what price point because you want a realtor who works in that area owns in that area sells in that price point and understands that asset class that's actually what you're going to look for so we kind of talked about that rob and i connected you with a couple people and then with this specific issue we had a bunch of questions and i said hey we need to find a person that is an expert in this asset class why don't you call the brokerages in the area and ask who their luxury specialist is and then find out the other questions and i shouldn't have been surprised you completely hit it out of the park on like your first try you came back with a rock star so tell me what you actually did to make that happen all right man so i woke up i went out to my front door and took out my yellow pages you know i found it i was like all right and i flipped all the way over to uh to the s's and found sotheby's i mean we all know that sotheby's is obviously like one of the more luxe places out there and so i i called him up and it was like the receptionist of the place and i and i was like listen here bub rob built and david green are looking for a luxury house i was like do you have excuse me do you have anybody that might be able to help us please and so they were like asking and i was like look it's really important to me that they know short-term rentals um because i already know short-term rentals and so if they don't know i'm gonna know that they don't know and so she was like okay okay great and so she actually ended up patching me through to two people they were like partners i think they partner up on selling houses and everything like that and i talked to i talked to the guy he was super nice i mean really really nice and i started kind of you know interrogating him a bit and being like well what a short-term rental mean to you and you know we kind of went back and forth it was pretty clear that he it wasn't his wheelhouse but that's okay you know we talked it through and i was like hey man you know honestly uh i appreciate your time but i need someone that can help me accurately estimate how much we're going to gross on a property like this because it you know it's three million dollars and he's like you know what i know a guy and i was like you do he's like i know a guy he doesn't work here he actually works at a you know at a competing brokerage and he's really great this guy knows everything there is to know about short-term rentals he owns five luxury short-term rentals he owns a property management company that manages 70. this is going to be the guy and i was like hey i just want to say thank you because you just gave over a three million dollar lead to a competitor i know he's your friend but that's super nice of you to do and that's what he did and i called the guy and you know i talked to this new realtor and he was schooling me man he knew everything there was to know about luxury and like his insight throughout this whole process has been so so helpful for us because now you know i can run my comps and i can go back to him and say hey am i off here i have calculated 47 559 is that right and he's like yeah that's pretty close or actually in this neighborhood it's off because of this this and this and this and so there's a little bit of a of a synergy there that i get to work with and it wasn't necessarily easy to get to that realtor there was a little bit of work involved but now it's going to dramatically affect us moving forward because now we got you know the best of the best and that perfectly highlights step number six receive information from your realtor if you know your asset class your area and your price point you can go to the realtor and say what do you think we need to do to get these properties what should you be aware from and that's some of the stuff he provided because he owns these things one of the things we went one of the concerns i had was yeah we're being told this is the revenue it's going to get in tonight that seems really high how can we verify that well he happens to own properties and he actually said you're probably going to get more than that you're more than okay on this one avoid these ones so we got information from the realtor that helped us to develop the strategy that we use to move forward and number seven the next step would be communicating what we need to that realtor so that's where you say here's what i want you to look up here's a question that we're stuck with can you ask someone else in your office if they know what to do in these situations that is also very important is that after your weekly meeting and the tasks are delegated that you go communicate with your agent and say here's what i need to know is that something you can help me with or is that not something you can help me with very clearly well we also want them to go in and sort of you know assess the situation if you will right so this property's been sitting for one two three four five six seven months we kind of want to know why and we want to know if the sellers are at all motivated why hasn't it sold has it fallen in escrow or has it fallen out of escrow and you know go in and do a little bit of recon run some recon on the property get back to us and let us know why and usually they'll go in and they'll talk to the listing agent and that you know for a property that's been on the market for six months that listing agent might say oh yeah hey by the way the seller is super motivated between you and i let's get this done um that's not exactly how it worked out for us but that that's really important to have a realtor that's you know that can play the game a bit i think that's uh you know that's going to work out in your favor whenever you're really going back and forth in negotiations yeah and i'll probably highlight here before we move on that when you're telling your realtor here's what we need a big piece of it should be is telling them to call the listing agent and find out if we wrote an offer today at this price would