BiggerPockets Real Estate Podcast

BiggerPockets Podcast 391: Your Real Estate Questions Answered, Live! with Brandon, David, and BP Nation

Expertise:
406 Articles Written

Live calls, Dave Ramsey-style!

In this episode we open up the phone (er, Zoom) lines to take audience questions on everything from “Should I flip or hold this deal?” to “Coronavirus cost me my job… how can I invest now?”

Brandon and David also offer advice on house hacking, home equity lines of credit (HELOCs), appraisals, and the pros and cons of tapping a retirement account to jumpstart a real estate investing career.

We’ll be back to our regular programming next week… but let us know what you think of this format. And if you’ve got 30 seconds to leave us a rating and review in Apple Podcasts, we wouldn’t be mad at that either.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Speaker 1:
This is the BiggerPockets Podcast show 391.

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Speaker 2:
This is similar to the BRRRR method where people think if they don't get out 100% of their money that they didn't do it right. That's not true, that's like saying, "If I didn't get a home run, it was a waste [inaudible 00:00:13]." Doubles, triples, walks, singles, they all are still wins.

Speaker 1:
You’re listening to BiggerPockets radio, simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing, without all the hype you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

Brandon:
What’s going on, everyone? It’s Brandon Turner, host of the BiggerPockets Podcast here for a really unique show with something we’ve never done before with my co-host, Mr. David Greene. What’s up, David?

David:
God bless you, this was an awesome day. I’m actually pretty pumped up, I’m hoping that the listeners like it and we can figure out if we should do it again.

Brandon:
Yeah. So we decided to pull a Dave Ramsey today and do a call in show. And so we kind of finagle [inaudible 00:01:01]I used Instagram to drive people to a Zoom thing or where you recorded people one at a time coming in asking questions. And so these questions very well might be things that you guys are dealing with, things like what to be aware of when doing the BRRRR strategy, should I house hack for my first deal? What do I do if I have 20 grand and no job because of COVID?
Those issues and a lot more are coming up today, everything from people who are just getting started to somebody in this show today, I mean in his first year, he's already done like over two dozen different deals. You're going to learn about what he says is the reason behind that, and just a whole lot more. So you guys are going to love today's show really, really cool I think. And then let us know in the show notes, biggerpockets.com/show391, if you want to ask questions or you want to get a lot more information there you can leave comments. So do that again, biggerpockets.com/show391. And with that, let's get to today's quick tip.

David:
Quick tip.

Brandon:
Your quick tip is very simple. If you have questions like this and we didn’t get to your question today with your specific real estate questions, if only there was a forum that was free to use and you could ask any question like this, anytime you wanted to 24/7 and there’s thousands of people on there willing to give answers. There is, it’s called BiggerPockets Forums so go check them out, biggerpockets.com/forums, you can type your question.
I know forums are like a weird ’90s thing but all it is like Q&A, it’s like you ask questions, you get lots of perspective different answers. So it definitely changed my life, it’s been a huge impact on me and I think it will be for yours as well, biggerpockets.com/forums, that is your quick tip. All right, all right, all right. David Greene, are you ready to let people listen to our live call in show?

David:
Buckle your seat belts, this is high-octane, fast paced, who’s the guy that directed Transformers, Michael Bay? Michael Bay style podcast today.

Brandon:
There you go. All right, without further ado… Oh, I just admitted everybody. Oops, oh boy, we’re brilliant. I just hit the admit everybody button and so there are going to be a ton of people here.

David:
Right after you said you won’t be on the podcast, you’ll just be in the waiting room, you went and brought all of them into the podcast.

Brandon:
All right. How about we’re going to start with this way? We’re going to start with this way. Anybody in this group who’s here right now, anybody buy a real estate deal in the past month or close in on one in the next month? I’m curious. We’ve got Brandon Johnson down at the bottom. Okay, I’ve got a few people, Jared up there. Let me start because the first name I saw was Brandon, I’m going to try to bring you in Brandon Johnson. What’s your story? What have you done recently?

Brandon J.:
So we bought a two-family house from a wholesaler and caught this awesome deal, I live in Cleveland, Ohio. We got it for $30,000, we just renovated it, put tenants in it, rented it out for $1,900 a month. And now we have an offer on it for $118,000 and we only put $25,000 into it, so-

David:
Wow.

Brandon:
Wow.

Brandon J.:
… unfreaking real.

Brandon:
That’s amazing, man, that’s awesome. How did you find that deal?

Brandon J.:
Somebody listed it for sale by owner, it was the wholesaler that listed for sale by owner on like Zillow or something. My partner found it, we were very persistent about getting that contract from too.

Brandon:
Yeah, I bet. How long have you been in real estate for?

Brandon J.:
I’ve been an investor for about five years, just kind of more passively. I work a full time job still and I travel a lot for work so it’s harder, but since COVID kind of hit I stuck at home. So my question is with my current deal that I’ve just made, would you have held onto it and took the $1,900 in rent or sold it for 100% profit?

Brandon:
All right. So give us the quick update on that property again, what you just did?

Brandon J.:
So we bought it for $30,000 in May, we put 25,000 into it so we’re about 55 all in, and we just got an offer on it yesterday for $118,000.

David:
You’re all in for 55, you can sell it for just shy of 120, right?

Brandon J.:
Yep.

David:
And how much would you cashflow if you kept it?

Brandon J.:
It'd be 1,900 because there's no mortgage on it since we paid cash, taxes are about 100 bucks so 1,800 insurance about 75, I guess we're at 1,725. Everything's pretty much new in it so there shouldn't be too much repairs, they can see rate 10% so 180. I'm still over $1,000 cashflow, I mean.

David:
So let’s call it was like 1,300, conservative number. Here’s how I do this, I take 1,300, I multiply it by 12, so in a year you’re going to be making 15,600. And again, these are not exact numbers so don’t worry about that, we’re just talking about the principle. I’m going to divide that by how much equity you have in the deal that you would get if you sold it. So we were at all in for remind me, 55…

Brandon J.:
55, yup.

David:
Right, let’s say that after you sell it all your fees you’re at, you’re going to spend 100 or sorry, 20 grand to be able to get the thing unloaded. So 55 up to 100 is going to be 45,000, so we divide that yearly cashflow by 45,000 and that’s going to give you a 34.6% return on your money. So the question becomes, if I sell it and I take my 45 grand can I get a 34.6 return percent somewhere else? Probably not.
That would lead me towards hold it, refinance it, get some money out that way because your cashflow is super strong. When that number that we’ve looked at becomes small like it’s a 4% return or something, that’s where I say, “Okay, we should sell it and redeploy that money to invest somewhere else.”

Brandon J.:
Okay.

David:
I didn’t even go into the fact that your $45,000 profit on a flip is going to get hit with capital gains taxes, so there’s another expense in there I didn’t mention to you. Brandon, are you going to say something?

Brandon:
Well I was going to say, really to me, I would just come down to goals like if you needed some cash right now and you needed to buy a rental property you wanted the cash, it wouldn’t be a bad time to build to [Worches 00:06:31] right now if that’s the goal. But if the goal is this, “Hey, I want passive income to build it up.” That would be a pretty darn good, I would probably have BRRRR it instead if the goal was just building this all well. So that’s what I would do, but yeah.

Brandon J.:
Yeah. I think I was having trouble finding places to cash out refinance and then maybe I just didn’t put the time in to do it so I need to kind of invest [crosstalk 00:06:49].

David:
His cashflow is so strong without even a loan on it, I mean your return is really good. So I wouldn't be in a huge rush to cash out refinance, keep it, make some money, put it aside when you get the opportunity to cash it out, that makes it a BRRRR. And then you can avoid capital gains and avoid some of the selling costs and go put it in your next deal, especially if you can't get another one like that.

Brandon J.:
Right. All right, thank you guys.

Brandon:
Yeah, thank you. And again, [inaudible 00:07:12]or it’s like it doesn’t matter that you win either way, it’s both good options. So congratulations on that deal though, very, very cool. Brandon, thank you for joining us today and we’re going to bring in another caller here. Okay, Lionel, welcome to the BiggerPockets Podcast. How are you doing, man? Where are you calling from?

Lionel:
I’m calling from Los Angeles.

Brandon:
Los Angeles, California.

Lionel:
Yeah-

Brandon:
Land of [crosstalk 00:07:35], I’m just kidding. That’s a reference to the movie, That Thing You Do! is my favorite movie of all time but anyway…

Lionel:
I love that movie.

