BP Podcast 038: Unique Strategies for Buying Real Estate with Travis Daggett

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On today’s episode of the BiggerPockets Podcast, we want to dive into some really great buying strategies for picking up properties for the best deals. Our guest today, Travis Daggett, leads us into some really interesting and high level techniques that any investor, new or seasoned, can immediately apply to their own business. From buying HUD properties to bidding at the Courthouse steps – this show is chalked full of actionable advice.   Although Travis is primarily a wholesaler, his story and  knowledge on buying great deals can help any house flipper, buy and hold investor, wholesaler, or any other real estate investor. Definitely don’t miss this show.

Read the transcript for episode 38 with Travis Daggett here.

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In This Show, We Cover

  • The “failed” early experiences that helped define Travis’ future investing
  • How Travis made 5 figures on his first wholesale deal
  • The benefits (and downsides) of buying a HUD house
  • How to “shotgun” offers on real estate deals
  • Strategies for bidding on the “courthouse steps”
  • Travis’ story of when flipping didn’t work out
  • Tips for being more productive and getting more done in less time
  • Creative ways to attract private money

Links from the Show

Books Mentioned in the Show

Tweetable Topics

Just like most things the federal government does – they don’t do it well. (Tweet This!)

REI Quick Tip: Find out who the neighbor’s landlord is – and become friends with them.  (Tweet This!)

Your first offer shouldn’t be accepted – or it’s too high. (Tweet This!)

Connect with Travis

Travis’ BiggerPockets Profile

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

41 Comments

  1. Brandon-

    One of the secrets to a good interview is great interviewers! You know how to bring out the best. You kept it relevant, interesting, timely and applicable. I really appreciate the opportunity to share. Please let me know how I can help you and BP in the future!

  2. Another good podcast fellas. I have two of the scenarios going on right now. The paying draws early (I did get pictures but they were definitely from the best angle.) I didn’t use my own crew or subs as it was quite a distance from where we normally do business and the guy figured he would be good. Went into it knowing it might happen. It was a friend who used to work for me years ago. House had so much equity I figured Id give him a shot. I did stop him though as the time and money was over the top (still friends he understood). Didn’t turn into a big ordeal, because I had quite a bit of equity. Second issue was the same house, just underbid a little too much. Im sure he didn’t get quotes. Regardless it will end up alright but it would probably make some newbies pretty uneasy. — Oh and I just found out I missed hoa fees on a house I bought in another state. Something I remember at signing but seemed to just forgot to put down as expenses. The fees are small but they could have put a lien on the place and it would have been annoying.

    Thought Id give some input on working with contractors. Contracts can definitely have time frames and liquidated damages with them (at least in Washington). I would suggest if you choose to go this route that the contract is reasonable and there is profit for the contractor. Don’t just use the desperate guy that will sign anything then hold him to it. You won’t win any money from them if they go out of business anyways. Time can be big money so even 5 to 10 grand more on a contract can wash if they get the house done in one month vs two. I don’t mean because of the cost of money (that would only save a little) but because of the value of money in hand for your next deal. Getting your next deal started and finished, realizing profit etc.. All my contracts for my own projects using subs and projects my construction company has for clients have a time frame in them. They are good to have in there but should be fairly reasonable. A bonus for beating the schedule is a great option as well.

    A little warning on contracts though. It wasn’t this podcast but someone mentioned not allowing change orders on their contracts. Im not saying you cant try it but change orders really can’t be avoided if they are legit. When you write a contract that says no change orders allowed, the contractor can sign it but all that means is that if he hits a point where their are changed to the original scope of work necessary or asked of the owner then the contractor does not have to do them. They would still be entitled to finish the original contract for the original price. If a change order isn’t issued then they either pull of the project and get paid for work completed, or go around the change, but if its necessary to do a change in order to finish the house someone will have to do it and if it isn’t the owner it will not be free (unless the contractor is extremely nice or doesn’t know the law).

    Your best bet is to have a contract that has pricing already established for the changes if they are needed. Or assume the worst and have credits in their when the unforeseen doesn’t happen. (This is Washington but I really would find it hard to believe this isn’t standard contract law). Put clarifications in your contract or in reply to the contractors contract, and give them specifications to go off of. On a big project have them turn in submittals for materials that you have to approve. Its really standard stuff when working with a real contractor and of course costs more. (some smaller contractors might not do this stuff this isn’t saying they are bad.) and nope I didn’t hold to any contract on the deal above, could have but didn’t.

