Future Millionaires: Why You Should Start Making “Offensive Offers”

David:
This is the BiggerPockets podcast show 726. In the future, lock it up, understand your contract and your contingencies, have your realtor go back and renegotiate in the thick of it, right? Because now they’re in emotional state. They’re like, Ooh, we’re finally going to sell our property. They’re thinking about what they’re going to go spend the money on. They’re shopping for their next thing. So when you come back and say, I need another 30 days, they’re not going to tell you to pound sand. That’s a great learning lesson. I’m glad that we were able to go through that together. I’m sorry that you missed it, but this should encourage you to go write another 10 offers way below asking price on other properties and see which one of these people want to play ball. That’s the name of the game.
What’s up everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast, the biggest, the best, the baddest real estate investing podcast in the world. Here today is my co-host and partner in crime, Rob Abasolo. We’ve got a fantastic episode for you guys. In today’s show, we bring back our three mentees and get a progress update on the progress that they’ve been making in their journey, and we actually have some pretty cool stuff to share. We’re starting to see some progress get made. Rob, what did you think of today’s show?

Rob:
It’s good, man. It’s really good. It’s really nice to see they’re all starting to turn the corner and they’re all starting to figure out what exactly they want to do and they’re all starting to take action and you could just sort of see their minds sort of opening up and evolving and being like, wow, okay. Because a lot of the stuff that they’re doing now I feel like seems so inconceivable to them like a month ago or two months ago when we first started this, right? And so now that they’re actually doing it, it’s just funny because it’s like a lot of this stuff was very simple, but small goals and they’re doing those every single day and every single time they achieve a small goal, you can just see the confidence glowing from them.

David:
Yeah, that’s a huge piece of success and we’re learning that with these mentees is you’ve got a big goal, a place you’re trying to get to, an end destination, but you don’t get there in one step. You actually have to set up a lot of smaller milestone markers along the way that guide you in your journey. It’s one of the things that I’ve learned from Jocko Willink when he talks about Navy Seals and how they succeed throughout the day. I believe it was Andy Stump I heard talking about this, where they describe when you’re in seal training, buds training, it’s incredibly difficult and rather than thinking about I’ve got to get through two weeks of this or a month of this, they say, just get through the next portion. In another two hours, they’re going to feed you and you’re going to get to rest for a minute. Just think about the next two hours.
If you can get to that point, worry about what comes after that when you get there. And what we’re doing here is the same thing, setting small goals, turning it into bite size chunks that are manageable, asking yourself and debriefing at the end of the next milestone, what did I learn? What could I do better? How do I prepare for the next one? And then taking that next step can change things in a big way when it comes to success. Really, success is just an accumulation of all of these small goals.
Before we get into today’s show, I’ve got a quick tip for everyone here. When you are lost in an ocean of possibilities, look at your tasks and your business and assess what you could implement as a system to streamline or track your progress. It is very difficult when you’re wandering around and you just say, what do I do next? And you start asking people, what do I do? When you start looking to the universe for some kind of direction as opposed to having it written down and planned out, I’m going to do this and then this, and then this. Just removing the wondering of what am I supposed to do and replacing it with a system that you can work can do wonders for your peace of mind and removing anxiety. And it can also empower you because you can always say, what could I have done better and how do I do better on the next step? Rob, before we bring in our first mentee, is there anything you’d like to say before we get into it?

Rob:
No, I was just going to ask you if you had any crazy stuff or anything wacky happen in your real estate portfolio these days?

David:
Yeah, I am “drowning” in problems right now. I just [inaudible 00:03:42] that yesterday. One of my short term rentals, it’s really of all of the 18 properties I bought, this was the only one… I’m sorry, out of the 8 that are being rehabbed, this was the only one that didn’t have a problem. I was very grateful for it. I would think God every day that this property was doing well. And I woke up yesterday to find out that while the garage is being converted into living space, the main unit has been sitting in two and a half feet of water for the last week, and we think that a pipe burst in the kitchen and started flooding the house and no one knew, and the water has been building and building and building for a very long time.
So when I sent my contractor in there to take a video of the inside of the property so I could send it to a designer, taking a page out of your book to try to make the property look better, he couldn’t get the door open because the water was so high. Turns out the entire floor, the entire subfloor, all of the electrical outlets, all of the furniture, everything two and a half feet and below on that property is completely trashed, including the basement underneath it and more. So that’s one of the things in real estate investing that you don’t expect to hear.

Rob:
Well, you know what’s better than a hot tub, Dave? A house tub. I say, turn, make lemonade out of lemons. Let’s get a heater in there and let’s create the first house tub of this size.

David:
This whole disaster might have been worth it just for you to come up with that. Why get a hot tub when you could get a house tub?

Rob:
Well, I just had a guest try to cancel his Airbnb stay at one of my properties about a week or two ago because my wifi levels were too high. He said it was bothering him in his sleep, so I had to work that one out with Airbnb.

David:
That’s funny. So you had to send a worse router in there because was it the buzz that he was hearing that was keeping from sleeping?

Rob:
Oh dude, no. He was just, there’s a closet downstairs and I know it’s full of equipment and it’s bothering me when I sleep, I want to cancel. And I was, that’s not a thing, man.

David:
There’s a tinfoil hat and the nightstand next to you, just put that on.

Rob:
Exactly. For a small fee.

David:
Yes. All right. Well, it happens to the best of us. Not that I have the best of us, but it happens to all of us. Problems pop up that you don’t expect. It’s all about how you pivot and try to learn from that mistake. So in today’s show, you guys are going to learn about the problems that our mentees are encountering as well as the advice that Rob and I give them to navigate through it. I think you’re going to love it.
All right, Philip Hernandez, last time we talked, you were going to network with agents who had experience with land deals and then analyze the potential pitfalls of the desert hot springs property. Walk us through your updates.

