March 2022

The Fed may get more aggressive to fight inflation. How to prepare

The Fed may get more aggressive to fight inflation. How to prepare

The Fed may get more aggressive to fight inflation. How to prepare


For most Americans, the surging cost of living is weighing heavily on their wallets.

“Wage growth has failed to match the dizzying pace of rising prices, which the Federal Reserve has effectively identified as ‘monetary policy enemy No. 1,'” said Mark Hamrick, senior economic analyst at Bankrate.com.

After the Fed raised interest rates for the first time in more than three years, Chairman Jerome Powell vowed tough action on inflation, which he said jeopardizes an otherwise strong economic recovery.

More from Your Money Your Future:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

Now the expectation is that the central bank may raise rates by a half percentage point at each of its May and June meetings.

Each move will correspond with a hike in the prime rate and immediately send financing costs higher for many forms of consumer borrowing.

What to know about rising interest rates

Consumers will see their short-term borrowing rates, particularly on credit cards, among the first to jump.

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark, so your APR will increase with each move by the Fed, usually within a billing cycle or two. 

Adjustable-rate mortgages and home equity lines of credit are also pegged to the prime rate. Most ARMs adjust once a year, but a HELOC adjusts right away. 

Because 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, homeowners won’t be impacted immediately by a rate hike. However, anyone shopping for a new house is going to pay more for their next home loan (the same goes for car buyers and student loan borrowers).

“Mortgage rates have been rising steadily for a month, driven higher by inflation and the Federal Reserve’s effort to control inflation,” said Holden Lewis, home and mortgage expert at NerdWallet.

“Just a couple of months ago, most forecasters were predicting that rates would rise all year but wouldn’t reach 5%,” he added. “Well, we’re approaching 5% just a quarter of the way through the year.

“Rates will keep rising until investors see inflation heading downward.”

Here are three ways to keep ahead of rising rates.

1. Pay down debt

If you’re carrying a balance, try calling your card issuer to ask for a lower rate, switch to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a low-interest home equity loan or personal loan.

“Even if you have to borrow a bit from your home equity loan, you would at least be paying a lower interest rate,” Jones said.

2. Put off large purchases

3. Boost your credit score



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From Struggling Renter to Cash Flowing Landlord Using alt=

From Struggling Renter to Cash Flowing Landlord Using $0 Down Loans

From Struggling Renter to Cash Flowing Landlord Using alt=


No money down real estate investing usually sounds too good to be true. It seems almost impractical that someone without much experience, money, or property can secure cash-flowing rentals without putting a dollar into the deal. Even more astounding, today’s guest Andre Haynes was paid a few thousand dollars to buy his first rental property. He shares his exact steps on how he did it on today’s show!

While investing in real estate with no money down can seem like an advanced concept, Andre wasn’t some cash-flowing wizard from the start. If anything, Andre’s upbringing may have brought some hurdles to the financial side of his life. He had no credit, no cash, was faced with eviction notices, and generally was falling behind financially as a parent. He had to take a hard look at his life, redefine his goals, and reevaluate his choices. From there, it was a hard, yet incredibly valuable, climb upwards.

Now, only a short time later, Andre has built a real estate portfolio worth over a million dollars. He has numerous cash-flowing assets that pay for his liabilities and has started to educate others about how they can do the same. He defines this easily repeatable process on today’s show but doesn’t gloss over the fact that the only thing stopping you from obtaining the wealth you desire, is yourself.

David:
This is the BiggerPockets podcast, show 590.

Andre:
The moment that I took action over the way that I was thinking, and the way that I was speaking, probably in 24 to 48 hours, man, I noticed just an immediate change. And just the way that I felt, I just didn’t feel that was a black negative cloud hanging over me, walking around every day anymore, you know what I mean? And it’s all me. It’s nothing anybody else is doing around you. Most times, it’s you, and the way that you’re thinking, your surrounding, all of that. And if you’re able to change those things and identify those things, man, you can really expedite your process to get to the next level.

David:
What’s going on, everyone. It’s David Greene, your host of the BiggerPockets, real estate podcast. The show where we teach you how to build wealth through real estate. If you’re looking to have a better life, if you want more freedom, if you want more financial flexibility, if you don’t want to worry about money, if you want to feel like you’re actually making progress then you are in the right place. BiggerPockets is a community of over two million members that are all on that same journey for themselves, trying to improve their lives and their finances through real estate and doing it together.

David:
We bring lots of ways to help you accomplish that. The website has a forum where you can read about tons of questions that we’re asked, and ask your own questions, amazing blog articles. We have an agent finder system to put you in touch with agents in your area that are familiar with real estate investing, and we have the best freaking podcasts in the world when it comes to real estate.

David:
Today, we are going to be talking with a very special speaker, Andre Hines, as well as an amazing asset to your real estate investing journey, my co-host of the show, Henry Washington. Henry, welcome to the show.

Henry:
Hey man. Thank you for having me again. Glad to be back. You know I always love chit chatting it up with you, Mr. David.

David:
Yeah. And you brought some help with you today. One of your friends is who are going to be interviewing. He has an amazing story. Can you tell us a little bit about Andre?

Henry:
Yeah, man. Andre has a super inspiring story, man. It’s really a genuine rags to richest story, right? He talks a lot about coming from nothing, and had every excuse in the world to not be successful, right? And even when he pursued one path and didn’t find success, didn’t let that stop him from finally achieving financial freedom. And so I’m excited for you guys to hear how this young man literally took everything that was formed against him and used it to prosper.

David:
That is a great summary of what this is like. This is one of those shows where you’re probably not going to be able to multitask. You’re not going to be doing other things while this is playing in the background. You’re going to be sucked into Andre’s story, the adversity that he faced, the way that he handled it. He’s very transparent in sharing how he used to think versus what he went through, and how it changed the way he thought. And now what he’s doing with some of this momentum and synergy to build an empire for himself. So it was an awesome time. And especially if you are a first time investor, so when trying to get your first property, or someone who just feels like you’re sucked into the undertow of this current market, and you’re under the ocean doing circles, trying to get your feet underneath you, and you can’t figure out which way is up, this is a show for you.

David:
And for today’s quick tip, check out biggerpockets.com/podcasts. It’s being revamped. So now if you like a show, you can go there and you can find other shows of the same topic listed on that site as well as more thorough show notes. So if you hear a story like this one and you think, “Man, I’d love to hear more inspirational stories,” You can go there and you can have a list of other podcasts that were similar to that one. We are really ramping things up, so we’d love for you guys to check it out and tell us what you think. All right. That’s all I got. Henry, anything you want to add before we bring in Andre?

Henry:
Yeah, man. Absolutely. I just really encourage people to engage with this show, man. It is one of the realest, most raw, uncut conversations we had. And life isn’t always pretty, David, and we are all faced with choices at some point. And we can let life circumstances knock us off our path and take us out. Or we can take literally those life lemons and make lemonades and choose success. No matter your circumstances, Andre’s a real guy. He had some real situations and he turned it into real wealth. And so I encourage people to just take a list and try to put yourself in his shoes. And if you’re really just getting started, just like David said, man, what an inspirational story to hear. Because truly, if this guy can go from nothing and then turn it into wealth in an expensive market, right, even in these expensive times in real estate, then trust me, y’all you can do it too.

David:
Very well said, Henry, look at you, becoming quite the wordsmiths yourself.

Henry:
I appreciate that Mr. David. I’ve learned from the best.

David:
All right, let’s get to Andre.

Henry:
All right, Mr. Andre Hines. Welcome to the show, man.

Andre:
Hey man. Thank you guys for having me. I appreciate it.

Henry:
Hey, man. No worries. Thank you for being here. So you got your start in real estate through some counseling that somebody pointed you in the right direction. But before we get there, why don’t you tell everybody a little bit about your background, how you came up and how that story shaped who you are, and where you are right now?

Andre:
Again, my name is Andre Hines. I am from the South Side, Chicago, the Ida B. Wells Projects. I come from a non-financially literate background. Everything pretty much was government assistant. You know what I mean? When I was a child, my family was hit hard by the drug epidemic in the late ’80s and early 90s, so my mom and dad were affected by that. I ended up being adopted, blessed enough to be into my own family. My aunt raised me in church, and that molded my character and built me, you know what I mean, gave me my foundation of just the [rituality 00:05:55] and everything that I have now. Yeah, man, just coming from that to be where I am now is like night and day compared to, you know what I mean, some of the people that I grew up with, or grew up around or just, you know what I mean, some of my family members. And I’m extremely blessed, man.

Henry:
That’s cool, man. Because a lot of people didn’t grow up with a silver spoon in their mouth, and had to fight just to get where they are. But what I like about your story is you didn’t let any of that stop you from becoming financially free or even pursuing your goals, right? In your previous life, right, you went into even looking at a music career as a way to try to gain some traction. And so, how did what you learned when you started doing music guide you toward starting to understand that you need to be doing something to build wealth?

Andre:
I learned a lot of stuff in the music industry just about ownership, you know what I mean? And I looked up to a lot of guys like Damon Dash, Master P, Jay-Z, you know what I mean, Sean P. Diddy Combs, and they all had their own labels, and they all had clothing brands. They would start liquor companies, all of these different things that stemmed outside of just them having a rap career. And I always wanted to model just my business after that. I just didn’t want to be just in a single lane. I always wanted to be multi-faceted. And I always just felt, growing up because like I said, there was no financial literacy. Sports and entertainment were my only options for me to really attain wealth and just have success because that’s all I would see, and that’s all I really would, you know what I mean, was around.

Andre:
And just being able to really just maneuver the way that I have maneuvered and just really get to a point where I have just starting in the music industry, that experience really taught me, like I say, how to just operate in an ownership space, knowing that it won’t be easy, knowing that I’m not operating with a big major label behind me, you know what I mean? I was selling CDs out of my backpack and out of my trunk, all of those different things. It just really taught me a grind and a hustle, and I never lost that spirit and that energy when it came to real estate, and business, and entrepreneurship.

Henry:
If I hear you right, Andre, what I’m hearing you say is you had a mindset before. And this is really the mindset part of your story that was, I’m not financially literate. I see two roads to success, entertainment or sports. And if I can’t make it happen, well, then there’s no point of trying. I’m probably oversimplifying, but more or less, that’s the perspective. And then when you started your music career and you were not signed to a big label, if you’re signed to a big label, you’re kind of more of a W2 employee, is do what they tell you, “Hey, you go do this and we will take care of the details.” Right?

Andre:
Yeah.

Henry:
When you do it yourself, you are not entrepreneur, which means you’re a business owner. Even if the business is selling CDs out of a trunk, you still have to make the stuff, market the stuff, manufacture the stuff, price the stuff, keep your own books to know what your profit margin is. And that is what opened your mind up to, whoa, there’s actually a lot more possibilities and routes than just the two that I was seeing before.

Andre:
Absolutely. And I wasn’t necessarily successful in that field as far as on a famous or multi-platinum level or anything like that. But as far as, like you said, the mindset that it taught me and the hustle and the grind that it taught me. And it also, it kept me humble because I wasn’t successful. You know what I mean? Rappers tend to have these big egos and these images, that they’re this famous person, and they got all of this money. And really in all actuality, like you said, they’re really an employee. They owe money to the label. They owe money to the car company. They owe money to the mortgage company. They owe money to the jeweler. They owe money to the clothing company. There’s just like, they’re in a bunch of debt. And I was shaping up my life to be in the same way.

Andre:
I had to realize that it wasn’t working for me after a while because I spent maybe 10, 11 years chasing this dream. And sometimes, you don’t necessarily have to give up or quit, but you have to pivot, you know what I mean? And I didn’t give up on my dream of being wealthy because that’s what I was using music for because that’s all I knew. Because again, you find out you’re not going to make it in sports pretty young, you know what I mean?

Henry:
[crosstalk 00:10:02].

Andre:
Once you get to high school, you realize it’s a wrap. Once you’re not starting on the varsity team and there are no colleges coming to see you, that kind of stuff, it gets to you early, like, yeah, so this may not be my path now that I’m seeing what’s going on here. And yeah, I figured that out early. So I just started to learn how to hustle, man, because I just didn’t have a mindset of stock market, real estate, all of that stuff. So I would do little stuff like, man, sell sneakers, go and get a job here and there, just little stuff to make money. And after a while, like I said, I had children, fell behind on my rent for so long. I mean, eviction notices, you name it, just like all the problems that a person could possibly have and just, it was time for me to just really get my [inaudible 00:10:51] together, man.

David:
Well, that’s why I wanted to ask you that question because, so it’s funny that you mentioned sports. That was really where my journey started off as well. I just wanted to be a basketball player. I wasn’t at the time wanting to be wealthy or famous, but I just loved basketball. And I hit a ceiling, that was my athletic ability, right? I was more athletic than most people, but I was not more athletic than division one college athletes, much less professional athlete. Like you said, it becomes very obvious very quickly. It doesn’t matter what you do, you’re not getting past this point with these limitations. But in the world of real estate or maybe entrepreneurship in general, what I tell people is that your athletic ability is your mindset.

David:
And what’s amazing is that there are no natural limitations on it. It’s only what you put on yourself, right? So I just wanted to draw that out of your story and make the connection for our listeners that you had to have your mind opened, and that came through what you would call a failed endeavor. But what you gained in that failure is what opened up the door. So we’re going to talk about now. So I’m going to throw it back to Henry and let you guys keep going into your story. Thank you for that.

Henry:
It’s a perfect transition because you talked about getting your [inaudible 00:11:51] together, you talked about evaluating your situation, and then using that to guide your next steps. You essentially have documented this process that you’ve used to go from where you were to financial freedom now. So talk a little bit about what that is and how this ties into that step one.

Andre:
Yeah. And like you said, step one is the self-evaluation process, which is typically for most people, and for me as well, it’s the hardest part because that’s when your pride and your ego gets the biggest blow, because you got to take that look in the mirror and say, I ain’t going to the NBA. I’m not going to be a multi-platinum rapper. Or even just, even the level of responsibility just to say like, you know what, I’m just not where I’m supposed to be in my life, or where I want to be in my life right now. A lot of people just, like I said, in certain lifestyles they get caught up like with internet lifestyle, and just what’s going on with other entrepreneurs, what’s going on. Like I say, with rappers and ball players and they want to act like they’re living this lifestyle the entire time, you’re not taking care of your children and you’re behind on your bills.

Andre:
Like I said, you’re behind on your car note. Every dollar that you have is essentially on your body with the clothes that you’re wearing, just… you know what I mean? It’s bad, man. You know what I mean?

David:
I never thought about it like that. That’s funny though.

Andre:
Yeah. And when you’re able to have this conversation with yourself and be like, “Yo, I’m out here bad as hell right now. I’m really down bad. I really need to just sit down, reevaluate my situation and just re-plan.” And a lot of it comes with just unlearning a lot of stuff that we’re taught, you know what I mean? And just like school, church and stuff like that, just real traditional stuff that we’re taught a lot of times. And if we can shake that mindset, and just open up our minds, and think outside the box just a little bit, because nothing is wrong with the stuff that we’re taught in school and church. Just a lot of times it’s very limiting. You know what I mean? Especially the older stuff, because I was raised by, like I said, an older church woman, you know what I mean, who was just very traditional.

Andre:
A lot of times she would choose church over sports, and [inaudible 00:13:54] like that. It was like, “Lady, I had the opportunity to go to college. This could be my full ride scholarship here.” And she’s like, “No, we’re going to Bible study today.” Like, “Are you serious?” I would have coaches coming by the house, knocking on the doors and everything, she’s like, “Nope, we’re going to church.” You know what I mean?

Andre:
So certain stuff, man, like I said, we just really don’t get and understand. But for me, that was the first step in just understanding myself and knowing that I had to make a change. And it was taking that look in the mirror and being like, yo, you’re not the person who you say you are. You’re not the person who you think you are. You’re not the person who you’re front out here acting like you are. Like, dude, get it together. And the first step in doing that is having that conversation with yourself. And that’s a step that most people don’t want to take because it’s tough to say, I’m just not that guy, or I’m just not that woman right now.

Henry:
Absolutely, man. And just so people know, when I say you documented this process, you wrote a book, right? What did you call that book, specifically because of this?

Andre:
Renaissances’ 5 Step Guide on Getting Your Sh*t Together.

Henry:
Right. And so first step, self evaluation. Step two, what was next for you?

Andre:
Understanding the power of your mind and your words because typically that first step is brutal. You’re beating yourself down a little bit, you know what I mean? You’re identifying all your weak points. But after you do that, you have to tell yourself, you know what, but that doesn’t have to be who I am for the rest of my life. Now it’s time to make a change. I’m a confident person. I’m a talented person. I can go out here and do whatever I want. I’m able to build wealth. I deserve to build wealth. I deserve to change my life. And the more that you start speaking like this and thinking like this and just… you know what I mean, having these just positive affirmations and speaking them into the universe, the more you’ll get that stuff in return because the more you put it out there, the more you’ll get it back. And that’s just the law of attraction at its best.

Andre:
And that’s how it works because the moment that I took action over the way that I was thinking and the way that I was speaking, probably in 24 to 48 hours, man, I noticed just an immediate change. And just the way that I felt, I just didn’t feel that was a black negative cloud hanging over me, walking around every day anymore. You know what I mean? And it’s all me. It’s nothing anybody else is doing around you. Most times, it’s you, and the way that you’re thinking, your surroundings, all of that. And if you’re able to change those things and identify those things, man, you can really expedite your process to get to the next level.

Henry:
I like that. And I think that a lot of people gloss over mindset steps like this when they’re trying to think about their business or their real estate career. And I like to try to put some practicality behind it for people so that they can understand that this stuff truly does work. I know it sounds like, oh, okay just think about it, and it’ll be, but it’s not that. It’s like, our minds are powerful. And the things that we tell ourselves, that’s why vision boards are powerful for people, right? Like if you put something in front of your face every single day, you’ll start to realize that the actions that you’re taking are going to be moving you towards those goals in small ways, it’s almost like our subconscious takes over and we start moving ourselves in that direction. Now I’m not saying it’s magic, you write it down and you make it happen. But what I am saying is that when you surround yourself with your goals, either visually or taking the action to write them down, your actions follow suit, and sometimes that’s intentional actions, and sometimes it’s even subconscious actions.

Henry:
But so I challenge anybody, like if you have a goal of getting started with real estate investing and you’re not quite sure exactly how you’re going to get it done, take the first step of just writing down every day, I will be a successful real estate investor. I will be a successful real estate investor. Write it down five times every morning. If you do that consistently, what happens is, and we’ve talked about this on other episodes, David, it’s like the red truck theory, right? You buy a red truck and then now all you see is red trucks. Well, that’s because your mind is open to seeing those red trucks. If you tell yourself I am going to be a successful real estate investor every single day and you’re writing that down, you’ll start to see opportunities that you weren’t focusing, your brain wasn’t focused on before, you weren’t open to before. And then you’ll start to act on those. And that’s how mindset really starts to practically take hold in your life.

Andre:
I agree with that wholeheartedly because I’m a prime example of just what you said. You say, just writing it down because even before I was a real estate investor, before I got my first property, before I really knew about real estate investing, I knew that I wanted to be a real estate investor, I just didn’t have the right information to do it and get into the field. I was in a cubicle when I first got my job, I had to step away from the music industry. And once I started getting my stuff together and we’ll get into that, but I just wanted to just piggyback off of what you just said, I wrote down into my cubicle that I would attain over a million dollars worth of real estate assets by January 25th, 2029, which is my birthday. But I eclipsed that number probably 10 years earlier just by writing it down and having it in my face every single day and just believing and knowing that.

Henry:
Let’s put some parameters around that for people. And so you left music, because you said, this isn’t going to get me where I want to be. And even the people that are where I want to be, when you really look at it on paper, they’re not there. Right? And so-

Andre:
Yep.

Henry:
… you then said, “I got to go back to work.” And you went and you got a job. What kind of job did you get?

Andre:
Oh, man, dude was working at a telemarketing company. And I was calling people, putting them in schools that just weren’t accredited. Schools, like you hear about them in the news, like yeah, they just got shut down for education scams. [inaudible 00:19:43] Maybe I shouldn’t be working here.