it be taken like just don't waste your time in a hot market if there's 14 other people that want that house and you're insistent on on having very strict criteria it's great to have strict criteria that's why the first step is you should figure it out but if the property isn't going to work for that don't try to make it work just move on from it and find a house or a property where it's still going to work for you and they're more motivated yeah it's been really interesting because we tend to only look at properties that have been listed for a while because we're just so tired of competing it's you know it's why compete with 100 people when we can go find you know the diamond in the rough that's been listed for a while and see if we can make that one work and for the most part i think most of our options have been things that have been sitting for a bit at that higher price point which is really great for us because we see where we can add value to the property and we know that we can maybe come in a little bit lower and if we can't come in a little bit lower maybe we can start asking for things like seller credits that's exactly right now i use this strategy on the david green team with all of our clients as i tell people stop chasing the house that's been on the market for two or three days you're gonna get your heart broke or you're gonna grossly go over asking price but of course it's tempting like but it says it's only eight hundred thousand dollars on zillow why can't i get it for that price go work a miracle but this is the strategy that i use for myself we're looking at one here they've been on the market 190 days i have an offer out on one yesterday that was sitting on the market at 2.4 and sat there until it expired and we got a hold of the sellers off market and i'm now trying to put a deal together with them because their motivation level is different after their house sat and expired i only go after properties that i think the seller wants to sell it just as much as i want to buy it if i want to buy it more than they want to sell it they're going to get a lot of other buyers they're going to sell it for more so be disciplined in how much time you spend on a property the first thing you should be looking at after it matches you know your criteria which for us are those five things is do i have a chance of getting it if the answer is no don't put any more time into it wait until it falls off the market or it sits there for longer if the answer is yes then you could dig in with a little bit more due diligence yeah if you're excited about a prop just just a rule of thumb if you see a property pop up on zillow and you're super excited at how beautiful it is and you're even more excited at the price point you're probably not going to snag it for that price point it's uh it's pretty rare all right step number eight is actually writing an offer so we're going to do a show in the future with a lot more detail about this but just let's focus on this deal that you and i are working on that we we're probably having contract today can you share a little about the offer that we wrote what we asked for and why yeah so i alluded to this a little bit at the beginning of the of the show but this house was on the market for i think just just under six months by a couple days it was listed at 3.4 and we made an offer with a couple of you know interesting contingencies so we came in at 3.25 million so about 150 thousand dollars less than asking but then we also asked for a 75 000 credit to be applied toward closing costs and other things like that so really when you start mapping it out this property the offer is closer to 3.175 million and then we also ask for all the furnishings to be included as well they weren't necessarily all my favorite furnishings not necessarily things that i would choose but they were pretty good they were good enough for this property and i was like i'm happy with 90 of this stuff and so when you factor that in i mean that stuff could be anywhere from you know thirty five to fifty thousand dollars and that's really important for us especially in the short term game where you know cash on cash is a really important metric for for for in our matrix right and so if we can save seventy five thousand dollars in closing costs and we can save fifty thousand dollars on you know uh furniture yeah we've just saved over a hundred thousand dollars in cash and so our cash on cash our roi really starts going through the roof um is there anything else on that offer that oh yeah and then we also asked for a 60-day close a 60-day close because we wanted more time to be able to raise money and then we asked for a home warranty that would cover anything that might break in the property what i want to highlight here is that price is not the only thing that matters most people get stuck on price they think they won or they lost based on the price this property from what we've seen so far we have to do inspections still appears to be turnkey we're not gonna have to spend hardly any money in fixing this thing up and now that we've taken out our closing costs and we're actually able to buy down our rate with that 75 000 credit and get it to be a cheaper monthly payment and we don't have to furnish it even if we paid more than someone else our cash on cash return would be much higher than theirs and we would have more capital buy another house that's the thing is we structure the deal so that we have minimal money in it while still keeping incredibly big reserves so that it's not risky and getting to borrow the majority of the money at a lower interest rate now people get really good deals on properties but they need a ton of work and then they dump a bunch of money into it and then they got to borrow money from somebody else like a hard money lender at 12 and so even though the price was better what they actually end up spending per month ends up higher so it's not only about the price and that was one of the ways that we were able to work