BiggerPockets Real Estate Podcast

BiggerPockets Podcast 428: Using Simple Conversations to Get Deals Others Can’t with Investor Rodney Ross

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Rodney Ross didn’t have the most gracious entrance to the real estate space. He bought a house while in college, with only $8,000 down and not a lot in the bank. The house ended up getting de-authorized for tenants to live in so Rodney had to go back on his loan. Game over right? Time to give up? Not for Rodney!

While finishing college, Rodney decided to take it a bit slower, getting his real estate agent license so he could build up the capital to buy rentals. He's been an agent, a wholesaler, a general contractor, and a buy and hold investor. If it's happening in real estate, Rodney probably knows about it!

Unlike many new (and even experienced) real estate investors, Rodney took the time to nurture leads, have meaningful conversations with sellers and buyers, and found that by having some basic empathy for the other party, you’re more likely to close deals.

This strategy seemed to have worked, in a decade since his first deal, Rodney now has around 20 cash flowing units, and he’s looking for more!

Using the 203k loan, Rodney has been able to get homes at a discount, finance the repairs, and get them rented and refinanced, kind of like a speciality BRRRR. This episode proves that if you care about real estate, care about your partners, and are willing to take risks, it will truly pay off.

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Listen to the Podcast Here

Read the Transcript Here

Brandon:
This is the BiggerPockets Podcast, show 428.

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Rodney:
They said, “Hey, I just want to let you know, we got your offer rates”. And by the way, no proof of funds, no nothing. Like “We got your offer for 18, we’ve met this other guy who is a cash buyer. And he was like, all 50 places in the area, he offered us money.” And I was like, “Okay. Well that’s it”. About to hang up, she’s like, “Wait, we’re going to go with yours.” I was like, “Why would you go with mine?” Like, “Well, we like you better.”

Speaker 3:
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. And I got one thing to say to you, my co-host Mr. David Greene, merry Christmas buddy. Merry Christmas.

David:
Merry Christmas to you as well, Brandon Turner.

Brandon:
How’ve you been?

David:
You look a slim, fit, young Santa Claus.

Brandon:
Wow, thank you. That’s actually what I’ve been going for. I’ve actually been watching a ton of the Grinch for the whole Christmas season here, the last two and a half months. I’ve been watching the newer version of the Grinch, not the Jim Carrey one, the newer one, because Rosie loves it. And sorry to say I’m like the Grinch, because he’s fairly thin, but he’s not all the way in shape. And he’s got a nasty looking beard, but it’s okay, whatever.

David:
And he loves green and so do you.

Brandon:
I actually don’t green at all.

David:
Well, you got to pretend to when you’re doing this Podcast.

Brandon:
Okay, I love green and I love Christmas. Actually, we got a tree up two months ago because we’re like, this has been a rough year, let’s have a longer holiday season. So we put it up before Thanksgiving.

David:
There you go. I’m sure the kids didn’t mind that.

Brandon:
Yeah. This actually leads into today’s quick tip.

David:
Quick tip.

Brandon:
Here’s my quick tip for you. You can choose what you want to be excited and happy about. You don’t have to rely… And it sounds super, I know, esoteric or whatever, but listen up. You get to choose what you want to be excited about and what you want to be excited for in the future. And so in other words, if you’re like… Like early this year I’m like, “I’m going to choose to just be super excited about Christmas and be all in, rather than being grumpy about it”. So I’m not quite the Grinch. You can do the same thing, choose what you want to be excited about, what you want to choose to be enthusiastic about and then be that to your family, be that to your friends. So that’s my quick tip today is, choose what you want to be excited about.

David:
It’s really good.

Brandon:
Hear that? I just think people are always like, they let their emotions drive them and they do, but they forget that we’re actually in charge. You can define what emotions you want to have and then you can make yourself feel that way, which is cool. Anyway-

David:
100% true.

Brandon:
Yeah. All right, man. Well, I know you’re not feeling super good today, you got a little bit of cold I see.

David:
Yeah, I’m fighting one off, but this weekend was awesome in spite of that. We put six people under contract on Saturday and Sunday.

Brandon:
Really?

David:
Yeah, it was spectacular.

Brandon:
Maybe you need to get a cold more often so you can get more people in contract, I don’t know.

David:
Balance out the force. I can’t have a great weekend and be healthy the whole time, right? You got to take the good with the bad.

Brandon:
There you go. Well, speaking of good with the bad, you and I are the bad and our guest today is the good. Our guest today is Rodney Ross. Rodney is awesome. He is a real estate investor in the Philadelphia area.

David:
What part of Philadelphia?

Brandon:
West Philadelphia, born and raised. And he is… I don’t know if he’s actually from West Philadelphia, but he’s investing there now. And he’s got just a cool vibe to the way he approaches real estate. It’s very relational based. He’s going to talk today about how to get people to like you so they want to do business with you. How, when you make an offer and even if you offer less than other people, you may still get your offer accepted above those who had a higher price because they like you. So we’ll talk a lot about that today. We’ll talk about the [Birch 00:03:39] strategy, something that we call browse hacking, which is cool and about financing a bunch of real estate deals, how he’s done a lot of really creative, no unlimited down stuff[inaudible 00:03:48]and how his first deal, he lost a bunch of money on it. So you’re going to learn about that today and a lot more. All right, with that said, it’s time to get into today’s show. Anything you want to add David, before we get started?

David:
Yeah. What I love about Rodney is that the beauty in what he's doing is in its simplicity. He's finding deals on the MLS, he's doing it through relationships. He's being very open and transparent about what he does. He's putting other people before himself and that has resulted in big wealth being built. It's not some super secret little niche that no one else knows about that you get to outsmart everyone, just do the fundamentals better and you can be successful, which means that his strategy can be replicated by anybody. And he gives us some really good advice on how to do it.

Brandon:
Yeah, so good.

David:
So good.

Brandon:
Well with that said, let’s get to the show. All right, Rodney, welcome to the BiggerPockets Podcast man. Good to have you here.

Rodney:
Thank you so much for having me, it’s a dream come true.

Brandon:
Oh, good. I love making dreams come true. Let’s talk about your real estate story. How did you get started with real estate? Why real estate? What were you doing before that? And how did you get into your very first deal?

Rodney:
So actually, I started learning about the whole concept of real estate way back in college. I'm from Philly and that's where I'm at and pretty much grew up in the suburbs here. So I was studying engineering here and in my second year I moved in after I was… I was on a rowing team and it sucked up all my time and energy and all that. And then stopped that, move in with six other roommates and one of them was a Keller Williams agent. And mind you, he was in his fourth year and long story short, it just blew me away that you could … I didn't know anything about business or real estate or anything. And just as an agent, he was making more money than almost both my parents who work full-time. And he's a part-time agent in classes, so he's one of my best friends today.
He just gave me this book. So he gave me this book called Rich Dad Poor Dad, which I’m sure obviously you guys have heard about and it just fascinated me so much. I read the whole thing through in one sitting, because I thought I was going to just follow the traditional, all right, I’m going to do my college, be an engineer, make money and whatever. And then that just changed everything. I was actually 19 then, I read that book and then, I’m a higher risk personality now. I’m like, ready, fire, aim. So I took a little bit of extra money in student loans and I actually bought my first place right before I turned 20 and I lost everything.

Brandon:
Oh, no.