Henry:
So you were doing telemarketing. How much were you making?

Andre:
Minimum wage age plus a bonus, sales bonuses. You know whenever you get sales, you get an extra little bonus or whatever the case may be. But the thing is, dude, I was killing them, bro. I was like signing people up for these schools. I look back at it, dude, I probably have 1,000 people who are just uncredited degrees right now.

Henry:
So you got a job at a call center. You were making a minimum wage, living in what city?

Andre:
In Chicago.

Henry:
In an expensive city. And you wrote down, you were going to do what?

Andre:
Obtain a million dollars worth of real estate assets.

Henry:
Right? That’s powerful. People need to see that. You had every reason to believe that you couldn’t do that. And you went and you got a job. And as you’re working at this job, you were trying to do the best you can at the job and you were doing well and you decided you were going to buy a million dollars in real estate assets. And most people who are in that situation, that would be so far out of their mindset. But you spent the first time in those two steps in trying to figure out how you were going to get to your goals, right. You had to self-evaluate, and then you had to look at the power of your words and then that leads you to learning about real estate. And so tell us a little bit about how that came to pass. So how do you go from a call center to buying real estate assets?

Andre:
That would lead into step three. Once I knew what I wanted to do, and once I started reading about it, I knew I needed some damn money. All right. All right. So real estate, I can’t do this bro. I started reading a little bit more. I started saving man, every dime that I had. Because at the time I was reading Rich Dad Poor Dad, MONEY Master the Game by Tony Robbins. This is maybe 2010, 2011. And I’m just picking up everything, just digesting information like it’s food, man. I’m just like, I’m hungry for it. So I’m just taking in everything. And those two books were what sparked the most interest in me and really taught me the most and really lit the fire under my ass. And I’m reading that book by Tony Robbins and just really just had me turned up. So I started, like I said, saving every single dollar from work. I started eating noodles for like a year straight.

Henry:
Which for the record is step three. Right?

Andre:
Yep. Yeah. Yeah. That’s what I’m saying. I was going into step three. And that was me understanding my money. And step three, is, are you frugal or are you fraud? Because again, a lot of times as we spoke about in my particular culture and just background, we tend to want to look like we have money more than we actually have money. And it’s a problem and I was one of those guys. So I had to really evaluate, okay, am I frugal? Am I saving money? Or am I actually doing what I’m supposed to do? I’m out here just really being a fraud and looking like I am and acting like I’m financially responsible and just tricking people. And I was, I was being a fraud, you know what I mean? And I had to really evaluate that. So like I said, I started saving money, making sacrifices, not buying Jordans every weekend all of that kind of stuff that was just really taking big chunks of money out of my pocket.

Andre:
And over time, man, maybe after about a year, year and a half, I had saved about 10, $12,000. And I just knew, oh, okay, I’m on something with this. And I need to do something with all this money because I never had this much money in my life just sitting there.

Henry:
But for reference, what were you making yearly?

Andre:
Ooh, maybe after taxes, about $26,000 or something like that. Barely over the poverty line.

Henry:
Right. And so I say that, because I don’t want people to not get the value of what you just said. You saved $10,000 while only making just under 30 that’s almost half your salary.

Andre:
Yeah.

Henry:
Right. Just through self realization and then putting yourself in checking on a budget. That’s amazing.

Andre:
It was hard. Oh, it was real hard, man. Just sitting in the house for, really a year and a half straight really only doing… really just not doing nothing. The whole summer long. You know when Kanye was like, man, imagine being locked in your room for three summers, that’s a different world, bro. You looking outside the window, you seeing everybody having fun. You on Instagram, everybody just says at the concert, Drake concert came to Chicago, oh it was lit. But you have goals and you know what I mean? You understand short term sacrifice for long term. You know what I mean? Greatness. And that’s really what I was on. And it worked out for me because after I did all of that stuff, man, and after I made those sacrifices, my life just took off just when I say on a rocket ship. And I never looked back.

Andre:
So it was just more so anything, man, just understanding that those sacrifices weren’t going to be forever. You know what I mean? It was just, somebody told me, man, sometimes you just got to turn down steak on an empty stomach. You know what I mean? At first it didn’t make sense to me, but then it made sense to me when I was able to have surf and turf buffet for the rest of my life. You know what I mean? So it just was the financial part of everything. And just me understanding my money and understanding what was smart to do with my money and what not to do with my money was just a major step for me.

David:
That’s very similar to my story. I did not do fun stuff when everybody my age was doing fun stuff. And this comes up a lot. So I’ve got a young guy on my loan team. He’s 23 years old. He’s my first hire. He’s crushing right now. He probably has 60 loans in submission right now at 23 years old. And he will say the same thing, “Ah, sometimes I feel like I’m missing out not hanging out with my friends.” I relate to it because I was in that same boat. But I’ll tell you, I don’t have any regret about not going out to a fancy restaurant or not going to a concert now where I am in life, knowing that that would’ve stole a house from me, right. If I had to pick, would you rather go back in time and go on a vacation with friends that you don’t even have anymore because nobody stays friends with these people for 20 years, right? Or have a house that’s going to pay you for the rest of your life. It’s pretty easy decision.

David:
So I just want to encourage the other people that are in this situation. You were Andre that you’re not doing this for nothing. It’s worth it. And then the other part I really like is that you mentioned is now you eat a seafood buffet every night. See when you spend your money on a car or on Jordan’s or something, you get the shoes, they get worn out, you don’t get to wear them anymore, you got to buy new shoes. When you get the house, it buys you a new pair of Jordan’s every month for the rest of your life. And it doesn’t matter, right? And you keep the house. That’s the difference. And when you get the asset, first, it buys the car, it buys the dinners, it buys the shoes, all the things you want are taken care of because you sacrifice early to get it. And it doesn’t stay where you’re just depriving yourself all the time.

David:
And the last point I’ll make is many things in life work this way. So if you think about, if you’re out of shape and you first want to go start running, you can’t run very far, you get maybe a quarter mile and you’re done. So you don’t really burn that many calories. You don’t see a result.

Henry:
Were you watching me workout out this morning?

David:
It seemed like you’d be probably in the gym, Henry. I don’t really see you doing a whole lot of running. I see you pushing some weight. But that’s the same thing, when you first go to lift weights, you’re not very strong. You don’t work out very long before you get tired and you don’t burn many calories. You’re not building muscle. You are conditioning yourself to eventually run four miles where you’re going to burn a lot of calories. And so what I’m saying is it does not suck the whole time like it does when you’re starting. When you first start running, every single step is agony and it’s terrible. And you do it for a long enough time, and like, this isn’t that bad. It might actually become fun because you’ve conditioned yourself. So I just want to throw that in there that while this may sound not appealing, when someone’s like, man, I don’t want to be sitting in my room watching everyone else have fun. It changes, right?

David:
Now Andre, I’m sure you’re going to tell us about some of the ways you’re finding deals. Some of the empowered way that you feel where you’re like, I’m walking around, I don’t have pretend I’m wealthy, I am wealthy. And the confidence that comes from that, where now you recognize all the things that at one point were temptations for you were because you wanted to look a certain way. And now that you don’t need to because you are that person, the temptation just goes away and that’s nice.

Andre:
And the crazy thing is just to take it back a little bit. It was extra hard for me because like I said, I had just come from a lifestyle again, while I was rapping, I was sitting next to Jay Z and Beyonce at basketball games, doing shows with Fat Joe and mind you two of my closest friends played NBA basketball. So I was playing video games with LeBron James, and weddings with Kobe Bryant, just wild that you wouldn’t even believe. And to go from that to having to sit down in a cubicle where the mindsets of the people who I’m sitting around every day just aren’t like mine, just the very, very bottom of just the work level. I said, I’m sitting in a cubicle, calling people, putting them in schools that aren’t accredited. So this was a very, very, very humbling and pride killing experience for me.

Andre:
And for a little while, I went through a little bit of a depression with this. But again, I realized that it was just a short term sacrifice for long term greatness. And as you said, man, I live my life on my own terms, now I buy all the Jordans that I want. I’ve learned about cool, art and dope [inaudible 00:29:03] like that. The ways I can use the money that I make from my investments to make other cool investments. So it’s not like I’m just spending the money now. So now let’s say I want to go buy a pair of Jordans, I can buy a two pair of Jordans. I can buy one to wear and I can buy one to put up and they go up in value like stock. Even if you’re watching this YouTube video, these little art pieces behind me, they’re really dope. They’re by this artist named Brian Donnelly Kaws. I collect his pieces, man. I learned about him, I started collecting his pieces. I’m paying two, 300 bucks for a piece just because I think it’s cool.

Andre:
I start looking this stuff up, man. It’s going up in value by 30 and 40% every year. I bought these two things back here, maybe four years ago for 300 bucks each, right now they’re worth 1,500 each and he’s still alive walking around all good and healthy, man. And God forbid something happens to him, but you understand how this goes. When typically something happens to artists or anything like that and you own a piece of their original work, man, that stuff usually skyrockets and values. I’ve learned so much different cool stuff. I and have been able to put my money in other cool stuff that are investments and not just me wasting my money.

Andre:
So just it’ll pay off man. Like David said, don’t think it’s just you just eat [inaudible 00:30:12] just for no reason. And you just got to do this for no reason. No, man. Over time you’ll be able to live a very, very happy life and just do whatever you want do out here, which is the main, that’s happiness. That’s what happiness is. Is time freedom, going to your kids baseball games when you want to, you know what I mean? Taking a family on vacation. Like Henry said, he’s leaving to go to Hawaii for two weeks. Who’s doing that. You know what I mean? You got to understand, but he had to make some sacrifices to get to that point.

Henry:
Yeah, absolutely right, man. I’m glad that you were able to touch on that for people because as soon as you start talking about sacrifice, people tend to tune out. I like that we’re able to put some color around that. So that’s good man. So you saved this money, right?

Andre:
Yep.

Henry:
You made these sacrifices, you built this nest egg and then how did you go from that nest egg to knowing you needed to buy some real estate with it? What led you to the real estate?

Andre:
That was step number four for me, which like I said, was building a solid foundation and maintaining stability. Because after I started saving money, I also started to understand and learn how to keep the money. Because once you start to get these big lump sums of money, like I said again, I’m speaking just from my personal background, from my culture, what I come from. We tend to want to go buy big ass gold chains, big cars with rims that aren’t worth anything. Just spend our money on a lot of… just ain’t worth nothing and depreciates in value, as soon as we get the receipt for it. You know what I mean? And I just wanted to maintain where I was at and have that solid foundation of just financial literacy.

Andre:
So like I said, I kept educating myself on top of me having that cash, I started to build my credit man. I started to learn about credit. I started learning about how to use credit. I started learning about how to leverage credit and all of these different things. After that, man, it was time for me to go into step number five, which was taking my leap of faith and buying that first property. And once I was ready, I reached out to a mentor of mine, a big sister of mine, her name is [inaudible 00:32:04], she’s a broker in Vegas. I’m like, “Hey, I’m ready to buy a house.” And she was like, “Eh, that sounds good. But you should consider getting a multiunit, and you should consider getting a multiunit with this program called NACA.” And I’m like, “NACA?” And she’s like, “Yeah. It’s a program that I feel like would be best for you because of all of the benefits that they offer.”

Andre:
And I’m like, “Hmm, what are the benefits to this program?” And she goes into telling me everything about this program and I’m just like, “Wow, I just read the same thing in Rich Dad Poor Dad.” So just it really clicked to me just about buying assets and buying cash flowing assets over liability, you know what I mean? All of these different things and it’s just like, a real light bulb just went off in my head when she said this. And yeah, so I took the leap of faith man and I went ahead, I started looking into the program, NACA, N-A-C-A, Neighborhood Assistance Corporations of America.

Henry:
Awesome. So what were some of the benefits to you and then how did you leverage that program to buy a property?

Andre:
So the benefits are for first time home buyers. And the NACA program, first out, they offer the lowest interest rate in the country regardless of what your credit score is. They’re mainly concerned about the debt that you have in collections and your debt to income ratio. In addition to that, they also offer to pay for your attorney, your agent, and most of your fees. The only thing you’re liable to pay for is your… but your inspection costs. They pay for your appraisals as well. Also, they give you the option to buy the interest rate down lower than what it already is. In addition to that, you don’t have to necessarily have substantial savings. What they will allow you to do a lot of times is what’s called payment shock. So they’ll say if you can afford rent, you can afford mortgage.

Andre:
So as long as you can show them that you’re paying your rent on time for a certain amount of time, you can qualify for a property. And if you want to qualify for a property, that’s more than what your rent is you would just have to save the difference between what your mortgage would be and your rent would be for six months.

Andre:
It’s just a really, really powerful program when I heard all of these benefits, man. And also you don’t have a down payment, it’s no money down, which is the biggest benefits of the program. And when I heard all of this stuff, I’m just like, “Are you serious? This can’t be real.” She’s like, “I swear, it’s real.” I’m like, “No, it’s not.” She’s like, “I swear it is.” So I went to the meeting man, everything that she said, they confirmed it. And it was just like, wow. So I went ahead, signed up, met with my mortgage counselor. From there, dude, it was just a mind blowing experience because I walked into the office and I wear a lot of dope sneakers. I collect sneakers. So I had on a pair of Jordans that had just came out. They were really hard to get. And my mortgage council was like, “Oh man, I went through hell trying to get my son those shoes, how’d you get them?”

Andre:
It just really started off like a great conversation between me and him, which just built up into a really great relationship. And he just asked me, what I was trying to do, what my goals were. And he was extremely helpful throughout my process. And he was like, you know what? We’re going to get you set up. He’s like, the fact that you’re looking for a multi-unit is amazing because that’s what I suggest that most people do when they come through these kind of programs, FHA, NACA, three and half percent down, no money down, man. Use it to leverage to get ahead, use it to get you a cash flow asset. Don’t go and buy something that’s going to, you know what I mean? Have you in debt or have you, you know what I mean, paying bills, get something that’s going to pay you monthly or at least take care of your mortgage for you.

Andre:
And the market that I’m in here in Chicago, we have a million multiunit. It’s probably 60, 40 houses to multiunit. So it’s not that hard to find multi units here. And I went out into the market, man, and I got my first property, got a brick four unit in a beautiful Chicago suburb, right outside of the city with amazing amenities, Walmart, churches, bus lines, trains, restaurants in the area and great parks, great school system in the area, swimming pools, all of this kind of stuff that you can find. And I knew about the area because I lived in the area for seven years before I purchased in the area. And I’m like, “Yo, I want to buy in Forest Park.” And I was able to get the property for $360,000, which was well below what it was worth at the time. I believe it appraised out for 390 and that was as is. And that deal was really, really good. And I took advantage of every single benefit that they offer in that deal.

Henry:
Awesome, man. So you went from working in the cubicle, saving $10,000, getting ready to make the leap of faith. You make the leap of faith, you learn about NACA and then you go and you find yourself a multifamily and you buy it. And so tell us a little bit more about that deal. So you bought the property and then did you move into it? What were the rents like? How transitional was that for you?

Andre:
So first off, it wasn’t just that easy. It was a lot of searching and I’m sure there are a lot of first time home buyers that are going to listen to this. I just want to mentally prepare you for what you’re going to be dealing with in the process. And this was, I’m speaking seven years ago. So now today’s market is way more hectic. So this is what you want to expect in today’s market because lot of people have these… Like I say, the internet has everybody, for some reason they think you’re just going to go out and just find this just magical, amazing property. It’s just going to appear right in front of you or you’re going to put in an offer and it’s going to get accepted and it’s just going to go so smooth when it just does not work like that.

Andre:
All right. So you’re going to go out, you know what I mean? [inaudible 00:37:36] and you’re going to start looking for stuff and you’re first off, you’re probably going to start looking for stuff that’s really out of your price range just out the gate because you just don’t know… You know what you can afford, but a lot of times your eyes will trick you into saying that you can afford something that you really can’t have. You know what I mean? Just because it’s beautiful. So you’re going to go out, you’re going to look at all these nice properties and you’re going to try to make these deals and people just aren’t going to want to negotiate their prices. You know what I mean? Their prices, their price, because they have 20 other people that are standing in line waiting to offer them more money than what you’re offering even if you’re offering what they’re asking for.

Andre:
So don’t expect your first offer, second offer all of that kind of stuff to be accepted. So you have to be really diligent and just persistent with this stuff. You got to go out here and really put in a ton of offers and kind of work with sellers. And nowadays you want to try to build relationships. Because in my property, that’s what worked, building a relationship, my agent built a relationship with the other agent and we played that card. In addition to that, you want to run the numbers more than anything. Don’t get caught out with how a place looks. Yeah, a place can be beautiful, but you’ll be upside down on your mortgage if you don’t run the numbers the right way, because you want to get a beautiful place. You know what I mean?

Andre:
So make sure the numbers make sense, man, if you’re not cash flowing, at least make sure that you’ll get to live for free. Meaning that the rents coming from the place they’ll cover most of the mortgage and you get to live in their place for free, not paying anything at all. Pretty much essentially keeping all of the money that you work for, that you make doing other stuff. In addition to that, man, you want to make sure you’re finding a property that is cash flowing a lot of times because a lot of times that’s how you’ll get qualified a lot easier and a lot faster by the bank.

Henry:
So it needs to have tenants in it?

Andre:
Yeah, absolutely. That are already in under leases and it shows that what they’re paying and all of that kind of stuff, it shows the rent roll. And that’ll be a great benefit to you because a lot of people don’t know because what I hear a lot of times is, “Oh man, multi-units are 400, $500,000. I can’t afford those.” But it doesn’t just go based on what you can pay. It goes based on how much the building is already generating as well. So they’ll take 75% of what the building is generating and add it to your income, which will make the property more than affordable most times.

Henry:
Man. That’s awesome. How many offers did you put in on properties before you landed the one you got?

Andre:
Probably five. And on that deal we just kept getting out bid. We kept getting just rejected. And on the last one, even we almost lost that one because what happened was, like I said, we put in five offers previously and I was just tired and frustrated. It had been two months I was looking, and I told my agent, “You know what, man, I want to get us a break. We’re out here every day. We’re not finding anything, nobody likes us.” You know what I’m saying? I’m taking everything personally. I’m like, “They don’t like us man.” So I’m on the MLS, realtor.com or Zillow or something like that. It was maybe 11:00, 12 o’clock at night, one night and this property just pops up, man. It is in my desired neighborhood, it’s a four unit. It has an apartment vacant ready for me to live in, the other three units are cash flowing.

Andre:
I’m like, “Oh my God, Jesus, what did you just do?” And so I called my agent, I started calling his phone recklessly. I probably called him 15 times. And the last time he finally picked up the phone was like, “What the hell man? You know I don’t do business this late.” He was really upset, but I’m like, “I hear you, but check your email though. Please just check your email.” So he was like, “Man, give me a second.” So he looked in his email, he was like, “Oh you right.” He was like, “So I’m going to write this up right now.” He wrote up the offer, sent it back to me. I signed everything over. He was like, “I want to get this over to them tonight. So as soon as they come into their office, it’s the first…” People were still sending faxes and stuff at this time. He’s like, “It’s the first I offer on their fax machine.” You know what I mean?

Andre:
It worked, they came into the office, they saw it and they were like, you know what, we accept the offer. But the only thing was the wife was the one that was home and she accepted the offer and I got excited, right. So I had a seminar to go to later that day it was, was a Rich Dad Poor Dad seminar. So I’m like, “Oh man, I’m lit. I just got my offer accepted. I’m going to this seminar.” You know how they pump you up at the seminar. So I’m just like, “Ah, yeah, I’m about to be rich as hell.” So as I’m doing all of this, I’m excited. My phone is just ringing, ringing, ringing, ringing, ringing. And I’m not answering because I’m just gassed up at this seminar. So I go out and I check the voicemail and it’s my agent. He’s like, “Man, give me a call back as soon as you can.”