Philip:
Yeah. So I had some great conversations with agents, particularly I connected with one that specializes in land. He started sending me some of his listings. I think that’s a relationship that’s just starting out, but it was really great to talk to somebody that I didn’t really have to explain some of the things that I’m always looking for in land as far as wells and access and zoning. And so it was really refreshing to connect with that agent.
And then, yeah, I’m also a musician. I played a New Year’s Eve event at this 40 acre retreat center that happened to be for sale, and I developed a relationship with the owner and I’ve had a few meetings, three hours worth of meetings of him and me just on the phone really going through his books and trying to figure out what is this actually making and would this work for our business plan? And yeah, trying to figure out if that’s something I want to take a bite of has definitely been in the back of my mind for the last couple weeks.

David:
Okay, cool. You also have gone through a couple struggles, so tell us what was your struggle of the week?

Philip:
Yeah, my biggest struggle was I found a property that I visited that was in my dream location of not just for a retreat center, but actually someplace I’d love to live that I have a lot of connections with. And we got into negotiations. I submitted an offer, I got a counter offer, and it was a counter offer that was totally within my budget. I think I got a little too overconfident in this is a buyer’s market, you can just ask whatever you want. And I asked for a due diligence period that was not in line with what the seller wanted and they went with another buyer and I’m definitely still feeling bummed about that one and secretly hoping that they fall out of a contract. But yeah, that was really hard on an emotional level really.

David:
So that kind of disappointment’s something a ton of people in real estate have to deal with, this missing, something small that you feel like I’m going to stick to my guns and I’m not moving off of this. And then later you’re like, why did I die on that hill? How can you move forward with this new knowledge in place of knowing what you wish had done different to frame it differently?

Philip:
I think the biggest takeaway for me is instead of trying to play this game where I win every single advantage that I can get in a real estate transaction, just finding what is my number, what is the number that will work for my business plan that I will feel good about, and then just going forward with that number and not playing some mind game like could I have saved 5 grand here, 10 grand there?

David:
Yeah, that’s a good point. It’s very easy to measure the wrong things when we’re trying to win in real estate investing. So you can win in things that don’t actually have objective value to you sometimes or they have a little bit of value, but you put a lot of effort towards them. And then the other things that have a lot of value you maybe overlook. So don’t beat yourself up about that because this is a thing that we all learned. This is how my system or Rob’s system, whatever, people have our own system. It’s usually a set of values is what we’re referring to when we talk about a system. They’re developed mainly through these frustrations that you experienced. Can you give us a little bit of detail about what the seller wanted and what you were looking for and how you missed?

Philip:
Yeah, so this property is listed for a million dollars. It was on the market for almost 10 months. I had been told by the listing agent, it had fallen out of contract a couple times. So I was feeling like I was in a very confident position to really ask for a lot. So my initial offer was more than 200 K below asking, and then we got a counter that was only 50 K from what I had asked for and has totally fit our numbers. We were a little concerned because we’re looking at land and things that don’t necessarily have permanent structures built on them, so we wanted a longer due diligence period. For them, they’re sick of this property, they’re ready to get it done, and they’re like 30 day due diligence. I decided to ask for a 60-day due diligence, which was asking way more than they were ready to do, and that was where I tripped up and, yeah, somebody else came in and said, yeah, 30 days is great.

David:
Was this the property that I had said, Hey, write an aggressive offer and see how they counter you?

Philip:
Is actually very similar property. Actually, that property, I didn’t get a counter offer. That seller was like, you can go take a hike, but it was really the exact same strategy that we talked about for that.

David:
All right, so that’s a good lesson that you recognized. You went after two properties. This couldn’t have worked out better. One of them told you to go pound sand, the other one countered you aggressively. Then you’re like, oh, these guys want to play ball. So you did get very close and that is a good lesson for everyone who’s listening to learn from what Philip did is by poking holes in different properties, you saw which one had the weakness. Your finger went right through the paper on the one where they countered you aggressively.
The advice I’ll give you the next time that happens is when you feel like, oh, they really want 30 days, I really want 60 days, but this price is really good and the numbers work, accept the offer, start your due diligence and when you get to the point where 30 days have passed and you are… this is especially for California, and you have to waive your inspection contingency, meaning your deposit’s at risk, offer them another 5 grand or maybe 10 grand to extend you another 30 days.
You don’t necessarily have to release money from your deposit because that’s money that you’re losing if you don’t buy it. But you could just be like, you know what, I was going to pay you X price. How about if we readjust it and I’ll give you another $5,000 if you give me another 30 days? At that point, their pot committed. They’re like, well, we don’t want to lose this buyer. We lost our other buyer that walked because we went with Phil. But, you tried to negotiate that extra 30 days when they had the leverage because they had other buyers.
The goal as the buyer’s to get that thing locked up, get all your competition, okay, get that girl off the market, she’s yours. You don’t want to be worried about, she wants to go to Forbes Steakhouse, but I want to take her to Applebee’s when she’s got other opportunities of other guys that’ll take her out. Once you got the date set and you got that property in a contract, you got a little more wiggle room to negotiate to buy herself some extra time. So that’s just a little bit of experience for you moving forward. Just because you said I want 30 days instead of 60 doesn’t mean that you’re not going to get the 60.

Rob:
That’s really good. Honestly, you never cease to amaze me, David, with your negotiation skills, but it is, it’s really hard to negotiate in the moment because tensions are always high, but once you’re in the deal and you show them that you’re a serious buyer and that you really want this, asking for a two-week extension and then another two week extension is always a lot easier because all the stakes are high for everybody. We’re all in the deal. No one wants the deal to fall out again, and so you have way more leverage on the backside.
I do want to say, Philip, I don’t want you to be too down on this because 30 days due diligence on this type of project really isn’t enough. Personally, I think you need 60. At a minimum, for this kind of stuff, I’m always looking for 90 days plus. So I don’t want you to beat yourself too much about it because I just don’t think 30 days is reasonable, but employing David’s tactic, that’s how you turn the corner on a deal like this.