Rodney:
Yeah. Basically it was a little single family, Section 8 rental in Southwest Philly. And I put down $8,000 and took over this guy’s mortgage, which I had read about in a book. I’m like yeah, cool, I can’t qualify for one, so I’ll take over this guy’s mortgage. And then everything went horribly after that. The Section 8 payments stopped a month after I bought it. The tenant actually ended up dying in the [inaudible 00:06:42]a couple of months afterwards. And then the son who was there, he started threatening to sue me because he tripped or something. So I just let it go. I gave it back to the guy, I get a 1,000 bucks. So I pretty much lost everything, but 1,000 bucks. And now I got my license a year afterwards, in 2010 and then started selling. Graduated in 2012, finally was able to start buying stuff again in 2015. And then in 2017, that’s when the whole [crosstalk 00:07:09]turn of events.

David:
You really grow into it.

Brandon:
So I want to go back to this first deal, this is fascinating. Knowing today, so a couple of things that went crazy there, right? Section 8 stop paying at some point, is that because the person got off the program or they stopped [crosstalk 00:07:23]?

David:
It's because the lease renewal happened to be a month after I closed and they had to do their bi-annuals or their annual inspection. And then I failed because I didn't have any money because I spent it all buying.

Brandon:
Yeah. This is something interesting. A lot of times people talk about Section 8. For those who don’t know, Section 8, which is the … they have a new fancy name for it now, everyone still calls it the Section 8. But yeah, it’s this program where the government pays the rent or at least a portion of it. So all investors tend to think, oh, amazing. This is going to be great, free money from the government, there’s no risk. I mean, I Section 8, I have some Section 8 rentals still, but I’ve had very similar bad experiences where one of mine was the Section 8 stopped paying because… And this one wasn’t necessarily my property’s fault, but the lady refused to allow in the inspectors because she thought they were government spies.
Well, if they can’t inspect, they won’t renew their voucher. And so we ended up having to evict her and she ended up threatening us saying she was going to shoot us and it was messed up. So Section 8 first of all, doesn’t guarantee money for sure, there still are conditions. But what I want to know is, knowing what you know now, you bought this property basically subject to and it just didn’t work out. What would you do differently today? Do you think you could establish that deal based on the knowledge you have today? Or is that just going to be gone no matter what just because you had no money to go into it. What would you do?

Rodney:
I think it was probably doomed from the beginning, unless I … The only way I could have made it work is to have had a little bit more money to start with because I only had $10,000 in the world was everything on the planet. And I borrowed a little money [inaudible 00:08:52]get that much. And so after I didn’t have money to do the repairs, to get the Section 8 back up and running. So if I had that extra money probably, but I was still upside down from the start, It would have been salvageable, but the mortgage balance is 50,000 and the house is probably worth 50,000. So not the best deal ever. I just wanted to try and get some cash flow and it would have cash flowed a little, but it would have been a rough road. I don’t think I would have done that, that way, knowing everything I know today.

Brandon:
Yeah. Well, I do just want to commend you for jumping in and trying it. Most people will never jump in and try anything. So I mean, the fact that you jumped in, you tried it, it didn't work, you figured out what didn't work really, really well and then a few years later you got back into it heavy. So let's move there. So you became a real estate agent first, is that right? You started being an agent then after that?

Rodney:
Exactly. Right after that, in 2010. So I still had a couple of years of school left. I thought, okay, I clearly know how to not do it, right? And I’m going to get my license, I’m going to go join the same office my buddies at, learn how to sell houses, learn with other people’s money and make some commissions and then hopefully I can have savings and start investing with that. So I graduated in 2012, then went right into it full-time. I probably sold two or three houses while I was in school. Just random like the cookie truck guy or some person I happened to talk to off of Craigslist. And then started doing okay. I graduated and then a year after I graduated, I actually joined … Except for this 18 month period, I’ve been with Keller Williams all the time.
I didn't really know much about construction, so I left the Keller Williams office and went and joined a construction company developer in the area. So I was pretty much just a Villone realtor in the middle of the construction office. I figured I'd get a double whammy because they had a couple sales that they gave to me, which helped with a little bit income, but also I was just sitting around in a bunch of construction meetings trying to learn about the rehab process so I could actually feel comfortable buying something. So that was 2013, '14. And then finally in 2015, I was actually able to buy a couple, three more places with … I was wholesaling in between that time. So I think I did my first wholesale deal in 2013. Did, I don't know, maybe a dozen or so in the next year and a half.
And then one opportunity came along where there was a family that I had sold one of their houses for in West Philly and they had… It was an old lady and her family. They had a group of five places and long story short, I was trying to sell all five of them as a realtor at once. They were all beat up shells and all that, needed to be sold to investors, but it didn’t work out. And I figured if I had more control because they all needed to close with different people, but at the same time. So I just put them on a contract instead and then wholesaled two of them and was able to keep the other three-

David:
Oh, cool.

Rodney:
… without putting any money in the pocket, which was crazy. And we sold those and paid off some debt, and that was my next jump into the investing in 2015.

David:
Yeah, very cool.

Brandon:
All right. So you started doing this wholesaling thing, started picking up some houses. I mean, these are, you said, shells of houses that are maybe not [crosstalk 00:12:07].

Rodney:
Yeah, mixed use buildings, actually.

Brandon:
Really, okay.

Rodney:
It was just a couple ones, yeah.

Brandon:
And I know, I mean, I was honestly looking at Philadelphia this morning for rental property stuff. I’m just working through some projects for BP and I was just digging into the data in Philadelphia. And there are a lot of really old properties there, some of them are shells. You still buy them $20,000 in some areas for some rough little properties. Is that what these were or is it a little bit different?

Rodney:
Pretty much, that’s what it was. These three, they just happened to be mixed use because the other investor that I sold the first two didn’t want them, so it was actually an old seafood store. And then some really, really beat up, almost falling down. I don’t even know what kind of store it used to be, but I didn’t even really care what they were. I just figured, all right, I can make a little bit of … I figured like, so basically all the properties have a bunch of liens on them, right? Add $100,000 something worth of liens on them and the two that I sold, I knew that investor was going to clear the liens off which are the same liens were on mine.
So once he paid them off, then I was able to sell mine a couple months later and make $40,000 off of it. And that helped a little bit with more confidence than anything. And then I started looking for… I’m like, okay, cool. I’m starting to get a little confidence, I sold some properties, now I’m trying to find partners. And then it really took off in 2017. The one I put together, the one partnership where we did the 36 houses redevelopment in West Philly. And also in that year, another partnership with my partner where we bought probably 17, 18 places. We’re just building up a steady… We’ve got almost 20 units right now, building up a steady rental portfolio. But yeah, I did answer your question. You can just buy, it’s pretty simple, most properties are 14, 18 feet wide, 35 to 45 feet deep. And it’s all the same box. And you can make bi-level duplex, a duplex with two bi-level units or a triplex with three single four units. And the cashflow is pretty good.

Brandon:
Yeah, that’s cool.

David:
So would you say most of these properties that you’re buying, they required extensive amount of rehab?

Rodney:
Yeah. Most of them are almost full [grass 00:14:12]. We’ve probably only got two that aren’t, and now we’re jumping into Camden. The last one we just bought was already good to go, but also all full grass.

David:
So is part of your team a contractor who's included in the equity of the deal or are you just contracting that out?

Rodney:
We’re contracting that out. The first couple we managed ourselves to really, really learn and just subbed everything out and built the whole team and got all the mechanical guys and electric guy. [inaudible 00:14:40], plumbing guy, probably the frame, all that. And then we used the general contract. We worked with one guy most of them, who’s handled most of the GC work, but now I have my GC license and we’re back to subbing it out. I think the guys prices that we’ve been using, have crept up a little bit. So now we’re managing the construction a little more closely ourselves.