Brandon:
I love that movie. Questions, what do you got questions for us today?

Lionel:
I’ve had this goal that I’ve wanted to retire myself doing passive income and retire my wife, we just had our second child. And just from going on the Bigger podcast discussion boards and everything, I ran across some people in Indianapolis and just this year I closed on my first out of state deal with [crosstalk 00:08:05].

Brandon:
Congrats.

Lionel:
Thanks. Yeah. And now I’m at the point where I couldn’t believe that, that happened. I’ve got two other deals sitting on a table, so it’s moving really fast. And I just want to ramp it up to the point where I have a good system in play, but I’m having issues with the cashout refi as well right now, maybe because the whole COVID-19 thing.
But my direction is cashflow, I want to create as much cash flow, passive income for long-term wealth. And I kind of want to follow you guys’ lead. So what do you recommend for someone like me who’s just getting started?

David:
All right. The first question we got to ask is capital. How are you sitting as far as how much capital you have as well as how quickly you can add capital to invest?

Lionel:
So funny enough through you guys as well, I met a really cool hard money lender and we've created a great relationship. So he's funding most of my deals about 75% and he's doing rehabs as well. So as far as capital, I have an IT company and I do cashflow from IT company about eight to 10 grand a month. And my expenses aren't even near that, so most of the money I'm just putting aside like a money market account and stuff like that. And then using that to invest in real estate.

David:
Okay. How much did you say you have right now?

Lionel:
Cash wise?

David:
Yeah.

Lionel:
50, 60,000.

David:
Okay. So there’s enough that you can cover your 25% right?

Lionel:
Yeah.

David:
Now, is your goal to build, you said like passive income so that your wife doesn’t have to work.

Lionel:
Yeah.

David:
All right, are you currently renting or owning the house you live in?

Lionel:
Own.

David:
Owning, okay. Do you love it and you don’t want to live anywhere else or would you be open to moving?

Lionel:
I’m open to moving.

David:
Okay. First thing you do is you can house hack, right? This is every year you could house hack a new house. 10 years later, you'll have 10 properties that you can make as rentals. And you're just looking for something that can generate rental income, it could be a duplex, a triplex, a single family house with a basement that you could live in and rent out the rest of it. But the awesome part about house hacking is you get by with only like 5% down, 10% down, you don't have to put a ton of money in, so you don't even have to BRRRR because you don't need to worry about getting your capital out if you didn't put very many in.
And this is especially helpful if you live in an expensive market. So I'm an agent in the Bay Area, we have a lot of people we help do this because their rent might've been 3,500 bucks. If we dropped that down to coming out of pocket 1200 to 1500, that's a significant savings, that's $2,000 or more that they're saving. It's very hard to go generate $2,000 a month of cashflow. You got to be a super good investor to do that, you can be a mediocre and moderately successful investor and do really good with house hacking because you're just getting rid of an expense that you already have.
So eliminating housing is just the same as cashflow, in fact, it’s better because cashflow is going to get taxed. But getting rid of expense you already have does it. So that’s the first thing I would say to do is put some of that money towards getting a place to house hacking living, and then anything you buy outside of it, that’s where you’re going to be looking at the investing strategies we talked about.

Lionel:
I think that’s awesome. Like I never even thought about that. That actually makes sense. I mean, our idea was, “Okay, we’re going to live here two years and then find a house that we want to live in a little bit longer,” but I’m very open to that because that’s kind of how I got, I actually have a triplex down the street and I bought it FHA, lived in it for a while and I did Airbnb, while we could do it, because you can’t really do it anymore.
And then moved into this place so that’s great, I love that strategy.

David:
And look for houses that other people have missed, that’s the last thing I’ll leave you with. Look for a house that has a floor plan that would be conducive to putting up some drywall, making two units or something that’s already set up where you can like something with an ADU.
A lot of the stuff that you're looking at, if the description says, mother-in-law unit ADU, they're going to go quick. So what we do on my team is we target the houses that other people aren't describing like that. But then there's a bonus room that has it being marketed or it has more square footage than what the agent is saying. You want to look for something like that on the MLS.

Lionel:
I love that. Now I do have a quick question about that, you guys just use like Zillow, Redfin, stuff like that to find your deals or because I’m always curious. Because I get, sometimes people send me stuff and I see it’s different from what I’m finding online, where’s your kind of go to source for that?

David:
Well, I’m an agent so I’m using the MLS. And what I actually do is I have a little cool system set up for our clients where I set up keyword alerts like what BiggerPockets has four words in the confidential remarks that only agency that would lead me to believe this could be a house hack.
So anytime something says like unpermitted square footage, bonus room, extra space, addition, I know to look at those houses first. So they pop up on my little house hack list for my clients and then we go look and we see, “Ooh, they show 1200 square feet on the tax records but that’s an 1800 square foot house.” The agent didn’t market it correctly, we see that they built onto the house, you could easily put up some drywall, run some plumbing from the kitchen right through it. You’ve got another kitchen and now you’ve got a whole separate unit that you could be living in or renting out and boom your house hack in an expensive market.

Lionel:
Okay.

Brandon:
Okay, very cool. Well thank you Lionel for joining us today. That’s awesome.

Lionel:
That’s guys.

Brandon:
Let’s move on and bring in next one on our list here. And we’re just going in order of what they’re showing up on my screen. I think we have, was it Justin Bourne is the next one on my screen here? So let’s see if we can get you in. Are you there, Justin.

Justin:
Yeah, I’m here pretty awesome to be on the show. Thank you.

Brandon:
What’s up man?

Justin:
I actually live in Denver, I moved here three years ago. So I actually haven’t bought a rental property yet, I have the cashflow too and I’ve been looking at houses for about three or four months now and I’ve been looking like a pretty specific area and there’s only been one house that I really felt like I could have made the numbers work. So do you think I need to maybe stretch my search to be in a different area, maybe more outside of Denver that I could cashflow more, or do I just need to be okay with the fact that I’m going to be saving money on rent and then after I moved out in a year I will cashflow on that property.

Brandon:
Yeah, so you want a house hack essentially, right?

Justin:
Absolutely. Yeah. I’m definitely planning on house hacking.

Brandon:
Yeah, so I guess, I mean, David, I’m sure a lot more thoughts on this. But if you’re saving money, you don’t have to live for free in a house hack. If you’re just saving what you would be spending elsewhere, that’s a win for me. And then, so I was analyzed the house hack two ways. When I’m living there, what would it be like to live there? I don’t live there, I live in Maui, Hawaii right now. I bought basically a three unit property, I don’t cashflow right now technically, I spend thousands of dollars a month to live here.
And I probably spend about what I would spend if I were to rent this property out, or if I were to rent the property but I own it, so it’s still worth doing it for me. And then once I move out, I also run the numbers as if, if I’m no longer living here I would probably break even maybe make a little bit, maybe make a thousand bucks a month.
And so for me, buying a property in Maui that is worth it as well because I believe in Maui appreciation. And so I'm willing to play that game, I'm not going to lose money betting on appreciation, but I would play that game a little bit there as well. So yeah, David, what do you think?

David:
This is similar to the BRRRR method where people think if they don't get out 100% of their money that they didn't do it, right? That's not true, that's like saying if I didn't get a home run, it was a wasted at that, doubles, triples walks, singles, they all are still wins.
So the first major fallacy with house setting is that you have to live for free, you don’t. In fact, areas where people live for free tend to be areas where homes are cheaper. So you can go, your rent would normally be 1100 bucks, you can collect 1500 house hacking, right? All you’re really doing is coming ahead, $1,500, whereas if you go to an inexpensive market like mine, like we just put someone under contract yesterday in San Jose where he would normally he have a mortgage of $5,500, instead he’s going to be coming out of pocket about $2,000.
That’s a huge win. He came out ahead $3,500, but he’s not living for free, he’s still way better off. And if you look at that high priced home, he’s paying off a bigger chunk of the principal every year. It’s going to appreciate much more every year when the rents go up next year, instead of coming out 1500 out of pocket or 2000 out of pocket, it’s going to be 300 less than that or more because the rents are going to go up.
So even though he’s not technically living for free, his overall wealth building is going to be way better buying in a more expensive market. So, Denver is one of those markets you’re going to be spending a ton to live somewhere. If you just take out a big chunk of your housing expense, that’s a huge win. And instead of looking at what can I get versus what’s the ideal perfect scenario I like to look at?
What can I get versus what if I do nothing? If it’s better to take action, then go do it. If it’s cheaper than you’re paying right now, then go do it. And then 10 years later, it’s going to look really, really good that you made that move as well as hopefully you do it every year.