Philip:
Yeah, that’s great advice. And, yeah, we had coincidentally, a very similar property that we were in negotiations for, and it was the same thing that made us lose the property is that they wanted… in that case, they wanted a 19-day due diligence period and we’re like 19 days, this is totally not reasonable for what we want to do. But in hindsight, because I was following how it got under contract, the people that it got it under contract and they did request two extensions because it closed fully 40 days after they got it under contract.

David:
I’m sad to hear this happen to you, but I am not surprised. That’s just the experience that I have being in this situation, representing clients. Really frankly, this is why having a good agent makes such a big difference, right? When Rob and I did our deal together, he kind of got to see how my brain works and how I think, but we also had an agent that could implement my strategy well. There’s some agents that just can’t do it. So you had the right idea, and that’s the point we want to highlight here. It’s just the execution could improve and you should expect that. Nobody walks into something and crushes it on their first moment. What I just said, the majority of people listening are probably thinking, I didn’t even know you could do that. And nobody knows you can do that unless they’ve done this often

Rob:
Hey, it’s kind of like whenever the buyer or the seller’s like, I’m selling this house as is, no repairs, and then you’re, okay, sure. And then the inspection comes back and you’re, but I need you to fix all of these 1000 things. That’s pretty much what you’re walking into.

David:
Yes, that’s a rule that I learned, there’s no such thing as an as is sale. No one should even say it. When they say as is, it means nothing. If there is an inspection contingency in place, there is no such thing as an as is sale because you will just say, okay, I don’t want your house. What do you mean, you have to buy it? No, I’m walking out with my deposit. Well, I don’t want you to leave. Okay, then fix all this stuff and you’re right back to where you were.
But don’t fight that battle in the beginning when they have the leverage because they can still date other people. They’re still shopping that property. Once it’s in escrow, you’ve taken leverage away. And the opposite’s true of sellers. If I’m representing you as a seller, I’m, no, we’re not going into contract with this buyer until they show they can get due diligence done in 30 days or we structure it so you lose 10 grand if you want to back out. We get something if you get out of this deal. But most agents aren’t that smart, man. They just go along with the road of least resistance.
So in the future, lock it up, understand your contract or your contingencies, have your realtor go back and renegotiate in the thick of it, right? Because now they’re in an emotional state. They’re like, Ooh, we’re finally going to sell our property. They’re thinking about what they’re going to go spend the money on. They’re shopping for their next thing. So when you come back and say, I need another 30 days, they’re not going to tell you to pound sand. There’s no one else to take that deal to. It’s been showing pending on the MLS for the last 30 days. They’ve lost all their leverage. Now, they don’t like it, but they have to agree to it, and if you want to sweeten the deal, give them a couple extra thousand dollars on the purchase price.
So that’s a great learning lesson. I’m glad that we were able to go through that together. I’m sorry that you missed it, but this should encourage you to go write another 10 offers way below asking price on other properties and see which one of these people want to play ball. That’s the name of the game. One question that you asked this week was about systems and you asked if there’s a way to streamline due diligence for analyzing properties. I assume that’s because you’re like, how could I have possibly got this done in 30 days? What are some questions that you have on that topic?

Philip:
That’s definitely a part of it. I also, as a side note, just yesterday, which was really exciting, I got a 22 unit in Cleveland under contract with a couple of partners. So now it’s a lot different because it’s a commercial property, there’s not land that I’m analyzing the due diligence, but we are definitely on a timeline with our due diligence for this 22 unit. And so really being as focused and really having the best checklist that I can even imagine for going through this is at the top of my mind.

David:
All right, Rob, from his perspective, because this is sort of in your wheelhouse, is there anything in particular you can give Philip advice for when it comes to streamlining due diligence?

Rob:
Yeah. So I think that this is a really tough one because when it comes to due diligence on these types of land deals, it really does require acquainting yourself with all the different roles in departments for all the different counties that you’re going to be calling. So there’s going to be a difference between a plan checker and then a building and safety official and then the environmental health department and then the zoning commission.
So you basically have to learn the language of all these different people and call them and ask them the same questions. So one of the things that I’ve learned doing this multiple times with different properties is I tend to call over and over and over again, and sometimes I’m a different person. I just want to hear all the different regurgitations because while the code is always the same, people’s interpretations of the code is always very different.
So I like to call all the different city officials and basically kind of understand their basis for why they believe what they believe, why they have certain code in place from septic tank to how big the septic tank has to be to off-grid procedures, can you use compost toilets and all that kind of stuff, right? I’m getting in the nitty-gritty here, but the reason I say all this is I tend to write down all the questions that I’m going to ask beforehand because you don’t want to sound like you’re just rambling out of nowhere when you’re on the phone. You want to have a very concise and meaningful set of questions for everybody, and then you want to learn the names of the people at that different department and ask for a referral on who you can talk to next.
So hey, thank you so much for your time. I know that you didn’t know too much about what off-grid toilets are allowed here. Is there anyone in your department that you could point me to? So I think having a very long list of questions like that, and then also make sure that you’re notating who you talked to. That way if you talk to them again, they’re not, weren’t you the guy that called two days ago? And then you’re, no. So I’ve done this so many times where I’ve called the same county over and over again, and at a certain point when that happens to you and they’re, you just called two days ago, your cover’s kind of blown, and then they won’t give you the time of day, right?
So make sure that you’re notating exactly who you’re talking to, what their position is, what they do, and then also write down all your questions in advance so you can keep those conversations as concise as possible. Because for the most part, people don’t want to talk to you on the phone for an hour. I don’t know if you’ve tried this yet, but they want to get you off the phone as quickly as possible.

Philip:
For when you’re doing that and you’re talking to county officials, will you have things that will come up and be like, okay, this is a red flag, this means that I shouldn’t pursue this opportunity?

Rob:
Not necessarily no, but I ask them, what is something that could possibly happen that would stop this project from moving forward? Most of the time they’ll say, oh, there’s not really something that could stop it, but you do have to watch out for this. But what I like to do in this due diligence phase is to know that my project is technically feasible and then I close on the property and then we can do the actual permitting, but there’s no way for you to do the full on due diligence in 60 days and know every single answer. You can get a pretty good idea, and that’s what you’re trying to know, right?
You’re trying to check the feasibility of your project so you have the confidence to close on your property because what you don’t want to do is close on your property with all these unanswered questions and then find out that you can’t actually develop your project, right?

