Michael Gomez and I'm a real estate broker and an investor here Nashville Tennessee and I'm Seth Mosley Grammy award-winning songwriter and real estate investor we host a monthly meetup in Middle Tennessee for anyone who wants to build passive income not only for retirement but for today on the first Wednesday of every month we bring in an expert from every area of investing to help you with things like finding deals getting your financing locked in asset protection every kind of investing so much more our videos are all about delivering that content to you go to music and money IG comm for more info on our free monthly events hit subscribe on the page so you don't miss any awesome content and hit that like button if you like it don't let all the fur on my jacket distract you here's the content [Music] all right well all the way from California make some noise for David Greene of bigger pockets hey guys good morning everybody it's really nice here use all this talk about California have it all the good weather I think is a lie so that we don't get upset about our taxes because this is really nice weather and we're very far away from California so uh is there anybody here who has not heard the acronym bur that is willing to admit it in front of a group of other investors cuz that's the truth yes we have an honest guy I like you already man sweet so burr is an acronym stands for bi rehab rent refinance repeat and all it is is the order in which you buy properties in order to maximize their value before you pull your money out okay it's a super simple really concept as opposed to like a hard core strategy but what it does is it allows you to recover capital so that you can buy more houses we're gonna talk about that today why I like it how I do it and how I feel like it really is kind of a game changer for real estate investing as well as how much it changed my personal investing and then I'll power through this as fast as I can actually go and at the end us guys to be whatever questions you want about pretty much anything you don't have to worry you could just throw it at me I'll I'll work my way through them there I did just release a book on this topic that came out like a couple days ago but you're gonna hear the gist of what's in that book today so let's get started Birds the most efficient way to build wealth in real estate and that's why I love it cuz I'm a big fan of efficiency right its way of supercharging your success through efficiency and mastery that's really what this comes down to so if you master burr and this is what I say now all the time you will have mastered real estate investing the five what I call like the five elements of burr each of those little letters if you get good at all of them you'll be good at the entire process of real estate investing and that what's gonna lead to building a lot of wealth so this is what they are I kind of just went over that for you guys mastery okay this is one of my favorite quotes like of all time I love this all the time I learned it as a cop and I say it all the time now I fear not the man who has practiced 10,000 kicks once but I fear the man who has practiced one kick 10,000 times that's a Bruce Lee quote and when it comes down to basically is repetition right the more times you do something the better you will get at it does anybody in here know somebody who got really good at something and never does it it doesn't work right like the very first time I ever went snowboarding I was not good at snowboarding and I never kept doing it so I never became good at snowboarding I Matt's honest you got truth and now I don't even like it because it's miserable but the key is mastery right and it's really hard to get good at real estate investing when you buy one house a year or for most people less has anybody in here ever stopped going to the gym and then started going again there's got to be more than four people there we go okay it's rough that's exactly what somebody just said the problem is when you stop going you get out of shape and then when you start going again your muscles are not used to what you're doing in this pure misery the workout itself sucks and then the days after that are even worse this just happened to me Brandon and I were in Seattle speaking in a different conference and I worked out at the hotel gym and then I got stuck in the middle seat on the plane here so I was squished the entire time and those pecs that I had just worked out were forced to being slammed together and it was miserable right because I don't do it very often the people who are in good shape work out a lot in fact I would say consistency is more important than even intensity most of us like oh this is my goal I'm gonna run out there and I'm gonna crush it and we think that our willpower and our intensity is gonna get us over that hump but it never will it's the consistently taking the small actions all the time just like what you guys heard about what your what's your big goal and that book the four disciplines of execution like Brandon will not stop talking about it all the time he loves that book because it gets down to how do I stay consistent how do I come up with a plan to do the same thing all the time and consistency works and it definitely works with real estate investing as well can you guys see that screen okay okay spry the angle I'm looking at it looks like it's washed out you guys can see it that's good so masteries developed through repetition and that's defined as the action of repeating something has already been said or written so here's what we're gonna cover the five elements of BRR how it will improve your ROI how it improves the velocity of your money how bird investing makes you a better overall investor through mastery and how it helped me change from buying to properties a year to two properties a month all right so the most important thing that we're going to talk about today is something you guys have probably heard before but it's really true and that's the secret to success in real estate is buying right you guys I've heard people say you make your money when you buy what that really comes down to is if you spent too much on a property there's not really very much you can do to dig yourself out of that hole than when you pay too much a lot of people will try by shorting their real estate agent trying to find an agent who works at a discounted Commission they'll try to overspend on the rehab they'll try to price the house too high they'll do all kinds of things to just end up making it worse for you right like if you find that you've spent too much money to buy a house that you have to then sell your best bet is just to take it mindset of I'm gonna limit my losses and move on factor on the airport on the way here I had a phone call from a guy who was wanting me to sell this house and he had spent way too much for it so he couldn't flip it and he wanted to price it way higher than everything else and try to sell it with a tenant in it simply because that was what he thought he had to do to get his money back and all that would happen is that house would sit on the market not selling the tenant wouldn't leave and the only buyers you're gonna get when you're trying to sell with a tenant in place is another investor and our investors looking to pay over market value know so that's a terrible idea right but he's stuck in that mindset of I have to get my money back instead of just accepting I've already lost it I overpaid on a property so we're gonna talk about how bur basically helps you to buy right and allows you to buy more which is the only part of the whole cycle where you're actually making money is when you're buying a good deal right with every day we make we want to be paying less than the property's worth that's a skill that can be developed improve and ultimately mastered how the price you acquire property at is a skill that you should not expect to like crush on your very first set time you're not going to do awesome when it comes to negotiating or finding houses way below market value until you've done it a handful of times that's okay but that's one of the reasons we want to do it a lot right so how do we find great deals well there's agents there's wholesalers there's direct mail and there's your core four has anyone not heard that phrase core four you guys are getting more honest yes look at this we've got like twelve on his people we had one mister jean jacket right there in the very beginning so your core four is a concept I wrote about in my first book long distance real estate investing and it's the four people that I need to invest anywhere so if I wanted to come invest in Nashville or Franklin the first thing I would do is I would look for a real estate agent who could help me find a lender a contractor and a property manager and with those four people I could get anything taken care of that I need to get taken care of that's why I call them the core four so those are also people that will send me and find me deals property managers come across deals all the time some of the clients that they have that are that they serve they know when that guy wants to sell or that girl wants to sell they know which houses are always late on rent and the owner maybe is just getting tired of it right a lot of property managers are also real estate investors now not everybody has a ton of capital because not everybody does the Bur method so a lot of the time if you find other investors you're not gonna find yourself competing with them you're gonna find yourself waterskiing in their wake meaning they're getting more deals or they're having opportunity to come up that they can't do anything about and they're gonna pass that deal on to you especially if they know that they're gonna make some money out of it so a property manager wants you to buy that house because they can manage it a contractor wants you to buy that deal because they're gonna get the bid right I get deals all the time from contractors who go give a bid and it's 50 grand to get a place fixed up and the owner doesn't have the money so the contractors he's not getting paid to do the job the owner can't afford to get the house fixed up so he's not making any money on it nobody's winning and if that contractor knows you buy houses and he knows if you buy it he's gonna get paid his fifty thousand dollars to fix it up you just got a deal brought to you right so those are some of the ways that I look for people to bring me deals i shy away from direct mail I haven't really ever gotten into this one I've always worked through these other avenues mainly because I want people bringing something to me I want them out there working looking for what I need as opposed to me out there working looking for what I need alright how to recognize a great deal these are my three criteria I apologize my voice keeps going in and out I got to hold this microphone really close it's basically three things that I look for and if a deal has it I will buy it it's