December 2022

CNBC’s Diana Olick joins ‘The Exchange’ to report on continued tightening in the supply of available homes, an increase in the share of all-cash home sales, dips in the number of investor-based mortgages and demand from home buyers remaining flat.

Ashley :
Happy holidays. This is Real Estate Rookie, episode 246.

Tony:
In terms of market selection, there’s three big buckets that I look at. I look at permitting, the policies in that market, I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I’m getting in a market versus the average purchase price, what does that ratio look like and am I able to hit my return?

Ashley :
My name is Ashley Kehr and I’m here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. And today I want to shout out someone who left us a review on Apple Podcast. This review says I’m a real estate agent in Minnesota looking to invest in real estate, and I think I found the perfect virtual mentor to help me get started. This is the best place to learn if you’re filling overwhelmed. We appreciate that. If you guys are listening, and haven’t yet left us an honest rating review on Apple or Spotify, wherever it is you’re listening, please do. The more reviews, the more folks that we can reach, more folks we can reach, the more folks we can help. Actually, Kehr, this episode comes out a day before Christmas, and I got to say, I think the best Christmas gift I’ve gotten so far is knowing that you have a pretty decent singing voice. That was a nice little intro right there.

Ashley :
You know what? I’m shocked that you’re saying that because my voice is not nice. So that must be the only two words that I can sing. When I was younger, I always thought that I would have a life with a mic in my hand, but I always thought it was because I was going to be a Spice Girl, not a podcaster.

Tony:
Not a podcaster.

Ashley :
So I think that’s definitely way more fitting than me actually singing.

Tony:
Wait, but our good friend Kara Beckmann, she actually just released a Christmas album. So if you guys can go support Kara Beckmann. I don’t know, producer, if you guys can put a link to Kara’s like Spotify album in the show notes, we’d love to support-

Ashley :
Yeah, Kara, I think it’s on Apple Music. I don’t know about Spotify yet, but yeah, she’s @beckmannhouse on Instagram and is an amazing designer. She has a short-term rental, she has long-term rentals and she does the most amazing luxury house flips too. So you’ll have to go and check out. This has been a passion project of hers forever. And I think it just shows too, the power of real estate investing is that you get to pursue these passion projects as you’re building up your wealth and your time freedom through real estate is that you can be able to go off and do some of the things that you’re passionate about. So Tony was recently kicked off Instagram, so that must be his passion.

Tony:
Yeah, I was banned from Instagram for three days, but I’m back now from Instagram jail, so cool. But we got a good show for you guys lined up today. So one of the last show you guys are here before Christmas, we got question on house hacking and how to make your units stand out if you’re trying to rent that extra room. We’ve got questions about zoning and what to do if you’re trying to figure out to what can I do with this property after I purchase it? We talk about a little known phrase called the Chamber of Commissioners, and what exactly does that mean, and how does it play a role as a real estate investor? And then last thing we talk about is litigation and how to deal with attorneys and how to use them as a new investor. And Ashley goes on a world class example of how she worked with her attorneys. And then we actually added a little bonus question that came from my Instagram about choosing your market and how rookies can go about doing that. So lots of good questions that popped up in today’s episode.

Ashley :
Yeah. And we tailor that last question to short-term rentals or long-term rentals, but it can definitely be tailored to flippers too, as to some of the key points out of that too is to choosing your market and just where to even start when picking a market, especially if you already know you’re going to invest out of state. Okay, you guys, let’s get started with our first rookie reply question. This is a house hacking question from Tony Wong. Should you furnish the house if you’re renting out rooms? So I mean, it depends. You don’t have to, you could. That is really up to you. But I think one of the most common things is that you are furnishing the common areas.
So if you end up furnishing the kitchen, the living room, you can always put that into your listing as to, there’s two couches, there’s a big dining table, room for everybody in the house to eat at. But also if you’re going to furnish the bedrooms, you can increase your rent by providing a bed, a dresser, maybe even a desk in that room, and that can increase your value. That maybe won’t be valuable to everyone. There’s probably people that already have their furniture, so they’re going to want an empty room and not willing to pay that increase. So that is completely up to you, but I think at least it’s very common to furnish the common areas of the unit.