Justin:
Absolutely. Okay, and then one other thing. So I was talking to one of my buddies, he’s actually gotten a couple of these home runs that you guys were talking about. And so I guess I was basing my success on his, which obviously I shouldn’t be doing. So his things that he pointed out to me in the tab and like a couple of different exit strategies. So one of the big ones that he was like, if you have like a four or five bedroom house it’s nice to have it in an area or set up to where you could sell it to a family because it gives you that opportunity for that exit strategy.
Should I be focused on that exit strategy as much or should I be like, “You know what, I feel like I can rent this house out for the next 10 or 15 years and feel comfortable with that.”

David:
What do you think, Brandon?

Brandon:
Well, I mean, we talked a lot about exit strategies, right? About you just should have a multiple exit strategies, but if your exit strategy is simply, I’m going to hold it and I’m good for as long as I need to. I always look at that as good enough. Like I’m like, “Hey, as long as I’m good holding it forever, I don’t have to think like 10 years down the road.” I mean, we don’t know what life’s going to be like down then. As long as the cashflow is now, that’s an exit strategy I’m… It’s like I stop right there. What do you think?

David:
I like to look at, I heard an NFL coach one time who had, I don’t remember who the quarterback was, but it was a pretty good quarterback but it wasn’t an awesome quarterback. And they said, “Are you going to draft a quarterback?” And he’s like, “I don’t know. I have to wait and see what other quarterbacks are there. If we find, when we think is better than what we got? Yes. If we don’t, no.” It’s not a hard and fast, this is my plan I’m going to go do it.
And that’s kind of how life works, you may hold, hold, hold. Then at a certain point, you realize, “Man, my rents have not kept up with my appreciation, there’s a lot of equity here. Or I got a chance to go sell this house and turn it into three more and they’re all going to appreciate.” And in which case we would say to sell.
So I try to always look at it like a dynamic constantly evolving thing where you’re looking at all your options and you’re asking yourself, “How do I efficiently deploy my capital?” The awesome thing with real estate is if nothing ever comes up and you just hold it forever, you’re going to win. It’s just, “Am I going to win or am I going to win even bigger?” And that’s the way that I would advise you to go about looking at.

Justin:
Okay. Awesome. I really appreciate it guys.

David:
Yeah. Awesome, Justin.

Brandon:
Thank you.

David:
And by the way, how often do you get called like Jason Bourne instead of just Justin Bourne, Justin?

Justin:
I want to say happened at least once a week and it’s usually doctors or dentists.

Brandon:
That’s funny. Awesome, man. Well, thank you for joining us. And let’s bring in I think Jay Hill. All right Jay, are you there? Do you hear me?

Jay:
Yeah, I’m a long time listener and a first time caller-

Brandon:
Awesome.

Jay:
[crosstalk 00:18:55]traveled with me across the road, many times my son had been telling me to listen to you and I was like, “Oh no, I don’t want to blah, blah, blah,” whatever but anyway, I got hooked.

Brandon:
All right, good.

Jay:
And I engaged my life.

Brandon:
Well, good. Well, thank you.

Jay:
So now I am looking at tax sales and want to know what your thoughts are about those kinds of deals.

Brandon:
Sure.

David:
Tax or tax sales?

Brandon:
Yeah. Tax sale. So I’ll start real quick with I’m not an expert, I’ve never bought a tax sale before. However, I know some people are really, really good at it. So I don’t have the things that I know makes money. I know people are good at it, but you got to really know what you’re doing. I actually went to a tax sale one time, and this person there was like an old grandpa and a young family, he was like older guy, young family, two kids, maybe 20’s, and grandpa was there to buy their grandkids at their house. And so they’d bid on it, they were bidding and they got this house at a tax like auction.
And then afterwards they celebrate and they left. So after that, they got a good deal on, and I think I remember what it was, 30 grand maybe or something like that. So I went and drove by the property, the house didn’t exist anymore, it was tore down and they didn’t know that information when they went there. So grandpa bought their kids a lot and where he thought he bought them actual house. So like those are like the, I would not just like show up at one and just do it but that’s what I know tax sales is about like that. David, anything you want to…?

David:
It's very similar to people that asked me about, "Hey, how do I buy a foreclosure?" Well, if you're trying to buy an REO property, it's just like buying anything else. It's probably on the MLS and agent's going to be marketing it. If you're trying to buy a true foreclosure, you're saying, "I want to go to the courthouse steps and buy a property with cash, which no title insurance and no home inspection and no contingencies and I have no idea what I'm actually buying."
And so you don’t want to go anywhere near that unless you’re very, very experienced like our buddy Aaron Amuchastegui, he hosts the Real Estate Rockstars Podcast. He does this, but it’s all he does. He just goes to auctions, he knows inside and out what he’s doing. I’d feel comfortable that Aaron was telling me which one to buy, but a regular person, it sounds on the outside like this is a good way to get a deal, but you’re walking into something with like no protection at all. You don’t want to, what’s a good analogy for that? Like you’re drinking out of like a pod waters. There’s no way to know what kind of bacteria you could be ingesting if you don’t know what’s in there.
So I would avoid the tax sales until I had been around that world for a long time, and I knew inside and out like if I could describe to someone else, here’s all the things that go wrong, here’s all the ways I prevent it, here’s all the people I’ve talked to that have done this and it told me what to look out for. And you sit like you could write a book on tax sales at that point, I’d be comfortable to go in there and do it. But anything short of that, I would avoid those.

Jay:
So right now the one that I’m looking at is like, literally it’s a duplex that’s maybe four houses away from my house. And the tenant in there now says she has not paid the rent in over two years, I believe. And she believes that the owner has passed away, so I investigate it and I found that it was on the tax sale, that Sheriff’s Sale list. So even with that kind of background, you think that may be a bad idea?

Brandon:
I don’t think it’s a bad idea, it’s just more like, you just know that there are going to be a complications there. And so I would find somebody who’s really good at this stuff and just keep asking, keep asking, just don’t assume it’s going to be easy, assume it’s going to be hard. And then, and go at it with that. I think it can be a great way to get deals, just you have to like, really know what you’re doing to get in there.

Jay:
I actually bought one about a year and a half ago, but I didn’t know it was a tax sale. I bought it from a person who bought it at a tax sale. And then they in turn sold it to me and I thought it’s a duplex. And I thought it, I mean, it was in great condition, even though I had to go in and put money into it. But I realized that I paid substantially more than what they paid at the Sheriff’s Sale.

David:
Yeah. And that’s because they took risk, they were buying something that they didn’t get a lot of the insurance that you got. You got a regular contract, you had contingencies that you could back out, you could take your time. Then you kind of had to go in there and just shoot really quick from the hip and they had to have resources at their disposal that they could use to make sure that they didn’t get burned.

Jay:
Great. Thank you.

Brandon:
Thank you. All right, before we move on, I need to go and fix my screen real quick. Hold on one second, guys.

David:
Kevin, do you want to bring someone in while he’s doing that? And I’ll talk to him.

Female:
Hi. I’m a first time caller, long time listener, I appreciate being called on the show. I am brand new, I’ve been in the learning mode, so I’m interested in finding a fourplex, and then living in one unit. So I don’t really see those, I haven’t met with a realtor, I don’t have access to the MOS, and I’m trying figure out how do I get ins again doing real estate investing?

Brandon:
Yeah, that’s a great question, Dave, you want to start?

David:
Yeah. The first thing you’re going to do is probably go on BiggerPockets, go to network and then click on real estate agents, and it’s going to bring up a list of all the people who have a company profile on BiggerPockets that are agents, there where you have a much higher likelihood that they work with investors. So that’s going to help and then once you…

Female:
I actually heard that yesterday because Brandon mentioned it on the webinar.

Brandon:
Oh yeah.

Female:
On Wednesday. So I sent out a few messages but no one has responded yet, so I am going to go back to see if people responded, I didn’t sign anyone in Florida, a lot of the companies were Atlanta-based. I don’t know if they’re actually here. So I’m being patient because it’s the first one I’m going to do and I don’t want to rush.

David:
Sure. So when you find that agent, they're going to have you get pre-approved with the lender, and then that's going to tell you if you're able to get a loan, how much you can get the loan for. Questions kind of like, how much can I get for a fourplex versus a threeplex versus duplex versus a single family home?
Once you’ve got that, you know what price range you’re in you and your realtor can both get on the market, start looking for stuff, your realtor can go directly on the MLS and send you a list of homes, you can look at that, you can also look at Zillow, realtor Redfin, all those kind of websites, and you can start hunting down fourplexes. And then when you find them, you send them over to the realtor and ask the questions you have about what you want to go see.