this deal out to work for us where the other people who were looking at that property probably just got stuck on the price and couldn't see past it i mean yeah literally you and me just with the with the credit and the furniture you get to keep sixty thousand dollars in your pocket i get to keep sixty thousand dollars in my pocket not only that buying that rate down you know that's not necessarily a big deal on a three hundred thousand dollar house but on a 3.25 million dollar house buying down a half a percentage point that's a pretty significant difference not just in the monthly but in the actual interest that we're paying on that property like over time over the life of that loan that's exactly right so that's one strategy that that we use on the david green team that we brought into this one was a lot of the time if you if you got a deal with the seller and they're willing to take 500 grand it might be better to give them 520 with a 20 000 closing cost credit that you can use to cover your closing costs to fix the house up to buy down your rate because when money is cheap like this borrowing more of it is less expensive than when rates are higher another thing moving on to number nine actually offer strategies like our strategy with this deal is when we first submitted that offer they said no they told us to go you said kick rocks i think maybe pound sand might be more appropriate because it's in the desert right surrounded by sand in scottsdale so they told us to go pound sand and uh we said that's fine there this is normal right my experience as an agent i understood that the sellers were an emotional place they received our offer as a kick in the pants like this this to them was like an insult that it was lower and if your house has been on the market for six months and it's not selling you have some unrealistic expectations they should have already dropped the price so we here's what we said to the realtor uh ignore them for a couple days then we want you to go back to them and this is what i would do if i was the buyer's agent representing us is i would say hey my clients are going to buy this house if i tell them to buy it they rely on what i'm saying they don't really understand whether they should buy this one or another one they told me to go find them a deal that works for their numbers and that's my job so if i tell them that this is the one that's going to work for their numbers they're going to do it but the numbers need to be right here uh listing agent what do we have to do to make this work and we are going to put the onus on that agent to go work on her own clients and say guys what do you need to feel good about this deal that is different than what most agents will do which is they'll protect their own ego at the expense of yours so what they'll do is they'll say you know i got a lot of clients i don't really need this sale but my clients really want the house you know what do we got to do here that doesn't work you want it to be the opposite you want your agent to say i want to put this deal together tell me what has to happen in order to do it my clients will listen to whatever i tell them that's literally what i say to the agent on the other side and what happens is it now gets the listing agent to go to her clients to be an advocate for us she's or he is going to go say listen we got an offer here we haven't got anything else i think this is our best shot what do you guys need to feel good about this deal and then she's going to go back to our agent and say here's what they said and he's going to say oh that just the numbers won't work at that like what can we do to get him to this point instead and we let the agent sort of whittle down the sellers until they got to the point where they were good with us now i knew if this house has been on the market for six months that there's a very good chance that they're not going to maintain their resolve to keep going that was one of the things that rob really liked about it he's like dude this one's been on the market for a long time there's not a lot of of houses that are at this price point there's not a lot of buyers that are looking at this price point they they can't move on with their life until they sell it and that's what you want to remember is when it's been there for a long time when that offer comes in their knee-jerk response is no most of the time but then what happens is their thoughts start going into what else could we use this money to buy if we got rid of this thing we could go buy that house in the caribbean or we could buy that multi-family property that we could use to retire like all that stuff starts moving through their head and it slowly weakens their resolve to hang on and lo and behold about a week maybe a week and a half later a realtor came back to us and said yeah they're willing to accept your terms they just ask for a few little things to be different yeah i actually want to point out the the phrase that i you know that he put out there and i think he said putting him on ice he's like oh yeah i call that putting them on ice and so that's basically you know that's ignoring them for a little bit and then well coming in strong and saying hey i want to put this together and then that realtor came back and said highest and best whatever and then he was like okay then he put him on ice for i don't know yeah however long several days and then he came back and he's like hey i really want this for my clients they're not going to go for it i'm the decision maker here i've comped it out the numbers have to be here and yeah they accept you know they accepted most of the terms and we're kind of working through what that means but all in all a pretty yeah i called you that the morning he told me that he he sent me a text and he said call me and i was like oh okay this is this is always my favorite text from a realtor and then he was like all right hey uh they didn't really counter your counter uh after they had let it expire and i called and i