Andre:
So I give him a call back. He was like, “Man, you know the offer that we put in earlier, it got knocked out.” I’m like, “Knocked out? What you mean? I thought we got accepted.” He’s like, “Man, the husband was at work. And as he was on his way home to sign the contract, another offer came in and it was all cash.” I’m like, “What?” He was like, “Yeah. So that knocks us out. It’s not our property. We don’t have it under contract.” I’m like, “Are you serious?” So my heart drops into my stomach at this point. Mind you, because I just went from here all the way back down to here. I’m on a thousand. So it’s just, oh my God what is going on?

Andre:
At the end of the day, what happened was they came in with a cash offer, the husband didn’t sign the contract. So like you said, it was just that offer was really null and void. But they didn’t just say, “We’re not going to take your offer.” They was like, “Hey guys, this is what we’ll do. We’ll give you everybody till the morning. You are the last two offers that we’re going to look at, come with your highest and best offer first thing in the morning.”

Andre:
So that’s what we did. Luckily for me the cash buyers, they came with the same offer. They’re like, “We’re offering cash, we’re going to stick to our guns. This is what it is.” And I offered an extra 15 or 20,000 I believe it was on top of my agent. Like I say, playing a relationship and the emotional card. He reached out to the agent. He’s like, “My guy’s been living in this neighborhood for the past seven, eight years, his kids love the parks, they love the school systems. They really, really don’t want to leave. And these guys are just investors, they’re probably just going to come over here and knock the building down.” And these people had an emotional attachment to their property. You know what I mean? So they’re like, “Ah man, you’re right. Let us just sell it to a nice family. Who’s going to take care of the place. We’re getting extra money.”

Andre:
And that emotion, you know what I mean, that relationship card, it played out in our favor. We got the offer accepted man, everything was cool. I was able to get the property. Like I say, with no money down, I was able to buy the interest rate down to two and a half percent from three and a half percent because I got a $10,000 sellers concession. And I used that money for that. I was able to keep all of my money. In addition to that, I walked away from the closing table with the $5,000 check because I didn’t need all of the money that they gave me to buy the interest rate down. So I essentially walked away with the building that was paying me cash flow and I didn’t spend anything on it. All I had to do was turn in the proper documents for a few months, let them, you know what I mean, check my info, go through my bank accounts, this typical home buying process. And they were like, “You know what, hey, we trust you enough. Take this building and keep all your money and take $5,000 with it.”

Andre:
On top of that, the day that I closed, I walked into the property, it was the end of the month, I got checks from all three of my tenants because it was like I said, the end of the month, it was time to pay the rent. And you know, when you close that first month, you don’t have a mortgage so that was all my money. So I essentially went from worth nothing to owning this four unit property where I lived for free $22,000 cash. And I got my check from work that same day. It was the most amazing feeling in the whole [inaudible 00:44:57] world.

David:
So now everyone listening to this is saying, “Okay, hear that, honey. I want one of those.” They’re calling their agent and they’re saying, “Hey, find me that deal.” Right? And so what I want to ask you is obviously you would do that over and over and over if you could. It’s hard to do that. It’s worth it, which is why we’re talking about it but it is not easy. It’s just like the workout analogy we gave earlier. And it’s still for me even as much real estate as I’ve bought, there are emotional spikes. You get excited, you get crushed, you get excited, you get crushed. And that happens too many times and most people tap out. They just say, I don’t want to do it anymore, right. I see this as the agent trying to protect the client from that. And then I get it myself when I start to get excited and then, oh, turns out something changes, right?

David:
So what advice do you have for the people that are not accustomed to this entrepreneurial bipolarism that the three of us have just embraced from the things that we’ve been through, where we expect these big highs and lows so that they stay in the game and they don’t miss out on this awesome deal when it finally happen.

Andre:
Man, just a simple one liner, man, it gets greater later. As long as you understand that. And as long as you can stick it out and know that the reward later down the line is going to be just way bigger than what you imagined, because I just never imagined that from that point of buying that first property, I’ll be here where I am, where I’m walking around, doing public speaking. I have an apparel line, I have a book, we’re hosting our own seminars. I’m investing in the stock market. I’m teaching people, mentoring people, just all of these different cool things that set me free from the work system and allowed me to start helping people and just pouring into the world on a greater level and on a bigger scale man. I just wouldn’t have thought that, but the fact that I made those sacrifices and I understood that even in the down times that I would be okay, just as long as I stick this out, it always comes out better than what you think it will.

Henry:
Part of that story that I love is, that you made the sacrifices, you saved the money, because your intent was to have to use that money to start building your real estate assets. And you didn’t have to because you found this amazing vehicle, but had you not went through that sacrifice and made those mindset shifts, right? When you come into money like that, you might have spent it differently, right? You might have blown that $10,000 on something else. And so I don’t want people to hear, oh, he saved that money, he didn’t have to. No, the discipline it took for him to save that money set him up to be able to continue to be successful once he was able to acquire that asset, right?

Andre:
Absolutely.

Henry:
That’s just an amazing story.

Andre:
And I did have to save the money. I didn’t have to use it. I had to save it. They want to see that you’re responsible that you’re able to save money, the same process that you would have to go through, through any other lender, whether it be Conventional, FHA, whoever it’s the same thing. They want to see that you’re saving your money. They want bank statements. They want to check stubs every two weeks, they want all of those documents to show that you’re doing what you’re supposed to do. And you’re a responsible human being before they release a 300, 400, $5,000 property into your name with no collateral. You know what I mean. Because essentially that’s what they’re doing. They’re just like, we’re trusting you to take care of your business and do what you say you’re going to do. And we get absolutely nothing for this, so hey, you better do right.

Henry:
And one thing before we move on to the next segment of the show, I want you to share with people is now you’ve found a way to even make more cash flow on the asset that’s already paying you cash flow. And so just give them a little teaser on how you’re additionally monetizing that asset right now.

Andre:
Yeah, man, in addition to like I say, just getting rents and everything, man. They got a lot of cool stuff going on out here with these apps, Airbnb, Vrbo. And I found this thing called Peerspace where I get to rent out my property, man to people who want shoot movies, music videos, photos, and things like that. And for the past six months, man, my house has just been like a movie studio it seems like man, because I got people coming in doing everything and it’s just insane. It pays a pretty penny. I’m really happy that I found it because it’s essentially been like a new ATM for me, man. Anytime I need some extra cash, I just go to Peerspace and I can make three, four, $500, three, four hours easily. And the cool thing about it is, it’s you don’t have to own the property to do it. And on top of that, you don’t have people staying overnight at your home that come in for a few hours and you make money just like you would in the Airbnb without people having to stay.

Andre:
I’m putting out a course on it soon to show people how to do it and how to really maximize it. So you guys check that out when it does come out, turn on your notifications on my Instagram, Facebook and YouTube. And you’ll be able to get that

Henry:
Man. Yeah. I mean it’s super. You put me onto it. I didn’t know it was a thing until you told me about it. And now we’re looking at putting some of our Airbnbs also on Peerspace, because it’s essentially, you can just rent a furnished space to somebody who may just want to use it for a couple of hours to do just like you said, shoot a video. Maybe even just host a quick event where they have a meeting or something like that. And so if you’ve got a furnished space, it could be your space. It could be an Airbnb. I think it’s just a really cool way to continue to monetize.

Andre:
Yeah. Families host Thanksgiving dinner parties at your space. Maybe they don’t have a big kitchen, and they’ll come and rent out the space. It’s just used for a lot of different cool reasons, and it’s a very, very short term rental that like I said, you can maximize the profits on it without having to deal with people for as long as an amount of time.

David:
Can I just say something from a overall perspective of, the thought just went through my head? As technology like Airbnb, Turo, Peerspace starts to become more prevalent where it is easy to go find something to use that you used to have to own if you wanted to use it, owning these assets becomes even more valuable. So if it’s like, if you’re the rapper who can’t afford the Lamborghini and you can go rent the Lamborghini, well, the guy who owns the Lamborghini has a more valuable asset because it’s not just him driving it, it’s the rapper who wants to rent it for the video. But then when Turo comes out and anybody can rent a Lamborghini whenever, right now, having a Lamborghini actually becomes a legit business because it’s so easy for people to find you. Unique properties, really nice spaces. These type of assets will only become more valuable as it becomes easier to market them with these technologies like we’re talking about right now, Andre.

David:
So I just wanted to highlight that’s one of the reason you see the price of certain things that isn’t going down, it keeps going up it’s because technology is making it easier to make it cash flow.

Andre:
Yep. And even just to add to that, like how I was just telling you guys, I used my cashflow to buy these art pieces, and they go up in value. So the art pieces are one of the big attractions that draws people to my Peerspace, so they’re even making me more money than going up in value, you know what I mean? It’s just like, man, it’s just one big circle of just money coming in, you know what I mean? When you do this stuff the right way, man, it’s insane. But again, it all starts with mindset and doing that first deal.

David:
Yeah. I think that’s great. One of the points that you mentioned there, Andre was what I call synergy. So once you start to get momentum, which is another concept. I know everybody always wants to hear, well, how do I just buy the house? Like you said, just what website do I go to, to just get a house and write an offer and have it be easy? And they don’t want to go through the grind, but that’s why these deals are available because people don’t want to put the grind in to get it. And then when you get it, it tends to be where they all play off each other. What you’re describing is, I make money off of art, then I teach people how to buy art, then that brings them to my Peerspace. And then I make money off of renting out my property. Now I have more money coming in, so I have more for the down payment for the next property. Then I get better at buying properties. And then agent said it to me before other people. And then the contractor calls me back first and gives me a better price.

David:
Everything gets better as you build this momentum. And so many people at the beginning of the journey are sensing, well, it I must be nice. Wish I could be Andre and I could have what he has going on, but you built momentum. You were slinging CDs out of the back of your car, right?

Andre:
Yeah.

David:
You were looking at everyone around you that was having the success you wanted and being tortured by that buffet that you felt like, I can’t get a seat in that buffet. I’m all around it, I could smell it, but I can’t eat it. Right? You put in the grind, and now that’s why it’s catching up to you. You look like you want to comment on that.

Andre:
You just see hit the nail directly on the head. Like I said, I was around guys who were in the NBA, winning NBA championships like, “God, when is it going to be my turn? You have me here, you have me around this, what are you trying to show me?” Something has to come from this. Like, what the hell is going on? Because you can’t just be dangling this over my head, and not really letting me have it, you know what I mean? And then, like I say, when I had to divert back and start the whole nine to five process all over again, I’m like, “Oh my God.” Me and God were really into it at that point, it was just like, “Dude, I’m about to come up there and we’re going to fight because you’re really playing with my life.”

Andre:
Like you said, David, there comes a time when you start to just be able to breathe a little bit more and you can see the light, and you get the ball rolling. And then you can just really pick up pace. And it’s just like, aw, man. Yes. And it comes a point where you’re just not in survival mode anymore. Man, for a long time, I was in survival mode, just really trying to figure out how I was going to eat, how I was going to pay my bills. Scraping, trying to figure out how I would get my children the things that they need. And that mind frame doesn’t allow you to think in abundance. It has you thinking in, okay, I need to do this right now in order for me to eat today. It doesn’t allow you to think generational wealth for the future because you’re hungry right now, your kids need stuff right now. You know what I mean? You don’t have the luxury of thinking for the future.

Andre:
I think once you get past that survival mode and that mindset changes and you have the air to breathe, and to be able to save a dollar, to save two dollars. Most people, they aren’t even in a position to save 50 cent, two dollars out of their check. Unfortunately that’s just a lot of people’s circumstance. But when you’re able to start doing that, man, it shows you that, yo, this is possible. And the moment that you see this is possible, growth becomes addictive. It’s the most addictive feeling in the world. Doing better, feeling better, it’s a high that you just never want to come down from it. Once you taste it and once you get it, just a little bit of it, you want to keep going hard or keep going after it, man.

Andre:
And I understand Michael Jordan and Kobe Bryant’s drive, they just never got enough of the success. No matter how many rings they got, no matter how many Olympic gold medals they got, there’s just a high that comes with that, just an amazing feeling when you… you know what I mean, you reach your goals and you start making progress, man. And it’s really almost an indescribable feeling. It’s just your fort.

David:
I love that you shared that because I think the majority of people are trying to figure out, how do I get to that point? Because they’re just eating that frog every day, and they’re not tasting what it can be like on the other side. I have this analogy that I describe what it’s like when you’re trying to have success as a real estate agent, but applies to investing too. Really, probably anything in life. It feels in the beginning, like you’re pushing this huge boulder up a hill. And to just get one inch takes so much effort, your calves are screaming, you’re pouring sweat. Everything’s burning. You’re asking yourself all the time, is it worth it? Should I just let this rock go and let it roll down and give up everything I did because it’s not getting easier? And the boulder blocks your view of where you’re trying to get to. You don’t know when you’re getting to the top of the hill. It could be 10 years from now. It could be 10 minutes, there’s no way to know.

David:
And you just push, and push, and push, and you listen to this stuff and it gives you encouragement to keep going. And you wonder, is God with me? Is the universe with me? It’s like, is it angry at me because it’s not easier? But what’s happening as you’re pushing is your muscles are being built, that is going to prepare you for when you actually get the success. And at certain point you crest that hill, and now it’s a flat plateau. So it’s not as hard to push the rock, but you still got to push. It’s not just happening on its own. It just isn’t miserable like it was. You start building some momentum.

David:
And at a certain point you come to the other side of the hill, the rock starts going down. And then wealth starts coming at you so fast, opportunities start coming at you so fast. The deals start flowing your way that you can’t even keep up with them. So you’re running as fast as you can keep up with that rock that you used to be pushing, and that’s where you get to decide what you really want your life to look like. And the problem is you don’t get to start going downhill. Everyone’s journey starts going uphill and that’s why nobody really follows it. But I really appreciate you sharing some of the details of what your story was like, Andre. For the listeners who are hearing this and they know what they want is to be chasing a rock at some point in their life with an abundance of things they want but right now, they’re just grinding. I think you needed to be in your room, looking outside, everybody else playing for a couple years because that’s when you were being prepared, that was your uphill battle, right?

David:
That’s when you were being prepared to handle what you have right now, instead of immediately getting your first deal, selling it, making $80,000 profit and buying a room full of toys. Right? And now you got to start back over. That rock went all the way down to the bottom, you got to start at the top. I really appreciate that. We’re going to move on to the last segment of our show. It is the world famous.

Speaker 4:
Famous four.

David:
This is the segment of the show where we ask every guest the same four questions and we are going to alternatively throw them back at you. The first question is about a book. What is your favorite real estate book?

Andre:
It would probably be like I say a combination, and I don’t know if they’re necessarily real estate books. They’re just mindset and financial literacy books, but they do cover real estate. Like I said, Rich Dad Poor Dad, and MONEY Master the Game. They really did it for me. They really put a lot into perspective for me. MONEY Master the Game taught me a lot. And I just want to say Rich Dad Poor Dad, just the Rich Dad Poor Dad education because there’s a plethora of books that come with just that education. And I read them all. So I started with Rich Dad Poor Dad, which was the mindset shift. And I started going into the cash flow quadrants, guide to investing that teaches you about all of the different ways to invest in real estate, the tax sales. You know what I mean? The REITs, all of these different things. And the same thing with MONEY Master the Game, I just learned money in general with that book. That book just really opened my mind up to investing. Not just real estate, but just investing in general.

Andre:
And it also just expanding my mind, like I say, to all of the different ways that I can invest in real estate and not just buying, you know what I mean, residential property, just… you know what I mean, learning about commercial properties, learning about investing in real estate through the stock market, learning about investing through real estate through just group economics, just through funds, all of these different things that it would talk about. And it just really, really blew my mind. So those two would probably be two favorites.

Henry:
Well, good, you’re making my job easy because the second question was what is your favorite business book? But sounds like MONEY Master the Game was probably what that was for you. So we’ll jump to question number three, which is what are your hobbies?

Andre:
Man, I like creating content, bro. I love creating content just based around my business and my brand. So I have a series called The Landlord Life, where I essentially bring people in on all of just the jobs and stuff that I do, and the problems that I’m having as a landlord. Because again, I see the internet tend to make being a landlord just being involved in real estate.

Henry:
Passive.

Andre:
Yeah, they make it just so glorified, and so glitzy and glamorous. So with this series, I just really tell people the truth and let people in like, yo, I just had a $30,000 plumbing issue. My roof just caved in, all of these different things. Like, yo, I’m tired of paying a plumber, so I’m going to go to Home Depot today and I’m going to buy me a rodder, and I’m going to rod the toilet and the drains myself. And I’m giving people a real inside look at this stuff, I’m documenting, and I’m videoing it. And at this point, I have about three seasons worth of content with that over 40 episodes. Henry’s actually guest on my series in Landlord Life. So y’all, check him out on season three. I believe it’s episode two or three. He’s on that one.

Andre:
And yeah, man, just really trying to learn and grow, and build my businesses, networking with guys like you, you know what I mean? Now, starting to come to events like the BiggerPockets Conference, things like that. I spend a lot of time where I’m doing a lot of investing in myself. That’s how I like hanging out, and just the things I like to do as far as hobbies now.

David:
Awesome. Okay. This is the money question, in my opinion. What do you think sets apart successful investors from those who give up, fail, or never do get started?

Andre:
I think that’s it, they don’t ever fail, give up and they get started. You know what I mean? I think that’s the answer, and that’s in the question. People like myself, I never let my circumstances stop me. I never let things that I’ve gone through, any of the hurdles, just… you know what I mean, any of the hard times really hinder me from achieving whatever goals that I wanted to achieve. Yeah, they might have slowed me down. Yeah, I might have had to take a break and maybe I had to pivot, reevaluate some things, but the thing is like, we just don’t give up. I think that’s the main thing that separates any winner from anybody that’s not successful. We don’t give up. Keep going, and we push through until we get the results that we want.

Henry:
Awesome. I love it, man. So tell us where people can find out more about you.

Andre:
Across all social media. I’m at Renaissance 125, R-E-N-A-I-S-S-A-N-C-E 125. I’m sure that’s going to be a hard spell for a lot of people, so I have to spell that out sometimes.

Henry:
Dude, that is one of those words for me. Everybody has that word that they can’t. No matter how many times they type it, they can’t spell it right? That’s the one, I got to Google it every time.

Andre:
Yeah. So that’s me across all platforms, Twitter, Instagram, YouTube, Facebook, that’s where. And on a lot of different podcasts, you can find me on a BiggerPockets podcast, and a lot of different podcasts across the country. I’ve been doing a lot of speaking, and I’m just doing a lot of events and stuff like that now. Also, my website is www.therenaissanceu.com. I also have courses. I have a navigating NACA course where I teach the process, and the tools, and all of the stuff that I use to make it through the NACA program successfully. How I evaluated my deals through NACA, all of that stuff.

Andre:
I also have an introduction to real estate course that teaches people all of the different ways to go out and attain real estate. How to evaluate different neighborhoods, how to understand when the market’s going up or down. Just understand when is a good deal or a bad deal, a lot of different things. It’s over 30 video modules, over four hours worth content. Again, I have my merch, mindset matters where I’m just helping spread awareness about just mindset. It’s not about your circumstances, it’s more so about your mindset, man. And also have my book, man, Renaissance is Five Step Guide on Getting Your Sh*t Together, which is like I say, the blueprint to my life and how I really got on this journey and really got my life together. Just looking to do a lot more speaking, and a lot more helping, and a lot more mentoring, man. And I appreciate you guys for having me on, and allowing me to, you know what I mean, tell my story, get my word out there, and just tell people about my brand.

Henry:
Thank you, Mr. Andre.

David:
One of my favorite parts about your story is that if you wouldn’t have had all that pain, and frustration and carrot being dangled in front of you for so long, you literally wouldn’t have a story to put in a book that people would want to read. You wouldn’t have anything to say in a podcast like this. So I’m looking back and it always makes sense, right, when you’re looking back at why God brought you through what he did, you’re like, “Oh, I get it now.” At the time, like you said, you wanted to fight a lot of the time. Like, why are you doing this to me? Why? But it does make sense. So for everybody in that same situation, hang on, keep doing your best, keep pushing that boulder. It’s going to get better.