Female:
How do I know if I’m looking at a fourplex or a triplex if I’m on Zillow?

Brandon:
Yeah. It'll usually tell you right in the description, they'll say this is a four unit property or three unit property. They'll tell you in the script in almost all the time, but also once you get a real estate agent, like you don't have to even worry about that anymore. Your agent will be able to do that for you. They'll be able to send you here.
And honestly, if you're looking for a fourplex do not look at a triplex, do not look at a duplex, they could be great deals too, like small multi in general. So if I were in your shoes, I'd just tell your agent, find an agent in that town, tell them you're looking for any small multifamily properties and then yeah, go that route and make it work.

Female:
Okay. I’m going to continue listening to you every week because you’re opening the faucet for me in learning the market, so I really appreciate it.

Brandon:
Well, thank you. Appreciate it.

David:
Nice to meet you.

Brandon:
Yeah. Nice to meet you. All right, next I’m going to bring in Garrett. Garrett, welcome to the show, man. How you doing?

Garrett:
Good. How are you?

Brandon:
I’m good. I’m good. Where are you calling from?

Garrett:
Calling from Connecticut, so I just want to say a huge fan of the show and thank you guys both for taking the time out of your day to do this, so that’s pretty cool.

Brandon:
Yeah. Very cool. Thank you. So what can we answer for you today or discuss?

Garrett:
So I have a normal job that I’m a little bit of my background, just did the house hack from you guys didn’t know much about real estate, listen for a while, ended up buying a duplex, so I’m living here for free essentially and then we have another duplex or triplex actually that was supposed to close yesterday but a little delay in that because the whole pandemic. But we’ll be living there for free making money on this place about $500 in cashflow after everything.
I think lot of people would be curious if you guys could talk quickly on what your outtake or view on the current market is. I know things are at a pretty high point and we struggle a little bit with finding “good deal”. Where do you guys see the next year, two years, three years and kind of an outcast financially for the whole real estate market?
I feel like we’re at a pretty high point, but is it going to go up down? Did you guys get some sight onto that?

Brandon:
Yeah, sure. I’ll let me get my crystal ball real quick, I’m just kidding. Oh yeah, I mean, obviously we don’t know, we don’t know. But that said, if I had to take a guess where we’re headed, I think that we’re going to see a decline a little bit 10, 20%, I don’t think it’s going to be like, ’07, ’08, if I had to guess, I think we might see a little bit of a decline. But there’s still a lot of people wanting to buy houses and that’s not in every market. I think David’s market is going to continue doing really well because he’s in California and like tech still doing well.
So I think it’s market dependent of course but I think we’re to see a slight decline, but I think that’s just going to create more opportunity. And if we don’t see one, then it’s okay because I’m just going to keep buying anyway right now, it just means we have to get better, we just can’t rely on the easy deals, we got to get better. But David, would you think?

David:
I think this can be very confusing to measure that because when all things are equal, if prices go up we're in a good market and if prices go down, you're in a bad market, it's very easy to tell. I think that with the amount of money that the fed is creating, prices could stay the same and that would be the same as a bad market because money's being worth less then prices could go up and that could make you think we're in a great economy, but it might actually be the equivalent of a recession.
It’s very difficult to tell if you’re just watching prices themselves. And I was having a talk with someone about how confusing it’s going to be to tell, are we in a good market or a bad market? Because the value of money is so different than what it was. I have a fourplex I bought an antique in California in 2013. And when I bought it, 2013 wasn’t a bad market, it was kind of just starting to take off again after that recession was really hot.
But when I bought it rents for $700 a unit and I just put one on at $1,600 a unit, it’s in seven years, it’s more than doubled and that’s for every single unit. So when I bought it, it looked like a pretty solid deal and now it looks like an absolute grand slam. But is that really as good as it’s looked? Rents have doubled, does that mean I’m a great investor or is money just worth less and then we kind of throw it around a lot more?
I remember as a kid, when we were talking about building wealth, we’d say things like, “Oh, they’re making six figures, they’re crushing it.”

Brandon:
Yeah, that was a huge deal.

David:
Six figures was a big thing and I read an article that said, back when I was a kid, six figures meant your family had two nice cars, you take several vacations a year and you lived in a really nice neighborhood. Now, I mean, every market's different but where I live, six figures is like, you're comfortable, that's it, you're not rolling in the dough, you're not just like throwing money around and that's due to inflation.
So I like to look at things like how much money do I make per month? And then how many months of savings would it take to get a down payment on a median house in my area? And that way, whatever money I’m making is tied to the price of real estate in my own head so I can get a feel for how much money is really worth because it doesn’t have the same inherent value as it did a year ago or two years ago.
So I know that doesn’t answer your question of whether we’re going up or down, I probably made the crystal ball even cloudier. So what I would say is, if you don’t know, you just make sure that you buy deals that cashflow, so that it doesn’t matter if they go up or down and you continue to put yourself in a position of strength from your own personal financial position where you’re living beneath your means, you have plenty of money set aside. So if it gets bad, you’re okay, you’ll go buy more, and if it gets good you’ll have capital to go redeploy.

Garrett:
One big thing that we learned in the last couple of months, and thank you guys both for the insight was, I think we wanted to expand at, we’ll say probably a quicker pace than we should have. And throughout the last three or four months, we realized that how important and critical that reserve pile is for things like this in situations like this. So that was a very humbling experience for us too.

Brandon:
That’s good point, man. Yeah, this is why we need reserves for times like this. And if you happen-

David:
We all got that, got check when the pandemic first game and no one knew what was going to happen. People that had reserves were like, “Ooh, I’m glad they’re there,” and people that didn’t were not feeling very good.

Garrett:
And I’m the new one, the naive one, the innocent one where I thought we could expand at a very rapid pace. And after all this it’s time to slow down a little bit and I think some great deals will be around the corner, but our market here, things are flying like crazy right now, not lasting on the MLS and things like that.

David:
So there you go. I think that’s the case in a lot of markets where the economies weren’t as affected by the shutdown. If the jobs where you live, people kept working, then you’re seeing a really hot economy. If you live in a place where they were affected, then you’re definitely noticing that the slow down like Brandon gave good advice it’s market by market and your economy’s based. So thanks, Garrett. Really good question-

Garrett:
Thank you guys. Have a good weekend. Thank you.

Brandon:
All right, next guest, let’s bring in Michael. Michael, are you there?

Michael:
Yeah.

Brandon:
Welcome to the show. Where are you calling from?

Michael:
I’m in [Chesty 00:31:31] Virginia kind of Southeast Virginia by Virginia Beach.

Brandon:
Okay, very cool. And you got a good book behind you for those watching the YouTube version of this, you can see [crosstalk 00:31:39]. All right.

Michael:
So I’ve been in Asia for like six years and part time investor starting this year, I bought four houses in the last three months and I think three of those would be really good BRRRR deals. But my concern, not we concern but it kind of the unknown for me is have you guys ever had an issue where the tenant in the house made the appraisal not as good as it could have been because the way they care for the houses?

Brandon:
Yes, all right. So this is something when we were talking BRRRR investing that I don’t think people think about enough, like if you’re going to buy a property, fix it up and rehab it and then rent it out. Then after it gets rented that your tenants, they’re living there. So if they make the property look like crap, your appraisal could come in really low. So yes, I have not had anybody really destroyed my appraisal yet but it could easily happen if your tenants make a property look bad.
Like as much as we all like to think appraisers are like doing a good job in telling you the actual value of the property, it’s a complete lie, right? They could be off by like 10% in either direction based on how they feel that day or what they for breakfast or what the tenants…

Michael:
I’ve seen three guys go out in the same month on the same house and come back about 10% off.

Brandon:
Yeah, it’s insane. It’s just an opinion which is why I don’t put a lot of. So I guess that said I would always want to, and I’m just going to add this to my checklist of things to do is before getting the refinance for the BRRRR, make sure I inspect that property, make sure it looks really, really nice. And if not offer to pay for cleaning for whatever I had to do and you can let the tenant know, “Look, I need this thing to appraise high, I need you to help me out here, what’s going to cost?” And I would be willing to pay the tenant to do whatever they need to do to get that going. But yeah, that’s definitely a concern, David, anything on that?