that simple right I like to simplify things a lot the first is it's under market value so I'm buying below what it's worth the next is that it cash flows positively and the third is that it's in a bad neighborhood now I can get more specific for you guys by under market value I want to be spending 75% of the ARV so that's the rehab and the acquisition what I'm paying for it I want a total 75% of the after repair value which is what that house is gonna be worth when it's done super simple so if somebody's gonna sell me a house and I determined that it will sell for $100,000 if the rehabs $25,000 how much can I pay for that house 50,000 that's exactly right because 50 plus 25 equals 75 which is 75 percent of a hundred thousand and that's my number one criteria so what I care about more than anything else okay next criteria that I look at is will it cashflow positively you guys are familiar with that phrase cash flow very simple I wanted to make more money than it cost me to own it alright that's obvious for like or that's the case for pretty obvious reasons you don't want to be buying an asset that you're gonna actually lose money on you can use the BiggerPockets calculators to run your numbers or you can use what I call the 1% rule to get started which basically states if a property's gonna rent for 1% every month of what you paid for it it's likely to cashflow now you do still want to run an analysis on that you don't want to assume because it means the 1% rule that will cash flow okay but I wouldn't even look at it if it wasn't close to that 1% rule I wouldn't even waste my time if a property is gonna be sold for 200,000 and our rents for 1,000 a month that's half a percent right I wouldn't even run it through my analysis model because I know it's not gonna make money every month the third criteria is that I don't want to be in a bad neighborhood I don't care how good the numbers look on a spreadsheet I don't care how bad I want to get started I don't care how good it would feel to tell everybody in a meet-up that I did a deal and I'm a deal doer and you guys all know that pressure that you get when you show up and someone's like you're done and he deals dude and you got like nothing to say and then you feel like a loser right don't get sucked into that there's so many people that are doing deals that they shouldn't be doing because they want to say that they're a deal doer it doesn't really matter how great that property looks on paper if you're in a d-class neighborhood or or worse it's a headache you basically just bought yourself a job okay and if you know those neighborhoods inside and out you like dealing with that you want to put your time towards making sure you get paid every month and chasing down those rents that's fine like you should get in there and do that that's not what I want in fact if I'm living my life in a way that like my best use of my time is running around and like really really rough areas trying to convince a tenant to pay me the rent that they promised me that they were going to I did something wrong with my life these are investments this is supposed to be passive income we're supposed to be looking for ways to earn money that's easy for us and fun and that to me is not easy or fun so of these three criteria which one do you think I care about the least why would you guys guess know about neighborhoods what else cash flow it actually is cash flow right and I know this kind of sounds for reticle because we're at bigger pockets and we're constantly talking about cash flow cash flow cash flow right why do you think we do that why do you think that's such a big thing then we talk about cash flow so much we talked about it at bigger pockets specifically so much because most of the people that are coming to us are kind of like financial babies or real estate investment babies they are not financially free they don't have a ton of money and they're looking to real estate to kind of dig them out of that ditch right the reason I care about cash flow the least is because believe it or not you're not gonna get rich off of cash flow you're not gonna build a significant wealth off of cash flow in fact I would say the cash flow is actually a defensive metric cash flow is not designed to make you wealthy cash flow is designed to keep you from losing that set if it generates more than it costs to own you'll never have to worry about it being lost right but what if you have 20 cash flow properties and you're bringing in five thousand dollars a month can you afford to buy one that you lose a hundred or two hundred a month on what if you're making an extra ten thousand dollars a month from your job and you've got that much money coming in can you afford to buy a property that you might lose two hundred bucks a month on it's really not making a big difference when you actually look at the big picture right cash flow means at least to me because I'm investing from a 30-year perspective I'm saying 30 years from now will I be glad that I bought this property now if it's in a really bad neighborhood I probably won't it doesn't really matter right as the 30 years of headaches like you don't want to be in a bad relationship for a long time right if you're in a bad relationship you want to end it really quick so I don't want 30 years of misery and then 30 years from now if I didn't buy it under market value it probably won't matter because it's appreciated so much and the loans been paid down but that money could have been used elsewhere and made me even more because I didn't buy under market value right so that's why cash flow is the least important to me but you have to ask yourself at what stage in this like investment journey are you in if you're still trying to claw your way out of working a 9 to 5 and that's your goal cash flow is really important to you because cash flow can get you out of a 9 to 5 if you feel like you've already got a significant portion of wealth built up buying areas and really good neighborhoods with high upside is much more valuable to you than just getting an extra 50 bucks a month on cash flow alright so here's how to evaluate a good deal 1 you're buying properties under market value we talked about that too you need to know your ARV that's what we call the after repair value this is probably the most important number in any analysis because the best way to analyze the property is to start at the end and work backwards so when somebody comes and says David I have a deal you can buy this house for $50,000 before I need to know what the rehab is before I need to know what its gonna cash flow or what the rents are gonna be before I know about the neighborhood really before anything what I want to know is well how much will it be worth what I'm done because if the guy says it'll be worth $60,000 but it's gonna have awesome cash flow right I'm probably not gonna be interested in that because there's not very much being on the bone I'm definitely not meeting that 75% metric that we talked about and I don't even know what the rehab is right but I mean anything any rehab at all it's already not a good deal right so any rehab just gonna make it even worse so you definitely want to start by knowing what's this house gonna be worth when you're done that's based on comps one of my favorite things to do when I look at a house is not to just look at the house as it is right a lot of people will bring new houses for $50,000 that are worth $60,000 what I want to look at is how can I add value to this house is this house mahler than all the other houses in the neighborhood and I can make it bigger does it need another bedroom doesn't need another bathroom is it in really bad shape and it needs a facelift is this an emerging market where a lot of people are moving into but they expect the house to look really nice and this one doesn't look really nice right it's okay to look at deals that are not very far off the ARV if you can add value that will increase your ARV right and then I talked a little bit about already what my goal is I want to be all-in for 75% of the ARV all right so there's finding a good deal and now we're talking about creating a good deal and I kind of just mentioned that when I talked about how to add value right the number one way that you're gonna add value to a property is through the rehab most of what you're finding is gonna be a distressed house of some sort so the property itself is in disrepair that's why it's being sold you very rarely ever get a really good deal on a house that's in super good shape and why do you guys think that might be I'm gonna make you talk louder they're not motivated right and if they were motivated they'd probably just take that house and stick it on the MLS or the real estate agent right wouldn't you do that would you sell anything at a super good price if you could get more easily no so when we get a good deal is because what we're really doing is we're buying somebody's problem now sometimes the problem has nothing to do with the house right we call that I call that property distress sometimes the problem is personal distress this person has medical bills they have a divorce they got a new job somebody died and now five people own a part of that house and they don't really care about an extra thirty thousand and we split amongst five people right there are cases like that but in general most of the time when you buy a house at a really good price it's going to be because it needs a rehab so you can't let that scare you you can't get used to looking at Zillow and all the pretty houses and saying how do I get this seller to sell me their house for half of what it's worth right you have to go look for the ugly houses and say how do I find the seller that needs the money more than they need like as much as they could possibly get that needs a quick sale over a high sale I also do this through adding bedrooms bathrooms and square footage right one of my favorite methods because it is so easy is to look for a house that is too small compared to the houses around it so if every house in the neighborhood is between 1200 and 1500 square feet which is often the case with rental properties and I can find myself a 900 square foot house right the next thing I want to see is is there a cheap way to add square footage so on my way here from the hotel I saw three houses that basically have like a sunroom I don't know what you guys call them out here we know a little outdoor patio area what do you guys call that sunroom we usually call them Florida rooms you know I invest in Florida right there you go so the awesome thing with the sunroom or a Florida room is it already has infrastructure built in it already has electrical a lot of the time it usually doesn't have plumbing but you're not putting it framing you're not pouring concrete and you don't have to most importantly change the roof of the house to make it go out further right but it doesn't get included in the square footage of the house now when it's your