David:
Okay. So you have your general contractor's license, a real estate license you hold with Keller Williams, you're doing wholesaling and you're keeping a lot of these properties yourself, correct?

Rodney:
Yeah. I’m not really wholesaling that much anymore. Right now it’s mainly just retail sales and then just focusing on doing three or four or five at a time rehabs.

David:
And so you’re at about 20 units, you said?

Rodney:
Yeah, 23 really.

David:
Is that with your partners?

Rodney:
Yes. I pretty much, I have one partner and not all of them with that one partner, but most of them are.

David:
So how do and this partner that we’re referring to here split up the work as well as the ownership?

Rodney:
So we’re 50/50 partners. We split up. So I’ve managed the construction a little bit more closely and cutting the checks and doing a lot of communication. She’s really good with the finishes. There’re certain things that I don’t like to do like colors, I’m horrible with. Kitchen designs, that more abstract stuff, terrible with. I love numbers and I have more time than she does generally and that’s how our partnership started. She had much more savings than I did, I had more time. And so that’s how it’s split and that’s one thing we’re actually working on right now. We have to more closely define what our roles are. Just one of our resolutions, if you call it that.

Brandon:
Beautiful, okay. So that’s what you’re going to be doing moving forward. Now it sounds you’ve got a lot of things covered for once you find the deal, tell us how you’re actually finding these deals, what your strategy is to get them, lock them up and then divvy up the responsibilities of who’s going to do what.

Rodney:
So finding the deals for me, I don’t have any magic systems. We actually don’t really do a lot of marketing. Almost everything we bought for now has been one-on-one conversations. I’m really good at one-on-one phone call or in person. So before this year, I’ve been going to networking events for 10 years. There’s a couple of big meetups we’ve here, that’s… By the way, this is how I met my one partner who we did the 36 houses with, but it’s nothing complicated. I just asked certain questions. I think that my superpower is probably being able to build rapport with people and ask the right questions and then get into a meaningful conversation really quickly. And as simple as it sounds, just doing that X amount of times every week, deals just come around once every so often. And a lot of stuff we buy is on the MLS too, by the way.

Brandon:
Yeah.I was going to ask, is that mostly off market or on market? It sounds like it’s a mix.

Rodney:
It’s a mix, it’s a little more off-market than on-market, but we probably got eight or nine that are on the MLS and the rest off-market, but it’s the same. For stuff that’s on-market, it always comes up it’s the same thing every time. You see something… I was thinking about a house that we flipped and it sold a month or so ago. It was listed at 110,000. I knew it’s worth 50 to 60 and called day one, “Hey, my name’s Rodney, I’d buy this place in the area. We don’t know each other yet, but I’m just letting you know this is exactly what we buy, I’ll pay you 55 for it.”
“No, no, whatever, we’re going to get more for it.” Hang up. Call them two weeks later, same conversation. “How’re you doing? Have you sold it?” “No, no, no, no, no.” And then hang up. And then that one evolved into a month. Then they had gotten another offer finally for 75 from a 203K buyer, which I knew that was probably going to fall through, it always does because the buyer walks in and they think that it’s going to need 30 grand and it needs really $100. So it’s a lot of waiting people out and just being really upfront or really… I guess I come in with my real number usually, right off the bat. And then if it doesn’t work, I’m not changing anything.
Like hey, it’s the same number I told you two months ago, we’re serious. I can get this closed in a couple of weeks. I’m not joking around, but I know what I’m doing. I know what it’s actually worth and what it’s going to take to rehab.

Brandon:
That is such a good point and something that people should be writing down this note and then … I mean, if you applied nothing, no change to your business, but that one thing is like every time you make an offer follow back up two weeks later and just keep doing that until the project is sold or somebody else buys it or you buy it. People would buy so many more deals just from that one little thing. So how do you track that stuff? I mean, are you just remembering? I know you’re not doing dozens of deals a month here, but do you have a CRM or how do you track, I got to go follow up with this person in a couple of weeks?

Rodney:
These days we keep it real simple. We use our KW system, KW command and it’s got this little pipeline thing and we just drag people from one step to the next. So the warm leads, we’ve just got a couple of 1000 people there and I just look through that once a week and like, oh man, I feel like so-and-so is probably ready for another phone call and same thing with wholesalers. There’s just a couple of wholesalers who I’ll keep in touch with. And then every once in a while I’ll get lucky and they’ll bring me something. We have another one under contract right now where the guy brought me something right before he was about to list it. He wholesales and does retail sales. So I’ve just had luck to have some decent relationships with some of these guys and girls and they bring stuff to us. And then we go after it immediately.

Brandon:
So would you say when you're talking off market stuff, are most of them… You talk about relationship based, which is awesome. Does that mean primarily you're talking with wholesalers and they're the ones out there maybe doing the direct mail or doing the door knocking or auctions or whatever. And then they get under contract and sell to you, is that how this is? Or is it-

Rodney:
Yeah.

Brandon:
Okay.

Rodney:
A lot of it, yep. And sometimes it’ll be sellers, but it’s a lot of it is wholesalers and realtors who we do the occasional wholesale deal.

Brandon:
So how do you find a good one? I mean, this is a common complaint in real estate is there’s so many bad wholesalers out there. There’s so many people who think they’re wholesaling and really it’s just daisy-chaining 10 different wholesalers and everyone upsells. And it’s hard to find the good ones that are providing actual good deals, so how do you find a good wholesaler that’s out there hunting deals for you and then how do you build relationships and keep that rapport going? Because I agree, you seem awesome at building rapport, so how do you do that for somebody who’s listening to this going, I don’t even have any experience at all, I just want somebody to find deals for me?

Rodney:
So finding a good wholesaler, you don’t really know. Well, I’m trying to think about the best way to answer this. When I say I ask the right questions and I get into conversation with people, that knocks off, I think it checks all the boxes. How do you find the right people and get in a relationship? I think within a couple minutes of meeting someone or talking to them on the phone, I’ll ask… If I’m talking to a wholesaler that I don’t know, I like to just ask, Hey, I see you sent out whatever. I’m thinking about this one on Belmont Avenue that we’ve looked at a couple of weeks ago. You sent out this place was for $75,000, you just need to know the right questions to ask. Like, hey, just wanted to make sure … You just got to ask the obvious, is this your deal or do you have this under contract and you’re [inaudible 00:21:55]with somebody?
Awesome. Did you guys already run title already? Or if we come to an agreement, do you want me to run title? Do you typically do stuff in this area or are you all around the city? And by the time you just ask four or five questions like that, they get a sense that you know what you’re talking about and then you get to all right, if you had any offers on this, cool. All right, you have someone who offered you asking price on it, cool. Did that person send you proof of funds and all that? Or, what do you think is the percentage you’re going to close with that person? And I think that if you have the EQ to just know what position they’re in, because a lot of wholesalers they’re writing off so many people. There’s been tons of buyer leads, right?

Brandon:
Yeah.

Rodney:
So I think if you just show that you know that … One of the things I think I say to wholesalers is, I don’t need to be your first guy, just please keep me as a second runner up, if your main person falls through. I’m serious, I can get this done, but I understand you already have relationships with buyers. And if you have that conversation up, like I want to be your runner up guy, eventually you get something.

Brandon:
That’s great.

Rodney:
So that’s what’s really, really helped us actually getting a relationship with real people.