David:
Thank you, Andre. Henry, where can people find out more about you?

Henry:
You can find me on Instagram. I’m @thehenrywashington on Instagram.

David:
It’s the, and not the… It’s not like The Ohio State University?

Henry:
Yeah. I mean, I just, I try to play it down a little bit, David. I don’t want people… I’m not…

David:
You don’t want to just completely overwhelm people with a splendor of who Henry Washington is. Very humble. All right. Well thank you. This is David Greene. For Henry, never met a boulder he couldn’t push, Washington. Signing off.

 

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Mortgage refinance demand plunges 60%, as rates hit their highest level since 2018

Mortgage refinance demand plunges 60%, as rates hit their highest level since 2018

Mortgage refinance demand plunges 60%, as rates hit their highest level since 2018


People wait to visit a house for sale in Floral Park, Nassau County, New York.

Wang Ying | Xinhua News Agency | Getty Images

Mortgage rates took another jump higher last week, taking their toll on current borrowers who might have wanted to refinance. Demand from homebuyers, however, appears to be hanging in for now.

Total mortgage application volume decreased 6.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.80% from 4.50%, with points decreasing to 0.56 from 0.59 (including the origination fee) for loans with a 20% down payment.

“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” said Michael Fratantoni, MBA’s chief economist.

Driving the downturn in overall mortgage demand was a 15% weekly drop in refinance applications. They are now down a whopping 60% from a year ago. The refinance share of mortgage activity decreased to 40.6 percent of total applications from 44.8% the previous week.

Mortgage applications to purchase a home increased 1% for the week but were 10% lower than the same week one year ago. Homebuyers today continue to face sky-high prices and record low supply, in addition to rising mortgage rates. Affordability is weakening dramatically, but some real estate agents say the competition is not letting up.

“I will say I have had more cash buyers this this year than I’ve ever had, and they’re borrowing from parents. They’re just finding that cash because they know that it’s more competitive with cash offers,” said Kelly Theriot McMahon, a real estate agent with Compass in Dallas.

At an open house held last Sunday, she said buyers were steeling themselves for a bidding war.

“You have to look at it knowing you’re probably going to have to offer like $40,000 over asking price,” said Lauren Poey, a potential buyer touring the home.



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10 Actionable Steps Anyone Can Follow to Buy a Rental Property

10 Actionable Steps Anyone Can Follow to Buy a Rental Property

10 Actionable Steps Anyone Can Follow to Buy a Rental Property


Want to know how to buy a rental property? If rising home prices, rent prices, and fierce market competition have you struggling to get something under contract, your real estate saviors, David Greene and Rob Abasolo are here to help. In 2022’s hot housing market, it can seem almost impossible for new real estate investors to get their foot in the door. But, if you follow what the experts are doing, you may be able to lock up your next investment while other buyers are stuck in bidding wars.

Whether you’re wondering how to buy your first rental property or your next rental property, David and Rob have answers for you. They’ve partnered up to buy luxury short-term rental properties in sunny Arizona, all while recording the exact steps they’re taking to land a deal. If you’re already investing in real estate, some of these steps may seem familiar to you, but the gems that David and Rob drop are rarely discussed (and incredibly helpful).

So, if you’re ready to start your real estate investing journey, build wealth, rake in cash flow, and build passive income, you’re in the right place. David and Rob define their ten steps to investing success so you can spend less time analyzing deals and more time collecting rent checks.

David:
This is the BiggerPockets Podcast show 589. What I look for is me. So I think I’m a good realtor because I buy a lot of real estate. So if you come to me and you say, David, I want to buy real estate, I’m not looking it from a perspective of a salesperson, I’m looking at it from the perspective of someone who wants to help build your wealth. I like to work with other realtors who also own real estate and who like real estate. They don’t have to be a realtor, they want to be a realtor.
This is David Greene, your host of the BiggerPockets Real Estate Podcast, here today with my co-host Rob Robuilt Abasolo. How’s it going today, Rob?

Rob:
Oh, it’s going good, man. Just in the throws of putting together offers and negotiations and re-negotiations and triple re-negotiations. But I think we’re getting to some closure here, which I’m really excited to share with the audience at home.

David:
Yes. If I’m going to use a jujutsu analogy, which I do too much of already, we’ve got our joke sunk in and we’re just slowly, slowly tightening it. And this deal is about to submit to our plan. So on today’s show, Rob and I are going to walk you through the 10 steps to make sure that you get a property under contract in 2022.
So we actually have a rhythm, a pattern, a plan, if you will, of what we do to make sure we are moving forward on our plan of getting a property under contract. And it’s only been, what do you think, Rob? Like a month or two? How long do you think we’ve been going at it for?

Rob:
Eight weeks at this point. In six months, it’ll be eight months.

David:
There you go. But only two months of actual focus.

Rob:
Two months or so.

David:
Yeah. Like looking to get a deal. And we’re narrowing in on the one that we wanted the very most, that we think is going to be awesome, that we’re super excited about. We wanted to make a show that shared what we did to get to this point, right? Everyone always says, here’s the deal I got. They hold it up there and they wave it in front of you and they say, look, how cool I am. I got a good deal. And then you listen to you go, oh, I wish I could get a good deal, but I’m just not as good as them. And I kind of suck. So that’s what we’re trying to avoid.
Here’s all the work that went into the after picture, right? No one shows you that. They just show you what the six pack looks like. Well, this is what the actual workout routine looked like to get to have a six pack like Rob. So I’m very excited to be able to bring this to people today. This is a very practical show. If you write down these 10 steps and you and your partner or you yourself start executing them, you will get to a point where your offer is accepted as well.

Rob:
Yeah. I think we talked about this on a previous show. Or, hey, maybe it’s in a show that’s coming after this one. But consistency is the number one most important factor to success, I think. Especially in this game, in this market, so many people that come to me and they’re like, is it too late? Is it oversaturated? Is it so competitive? What do I do?
And I’ve heard you just say it time and time again that you don’t find good deals. You make good deals. And that’s kind of this deal that we’ve been working through. It, really on the surface, wasn’t what we wanted, but we started laying out our terms. We’ve been very consistent about chipping away at the other side. And I think now, after consistency and some tenacity, now we’re finally getting to a part where we’re seeing progress. And it’s by following this system that we’ve just been doing for years now, right?

David:
Tenasistency. The word that Rob created on today’s podcast.

Rob:
Hey, you heard it here first. It’s actually going to be the first book that I write tenasistency.

David:
I like it. Brandon used to make up words. And now Rob is doing the same thing. So we are really excited to bring this show to you, especially if you’re someone who knows that you want to take action, you just don’t know what that should look like. This is what it should look like. For today’s quick tip it’s going to be, check out BiggerPockets agent finder. If you go to the website, you can find their agent finder service, which will help find you a real estate agent that is familiar with the BiggerPockets way through the actual site.
When you are looking for an area that you want to invest in, like Rob and I did, you’re going to need to find an agent. Now we describe on the show how we found ours, but you can also use BiggerPockets to do it even easier. So I highly recommend that you check out their agent finder system and find an agent who understands investing in your needs today.

Rob:
I wish I would’ve heard that quick tip first before all the work that I went through. But duly noted, David.

David:
Yeah. It’s funny how I say that on the podcast, but I didn’t say it to you when I was asking you to go do something.

Rob:
I want people to take out their notepad and I want them to write down, verbatim, everything we say. No. Create your system. Honestly, I think that’s the real important message from today. Go in, have a system, stick to it. the more you can be disciplined about not straying away from your system, I think the more results you’re going to achieve in the long run in your portfolio.

David:
I agree. And make sure that you’re okay with tweaking that system. So whatever you create in the beginning is not going to be what you have in the end. It sort of evolves like everything else in life. So you don’t need to have it perfect to get started, but you do need to have something.

Rob:
Something yeah. That’s right.

David:
All right. Let’s get into the show. Mr. Abu Solo. So nice to have you joining me today. How are you?

Rob:
It’s a Wednesday. I don’t know when this is going to be released, but it’s always a good day here whenever I’m recording a BiggerPockets Podcast.

David:
Yeah. And in addition to it being a good day because of the podcast, we also have some potentially good news where you and I are very close to getting something in contract. You want to share a little bit about the background of where we are on this property we’re trying to buy?

Rob:
We’ve really been working this one. I probably, in most other circumstances, would’ve not necessarily called it quits, but no, I don’t know, maybe I would’ve because it was kind of one of things where a lot of convoluted communication going on and disgruntled sellers with offers and everything like that.
So you and I approached a property that was 3.4 million in Arizona. And we put an offer in, not too much under, but at around 3.25 million, because it been sitting on the market for six months I think. And they effectively told us to kick rocks at first. You came in, you swooped in with an all-star strategy that we’ll get into. It really worked out to the T. And now we’re just kind of waiting to hear back on some of those final details. So we won’t count our chickens yet, but it’s looking pretty good.

David:
Yeah. And what we really want to do in today’s show is we sort of want to share with everyone what the rhythm looks like of how we approached buying a property. Because I think this will work for anybody. Doesn’t have to be with a partner, but it doesn’t involve account ability, predictability structure, and a plan. That’s what we’re trying to give you, is if you look at the whole idea of being a real estate investor as a human body, this is a skeleton, this is what everything else sort of hangs off of.
So we have 10 parts to this plan. And the first is that we have to determine the criteria. So this could include finding an asset class, finding the area, want to invest in, and then picking a price point. Now, in different episodes, we’ve talked about those things. So we don’t want to get into them too deep, but I will share that our plan was that we wanted a short-term rental in a high appreciating market that we thought was going to be friendly towards short-term rentals. And we wanted to get into a price point that we felt would help remove some of the competition.
So we didn’t want to be chasing after $400,000 houses because so many other people are there. We basically wanted to get into a price point where we felt like there’s not a lot of other investors that are in the same arena as us because we frankly didn’t want the competition. Is it anything you want to add to that Rob that you can think of?

Rob:
Well, Yeah. We also wanted to just find a deal that was worth our time.

David:
Yes.

Rob:
And that’s really important because we’ve batted around dozens of properties at this point.

David:
Such a good point.

Rob:
And you’ll shoot something down, I’ll shoot something down because we’re just like, this doesn’t excite me for this reason. So, honestly, the best learning experience here is getting into a partnership with somebody that you haven’t partnered up with before. And what you and I have really done is we’ve explained each other, our respective philosophies in investing in why we do things a certain way. That way, whenever the partner shoots something down, we can respect that decision because we understand where they’re coming from.
So it’s been a really, really fun process. I’ve done partnerships now, Oh, I don’t know, seven, eight times they’ve all worked out. I think if I remember correctly, you’ve typically shied away from partnerships, is that right or-

David:
That’s true.

Rob:
… you haven’t done as many?

David:
Yeah.

Rob:
You want to talk about why, or maybe we can hold off into the very end? We don’t want to spoil all the good stuff yet. Yeah.

David:
I’ll give you the gist and then we can get into at the end. The main reason I haven’t got into partnerships is that most of the time, the assumption is we’re cutting the work in half, but you actually end up doubling the work. Because what happens is everyone ends up doing their job and then they have to explain to everybody else why they did that job and sort of satisfy the curiosity. So it ends up being more time.
And a lot of the times we get into partnerships because we’re afraid of doing it on our own, which is a terrible reason. You actually want to get into a partnership because you know you have a very good skillset in one area, which you wouldn’t have developed if you were afraid. You’ve already, at that point that you’ve developed a skillset, taken action to a certain point and your partner has to.
And the last is that the time element, like what you said, there has to be enough meat on the bone in this deal to justify all the work we’re putting in this partnership, which is why I’ve only done it on multifamily properties that were bigger. I never did it on single family homes. I could get into the more later, but do you have any questions after hearing that?

Rob:
I knew that. I was just throwing you a softball, but I think that makes a lot of sense. Because, honestly, I’ve done so many partnerships now. And one thing is when you partner up with so many people, it’s very tough to kind of go big or go home with every single partner. And so if you’re just going to partner with somebody on just one house, you’re right, man, there’s a lot of education, a lot of handholding if the other person is new to it.
And then if you’ll never actually end up doing any other partnering or any other houses, flipping or anything like that, then it was just a lot of education for one deal. Whereas you and I are trying to cultivate something a little bit bigger. We’re trying to go pretty big here. And so that’s why we’ve sort of been really taken our time with really understanding our viewpoints and everything like so.

David:
Very good point. Now, point number two, out of our 10 steps here, has to do with our viewpoint that we’re forming. So Rob and I look at every deal that we evaluate through a matrix of five different areas. The first is the revenue that it creates or the return on our investments. So that’s usually the first thing we look at is, hey, would this property cash flow? And how much would it cash flow?
The next thing we look at is the equity. And that’s either, are we getting it at a really good price, so there’s equity built in, or is this an area where we can reasonably expect appreciation to be happening and why? That’s where we start.
The third is we look at debt, like how can we use debt on this property? Is debt a benefit to us? Rob and I believe that in this environment borrowing more money, especially if it’s at a rate lower than inflation, is a good strategy. If you’re a Dave Ramsey fan, you. Well, you’re probably not listening to us talk about real estate using debt if you’re a Dave Ramsey fan. So I don’t worry about that, but we look at debt when it’s used wisely and prudently. That’s good thing.
The next thing we look at is time. Like, would this property take all of our time? Even if the revenue looks great, that revenue stops looking great if it’s a 30-hour a week job to manage this property, to get that 60% ROI. And then the last thing is risk. Like how much risk are we taking on in ordered buy this deal?
So every time we have a property that we’re going to analyze, we look at it through these five, I call them prisms, right? Imagine holding glasses up to your face and you’re looking through those glasses at the property, what are you seeing when you put on that different lens? Is there anything you want to add on to that, Rob?

Rob:
I mean, for the most part, I think kind of in the price point that we’re in, risk is sort of the big one, for me personally, because most of actual properties that I’ve purchased I would say cost between, well, $165,000 from my tiny house, all the way up to $624,000 for my house in LA.
So now we’re looking at properties that are at a minimum, two million, three million. And that right there places a whole new level of skepticism and critical thinking and scrutiny for every single deal. But the strategies that we’ve learned are whole career, they still apply the same. You got to be willing to take a risk every so often. And I have my whole experience, I have my whole life here of always being strategic to rely on and really take a bet on myself that I can figure anything out. If I have a little bit of confidence in myself, there’s never been a time where I didn’t succeed at what I do in this space.
And I know you probably feel the same way. And so when you really just kind of walk yourself the back from all that, it’s not as risky as-

David:
It feels that way.

Rob:
It is, obviously, but it does feel that way. It does. Yeah.

David:
Now it’s important to highlight when you’re doing this, as Rob and I do it, when you put on your risk goggles and you look at the deal through the prism of risk, you’re going to see risk. What you’re not doing is just looking at all your deals with risk goggles and saying, oh, I found risk. Don’t do it. Risk is going to be there.
Instead, what you’re doing is you’re looking at where the risk is and determining, do I have a plan that will mitigate if something goes wrong in that area? That’s what’s key about this whole thing. So you can imagine looking at a three and a half million dollar residential property is going to involve some significant areas of risk. We’re going to be renting out for a lot of money per night. That could change. What if we can’t get, whatever, 1500, $2,000 a night for this property?
You’re going to have a lot more expenses associated with an estate this big. You are going to have the fact that if there is a decrease in the market, these properties, they’d be very hard to sell. People still need to buy starter homes even when the market drops. They don’t have to buy luxury homes.
So what we do is we sit here and we say, all right, here’s where we have risk. How are we going to mitigate it? What is our plan? We come up with a contingency for every area that we can see when we put on our risk goggles. And there’s very practical things, right? We’re going to be borrowing some money to buy this place and to fix it up. Well, we’re going to keep at ridiculously large amount of money in reserves so that even something goes wrong, we have like three years of reserve set aside that we can pay somebody back.
That is an example of how we look at risk. We see where it is, but we put a plan in place. We keep moving forward. And you could do that for everything. If you’ve got your ROI goggles on, how can I improve the ROI on this property? Is there a place where I can make it go higher? As far as the appreciation and equity, there’s no appreciation here. Well, that means that I need to get this property with more equity built in. Or, there’s no equity in this deal, we’re going to be paying at the top of the market. Well, is the market continuing to move up? Because that can grow equity, right?
It’s not is it or isn’t it there? It’s, where is it missing and what is our plan for how we’re going to improve it? And so that’s just, what I wanted to highlight is we look at every deal through these lenses, but they’re is no perfect deal. Every deal will have something. Or in every one of these areas will have something that you don’t like. Your job as the investor’s to figure that out. Anything you want to add before move on to number three?

Rob:
Yeah. I just want to talk about a little bit of the discipline here that just between you and I, what actually we do on a weekly basis. Because we are pretty consistent. I don’t think we’ve missed a week yet, but we basically meet every single week. Same time unless there’s something comes up and we have to just move it, move it to the next day or something like that.
But we meet every single week. Most of the time, I would say 80% of the time or maybe 90% of the time, we Zoom, which I think is important to me. Well, first of all, I’m ADHD. So when I’m on the phone, I just know that it’s going to be so much easier for me to walk around and look at the dust on my door frame or on my fan or start making my bed. I always make the bed when I’m on the phone. I’ll remake it. I’ll take the sheets off and make it several times.
So being on zoom really forces me to be there, be in the moment, give my time to… Because our time is valuable. And so you want to respect your partner’s time and everything like that. And we’ve been really consistent about that. And I think that has really, even if we don’t have something to present, we’re still excited to meet, I think.

David:
Yeah. So that for exist to number three, which is that we meet weekly to review what we got going on. And this is incredibly important. I really, really want to just pound this point. If you are an investor and you’re committed to getting your first deal, maybe you got Brandon Turner’s Intention Journal, maybe you attended a webinar where we talked about how to get your first property, or maybe you just heard on this podcast, you said, I want to do this.
My philosophy is, if it is not in my calendar, it does not exist. If I’m going to go have dinner at my mom’s house or I’m going to my niece’s birthday party, it has to be in my calendar. If I don’t put it in my calendar, it doesn’t exist and there’s no way I can guarantee I’m going to be there. And if I do put it in my calendar, I can’t schedule anything else for that time. That’s what I love about it, is I block off the big things first and everything else goes around it.
So you not going to have success finding a property if you’re new and you’re not used to this if you don’t block time off to do the things that you need to do. And Rob and I block a time off every week where we’re going to meet and review the properties that we are considering.
Now, Rob, I just want to thank you for being incredibly gracious because the reason we don’t meet a hundred percent of time on Zoom is a hundred percent David. It’s me every time that say, ah, I’m stuck, I’m not going to make it back to the office. Can we do this on phone? And you’re very cool about that. But it is important that you do the meeting in a structured way, right? So we like ours on Zoom, because we can share our screens, we can go over the properties that we’re reviewing.
Now what’s happening is Rob and his partner are showing me the properties that they’ve looked at throughout the week that they think they have the best chance with and saying, hey David, here’s what we like about them. Here’s what we’re not sure about. Here’s what our thinking is. What’s your opinion? And then I will weigh in with my perspective based on the experience that I have with real estate. And they’ll learn from what I’m thinking and I’ll learn from what they’re thinking.
And what we end up coming up with is a list of questions on every property. Now, some of them we dismiss, right? Maybe during this, we realized they’re an HOA that doesn’t allow for short-term rentals. That’s happened a few times where they only let you do it six months out of the year. Those get thrown out. Other ones, we say, yeah, this would work, but we need to figure out these things.
And in that meeting is when we determine what we would need to know. This is why it’s so important you have the meeting. So we have our list of properties. We then get our list of questions. Now we’ve got our work set out for the next week. And that would lead us to step number four, which is delegating tasks. Rob will say, hey David, here’s what we need from you. Can your lending team solve this problem? Can you tell me what you think? Do you know a realtor in this area that could help us answer this question.
And I’ll do the same thing. I’ll say, Rob, can you look this one up on AirDNA and tell me what you think. Can you look at a comp that would show maybe the rents will be higher than what AirDNA is giving us. We will delegate the task that we have on an individual property. And then that’s what we’ll work at for the following week until we meet again. And anything you want to add there, Rob?