    • Rook-

      Great input on the work order changes! If something couldn’t have been foreseen by a reasonable person (plumbing leak-water was off when the contractor did the quote, etc.), then it might make sense to increase the scope of work. I think the key is to have a discussion w/ the contractor and the agent who is going to list it (if you’re using one) to make sure it’s justified and to avoid scope creep.

  3. Another good podcast.

    I especially like some of the insights on bidding on HUD homes.
    That has been a big part of my business and it is pretty easy to do.

    I also get a kick of people that all bent out of shape by those counter offers they send.
    I always just want to muss up their hair and pinch their cheeks because it is so cute! 🙂

  4. Love the podcasts. Haven’t listened to this one yet, but have a general podcast question.
    Is it possible to break the podcasts into 5 minute chapters? I listen to them, repeatedly, and often want to rewind to listen to something I heard, or didn’t hear, again. So with my ipod (maybe it’s just mine, or I’m just an idiot), I have to press and hold the rewind button to get it to go back for a minute or two. But, half the time, when I let go of the rewind button, it skips back to the beginning of the podcast. Really frustrating. If it only jumped back 5 minutes, I wouldn’t then have to fast forward for 40 minutes to get back to where I was.
    Are chapters possible?

  5. The four hour work week mentioned once again! I am currently trying to get through this book via the audio version. I assume you need to be a well established real estate investor?? I am a newbie, and I am completly lost listening to it and and I am about ready to stop listening, as it is providing no value to me at all at this time. Am I seriously missing something really important? Intrigue me please, as I am dying to know…

  6. While the show covered some ground that has been previously covered, the content was scattered & superficial. Too bad, the topics were of interest, but the show just didn’t deliver.

    • Joshua Dorkin

      Donald –
      Thanks for the feedback. Perhaps you could tell us exactly what you mean. We dug in with pretty sold detail on both bidding on HUD and on bidding at the courthouse — along with many other topics. These topics were never previously covered with such depth. How is that superficial coverage? Just curious . . .

  7. George Bittar on

    Another great podcast gentlemen! I learn something new every week and try to walk away with a different approach to implement in my business to take action on. This is the key to success- keep up the great work!

    Travis, I need to go back to and re-listen to the piece when you make offers and close, but it sounds like none of these HUD contracts are assignable and can’t only be wholesaled via a double closing? I am good with that if that is what it takes, but besides using transactional funding which is expensive, I am not sure of another workaround to finance the a to b before it gets to c without using alot of $ and credit.

    I immediately went to the HUD Homes site and already found multiple homes I would like to extend an offer on—one is 2 minutes from my house and I already did an ” exterior inspection.” Please let me know or DM asap.

    Thanks.

    George

    • That’s right, George-HUD doesn’t allow assignments, but they do allow double closings.
      All you have to have is POF-you don’t actually have to provide the funds if you’re doing a simultaneous close. I’ve just used a bank statement.

      • Thanks Travis, can you elaborate on this?

        I am assuming you are then closing using the buyers (person you are wholesaling it to) funds? Or am I overthinking this and the settlement agent will coordinate this to make sure it is cash less on my end.

        I have 4 properties in play now since your podcast and high engagement with the realtors that are lisiting for HUD.

  8. Still haven’t had a chance to listen to this one yet, but @George Bittar, the HUD contracts may not be assignable, but someone mentioned in a recent podcast how they will create an LLC, sign the contract under the LLC (so the business has the house under contract) then just sell the LLC to his buyer. The LLC has the contract, so whoever controls the LLC controls the contract. Might work in this case too, it would depend on HUD allowing businesses to buy their property.
    Example: Let’s say you’re going to buy 123 Here St. for $100,000. You go create 123 Here St LLC with your state for whatever that might cost. (It’s only a couple hundred here to create) Then you go get 123 Here St under contract through 123 Here St, LLC. If you would have wholesaled 123 Here St for $10,000. You can now sell 123 Here St. LLC and it’s holdings for $10,000 to your buyer. He then gets the house contract with the business. He still spent $110,000 and you still got your $10,000, same as if you could assign the contract.

  9. It was to have read “have NOT”, my brain was running faster than my fingers..

    What I mean, is that the guest didn’t seem to want to get into detail, and much of what was disclosed was mixed in amongst the banter. I think it would be more beneficial if 1 or 2 topics were covered indepth rather than trying cove,r so much ground in an hour. Speaking of an hour, why are the shows limited to an hour. Many of the guests could go on longer and seem to sometimes be cut short. Why not let the show run its natural course, and not rush things?