Philip:
That’s great advice. Thank you so much.

David:
All right, Philip, thank you very much for your time. Appreciate you and congrats on that Cleveland deal. Let’s hear more about that the next time that we speak.

Philip:
Sounds good. Thank you guys so much. Really appreciate it.

David:
Danny, last time we talked, you were finding a broker to work with and you were going to work on building up your ability to be a little more outgoing and make conversations in a more fluid way. We had kind of touched on rather than just attacking that directly, work on some other areas of your life where you were uncomfortable to just get some momentum going to then take that momentum once it was built up and apply it to this problem that you’re having now. So how did that go?

Danny:
Yeah, so hey, in the words of John Foley, I’m glad to be here. When thinking about the introvertedness, I did go and kind of just work on it a little bit every day like you all suggested. Because it was the top of mind after the last podcast, I was able to think about it in various situations where I’m talking to new folks and maybe I think you mentioned the cashier at the grocery store at restaurants, just kind of getting a little bit more conversation every day and it has become a lot more natural just as working out and just lifting up a little bit more every day and a few more weights. So it’s been working out pretty well.

David:
Okay. I got to say, it actually comes across on this conversation. You’re a little bit more outgoing and maybe not ridge is the right word, but it’s been a little bit more loose. Am I completely imagining that or do you feel a little bit more like you could flow?

Danny:
Yeah, I do. I definitely feel a lot more comfortable. I think part of it also is that we’ve done a few of these already, this is the third recording, so I’m less in my head about what I need to talk about and over-preparing and really worrying about that part of it and I’m able to be a little more comfortable.

David:
But there’s a lesson in that also, which is that the first couple times you do anything, it’s awkward AF, it’s hard. And the more that you stick with it, the more natural it becomes, and that is not different when it comes to analyzing deals or talking to people or attending events or like with our last guest, Philip talked about he wrote an offer, he got a really good counter offer, he just kind of fumbled it when he got to that point. But the next time he gets to that point, he’s not going to fumble. You can’t expect to hit it out of the park on your first shot. So props to you for sticking with it and recognizing the process does get easier the longer you go. Now, you had mentioned your struggle this week was that it’s the continued problem of having to balance your real estate investing work with your full-time work. How are you staying motivated on that front?

Danny:
Yeah, we also have the kind of like Rob as well, I also have the challenges around family life and kind of making sure that I carve up enough time there. So for me, I think it comes to the realization that I’ve got to embrace the chaos so that stuff isn’t going to change. I like my job. I plan on putting my full energy when I’m there. When I’m at home, I plan on putting my full energy in my family, so how do I fold this in and make it part of my daily life and make incremental progress also, where it’s not just a big bang thing every Sunday, spend all day and just kind of bust my butt and try to get all these checklists done?
But that has been motivating for me, just that realization, keeping my eye on the bigger picture. Why am I doing this? So making sure that that’s always top of mind. And this big thing about extreme ownership, just kind of saying I’m responsible for the results, so if I don’t do anything, nothing happens. So I always just keep using those things to keep pushing myself and having the right mindset as I keep going through.

David:
Yeah, that’s right, our success is much more determined by who we are than just what we do. A lot of people get into real estate investing thinking, if I just do these things, I’m going to end up with this result. It’s not the case. It’s who you are. Now doing things will impact the person you become. That’s what the key is. As this character’s being built, you will find that the right opportunity’s, the right people. It may be even a completely different asset class than what you thought, but it does become known the longer that you stay on the journey. So this is the way Danny, stay on the way.

Danny:
Yeah, I love it and just a little progress every day, it’s been awesome.

David:
So touching on systems, you mentioned that you like ways to systemize how you’re trying to educate yourself. Let’s talk about that for a little bit. How’s that been going?

Danny:
Yeah, obviously since I discovered real estate and decided that I want to dig into it, this podcast has been a big primary source of information besides all the books and all the other ways to learn. I find since I’m doing a lot of digging in Sacramento, there’s a lot of drive time, so I’m folding in time instead of listening to the radio, I’m making sure that I’m going through some podcasts or some audiobooks there. Gives a lot of time. In relation to my family life, taking my daughter to practices and stuff like that, there’s gaps there where you can go and get a few things done or smallish things done. Do a module or read, listen to part of a podcast, make a phone call or email and just find those gaps. Even at work, take a walk, go take care of a couple of phone calls. I think that kind of stuff has been really helpful just to recognize all the extra time that there is during the day and being able to prioritize these things.

David:
Have you tried signing up for the YouTube Premium feature where you can listen to it even when the app is closed?

Danny:
I have not.

David:
It’s a good 15 bucks a month or whatever it is. It’s one of my favorite things I did. So I invested in some AirPods and YouTube Premium. Because most podcasts will play their stuff on YouTube. If it’s not on YouTube, if you’re just listening to a podcast, of course you can do that too. But anytime I’m doing anything, I’m going for a run. I’m at the gym working out, I’m going to the grocery store to buy food, your meal prepping, you’re washing your car, cutting your grass, whatever you’re doing, you can have this stuff going on in the background. It doesn’t have to be let me carve out an hour of the day to sit in my room, in my couch and just listen. Right?
You can be something that you’re doing while other productive things are happening. So if you’re trying to figure out how to find more time, one way is you can find ways to educate yourself while doing other stuff that we all have to do, right? Like Rob’s got to go pick up his kids, he’s got to go deal with situations with them. You could be educating yourself in the middle of that. And so there’s probably some ways that you can combine synergy here to save yourself some time. As far as your action plan for your next steps, tell me what you got in mind and how we can help you with that.