Tony:
Yeah, that’s a great answer, Ash. I guess just to try and make that determination, take a look at some of your competition. Are there other listings that are being offered for furnished rooms or is everything an empty slate or is it the other way around where it’s like every single room that’s up for rent is also furnished, right? So I think taking a look at what the competition is doing can help guide that decision.
But ultimately, Tony, I mean there is no right or wrong answer. I think what I would look at to make that determination is what does it cost for me to furnish that room and what additional rents can I get by offering it as a furnished unit? And if the difference is nominal, if people aren’t willing to pay much more for a furnish unit versus a non unfurnished unit, then maybe spending the additional capital to furnish that room might not be worth it. But if the difference between a non furnished unit and a furnish unit is pretty big, then maybe it makes sense for you to go out and spend that extra couple of thousand bucks to furnish that room as well.

Ashley :
And since this is a holiday episode, it is Christmas Eve when this comes out, I’m literally going to twist every question into some kind of relation to Christmas holiday spirit. And I apologize if you don’t celebrate Christmas, but send me a DM with what your holiday is and if you want me to turn an episode into a holiday theme, I will definitely do it. So please send it to me. So for this one, that may include including a Christmas tree into the common area to make it all nice and warm and cozy, maybe putting Christmas lights in the window. So there’s all different kinds of things you can do. So even in the 40 unit apartment complex I managed, there was some common areas. There was a community room where it had a little kitchenette with a stove and then a large table.
So anyone that rented an apartment there, they could actually rent out for free. They just had to reserve the room and they could have parties in there for baby showers, holidays, whatever in there. So one thing that we did extra was we would put up a fake tree in there every year, and it started out with all of the tenants kind of adding their own little ornaments every year and then the tree would be brought out and everything like that. And it was just this… Especially when we were leasing in the winter, which in Buffalo, New York, not a lot of people move in the winter because of the snow. So it was nice to always take people into that room and just show them like, oh, this is a community, here’s that.
And so maybe that’s not for everyone. They just want to be kind of left alone and don’t want to talk to anyone or do anything. So thinking about ways that you can make your house hack stand out from other ones, and I think Tony hit it on the nail as to look at your comparables, what are they doing? And maybe what can you do that’s a little above and beyond, and that’s maybe a little extra but barely cost you anything. I mean, Black Friday, you can get what? A fake tree for probably $25, just a small fake tree to put up and couple dollar store decorations.

Tony:
Yeah, I love the idea of the decorations. We actually do offer, or not offer, but decorate our cabins in Tennessee for the holiday season. So every year right around Thanksgiving we’ll throw up the Christmas decorations and then after first week of January we’ll pull them all down. We don’t do it in Joshua Tree, it’s not as common out there, but in Tennessee a lot of people come out there for the holidays. But something else you said about what are some small things you can do to make the space more competitive, once you said that thoughts were just kind of running through my mind. And it’s like, if I were renting out a room, what are some of the small things I could do?
Getting obviously a smart TV would be a big one. If you could have the smart switches. So if you have an Alexa in there and it’s like, “Dim the bedroom lights to 25%”, and it can do that for you. If you get automatic roller shades, if you’re only got one or two windows in a room, it’s not going to be super expensive. But the experience with the person that’s staying there to say, “Hey Alexa, let there be light”, and the shades come up, that’s a pretty cool thing to have. Zinus brand mattresses, I love a Zinus brand mattress. So yeah, there’s a lot of little things you can do that don’t have or don’t cost a ton of money but still give you that good return on your investment.

Ashley :
And you know what? It does kind of tie hand in hand with a short-term rental almost, I guess. There’s some compatibility there as to things you can take from a short-term rental and put into your house hack as things too. So if you are house hacking, you know what will be a… Do you give out your checklist for supplies to purchase for a short term rental, Tony?

Tony:
I do. Yeah, if you go to the realestaterobinsons.com/shoppinglist, it’s got all of our household essentials in there.