Brandon:
It reminds me of… I mean, imagine this picture where there’s 20 people in a room, there’re 10 wholesalers out there looking for good deals out there and trying to… The 10 people call themselves wholesalers. And then there’s 10 real estate investors who want to buy from those wholesalers. The problem is there’s only two real buyers out of those 10, let’s say 20% of them are actual buyers. And out of those 10 wholesalers, there’s only two actual wholesalers. So really out of the 20 people, there’s only four actually doing business, two and two, let’s just say. I’m making the numbers up, right? First of all, people who are wanting to be buyers, the people listening to this show right now saying, I wish I had wholesalers to just bring me deals. First of all, are you one of the two out of 10 that can actually close? And the way you know that largely is because either you’ve done it before or you’re asking those right questions.
And then secondly, if you’re on the wholesaling side, you’ve got to talk to a lot of them. And the wholesalers, you’ve got to talk to a lot of investors and you’ve got to ask a lot of questions and eventually if you’re networking enough… The reason I bring up the 10 people and 10 peoples is, it’s a picture of what you have to do to find the right people. This applies to contractors, probably to anything. There’s just terrible people all over the place. But the more you mingle and talk to more and more people, the more you provide your own skill, your own vocabulary, your own desires and wants and what you need and how you portray yourself. And then the more you meet these other people, the greater chance of getting that connection with the top guy over there. And you’re the top guy over here, you work together and boom, now you’ve got magic and now you can do 100 times more deals.
But when people are like, well, I can’t find any good wholesalers. I’m like, that’s because you’ve only talked to a couple and the odds are nine out of 10 or eight out of 10 are going to be terrible. Which means you got to talk to 20 or 30 or 40 different wholesalers to find the one or two that makes sense. Does that make sense to you, is that how you operate your life?

Rodney:
Yeah. And I agree. And I think, like you said, there’s no way around the numbers. And then whether it’s wholesalers or sellers, I love to learn about people. I’m a super huge extrovert and so just asking some of the basic. Like, tell me a little bit more about your business. Are you guys, one of them… You’re sending $10,000 in mailers a month and you’re selling 100 places a year or are you just building up and you’re wholesaling things to make money to build your own rental portfolio. And I really actually want to know the answer to that and then asking some… Another really good question I think I’d to ask is, what kind of challenges are you having in your business right now? I’ll tell you what I’m going through, it’s really hard for us to find good deals right now that actually make the numbers work and wholesalers that are daisy-chaining everything. What is it looking from your end?
Another followup to that is, would it make it easier if, I think is a good lead off. Would I make it easier if I can just be that buyer that never bothers you? And then when I see something I like I can just, I’ll send you my offer. I’ll send the deposit in the title company directly so you know I’m serious. I think just having a good sequence of… I just try and make it really easy for people to work with us and ask the right questions to … Yeah. I mean, whether it’s a seller or wholesaler, I’m telling you, it’s the same thing almost every time. That’s how I put our last place in our contract that we’re closing on. We have a residential house on this block that we did development and I was talking to the seller. And how we got under contract was, someone on the block who I’d spoken with before, the person actually just happened to pass away. She knew this person, she gave him my phone number, whatever. They called me.
Well, I met with them and said, “Hey look, since I’m a realtor, I have to always disclose before we talk about me buying your place, I’m going to let you know you could probably list it for 170, 180 and get an offer. But it doesn’t sound like you may want to do that. Is it easier for you if I make an offer that may be a little bit less, but we’re going to be at a closing table in 30 days, or would you rather go through the whole market process?” And they decided, “Oh no, I actually like you and I think you’re going to close and so let’s go. Pay 145, I don’t need that extra whatever, maybe.”

Brandon:
That’s a really good point. And I like the integrity behind that too. I mean, wholesalers get a bad name and sometimes rightfully so, for robbing grandma of her property and whatever. And I have to say, the best wholesalers I know, they’re not robbing anybody of any properties. They’re like, hey, this is a legitimate service. You could probably get more. And the seller knows that. And so like, hey, I could list this for you. We could go through the hassle. You might want to fix some stuff up. There’s a thing there or I get you a little bit less, but we’re done and it’s simple. And a lot of people choose that because money’s not always the number one primary motivator for people.

Rodney:
I 100% agree. And just being genuine and I like to tell like it is. Even if you don’t have… Like the first couple of deals way back that I did, I didn’t have any money at all to close anything. The first wholesale deal I did in South Philly, I went and hung up banded signs a couple of times at 4:00 AM on a Saturday, so it wouldn’t get torn down. And the first place I put under contract was for $18,000. I made an offer, $18,000, a little house probably worth 30 I thought. And long story short, it took me a while to make the offer. It took me a while to do a lot of things, but I met with the seller and just built a lot of rapport, had a really good conversation. Learned about what happened. It was an estate situation, horrible way and that they found a family member deceased inside the house. I was there for two hours, right?

Brandon:
Yeah.

Rodney:
They got two offers, mine for 18, somebody else’s for 20. And when they called me back, they said, “Hey, I just want to let you know, we got your offer for 18.” By the way, no proof of funds, no nothing. Like, “We got your offer for 18. We’ve met this other guy who was a cash buyer, he was like, all 50 places in the area. He offered us money.” And I was like, ” Okay, well that’s it.” About to hang up, she was like, “Wait, we’re going to go with yours.” I was like, “Why would you go with mine?” Like, “Well, we you better.” I was like, “What are you talking about?”
I was 22. I’m like, “I don’t have any money, it’s going to take me probably two months to close.” “Yeah, that’s fine, just let us know. We’ll come back up from,” they lived in Delaware, “we’ll come up from Delaware with the …” It took me two and a half months to close in that place because I couldn’t find a buyer and they stuck it out because they actually enjoyed our conversations.

Brandon:
I say this all the time, people like to sell to people they like. And the more you can get people to like you, the more chance you have with people wanting to work with you. Now, there’s a number and they’re not going to sell you that property for a dollar. They’re not going to give you 20, but there’s a discount that everyone offers called the likeability discount. And everybody, no matter how grumpy they are, even Scrooge McDuck or whatever, would offer … not Scoorage McDuck, Scrooge from whatever. There’s a likeability discount. So the more you can build into that, the more you can build that rapport the better.

Rodney:
Yeah.

David:
So Rodney, what advice do you have for listeners who are maybe thinking, well, I want to be likable. What do I have to do to be likable?

Rodney:
It’s a really good question. I mean, the first thing that comes to mind is, try and be less judgmental as possible. Everybody has their … Life is hard and everybody’s got their own, whatever they’re going through. And I try and not judge anybody off the bat, regardless of some of the crazy things that you see or people you run into, “crazy”, right? In real estate. And I think just asking, really learn how to ask probing questions. And that says a lot more than trying to tell someone how cool you are. I don’t ever get asked for proof of funds or bank statements or all that, just really because I ask a lot of probing questions and people get the sense that, cool, I think this guy knows what he’s doing and I actually want to learn about people.
So I don’t know if that’s just genetic, wherever, but have asked probing questions like the ones we talked about. Like what’s going on in your life. I’m hearing that I think this is a way that I can help you, do you think this is a way that I can help you? Just trying to take people through that conversation with whatever script it is, whatever system you want to come up with. Once you’ve figured out the whole, this is how I’m going to get leads and this is how I’m going to follow up with people, just asking the probing questions, it does wonders.