porch sometimes that's like tough to work in but a lot of the times in Florida when I'm buying houses I have a sunroom on the back of the house that's huge and all I have to do is knock down that drywall and put a new drywall where there were windows right run electrical or run plumbing into that area and I often convert it into another bedroom and if it's awesome I can add it a bedroom with a bathroom like a master suite so I'll target is 2:1 or 3:1 property three bedrooms one bathroom with 900 square feet and then I will add a fourth bedroom or bathroom or if I can't I'll just add more square footage but what happens is my property jumps from 900 square feet up to 13 or 1400 square feet and I literally increase its value by 25% because the square footage went up so much now it looks like every other house in the neighborhood and if I have comps that are supporting that price at that size the appraiser is gonna give me that same thing but I didn't spend a ton of money on that rehab because I didn't have to bring in like an entire crew and get like an architect to design an addition onto the house and it wasn't really expensive right sometimes it's like six or seven grand to add a bedroom to a property that increases it by 25% so that helps you a ton when you're burning and we'll talk about why because you're bumping up the ARV which is a number one thing you want to do on a per make sure make your property compare to better and nicer more expensive properties this does not work if your house is already looking like all the other houses in the neighborhood or if it's there are no nice houses in the neighborhood right this only works if you can find comps that show these other houses are worth a lot more than mine because mine's in terrible shape and when you find that you know all you have to do is just upgrade it which is probably the most fun and the easiest part of any of real estate investing through a contractor without even getting creative like I said adding a bedroom or a bathrooms and you can make it worth more so you want to put your property a better condition than it was when you bought it through the remodeling you need to understand how appraisals work because when we're flipping a house what matters is what somebody will pay for it when we're burying a house what matters is what it the prazer is gonna say it's worth winning you're done because that's what you're getting your loan based off of so they're gonna base it on comparable sales the neighborhood they will often take the average price per square foot multiply that by how many square feet your house has and then adjust from there oh you don't have as nice of a kitchen oh you have a better master bathroom they'll start with that number of the price per square foot multiplied by the actual square footage of the property and they'll adjust now I find this to be the case with cheaper houses much more often so if you're buying in a market where like home prices are 200,000 $150,000 or less that's exactly how an appraiser is probably gonna value your property if you're out where I mean in California where a $500,000 house is kind of like a starter home right I'm often selling houses between 500 and 1.5 million or so they don't care about the price per square foot metric nearly as much they're just looking at pure comparable sales they're saying that house sold for 700 this house right here is a little bit bigger it should be 800 right the price per square foot isn't really even coming into play but you need to know that when you're investing because you're starting from the end and working backwards so knowing how the actual appraiser is going to value what this property's worth kind of lets you know what strategy you should take to make it worth as much as you can you've got the concept of functional obsolescence they can screw this up so you really want to understand that that's a reduction in the usefulness or desirability of an object because of an outdated design feature okay so imagine a house that has two bathrooms but one of those bathrooms is coming out for the kitchen not something everybody wants appraisers know that so you make it harder to rent harder to sell and you're after a pair of values gonna be affected we call that functional obsolescence yes it has a bathroom but it's kind of obsolete because of the place where it's been placed and then improving the design of the property improves its value so sometimes just opening up a kitchen by moving walls will improve its design and we'll get you a higher appraisal in the end because the appraiser knows this is what people are looking for all right how did you find a good deal we've talked about this a little bit you're looking Lupe's I think I got myself into automatic all right here we go you're looking for distressed and I talked about this a little bit earlier there's three kinds the first is market distress so this is like 2010 many of you guys here investing or paying attention in the housing market in 2010 was a hard to find good houses that you could buy as a rental at that time no it's pretty easy in 2010 right it was like falling out of a boat and hitting water that's what I call market distress that and the problem is that's what everybody's looking for everyone I talked to that's not getting started is saying well I'm waiting for the market to crash right the problem is back in 2010 I remember just getting started as an investor and everybody was saying don't do it don't do it the economy is gonna get worse housings gonna fall you're not gonna find a renter nobody has a job there was a million reasons everybody was saying don't get into housing right it was also a lot harder to get a loan and a lot harder to borrow money does it make sense why I had been harder to find money to put into your deals at that time right so I don't like the idea of just waiting for market distress because that's the easiest time to buy the next is personal distress and this is really the best kind this is what wholesalers and house flippers like professional house flippers they're all targeting personal distress they're looking for that person like I said earlier that has a divorce a medical issue a problem with their job they're getting relocated there is a death in the family something that's causing that person to need to sell that house because of some distress in their life and the third is property distress that's what we were talking about earlier the property itself is in such bad shape now this is what I target because I don't really have the time to go for this because I'm doing other things and I don't want to wait for this so I'm always looking for that now the ideal is when you've got this mixed with these right this house is in bad shape and it's in a market when there's everything for sales so god who's gonna buy that house when they could buy a nice one you're really easily right or it's in terrible shape but this person also has to sell it in the next like three weeks and no one else is gonna buy that thing so that's just like a little hack for you guys that's definitely what I look for is how you can combine any of these three because you're likely to get a better deal all right so the rehab of burr talked about a little bit in my book here this is when I refer to earlier ways that I can add value through the rehab so we talked about bedrooms converting son rooms I'm glad I called it that because that's what you guys call it here and second bathrooms converting carports covered patios den studies living rooms and utility rooms right all of these are ways that you can add square footage to your house for less than what it would cost to bring a contractor out and literally build from scratch and that's why I look for them when I'm analyzing properties when I start seeing any of this stuff I know when my contractor goes out there to give me a bid on the rehab I'm gonna say hey while you're there let me know what it would cost to take that patio convert that into living space right and he's gonna look at it and say oh this is a problem right there's no way I can tie into the electrical or well you're the roof isn't the same as what's on the house we're gonna have to raise the roof up and run it over and that's to be expensive and usually when that's the case I don't buy it but sometimes I get lucky he's like this is gonna be really simple all I got to do is throw up some of this bring in some of that it's gonna be about eighty five hundred bucks and I can see that I'm adding thirty to forty thousand dollars worth of value to the property I'm definitely gonna do that and then we've talked about increasing square footage all right on to the rehab choosing a contractor this is probably the toughest part for most real estate investors here's what I want you guys to know about contractors and if I have one in the room I'm about to piss you off and I apologize for that this happened to me before I've had hecklers that were like contractors who got really upset the goal of a contractor is to great ambiguity they want to hide the costs in a general figure the goal of us that is investor is to create specificity we want to know exactly what we're paying for okay so what a contractor wants to do is say well I'll see you need to fix this up here it's gonna be about $40,000 will do your kitchen your bathrooms and your outside and you don't really understand exactly what you're getting right that's what they want to turn it into what we want is an itemized list of everything they're gonna do and what it's gonna cost to do it right now they don't want to do that for several reasons for one it takes more time for two you can see exactly what they're doing or not doing and what they're getting paid for every job right it also forces them to be a little bit more professional and I'm not trying to bag on contractors some of them are great and they do this on their own others became a contractor because they don't like numbers and spreadsheets and they like hammers and saws so when you're trying to pull them out of what they're comfortable with and into a different world they don't like it right and this is a battle that we're always gonna be having as an investor is as from our perspective we want it to be specific and from theirs they want it to be general and you have to know you're stepping into the battle so the goal of interviewing contractors is to find a good fit different contractors bring value in different ways and so do different investors so not every contractor is good for every job right when you're working on an investment property price is very important to you and quality is very important to you but you're not also going to get like really good communication and speed that's what I find is you want a job well done a job cheaply done sorry I was like not expensive done and a good like customer service they get there on time they finish on time they communicate really well and what I tell people is those are the three things you need you need