Ashley :
So if you are furnishing the living room and the kitchen, you could go ahead and use Tony’s list and then maybe create your own off of that based on what you actually need for your house. But at least that gives you a starting point is okay, I at least need to get utensils in the kitchen. It may not make sense for you to give everyone their own drawer, their own cabinet and they all have to bring their own silverware, their own spatulas, their own pans and things like that. So I think that’d be a great starting point to anyone who is looking to furnish their home is to go to Tony’s website or there’s a ton of other… The Maddens, [inaudible 00:10:43] Madden. She gives out her checklist too as to what they do. And I think Rob does too. Robuilt gives out his on robuilt.com.
So okay, let’s move on to our next question. This question is from Robin in Prentiss. The first question is, how do you find out the zoning on a property? Is this what you need to know if you want to build more houses on it?

Tony:
So I actually just had this experience, we were looking at some land and it was landed a great location that we’ve been kind of eyeing for a while and a lot of times when it’s listed they’ll put the zoning in the listing description, but the zoning itself, if it’s RL3, what the heck does that even mean? So typically what you have to do is you have to go to the city of the county’s website, they’ll have a link to their ordinances and inside of those ordinances it tells you the allowable use for each zoning like zoning description. So like, hey, this is only for rule, you can only build this there or this is zone commercial, you can do this or this is for mixed use or this is high density, this is low density.
So typically for me what I’ve seen is just going onto that city or county website is a great way to figure that out. And then the best way is just like if you can just go to the city or the county and ask them like, Hey, I’m looking at this parcel of land, can you tell me what it’s zoned for? We’ve called the county in different cities multiple times to ask those questions as well.

Ashley :
Yeah, if you go onto the GIS mapping for the county, you’ll be able to see, but I would always take Tony’s recommendation and actually call to verify, especially if that zoning is really going to rely on what your project is going to be. You can always go to the planning board and you can request to have the zoning changed, but that is something that you don’t want to commit to a project not knowing if that is going to be approved or not. So talking to the local code enforcement officer and even maybe a member on the planning board if that is something that you want to do, is to change the zoning of that property. And also finding out, because it does vary from state to state, or county to county, maybe even town to town as to what can actually be done on how a property is zoned.
So if it’s commercially zoned, are there limitations as to what kind of commercial properties can actually be put onto that property? So I think looking further and make sure exactly what those things are. And a lot of times you go to the town or the village websites, you can just pull that up and kind of read it. Very, very boring reading, but it’s in there. And so a lot of the towns that I invest in, there’s a code enforcement officer and it’s a very small town, so it’s not like they’re overloaded with stuff or you’re waiting years for permits. So I usually just send an email and ask my question and then get a response that way. I found that the easiest.

Tony:
And Robin, one thing you can do if you’re looking at a property, you’re looking at land or whatever it is, you can put as a contingency in your offer to say, contingent upon zoning allowing for X and like, hey, we’re not going to close on this land unless we can make sure that we can do what we want to do with it, we’re not going to close on this property unless the zoning supports whatever our end goal is for that property. So you can definitely write that into your contract as well. And your EMD doesn’t go hard until you’ve been able to validate that.

Ashley :
Okay. The second question is not sure how to word this next question, where can I find out information about a town and its future plans? A town was halfway burnt down and I would like to see if there has been any talk meetings about rebuilding. Would buying a property on that town be a good investment? Wow, first of all, that’s awful, the half burnt town.

Tony:
Half is burnt, yeah.

Ashley :
Yeah. I think the best place to start is the planning board because they’re going to approve any kind of development that goes into that area. So they would be the ones where people would bring their proposals as to what they want to redevelop there in that area and then they would approve it and they would kind of go through the process.
So going to that town’s webpage and looking when the planning board meetings are. Usually they are once a month, at least where I’m from. I don’t know, maybe if that’s the same everywhere. But you can also read the minutes online so they’ll have somebody take the meeting minutes that kind of goes over everything that happened during the meeting and you’re able to read those after they had the meeting too, so you could go back and look at meetings you’ve missed and see what they have, or even if you can’t attend, you can go ahead and read those meeting minutes, but the planning board would be the place to start.
Also, even just going down and talking to the town clerk, I guess it depends on how large your city is, but when you’re investing in small towns, and I’m assuming this may be a small town since half of it burnt and going and talking to the town clerk. Where my kids go to school, they actually send out a newsletter. The town there, it’s a village and the village sends out a newsletter every quarter with the water bills. And so it will go through like, oh we are in talks with so-and-so about bringing in this franchise or whatever to come in here and they update you on the new development or things that are happening.
There was recently patio homes that were being built and they’re not being paid by the builder or anything like that. They’re just trying to promote things within the community as to this development that is happening. Another place that I find out what’s going on more in the city of Buffalo is I’m subscribed to Business First. It’s a newspaper, I get it mailed to my house and I go through it where they go through real estate happenings, business happenings. So I find out some information there too as to what’s going on.