David:
Yeah. In other words-

Brandon:
As opposed to looking at that person they’re a transaction and how quickly can I get to the point where I can figure out can I make money from them? Start with them as a person, what situations they’re dealing with, what obstacles maybe they’re dealing with and then say, okay, now that I know their background, here are some methods that I think can work with what you’re specifically struggling with and the goal that I have to buy this property.

Rodney:
Yeah. And then you can also share, just share really genuinely what you’re trying to do. it’s not wrong to try and make money off… I wholesaled that first place for $29,000. We made $11,000 in settlement. And there was an attorney representing the sellers at settlement and that was my first time so I was like, is he going to feel some way that we’re walking with a check and it’s on the HUD and they can see it, but he shook my hand after. He’s like, congratulations. You were able to put a deal together and make some money and great. And guess who brought me my next wholesale deal? That attorney. So I think just being open with it and once you’re okay with it and you just treat people they want to be treated, with respect and you learn about them. I have stories for days. This is how I put together that big development too.

Brandon:
Well, you said something there that I don’t want to gloss over because it was so good. And you just said, well, maybe it’s genetics or something, but I just actually care about these people’s stories. And that in other words, shocking, you genuinely care about people and people can read into that. People know when people genuinely care or when they’re being a transaction. And so anybody listening to this just, genuinely care. I’m not saying pretend to care and do a better job acting, but genuinely care, be in the moment, be present when you’re having conversations with motivated sellers or attorneys or wholesalers or mentors and stop thinking, what’s in it for me, how do I get more out of this? But just genuinely say, hey, I’m really interested in this person and I want to know what’s going on in their life. Yeah.
It’s like how to win friends and influence like One-on-One from Carnegie, it’s such a good book. But that’s the basis of that book, just care. And people, they’ll root for you. Like you said, the 18 versus 20,000 person, they wanted you to get it because they liked you and they were rooting for you. They were on your team, which feels weird because you’re trying to get a good… They’re making less money, but people sincerely like to sell to people they sincerely like. So anyway, that’s awesome. All right, dude. So let’s talk about what you’re doing with all these properties. You’re buying a bunch of stuff, you said you had what? 20 something rentals now?

Rodney:
Yeah. 23 units up to that, including the ones that are in construction.

Brandon:
That's a lot. I mean, that's awesome. So how are you financing all of these properties and are you flipping some? Is that how you're paying for it? Are you buying them, what's your strategy?

Rodney:
So most of it, 90% of them were doing the first strategy buy. It’s all the same. We’re buying stuff for 30 to 70 and putting them to 50 up to, probably the biggest ones 180, since it was a triplex and then where we have the value, we’re in it for right around the 70% Mark. And then we’re able to refinance and get most of the money back. We’ve sold a few of them, especially this year, in March where we were like, all right, let’s cash up on a couple of them and we want to move up to larger stuff too. So we’re also thinking about selling some of the duplexes and triplexes we have, but it’s basically the Barsh strategy or all of it and selling some when we need to get more cash back in our pockets.

Brandon:
That’s cool. And are you finding local banks are able to help you refinance? Do you know this is the whole, can’t have more than four or 10 loans to your name. But are you running into that problem or how are you getting around that stuff?

Rodney:
So we're not. All of ours are in LLC, except for one that I have that's in my personal name, but there's one, a local credit union, that's been a great asset to us. We've found a lot of options, most local lenders, whether they're banks or what do you call it? The larger institutions, they're usually lending around 70, 75% LTV. And the rates are five, six amortized over 25, 30 years. But you got to pay it off in 15. This one bank that we've found that it's amortized over 20 years, you paid off in 15, but they get 80% of the value.

Brandon:
That’s cool.

Rodney:
And the rates only, we just refiled with six the other week, and it’s four and a quarter, so really low. So we’re trying to lock in as much of these lower rates as we can right now, before I don’t know, what’s going to happen next year or the year after. But yeah, the reef has been the easy part luckily. We built a good relationship and they’ve gotten the same. We’ve been hitting our values too. We’ve been focusing mostly on West Philly. So I decided to specialize in this one area and rents are going up in the area, the values are going up in their area. We’re doing all right.

Brandon:
Oh, that’s cool. Did anybody else have the problem where every time somebody says West Philadelphia, they immediately think, born and raised, on a playground is where I spend most of my days. Everybody else, every single time. Anyway. So you’re buying these properties, You bury them, I love that. I love the tip about the local community bank. Like, you’re not getting a 30 year mortgage necessarily. You’re paying it off way faster, which is great for long-term wealth building. Maybe a little less cashflow then maybe the interest rate isn’t as low as you’d get from maybe like a Wells Fargo US bank, but it’s so much easier. Who cares right now? You’re building wealth, you’re building passive income and cashflow and building these things up and you’re building the portfolio, which is awesome. And so you do what you got to do.
I think so many people get stuck with these. Like, this is the rule of real estate, is I have to go to a big bank and put down 30% and get this on… There’s so much flexibility and you don’t know that until you jump in and start doing stuff and asking questions and talking with other investors and getting to know it. So I’m curious before we move on to the deal deep dive. There’s a question I want to ask more often on the show, but I never do, but I’m going to ask you. How has mentorship played a role in your upbringing of being a real estate investor? And maybe it has, maybe it hasn’t. And what I mean by that is, are there people that they were your mentors getting into this or did you just figure things out along the way? I guess what role has mentorship played?

Rodney:
I don’t think I’ve really necessarily had a… I don’t know if you call a coach and a mentor the same thing, do you, or sort of?

Brandon:
Yeah, you could. I mean, I’ve heard people call them the same. I’ve heard people call them differently, but yeah.

Rodney:
So I’ve had mentoring. I’ve had both coaching and mentoring. I’ve had a business coach for the majority since 2000, late 2013. KW, he’s really helped and he invested in real estate too. So he’s helping the sales end and pulling me back to reality with investing because I’m crazy and I’m like, let’s go do this. And he’s like, no. So that’s really helped. But mentoring wise, there’s just been a couple people who have really helped first joining the development from 2013. There was only five of us and so I could ask all the questions in the world that I wanted to put about the guys I was working with who were doing all this construction. That really helped in the construction end.
And one of my lenders, he’s been a big investment for himself and he’s been a really good resource for us. He’s in between hard money and private money rates, but guy who’s done tons of developments, tons of rehabs. And I just have a few key people like that. Like one of my partners on that large project, before the construction guy, the developer I was with, and then one of the lenders. I think a few of those people have made huge differences in what we’ve done, places that I bought and not bought. But I haven’t had any direct apprenticeships or mentorships like that.
But I think having a couple of key people makes all the difference because there’ve been some moves. Definitely there could have been some places that would have been really bad investments that I was going to buy. And I’m glad that we didn’t. Like this 10 unit in Camden, we almost bought that. I think I would have had all these structural problems, we’d have lost a bunch of money on it. Being taught out of some of those things is that we’ve dodged some bullets. So I don’t know if that answered your question.

Brandon:
Yeah. It does. I’m just, I always like to know because some people are real big on, I can’t get started unless I have a mentor and then they’re like, will you be my mentor? And they get the awkward relationship. But you strike me as somebody who is more like, just figure things out, but also at the same time, build relationships with people who are experienced. So you don’t have the formal necessarily awkward like, I’m going to meet with you every week, mentor thing. You have a business coach, which I love coaches. I love performance coaches or business coaches. I think they’re fantastic. But you just build relationship with everyone around you. I guess the way I’m going with this is, you strike me as super authentic in the way you build relationships. And I think that’s the way that people trying to get into real estate right now should be focusing as authentic relationships with sellers, with vendors, with potential mentors. Just authentic, build friendships and relationships with people, and they’ll want to help you. They want to root for you as long as you’re not weird about it.