to pick two because the minute that contractor can do all three really well what do you think happens he starts to not be chief anymore right he's got a lot of business and that's just common sense like all of us would charge more for whatever we do if we could so you're never gonna get all three as an investor it's most important to you that you get a good price so you're gonna have to sacrifice on something and because I don't want bad work I tend to skew towards he's not gonna communicate well they're not gonna show up on time they're gonna tell me it's six weeks it's gonna turn into eight or nine that's just a part of the process now and I'm interviewing the contractor I know they're not gonna be perfect but are the ways that they are flawed okay for my business model okay for my plan the other thing we have to ask ourselves is what are we bringing to the table for them it's very easy to get into this mindset of I need this and I need that and are you the best and I'm gonna interview 12 of you guys and I'm only gonna pick one and we just stop thinking about the fact that they don't have to work with us either and if they're really good they're not gonna work with you if that's the attitude you take in fact right now contractors have more work than what they can keep up with that's why they're always going over on their job this is a good economy and everybody wants their house fixed up right in a bad economy nobody wants to dump money into their house stock for Home Depot and Lowe's crashes because nobody's spending money at those places but right now everybody's watching their home values go up they're fine to go invest some money into their house and you're trying to get the same person to do your work that all those other people are looking for and if they're not an investor it's just the house they live in they're probably gonna pay more than you so why would they bump you to the top of their list and that's something that I talk to the contractors about what's what's your plan what's your business look like what's important to you what are your goals are trying to grow do you have enough people for how you're trying to grow alright trying to get your name out there are you already established right if I've been talking to a guy that's been doing this for 20 years and everyone in town knows him and he makes a ton of money I'm probably not gonna continue that conversation too long when I know I'm gonna be wanting him to charge me half of what everybody else pays right but I may look at how I can send that person referrals I may say when I have friends or family that want to remodel their kitchen because they see on my Facebook post well let me refer you to this guy right and now that I'm sending him business is he more likely to want to send business to me when he finds those deals like I told you about that need a big rehab and the person can't afford to do it he's way more likely to send that my way when I've been sending him something so don't just look at the value that you can provide being the money that you can give them there's other things you can do for those people to help them with their goals then there's other things they can do for you right now do you think if somebody's been following the four disciplines of execution model that they're gonna be very clear on what their goals are and how you can help them yeah right but do you think most people are doing that right so one of the ways you can probably add value is just explaining how that works that could be like I've never even thought about that I'm just swinging my hammer and using my saw every day right and you can have that conversation with that person that shows them how they could scale their business faster and they may really appreciate it here is something that's really important right the way that the contractor bid is actually formatted is really important so the number one thing I want I talk about this in my long-distance book because I want to itemize list of the scope of work so I want it to read like a menu I think that I actually if you guys just go to BiggerPockets com slash hire contractor you should be able to get like a shortcut to this article that I wrote here but it's basically a blog post about my step-by-step guide to how I hire my contractors and the most important thing is that they give me an itemized list so it should read like a menu at a restaurant right how much does the chicken cost how much does the State cost how much does a salad cost and then you can pick and choose what you want based on how hungry you are and what the price is that's how you want your rehabbing to lick new countertops this much money new cabinets this much money new flooring of this type this much money and then you can tell are you being charged too much and is it worth doing in this house all right I often look at these bids and I don't just say okay I say I do not need granite countertops in this thing how much wood laminate be right okay that's what it's gonna mean for carpet how much can you do laminate flooring instead because this is a rental and it's gonna get trashed right or I don't need carpet that nice like all those things come up when I'm looking at this itemized list and they're happy to adjust that for you right another hack that I use is I'll actually ask the contractor what kind of work do you enjoy doing and what do you hate and if you can get them to tell you and you can design your rehab around what they like you're gonna get better prices and a much happier contractor right so a lot of these guys hate laying tile because it's a hundred times harder than just putting down laminate flooring right but the price is often kind of similar if I can get them to admit to me like hey I hate laying tile and I say okay well what if we do laminate how much cheaper can you do it he's thinking in his head my back's gonna be saved for the next two weeks of laying tile and he's gonna give me a really good price right that's just from asking questions of the other person and looking at them like a partner not like a slave or like an employee who does your bidding by creating that specificity the contractor cannot hide costs right this is a pretty big thing here once it's itemized like let's say that he says I'm gonna put in 10 doors for $5,000 right I can do some math now that he's giving me those specific numbers and I can see that I'm paying $500 a door right now let's say that I don't know contract stuff I don't know construction how do I know a $500 a door is a good price well the first thing I'm gonna do is I'm gonna say what does the door cost what's the material right throw out a number what do you guys think a new door for a bedroom would cost hunter bucks okay so that means there's $400 these charging me for labor that son right do you think I should be paying someone $400 to put up a door now we know that because we work in construction but what if you don't know anything about it how do you know well when you talk to the other contractor that gave you a bid I asked that guy hey how much does your guy how long has it taken to put up a door right how long do you guys think it takes us to hang a door it's an hour let's say that we give them two hours okay if it takes them two hours at $400 an hour that's 200 bucks an hour the heat after the contractor is charging me to hang a door right I can tell that doesn't sound right I know that much I may not know construction but I know $200 the hangar door sounds a little ridiculous okay now let's say I go back to the first guy and ask the same question Helmut how many hours is a steak and he's smart he's like oh you must have done some math here he goes well actually hanging a door it takes about like six hours to do right so he's trying to hide his cost by saying it takes more hours well at that point I can come back and say well why does your guys suck so bad it takes him three times as long as your competition what's he gonna say that right he's kind of pin there so either your guy sucks and I shouldn't hire you because you takes you too long the hang doors or you're gouging me on the price and I shouldn't hire you because you're dishonest but once I have it specific like that I can very easily figure out if I'm overpaying or not when they just hide that number in a $40,000 quote do you have any idea what you're actually having to pay that's the problem that's why we wanted to be specific and that's what I just said all right how to determine market rents or moving on to the the next are rent that right there is my favorite method guys I used to think that this was like you know it's a really rough idea you can't really use it too much you got to really rely on a property manager and I do think that you do have to rely on a property managers they know better but you know what I found is this is how my property managers were actually looking it up [Music] they're just as lazy as me right if we go to a website and pound in and address and take a look like that's what we're gonna do and rent ometer is surprisingly accurate you can also call Craigslist so you can call somebody who has a house for rent and you can ask them hey how many bytes are you getting right do you have other applicants if you ask someone who's got a house for rent how's it going and they say well it's been vacant for three months I'm trying to find a 10 is that a good sign for you you probably want to buy in that area especially if you don't know it right if they say oh you're like the 24th person today that's a hot market right when I'm using rent ometer I don't know if I have anything in the slide for it but uh it'll actually show you what a map where your house is and what the other house is around it that it's using as comparable rentals where they're located okay and not only that it'll tell you what they're renting for and not only that it will tell you their address now I'm not a big fan of sites like Zillow and red fin and realtor because they're not doing a whole lot other than letting you look at pictures but I am a fan of them for actually looking at pictures so if I can see that my house is 1 2 3 Main Street and I see that 1 2 3 Jones Street is renting for 200 bucks a month more so the one I'm looking at I'm thinking around 1,100 but Jones Street is 1,300 and then I can see that it's a Jones Street so I go look that up and Zillow and I'm looking at what 1 2 3 Jones Street looks like and it looks just like my house wouldn't you think I can probably actually get 1,300 instead of 1,100 yeah and vice versa if you thought you were gonna be getting 1,100 and you look up the other $1100 houses and they look way better and way bigger than yours you're not gonna get that right and that's one of the ways that you can do analysis really quickly with rent ometer and get a really accurate idea of what you're actually gonna be expecting that you can get for rent you can also ask property managers that's your best bet because they're the ones who do this for a living