Danny:
Yeah, so I’ve spoken to some brokers, some folks in Sacramento. I think I’m pretty comfortable with one person. I’m going to start now kind of dialing up the evaluation side and kind of going through and really more closely looking at these deals with the intention of making aggressive offers there. So that’s the next step for me is to just go in and to… I’ve been up there a few times. I see some interesting properties. Now it’s time to where the rubber hits the road and just really dig in.
I think it’s going to be interesting for me in terms of aggressive offers and when we think about 10 to 20 unit properties, there’s a lot of money. The price point that I’ve been looking at is about 2 to 4 million. Still upmost things out there are vastly overpriced based on what I can tell. So aggressive offers may be 600, 700 K less. So is this the right market? I get the feeling there’s going to be opportunities and it may be just kind of going through and just keep doing it. It’s going to be one of those things where just keep working at it. It’s not going to be the first time that I go through and they’re going to accept the offer. But is that reasonable, 600, 700 K off of listing price or am I just so out of whack right now that I should be rethinking?

David:
Everyone listening needs to do what you’re saying right now? This is the strategy I’m recommending for everyone in this market. When Rob asked me for advice, I give him this advice. When I’m buying my own properties, I’m doing it. Get out of the habit of running your analysis with the BiggerPockets calculator on the list price from Zillow. Stop that. Stop analyzing it at what is listed for and saying nothing works, and then just saying, I can’t buy real estate. Find the area, the asset type you want, the crystal clear criteria. Sounds like you know, stuff in the 2 to 4 million range, 20-plus units in these areas. Know that, know the number that makes the deal work and just write the offer at that number.
And you’re not trying to get it accepted, you’re trying to get a counter offer. You’re trying to find the seller that’s like, well, I was listed at 4. You wrote it at 3.4. What about 3.55? Okay, now they’re very close to where you want to be and you can look for creative strategies to structure this. Maybe they give you a note and second position so your down payment’s a little bit less. Maybe they fund you some money at 0% interest that you can use for the rehab. You do something once you get it really close.
And so the action needs to be taken aggressively. More offers should be written, but don’t write them at… Don’t just, A, look at a bunch of stuff at the list price and say, nothing works. This is what everyone else is doing. Danny, your competition is analyzing stuff at the list price. Doesn’t matter. If that stuff’s been sitting there for a while, sellers are listening to the news. They’re seeing interest rates are not really budging. It’s slowly wearing in on them that they’re going to have to sell, and if they want to sell, it’s going to be at whatever offer they get, not what they want. Make sense?

Danny:
Yeah, absolutely. I think I’ve learned from you, it’s not about that list price, it’s about what prices at work works for you. And I’m definitely of that mindset.

David:
So I literally have a spreadsheet, it’s got tabs, offers written and then offers accepted, and then it goes down properties I have, stuff in rehab, blah, blah, blah. When I write an offer on a property, it goes into that tab because I’m going to follow up in two weeks and write another offer. Maybe they say no to your 3.4, that’s fine. In two weeks you write it again. They say no again. Well, six weeks later, maybe that 355 counter comes back. Okay. That’s the way that we win in this market is you’re just poking, poking, poking, looking for the soft part. Quit waiting for sellers to get there on their own and just decide to reduce the price, go after it and find them before they do the price reduction so you’re the one that locks it up.

Danny:
Absolutely. Thank you.

Rob:
One quick thing, Danny, have you put in an offensive offer yet?

Danny:
Not yet. No. I’m just-

Rob:
All right, yeah, you got to do it, dude. I think you’re probably very scared. You’re like, oh my gosh, if I do this, it’s going to ruin that person’s life. It’s all going to come crashing down. Everyone’s going to talk about me for years to come, and no one will… dude, no one cares. Just do it and then expect the no. Get them to tell you to pound sand, basically, and then be, all right, whew. First rejection feels good, let’s do it 10 more times. Honestly, every “bad offer” that I’ve ever made, it feels good to get the first one out there because it’s, all right, I knew they weren’t going to go for that, but now let’s go for another one.
So I would say just to get the jitters out, go make an offer. Go make a crazy offer on something that you’re like, eh, I don’t really want this one, but if I got it for a million dollars less, I guess I’d take it. And you can make the offer. They’re going to say no, whatever, move on. But you just got to get that the jitters out, I think, and then you can make it more of a recurring habit.

David:
That’s your homework.

Danny:
Yep.

David:
Well, I want you to come back next time we talk with several of Rob’s double O method, the offensive offer.

Danny:
All right, will do.

David:
Yeah. And remember, the goal is not to get it accepted, the goal is to get a counter. So you can play with that. You can start off at a level of offense, and then, dude, I don’t like that. Maybe come up a little bit and at least it gets a conversation going, which is what you really want. You want their agent to come back and say, no way. And your agent to say, well, what would it need to be? Well, what about this? Now you are at least building some momentum. You’re not just throwing spaghetti at the wall and hoping it sticks.

Danny:
Yeah, love it. I will absolutely do that.

David:
All right. Thanks, Danny.

Danny:
All right, thank you.

David:
All right, that was Danny. Next up we have Wendy. Wendy, you have Rob Abasolo’s favorite name in the world. He loves to mention it every time we talk to you. How’s it going?

Wendy:
Aw, that’s great. Thank you. Yeah, I like my name too. I think I’ll keep it.

David:
The last time we talked, you were assessing your existing properties for potential as either medium term rentals or short-term rentals. I understand that they’re not necessarily in areas where that would work, but you were going to kind of do a stress test just to see what would need to be done. Walk us through what that process was like.