Rodney:
Yeah. And I think something that comes to mind, as you say that is, I hate asking people for help. First of all, it’s one of my things that just I’m working on. But I think whenever I ask someone a question I try and make triple sure that I’ve gone and researched everything I possibly can. So it ends up being a three-minute conversation and I’m not sucking out way that person’s time. I think that’s why the rare times that I do it, people will want to talk to me because I’m like, I went and tried this and I called the slender and I did this and I can’t figure this little thing out, can you please help me. Instead of, hey, I’m trying to buy a 10 unit, what do I do?

Brandon:
What do I do. Yes.

Rodney:
So that’s really helped.

Brandon:
Yeah. I think that’s the ideal use of a mentor is, I’ve tried everything, I’m stuck on this one point. Can you help me out here? And then, a little question like, I’ve talked to 10 banks, I can’t get one will finance this? That’s a good question for mentor. But not what bank do I go to, to finance this? I go talk to the 10 first. Yeah. So good.

David:
I think that’s a great lesson in general, when it comes to looking for partners or looking for help, that the more general your question, the more onus you put on the other person to figure out how to solve your problem, which gives them less incentive to do it. The more specific of a question you’re bringing, the easier it is for them to help you. And so the more likely they are. And I say this because a lot of very well-intentioned people probably have no idea how that question comes across to the person that you’re asking it of.
And Rodney, I think that probably for you, is somewhat natural because you’re very good at being likable and you’re a genuine person. So that would automatically be the way that you’d go about it, which is probably one of the reasons you’ve been successful. And I’m sure that that success isn’t just related to real estate investing. I’m sure in your agent business, you’re doing very well there also. And you probably are on a very good trajectory to build that business as well because people like genuine people. If you look at the real estate industry in general, just all of real estate, the trend is towards technology. There are big companies that are trying to convince people that own real estate, you don’t need humans in this. They all do the same. They’re all interchangeable. Every agent’s the same as every other agent, let us connect you with a buyer.
I buy our SEO programs to get people, to click on something and say, I can sell my house without an agent. And they get really excited and they’re not being told you probably would’ve got a lot more if you’d use an agent or the agent that you use matters as far as how much money you could walk away with. And the only way for those of us that are trying to make a living in this industry that are not part of a huge machine of I buying companies is by setting ourselves apart with the relationship piece.
And that’s really why Brandon’s asking you these questions and why we wanted to share your story with the listeners, because you’ve got that secret sauce. One conversation with you, and it’s very clear this is different than most people. I trust this person. I think they’re looking out for me just as much as they’re looking out for themselves. And that’s how you get ahead. You don’t try to beat technology at its own game. By let me make this as transaction focused as possible. A computer program will always be able to do that better than we could as a human being. You do it by playing this other game, this relationship game, that technology will never be able to overcome.

Brandon:
Yeah. Totally agree.

Rodney:
Totally agree. It’s an intangible thing that sounds airy, very talked about sometimes, but like… And by the way, one of the challenges I’m going through right now is, my agent business is doing okay. But I feel like I’ve been self-sabotaging because I’m actually getting bored in a way of the [inaudible 00:43:59]. I really want to step up and do larger investment stuff. So I’ve been talking to my coach. I’m like, I’m ignoring all my clients, so we’re trying to figure that out. But the people that I do work with, I think really appreciate just having a relationship. I’ve tried, it’s taken time to learn about someone’s whole life story. Talking people out of buying the wrong houses, or that conversation I have a lot more often than like, okay, this is the one you want because you told me, you’re trying to buy investment properties and retire in X amount of years, but you’re telling me you want to buy a $500,000 house and you’re like, you don’t have any kids yet. So sometimes that conversation goes in the other direction.

David:
But they’ll remember it. And those people will come back to you when it’s time. There’s many people that called me about selling their house and I talked them out of it or that wanted to buy the wrong type of property and I talked about that and had to buy a different one where they knew I made a lot less money, but it was better for them. And it always comes back 10 fold with referrals that get sent your way or them bring in other people to you. I mean, one really good investment deal could be five to 10 transactions in a normal thing.
So that’s always the struggle though, is there’s a tempting side that wants to say, well, I could get this right now, but if you just have faith and you put other people first, it always ends up coming back to you. That was really one of the core tenants that Josh Dorkin used when he established BiggerPockets was, you’re not going to be in business long, if you go for the quick, easy kill right off the bat, instead of the nurture of doing the right thing. And Brandon and I have seen this time and time again, there are flashes in the pan. They come along and put a lot of people in our contract really quickly, but the way they do business was very one-sided or dishonest. And they don’t last very long. And then the Rodney’s, I’m sure when we talked to you five, 10 years later, you’re going to have an empire that was built on the back of this being genuine and being trustworthy and being an honest person.

Rodney:
[inaudible 00:45:45].

Brandon:
There you go. All right, well, let’s move along and hit the next segment of the show. It’s called our Deal Deep-Dive. This is the part of the show where we dive deep into one particular deal that you’ve done, Rodney. So do you have something we can do?

Rodney:
I do. A simple, straightforward one, actually.

Brandon:
Perfect. So I’m going to ask you or, we’re going to ask you a series of eight questions about it first. Well, technically nine because the first one I always asked two questions. What kind of property is it? And where’s it located? That’s the first question.

Rodney:
It’s a duplex that’s being turned into a Triplex in Cobbs Creek possibly.

David:
All right.

Brandon:
All right. And how did you find this deal?

Rodney:
On the MLS?

Brandon:
MLS. All right. This is a side question of the Deal Deep-Dive, but what do you look for when you’re looking on the MLS in a competitive market like Philly?

Rodney:
So for this one, particularly I look for areas that I’m pretty confident that you can see a couple of things going on with the area that are going to be worth more in the next couple of years. And this is the perfect example of, because I bought it two something, a little more than two years ago. And now the rents are way, like $300 to $400 higher, devalues way higher. And so having a certain amount of Castile like a couple 100 bucks per unit, plus the appreciation and plus being able to put the least amount of money out of pocket, which is what happened here.

Brandon:
All right. So the MLS, very cool.

David:
And how much did you pay for this property?

Rodney:
It was 132 with the $7,000 excess.

David:
Oh, wait 132 with excess. So they gave you 7,000 for closing costs. Is that how [crosstalk 00:47:27].

Rodney:
Yeah. And mind you, it was actually listed only for 110 or 115. So I overpaid for it because I thought it was worth something.

Brandon:
All right. And how did you negotiate all of that? What’d your negotiations look like? Obviously that played into it offering more.

Rodney:
So I called the agent day one when it was listed. I had this really short window that I was finance able for a couple months at the end of the year, so I really wanted this. Called the agent, set up a showing, felt out whether I thought I needed to have them represent me or not. And they actually seemed to be, it was okay if I represented myself and then I just said, “Hey, look what’s your highest offer right now? And tell me what I need to do to beat it”. That was really what it was. And then that number happened to match. Our highest offer’s 122, one whatever. Cool. I’m going to offer net 125. But I’m going with that BJ, but here’s the reasons why I think I’m going to close because I’m Rodney Ross and blah, blah, blah, blah. And I’ve got a great lender and here’s his phone number and so built a lot of rapports. That agent really nice lady. And that’s the only reason I got it. Because there was six other offers.

David:
Yeah I thought so.

Brandon:
Right on.

David:
So you already told us you funded it with an FHA loan, any additional financing?