and if you have a good one they know what it's gonna run for just like me as a real estate agent I'm showing houses all the time I'm taking listings I know what sells and what doesn't I know what price range people are snatching them up right away and what price range you're gonna be sitting there for a little while I know what people want the house to look like or what areas they want to live in I can't help it it's all that I hear I have to listen to buyers cry to me for 30 minutes at a time about how they can't find you know a champagne house on their beer budget and it's the same way with property managers they know what tenants want so I like to start with that hey what are the parts of town that everybody wants to live in hey what are the areas and I need to avoid because it's like they're attracting the wrong kind of person right what do you think I can get for rent and what's the safe bet that I can get for rent right away right I definitely use them as a resource and rents like property values are determined on comparable sales we talked about that a little bit with rahmanir but that's that simple what's he gonna rent for I don't know what's everybody else paying that's kind of how real estate works actually we sound just like that when we talk here's here's the rent ometer this is how you know you went to the right site it looks like that very simple you throw in your address you put in what you think the rent would be and you put in how many bedrooms it is and then down here you're gonna get that little map all right how to increase rents well first you can bring grants up to market value a lot of time when you're buying a property especially in multifamily like you heard they're not charging as much for rent as what they could be charging right so knowing what market rents are before you even buy a property lets you see like could I be getting more than what I'm getting and those are the numbers you can put into your spreadsheet to see what you can expect when you're done you can improve your property's desirability through the rehab which we talked about a little bit tenants like that just as much as home buyers like that home values and rents increase in proportion to wages this does not get talked about enough if you guys are do I have fans of the podcast hearing to be a list of the bigger pockets I should ask that the beginning got all happy before I did this huh this doesn't get talked about enough but when you get into like high-level real estate investing you start dealing with wealthy people that do this really good this is something that they talk about all the time so let me just give you an example let's look at the cities that we all hear about our exploding throughout the country as far as the price is going up right what are some that you guys have seen Nashville okay Austin Texas what about Seattle Denver very good one what about Portland Oregon what about Madison Wisconsin have you guys seen that all right what are we San Francisco okay take all these cities that are absolutely blowing up and tell me what are they have in common what's a common denominator that is a hundred percent true jobs from technology and education okay so why do you guys think that the areas that are having tech companies move in are seeing such an increase in home prices you're exactly right this is a smart group you got here Seth this is not what I'm used to you guys are 100% accurate right it is because of the salaries and it is that simple now I kind of have pressure on me to understand all this stuff because I wrote that book long distance real estate investing and now everyone wants to come to me and say David what's going on in Tupelo Mississippi and I'm like oh I don't know man so I actually have to know what's going on so I don't look stupid and then as a real estate agent who works in the San Francisco Bay Area I need to understand what's going on with the values of homes to help my clients so here's what I've learned after talking to a lot of smart people how do you decide how much you're gonna pay for the house that you want to buy let me you guys tell me fits your budget and what else so one you have to be able to afford it yes which high wages will help with and what's the other thing well yeah it's occasional what it really comes down to is do I have to pay that right I could pay I could spend five hundred grand on this house but do I have to I like you know four four eighty we're all gonna do that right that's just human nature everybody thinks the same way so salaries determine what you can afford to pay and demand and supply determine what you have to pay does that make sense so when more people are moving into an area then they can build houses for that's really like that's that puts a constriction on supply and an increase in demand so prices go up now that doesn't matter if prices keep going up but people can't afford to pay it they can't get pre-approved for a loan they're not gonna spend that on the house right so when you get those two things combined high wages and higher salaries with demand and supply that are constricted what you find is that home values are going up okay and the same exact thing works for rents if there's more renters to want to move into an area then there's houses for those people to move into rents are gonna go up unless they can't afford it right and what determines if they can afford it is what their jobs exactly how much their wages are so when you're trying to figure out should I buy in this city versus that the first question you should be asking is what's the actual economics look like in those areas what kind of jobs are people getting so this comes up for me oftentimes when I'm when I'm looking for a different area to buy in like let's say that someone said hey David you should check out Nashville right the first thing I'd say is okay do the houses meet the 1% rule if the answer's no probably not gonna look there if the answer is yes I'd say okay do they have good neighborhoods most cities do all right once I get to that part I'd say what does everybody in Nashville do for a living right if I asked that question what would you guys tell me healthcare healthcare and Technology anything else music yeah there you go people like music it's true so right away when I hear healthcare and technology I think stability and rising prices that's a big yes right that's the market that I want to be in now what if everybody yelled at me like well it's a fishing village right or everybody in that city does nothing but work on cars and build cars and that's it that's the only reason it exists could that be a problem can you think of a city that matched that description recently that had some issues it's exactly right and we're Detroit's issues based on anything other than the economy and the employment factor that was it right that's the only thing that caused Detroit to crash so that's what I want you guys to understand is that home values and rents increase in proportion to wages so if you want to buy a house in an area that's gonna go up in value you have to look at wages and if you want to understand wages you have to look at companies who's moving in there and what are people doing and is this an industry that is increasing would you want to buy a house in a city that is known for their strong taxicab base terrible way right but what if that was like uber headquarters or something right different story you guys see what I'm getting at okay so buying areas with job growth buying areas with limited supply can you guys think about why you might want to be buying in an area with limited supply yeah if demand goes up and supply stays the same the prices have to go up right we mentioned Austin Texas earlier when we were talking about cities where prices are going up a lot remember that anybody here been to Austin okay we got a fair amount nobody in California has ever been to Austin it's very rare you guys know that big river that runs into the middle of the city you need a bridge across it right that bridge becomes like a choke point for all the commuters who are trying to get in and out of Austin so what happens is if you're on the inside of that bridge you're in the city you're in a much much more desirable area that's where everybody wants to live if you're on the outside you're basically having an extended commute because you got to fight your way through that traffic to get into the city to get to your job that's less desirable right so what do you think happens to prices and rents depending on if you bought 20 years ago inside the city or outside the city makes a big difference right let's say that you could have bought a house 20 years ago for 30 grand less outside the city do you think that might have been tempting I would say it's always tempting to spend less money right but how would you feel about that decision 30 years later right you're the the actual like accumulation of appreciation over that much time would make you look like a fool if you'd bought outside so I like to buy in areas that have a limited supply when I can now oftentimes we can't especially in this market because there's not a lot of areas of cash flow so you got to go where you got to go right but in an area where I can have my pick you definitely want to buy in areas with limited growth and I talked about that in the Berbick you know like you look for areas where the the local government will say hey we're not gonna allow any building like yeah so who grant cardone is grant cardone only buys in really liberal areas and it's not because of any his own political view but because he knows in liberal areas the government is much less likely to approve new housing starts new permits for new construction so that's gonna force a limited supply wherever he buys which is going to do what surprises now what if you also buy an area where tech companies are moving in or other high-paying jobs are moving in right now you've like supercharged your wealth building because you understand real estate as a whole and then you only want to buy in areas with healthy economies right so one of the number one ways that I define that is they have to have more than one economic base I do not want to buy in any city that has one form of employment and that's it so if I said hey guys what do people do for work in Nashville and the only thing you said was music and there was no other types of jobs like everybody only came to Nashville to make it in the music industry what would happen if we hit a depression and people stopped spending money on music right what happened in Detroit when the automotive industry took a plunge I would never buy a house in an area that's known for nothing but tourism it may sound great if you're buying a Airbnb in an area with like a tons of tourism right but do you think people spend a ton of money travelling and going on vacation when the economy's rough no part of the ever right everybody cuts back so I don't want to buy any house in an area at all