10 Actionable Steps Anyone Can Follow to Buy a Rental Property

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.