Rodney:
It was actually FHA 203(K)loan. So did the 20 something thousand dollars worth of rehab. Now I’m putting another 45, 50 out of pocket adding a unit and going to refinance again.

Brandon:
Oh, so it’s a Burr house hack. It’s a browse hack. It sounds like [crosstalk 00:48:55].

Rodney:
Exactly.

Brandon:
Okay. All right. So first by the way, 203(k) loan, can you explain what that is? Because I love the FHA 203(k) loan. Explain how that works for those who might not know.

Rodney:
Yeah. So a 203(k) loan is a standard FHA loan. You can put as little as three and a half percent down. You need 203(k) loan is the same and you’re allowed to do rehab work. I did the streamline one, which is, if you do less than 35,000… They don’t need to have the whole hug consultant go out and do their whole, this is what I think the rehab is going to cost. You just submit a budget. Boom. Here’s your contractor, what contracting you want to use, here’s how much it’s going to cost. And then they let you just go at it. And it takes a little bit longer to close. You’re probably looking at 45, 60 days, but it’s a really good product. If you know what you’re doing and have a contractor who doesn’t need a ton of money upfront because they have to fund a little more money than normal.

Brandon:
Yeah. It’s cool. As you don’t have to come out of pocket with all the repairs needed, that gets financed and it’s just three and half percent of the total, which is super cool for those who want to do a browse hack, we’ll call it the buy rehab. It’s like, you don’t have to refinance because you get the rehab bill. So it’s like the buy, rehab, rent it out and live in it. Because you got to live in at least for a year, right? And then instead of refinance, it just transitions to a long-term loan basically because it’s already from the beginning. Anyway. It’s awesome.

Rodney:
Well, there’s not a lot to refinance out if you use an FHA loan because you only put three and a half percent down. So there’s not a ton that you need to get back out of it, especially because the rehab was included in the loan too. So you accomplish the same thing as a Burr.

Brandon:
Unless you add another unit like Rodney though, which is super cool. You said you went from a duplex, you’ve added a whole other unit. You’re covering that out of pocket now to make the value go way higher. So then you can refinance. Right?

Rodney:
Exactly.

Brandon:
That’s so cool.

Rodney:
And like what David said, I use my 4% commission as my down payment. So I actually came out of pocket 500 bucks at closing because the last insecurity covered the other half percent down payment and my seller’s assist covered the closing costs. So it was literally 500 bucks out of pocket. And both the units were already rented at 825 and 850. And I had every intention to move in there. But within the first 60 days follow FHA guidelines, but it actually just ended up being a straight, duplex investment. I didn’t live there.

Brandon:
Yeah. The FHA guideline is you need to have the intention to move in and your plan has to be moving in there. Now, if something changes in your life and you end up not moving in because of that, they don’t come at you with guns and jail time, but you do have to be able to say… You have to genuinely have a plan or your intentions are to move into the place. So that’s what you’re talking about there, right?

Rodney:
Yeah. There was an old lady on the first floor unit who didn’t move out. So yeah.

Brandon:
It’s like, well, I could evict her or just leave it.

Rodney:
Right. I don’t want to talk about that [inaudible 00:51:47].

David:
So for this third unit, did you have to get it permitted to add it? How did that work?

Rodney:
Yeah. So this one is on a block where, luckily the places are all set and really backed apart from the street. And the first floor is raised a good, six steps off the ground. So all the basements of tall ceilings only thing you have to do is add an entrance and it’s three steps down. And it’s a really deep to bed a Munich. That’ll be a thousand square feet. So that’s how we’re just going through the process. We dug the entrance, got the permit and yeah.

Brandon:
I just-

David:
I love basements so much. I wish we had more of them in California. They’re the best thing ever when it comes to real estate, if there’s a decent rental demand. That’s one of the benefits, I guess, of living near tornadoes and stuff.

Rodney:
So wait, there aren’t basements at all, really in California?

David:
Hardly ever do we have those?

Brandon:
Yeah.

Rodney:
[inaudible 00:52:37]imagine that.

Brandon:
Yes.

David:
It’s very rare when you come across very old properties and only in certain cities, do they even have properties that were built with basement foundation? So that’s something that as an agent, when I’m looking at stuff, if I see anything that says basement, I immediately key in on that. How big is it? How tall is it? It’s so easy to convert those and relatively inexpensive compared to building a whole new ADU. Side note, We do have legislation that passed in California that makes it so that the government can’t stop you from building 80 units on your property. The problem is there’s no easy financing in place for those. So it’s going to cost $80,000 to $120,000 to build this entire new structure, which could have been the down payment on a whole property. So it’s not very financially advantageous to do that.

Brandon:
Well. So the question for you, David on that, because it’s something I’ve been thinking about lately here in Hawaii, for the same reason that you got in California. It sounds a business opportunity for me, somewhere in… Here’s where I’m going with it. If you spend 100 grand, let’s say building out an ADU, I don’t know if that’s reasonable in California. Let’s say you spend 100 grand building a two bedroom little shack on your property. What does that rent for there in your area?

David:
Somewhere between $1,500 and $3,000.

Brandon:
All right. So we’re looking at probably a one and a half to 2% rule and basic on this thing. It’s got a cashflow like an ATM machine. It’s a good investment to do. Most people won’t think that way or don’t have the money to do that bid, right? So what if there was a company… I’m just making this up, but I’ve been thinking about this. What if there was a company who would go into people’s properties, fund the entire building of the ADU, manage the property that gets rented out and just take a sizable percentage. Like, I’ll take 50% of the rent for the next 10 years or 20 years. So they get paid back their whole amount plus some. Anybody ever heard of that, anybody doing that? Because I feel there’s an opportunity there somewhere. It’s a business model that could work really well. Nothing?

David:
Yeah. It would work. I think that, especially with as much money is floating around, but I just, have not heard of it.

Brandon:
Yeah. I don’t know anybody doing it, but it’s cool. If anybody knows of anybody doing that, let us know in the show notes. Because I’m super curious.

David:
I think in Hawaii that probably adds more value to your property than it does in California, because everybody wants that. That Ohana unit in Hawaii. So you can then refund the money that you spent out. You'd basically burn your Hawaiian property and get back out. California having one of those doesn't really add a ton of value because not as many people have caught on to, I want to rent out part of my property. Of course, BiggerPockets listeners want that. But your average home buyer, isn't looking to be a landlord. Anyway, though. I've digressed a little bit here. Thank you for letting me get back on track. All right, Rodney, we know that this became a Burr house hack. You're adding an additional unit and that's not completed, correct?

Rodney:
Not completed. Not yet. Almost.

David:
Okay. So what lessons have you learned from this deal so far?

Rodney:
The main lesson, having had challenges at my one Section 8 tenants. So how to work through, it’s just difficult especially this year. I challenged everyone this year when I would only eviction rules happen and all that, just ended up being a weird situation. But I think the main thing was, believing in… It was the only place I think I paid over asking like that, especially with financing. But I knew in the back of mind, I’m like, this has got to be like, the cashflow makes sense. They won, it’s already making $1,750 a month. My payments going to be 11.
So I believed in what I thought the value was, even though it was listed on the MLS for a lot less than what I thought, and that paid off because in just two years, that unit that the old lady was in, that was 825. I just listed at 1,175 and have a bunch of people that want it. Second floor i just vacated and was going for 1,175. Bottom is going to be 1000. So it’s going to turn from making 1,750 to 3,100 bucks or even a little more maybe, which is crazy, in a couple of years. So the area is just really just[inaudible 00:56:27]. so believing in what you think something is worth. And when no one else can see the value just going after it and forget what other people think that it may or may not be worth. If that makes sense.