Wendy:
Yeah. All right. First of all, it was a great experience. I went ahead and analyzed all these different properties that I have in I would say C class neighborhoods, and here’s the interesting fact. People still do Airbnb and short-term rentals in these kinds of neighborhoods, and I was surprised. Now all that being said, most of the ones that I’ve got, the ones in Indiana, they’re stable. They’re performing right now on a long-term, and I’m not ready to jump head into any of those to kind of upset those apple carts yet.
Baltimore, I think, could be a really great midterm rental market. However, once again, as I look at those areas, they’re still a little bit transitional, if you will. And so I’d maybe like to wait one year. I’ve got section 8 tenants in three out of four of them. The fourth one I think would be a decent one for a midterm or short term rental, but I’m going to wait this year out to kind of see what’s the right approach for them in a year.
But I’m going to take my best opportunity one, which is in Ocala, Florida. Now, these are two properties that I have put money down on that are delayed a year, and I’m frustrated, yes, but they’re supposed to be done in April, and I’m going to take one of the two of those. As I did the analysis, with the interest rates the way that they are now, it’s pretty much just a break even when these properties get put to market. So I think the opportunity for me is to turn one of those, this is the least risky path, into a midterm rental. I can’t do short-term rental in that community, but I can do a mid-term rental. And, what that would do is take my cash flow from breakeven basically to about $600 a month. At least my analysis shows that’s what the market should garner. So that was where that ended me at.

David:
So you’ve had some several positive things that kind of came out of that little stress test or mock experiment here of seeing what it would look like if you move some of your existing inventory into medium term rentals.

Wendy:
Yeah.

David:
Okay. That brings us back to your original question, which was like market, should I go invest in? I believe it was Las Vegas, is that what we were talking about? Is that right?

Wendy:
Yes.

David:
Okay. So what’s your thoughts on that after our last conversation?

Wendy:
Okay, so since we last talked, I’ve got a lender, I’ve got a realtor, and I selected this real data driven lender who’s done a lot of work in Vegas for 20 years, who has very clear criteria for what they will recommend their investors or people buy in certain parts of town. So they look at it kind of like this L, if you know Las Vegas, and you kind of stay away from the areas that are close to the strip. Ironically, that’s where all the short-term rentals are, which I don’t know, I’m sure you’re familiar with the short-term rental market there is kind of in an upheaval right now because they’ve put some strict rules into place.
So that’s the one downside of Vegas is that it is, it’s probably a B minus or a B market for me to go into. It’s got great opportunity, and even for mid-term rentals and even for a short-term rentals, if you can get a contract and you are living in the property, they’ve got some strange rules. But it is potentially a little bit saturated because of all the hotels that are there because of all the other short-term rentals that are going to maybe be pushed into the midterm rental space.
But I did get to have a conversation just last night with Jesse Vasquez, who is the midterm rental guy, and that was fabulous. He kind of gave me some insights and hopes. He said, it’s not a terrible market, it’s not the best market, but it definitely can be done there as far as midterm rentals are concerned.

David:
Okay. So what are you thinking as far as that strategy? I think you were talking about possibly moving there to house hack. Are you thinking medium term rentals might be the way to go?

Wendy:
Yeah, so here’s my safe approach because I have this sort of Murphy’s Law of real estate investing, what can go wrong will go wrong. So I’m pretty conservative in how I want to do things, although I’m also a bit of a nomad, and so I’m free to do whatever works best for me financially. So I’m thinking that with my first go round in Vegas, that I’d like to buy a house, maybe a four, five-bedroom house with at least three bathrooms, possibly four as many as I can get, and house hack that as a person who lives in that house, and then also rents out the rooms to others, maybe some mid-term rentals. If I could get a short-term rental license, I could probably use one of those rooms for a short-term rental license. But rent out the other rooms to either traveling nurses or digital nomads, or even just people that I find in the market that are looking for something.
The market seems to be able to bear a minimum of $1,200 a month for a really nice place. Now, there’s some kind of low end, not look great looking ones for 800, 900, 1000, but if you wanted to live somewhere where you felt comfortable and safe and it was sunny and it was nice, I think you could get people to pay definitely upwards of $1,200. So I’m thinking if I can get three rooms filled at that price, I can pretty much cover the mortgage and mine and at least break even with a house hack in Vegas.

David:
I love it. This is some encouraging news, much better than when we first got started, and it seemed like every potential had some kind of a roadblock. So if people want to hear more about Jesse Vasquez, he’s a friend of Rob’s, and turns out he knows a bunch of my friends too so we’re probably going to become friends. You can hear him on episode 728. It should be the next one that airs after this episode, and you’ll be blown away just like Wendy was. Now, Wendy, in your update last week, you mentioned that you’re struggling with limiting beliefs. Let’s talk about that. Where can we help you with those?

Wendy:
Oh, yeah. So I guess this is a pattern for me. I go between this balance of analyzing new opportunities and things and analysis paralysis that kind of stops me from taking action. And sometimes it’s for the right reason, but other times I feel like I should have done that. I look back six or eight months later and I’m like, look, someone else just made it happen, why wasn’t that me? So I try to look for reasons almost to say, no, it won’t work, and I’ll move on. Even when I was going to talk to Jesse last night, I was about to get on the phone with them, and he said, I have some very specific thoughts about Vegas, and all I could think was, ah, he’s going to tell me not to do Vegas.
And part of me sickening as this sounds, felt relieved that I could say no, and then I could move on to some other new idea. But at least I recognized that in myself and I said, gosh, don’t do that to yourself.

Rob:
Basically, you were relieved that it wasn’t going to work because then that kind of would allow you to stay in the research phase that maybe would get you onto this next thing.

Wendy:
Yes, it’s like this self-fulfilling prophecy of failure. And so perhaps the first step is realizing it in yourself. And luckily, when I did talk to Jesse, he didn’t say that at all. And so I think I’m going to just try to take a step back and say, all right, realizing that I do have these self-fulfilling ideas about what will work and what won’t work, that as you guys have said, many times, anything will work in any market if you put your effort toward it in the right direction. Not anything, but most real estate plays can work. You just have to put effort into it.
I’m not afraid of effort, I guess I’m just afraid of failure. It’s my life savings, and so that’s what kind of holds me up. And then in addition right now in Las Vegas or even around the world, I think everybody’s wondering what’s really happening with the market. It has dropped. Is it going to keep dropping? I know I can’t anticipate that I’m going to buy at the very bottom of the market, but I want to at least know that I’m not buying into something that’s about to drop a hundred thousand dollars as soon as I buy into it. So those fears I have.