David:
Yeah. I hate to be the BRRRR bad news because no one’s going to like hearing this, but I just got to shoot straight with you. This comes up all the time when I’m a realtor, I negotiate houses really high and then they appraise lower. And so I’ve had to do some soul searching about appraisals in general. Guys, here’s this honest to God truth. Appraisals are there to give you a false sense of confidence about what something is “work”.
Okay, the reason you get three different answers from three different appraisers is that there is a fallacy that they can give you a true indication of value. They’re giving you an opinion based on several different things. And that’s all that it really is. The reality is a house is worth what somebody will pay for it, people that are buying a house, tend to look at what other people sold for their house and say, “Well, if my neighbor sold this, then I’ll pay that largely an ego thing.”
But that's just how the human brain works, they want some form of like context, like where do I fit into this whole scheme? And that's why we use comparable sales. How those are interpreted? It's completely up to the person, three appraisers will give you three different answers. The best thing you can do is let go of this dream that you can get a number from an appraiser that will tell you what your house is worth, if it doesn't exist. It's an opinion.
Now that being said, when you understand how it works, you can make it work in your own advantage. So I have a story, it’s funny that someone was saying when you’re in deep crap, I think you said that Brandon because this story involves a lot of crap. I had a listing and we sold it for a really high price and the appraiser came in and came in low, and I finally got him on the phone and I’m like, “How did you not look at these three comparables?”
And he was actually irritated, the guy was like angry and he had stepped in a pile of dog crap doing the appraisal in the backyard and was so pissed about it. He was like, visibly telling me, like, “Your client even bother picking up the dog crap at his backyard, like his house isn’t worth as much as that one down the street.” And I’m like, “What does that have to do with anything that the neighbor’s house didn’t have a messy yard, it might did, it’s worth less?”
But that’s where he came up with those numbers. And so 100%, yes, the condition of the house is in will affect a human being that is looking at those numbers that will affect the perspective they have when they’re looking at them and it will have a real world impact on your deal.

Michael:
All right. So pre-inspected and offer to pay for a claim for the tenant and we may make some cookies-

David:
That's exactly right. That's exactly right. There's a bigger principle in this. One of the things I tell people like when you get an offer, let's say I'm going to send an offer for one of my clients and I can either write the offer for 500,000 with 20,000 in closing costs or 480,000.
It is the exact same thing to the seller. When they open that offer, the first thing every listing agent goes to is they zoom in on the price and they say, “What are you offering for the house?” And if you see 480, it feels like a punch in the gut and everything you see after that is going through this filter of, “I’m pissed. This sucks. I don’t like it.”
And when you go and talk to your client, that gets conveyed with how you described that offer. When you see 500 and you go, “Ooh, it’s full ask.” And then later on you see $20,000 in closing cost credit. You’re like, “Ugh, that’s not great, but hey, this is a great offer.” And then that gets conveyed to the client. So I take advantage of that aspect of human nature that I just accept rather than getting angry about it.
And I write my offers in a way that will look really good to the agent who gets it, give them a really good filter to view the rest of it from and then call them on the phone and give a really good impression. If you just understand, that’s how human beings work, it makes your job easier when it comes to investing.

Michael:
Right. Awesome.

David:
Thank you, Michael.

Michael:
Thanks, dudes.

Brandon:
Yeah. Thank you for for jumping in today and we’re going to move on and bring in, this time we’re going to try Jenna.

Jenna:
How’s it going guys?

David:
Hi, Jenna.

Jenna:
Hey, guys.

Brandon:
It’s all right, I’m 35 now, so I feel old, but other than that, we’re good.

Jenna:
You look great.

Brandon:
Thank you. Thank you. What can we help you today?

Jenna:
Okay. Here’s my question. We have been investors for quite a while and we’re buying our first, we’re under contract on our first 16 unit apartment complex. I’m really big on like passive income, longterm holds, I want to keep them forever. My husband has the same perspective but his idea with this building is to raise rents, hold it for a couple years, do some capital improvements and sell it in a couple of years. So I’m just wondering, what do you guys think?

Brandon:
Oh, great question. For me, it’s going to come down to, the good thing is you can change at any point, like you could change next week, you could change like whatever. So that’s a good thing is like real estate gives you that ability. If you get a long-term mortgage you can, at any point you’re like, “I’ve had it. We both have had enough.” That said, like, I think it comes a lot down to a return on equity question. I know David, you were probably going to go here is like, if you hold something forever, you typically start building up massive amounts of equity but your cashflow is not growing at the same rate your equity is, which means you’re getting a lower return on what you could do.
So I would just analyze it every single year and just be like, “Hey, am I getting the best? Can I sell this make 400 grand, put that money into something that makes a higher return and double my cashflow?” Because now you’re shooting both your guys’ needs, you care about the passive income and cashflow and he cares more about like getting it fixed up and moving on.
The most amount of wealth you’re going to likely get to make on a property or a big chunk of it isn’t that first year, when you buy a property undervalue and somehow bring it up to a new value. So I like to be able to redo that ever so often, so I just keep jumping instead of like growing wealth this way, you grow by stairstepping. You all heard it here first, we’re making a new thing it’s called the stairstep method and you stair step it up.

Jenna:
I think [inaudible 00:38:43]in the ’80s actually.

Brandon:
They might have.

Jenna:
No, okay. So on that then what would you, if you’re analyzing it every year at first upfront, how do you decide, “Okay, I’m going to do this or that in terms of capital improvements,” but maybe not that because we might not keep it. How would you go about making those decisions?

Brandon:
Good question, David, you want to start with that one?

David:
Yeah, you’re asking, how do we decide which capital improvements to make if we don’t know if we’re going to keep it or sell it?

Jenna:
Yeah.

David:
Because you don’t want to put money into it, then you’re going to sell it?

Jenna:
Right. Or some, but maybe not as much as you would.

David:
Yes, you probably put, if you don’t know if you’re going to sell it or not, the only improvements you make would be the kind that wouldn’t affect the sale price, so mostly cosmetic stuff. You’re going to get a little bit more rent and you are going to get more sale. Once you know, I’m going to keep this thing for a long time, that’s when I put more money into the roof and maybe upgrading the electrical, the foundation. Some of the stuff that makes it a better investment for you but isn’t going to translate to sponsor the open market.

Jenna:
Cool. Spot on.

Brandon:
Very cool. Well, Jenna, thank you for joining us today. Next, we’re going to bring in, but I’ll happily go Justin Taylor, Justin, you’ve been here a little while. Justin, welcome to the podcast.

Justin:
How you doing, man?

Brandon:
Where are you calling from?

Justin:
Jonesboro, Arkansas, I've been in Louisiana the last my entire life, I actually moved up here, it's crazy. I moved up here and I met a wholesaler and we started a wholesaling company back in August and picked up about 20 flips and wholesale 15 deals, but it's crazy because back in May, I was graduating with a pre-med degree, but I don't know…

Brandon:
A year ago, you are pre-med, graduating pre-med. Then you just decided to start a wholesale company, you’ve done how many deal since then?

Justin:
We’ve had 20 flips and 15 wholesale deals since then.

Brandon:
20 flips and 15 wholesale deals in the first year?

Justin:
And I’ll pick up one flip personally and a duplex actually house hack in it. And honestly that’s kind of the main reason I was hoping I could speak today, because one of the things that like I got into this was, I don’t think I’ve missed a single one of your podcasts and I’ve read probably every book they had out there and it’s cool because like there’s such an overload of information y’all provide, but at the same time, it’s like I got that analysis paralysis and it’s like, “Where do I begin?”
And the thing I really want to speak on was like, “Man, that change that got me into it was when I really started focusing internally,” I feel like your mindset is what’s really going to change you and get you into it because a lot of that people get scared and they get overloaded and it’s like, “Man, just learn 70% of it, learn the rest on the way.” And just stuff like that. And I know you actually spoke on a podcast like that, you had mentioned, you said, “Man, this podcast is going to be a little different. I’m not going to speak on real estate, we’re going to focus a little more on mindset. I don’t remember which one that was. But I think that’s my biggest advice is just from what I’ve learned is like that mindset, like where are you mentally?”

Brandon:
Yeah, it is so much of a mental game, I have a performance coach that he tells me all the time, like you’re going to expand to the level at which you’re like, “Mine can allow the expansion.” If you’re mentally there, like you’ll do it. You don’t have to know everything 100% like you said, learn a bunch of you can and then at some point, just jump in.
Man, it’s not like the best at like, for those people who are in your shoes a year ago saying, “I’m just starting this thing,” what’s like any other final advice I mean, you’d get people for getting their first year just launching like you did?