David:
It does. Real estate investing is meant to build wealth over time. So it’s somewhat foolish to look at your year one numbers and assume that’s what it’s going to be forever. They could go up, they could go down, but you shouldn’t be looking at what you expect them to do, because my experience has been just like yours. In areas that I bought in higher appreciating markets both rent and value, they performed really, really well over time. And it’s okay if I didn’t make an incredible high ROI in year one, because by year five or six, I definitely was. And conversely, some of the markets where I had a stronger ROI going in on year one, they flat-lined, they didn’t really do a whole lot. And then when I did get capital expenditures, they crushed me.
I got one right now that hasn’t appreciated at all. And the sewage line has to be fixed. It’s about 3,500 bucks. And that’s probably two years of profit, completely gone by one thing. And rents over a two to three year period have gone up $25, hardly anything. So it’s definitely wise to consider the big picture. That’s what I wanted to highlight with what you’re doing. It sounds you got a great deal there.

Brandon:
Yeah. That’s cool.

Rodney:
Yeah. I’m thankful for it.

Brandon:
That's awesome and congratulations on that. That I feel like the Brandon Turner special right there. I love that type of product. I've done so many of those small multifamily adding a unit that kind of stuff. I love it. All right. Well, we got to move on to the last segment of the show. It's time for our famous four. This is the part of the show where we ask the same four questions every week to every guest. So we're going to throw my shoe, Rodney. So number one, Rodney, current favorite or all-time favorite real estate related book?

Rodney:
All time favorite is probably the Rich Dad Poor Dad. Current favorite that I've been revisiting is the Millionaire Real Estate Investor. The diagrams in that, I really like the visual kind of guy. And it's a good mental reminder. And even for clients, it helps, it shows this is what happens. Even if you buy a place every other year for 15 years or whatever, it just shows. It does all the math where it shows, if you put this many such and such. They have the basic models, like you get a little house, 20% under value, put 20% down and finance it. It's funny the rates that they use in there are seven and eight. I'm like, Oh my God, the rates. So anyway, those models are timeless. It just shows that if you just make little investments over a decade or two, you'll end up having millions of dollars. So that's the current one I've been looking at. But Rich Dad Poor Dad, I mean all time for me.

Brandon:
Cool. Awesome. That’s a great shout out. What about your favorite business book?

Rodney:
I think my favorite business book was really just a whack me in the face last month, which I actually think you guys had mentioned on our episode, the E-Myth I got the audio book. I was like, Oh my God, I’m going through this. It breaking down the three roles and the trunk technician manager and I’m like, wow, I’m going through this burnout thing right now. Or I’m operating and all that. And it’s different skill sets to run a business than to be a really good agent or investor or whatever. So we’re readjusting now. And it just hurt a little bit to read that, but I think I’m stepping way back out of my comfort zone again, trying to make our business look more like a business and not just based off my energy all the time.

David:
There you go. Its awesome.

Brandon:
Yeah I Love it. You’re a very smart guy, Rodney. In case no one’s ever told you.

Rodney:
[crosstalk 00:59:57]I should’ve learned from… I’ve listened to so many Podcasts. I’ve been a long time listener. I think I started listening to BiggerPockets just like, I don’t know, five… How long have you been around?

David:
Seven.

Brandon:
We’ve been around for almost eight years now, I think, right? Its been a while.

Rodney:
Yeah. So I’ve learned a lot of tips from both of you guys.

Brandon:
Thanks.

Rodney:
Just trying to pick off a little here and there.

David:
I like how you gave us credit for your own intelligence. That’s very classy move there.

Brandon:
And smart proving my point even more. Okay. When you’re not flattering the host of the Podcast show you’re being interviewed on, what are some of your hobbies?

Rodney:
I love working out, the bikes, the Lyft. I like to speak French. My big goal this year is to try and go back to France for a month or two. It didn’t happen. Then now I don’t even think we could go right now, because of the [inaudible 01:00:44]again. But working out, speaking French and just playing guitar. So that helps my mind because my mind goes a thousand miles an hour, thinking about this all the time. Big goals right now or just take time off, get over to Europe for a couple months, at least get in the happy place.

Brandon:
That’s fantastic man. Well, my final question of the day and the last of the Famous Four, what separates successful real estate investors from all those who give up, fail or never get started?

Rodney:
I saw, I had forgotten you asked that. I think as cliche as it sounds, just sticking with it, not getting out of the game, right? This is as simple as it is, It’s not easy. And the hardest part about this right now… A couple of years ago, we were just building up, I feel like figuring out the rehab and the numbers and I hadn’t done any of that yet, but now it’s managing my own emotions and not getting to the point of… My coach was telling me, he’s like, look, you’ve been doing this for the past year again, you’re really good for a couple months and then burn the heck out and get anxious as heck and not be able to sleep. And then you have to chill out and then you don’t have any business. And then it happens again.
So just managing. First of all, staying in the game and then just learn how to manage your own emotions and just be more self-aware. That’s my biggest thing right now. I’m taking a step back. I’m not really out looking to buy something hardcore right now. I’m trying to get my head together to get ready for hopefully next step, which is buying bigger things, not houses.

Brandon:
All right man. I love it. Well with that said David Green,[crosstalk 01:02:25].

David:
For those who want to learn more about your story, tell us where people can find out more about you?

Rodney:
Sure. So we’re a lot heavier on social media these days, @realestateboss on Instagram. I have LinkedIn, our new website, which is almost done, will be done in a week or two limitlessre.com. And so Instagram, LinkedIn, Facebook. Mainly the Instagram, I think is where we’re posting most often. Just started TikTok, which is also @realestateboss. So I think there’ll be more fun stuff up on there in the near future. Those are the main channels.

Brandon:
All right. Very cool. Well that said, it’s time to get out of here. David Green, you want to close down shop. I appreciate you, Rodney. It’s been a great show.

Rodney:
Thank you so much. Appreciate both of you.

Brandon:
Thanks Rodney, it was awesome talking to you and thanks for sharing your knowledge. I think it’s going to a lot of people a lot of good. This is David Greene for Brandon, the Browse Hacker Turner, signing off.

Speaker 3:
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In This Episode We Cover:

  • How to get back up after a frustrating investment
  • How knowing about construction timelines and projects can help you get comfortable enough to do your first rehab
  • Why mixed use properties are often an overlooked real estate class
  • The importance of defining your role with your partner
  • How to talk to buyers so they’ll choose you over other offers
  • Why it’s so important to look out for the other real estate parties in a deal
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

Connect with Rodney:

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 investors and other real estate professionals, who chat about failures, successes, motivations, and lessons learned.
    Julie Marquez Investor from Seattle, WA
    Replied 27 days ago
    So many great nuggets from this show! My favorite "...well I'm Rodney Ross and I'll get this deal done..." and "I don't have a mentor, I just have a great partner, and a friend, and an investor, and another smart guy I hang out with, and another great partner, and another smart person on my team...." Sounds like a lot of great mentors! What a great guy, no wonder he is successful! All the best Rodney!
    Adam Walz Investor from San Francisco, CA
    Replied 5 days ago
    Great interview! And @Brandon I do remember reading about a company in LA that was seeking to build, finance, and lease ADUs: https://www.fastcompany.com/90442349/this-company-will-turn-your-garage-into-an-apartment-for-free-and-help-you-rent-it-out