Rob:
No, no. I think we can move into number five because this really sets the tone and the communication for the entire week. And number five here is, communicate throughout the week for follow up. So this would be text messages, emails, voice notes. I actually really like voice notes. We send a lot of those. The only thing I don’t like about them is, when you send them, if you don’t hit, keep, they erase.

David:
Yes.

Rob:
And all of the golden nuggets that you send me, they’re gone. They’re gone after I listen to it one time. But it’s really nice because we may not be in a scenario where we can take a phone call. I’ve got two kids and all that. You might be in meetings and everything like that. But we can relay some pretty nuanced things that are very hard to relay via text message. We send emails. This is where we’re kind of introducing each other. Like if you’re introducing me to a realtor that you’re connected with, or if you’re introducing me to someone on your lending team, this is where I can then pick up the communication and drive that ball forward a bit.

David:
Yeah. That’s important. So if you’re working with a partner like what we just mentioned in step number four, when we’re delegating tasks, okay, Rob, you’re going to work on this and I’m going to work on this. You don’t want to just get and then say, oh, I don’t know what to do. I’ll wait until the end of the week and we’ll discuss it. You just lost five days of possible productivity.
Instead, Rob’s going to say, hey, this is what they’re saying. What do you think? Or I’m going to be like, hey, I’m stuck on it. This is worth it. Can you look this part out for me? I need help accomplishing my part and you can help me with it. And that’s when this communication happens.
The voice notes, they’re powerful. It sounds simple, but there’s times when you’ve received a text that was like three feet long and you just think I’m not even going to read that. That’s something that should have been a voice note.

Rob:
My entire inbox. I’m like, no.

David:
Exactly right. And then there’s other times where you get that phone call and you’re like, I just don’t have time to take this call. So the voice note is the perfect medium between the two. And if you have a partner, this is something that you need to be working on yourself. If you’re meeting every week with yourself to review where you’re at on every property, make sure you’re working throughout the week to get the answers to the questions that you needed so that when the week comes, you actually have information to be able to move forward. This is the structure that’s so important, is we’re treating it sort of like it’s a job. Not just like it’s a hobby.

Rob:
I’d like to squash a bug here. Just something that I’ve really been wondering since the day I met you. And I just want confirmation on if this is an urban legend or if it’s true. When I first met you, when I did the BiggerPockets Podcast like six months ago, I was like, oh yeah, I’ll shoot you a text. And then you’re like, man, I’ve got 1200 unread texts right now. I was curious, do you actually have 1200 texts? Because I think about that every single time I text you.

David:
It’s more now. In fact, what happened is I need a new iPhone because you hit a certain point where it stops displaying the number on little text thing. Like it doesn’t even tell you how many unread text messages you have. I hit that. So that’s one of the things I say to human beings. If you take the same road everybody else has taken, you’re probably not going to get there, right? Like, Rob, text me. And if you don’t hear back, you don’t take it personal. You’re like, all right, I need to email his assistant Krista and get time on David’s calendar. And then boom, you’ve got all my attention.
And I use that hack all the time. If I’m trying to get ahold of somebody who’s over 30 years old and they’re really busy, I send them a message on Facebook Messenger because nobody else uses that other than 30-year-olds or older. Right? So if you look at my Facebook Messenger, I have like two or three unread messages. If you look at my text, I have a million. So that’s just a little a quick tip for everybody there, is find the road most traveled.

Rob:
Quick tip. Okay. It’s good to know. All right. Well, I always send the gentle… Just I write bump anytime I hear back bump. Just a little friendly reminder.

David:
Yeah. Everybody who’s listening. If you’re in my life and you text me, just bump me all the time. I don’t get upset about it. I’m never going to say, why are you bumping me? I’m like, I know I need bumps. I need to get bumped all over the place. It’s really hard to get ahold of me. And I’m aware of that. Thank you, Rob, for your patience there.

Rob:
Go to the day. I need to get bumped everywhere. All right, cool. So moving on to number six. This one is receiving information from your realtor. This is really… Man, this is big, because we get so amped up and step five here, texting, I’ll text you bangers all week and be like, dude, check out this house. It’s going to gross $250,000. And then we get all excited and we’re like, oh, what if we do like a hot tub and oh, a golf card, and a basketball court. And we get all excited. But it’s kind of one of those things where I’m usually better about this, but on some of these luxury properties, one cannot help but get excited at certain properties, because they’re like dream properties. And then you talk to your realtor and your realtor’s like, oh yeah, that isn’t an HOA. And they will not allow short-term rentals. And you’re like, no, I spent three hours counting this out. Happens all the time.

David:
Everyone does this. This is where experience has led me to sort of being able to direct in these situations better than someone who’s not. Experienced by my own properties. And frankly, the thousands of houses that we’ve helped our clients buy, I had to learn how to do the same thing. You don’t want to get too emotionally connected or put too much time into a property that you don’t have a good chance of getting.
So when we first look at them, it’s easy to just want to run as far down the path as you can get, even in your mind of, oh, I can do this and I can do this. And I love it. And I have to have it. And as a realtor, I’ve learned, if that house has been on the market for two days, don’t do that. There’s 30 other people that are doing the same thing. And you know what? It kind of goes down that don’t take the road that everyone else is taking, right? Like if you’re trying to text me, that’s not the best method. You don’t want to look at houses that everybody is looking at, especially if you’re going to put all that time into it.
So what’s important is that you identify, is this a property that would work for what we want? You go through your matrix, which for us is these five prisms that we look at. And then we say, do we have a chance of getting it? So oftentimes, the first step is having our realtor call the listing agent and saying, how many offers do you have and where do we actually have to be? And if the listing agent plays this dumb game of, I don’t know, highest and best, that’s like one of my pet peeves is this little parrot on the shoulder of a pirate that just says highest and best, and they call themselves a realtor. That is not selling a house.
If you’re a listing agent doing that, they are not earning you money. They need to be aggressively trying to get a good offer from the other side. But if we get that and they’re like, oh yeah, they just said highest and best And they just don’t really care, we’re probably not going to go after that property. Okay. Let everybody else have it. That’s why we went after the one we’re talking about now that’d been on market 190 days or whatever it was because they weren’t getting a ton of action and we knew that we had a better chance of putting time into it. So that’s huge.

Rob:
Well, I’ve actually got a new policy now. Whenever a realtor says highest and best, I actually submit lowest and worst. So I’ll submit an offer for $2 and see if it’s a-

David:
Put that in your pipe and smoke it.

Rob:
Highest and best.

David:
That’s really good. So a lot of what the conversation involves around in the beginning is something that actually should be happening in the due diligence phase. Okay? That’s why you have an inspection period. And it’s just it’s easy to not be disciplined and to do all that up front and call it work. And this is how you get your heart broke, right? Like you try to date too many people that aren’t interested in you, you’re just going to get tired of the rejection and stop dating and become like a cat person. Right?
That’s not what we want to do. We only want to actually put our efforts of pursuing the properties that we have a reasonable chance of getting. So part of this is experience, but the other part of this is just working the system that we have, where we know, all right, realtor, we need you to go find out, can we get the property? What price would realistically get it at? They’ll bring that information back to us. We will then kick in and say, okay, at that price, would this work? How much equity? We look at it through the prism. How much equity be in there? How much risk would be in there? How much revenue would we expect? And if they have nothing, then we go look for a different property.

Rob:
Well, yeah. Let’s talk about that a little bit. Because there’s obviously the communication… Well, not just the communication, but the actual selection of your realtor-

David:
Yes.

Rob:
… is so important. So can we talk about what do we look for in a realtor? What kind of questions do we ask? How do we even choose ours? I would like to tell that story in a second.

David:
Yeah. So I’ll start and then I’ll let you tell our specific story. I’ll start with a general. What I look for is me. So I think I’m a good realtor because I buy a lot of real estate. So if you come to me and you say, David, I want to buy real estate, I’m not looking at a firm perspective of a salesperson. I’m looking at it from the perspective of someone who wants to help build your wealth.
I like to work with other realtors who also own real estate and who like real estate. They don’t have to be a realtor, they want to be a realtor. Now, that means they’re going to be picky about their clients. So you actually have to be on your A game to get them to work with you. And a lot of people don’t like that. They want the realtor that answers their call right away, that they can boss around. I don’t like that. If I can boss around my realtor and I haven’t proven why I should, they’re probably not that great.
So what I tend to look for when I’m going into a market is what is our strategy. That’s why the number one thing that we talked about was determine your criteria, what asset class, what area, and what price point, because you want a realtor who works in that area, owns in that area, sells in that price point, and understands that asset class. That’s actually what you’re going to look for.
We kind of talked about that, Rob. And I connected you with a couple people. And then with this specific issue, we had a bunch of questions and I said, hey, we need to find a person that is an expert in this asset class. Why don’t you call the brokerages in the area and ask who their luxury specialist is, and then find out if has these questions. And I shouldn’t have been surprised. You completely hit it out of the park on your first try. You came back with a rock star. So tell me what you actually did to make that happen.

Rob:
All right, man. So I woke up. I went out to my front door. I took out my yellow pages. I found it. I was like, all right. And I flipped all the way over to the S’s and found Sotheby’s. I mean, we all know that Sotheby’s is obvious one of the more lucks places out there. And so I called him up. And it was like the receptionist of the place. And I was like, listen here, bub, Robuilt and David Greene are looking for a luxury house. I was like, excuse me, do you have anybody that might be able to help us please?
And so they were asking and I was like, look, it’s really important to me that they know short-term rentals because I already know short term rentals. And so if they don’t know, I’m going to know that they don’t know. And so she was like, okay, okay, great. She actually ended up patching me through to two people. They were like partners. I think they partner up on selling houses and everything like that.
And I talked to the guy. He was super nice. I mean, really, really nice. And I started kind of interrogating him a bit and being, well, what does short_term rental mean to you? And we kind of went back and forth. And it was pretty clear that it wasn’t his wheelhouse, but that’s okay. We talked it through and I was like, hey man, honestly, I appreciate your time, but I need someone that can help me accurately estimate how much we’re going to gross on a property like this because it’s $3 million.
And he is like what, you know what? I know a guy. And I was like, you do? He’s like, I know a guy. He doesn’t work here. He actually works at a competing brokerage. And he’s really great. This guy knows everything there is to know about short-term rentals. He owns five luxury short-term rentals. He owns a property management company that manages 70. This is going to be the guy. And I was like, hey, I just want to say, thank you, because you just gave over a $3 million lead to a competitor. And I know he’s your friend, but that’s super nice of you to do.
And that’s what he did. And I called the guy. I talked to this new realtor. And he was schooling me, man. He knew everything there was to know about luxury. And his insight throughout this whole process has been so helpful for us because now I can run my comps and I can go back to him and say, hey, am I off here? I have calculated $47,559 and 49 cents. Is that right? And he’s like, yeah, that’s pretty close. Or, actually in this neighborhood, it’s a off because of this, this, and this, and this.
And so there’s a little bit of a synergy there that I get to work with. And it wasn’t necessarily easy to get to that realtor. There was a little bit of work involved, but now it’s going to dramatically affect us moving forward because now we got the best of the best.

David:
And that perfectly highlights step number six, receive information from your realtor. If you know your asset class, your area, and your price point, you can go to the realtor and say, what do you think we need to do to get these properties? What should be be aware from? And that’s some of the stuff he provided, because he owns these things.
One of the concerns I had was, we’re being told this is the revenue that’s going to get in tonight. That seems really high. How can we verify that? Well, he happens to own properties and he actually said you’re probably going to get more than that. You’re more than okay on this one. Avoid these ones. So we got information from the realtor that helped us to develop the strategy that we use to move forward.
And number seven, the next step would be communicating what we need to that realtor. So that’s where you say, here’s what I want you to look at up. Here’s a question that we’re stuck with. Can you ask someone else in your office if they know what to do in these situations. That is also very important, is that after your weekly meeting and the tasks are delegated, that you go communicate with your agent and say, here’s what I need to know. Is that something you can help me with? Or is that not something you can help me with very clearly?

Rob:
Well, we also want them to go in and sort of suss the situation, if you will. Right? So if this property’s been sitting for 1, 2, 3, 4, 5, 6, 7 months, we kind of want to know why, and we want to know if the sellers are at all motivated. Why hasn’t it sold? Has it fallen in escrow or has it fallen out of escrow?
And go in and do a little bit of recon. Run some recon on the property. Get back to us and let us know why. And usually, they’ll go in and they’ll talk to the listing agent. And that property that’s been on the market for six months, that listing agent might say, oh yeah, you could pay. By the way, the seller’s super motivated. Between you and I, let’s get this done. That’s not exactly how it worked out for us, but that’s really important to have. A realtor that can play the game of bit. I think that’s going to work out in your favor whenever you’re really going back and forth in negotiations.

David:
Yeah. And I’ll probably highlight here before we move on that when you’re telling your realtor here’s what we need, a big piece of it is telling them to call the listing agent and find out if we wrote an offer today at this price, would it be taken? Just don’t waste your time in a hot market if there’s 14 other people that want that house and you’re insistent on having very strict criteria. It’s great to have strict criteria. That’s why the first step, is you should figure it out. But if the property isn’t going to work for that, don’t try to make it work. Just move on from it and find a house or a property where it’s still going to work for you and they’re more motivated.

Rob:
Yeah. It’s been really interesting because we tend to only look at properties that have been listed for a while because I we’re just so tired of competing. Why compete with a hundred people when we can go find the diamond in the rough that’s been listed for a while and see if we can make that one work.
And for the most part, I think most of our options have been things that have been sent for a bit at that higher price point, which is really great for us because we see where we can add value to the property. And we know that we can maybe come in a little bit lower. And if we can’t come in a little bit lower, maybe we can start asking for things like seller credits.

David:
That’s exactly right. Now, I use this a strategy on the David Greene team with all of our clients, because I tell people, stop chasing the house that’s been on the market for two or three days. You’re going to get your heart broke. You’re going to grossly go over asking price. But of course it’s tempting. But it says it’s only $800,000 on Zillow. Why can’t I get it for that price, go work a miracle?
But this is the strategy that I use myself. We’re looking at one here that had been on the market 190 days. I have an offer out on one yesterday that was sitting on the market at 2.4 and sat there until it expired. And we got a hold of the sellers off market. And I’m now trying to put a deal together with them because their motivation level is different after their house sat and expired.
I only go after properties that I think the seller wants to sell it just as much as I want to buy it. If I want to buy it more than they want to sell it, they’re going to get a lot of other buyers and they’re going to sell it for more. So be disciplined in how much time you spend on a property. The first thing you should be looking at after it matches your criteria, which for us are those five things, is do I have a chance of getting it? If the answer is no, don’t put any more time into it. Wait until it falls off the market or it sits there for longer. If the answer is yes, then you can dig in with a little bit more due diligence.

Rob:
Yeah. If you’re excited about a property, just a rule of thumb. If you see a property, you pop up on Zillow and you’re super excited at how beautiful it is, and you’re even more excited at the price point, you’re probably not going to snag it for that price point. It’s pretty rare.

David:
All right. Step number eight is actually writing an offer. So we’re going to do a show in the future with a lot more detail about this, but just let’s focus on this deal that you and I are working on that we’re probably going to have in contract today. Can you share a little bit about the offer that we wrote, what we asked for and why?

Rob:
Yeah. So I alluded to a little bit at the beginning of the show, but this house was on the market for, I think just under six months by a couple days. It was listed at 3.4 and we made an offer with a couple of interesting contingencies. So we came in at 3.25 million, so about $150,000 less than asking. But then we also at asked for a $75,000 credit to be applied toward closing costs and other things like that.
So really when you start mapping it out, the offer is closer to 3.175 million. And then we also ask for all the furnishings to be included as well. They weren’t necessarily all my favorite furnishings, not necessarily things that I would choose, but they were pretty good. They were good enough for this property. And I was like, I’m happy with 90% of this stuff.
And so when you factor that in, that stuff could be anywhere from 35 to $50,000. And that’s really important for us, especially in this short-term game where cash-on-cash is a really important metric in our matrix, right? And so if we can save $75,000 in closing costs and we can save $50,000 on furniture, we’ve just saved over $100,000 dollars in cash. And so our cash-on-cash, our ROI really starts going through the roof.
Was there anything else on offer that… Oh. Yeah. And then we also asked for a 60-day close,

David:
A 60-day close because we wanted more time to be able to raise money. And then we asked for a home warranty that would cover anything that might break in the property. But I want to highlight here, is that price is not the only thing that matters. Most people get stuck on price. They think they won or they lost based on the price.
This property, from what we’ve seen so far, we have to do inspections still, appears to be turnkey. We’re not going to have to spend hardly any money in fixing this thing up. And now that we’ve taken out our closing costs and we’re actually able to buy down our rate with that 75,000 credit and get it to be a cheaper monthly payment, and we don’t have to furnish it, even if we paid more than someone else, our cash-on-cash return would be much higher in theirs.And we would have more capital to buy another house.
That’s the thing, is we structure the deals so that we have minimal money in it while still keeping incredibly big reserves so that it’s not risky. And getting to borrow the majority of the money at a lower interest rate. Now, people get really good deals on properties, but they need a ton of work. And then they dump a bunch of money into it. And then they got to borrow money from somebody else, like a hard money lender at 12%.
And so even though the price was better, what they actually end up spending per month ends up higher. So it’s not only about the price. And that was one of the ways that we’re able to work this deal out to work for us, where the other people who were looking at that property probably just got stuck on the price and couldn’t see past it.

Rob:
Yeah. Literally, you and me, just with the credit and the furniture, you get to keep $60,000 in your pocket, I get to keep $60,000 in my pocket. Not only that buying that rate down, that’s not necessarily a big deal on a $300,000 house, but on a $3.25 million house, buying down a half a percentage point, that’s a pretty significant difference, not just in the monthly, but in the actual interest that we’re paying on that property over time, over the life of that loan.

David:
That’s exactly right. So that’s one strategy that we use on the David Greene team that we brought into this one, was a lot of the time, if you got a deal with a seller and they’re willing to take 500 grand, it might be better to give them 520 with a $20,000 closing cost credit that you can use to cover your closing costs us, to fix the house up, to buy down your rate. Because when money is cheap like this, borrowing more of it is less expensive than when rates are higher.
Another thing moving on to number nine actually offers strategies like our strategy with this deal is when we first submitted that offer, they said, no. They told us to go… You said kick rocks? I think maybe pound sand might be more appropriate because it’s in the desert. Right? Surrounded sand in Scottsdale.
So they told us to go pound sand. And we said, that’s fine. This is normal. Right? My experience as an agent, I understood that the sellers were in an emotional place. They received our offer as kicking the pants. Like this to them was like an insult. That it was lower. And if your house has been on the market for six months and it’s not selling, you have some unrealistic expectations. They should have already dropped the price.
So here’s what we said to the realtor, ignore them for a couple days, then we want you to go back to them. And this is what I would do if I was the buyer’s agent representing us, is I would say, hey, my clients are going to buy this house if I tell them to buy it. They rely on what I’m saying. They don’t really understand whether they should buy this one or another one. They told me to go find them a deal that works for their numbers. And that’s my job.
So if I tell them that this is the one that’s going to work for their numbers, they’re going to do it. But the numbers need to be right here. Listing agent, what do we have to do to make this work? And we are going to put the onus on that agent to go work on her own clients and say, guys, what do you need to feel good about this deal?
That is different than what most agents will do, which is they’ll protect their own ego at the expense of yours. So what they’ll do is they’ll say, I got a lot of clients. I don’t really need this sale. But my clients really want the house, what do we got to do you here? That doesn’t work. You want it to be the opposite. You want your agent to say, I want to put this deal together. Tell me what has to happen in order to do it. My clients will listen to whatever I tell them.
That’s literally what I say to the agent on the other side. And what happens is it now gets the listing agent to go to her clients and be an advocate for us. She’s or he is going to go say, listen, we got an offer here. We haven’t got anything else. I think this is our best shot. What do you guys need to feel good about this deal? And then she’s going to go back to our agent and say, here’s what they said. And he’s going to say, oh, that just the numbers won’t work at that. What can we do to get him to this point instead?And we let the agent sort of whittle down the sellers until they got to the point where they were good with us.
Now, I knew if this house had been on the market for six months, that there’s a very good chance that they’re not going to maintain their resolve to keep going. That was one of the things that Rob really liked about it, is he’s like, dude, this one’s been on the market for a long time. There’s not a lot of houses that are at this price point. There’s not a lot of buyers that are looking at this price point. They can’t move on with their life until they sell it.
And that’s what you want to remember, is when it’s been there for a long time, when that offer comes in, their knee jerk response is no, most of the time. But then what happens is their thoughts start going into, what else could we use this money to buy? If we got rid of this thing, we could go buy that house in the Caribbean, or we could buy that multi-family property that we could use to retire. All that stuff starts moving through their head and it slowly weakens their resolve to hang on at.
And lo and behold, about a week, maybe a week and a half later, a realtor came back to us and said, yeah, they’re willing to accept your terms. They just asked for a few little things to be different.