Rob:
Sure. Well, first of all, I think recognizing it is huge. I’m like that too, right, I’m just like, all right, not going to work, let’s find something else. But I think after doing this for a couple of weeks, what you probably struggle from what I struggle with, which is the shiny object syndrome of real estate’s, great, there’s so many things out there, and I just want to do it all. And I’m always, I’m not closing doors, I’m not opening doors. And so for me, that’s always a problem because everything’s an option. And when everything becomes an option, then it’s just really hard to make any kind of final decision. So I think really what it sounds like in this particular episode, in this moment in your life, we’ve sort of found the strategy. You want a house hack in Vegas, you’re open to it.
I think it’s time to just commit to that. I think it’s time to commit to that specific strategy, to that specific decision. Is that something that you’re going to do? If it is, yes, I’m ready to do it, boom. Because as soon as you have that final decision and you’re like, this is what I’m going to do, it’s really hard to move from that because now we can actually start taking actions to make that decision come to fruition. You can start looking at houses in Vegas that are the five bedroom, four baths or three baths or whatever you can get. You can start making a recurring list on Redfin. You can start contacting agents, you can start making offers.
And really the deeper you get down into this rabbit hole of that specific strategy, the harder it is to climb out of it, which is a good thing, I think. So I think it’s just really, the problem is at the beginning of this, when there’s so many options, it can be a little overwhelming, but committing to what your strategy is, which I think is the house hack, I think that’s going to solve a lot of these problems for you.

Wendy:
Right. I feel like I’ve made the decision to go ahead and do it, and I’ve got realtors looking and I’ve given them a very clear set of criteria. And so now the question becomes, what’s the right size house? What’s good enough? What’s not good enough? So now I kind of have my systems and my prioritization matrix to work me through what’s a good one versus a bad one.

David:
All right. On the topic of systems, you mentioned that you use a lot of spreadsheets, that you are spreadsheet dependent and spreadsheet friendly. What have you learned from all the systemizing that you can share with our listeners?

Wendy:
Well, systems help me make better decisions. That’s the overarching theme in general. But I wish I had more of them, and sometimes there’s too many of them. That’s the double-edged sword of systems, because I do have many spreadsheets and sometimes they’re not as organized as I’d like them to be. But let’s take, for example, when I’ll be analyzing a property, I do have a very clear process of going through this, and what it is I get the property listing from the agent, and then first I look at the aesthetics of the house, the space, does it have enough bedrooms and bathrooms, and does it have a good space and does it have at least 2,500 square feet, et cetera, et cetera. What’s the area around the house?
And I start to look at it from a Google Maps perspective. What part of town is it in? Does it have parking that’s good? Does the street look attractive? And then I go out to Zillow and I look at what else is for sale in the neighborhood? What did it sell for last time? How long ago did it sell? Just getting an economic picture of it. And from that, I get a good enough idea of the unit if I can’t go visit it, I’m kind of a tactile person, would love to put my eyes and hands on it, but if I can’t, this is how I do it.
From there, then I go to do the analysis from a moneymaking standpoint. If it’s a long-term rental, I’ll look at a rentometer or the BiggerPockets version of it. The short-term rental, I was able to do it through AirDNA. And then for midterm rental, there really is no official calculator, but it’s kind of one and a half times the long-term rental rate and/or what I think the market will bear, which is about 1200 minimum a month for a room. So if I multiply that times 3, it’s 3200, how does that compare to my mortgage? Put myself into the mix, and that’s how I can at least say, all right, we’re at the point where maybe now we could determine what we might offer to pay for this house. I loved your advice though on how to make more offers and just make it at what you think you should make it at as a starting point.

David:
All right. So first piece of advice that I’ll give you is come up with a hypothetical deal. I think you mentioned if it has at least three bedrooms, they each rent for 1200. That allows you to break even and have a space to live in. Some form of an avatar like that and make that a baseline. Or maybe this is what I have to have. Then say, how can I improve on that? If three bedrooms works, how do I get four? Or how could I get five? And don’t just set your search for, I want to look at four bedroom homes. Of course, you can do that, but look for every three-bathroom house and notice that, let’s say maybe a three-bedroom house has 1500 square feet, what if you set your parameter to 2200 square feet? You’re going to get more four bedrooms.
What if you set it to 2,600 square feet, but you find a three-bedroom house? Okay, the people who are looking at 2,600 square foot homes are probably looking for five bedrooms. So they’re going to be missing this home. There’s probably enough square footage in that 2,600 square feet to add two more bedrooms or even possibly three. You have to look at every floor plan. But you are going to define the gems like that. If you know that three bedrooms works, look for ways to get more square footage and say, could I add four? Could I add five? Could I get six? And if the answer is yes, does it have parking? Does it have enough bathrooms? Does the floor plan work?
That will give you something to do. Like you said, you’re not afraid of effort. That you can put that energy towards that’s going to be productive for you, rather than just looking, well, what three-bedroom houses are out there and what’s the best one. That’s a frustrating approach to take, okay? When you find it, it’s probably going to have been on the market longer than the competition because there’s not a lot of people looking for a three bedroom home that’s 2,600 square feet.
So then you write the offer at the price that works for you. Now, it might be the list price, it might be less than the list price, but do something like we mentioned where you write an offer to try to get a counter. Now what happens, this is my strategy is I don’t look to hit a home run on any one area of a deal, I look to accumulate several areas where I win that combine to make it a grand slam. So if you’re getting a 2,600 square foot home that you could get five or six bedrooms out of now instead of breaking even, you’re going to be making 2,500 bucks a month or so on this deal. Maybe you get into a better neighborhood and then you get it less than what it’s worth, and then there’s a value add component to it.
Those combine to make the deal really good. After you’ve seen a handful of those, your brain is going to recognize them like, Ooh, that’s the one I want to look at. That has potential. Then it won’t be as hard to find them. They’ll start jumping out at you when you’re looking at houses. Does that make sense?