Justin:
I actually wrote down a quote right here, it was like set up systems, help ordinary people achieve greatness. And I think what's so important about that is like your daily routine and your mornings and your systems throughout the day. For instance, I get up, I get up at 4:30, I go to the gym and I read for about 45 minutes and then I start my day by 8:00.
And it’s like, I mean, you don’t have to get up at 4:30, that’s just what works for me. And to me, it’s just that little bit you put in every day, like it’s going to be crazy where that leads you to, for about the last year in my life, I’m pretty disappointed that, and the guy I’m with made me COO of his company and he’s running that CEO position. And I don’t know, I just feel blessed and it’s cool because a lot of that is started with when I was listening to all your podcasts and I don’t know it’s just awesome.

Brandon:
That’s awesome, man. Well, thank you for sharing that, very, very cool.

David:
And then I want to point out to everybody else. If you just heard him say that and you realize he’s probably making more money than a doctor would be without all the student debt, without the eight years of time he has away, in the new book I’m writing for BiggerPockets actually point out this, most people in America would say, “Heck yeah, I’d be a doctor if you gave me the shot.”
But real estate investors, real estate agents and real estate people can make much more money than doctors without the lifestyle. The reason is his mindset allows Justin to do the thing that none of us want to do. Wholesalers are out there, boots on the ground, facing rejection, getting told no, creatively trying to solve problems, having upset people yell at them in order to find that golden nugget that everybody wants. That’s why they do so good.
So if what he’s saying is absolutely right, the reason Justin can excel and succeed in that world is he has a mindset that allows him to do whatever has to be done. So before people get upset and say, “Well, why are wholesalers making so much money?” Because they’re doing what you want, they’re calling the angry people, they’re cold calling, they’re knocking on doors. They’re spending money up front to get leads coming in, they’re doing it for six to nine months at a time before they get that opportunity.
And if you to get your mindset to the point that you’re willing to do whatever it takes, you could have the same success, a guy like Justin has. So thanks for sharing that, Justin, very inspirational.

Justin:
I appreciate it. Thank you.

Brandon:
All right, so we are one hour into this recording here, roughly. Now, we’re going to move into what we call the, we’ll call it a lightning round, a fire round. Which basically just means we’re going to try to get more people in, in a little shorter period of time. So if you guys got a question, those people who are here right now, if you got a question ready, we’ll bring you in. We’ll talk about it, but we’re going to attempt to get more people fit in the next time. So let’s go next. Let’s go, Justin. I’m going to bring Justin in with the white hat, Justin, welcome to the show.

Justin:
Yeah.

Brandon:
How you doing, man?

Justin:
Hey, good to see you guys. Long time listener. First time, caller, reading the good books, all that good stuff.

Brandon:
And everyone’s really BRRRR, everybody keeps talking about BRRRR.

Justin:
Yeah, [crosstalk 00:44:43]. Hey man, I've got a quick question. My lease I rent right now currently, and my lease goes up and at the end of the year, like in December. My goal is when my current lease goes up, I either want to house hack with like an FHA loan for a duplex or tri or quad, or be set on a house to BRRRR.
My question is I don’t have a ton saved up, I’ve got like, well, by the end of the year, so probably have about 15,000 set aside in a savings account. And then I actually had the coronavirus, I’m totally fine, totally good. But that actually allows me to pull out everything from my retirement with no penalty right now if I want to do that.
I’ve got about, well, by the end of the year, I should have about 15,000 in there. So question one is, should I pull that money out of retirement? And two, any suggestion if I should go house hack former?

Brandon:
All right. So pulling out of retirement, like whether you tax, penalty for you or not is always a tough thing. I generally lean toward, I’m okay pulling money out of retirement but I prefer not to do it on the first deal. I would rather find a way to do it with the first deal without if possible, because you want to make sure that the money you were… Because people don’t always make a lot of money in their first deal, so it kind of sucked. Now, if it’s your only way, I would still say that’s better than not doing anything at all.
That said like, I like retirement accounts because they kind of serve as a backup plan, so to speak, like it’s there no matter what. My opinion is I would try to do the first day without pulling the retirement account, try to find another way to do it again, like finding a house hack where you can put three and a half percent down and not do the pull that money, would be an ideal.
And yeah, I think I would aim for a house hack before BRRRR, what do you think David?

David:
Yes. House hack before BRRRR simply because it’s going to be less risky, and without us having enough time to dive into this during the lightning round, we’d be really hesitant to tell you to pull money out of our retirement, which your first couple of deals or first deals often like a loss you’re learning. You don’t want to use your retirement for your education in real estate.
So find some other way to raise that money, see if there’s even like government grants that you can use to buy a house hack, that’d be much better to get your feet wet with. And once you have a reasonable level of security, then we can say [inaudible 00:47:04].

Justin:
Okay. Awesome. Thanks guys.

Brandon:
Thank you, Justin. All right, William Hood, welcome to the BiggerPockets podcast. Welcome.

William:
All right. So I’m actually from the same place that Henry Washington’s from, he was on your podcast not too long ago.

Brandon:
Yeah, he’s awesome.

William:
22 years old.

Brandon:
Where was that? Remind me. Where was Henry at?

William:
Northwest, Arkansas.

Brandon:
Okay, that’s right. That’s right.

William:
Yeah. I'm 22 years old and the biggest issue was starting off in real estate was having banks take serious. So me and my wife, we got married in December, we started the LLC in February, they're straight in and closing on our first deal this month actually.
And got it for 80,000 appraise, appraisal coming around 115, 145. My question is, how can I, after we get this still done and it goes exactly as planned, not going to use that first house, the best way to leverage to two more deals?

Brandon:
Are you going to live in the house? Is that for your like primary?

William:
No, I’m in my primary house right now. We have another house.

Brandon:
Yeah. You David, you want to start with that one?

David:
Yeah, I think I was going the same way as Brandon, if you're living in it, you could have taken out a HELOC on it, got access since you got so much equity and roll that over into that next one. Do you have an equity in your primary to do what you lock?

Brandon:
I think I have 25,000, so probably not.

David:
Probably not a ton there. I would probably look at just buying another house hack to get from your primary into something else, which now gives you the ability to cut down your expenses on where you are right now. If you can get another deal like the one you just found, get into it and access the equity through a home equity line of credit, that'd be an easy way.
The other one would just be, you’d have to leverage it a lot more, pull more money out than you put in like the BRRRR method. So if you could go get a loan on it for 120 or something like that, you’d probably walk away with 30 to $40,000, which you could use on the next property. Just have to make sure it cashflows if you do that.

Brandon:
Yeah, I was going to say that basically that same thing, as you could just go in, like, if you can get the thing to price for 150, and you can go get 75% loan devalue loan on it, you probably even get 80% from a local bank there. You could pull out 120 grand pay off the 80. Now you got 40K and just go and use that split in half, you got 20K for two different properties, buy them for 100K each 20% down, there’s your two deals.
Of course you got to get the bank to be able to prove it, you got to have the right loan to value, but that’s probably the route I would take.

William:
Gotcha. All right. Well, those are my question.

David:
Congrats and you may have a hard time getting banks to take you serious at 22, but they’ll always take that debt to income ratio serious. So keep living fiscally responsible and you’ll be able to keep getting financing.

William:
Thanks guys.

Brandon:
Thank you, William. All right, we’re going to go. Next to Jeremy Dubois, Dubois. I don’t know, a guy with a better beard than me. Welcome to the show.

Jeremy:
Hey, thanks for having me guys. So my question is actually a little bit different. First of all, I just want to say thank you to you guys for changing my life. I’m now officially financially free, I get to work because I love it and change people’s lives. So it’s really, really cool. And that’s literally because of two years ago, I started listening to a podcast and that happened to be you guys.
So congrats on that for changing many people’s lives. The question that I have is not directly real estate related because I’m already at that point. So I’m into a phase now in life where I want to kind of better myself and just be a better human and be more well-rounded. But what podcasts do you guys listen to? Or what do you read as far as living in a more well-rounded life?

Brandon:
Oh, that’s great.

David:
Brandon’s going to give you [crosstalk 00:50:39]. Go ahead, Brandon.