Rob:
Yeah. I actually want to point out the phrase I that he put out there. And I think he said putting them on ice. He’s like, oh yeah, I call that putting them on ice. And so that’s basically… That’s ignoring them for a little bit. And then coming in strong and saying, hey, I want to put this together. And then that realtor came back and said, oh, highest and best, whatever. And then he was like, okay.
Then he put them on ice for, I don’t know, however long, several days. And then he came back and then he is like, hey, I really want this of my clients. They’re not going to go for it. I’m the decision maker here. I’ve comped it out. The numbers have to be here. And yeah, they accepted most of the terms and were kind of working through what that means.
But all in all, a pretty… I called you the morning he told me that. He sent me a text and he said call me. And I was like, oh, okay. This is always my favorite text from a realtor. And then he was like, all right, hey, they didn’t really counter your counter after they had let it expire. And I was like, man, David’s going to be so happy about this. Because it worked out exactly how you called it, man. It was like pretty funny. Exactly how you called it, hey man, I guess what you’re talking about.

David:
Well, thanks, Rob. This is David Greene team pen. I’m holding up here. That’s why I learned it. Right? So that’s why we wanted to share this, because most of our listeners won’t have the experience that I do being in these situations and they wouldn’t have understood this is a stride that will work. So I wanted to make sure we conveyed that. Because it did worked awesome.
The last thing, step number 10, is have several irons in the fire. And this is what we do so we never get too in love with this deal. While we had it on ice when they rejected our offer and we said, hey, just let them chill for a minute, let them think about it, we didn’t just sit around crossing our fingers and feeling tempted to adjust our standard. We went out and looked for other homes. And it let our realtor tell their realtor, hey, these guys have me looking for other properties. If you guys don’t want to put this together, they’re going to find something else. I’m going to find them something. You be the thing that I find them.
But you got to be willing to keep looking. You cannot fall in love with any one deal. So we sort of set that one off to the side and we kept evaluating other properties. We kept meeting every week. We kept bringing new properties into this perspective that we had so we never fell in love with one property. This will help you in two ways. One is it will stop you from falling in love with the property you should not be in love with. Two is, if that property is really good and you just don’t want to accept it when you see everything else is not as good, it will make it more clear that’s the right property to go for.
This is what we do to make sure that we protect ourselves in those two ways. Anything you want to add there, Rob?

Rob:
No, I think that’s… Obviously, I very much overanalyze every deal and I think your advice to me. Because in this market, it’s crazy. We’re just lucky to get an offer accepted. Period. But your advice was like, hey, stop being a sniper and start throwing grenades. And I was like, all right. All right, I’m going to ease up a little bit on every single criteria. Then I just started. I was like, okay, I’m just going to look at all of the other prisms in the matrix, I guess, if you will. And I’m just going to cash flows there, but I’m just going to really start evaluating deals on all those other points and start looking at dozens of deals. And I’m like, all right, we have all of these to fall back on right now if this one doesn’t work out.

David:
Right. We call that the call of duty strategy, right? You don’t win a call of duty by just hiding in one little spot and waiting. You have to go out there and go crazy. Now, once it’s in contract, we will go into sniper mode. That is when we look down the scope at every little single fine-tuned detail to make sure we like the deal. It’s not appropriate to do that before you even have it in contract. That’s how you’ll just burn yourself out. It’s too hard to look from a scope if you’re trying to see the whole field. So that’s what we’re getting at there. I forgot about that. That’s a really good analogy that you brought into this.

Rob:
Yeah. Well, hey, it was just yours. I’m just throwing it back out there. But yeah, we’ll get into that whole strategy of the actual due diligence of a luxury property in a different episode. But this is pretty good synopsis on everything we’ve been going through for the past what? Eight weeks or so?

David:
Yeah. That’s exactly right. And I really believe this method works. I do it with… When I partner with someone, this is how I do it. And when I was in super buying mode, this was a strategy that I had set up when I was buying three to five deals a month. And I was using the birth strategy is I’d meet with my realtor every week. We would discuss these things. I had a prism that I looked at every property through. I would look at the list and say, here’s what I need to know.
Now, it’s obviously more fun and better to do it with a partner like Rob who understands this asset class because he’s done it a ton. And I don’t really have to teach as much as Rob is bringing value. That’s what you want your partner to feel like. Is their angles that you don’t see. And they know stuff that you don’t know yet. And Rob’s really experienced with this. So that makes it a lot more fun and easy.
But the system’s the same. And that’s what we’re trying to say. These are the 10 things that you need to do if you are serious about wanting to get your property under contract. So thank you for joining me here, Rob. I’m going to let you get going, but I’m going to give you the last word.

Rob:
Ooh, wow. So much pressure. I guess… Hey, the personal note here. I’ll let you know what the realtor says. He’s going to be getting back to be here in like the next hour or so. So the ultimate cliffhanger for everybody listening at home.

David:
So if it works out great, we’ll start our series of due diligence, like we said. And if it doesn’t work out, that’s fine, we have other irons in the fire. We’ll talk about them at our next meeting. We win either way. So, thank you very much. This is David Greene for Rob call of duty Abasolo. Signing off.

 

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How to Ask for a Raise (and Actually Get It!)

How to Ask for a Raise (and Actually Get It!)

How to Ask for a Raise (and Actually Get It!)


Do you know how to ask for a raise? If you’re like most people, you probably think that we’re asking a rhetorical question. If you think it’s as easy as simply walking up to your boss, asking for more money, and leaving, you probably haven’t ever asked for a raise before. Behind every pay raise request is a clammy-handed employee, hoping that they’ve done well enough to justify that salary bump. Maybe you’re nervous to talk to your boss, maybe you feel unprepared, or maybe you just find it hard to talk about money.

On today’s show, Kassandra Dasent, program manager and wealth advocate, touches on how every employee can prepare to get the raise they deserve. Despite what most people think, you should NOT prepare for your salary review days before it happens. Kassandra has a simple timeline that allows employees to maximize their raise potential throughout the year. So, when it finally comes time to talk numbers, most of the discussion is already done.

This type of strategy has not only helped Kassandra but numerous listeners of the BiggerPockets Money Podcast. But, what if you can’t get a raise? What if your boss says no? What if there’s no budget left for you at the end of the day? Don’t fret, Kassandra lays out the exit strategies you should plan for when career hiccups happen (which they inevitably will).

Mindy:
Welcome to the BiggerPockets Money podcast, show number 287.

Kassandra:
You need to actually create a relationship with your boss, a professional relationship with your boss that is positive, and that is open for dialogue. This is what I’m saying. This is a project to people. Asking for a raise is a project. It’s a step-by-step process.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and joining me today is Kassandra Dasent, a world-class connector with the voice of an angel. On top of that, she is a gem of a person and absolutely a joy to be around. Today, we’re going to talk about how to really quantify one’s value in the workplace setting.
I am here to make financial independence less scary but just for somebody else, to introduce you to every money story because I truly believe financial freedom is attainable for everyone no matter when or where you’re starting. Whether you want to retire early and travel the world, going to make big-time investments in assets like real estate, or start your own business, I’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dream.
We have a lot to unpack in today’s episode because Kassandra has an enormous amount of information to share with you today. Here’s thanks to the sponsors of today’s show. Kassandra, welcome to the BiggerPockets Money podcast. I am so excited to talk to you today.

Kassandra:
Thanks so much for having me. I’m legitimately excited to talk about you, talk with you, I should say, and about this topic.

Mindy:
I reached out to Kassandra after she posted on Facebook that she is a connector and sharer of information. She offered to share on a variety of topics. The one that really, really hit home to me was how to advocate for one’s self in the workplace with regards to negotiating salary and bonuses. I think that this is something that people know they should do and also really gives people the heebie-jeebies because they don’t want to do it. It really makes us uncomfortable to advocate for ourselves and push, push, push, but if you don’t push, your boss isn’t going to give you a raise, right? So let’s jump right into this. Why do you feel that it’s so uncomfortable for people to really ask for a raise and really ask for a lot of money as a raise?

Kassandra:
I think one of the reasons… Actually, I don’t think I know. It’s from an emotional perspective. A lot of us are dealing with the fact that it’s almost like survivor’s guilt in the workplace especially if it’s during recessions, if it’s during major consolidation of companies, mergers, things of that nature. So if you’re experiencing that or you’ve had that experience, you tend to feel the thought of, “I should be grateful for what I have. I should be thankful for what I have because so many people are not in the situation that I have that I have a job.” So you get the guilt conscious on you that you should be just thankful and just leave it alone and just take what you get. So that’s definitely one.
For women in particular, I think we’re still working through a lot of constraints in the workplace in terms of whether some of us females are few and far between in our profession, especially in domains such as engineering, science, mathematics, even in the education system, how many are tenured versus not. So already if you feel like you are in the minority, whether it is a visible minority or whatever minority you represent, you feel that, again, “Okay, well, if I have a position, if I feel like, ‘Okay, I have a good salary. I shouldn’t push this any further.’” So I think definitely it’s a collection of emotions, guilt, and also you don’t know how to do it. Very few people talk about what the roadmap or what’s the process to actually setting yourself up for potentially getting that raise or that transfer or that bonus. So a lot of people don’t really discuss… Still many of us don’t talk about our salaries, so what makes you think that people are going to talk about the process of how to get a raise?

Mindy:
That’s so true. It’s not like there’s really this, like you said, roadmap to… right after your review do this, and three months later do this, and six months later do this. It does have to be this conscious, all the time but not really all the time but all the time process that you’re thinking about. Because how many people have been sitting there, “Oh, my review’s next week. What’d I do? What’d I do since my last review?” That is, to me, I sit here and talk about money all the time, and that is me. I’m not looking for advancement in my company. I don’t want to manage anybody. I don’t want to grow my career. I’m at the end of my career. I’m right where I want to be. But that doesn’t mean I don’t want more money. Who doesn’t want more money?
So sitting here, I’m like, “Ooh, I know I’m supposed to do my review every January. I’ll remember. I don’t remember. I don’t remember at all.” We talked to Erin Lowry on Episode 169. This is Episode 287, so it’s been a minute. She talked about keeping a success folder in your inbox, on your desktop. Any time anybody gives you praise, like through email, put it in your inbox. If somebody shares with you successful thank you accolades, anything, you put it in your desktop folder so you can remember what it was. You don’t have to rack your brain. You just go into your folder, “Oh, that’s right. There’s 27 emails from people who loved me,” or, “Here’s 57 things I did right at the company.”
Episode 169 released a really long time ago. Guess who hasn’t started her success folder in her inbox yet or on her desktop? That would be me. So this year is different. 2022 is the year of Mindy, and I have now a success folder. Every time somebody sends me something, “Mindy, I’m so thankful for your podcast,” I get a lot of emails like that, it goes in my inbox or my success folder inbox and it goes in… I’ve got work things. People send me DMs on Facebook. If you want to do that, it’s [email protected] on Facebook, [email protected] on Twitter, [email protected] if you want to send me a letter so I can put it in my success folder, or you can send one to [email protected] But not everybody has a boss who hosts a podcast with them. So let’s talk about some of these things. Erin’s success folder is a really great idea. How frequently should I be looking into that?

Kassandra:
I definitely second what Erin said. It’s so important to have a log of your accomplishments or successes, comments, feedback. You need that. Before we even talk about the money part, it validates your work. It lets you know that you are doing good work and that you’re impacting somebody positively. You’re doing good work. So first and foremost, give yourself the kudos to say, “I am getting an acknowledgement.” You know that you’re doing good work, but when you get that affirmed back to you, that confirmation, that knows that you’re on the right track. You’re doing something right. That’s first and foremost.
The other part of that equation is it’s not only important to have that log. Here’s where the money part comes in, and here’s where you start setting yourself up for that conversation is that you need to actually link it back. Whatever accomplishments or whatever feedback you’re getting, you need to link it back to any department goals, any major organization objective, essentially. So you need to know, is this falling in line with what the company wants to do? Is this falling in line with what our department is looking to achieve on a monthly or a yearly basis? So it all has to roll back, roll up, I should say, to the upper levels of your company, your division, or whatever that may be. Because if you cannot quantify your results to management, they’re really not going to give you anything.
That’s the truth. Because as much as you think you’re the best thing since sliced bread, which you are, we’re not saying you’re not, you are, but for money purposes, you need to come with metrics. You need to demonstrate the fact that you were able to resolve X problem has saved the company money or has saved the company from going into a dire situation on a project, whatever that consequence could have been, and you need to map it out. As a program manager, my job is to plan. It’s to expect unforeseen circumstances and be able to address them with potential solutions. From the gate, I need to look forward. I need to be future looking. You know what I mean? You need to do that as well with your career.

Mindy:
Oh, that’s really great advice. I love that: be future planning. Yeah, you need to pull it back to the business objective. Oh, the business wants to do this. Here’s how I contributed to that big goal, here’s how I contributed to these little goals, and this is why I have earned this raise. That’s another thing that Erin said in her episode was it wasn’t just, “I want a raise.” Well, nice for you. I want a new car. You don’t just get things because you want them. You earn them. You don’t even deserve them. You earn them.

Kassandra:
Exactly.

Mindy:
Here’s what I have done, and here’s why I am so valuable to this company.

Kassandra:
I think and also just to… It’s not only the company objectives. Also, typically in a corporate setting or in a company environment, every year, once you do that, we have a common review process, so there’s the department objectives, but then you, yourself, are supposed to come up with personal objectives to show the company that you are looking to grow, that you are planning to grow your career or grow within your position. So whatever you’ve accomplished, you need to find ways to tie it into both: the company objectives and the personal objectives that you identify, that you said were promising to the company that you are going to fulfill, two-pronged.

Mindy:
Let’s see. I want to make sure that I’m on the right track. It’s been a year since I had my last review. I’m doing great. I know I’m doing great. I want to make sure that my boss thinks I’m going great, too. How can someone check in and use their boss to their advantage to make sure that not only does their boss know that they’re doing well, their boss knows that they are expressing interest in growing, but their boss can help correct anything that they’re seeing? Because just because you think you’re doing great doesn’t mean that your boss thinks you’re doing great.

Kassandra:
Absolutely. I think what you said is key. You have to take the initiative. You cannot allow your career to be determined by your boss because your boss probably has more than one employee. You may not be the only person in their sphere, so you cannot count on them to manage your career. It is your career. It’s your responsibility. If you have a great boss who is… she’s very forward in the sense that she or he takes the initiative to set up quarterly meetings or monthly meetings, that’s great. But you need to think like the boss because at the end of the day you have to put yourself in their position to say, “Okay, well, how much of the full purse of money am I going to allocate to each employee? Why is [inaudible 00:12:44] deserving 6% raise while Emily’s only getting 3%?”
What I would suggest, first and foremost, is that you approach your boss and say, “Hey, I would love to have check-in meetings with you. I know your schedule is busy. I think it’s important for me to be able to tell you what’s going on within the workplace, within my environment, within the team because I know that you’re not really hands-on because you trust us as employees to get the job done, but I know that you’d like a summary.” So whether it’d be a monthly or quarterly call, whether it’d be an email every couple weeks, however that person likes to receive information is how you’re going… You need to cater to them. That’s the first thing is that you need to take control and cater to them how they like to receive information.
Secondly, you need to be delivering that information. You need to be consistent with how you communicate your results or communicate what’s going on or communicate even obstacles or even situations that are not going well within a project or within, let’s say, customer service. The metrics are off. You need to be able to clearly and succinctly explain the problem, explain what you’re doing to resolve the problem, and communicate with them that the problem is resolved, because that’s what you’re guaranteeing them to do is you are here to resolve problems. That’s what we get paid to do. We create, we innovate, and we resolve problems. That’s what we do as people. So that’s the first and foremost thing is you need to take control. If you want a one-liner, you need to take control of the process, and you need to set and establish consistent reporting to them.

Mindy:
How much time do you think it would take to set this up? How much time should be spending on checking in with your bosses? Is this a five-minute process? Is this a 30-minute process? Is this per week, per month, per quarter?

Kassandra:
I think it really depends on the nature of your job. Let’s say, for example, you’re working in a call center, you typically have more touchpoints than, let’s say, someone who’s a program manager or who’s in engineering. You may have it just monthly. You may have it biweekly. Again, that’s why it’s important to have that first conversation with your supervisor and say, “Hey, based on your current workload, based on your schedule, what works best for you?” You don’t want to be domineering and say, “Okay, I’m just going to send them emails.” You don’t know if they’ve got a thousand unread emails. You don’t. I know I had a boss who had. In reality, that’s it.
So it could vary. It could be weekly. But typically from my experience it’s been biweekly to monthly. Quarterly is a stretch. I think quarterly is a little long. I think you should at least touch base monthly, let’s call it average, at least monthly for at least 15 to 30 minutes every month if you’re doing a con call. If you’re doing email, I would say every two weeks, very short, concise emails, bullet points. They don’t have time to read. Put yourself in the position of your boss always.

Mindy:
That’s very interesting. You said quarterly is a little long. If you’re listening to this and you’re thinking to yourself, “Oh, yeah, I get together with them once a year,” I’m thinking-

Kassandra:
Oh, gosh.

Mindy:
… we do quarterly at BiggerPockets, but I also don’t do a [crosstalk 00:16:23].

Kassandra:
Do you remember? My question is, from each quarter, do remember those conversations?

Mindy:
I don’t remember what I did last week. I have a terrible memory.

Kassandra:
This is why I’m saying it’s important to stay in the front of their thought. Because if you’re not present in their thought. If they don’t think about you at least once every couple weeks, either they’ve got too much on their plate or you have not put yourself in the sphere of consciousness, and that’s really, really important even if it’s for five minutes, even if it’s just for… My manager and I, we talk about our dogs. It doesn’t always have to be about work, but it’s building that connection and that rapport that you need to establish first before demanding money because that’s very off-putting. You need to actually create a relationship with your boss, a professional relationship with your boss that is positive, and that is open for dialogue. This is what I’m saying. This is a project to people. Asking for a raise is a project. It’s a step-by-step process.

Mindy:
Let’s talk to our introverted friends. It seems confrontational. I’m not an introvert, and it seems almost confrontational to say, “I want a raise,” because I would love if my boss just recognized it and gave me a big pile of money. But I also don’t like to pay more than I have to for anything, so I can understand why my boss wouldn’t want to pay more than they have to. If I’m not out there advocating for myself, who else is advocating for me? But it seems really confrontational at the same time. So how can our introverted friends make the most of this plan?