Tony:
That’s a great answer, Ash. I literally have nothing of value to add on top of that.

Ashley :
The other thing I would say is join Facebook groups. My mom is part of one that’s like Be Neighborly Springfield and so she’ll know things that are happening before I do one of the towns that I invest in because she belongs to the Facebook group because it’s everybody in there telling what they know or what’s happening or there’s a police car parked outside somewhere and everybody’s going on in these groups. So that’s really also a great way to gather information. I will say it, use it as a starting point makes you verify that information. When I was doing this new development for an investor, we were building a 40,000 square foot auto dealership and we had to have an environmental study, but we also had to have an archeologist study done because they had built a highway extension behind this property several years prior and they had found artifacts there.
So they required us to pay for an archeologist to come out from one of the city colleges and do an archeologist dig and ended up going to a phase two thing, cost us $15,000. But they went out and they marked all these red flags, went viral across the town’s Facebook, they found a dinosaur there, an Applebee’s is being built there. All these different rumors just going around and it was so funny, and all it was, there was a farmhouse that had been there, it was one of the first houses in the town from the 1700s. And when they had done that highway extension, they had started all this research on that person because they had found the barn. But now on our property they had found the house and there was the actual stone foundation still there, but it was like crazy. They knew how many cows he had, how much milk his pigs produced. It was wild. I would’ve been fascinated by it if I was not part of the team-

Tony:
The person trying to make it happen.

Ashley :
… that was paying $15,000 to try… And my project stalled to try to get this thing going. But yeah, it was just… So, make sure the Facebook thing, at least everybody knew there was something going on there, so you could see something’s being built there. But there’s other ways. If anybody would’ve went to the planning board minutes, they would’ve seen that we had approached and it was for a new dealership that was going to be built there. So that’s a funny story for you guys.

Tony:
Interesting. So no dinosaurs?

Ashley :
No dinosaur bunk because I would’ve shipped those right out to AJ Osborne.

Tony:
All right, so you ready for our next question? This one comes from Doug Smith and Doug says, what does it mean when a house is owned by the Chamber of Commissioners? So I’ve actually never heard of the phrase Chamber of Commissioners. I’ve heard of Chamber of Commerce, I’ve heard of commissioners in a county kind of level, but I’ve never heard of Chamber of Commissioners. So Doug, I can’t say with exact certainty what a Chamber of Commissioners is, but without too much context, what it sounds like is that this property is owned by some kind of public like agency. It could be someone associated with the city or the county.
And that could happen for a multitude of reasons why land or a house is owned by the local city. It could be that it was just left empty for so long and no one claimed it. Maybe there were liens or some other reason. There’s a lot of different reasons how cities and local governments end up as owners of properties. What I have found though is that typically they’re not eager owners of those properties and typically there’s some kind of auction that’ll happen to get rid of those properties that are owned by that local government. So that’s my take Ash. I don’t know if maybe you have more familiarity with Chamber of Commissioners.

Ashley :
Yeah, I’ve never heard it. I’ve heard of the Chamber of Commerce, but I’m assuming this is more of a board of commissioners maybe, but the town commissioner who maybe the property has been vacant, and the town has taken over the property. Maybe an abandoned title has been filed or something like that. And so most of the time when the town takes over a property, they are obligated to put that property up for auction. They can’t just go and sell it.
So if you did see a property that’s owned by a town, the first place you could go to is talking to the town clerk, is go right there and ask, I’ve seen this property here. But also if you look on the GIS mapping system for that county that property is in and pull up that property, you should get a mailing address too for the Chamber of Commissioners. And you can send a letter to that mailing address too and just say that you are interested in buying this property. And worst case scenario is that they send you the information of when the auction is or how they plan to sell the property.

Tony:
All right. Our last question for today comes from Alan Thomas Taylor. Alan’s question is, at what point in the process, if at all, get a buyer’s attorney when going to purchase property? Before you even make your offer? Never? This will be my first investment property. So I don’t currently have any legal paperwork drawn up, but want to make an offer on a three units property. So Ashley, New York is the state of litigation. So I’ll let you take the first answer here.