Brandon:
I hadn't actually thought of that until you said it, but I do love the book Life and Air. It's like millionaire but with the real life. I listened to for example Brendon Burchard has a podcast, he had several different ones over the years. I can't remember what the newest one's called, but it's basically… I think it's called the Brendon Show. So Brendon Burchard is kind of a personal development guru, kind of like Tony Robbins.
I listened to Brendon a fair amount. The book called the Wealthy Gardner, which is pretty fantastic. MJ DeMarco’s Unscripted is really, really good. Yeah, really, like there’s like those different areas of your life. I think I called it once like the five asks’ like your family, your finances, your fitness, your faith and your something else I’m missing in there.
So I try to just like always be looking at like the biggest thing for me is that always be like, trying to figure out am I level across all of them? And like, this is one thing, the book, the one thing talks a lot about it. Sometimes you go out of whack and one of them, but you just can’t let them go out of whack for too long. So I’m just always trying to think like, “Where do I need help?” Like right now I have a company, we’ve been doing for like a year and a half and I called My Body Tutor, because I felt like I needed to lose some weight. So I focused on that pretty intently and then it’s like, I want to build a real estate business stuff.
So I focused on a lot of like the bigger real estate stuff, and that’s what I kind of focus on. What about you David?

David:
I got two things. There’s a podcast called the Essential 11 by my buddy Matt Boudreau, he’s involved in the Acting Academy Education System that I probably can’t describe that here. But it basically is trying to teach kids entrepreneurial skills that will help them succeed in today’s environment as opposed to just sit in the same chair, raise your hand, answer a question that was designed to help you succeed in the industrial revolution type of environment.
He does a really good podcast where he interviews different people and ask some questions about how you became a successful entrepreneur and a lot of it has to do with personal development. So that’s one thing that I really like and then I’ve embraced the philosophy that I’ve coined myself called The Barrel of Monkeys. And do you remember those toys with those little red monkeys where they [crosstalk 00:52:33].

Jeremy:
I know precisely what you’re talking about.

David:
Yeah. So what I’ve tried to do in my life is I always have people that are ahead of me where I’m trying to go and I’m looking up to them and that helps me stay humble, no matter how successful I am, I’m seeing people more successful than me and I’m watching how they do, what they do and I’m taking pieces of advice that I’d come underneath their mentorship. And when they give me constructive criticism or even non-constructive criticism, I take it.
And then I also make sure there’s people beneath me, so to speak, that I’m mentoring to them. I’m helping give them a hand up. And as long as I’ve got one hand up and one hand down, I never get a big ego because I’m only dealing with people beneath me and I never get to self-centered to what I’m always taking from other people.
I’m taking what I learned and I become a conduit that passes that down-

Jeremy:
Pass it down.

David:
… to other people. And then you always like, if you think about a pipe that is it can’t generate heat on its own but if it’s full of hot water all the time, it gets to enjoy the benefit of hot water as the heat transfers to the pipe. So I look at all the things I want in life, whether you call that love, wisdom, success, friendship. And I made sure that I’m a conduit of that for other people.
So like Brandon and I are in a group called The Abundance, well, a lot of people don’t have access to a group like that. So I take those philosophies and I pass them through things like this to people who wouldn’t have it. And then I get to experience their joy, their excitement, their success, all this stuff that I did before. And at the same time I get access to people that are doing things that I wouldn’t have even thought to do.

Jeremy:
I love that answer again. It’s David Greene analogy, what a surprise.

Brandon:
It is. Surprise. Surprise.

Jeremy:
Thank you guys so much.

Brandon:
Well, Jeremy, thank you for joining us today, we’re going to bring in next, Fi Levon. What’s up Chris?

Chris:
I can see you guys. Brandon and David, thank you so much.

Brandon:
You too. Another guy with another epic beard. I love it.

Chris:
Oh yeah, I’ve been working on this for four months-

Brandon:
There you go.

Chris:
… and it’s full time to working for a little bit now.

Brandon:
There you go. How can we help you?

Chris:
Weird scenario. I bought my first rental property three years ago and one of the objectives was to remove PMI because I'm on it conventionally 30-year, 15% down, turns out in appraised 50,000 more than I thought it would, which was great. So I saved 30 bucks a month removing PMI. Now I'm in a new quandary and I'm trying to figure out which would be the most valuable way to refi this thing and pull some of that equity out. And my options, I think, obviously I could sell it, which I'm not trying to do because I'm a buy and hold investor.
I can take a HELOC somehow off the top, which might be a little bit tough because the percentage isn’t quite there. And then I could also refinance it in my name again, or refinance it into my commercial LLC bank. So between the last two refi in my name, cash out refi, or commercial, which would you pick between those two?

Brandon:
So you got some equity in a rental property. You want to pull out some of the equity, so that avenue is what’s the best refinance method. There’s one you didn’t mention that I would definitely look into is you can do a HELOC as a first mortgage and just pay off the entire mortgage with all of HELOC.
So that’s something to look into, I had some, I have not personally done but I know a number of investors who have and have found success. It’s typically a small local community bank that will do that, but the benefit is you can go up to 90% of the loan to value with no PMI required and no closing costs as well. Now, the downside is you may have adjustable rate mortgage but usually they cap out at like 11% or 12% and they can only go up so much anyway.
And so it might not be actually a bad thing to look into that. So I would at least look into that. And if not, I’d go to the security of a brand new 30 year, 70%, LTV refinance like 70, 80% LTV, refinance and tried to just completely redo the whole loan. But David, what do you think?

David:
You always want to look at the cheapest loan you can get first and see if you can, which a HELOC is almost always the cheapest option. Then it would be like a rate and term or a cashout refi over an advertised period of time, like a 30-year fixed rate. And then if that doesn’t work in adjustable rate market. And if that doesn’t work portfolio loan, if that doesn’t work a commercial loan. So I don’t know enough of the specifics of your deal to tell you which one to do, but you should start with that progression, exactly what Brandon said.
And then if you get all the way to the end, the only one that you can do is a commercial loan, that’s kind of where I am with a lot of ideals, then you just find a way to make that work. But you start with the most efficient, cheap loan you could possibly get and use all those up before you get into the commercial stuff.

Chris:
Okay, cool. I like that approach. I was thinking portfolio, maybe stacking them up, that would be the longterm goal, but I don’t want to kill my cashflow either. So I appreciate the help and thank you guys. I’ve been a long time, lurker, listener and looking forward to the next BP con. I got to see you guys up in Nashville.

David:
Yeah, we want to do that again.

Brandon:
I know I was really bummed out that they had to postpone this year because of COVID, but we’ll make it happen then, and we’ll hang out in person again. Well, thank you Chris.

Chris:
Appreciate it.

Brandon:
Appreciate it. All right. Let’s bring in Johnny. All right, Johnny, welcome.

Johnny:
Hey, thanks for having me. I’m so excited to be here.

Brandon:
Yeah, where are you at?

Johnny:
I am in the Western suburbs of Chicago.

Brandon:
Okay. All right. So in the Midwest, I’m a Midwesterner myself, Midwesterner, what do we call that? We’ll call it that. So what can we help you with?

Johnny:
So, I mean I am a casualty of this whole COVID thing, I lost my job with everything going on. So if you were going to start at ground zero and you had like, let’s say 20 grand to invest and wanted to take more of a real estate path, what would you take?
And to give you a little background there. I started investing last year, so we own two properties and five doors, so we’ve got some cashflow coming in from there.

Brandon:
So and you currently don’t have a job right now, Johnny, right? Because you just lost it, right?

Johnny:
No job right now. Just using the time to improve the current rental properties that we have and actually like renovating our entire house, so I just finished with the basement and moving my way up.

Brandon:
Yeah, okay. So, the couple options here I’ll throw at you. Number one is just kind of based on your personality and what you’re interested in. Number one, if you’ve got some savings right now, 20 grand is enough to live for a while probably if you had to. Where I would pursue because it’s hard to get a loan without a job, it’s going to be hard to do full time real estate.
So I would either A find a partner, I tell the story a lot on the podcast about Greg my partner in Maui, who we flip houses together, I put the money and he does the work. He just hustles like crazy and he’s really good at it. You’ve got experience which is great, you could probably find people with money to fund your deals, whether you do some flips and then start buying some rentals with the proceeds. And you could start because you have to have income coming in somehow, you can’t just live off cashflow right now because you don’t have enough cashflow coming in to live off forever, it’s going to take a number of properties to get there.
So how you can get money, either option A, start flipping houses with a partner funding your deal, that way you have the security of not having to… because they got the money and the ability to get the mortgages and all that. If you couldn't sell a property at the market crashes, you could refinance it because you have this partner who would get a mortgage.
And then I would just start flipping houses for money and then using that as my job, so to speak, to be able to get back into normal life and you never have to have a job again. And the alternative is go get yourself a new job like as quickly as you can and just keep doing what you’re already doing with the buying rentals, saving money. But man, right now, I think it’d be an interesting time to try to find that partner and flip houses to make money.