that has one form of employment I want to buy an area with an economically diverse base so that it doesn't really matter what the economy does there's options for people to be able to keep paying the rent all right the refinance part this is really what's super important how lenders determine how much saline to you is very simple they have what we call a loan to value ratio so what how much can I get on a loan compared to the value of the house so if the value of the house is $100,000 and the loan of value is 75 percent that means they're lending you 75 percent of $100 very simple the value is based on comps right the the end result a loan amount is based on the risk the bank is willing to take okay so banks want a lower loan-to-value ratio they'd like to lend you 50% of what that property is worth us as investors we want to higher loan-to-value ratio we want to get more of our money back out so whenever you're going to get your loan that's the first question I'll ask a bank is what loan to value can you give me higher loan amounts are riskier for the lender lower or safer you want to find lenders that will let you borrow more to recover more capital increase your property's value more to increase the amount the lender will let you borrow it is easier in my opinion to pump up your ARV than to force the bank to give you a higher loan of value right here's something else to be careful of some banks will will lend on what we call loan to cost right LTC which is completely different the problem with that is they're not letting you borrow on the appraised value they're letting you borrow on the amount of money that you put into the deal so what happens if you get a scream and deal in your and you're all in for 60,000 and the place is worth you know one hundred and twenty they're not letting you borrow seventy five percent of 120 they're letting you borrow 75% of the sixty thousand you put in right so you're getting back like forty five thousand dollars on a house that's worth 120 is s I think a good deal to you but the banks love it right so be careful when they're giving you numbers if they say oh we'll let you borrow ninety five percent if they're referring to loan to cost that's really not good all right how to find good lenders the number one way that I like is a rock star referral I like a person who's a rock star to tell me what lender they use because they're more likely to be a good lender I also use my core four which hopefully is made up of rock stars and I'll get referrals from them I'll talk to other investors now let's be honest all of you guys who are buying a house do you really want to give everybody the name of your contractor who does great work for you do you really want to give them the name of the agent who brings you great deals but do you mind giving them the name of your lender no that's a oh you don't mind very good okay yeah everybody will give up the name of their lender so that's the first thing you should ask for right like there's no competition with that it's funny other lenders too so here's how my strategy works I call Acme lending and I'm like hey can you do this loan at a seventy-five percent loan to value and they say no we cannot we can do it at a ninety percent loan to cost and I say haha no my next question is who do you know that does do those and I just sit there and make it as awkward as I can and so they give me a name like I actually forced them to think through their brain and they'll say well bill over at Washington loan company I've heard he does him so then I called Bill over at Washington right and I asked bill can you do seventy-five percent loan to value yes can you do to fire do you have five properties no that's great who do you know they can and I will chase that rabbit trail as far as I have to chase it until it leads me to that one lender in town who can actually do it right and then when all the other people come to me and say who's your lender I make pay I'm just kidding you know don't make me pay I don't know what you'll be paying for the loan okay so loans are actually very expensive and if anybody here has actually owned a house or bought a house with financing you were probably surprised of what those closing costs are the problem with me being a real estate agent as lenders never ever ever want to tell their clients so what the closing costs are gonna be so it ends up being me that has to tell them even though I don't get any of the money closing costs are I mean where I live ten to fifteen thousand dollars is kind of routine you see that all the time sometimes more for the higher net worth houses they in it are made up of points origination fees underwriting fees processing fees notary fees lenders or salespeople and when you ask them do you have fees they can very easily say nope we will do this with no fees right but what they meant was no origination fees okay they didn't tell you that you're actually gonna be paying points or you're gonna have underwriting fees or processing fees maybe they pump up but your processing fee was but they sell you that your underwriting fees only gonna be this much right what you want to know is when I'm all said and done how much money am i spending on this loan and then the interest rate of course right like that makes a big difference too but sometimes in your buying a house and it's only like the loans $80,000 and you may think you're getting a great deal because they're giving you a four and a half percent rate instead of a five but their fees are thousands of dollars more it stops being a really good deal so that's something you want to look at like you guys ever heard the term APR annual percentage rate I bet most of you probably don't know what that means though because nobody tells us right APR is a way of taking the interest rate that you're paying and factoring in all of these fees over the life of the loan right it's a way that the government forced lenders to kind of be honest about what you're actually having to pay for a loan now you're not gonna get that very often in the mortgage industry but when you go buy a car or something else that's when you hear this phrase APR because it's easy to figure that out over a five year loan it's it's much less dramatic over a thirty year loan like what we have to get with houses and then compare several lenders to find the best deal for you definitely ask around alright why you want to refinance you can recover your capital allows you to buy more properties it will prove your ROI tremendously which we're gonna talk about it increases your net worth as you buy more which we're also gonna talk about ooh the last one the repeat process right repeats my favorite part that's why I made that sound and why I have Bruce Lee up here again repeating creates repetition and repetition creates mastery and mastery creates wealth and that's why it's my favorite right systems allow me to create a business where there was once a job this is why I love them because I don't like working jobs and then I don't want to just be a real estate investor I want to be a bad ampersand a dollar sign dollar sign wealth building passive income creating machine that harnesses the power of real estate like a 50-foot wave that I can surf safely I cannot do that without systems right without systems you're doing everything manually and that's not like surfing that's more like trying to swim stroke by stroke right when you build systems that operate on their own you harness the power of all the work you've done in the past that builds up to be a huge way that will carry you towards wealth and that's what the repeat part of BER is really all about so anything that can be done more than once should have a system created and that's the rule on our team we don't always do this really well but over time this system start to form because people get tired of doing stuff it prevents you from making errors of commission which are mistakes that you've missed it also makes you more efficient it allows you to someday train someone else to run the aspects of your business that you don't like that's pretty important right is there anybody who knows that they should be doing something but they're not and the truth is because they just don't like doing it that's human nature right the quicker that we can accept it's stupid but I'm just not do that thing because it bugs me the more successful that will be because that thing that you think is stupid is the thing that somebody else really likes to do and if you don't have a system you cannot leverage it off to somebody else and allows you to find oh there we go someone else to do parts of the business better than you could right maybe they're just better at doing that thing which will allow you to find your 20% which is what we call the Pareto principle you guys heard of the 80/20 rule is this idea that 20% of your efforts will produce 80% of your results but not all of us have the same skills right so my skills my 20% of what I like doing are different than yours so if I'm doing something in my 80% I should stop and only do by 20 and I need to find people around me who my 80 is their 20 that's the Pareto principle and if you do that you'll build a really strong team and you'll be successful all right this is kind of a case study in me how I went from buying two houses a year to two houses a month through BIR so here's what I did I sold one Arizona house that I had I picked the house that I sold because the price of it had increased but the rents did not keep pace what happened is I bought a house in a city called Buckeye Arizona and a new builder moved in and started churning out properties right and those properties the Builder was selling kept increasing in price which then pulled the price of my house up but a lot of these homes were being built by or sorry bought by investors so they were turned into rentals which meant demand never went up for my house because there was plenty of supply and so I wasn't able to increase my rents so I owned it for four years and it like went up by 50% in value but the rents increased by like four dollars it was horrible so that was the house that I decided to sell when I was when I sold that I had $65,000 I took that to Jacksonville Florida and I bought an undervalued rental so I paid less than what it was worth when I refinanced that rental I was able to pull out $80,000 right why do you think I was able to do that bought it right very very simple I paid less than what it was worth I fixed it up when it was done the bank so it was worth like 105 or so but I had only spent 65 total to buy it I was able to pull out $80,000 of capital which I now had I took that money and I used it to buy my next house I was able to refine 100% of that $80,000 back out and then I went on to buy 10 more homes the very same way so I'm buying it I'm fixing it up I'm making it worth more I'm then refinancing it which usually allows me to get all my capital back or at least most of it and then I go buy the next house