Kassandra:
I am an ambivert, if you will, so I can related to many people. I can be social when I need to be, but I’m good at home with my cup of tea and with my dog and I’m fine. Life could stay like that, I’m happy. So I can understand the anxiety that people may experience or just the plain, “I just don’t want to do this.” So I think you have some questions that you need to answer for yourself. How important is getting a raise to you? If you decide on a scale of one to five, let’s say, that one is not important and five is, “Okay, I need this raise because I want this new car or I want to pay debt off,” or whatever that X is, the closer you get to five, then you need to realize that, “Okay, what needs to give in me, what am I willing to give up in terms of discomfort in order to gain?” Because this is an exchange of energy at the end of the day.
If you decide that, “Okay, I’m a four and a five. I want this money. I deserve this money,” so here’s where, again, you say… If you’re an introvert, typically it’s easier to do this by email. You’re not visually in front of somebody. You’re not having to just read someone’s reactions visually. That’s very tough for introverts. So if your boss knows you as a person… Again, I come back to building that relationship of understanding so they know you as an employee so they respect your boundaries as well. They understand that, “You know what? He or she is a great worker. They just don’t do well with face-to-face constantly all the time.” So you have to explain to them who you are as a person. Otherwise they’re going to do things to you that you don’t like. They’re going to make you do things that you don’t enjoy. It’s true.
In my career, I have managed to mold my boss to react to me in a way that makes me feel comfortable. Really, that’s it. It sounds psychologically challenging, but it’s not. I really want to encourage everybody that talking to your boss is not the end of the world. You’re going to have to do it. If you really want the raise, you need to educate them on how you best like to communicate. It takes time. For some it might be easier than others.
If you’re in the situation where a boss is not necessarily respectful of your introvertedness, what I would suggest you can do is perhaps… It depends if you’re on a bigger team or not, but you could potentially ask a colleague to not intervene for you… I don’t know how I can put this. They can advocate for you in very subtle ways. What I mean by that is, let’s say there’s a con call and everybody needs to be on video. By the way, I don’t go on video typically for my company con calls. I’m very like, “No, you don’t need to see my face,” because I built over time a level of self-confidence and self-awareness that I’m not afraid that I’m going to be fired if I advocate for myself.
That’s the muscle that I’m encouraging you to build is learn how to advocate for yourself even if you’re introverted. There are ways to do this. I’m not an expert in it by any means. It’s also a process over time where you’re just like, “You know what? The worst that can happen is I lose this job. I know I’m skilled enough to find another one.” That’s where I am at this point in my career that I’m very confident in my skills and my ability and my value. I know my worth. I know my worth. Now it’s just finding your way of communicating your worth and your belief in your ability to do your job so that your boss really doesn’t pressure you into doing or communicating in ways that you don’t want to communicate.

Mindy:
Let’s switch gears a little bit and talk about setbacks because it is really nice to think that your employment is always going to be unicorns and rainbows, but there are problems that sometimes come up. You make a mistake, a project doesn’t get out on time. Sometimes the project doesn’t get out on time due to no fault of your own, but it’s still your project so it doesn’t go according to plan. How do we get back on track after a setback?

Kassandra:
The first thing that is crucial, you need to accept responsibility for it. You need to demonstrate that the blame game doesn’t work here. So if you are responsible for an outcome, you need to take responsibility for that said outcome. You cannot hide behind other people. You cannot throw people under the bus. That’s not going to lengthen your career. It really will shorten it, in fact. So first and foremost, you just need to be honest. Explain why it went wrong, explain the factors that caused it to go wrong, and really come up with some solutions, plan A, B, and C, not just one option. You have potential options how to be able to rectify or at least limit the damage or the consequences of what happened because sometimes we can’t fix it to fruition. Some projects just… You know what I mean? It doesn’t end well.
In those cases, you really just have to say, “Okay, well, I identified why and how and when it went off the rails, so for future, I am logging it so that I recognize that if we are even close to being in that position in a future effort, I know how to roll it back. I know how to divert, and I know how to deal with it.” So there’s lessons learned, we call them in our world. That’s really it is you’ve got to acknowledge it. You have to state the reasons why. Then you’ve got to be able to present solutions or how would you do it differently in a future project.

Mindy:
What do we do if you state your case, “I have earned this raise because of XYZ. Here’s all of my proof. Here’s all of these things that we’ve done right,” and your boss says, “No, we can’t give you a raise at this time. The company doesn’t have any money. I don’t agree with your assessment”? Whatever the reason is when your boss says no to your raise request, what do you do?

Kassandra:
Before you go into the raise, you have to understand that there are two outcomes potentially. There is the, “Yes, okay. Yeah, we agree with you.” There are actually three outcomes. There is the, “Yes but we don’t have as much money so here’s what I’m going to offer.” There’s the worst-case scenario that you outlined that says, “You know what? No.” But before you go into that meeting, you need to be prepared to essentially say, “Am I willing to walk away from this job if I don’t get this raise?” Before you even open that door, what’s the worst-case scenario? Are you willing to accept it that you would be willing over this issue even if your job is amazing, you love your colleagues, you love the work that you do, all the good stuff? But if that money request is denied, are you willing to give that up?
Then secondly, depending on the type of boss that you have, they may be thinking, “Well, they’re a potential flight risk because they’re asking for money, and if they’re told no, well, then they’re going to quit.” You have to also understand it’s how you communicate that request with money. That will determine how they will view you even if you’re told no. So you can still be told no and both parties leave with the same respect that you guys entered into the conversation with. So it’s really important how you approach that conversation. Like I said before, are you willing to stay with the current terms if you love your job or if you appreciate your job, or b) is the issue of money so important…? Like, you’re seriously underpaid, and they’re not willing to budge, are you prepared to look for something better that will pay you your worth? That I cannot answer. Only you can determine that answer for yourself, but you have to understand that that is a conclusion.

Mindy:
Let’s talk about that for a minute. I want to go in and ask for a raise and my boss is going to say no. How can I ask so that I am preserving my relationship with the company? Honestly, I’ve got to take care of my own self first, and if I need income, I don’t want them to think that I’m a flight risk until I have found something else. How can I ask for a raise in a way that says both, “I’m really serious, I want this, but I’m not going to leave if you don’t give it to me”?

Kassandra:
I think actually you start with that: You are not interested in leaving the company. You’re really, really happy with the work that you’re doing. You feel that it’s fulfilling to you. You feel that you’re a valuable contributor to this organization. That’s the bridge is that you’re a valuable contributor to this organization, and here is metrically why my value. I’m actually now demonstrating my value from a dollar/cent goals, objectives, perspective. But you always lead off the conversation is that you are genuinely happy with working at XYZ, working for you. Also, highlight the boss’s qualities as well, that, “You’re a manager that really helps my career to grow. You help me with opportunities.” Make them part of your success. You’ve got to get their buy-in. That’s what this is. This conversation is a buy-in. They need to buy in to you as a person.
So that’s my suggestion is how you would lead that conversation off is that you’re happy. You’re genuinely happy with your job. You’re happy with them as a manager. Also, I would suggest, ask them of their opinion of you. I know it’s scary. I know it’s scary, but feedback is really important. We’re not perfect. No one is perfect. We can all improve, and show them that you want to improve in the process. So with all these things, I think if you really position yourself as pro-them, not anti-them… But at the end of the day, you have the right to ask for more money. They know this. They know this. This is why they have HR. They know that employees are going to do this every year. It’s not surprising to them. I want you to become comfortable with the idea that you going into ask this, they’re expecting it.

Mindy:
Ooh, I like that. It isn’t surprising. Rates go up. We’re in inflationary periods right now. There’s a cost of living increase. There’s a cost of goods and services are going up. Girl Scout cookies went up this year.

Kassandra:
Hello? Yes.

Mindy:
Everything is going up this year.

Kassandra:
[crosstalk 00:30:05]. Actually, I want to add… Let’s say, an example, they love the work that you’re doing. They acknowledge that you’re contributing. They acknowledge the results because many acknowledge. They see for a fact that you are producing. But for whatever reason, they say that, “No, unfortunately we don’t have the purse strings for that,” you can negotiate in other ways. Well, can you get an extra week vacation? Can your bonus be increased? Because they tend to give more money on bonuses because it’s not guaranteed every year.
But still, if you were to say, “Okay, I’m typically allowed up to a 15% a year bonus,” would they be willing to give you extra on that? Because it’s still money for you. Technically, this year you got, let’s say, $3,000 more than you would have because they put it on the bonus side or you got an extra week of vacation. Do people understand a week of vacation, what that calculation is? That’s a nice piece of change, and that’s rest for you. Or, for example, can they, kick in more money to…? Let’s say, if you’re a smaller company, potentially they can kick in more money to a HSA or a 401(k). There’s a lot of ways around this, so don’t think that the door is shut to straight cash. So you also have to think about how else would you potentially be willing to be remunerated.

Mindy:
Ooh, that’s a really good point. I would love more vacation time, hey, Scott. We actually just went this year… I’m super excited. We went to unlimited vacation so as long as you’re getting your work done. Maybe I’ll just be unlimited vacationing to Fiji when it’s freezing cold outside. That’s great. More vacation, more bonus, more 401(k), more HSA.
Let’s say that there’s none of that available. When is it a reasonable amount of time to check back in with your boss? Let’s say that you love your job. I think that there’s a lot to be said for finding a company that you like to work at. I’ve worked for Satan himself, and it’s no fun. You get up in the morning, and you’re like, “Ugh, I have to go to work.” You drag your feet. You don’t want to get out of bed. It is just soul-sucking. Then I’ve worked for companies where, my husband is a stay-at-home dad now, I’m walking out the door, the girls are fighting, and I feel guilty because I’m going off to work and I’m going to have a good time.
So the difference is night and day, and it’s this huge weight that’s lifted off my shoulders. If I was working at this, and I am working at this job that I love so much, if they said, “No, we don’t have money to give you for a raise,” I wouldn’t automatically think, “Well, I’m leaving,” because in my decades of working I know that there’s a lot of value in working for a company that you love. When is a good time to check back in? Should you ask your boss about this, or should you just throw it at them, “Hey, okay, we don’t have any money now. I’m going to check back in six months or three months or tomorrow? Is there a rule of thumb to checking back in for more money?

Kassandra:
Yeah, there typically is a process. That’s usually agreed upon during that initial discussion, that initial ask, so you can ask, “Well, what would be a good time to check in back?” if they even mention, “We’d love to do this for you, but now’s not the best time. Our company’s just going through some difficult times,” or whatever that case may be. You could suggest whether it’s six or eight months, but give enough time a) let’s say if it’s a real deal where it’s a cash crunch, to allow them to work through that, and b) you collect more proof. You collect more ammunition. This works for you in a couple of ways.
Typically six months, eight months is a good period to check back in. Also, for bigger companies, they typically have a schedule, so you need to learn what their review schedule is and their calendar is because they literally have cut-off dates that decisions are made because it goes to committees to approve budgets. So you need to learn what that schedule is for your company. So you’re actually asking for that review in the cycle so that you can actually collect on it so you don’t miss the window. You need to know what that window is. So whatever that window is for your company, play within the window.

Mindy:
I like that a lot. I’m trying to think, as you’re talking, “Oh, yeah. That’s August.” And it’s known, so ask your business, ask your HR department. Now let’s go to the nuclear option. Despite all of your best efforts, there is no money available, that maybe the company’s not doing well, maybe other things are happening. Are there any warning signs that you need to leave no matter how great the company is?

Kassandra:
Well, if they’re a public company and they’re traded, you should be watching their stocks to be honest. So that’s kind of left field. Most people are like, [crosstalk 00:35:31].

Mindy:
That’s a great tip.

Kassandra:
So you should be watching their stock. You should be following the company’s results. Every company that’s traded on the stock exchange has quarterly earnings, and that basically tells the state of the company’s finances. They are published. They are public information. You can find it either within the company or outside, but either way you should be seeing if you are working for what other people, investors and shareholders, view as a healthy company. When you start to see that the company’s lagging, their earnings are off, they’re missing their earnings completely, like zoom, it just went south, you know what I mean, that’s an huge indication actually that you may need to look for another option. So that’s my first tip and biggest tip I would say.
The other thing is, how many people are quitting? How many people are being hired versus leaving? So see how your department or how your core team is shifting. Are people leaving? Where are they leaving to, if they’re talking about it? If people are leaving but they’re not hiring to fill that role anymore, they’re starting to share the responsibilities across people, these are signs. These are warning signs that you need to pick up on.

Mindy:
That’s really powerful. Don’t get caught being the last employee there to close up the company and then get your $1.50 severance.

Kassandra:
Literally. I got you another tip I thought of because I lived it. I’ve never really been fired from big girl jobs. I have lived through two corporate downsizings, and they’re traumatic. The typical rule of thumb is the longer you are there in terms of years worked, the higher chance you have to be let go. If you know that you’ve been at a company for, say, 10, 15 years and they’re looking to do massive cutbacks, you need to be very careful. So you need to start considering, should I negotiate for severance? Should I potentially take the money if you can find another job within your field? There’s a lot of things that wrap into this, but I want people to think that that is a potential possibility that you might be on the chopping block faster than someone who got hired only six months ago or two years ago because they cost less. You cost more typically.

Mindy:
That is a really good point because when they do a buy-out, it’s usually based on how many years you’ve been there, so you get a month for every year you’ve been there. Well, here’s two months versus 10. If you’ve been there for two years, you probably know the processes and understand enough that you can help them maneuver through [crosstalk 00:38:46].

Kassandra:
Like I said, they’ll keep you around because you’ve got the knowledge. Until you’ve passed that knowledge on to somebody else, you’re still golden to them, but as soon as that knowledge transfer occurs, you’re at risk.

Mindy:
Okay, that’s sparks a couple of questions. We’ve heard the advice that in order to get a big raise, you need to leave your job and go to another company. We’ve seen that in several of our guests, A Purple Life and Financial Mechanic, kind of job hopped. You and I are the same age. It was definitely taboo for us to job hop when we were younger, but now it seems like it’s no big deal to just spend a year at a job and then move on and move on and up in the pay scale. Does it look bad to your current company that you went out and sought another job even though you weren’t planning on leaving? Are they thinking to themselves, “Oh, Kassandra’s going to leave, so we will give her the raise so that she’ll stay until we can find somebody to replace her”? Or do they think to themselves, “Wow, Kassandra went out and figured out what her worth is, so we’re going to reward her by giving her so much money”? That doesn’t really seem on-brand for the companies.

Kassandra:
Gosh, I think it really depends on your skill set. It depends where you’re working. Like, if you’re working for Apple or Microsoft or Google, you know what I mean, they’re desperate to keep high-knowledge talent. So this is very subjective. For, let’s say, people who are doing administrative work or people who are doing clerical work, for example, in the minds of many companies it’s almost sad to say, but they’re a dime a dozen, meaning that you’re easily replaceable. So they don’t value you as much as they should. That’s where you need to be careful in terms of what role that you’re currently in. How much knowledge do you have at the company? For example, you mentioned, we’re in the same generation. I was one of those exceptions that did leapfrog before it was-

Mindy:
Wow.

Kassandra:
… en vogue because I understood that… Really, the ultimate bargaining tool is when somebody wants you. When you’re at that hiring process and they want you, that’s when they’re most willing to give you the most. Really and truly, that’s just the reality of how it works. So it is much harder when you are already installed in your job. You’ve been there for a couple years. If you haven’t been advocating for yourself and you suddenly find Jesus in the process and you’re like, “Oh my gosh, yeah, I’ve been underpaid. I need to fix this right away,” they’ve been like, “Oh, oh, okay. She’s now aware. How do we handle her or him?” It really depends how you’re coming in, what role are you working in, what company do you work for, what relationship do you have with your bosses. Again, I come back to that. If you haven’t established a positive relationship from the get and you haven’t maintained it, that’s your job. That’s part of your job. It’s not only your job to do the work. It’s your job to make your bosses think you’re a superstar because you are.

Mindy:
Oh, I love that. I love that. I’m going to mark that as a quote. We’re going to have that up. It is your job to make sure your boss knows that you are the superstar that you are. How frequently should somebody update their resume? I know people who have never… As soon as they get their job, they just put it to the side. I look at that girl in the mirror every day, although I’m not looking for a new job, I don’t want a new job, but how frequently should you update your resume? Because it’s kind of hard to remember all the things that you’ve done.

Kassandra:
Well, if you’re keeping a log of what you’re doing, it’s not hard at all. It comes back to that folder. So that folder serves multiple purposes. That folder is not only to help you navigate your present career and to demonstrate your value to your company in the hopes of being rewarded financially. It’s also to help you to position into a new job should you need to do this very quickly. LinkedIn is a great tool, and I don’t think enough people use it the way it is laid out properly. I think your resume updates should be happening in concert with your updates to your folder. You can set yourself a time, let’s say, every three months. You have a meeting with yourself. You look at your folder, and you’re like, “Okay, well, what projects have I working on or that I’ve completed that they challenged me? They provided me an opportunity to learn a new skill set, new software, new systems, new programs, new processes. Whatever these newness is that can translate in potential raises, whether inside or outside the company, that’s when you need to update your resume in tandem.

Mindy:
My final question, how long should your resume be? I ask this because I see a lot of resumes. I’ve seen some 25-year-old applicants who have a three-page resume, and I’m like, “Ooh, no. You’re supposed to do that now? No.” I mean mine’s not even three pages and I’m not 25.

Kassandra:
No, no. Max is two, and two is big max I would say. If you’re able to consolidate everything into a one-pager… Obviously, it depends on age. The older you are, you have typically more work experience but that depends. If you’ve been at the same company for three years or for 30 years, I should say, you can actually format it to one page where you just separate the roles that you had or what you’ve working on. Ideally, I think the rule is that HR typically looks a resume for less than 10 seconds and chucks it. If they don’t see what… The other part is a lot systems are automated, so they’re looking for key words in your resume. So if they’re not finding key words that align to the job posting, that gets chucked. So you need to [crosstalk 00:45:05]. I don’t know if you knew that.

Mindy:
It’s been a while since I applied for job really. I only applied for this job. Before that, it was a really long time.

Kassandra:
A lot of companies are using that automatic, automated screening process, and it’s based on key words. It’s no different than websites. If they don’t see a certain number of key words, let’s say five out of 10 key words that they have identified in the job postings that is important or crucial to finding the ideal candidate and it’s not on your resume, this is why your resume can’t be cookie-cutter for each job that you apply to.

Mindy:
Oh, say that again for the people in the back. Your resume cannot be cookie-cutter. Say it again.

Kassandra:
You cannot be submitting the same resume with the exact same description of your job to 10 different postings because, again, it comes back to those key words. Also, the job descriptions may not be… They’re not unique necessarily. They’re not exactly unique. So you need to cater to them. Again, do you want this job or not? It’s work.

Mindy:
It is work. Yes, it is work to find a job. I was laid off once. I completely deserved it. I was a terrible employee. I’m much better now. It was horrible. I was married at the time, I’m still married, but I was married at the time, which made it a lot easier to regroup over the weekend, and then Monday I was at the unemployment office. It’s been a long time.

Kassandra:
Well, we’re dating ourselves because I remember the unemployment office, too, because I did get fired when I was 17. I’ll admit that. I was a bad employee.

Mindy:
I was at the unemployment office, and then I grabbed the newspaper and started looking for jobs in the newspaper because that’s how you found a job in 2002, I think it was, maybe 2003. Either way, that’s how you did, and Monster.com was just happening.

Kassandra:
That was it.

Mindy:
LinkedIn didn’t exist. I would circle everything. Then I applied to absolutely everything. I wanted them to tell me no because nobody was calling me up saying, “Hey, Mindy, are you looking for a job?” That might happen now, but back then nobody was reaching out.

Kassandra:
No, the age of recruiters was not happening then. It’s a completely different world when it comes to job hunting now. Honestly, for me, I find it so much easier, but I think a lot of people are lackadaisical in terms of they approach finding a job even today. Recruiters will not knock on your email or call you unless they have seen something publicly about you that interests them. That’s just how it works. So you have to make yourself an interesting candidate. There’s a process. You need to put work into this. You need to stand out because there’s millions of other people that want… [crosstalk 00:48:11] they want the same job.

Mindy:
Yeah, yeah, absolutely, absolutely.

Kassandra:
How do you stand out?

Mindy:
Anybody who’s had one applicant for the job that they were advertising for.

Kassandra:
Exactly. If it’s one applicant, you should question whether you want that job or you want to work there.