Johnny:
I love that you said that as an option, I’m actually closing on a house next week, that I partnered with somebody on [crosstalk 00:59:50]have an option to either flip it or [crosstalk 00:59:53]the rental. And then I have another house that I’m under contract for from a partner that I met with BiggerPockets at the end of August.

Brandon:
That’s awesome. Yeah. So you’re already on that point, I think you’re doing exactly what you should be doing there, but David, what do you think?

David:
Yeah, I think that the traditional methods only work if you can get financing, a lot of investing in real estate is dependent on getting a loan so that you only have to come up with a down payment. So if that part’s gone, you almost have to take a business approach. Okay, well, I’m going to start some kind of real estate enterprise your business with $20,000.
I got to go find partners and I got to play a role in this business to turn that into more money, so that’s the road, I would take a photo shoot.

Johnny:
Okay. Awesome. One other thing, I’ll be traveling for like the month of August, we bought a motor home when I lost my job because we wanted to do some traveling. What areas across the country would you guys say to list, look at investment properties?

Brandon:
For the fun of driving I was going to say South Dakota, I love it. But like RV and through South Dakota is the best thing for rental properties. Ah, man, I mean like every area works right, but if it were me, if I was going to go out and look around, I go Southeast America. So Georgia, Carolinas, Florida, that whole area, Louisiana even down and maybe in Texas a little bit. That’s where I’d focus [inaudible 01:01:08]especially if you’re trying to find like a, I don’t know, apartment complex or something like in one big shot, I like that area a lot.

Johnny:
Yep. I agree 100%. Okay, cool.

Brandon:
Thank you very much. Appreciate you being here and yeah, go get them, go get your 10 deals and come on the BiggerPockets podcast and tell us about it on a whole episode. So go do it.

Johnny:
Go guys.

Brandon:
All righty. Well, and that was our show. That was fun.

David:
That was really fun.

Brandon:
Yeah, we should have [crosstalk 01:01:34].

David:
I want to know what the listeners side. Where’s the best place for them to give us their feedback?

Brandon:
Probably show notes.

David:
And you can go on our Instagrams and you can probably comment there, but yeah, it would be nice if we could see it in the show. Did you guys like it? Do you not like it? Did you get something out of it? How often would you like to see this? We’re doing everything we can to make this as fun as possible for you.

Brandon:
We will tell you this again in the future for those you know, if you have not yet left a rating or review on the BiggerPockets Podcast on iTunes or Stitcher or whatever, go leave us a rating and review it really helps us reach more people. And make sure you are not just listening but you’re doing something. So join BiggerPockets today, free membership to join. And if you want to take it to the next level, we also have a pro membership, you can also do that and learn more about that on BiggerPockets.
So with that said, thank you so much. I hope you guys have a fantastic day. David Greene, you want to take us out here?

David:
Yeah. This is David Greene for Brandon Lightning Round Turner signing up.

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In This Episode We Cover:

  • Advice for a caller who wants to house hack a fourplex
  • Deciding whether to flip or hold a house as a rental
  • The “R” step of the “BRRRR” method
  • A common way for an appraisal to go bad
  • A caller who went from pre-med student to big-time real estate wholesaler
  • Whether a rookie investor should use retirement funds to buy a rental
  • Whether investing in tax liens is a good place to start
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

BP Nation:

Connect with David and Brandon:

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
Read more
    Nolan Napier New to Real Estate from Florence, AL
    Replied 2 months ago
    I really enjoyed this format with the live q&a and would love for this to become a somewhat regular format. Keep up the good work, guys! 🙂
    Ryan Alexander
    Replied 2 months ago
    Loved this show guys! It was refreshing to hear good questions from folks who may not have it all figured out just yet. I’d recommend more of this format...maybe once a month? Keep up the great content!
    Cole Horner New to Real Estate from Blackhawk County, Iowa
    Replied 2 months ago
    I really liked this show! I was captivated the whole time, couldn't stop watching! Seeing the different people at different places in their investing lives was awesome. There was advice for everyone in this podcast! I would definitely like to see more of this style of podcast.
    Shaun McNally New to Real Estate
    Replied 2 months ago
    I liked the format and I would enjoy seeing this once a month! Maybe rotate through topics that people will focus their questions on so the show will have a theme.
    Mandy Cohen from Sonoma, California
    Replied 2 months ago
    I would like to respond to Justin’s question as to whether he should pull money out of his retirement plan to invest in real estate. My suggestion is NO. Once funds have been put into your retirement plan, you should treat as if you have given birth to a baby. You can’t take it back. It is your job to feed, shelter and grow that baby Retirement for the rest of its life. Ok, my analogy might be a little over the top, but growing and protecting that Retirement account is really a good strategy. Whether it’s a traditional IRA, Roth IRA or 401K Plan, we don’t know for sure that the government will continue with these in the future. Once you miss your opportunity to put your funds in for the year, you don’t get a second chance to do it. People who “borrow” the funds from their retirement plan, often never return it and it becomes a taxable event. Having alternative ways of creating wealth is essential. For young people, this is a great time to be funding a Roth IRA or other retirement plan. Just put it in your budget every month and don’t take it out. Of course, I love real estate. It is a great tax-efficient way to create wealth and you can do it without dipping into your retirement plan. Don’t think “Either Or”, think “Both”.
    Kevin Leahy Rental Property Investor from Washington, DC
    Replied 2 months ago
    Thanks for the feedback, everyone! We will work in more shows like this in the near future.
    Kenneth Chen from Jersey City, NJ
    Replied 2 months ago
    Wow. High concentrate rapid fire tips from the masters. Like real estate 'espresso.' Impressed by how quickly you can coach and answer with both intuition and step by step strategy. Thank You, Questions + Answers could be a podcast on it's own, can you clone yourselves?
    Melodee Lucido Real Estate Investor from Arizona Idaho, Memphis
    Replied 2 months ago
    I really enjoyed this format! It is worth a 2nd listen because it went by fast! Thanks as always :-)
    Matt Carozza New to Real Estate from Richmond, VA
    Replied 2 months ago
    This was great guys! It was like a bunch of episodes of the Real Estate Rookie podcast rolled up into one. Very entertaining and easy to digest, it would be awesome to see more of these pop up. As someone looking into BRRRR vs flipping, and house hacking vs a 203k rehab, it was cool getting to hear questions and advice on a few of those strategies.
    Dillon Dale Rental Property Investor from St. Paul, MN
    Replied 2 months ago
    David, could you elaborate on why you would choose a HELOC before a rate and term or cash out refinance?
    John S. Rental Property Investor from Illinois
    Replied 2 months ago
    Thanks again for the oppertunity to be on the show guys! If anyone happens to be interested in partnering on some deals, feel free to reach me on here! -Johnny
    Ryan Veatch Investor from Meridian, ID
    Replied 2 months ago
    I think periodic episodes like this are extremely valuable to your listeners like me. The show is like a classroom with each episode being the lesson for the week. Episodes like this are similar to letting the students raise their hands and ask questions for themselves and their peers - and letting the students ask questions is always more conducive to the learning.
    Charlie Corn Real Estate Broker from Clovis, NM
    Replied 2 months ago
    Love the format of this show. I like the quick question and the quick solution. It's nice to hear differing opinions as well, as each of you approach the questions differently. The best thing about this format is you get very concentrated information. Do some more like this, please!
    Ryan Howell Rental Property Investor from Hendersonville, NC
    Replied about 2 months ago
    I'm running a week behind on my podcasts and need to get caught up! I'd been hoping you guys would try this format! Can't wait to hear it.
    Charles Hayzer Investor from Jackson, NJ
    Replied about 2 months ago
    wow this was really great! thanks
    Julie Marquez Investor from Seattle, WA
    Replied about 2 months ago
    I liked this show but when it initially started playing in my earbud I was disappointed. I really wanted to hear a long story of someone's real estate journey, not just popcorn around. Maybe it's just because I'm used to a certain format and that's what I was expecting to listen to on that Thursday morning walk. I remember long, detailed stories better and really wanted to dive deeper in to each person's life. I didn't hate it, I just like the other way better (call me old and stuck in my ways, lol).