I can't read that sorry Oh at an average of $25,000 in equity per house that I added to it and three hundred dollars a month in cash flow that meant that I turned sixty five thousand in equity into two hundred and fifty thousand dollars in equity and three hundred dollars in cash flow into three thousand dollars in cash is there anything you guys could do with 250,000 and $3,000 a month would that improve your life would that improve your family's life is that not why you guys are here at this Meetup waiting for me to get here and sitting there laughing at bad jokes right because you really want to build wealth and you're willing to laugh at a bad joke if that's what it takes to get there Oh what what's it's not impressive that I was able to build 250,000 okay it's impressive that I did it with that so the key is how did I take 65,000 and turn that into 250,000 and it's not because David Green is smarter than anybody else it's because when everybody else was swimming I was riding the wave and I left everybody behind me because burr is an incredibly powerful wave that will carry you towards wealth I took that same money and I kept churning it over and over and over until it grew bigger and that was I mean that was just the first 10 homes right I went on to buy many more after that so make sure you guys asked me at the end like why that worked what it was about this entire process that made that happen so Burt will also improve your ROI right why do you guys think we should care about ROI sense for return on investment beautiful exactly if you guys aren't a business would you allow an employee so to work for you without being productive never so why do we let our money do that why do we let our money sit in investments where it's not working hard for us ROI is a metric that we can use to determine how hard our money is working for us do most of us work really hard to make the money that we're investing so why would we not expect our money to do the same for us right we're cheating ourselves if that's the attitude that we have our why is a metric used to determine how hard your money's working for you it's a common metric because it makes it easy to compare and investments performance over several different vehicles meaning I love ROI because I can look at Bitcoin versus the stock market versus a CD in a bank versus real estate and know which one's the best because I've used ROI to comparable this is the formula for ROI is really simple it's the profit you make in a year divided by the amount of money that you invested now would we agree the goal is to increase ROI how many different numbers are in this metric too which means how many ways are there to increase it there's two okay there's infinite ways to use to increase it but these are the two levers that you're pulling on if I want to increase the profit I make in a year I pretty much have to increase rents right do I have any control over that usually can I just create increased rents as much as I want no I'm dependent on the market but what about the amount of money that I invested in the deal do I get to control that that's what this whole slide shows been about right all these things we're talking about how do you keep adding value and then refinance back out so knowing that it makes much more sense to put my effort into this part decreasing the amount I invest if I want to increase my ROI but what does every investor do yeah they just try to make more profit they try to push rents as high as they can or wait a really long time right and there are oh I creeps up whereas mine like blows up like this is not a scam but I tell people on deals I screw up on I often end up with a 50% ROI when my rehab goes way over budget when my ARV comes in low when something goes wrong I end up with a 50% ROI as a consolation prize that sounds like a scam but it's not when you understand it's because of burr you're leaving so little money in this deal that the amount you're dividing by is very small okay the velocity of money this is a term that doesn't get talked about a lot with like newbie investors but with wealthy people they understand this very well it's the rate at which money is exchanged from one transaction to another it also refers to how much a unit of currency is used in a given period of time okay what that means is how often you use the same dollar to buy something new but David once I've spent $1 is gone how can I spend it again if that was possible I would never run out of money isn't that cheating you can use the same dollar to buy things over and over and over as long as you're adding value to what you're buying before you try to buy again this is why buying right is so important if I put that dollar out there and that dollar turns itself into a dollar twenty-five and a banks gonna let me borrow seventy five percent of a dollar twenty five I get that full dollar back if I don't do that because I took the easy road I didn't look for a great deal I didn't want to have to manage a rehab I didn't do my homework whatever the case may be I'm only gonna get back 75 cents after I spend that dollar and then you run out of money Berle allows you to buy something with a dollar turn that dollar into more you're essentially loaning yourself money to buy a property then paying yourself back later the trick is this only works if you improve the property's value enough and that's why we talk so much about the rehab today that's why mastery is so important because the better you get at this the easier it becomes to do that it's really that simple right if I do this over and over and over and I learn what works and I get good at it I'll tell you at this point when I'm burr I almost always pull more money out of the deal than what I actually spent right so I'm getting back more capital like on that first deal than what I put into the deal in the first place which means I have more capital to go buy new houses yet with once we realize how important it is to get our dollar back we start to see why it's not enough to be a mediocre investor we want to be an investing ninja like shinobi right here by mastering each of the five elements of burr we are on our way to becoming a black belt investor that's kind of the phrase I use in the Berbick this can only be accomplished through repetition and burr allows you to repeat the process enough times to master it if you become a black belt buyer rehabber renter refine answer and repeater you will inevitably become a black belt investors that makes sense can we do that without repetition you guys are paying attention I love it masteries through repetition breaking down the investment cycle into smaller manageable chunks makes a really big deal increases your ROI and create systems with which you can replicate your success and amplify it and increases the velocity of your money it forces you to execute at every level of investing and incentivizes you to do so if you guys want to take a picture of a slide I think this is a pretty good one that like sums up everything we talked about because you won't remember everything I said until you read some of this stuff so here's what I wanted to ask you guys at every single level of the Bur method which one do you think that you're actually adding more value to your net worth that's the buy that's exactly right when you buy a property market value might add a little bit through the rehab there's like a tiny chunk there but it's nothing compared when you're buying it under market value if you so that means we should focus on the buy the most what you guys agree okay so if you want to be able to focus on the buy what do you need to have to be able to do that the court for yeah that will help you but what do you need to have to actually buy the property money you need capital right so can you guys see how capital becomes so important equity in a property is great but can you use that equity to buy new stuff no and if buying new stuff is what it increases your net worth more is that good is it right if your money stuck in your other houses it's not helping you this is why burr is so important because it allows you to get your money back out which you then have that you can net by the next deal you can make more money you can increase your repetition you get more deals brought to you than the next guy because you're buying more you're getting better at it and you're on this cycle of virtue that starts making you more and more so that's what I had for you guys today I appreciate your patience here yeah it's awesome it's give it up for David greens so good always want to leave time for audience question about in the contractor section I can't hold that much information in my head how much it costs okay so are you asking more specifically how do I know that like $400 an hour is too much for the door like or maybe not that but how much does the door supposed to cost so that I know I couldn't remember when you told me last time is that what you're getting at yeah and you're not a construction person so that's not what you're into it'd be like if I went to like Pinterest and tried to memorize what a faucet would cost right you might be able to pull it out nowhere but I will never have an idea right it's a really good question it comes down to when I was talking about systems right I was very frustrated because I heard all these smart business people saying you need systems you need systems you need but no one tells you actually had to do it anybody know that frustration and maybe as I was talking you were thinking the same like no David Thank You Captain Obvious but how do I actually do that right it's really frustrating what changed for me was when I discovered Google Drive that became like a platform to build a system and it sounds really simple but that's all that it was right so let's say that every property that you buy you have a folder in Google Drive for investment property and you have a folder inside that for every address and then when you click on that that's where you save your property tax information your insurance information the bids you got on the contractor your before in your after pictures right so what will happen is when you're four houses in and you're like oh I got to put up doors again and you don't remember what a good price was for doors you don't get stuck in a conversation with a contractor where you have to make a decision right there you say email me your bid so I can link it over okay then you pull up the last one you did and you've got all that same information right there and maybe you took notes that you saved in that drive as well right here's how I calculated it and after you do that enough times that will be stuck in your head but here's what I believe if something's in your head you're not efficient it's like a weight that's holding you down in my real estate business there's no way that I can keep up with everything I do so I pay a lot of money for a CRM that I can keep all that information in right I want my CRM reminding me hey