Mindy:
Exactly, exactly. Oh my goodness, Kassandra, this was super fun. Is there anything else that you want to share that I forgot to ask or that you think people who want to prove their worth or want to go on and look for a new job need to know?

Kassandra:
I think we’ve covered so much. I would just encourage people to put yourself out there. Before you put yourself out there to ask yourself, what’s the worst-case scenario? Can you live with that worst-case scenario that they tell you no? Nine times out of 10, yes, you can accept that no. But don’t be afraid to put in the work in order to justify why you deserve more. So it’s not an automatic. It’s not a guarantee. But I think it helps you to grow as a person to be open to that conversation, exchanging that information and seeing, “Yes, I know I deserve it. Here’s why. But I’m open to feedback, too.” I think that’s part of the conversation that people don’t typically go into that with is open yourself up to their perception of you as well because you might be working and thinking that you’re doing great, and their perception of you is not the same. It may be for a reason that… miscommunication. This is an opportunity to correct it before things get worse.

Mindy:
Yes, yes! If you want a raise in six months, you need to know now that you’re on the right path.

Kassandra:
Exactly.

Mindy:
Kassandra, I love you. You’re the best.

Kassandra:
Thanks so much.

Mindy:
This was super fun. Kassandra, thank you so much for your time today. I really appreciate you.

Kassandra:
Oh, it’s my pleasure. Thanks for having me.

Mindy:
From Episode 287 of the BiggerPockets Money podcast, she is Kassandra Dasent and I am Mindy Jensen saying so long and toodle-loo.

 

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When to increase your house budget and when to stick to your plan

When to increase your house budget and when to stick to your plan

When to increase your house budget and when to stick to your plan


Mikolette | E+ | Getty Images

Prior to the pandemic’s red-hot housing market, there was a simple profile that constituted an “A” buyer, according to Brian Copeland, a realtor in Nashville, Tennessee.

“Four years ago, an ‘A’ buyer was someone who was pre-qualified for a loan, had 3% down and could go out this weekend and buy a home,” said Copeland, who is also president of the industry association Greater Nashville Realtors. “Now, an ‘A’ buyer has all cash.”

In addition, the top buyers today are willing to waive appraisals and inspections and, in some cases, don’t even view the house they’re purchasing in person, he said.

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“Everyone is being squeezed,” said Copeland, adding that middle-class affordable housing is “absolutely suffering.”

Prices are going up

Americans are aware of the struggles they face in buying a home. More than 70% of U.S. adults believe the housing market is currently in a bubble, and more than half say it’s a bad time to buy a home, according to a survey of more than 7,000 adults from Momentive.

Price is a major factor that’s keeping potential buyers on the sidelines – some 38% said they have delayed or canceled plans to buy a home due to inflation. People of color were also more likely to push off a home purchase due to rising costs, the survey found.

“More scuttled or delayed plans to buy among these groups threatens to exacerbate already wide gaps in homeownership rates along racial and ethnic lines,” said Jon Cohen, chief research officer at Momentive.

In February, the median sales price for homes in the U.S. was $357,300, a 15% increase from a year earlier, according to data from the National Association of Realtors.

At the same time, mortgage rates are also increasing, which means buyers that need loans will pay more for them as well, said Danielle Hale, chief economist at Realtor.com.

That can hurt younger consumers, as well as first-time buyers, according to Hale. It also means that homeownership as a path to building wealth is now out of reach for many.

“It’s a very competitive market for those who are shopping at the top of their budgets,” said Peter Murray, a realtor and the principal broker at Murray & Co. Real Estate in Frederick, Maryland. “There’s a lot of disappointments.”

The money math

Some homeowners may be tempted to stretch their budgets to purchase a house, especially if they’ve had months of searching and being outbid.

It can make sense in some cases to stretch your budget, according to Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

“There are situations when I have told people it’s okay to stretch, but just understand the impact that’s going to have on other areas of your life,” she said.

For example, it could make sense to pay slightly more if moving will lower other expenses, or if you’re anticipating lifestyle changes that will free up room in your monthly budget. This could include going from two cars to one, or having children who will soon enter public school, meaning you’re no longer paying as much for childcare.

If you’ve calculated your budget using your base salary, not including any bonuses, you may also be able to afford more, she said. And, if you don’t have consumer debt, are adequately saving for retirement and have a solid emergency fund, there may be more wiggle room than you think at first.

The amount of time you expect to spend in the home also matters. If you’re looking to live in a house for more than five years, it may make sense to pay slightly more now.

When not to stretch

On the flip side, there are some situations where it does not make sense to increase your homebuying budget.

Cheng says stick with your original plan if paying more would make it difficult to contribute to other financial goals, such as saving for retirement or paying down debt.

“If the only way that stretch is going to happen is if they borrow from retirement money, I would probably say that doesn’t make sense,” she said.

If the only way that stretch is going to happen is if they borrow from retirement money, I would probably say that doesn’t make sense

Marguerita Cheng

CFP, CEO, Blue Ocean Global Wealth

She also cautioned against wiping out all your cash savings to afford a more expensive home. You need to budget for variable costs such as taxes, insurance and repairs.

It also doesn’t make sense to stretch your budget to a point where you can only afford it with tax breaks, said Cheng. If those benefits go away in the future, you’ll be in trouble.

What to do if you can’t pay more

Buyers who can’t stretch their budgets have a few options.

“They either pause their home search or they need to readjust their search criteria,” said Murray.

Stepping out of the buying market might make sense for some who need more time to save. It could also be a bad idea, however — if prices continue to rise, you could be further priced out of the market, said Copeland.

That means rethinking your must-haves might make more sense. That includes looking at different neighborhoods, including ones that aren’t as popular or might be farther away from city centers. They may also need to be flexible on the size or condition of the home they purchase.

They should also have all of their paperwork ready to go so that when they do see a house they like, they can make an offer right away, said Hale.

“To be competitive in this market, you could throw more money at the problem or you could be really prepared and on top of it,” she said.

Working with a financial planner or advisor can help homebuyers understand what they can really afford to spend on a house, said Cheng.

“The loan officer is going to be really helpful in helping you structure your loan, the realtor is going to help you find a home,” said Cheng. “You might think having a financial planner is over the top, but they are going to really help you see how this affects your situation.”

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Mortgage rate soars closer to 5% in its second huge jump this week

Mortgage rate soars closer to 5% in its second huge jump this week

Mortgage rate soars closer to 5% in its second huge jump this week


The rate for the most common kind of mortgage just surged again.

The average rate on the 30-year fixed mortgage shot significantly higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily. It is now 164 basis points higher than it was one year ago.

“That’s the second time this week, and it puts this week on par with the worst week from the 2013 taper tantrum — a record we didn’t see being legitimately challenged a few days ago,” said Matthew Graham, COO of Mortgage News Daily.

On Tuesday, the rate had hit 4.72%, a 26-basis-point jump from March 18. The quicker-than-expected rise in rates has weighed on demand for mortgages and refinancing loans.

The rate surged as the yield on the U.S. 10-year Treasury also took off. Mortgage rates follow that yield loosely, but not entirely. Mortgage rates are also influenced by demand for mortgage-backed bonds. The Federal Reserve is scaling back its holdings of these assets and is also hiking interest rates.

It couldn’t come at a worse time, as the all-important spring housing market gets underway. Potential buyers are already facing extraordinarily tight supply and sky-high prices. With both rates and prices considerably higher, the median mortgage payment is now more than 20% higher than it was a year ago.

Buyers are also facing inflation on everything else in their budgets, which exacerbates the affordability issues. Rents are also surging higher at a record rate, causing more potential buyers to be unable to put aside money for a down payment. In addition, as rates rise, some buyers will no longer qualify for a mortgage. Lenders have been much more strict about how much debt a borrower may take on in relation to income.

Economists are already beginning to revise their sales figures lower for the year. Lawrence Yun, chief economist for the National Association of Realtors, said Tuesday that he expects the rate to hover around 4.5% this year, after previously predicting it would stay at 4%.

NAR’s latest official prediction is for sales to drop 3% in 2022, but Yun now says he expects they will fall 6% to 8%. NAR has not officially updated its forecast.



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What It Means For Real Estate Investors And Homeowners

What It Means For Real Estate Investors And Homeowners

What It Means For Real Estate Investors And Homeowners


Californians might be facing new taxes, again.

Waves were stirred last week when Assemblymember Chris Ward (D-San Diego) introduced the California Speculation Act (AB 1771).

The bill is the Assembly’s latest attempt to curb rising housing costs and bludgeon investor profits. If passed, the Act would add an additional 25% tax on the capital gain from the sale or exchange of residential properties within three years of its initial purchase.

In other words, California lawmakers are trying to disincentivize investor activity in the state’s housing market. Yet, the bill’s language will also affect the traditional homeowner, including the most vulnerable.

An Overview of the California Speculation Act

The California Speculation Act carries the following provisions:

  • Homeowners would be taxed up to 25% on capital gain if they sell their home within three years of purchase.
  • The tax applies to all “Qualified Taxpayers”.
  • Applies to most residential properties with few exemptions.
  • First-time homebuyers and affordable housing units are exempted.
  • Properties sold within three years are subject to a 25% tax. After three years, the rate declines by 5% each year until seven years have passed.
  • Collected taxes would be put towards community investment, with 30% designated for affordable housing.
  • If passed with a 2/3 vote in the Assembly, the bill would become law on January 1, 2023.

What’s The Story Behind It?

California’s housing market is notoriously expensive. San Francisco usually charts at number one for the most expensive real estate market in the U.S. State tax rates are also among the highest in the nation.

AB 1771’s intention is to lower home prices by preventing investors from taking advantage of the market with cash offers. According to the bill’s sponsor, Chris Ward, the Act will dissuade institutional investors who buy up homes with cash and flip them at inflated prices soon after.

“We’ve heard of people getting into their first home getting beat by cash offers,” Ward said at a news conference. “When investors fall out of the buying pool, that will give regular home buyers a chance to buy a home,”

For Ward, prices are a major problem. As a representative of San Diego, historically one of the more affordable spots in California, he’s overseen skyrocketing real estate appreciation that’s put San Diego on par with San Francisco, a voting issue that does not bode well for him.

Unfortunately for Ward, his bill is being faced with significant opposition.

According to detractors, the main issue facing California’s real estate crisis is the severe lack of housing supply. Demand has been through the rough over the past few years and supply has been exceptionally slow in catching up.

California housing starts in 2021 totaled about 120,000. That’s a slight uptick from 2020, but right on par with the last four or so years. It’s way down from 2004 or 1988 levels though, where total units rose well above 200,000. The state is also below its construction goals, which is targeted to fall around 180,000 units per year.

California Housing Starts FRED

In essence, California is short several million housing units and is still not on track to meet demand. This, paired with high tax rates, has created a catastrophically overpriced market, locking out millions and putting an enormous amount of pressure on low-income and first-time buyers.

In fact, many real estate experts are pointing out that the Act would likely exacerbate the inventory crisis.

“California has a meaningful affordability crisis. Unfortunately, this bill would tax most homeowners and investors alike, leading to an even worse lack of inventory, one of the leading reasons for housing price escalation. We believe this is well-meaning legislation with significant unintended consequences,” said Nema Daghbandan, Partner at Geraci LLP, the General Counsel for the American Association of Private Lenders.

A leading issue with the bill is that it applies to all qualified taxpayers. Unless you’re on active-duty military service or deceased, you’re considered a qualified taxpayer. If you were to sell your home within a seven-year period, then you will be subjected to the tax, investor or not.

The argument, of course, is that most Californians don’t sell their homes that quickly, which is true. For instance, residents of Los Angeles tend to keep their homes for a median length of about 16 years.

However, it begs the question of whether it’s an infringement of the property rights of sellers? Let’s say you bought a home in Los Angeles in 2020 but were just offered a fantastic job in San Francisco. The catch is that you need to relocate.

Should you be taxed up to 25% for needing to move? A joint statement by multiple California real estate trade associations, including the California Association of REALTORS®, says absolutely not.

“According to the Neighbor 2020-2021 American Migration Report, over 20% of those surveyed stated they planned to move based on job changes, financial challenges, or additional space requirements. Under AB 1771, property owners with a growing family seeking to move into a larger home, downsizing due to the job loss of one of the occupants, or even those who must relocate to act as a caregiver for a loved one who became ill would be harshly penalized for simply needing to move” the letter stated.

The statement continued to scorn the bill, citing critical data that suggests investors who paid with cash only made up 3.8% of all transactions in 2021. It also ensured to address the bill’s primary reasoning, which is to lower prices.

“Further, [the bill] does nothing to ensure that first-time or other homebuyers are guaranteed access to homes, nor does it create more housing opportunities. Rather, the bill will cause unintended consequences for the market by reducing the number of homes available for sale. In January 2022, new home listings continued to drop by the double digits – with listings declining from 13,301 in January 2021 to just shy of 10,000 in December 2021. The reduction in listings would be exacerbated by this bill as it incentivizes investors to actually hold on to their properties longer and would force homeowners who need to sell to wait – further depressing California’s ownership housing supply.”

Closing Thoughts

Overall, the California Speculation Act is a senseless attempt to curb housing prices and will likely cause more harm than good to the real estate market.

By targeting all qualified taxpayers instead of investors specifically, it’s hard to see this bill as anything more than a government money grab off the backs of highly valued homes.

We’ll keep you updated on further developments.



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Why It Matters, and What It Means for Real Estate Investors

Why It Matters, and What It Means for Real Estate Investors

Why It Matters, and What It Means for Real Estate Investors


On Wednesday, March 16, 2022, the Federal Reserve announced it would be raising interest rates for the first time since 2018. While the 25 basis point hike (one basis point=0.01%) was largely expected, the underlying shift in Fed policy will impact the housing market, and real estate investors should understand and pay attention to it. 

In this article, I will provide a brief overview of what the Fed is doing, why they are doing it, and how it could impact real estate investors. 

At the conclusion of the March meeting of the Federal Reserve, it was announced that the Fed’s target for the federal funds rate would increase by 25 basis points. The target federal funds rate is the interest rate at which banks borrow reserve balances from one another. It doesn’t actually impact consumers directly. 

However, when the target rate rises, it sets off a domino effect that ultimately hits consumers. An increase to the federal funds rate makes it more expensive for banks to borrow; this, in turn, makes it more expensive for banks to lend to consumers—the cost of which is passed along to consumers. 

This week, it got a bit more expensive for banks to borrow and lend. It’s a big shift from the stimulative policies the Fed has embraced since early 2020. 

The federal funds rate is one of the primary tools the Federal Reserve has to manage the economy. In difficult economic times, it is lowered to stimulate economic growth. We saw this after the Great Recession, and then again at the beginning of the COVID-19 pandemic.

By lowering interest rates, the Fed incentivizes business and consumers to finance their spending by borrowing money. For businesses, this could mean new hiring or expanding into new markets. For consumers, this could mean buying a new car or house while rates are low and debt is cheap. The impact of cheap debt is an increase in the amount of money circulating in the economy, also known as monetary supply. An increase in monetary supply generally stimulates spending and economic growth. 

There is a downside to so much money flowing through the economy: inflation. Inflation is commonly described as “too much money chasing too few goods.” So to fight inflation—and reduce the monetary supply—the Fed raises rates. As interest rates climb, businesses and individuals are less inclined to borrow money to make big purchases, which means more money sits on the sidelines, helping curb inflation. 

Raising interest rates is a bit of a dance. Rates must increase to fight inflation, but rising rates also put the economy at risk of reduced GDP growth—or even a recession. Again, the potential for reduced borrowing and spending that comes with increased interest rates can hurt economic growth. 

This is why people like me watch the Fed’s moves so closely; we want to know how they will balance their dual responsibilities of fighting inflation and promoting economic growth. It’s a tightrope walk. 

What happened this week was expected. As they have been signaling for weeks, the Fed raised rates by 25 basis points. There’s nothing particularly interesting about that announcement, in my opinion. 

The data that interests me the most, however—and the data that will impact real estate investors the most—is contained in the dot plot.

FOMC opinions
Source: Federal Reserve Summary of Economic Projections – March 16, 2022

 

This graph shows what the people who actually make decisions about interest rates believe about where the federal funds rate will be going forward. Each dot represents the opinion of one Federal Open Market Committee (FOMC) participant. 

Another way to look at this data is presented here: 

FOMC uncertainty projections
Source: Federal Reserve Summary of Economic Projections – March 16, 2022

From this, you can see that the median projection of FOMC participants is now about 1.875% for 2022—a very dramatic increase from where we are today. This shows a clear position by the Fed. They intend to raise interest rates aggressively through 2022 and expect rates to keep climbing to 2.8% in 2023 before flattening out in 2024. Over the long run, the FOMC would like to see rates at around 2.4%. 

For context, the highest the upper limit of the target rate has hit since the Great Recession was 2.5%, which is where it sat for most of 2019. The Fed is planning to go higher than we’ve seen in years, and then bring it back down a bit, presumably once inflation is in the 2%–3% year-over-year range that the Fed targets. 

For real estate investors, interest rates are hugely important. As I’ve discussed already, they impact the entire economy. Importantly, rates also impact real estate investors and the housing market more directly—through mortgage rates. 

The reality is this: Although the Fed announcements make for a lot of news, the Fed’s target rate doesn’t impact mortgages that much. Check out this chart: 

fredgraph 47

The green line is the federal funds rate (the chart hasn’t been updated to reflect the announced rate hike), the blue line is the average rate on a 30-year fixed-rate mortgage (owner-occupied), and the red line is the yield on the 10-year U.S. Treasury bond. 

If you eyeball the relationship between the green line (federal funds rate) and the blue line (mortgage rates), you can see that there hasn’t been a particularly strong correlation between the two variables, at least since the Great Recession. 

Instead, look at the relationship between the red line (yields on 10-year treasuries) and the blue line. There is a robust correlation. If you want to know where mortgage rates are going, you need to examine the yield on 10-year U.S. Treasuries—not the Fed’s target rate. 

Yes, bond yields are impacted by the federal funds rate, but they’re also influenced by geopolitical events, the stock market, and many other variables. I am not a bond yield expert, but bond yields have risen rapidly this year, and given recent events, I wouldn’t be surprised to see yields hit 2.5% or higher this year. 

If that happens, I think mortgage rates for a 30-year fixed owner-occupied property could be around 4.50%–4.75% by the end of the year. That would be a significant increase from where we’ve been over the last few years, although still very low in a historical context. 

fredgraph 48

Before the Great Recession, rates were never below 5%, for as far back as I have data. Keep that in mind as you navigate the current investing environment. 

Mortgage rates will rise, and this will put downward pressure on the housing market. Rising mortgage rates decrease affordability, which then lowers demand. In a more typical housing market, this would have a pretty immediate impact on housing prices. But the current housing market is different, and “downward pressure” on housing prices does not necessarily mean “negative price growth.”

Remember, there are other forces driving the housing market right now, many of which put upward pressure on prices. Demand is still high, driven by millennials reaching peak homebuying age, increased investor activity, and higher demand for second homes. Additionally, supply remains severely constrained, and as long as that is the case, there will be upward pressure on housing prices. 

What happens next is hard to predict. On the one hand, we have rising rates putting downward pressure on the housing market. On the other hand, we have supply and demand exerting upward pressure. Without a crystal ball, it remains to be seen how this all plays out. 

If I had to guess, I believe prices will continue to grow at an above-average rate through the summer, and then come back down to normal (2%–5% YoY appreciation) or even flat growth in the fall. Past that, I won’t even venture a guess. 

Although I like to make projections to help other investors understand the economic climate, in uncertain times like these, my personal approach to investing is not to try to time the market. Instead, I try to look past the uncertainty. In my mind, the housing market’s potential for long-term growth remains unaffected by today’s economic climate. Short-term investments, to me, are risky right now. (Full disclosure, I don’t flip houses even during more certain economic times.) But long-term rental property investing remains a great option to hedge against inflation and set yourself up for a solid financial future five years or more down the road. I’m still actively investing because inflation will eat away at my savings if I do nothing. And I know that even if prices dip temporarily in the coming year, investing now will still help set me up to hit my long-term financial goals. 

 



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