Ashley :
So if you are doing an off market property where you’re not using a real estate agent, I would definitely start with an attorney and just talk to them and at least hire an attorney so that when you are ready to do your deal, you have an attorney ready to go. And you don’t have to put a retainer down with an attorney, you just setting a meeting or calling an attorney and just saying, this is what I’m trying to do, is this something you specialize in? Have you done this for other investors? Things like that. So it says that this is your first investment property, you don’t have any legal paperwork drawn up, but you’d like to make an offer on a three unit. So you’re basically going to tell the attorney that and ask them what is the process that you would help me with when walking through this purchase and getting the contract drawn up.
So they may send you to one of their paralegals, which is perfectly capable of doing that, and it will be a lot cheaper too, because you’re paying a paralegal rate than an attorney rate. So find your attorney first and get lined up before you make the offer. And then what I usually do for off market offers is I do a letter of intent. So you can Google this and you can use a sample format online where basically it’s just saying that you intend to buy this property at this address from this person for this amount. And it’s going to state in there that this offer is contingent on attorney approval. So make sure it does say that in there. And then you’re going to have the seller sign, you’re going to sign it, and then they give it to their attorney and you’re going to give it to your attorney and they’re going to use that to drop your contract.
So if there’s any kind of contingencies, like an inspection, you’re going to want to have that in the letter of intent too. But it’s not going to be your real estate contract that you’re drawing up to purchase this property. This is just to get that offer in agreement and something to give to your attorney to actually drop the contract. A seller could change their mind. So the sooner an attorney can get that contract turned around and you get under contract, the better. So that’s why it’s important to talk to an attorney first, have them lined up so that when your offer is accepted, you can go ahead and have them go ahead and put that contract together. They’re probably going to need some information from you about the property to actually get it started. I know that my attorney always includes the SBL number for the property, which is kind of like the property tax ID number, the Parcel ID number.
They include exactly how many acres, they include, everything that’s included. So appliances, are you purchasing the appliances with this three unit, things like that. So make sure that when you talk to the attorney and when they send you the contract you’re going through and making sure that it specifies everything that you want as part of the deal and everything that you are offering as part of the deal too. And I think talk to them too about structuring the contract, maybe if you’re doing seller financing, things like that and figuring out can they help you actually set up seller financing too, where they’re putting a mortgage on the property for the seller, things like that.

Tony:
Actually, that was a masterclass and I can tell you’ve done this a couple times.

Ashley :
Yeah Quite a few.

Tony:
So Alan, we don’t know what state you’re in and every state’s going to be a little bit different. So that’s the process Ashley has to go through in New York. For me in California, whether it’s in… And I’m assuming you’re going off market here. For me in California, when I go off market, we usually just go through our escrow and title companies here. So when I have a new off-market deal, I send it to my escrow officer and then between escrow and title they drop the contract, they send it out to the seller or the buyer or whoever the other party is, and they manage pretty much everything for me. They do ask me just a few details about the transaction, but outside of that I don’t have to get too involved. So I think depending on where you’re at, whether or not you even need an attorney is probably the first question. In California, we don’t, other states you do.

Ashley :
And when you get that contract too, if it is a commercial property and it’s not just a residential contract to purchase property, if it is a commercial one, I recommend getting a new contract every time because the commercial properties can vary so much. But if your attorney sends you a residential contract, and they send you almost like a Word Doc of it where you can go and change things in, what I recommend too is that you go in and you put in the information and then send it to your attorney to review and say, does this look correct? Here’s the letter of intent, did I put everything in okay? And that saves you in attorney fees by doing it yourself, inputting the information.
For my operating agreement, for a loan agreement, things like that, I have just sample contracts where it’s highlighted in yellow, the things that get changed every single time. Then I just go through and fill them in. And then if there’s anything extra that’s different from the norm, then I go and find out what spot should that be put in, or I ask my attorney and then I get that final attorney just glance over, send back, good to go. And then I take it to the seller to sign.