David call this person hey David make sure you get this thing done hey David make sure you get this form signed because if it's my head I'm gonna mess it up right in fact that's usually what causes most problems is that we have way too much in our own heads we can't leverage that out to other people and we can't keep up with it so the key is you get organized and Google Drive is free so that's the easiest way that I know to do it and then you go back and refresh your memory when you have questions like that the Bur method it's that last piece that I told you about in the end we're buying properties is what is actually going to increase your net worth and you need capital to buy properties that's the number one most important thing to remember right because there's people that will say oh I'm safer if I leave equity in the house and I would the Hemant Lee disagree because equity is adjusted when the market crashes and you can't stop that if you've got your capital out of the deal and the market crashes who cares as long as it's cash flowing you're gonna be fine but you can go buy new properties at lower prices if you've taken your capital or your equity out of the house and you put it in your bank account yes sir oh you did talk about it so when I sat up here and said no one's ever heard of it you're like lending rewards business owners you do one house you flip it we don't really care you do hold on we have more interest but you get to a certain level where you have systems in place to be able to have US equity then you're open up to a whole other level of Linde called non-recourse one thing I was you know one serve you if you're tied in a non-recourse or not but for for people that don't know and they didn't see the event last month that allows you to not personally sign on on loans and in cross-collateralized all those properties that pull all my cash now your networks basically doubles free of do other things so perfectly there but I mean it's probably step too far for us and in this conversation but that's one of the tapping that says what are you going once you do these things identify what you're saying once you do these things do certain leveling your master those skills you're able to not exponentially but what's word for higher for exponential I'm able to rocket launch into so that's a it's kind of a support of the whole idea that mastery matters and systems matter because that's what lenders are looking at right it's very easy to fall into this entitled idea that oh I'm supposed to lend me money it's their job right but would any of us lend $75,000 to somebody else because they had a spreadsheet made up and they said trust me I'm good for it no like that's a job a lender has is they got to make a decision can I trust you so the more squared away you are with your process and the stronger track record you have the more likely they are to trust you and it's really hard to build up a strong track record if we're not burning in your dump and 50 grand into every house that you buy you money really fast David thanks for being here I enjoy to talk much better than Brandon's a few months ago it's great do you have any recommendations or favorite tools for evaluating potential investment cities so looking for the data that you were talking about kind of what's the rent ometer equivalent for investigating potential places anybody in here familiar with the disc profile it's a personality assessment do we think this guy might be a hi-c hi-c hi-c okay just like the drink I think there's a drink called hi-c when I was a kid I don't have an actual tool that I can use to take numbers and plug it into and have it spit me out a formula that says this is what's better and here's why that's good okay if it was that easy everyone would be going there and everyone will be flooding that city so what actually in long just investing I talk about the metrics that I used to to look for a city I don't want it to be easy to do that because then everyone else is gonna go there have you guys noticed that investors kind of flock across the country like locusts right California was huge everybody was buying there and then they bought it all up and they moved him to Las Vegas and Phoenix and they bought all that up and then they moved into like Memphis and they bought all that up and they went into Atlanta if you guys like noticed he's like tracks like not berming tonality everybody's out there and they're all soaking up Nashville is another big one that was really popular I always try to avoid going the same road that everybody else goes on what I do look for is a target-rich environment so they have a lot of properties that I want if I want to flip I'm looking for a load a on market metric and I'm looking for higher price points with a big discrepancy in price so if you're flipping I love to see in the same neighborhood that house sold for a hundred and that one sold for 300 because that's that's my potential for profit if every house is selling between 100 and 120 I don't want to be flipping there it's very hard to add value because there's not really like a high ceiling to hit if I'm bike rentals it's almost the opposite I want a very high day on market nobody's buying their houses are just sitting there forever I have less competition right and I want to have like I don't really care about the price discrepancy at all I care about the price to rent ratio so that's what I mean by targeting rich and I mean if I want to buy rentals I wanted to meet the 1% rule if I want to flip I don't really care about that the way that I would say that you can look to verify information is the US Census Bureau if you guys look up Andrew Cushman were you interviewed on the podcast he's actually a friend of mine and that's my multi-family partner we did an episode with him on the BiggerPockets podcast his most recent one and he goes over a lot of really good stuff if that's what you're interested in specifically what websites he uses and what like literature he reads to get the information about like well where are people moving to what her jobs doing where the company's going all that kind of stuff and if you're like me and you just don't want to have to go listen to it I'll tell you that I'm in the southeast that's where I feel like most jobs that most people are moving to if you took the whole United States and you tilted it that's what it looks like everything's sliding down into the right as people are moving this way it's awesome what one comment really quick before we'll have time for a couple more questions here but if anybody feels like there's stuff that they miss do not worry about it because we've actually got a little text list that we would love to send you his slides I just I'm putting you on spot can we do that is that okay is that legal all right absolutely so we would love to send you his entire slide presentation I would do this now because we usually do it right after the event is over so just text get rich two three eight four seven zero and we'll send you a copy of David's slides time for a couple more questions get down in the front you call it my podcast you can keep saying that actually refinancing a duplex in Indianapolis now so when I look at the residential loan which where they are giving me 30 years term versus the business loan 20 years term so my question is what are some of the cons in putting it under my personal name and getting the 30 days versus that's probably a really long question we could talk about forever I'll tell you the most practical answer I can come up with the the cons of buying the property in LLC versus your name have to do with how the lenders gonna want title to be held when they give you the loan so I like I told you earlier I'm a big fan of starting at the end and working backwards I get pre-approved before I actually ever go write an offer on a house and I ask the lender questions like do you want it in an LLC or doesn't need to be in my name right because for commercial loans I find that it has to be in an LLC or they won't lend on it for a lot of residential loans it has to be in my name right so because the money is so important being able to refinance and reinvest that money is the most important part of this whole thing I'm Way more skewed towards making sure I can get the loan then I'm worried about being protected in case I'm sued or my business being protected right that's also kind of a fallacy in a lot of ways like I think LLC's give people a lot of false expectations of some of protection that aren't really there it's I mean if you guys do a little bit of research you'll find that it's easier to pierce through the veil of an LLC than what you think judges can just say nope I think that's actually you that's not your company you just set this up to look that way boom here give them the money right and when you buy a house in your own name your insurance has coverage for the majority of things that could ever go wrong like you'd have to do something grossly negligent before you owed more than what your insurance would cover if you were sued so I don't worry a whole lot about my name versus the LLC I usually put it in the lenders court and I do it when it's gonna make them happy thank you good time for one more question right right behind you sir there you go which ones have you tried and which are you sticking with well that was a bit misleading because the CRM that I use this for my agent business it's not so much for my investing and it's called brevity and I really really like it it's a bit expensive though Bri VI t why I haven't found a CRM that really really like it just right so what I would do is I would find one that real-estate agents use that maybe like 50 bucks a month or less what are some Zen ebuddy happening that they really like pipedrive haven't heard of that one the referral maker I think is one I've heard of I'm having I'm drawing a blank right now but I would use it like a real estate agent would because you're looking at your people that you're reaching out to is if they're clients it doesn't really matter if their agent clients or not and and that's part of your job as you schedule 2 hours a day to go in there and follow up with everything that's in your CRM we give it up for Seth guys hey let's give it up for David here amazing so good I'm actually gonna have you hang out up here on stage too right here so we're gonna do a nice little organized line so I'm sure there's a ton of people that want you to like sign their foreheads get pictures taken if you have if you have one if you have a baby that you want kissed if you have a book that you want signed this is your man to do let's give it up for David Greene one more time hey thanks for learning with us today on the show we would love to meet you are one of our free monthly meetups in Middle Tennessee hit the thumbs up button if you like the content make sure you hit subscribe so you don't miss a thing on this channel check out another awesome investing video here [Music]