  10. David-

    Shaun is right on. We’ve run into the deed restriction when flipping Fannie, but never w/ HUD. This is one of the advantages.
    BTW-In regards to the Fannie we wholesaled, we escrowed the purchase price and leased to the buyer for 90 days. Worked great!
    Hope that helps!

  11. I think this is the podcast you talked about being careful about buying auction properties with unknown liens. I am 98% sure that the foreclosure process/auction wipes out any subordinate liens. That is why one must advertise about upcoming auctions. It is the responsibility of the lender to show up at the auction to protect their interest. The way they do that is bidding up to the dollar value of their lien plus all senior liens – they would only do that if they felt the value was higher than their position. I think an IRS lien is the only lien that doesn’t get wiped out at auction. Hope that makes sense.

    • When a bank takes back a property at auction they will clear up any other liens and clear title issues most of the time. However generally you are buying all those problems if you get it at the auction. One reason a lot of people rather buy REOs is because you don’t have that risk.

  12. I really appreciate these talks – they’re great and I know you guys put a lot of effort into it. But, you asked for constructive criticism so here it is: the banter is painful. The “famous four” introduction is probably the worst part. I could personally do with much less of it.

    But, the real content is good stuff.

  13. Thanks for another great podcast guys-

    Hey Travis –
    I have been researching HUD homes in my region and have found a few I am willing to put an offer in on. I recall you saying that you would put in hundreds of offers on homes through a VA and if you were not interested in that property you would not send in the earnest money. How were you (or your VA) making legitimate offers without EMD? Were you emailing the realtor? Calling them? Are you yourself a real estate agent? Sorry if you answered any of theses questions in the podcast. Thanks for any and all help !

  14. Hi Travis,
    Thanks for your great interview. I have looked at HUD houses before but didn’t know you could bid below the minimum. Great nugget! I wanted to find out if you have a specific amount you always offer first once you have a property that fits your criteria. Do you offer 10%, 20% or does it vary by property? Since you don’t do your true due dilligence until after you have a counter offer, how do you determine your original offer?
    Thanks again!

    • I’ll be interested in seeing what Travis does, but this is something I do a lot of as well so I figured I’d add my $0.02 to see how it lines up with his approach.

      I don’t do arbitrary percentages of list since I find that the quality of the list prices vary a lot, at least in my area.
      For each place I will look at comps and come up with a conservative ARV.
      I then estimate repairs based on basic guidelines based my prices for standard things (pick one of 3 levels for a kitchen etc.) and a sqft basis for things that will cost more the bigger the house is.
      Then just do a MAO formula. I usually use 65% of the ARV less the repairs (Which will also include 6 months of holding costs and a few other things) then I start at 90% of that.
      This is usually so low that I can’t really lose if they actually take it.

      I will then look at the property if I get a counter in the right universe.

  15. I have been looking into Auction.com … they have a lot of negative reviews but most are from people not doing their due dilligence on the rules to bidding.

    Anyways – Travis what is your opinion on using an agent to big through the website? Is this a safer bet than putting in your own credit card info? I just saw that if you win you cannot back out and they will keep your deposit. How do you avoid losing your shirt when you send our shot-gun bids and maybe win on some you do not end up wanting to commit to buy?

    Thanks in advance!

    Joel

  16. Sean Madigan

    Hey Guys,
    Great show!

    A quick note about how to ensure a contractor finishes a job on schedule. In your contract you can include a penalty clause which provides liquidated damages for each day that the project runs over the schedule. You can also include a bonus clause, (which is sometimes required legally) that allows the contractor to be paid extra for finishing ahead of schedule, (usually the same amount as the penalty clause). You can explain to the contractor that the clause isn’t to punish them, but rather to cover the financing costs that you will incur should the project run over the schedule. It may be tough to enforce without going into arbitration or litigation, but it might just be enough to encourage them finish the job and earn the extra bonus. just an idea..

    -Sean

  17. Diana L.

    Hello, I just listened to this episode and went immediately on the HUD sale site. I saw a lot of properties, none in my immediate area but that is okay. As I am sure it is updated daily.
    Are they usually vacant?
    I am thinking about getting my agents license just to bid on these. Or from what I understand I can I contact the listing agent directly and they can place the bid for me?

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