Tony:
We do the same exact thing, Ashley, for our JV agreements. So we sit down with our attorney usually once or twice a year to make updates to the actual agreements. But when it’s done, same exact, and there’s just yellow boxes that we have that we need to go in and fill out every time we have a new partnership. And that’s so much more cost effective than having your attorney do that legwork every single time you submit an offer or have a new partnership or whatever it is. So when you reach out to your attorney specifically ask them like, Hey, when we’re done, can you give me a template that I can use for future transactions? That way they can show you where you need to fill in that information. I think we got time for maybe one more question.

Ashley :
Yeah.

Tony:
I have one that popped up in my Instagram DMs. So let me take this. This one comes from Nathan LaPortes and Nathan says, Hey Tony, Nathan here. I’m a first time potential buyer for a rental property. I’ve been listening to your podcast, I’m watching your YouTube piano for a little bit. And I’m really interested in buying myself a duplex in hopes of listening one side as a short-term rental and the other side as a medium term. The question is, what is the best way to search out and make sure that I’m buying in the best area with the best chances of returns? What resources do we have, or how do we go about choosing the areas to give us the best results and run our numbers the right way?
So Nathan, there’s a lot that goes into analyzing. Well, you’re not even asking about analyzing here. First you’re asking about market selection, and then within market selection, once you found a market, you have to analyze the deal. In terms of market selection there’s three big buckets that I look at. I look at permitting, the policies in that market. I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I’m getting in a market versus the average purchase price, what does that ratio look like, and am I able to hit my return? And then within a specific property, there’s really three things that I’m looking at. It’s location within that market because some parts of a city are probably better than other parts of a city.
If you’re in a lake town, being lakefront is probably better than being two miles away from the lake. If you are in an urban setting, being maybe in the heart of downtown is better than being on the outskirts. If you’re on the beach, beachfront is better than two blocks back from the beach. So every market probably has its location that makes more sense than somewhere else. So location is a big one. Next is the amenities and the design standpoint. So if you’ve got a property that really creates an amazing experience for your guest, even if you don’t have the best location, maybe you can make up for by making the property super amazing. So location, then amenities and last will be value. So how good of an experience can you give your guests in comparison to the price they paid for that property? So it’s more of a framework for you, Nathan, to look at. So in terms of choosing the market policies, popularity and profits, and then looking at the actual property, I’m evaluating location, amenities, and value. Anything to add to that?

Ashley :
Well, not to really the short term rental side, but I pulled up an article that I’d seen from Bigger Pockets for more of the long-term rental side. So the Bigger Pockets published this article, and it’s The Top 10 Real Estate Markets for Cash Flow in 2022 by Dave Meyer. So I think a great way to start out identifying a market is looking where the research tells you to go and also where other people are investing. So even before that, you need to identify what your goal is for real estate investing. Is it cash flow? Is it appreciation? Okay, so if it’s cash flow, then you’re going to look at this article, 10 Real Estate Markets for Cash Flow in 2022. If then you’re going to go, if it’s appreciation you want, it’s the long-term play you just want to cash out in 20 years after you’ve built up all this equity in these properties, then you’re going to look for the Top 10 Real Estate Markets for Appreciation.
So in this article, it goes through the top 10. And so the number one is actually Detroit with the median sale price at 63,000, the median rent 1400. And so the rent to price ratio is 2.2%. Okay, that information right there, that does not mean run to Detroit and buy property. This is a starting point. This is where you can kind of analyze that data. You have to go and verify. Just because it has that cash flow target doesn’t mean it’s going to not bring headaches, it’s not going to… These aren’t going to be properties that constantly need repairs. Are they going to be in bad areas, maybe where you have to deal with a lot of conflict, things like that. So you’re always going to want to look at other things too. Are they in good school districts, things like that. What class of tenant are you going to be getting into the property?
So maybe you want to be really passive, so maybe you want higher end properties where they’re more turnkey, they’re brand new. You don’t want to have to constantly send people to do repairs even though you’re getting a larger amount of cash flow. So think about all of these variables and what’s important to you, and then kind of work backwards from that. But you can start with where other people are investing and then kind of analyze those cities and those markets to see if they fit what you want to do, actually.