was like man david's gonna be so happy about this because it worked out exactly how you called it man i mean it's it's like pretty funny like exactly exactly how you called it i guess hey man i guess you know what you're talking about well thanks rob it's from the uh this is david green team pen i'm holding up here that's where i learned it right so that's why we wanted to share this because most most of our listeners won't have the experience that i do being in these situations and they wouldn't have understood this is a strategy that will work so i wanted to make sure we convey that because it did it worked awesome the last thing step number 10 is have several irons in the fire and this is what we do so we never get too in love with this deal while we had it on ice when they rejected our offer and we said hey just let him chill for a minute let him think about it we didn't just sit around crossing our fingers and feeling tempted to adjust our standard we went out look for other homes and it let our realtor tell their realtor hey these guys have me looking for other properties if you guys don't want to put this together they're going to find something else i'm going to find them something so let me let you be the thing that i find them but you got to be willing to keep looking you cannot fall in love with any one deal so we sort of set that one off to the side and we kept evaluating other properties we kept meeting every week we kept bringing new properties into this uh perspective that we had so we never fell in love with one property this will help you in two ways one is it will stop you from falling in love with the property you should not be in love with two is if that property is really good and you just don't want to accept it when you see everything else is not as good it will make it more clear that that's the right property to go for so this is what we do to make sure that we protect ourselves in those two ways anything you want to add there rob no i think that's uh you know obviously i i very much over analyze every deal and i think your your advice to me because in this market it's crazy we're just lucky to get an offer accepted period but your advice was like hey stop stop being a sniper and start throwing grenades and i was like all right all right i'm going to ease up a little bit on every single criteria and so yeah then i just started i was like okay i'm just going to look at all of the other matrix all of the other prisms in the matrix i guess if you will and i'm just going to cash flow is there but i'm just going to really start evaluating deals on all those other points and you know start looking at dozens of deals and i'm like all right these we have all of these to fall back on right now if this one doesn't work out right we call that the call of duty strategy right you don't win it call of duty by just hiding in one little spot and waiting you kind of have to go out there and go crazy now once it's in contract we will go into sniper mode that is when we look down the scope at every little single fine-tuned detail to make sure we like the deal it's not appropriate to do that before you even have it in contract that's how you'll just burn yourself out it's too hard to look from a scope if you're trying to see the whole field so that's what we're getting at there i forgot about that it's a really good analogy that you brought into this yeah well hey it was just yours i'm just throwing it back out there but uh yeah we'll get into that that whole strategy of you know the actual due diligence of a luxury property in a different episode but you know this pretty good synopsis on everything we've been going through for the past what eight weeks or so yeah that's exactly right and i really believe this method works i do it with with when i partner with someone this is how i do it and when i was in like super buying mode this was a strategy that i had set up when i was buying three to five deals a month and i was using the burst strategy is i meet with my realtor every week we would discuss these things i had a prism that i looked to every property through i would look at the list and say here's what i need to know now it's obviously more fun and better to do it with a partner like rob who understands this asset class because he's done it a ton and i don't really have to teach as much as rob is bringing value that's what you want your partner to feel like is there they see angles that you don't see and they know stuff that you don't know yet and rob's really experienced with this so that makes it a lot more fun and easy but the system is the same and that's what we're trying to say these the 10 things that you need to do if you are serious about wanting to get a property under contract so thank you for joining me here rob i'm going to let you get going but i'm going to give you the last word oh wow so much pressure um i guess hey the personal note here i'll let you know what the realtor says he's going to be getting back to me here in like the next hour or so so the ultimate cliffhanger for everybody living at home so if it works out great we'll start our series of due diligence like we said and if it doesn't work out that's fine we have other irons in the fire we'll talk about them at our next meeting we do it again we win either way so thank you very much this is david green for rob call of duty abba solo signing off [Music] you

Channel: BiggerPockets

Views: 66,184

Keywords: biggerpockets, real estate, real estate investing, investing, rentals, rental property, income property, bigger pockets, how to buy a rental property, buy a rental property, buying rental property, buying a rental property, how to buy rental property, buy rental property, how to invest in rental property, invest in real estate, how to buy an investment property, investment property, rental, real estate for beginners, buying investment property, buying rental properties

Id: PMwuh4Dj8mc

Length: 48min 30sec (2910 seconds)

Published: Tue Mar 29 2022