Wendy:
Yeah. And that brings up one of my other questions is with this house hack thing, how many individuals will live in a single 3000 square foot house? Do we max out at four people that don’t know each other? Are we trying to get a couple of couples? What’s the right mix of this? And I just haven’t mastered that understanding yet.

David:
Yeah, I can’t say for sure. I’ve never had a person that asked the question of, well, how many people are living there? Mostly what they say is, what does the room look like and what is my rent? That’s the majority, right? Because when you’re living in a room of a house, it’s kind of understood you’re not going to be spending a ton of time in the common area. It’s more of a hostile type environment. I just want to save money. I want a bed to sleep in. I want a place for my stuff, but I’m not looking for a home. It’s a very transitory type of a situation.
So I’m sure they prefer to have less people, but I don’t think it’s nearly as high on the priority as do I get my own bathroom? How many people do I have to share a bathroom with? That’s what’s going to be on most people’s minds. Just like when you check in a hotel, you’re not asking, well, how many other people are staying in the hotel?

Wendy:
But you do want your common area to be attractive and maybe some outdoor space where I might sit and read a book. Those are things I’m thinking about, but I don’t know if it’s what they’re thinking about. They’re just like, I need a place to sleep and I need a place to shower.

David:
I don’t think that they’re thinking nearly as much about, I want a place to read a book. If you like your privacy, you’re not looking for rooms to rent, you’re looking for an apartment. The people that are looking for this are looking for a budget option, which is how I lived my life for years as a cop. I was like, I don’t want a place to sit and read a book. I just need a place to go sleep and shower and then get back out there to work. So you’re going to be having traveling nurses that are trying to rack up that overtime and other people that are wanting to be out hiking and exploring and doing stuff. They don’t want a place and abode to chill. Those people are buying their own house or renting their own house or renting their own units, not sharing rooms. That make sense?

Wendy:
Yeah.

David:
Okay. So that’s some advice I’ll give you. And then I would also check in on local ordinances to make sure that there aren’t limits to how many people can be living in a house, which I don’t think is going to be a huge deal because it’s usually neighbors that report that. What will be a huge deal and what I tell people all the time, because we work with a lot of house hackers on the David Greene team, and we’ve got this down pat, make sure there’s enough parking. Everyone forgets that.
If there’s not enough parking, your tenants will park in front of the neighbor’s houses. The neighbors will get mad because even though they don’t own the space in front of their house, they think they do. And when they can’t park in front of their own house, it gives them some incentive to call the city and make your life hell. So you’re looking for houses, not necessarily track homes, where your neighbors are really close, you want a little bit more space and you want to make sure that there is plenty of parking.

Wendy:
Interesting. Yeah. Okay. And then I can turn loft areas into other bedrooms as well, right?

David:
Heck yeah. You want to look for that. That’s what I used to do is I’d find a house with a loft that was three bedrooms, turn the loft into a bedroom, turn the living room into two bedrooms, and still have a family room, and I could turn three bedrooms into six.

Wendy:
Wow.

Rob:
Yeah. We do that all the time on Airbnb. We mark it lofts as bedrooms. We disclose it, we say, Hey, it’s an open space, but there are beds. We put two beds in them and it can be used as a bedroom for sure.

David:
Or you just put up some drywall and turn it from a loft into a room. It’s cheap to do that if you want to actually just put up a door and frame off that loft.

Wendy:
Interesting. Okay. Well, I’m thinking if this works, that this will be my first foray into this city of Las Vegas, and I will probably then take Jesse Vasquez’s approach with other units, and I will maybe just rent the entire house out, houses, get a number of properties, sort of either under contract or arbitrage and start to make some relationships and build a business. Maybe this is my way out of my W2 someday as to kind of just really become a midterm rental kind of specialist in this area. So that’s my longer term thinking.

David:
Well, that’s exciting stuff.

Rob:
Yeah. That’s cool.

David:
We will check in with you soon. Thank you very much, Wendy.

Wendy:
Thank you.

David:
All right. I want to thank all of our mentees for participating in this program with Rob and I and sharing their journey with the BiggerPockets community. This has been awesome. Rob, any last words before we get out of here?

Rob:
Nah, but I will say it’s been really cool to see the journey and then the actual character development of so many people. For example, we kind of glossed over this, but Philip casually mentioned that he got into a 20 unit

David:
22 deal, yeah.

Rob:
Yeah. We didn’t even talk about that. I’m, wait a minute, where was this two weeks ago when we talked about it with them or two months ago? I don’t remember what the timeline is on this. But, that’s huge progress. And that’s just the tip of the iceberg for some of these peeps. So really to cool to see that they’re actually taking action. I think they’re so close to turning the corner, and I’m excited. I think as soon as Danny goes and makes a low ball offer and gets basically a big fat no, I think it’s going to be a little scary at first, but I think he’s going to feel good afterwards.

David:
Yeah, he’s making some big progress. Just you can tell with his personality, he’s definitely starting to open up and you’re seeing some of those natural talents and gifts that Danny has, are making themselves manifest. Before when he was thinking, I don’t really know enough to be doing this, some of that was held back. And then Wendy, I can also tell that and focus is starting to come in. She’s starting to get that target in her sights, and I have a feeling Wendy’s the type of person that when she zeroes in on that target, she’s taking it down. There’s not going to be any stopping her. So this has been very cool to see.
And I want to thank you, Rob, everybody, if you could DM Rob or leave a thank you to him in the comments, he’s here with a very sore throat, ruggling through the show, coughing up a lung because he is dedicated to this process and loves our listeners just as much as I do. So thank you, Rob, for being here.

Rob:
For sure. Happy to be here.

David:
And thank you listeners. Also, we wouldn’t have this podcast without you. We are here to help you make more money and build a better life, and we sincerely love you, and thank you for being here. If you could, please give us a five-star review wherever you listen to podcasts, that helps us out a lot. All right. That’s all I have. This is David for Rob “The Infirmary” Abasolo signing off.