Tony:
I love that advice, Ashley. And I think a lot of times, especially new investors, they just want that magic bullet that says, pick this city, right? But there’s so many factors that go into choosing the right market for you because what’s important to Tony might not be as important to Ashley, and what’s important to Ashley might not be important to Tony. So there’s this balancing of priorities and goals and objectives that each market kind of caters towards. So I think the point of thinking about what’s important to you first is super, super critical. So Nathan, hopefully that little framework helps you make the right decision for yourself moving forward.

Ashley :
Yeah. And Tony, I have one more thing to add because I was kind of just eyeballing the cities and states, and right after I stopped talking, I saw number two, and I don’t know why not… You would’ve been talking when I looked at this whole thing, I didn’t see this before, but number two is Shreveport, Louisiana-

Tony:
No way.

Ashley :
… for cash flow. It is-

Tony:
Is it really?

Ashley :
… median sale price, 93,000, median rent 950 with rent a price ratio of 1.02%. So if-

Tony:
I knew it, I was good.

Ashley :
… you guys have been a long time listener about Shreveport, Freeport, whatever I thought it was called for two years that Tony had to invest in property. So I think right there is an example of just because that’s the best cash flow you can get, does not mean that is the optimal market to invest them.

Tony:
Yeah. Yeah. So for those of you that don’t know, I lost $30,000 on a property in Shreveport, Louisiana. It was profitable as a rental unit. We had it rented out for about a year and we were making a couple hundred bucks on it every month. Got some great financing to kind of take that deal down. But when we went to sell it, that’s when all the problems started popping up. So anyway, it was one of these rookie reply episodes, you can go back and find it, but we lost 30,000 bucks on a house in Shreveport.

Ashley :
And that also gives another example is that, yeah, you were getting the nice cash flow, but also there was lots of repairs and even if you wanted to put the house up for sale, eventually these repairs would start [inaudible 00:36:33]-

Tony:
All those things would’ve came.

Ashley :
Yeah.

Tony:
Totally, totally.

Ashley :
Well, thank you guys so much for listening to this week’s rookie reply. And I hope you guys all have a wonderful holiday season. And I completely forgot after question one that I was turning every question into a holiday theme. But I wish everyone Merry Christmas and a happy New Year, even though we’ll have an episode next week and I’ll wish you a happy new year again before that. But thank you guys so much for joining us. And I just want to say you guys are amazing and you guys had an awesome year as rookie investors and some of you have just taken off and we love hearing your guys’ story. So keep sharing them with us at the Real Estate Rookie Facebook group and we’ll see you guys on Wednesday for a show with a guest.

Jonathan Peterson, Jefferies managing director, joins ‘Power Lunch’ to discuss Peterson’s thoughts on real estate investment trusts, the subtypes within the hospital sector and more.

Dave:
Hello, everyone. Welcome to On The Market. I’m your host Dave Meyer, and I’m doing this one solo. I’m all by myself here, but we’re going to have an awesome show. We’re going to talk about and sort of summarize some of the major predictions for the 2023 housing market.
Now if you follow the show and hopefully you listen to lots of episodes, you’ve probably heard a recent episode where we had the full panel and everyone came on and talked about their expectations for 2023, which was a really fun show. But we’ve also want to know what other experts in the industry, perhaps people who maintain or build their own financial models or forecast models think are going to happen next year.
And one of my favorite sources for data in the entire real estate industry is Redfin. If you listen to this show or follow me on social media, you probably hear me quote it a lot. They actually have a ton of free data too. So if you want to download data or use their, if you want to just understand data about your local market, highly recommend you check out the Redfin data center.
This is not some paid sponsorship, I just use that website all the time, so you should check that out. But they also put out some reports and predictions based on all of their research. And today, I’m going to go through some of the predictions that they are making for 2023. I’m going to explain mostly why they think these things are going to happen.
I’ll provide my own opinion on these predictions, provide some color, and I think it will give you a really good sense in a holistic manner of what is going to happen or what is sort of the most probable thing to happen in 2023. Of course, no one knows what’s going to happen, there’s just so much and unending uncertainty with the economy.
Just in the last couple of weeks we’ve seen inflation numbers that were very encouraging, but then a few days later, the Fed raised the interest rates anyway, very uncertain if there’s going to be a recession next year. So we don’t know what’s going to happen, but we always, as investors should be developing our own investment thesis.
Right? We should keep in our minds what we expect or at least think is the most likely scenario in the coming months so that we can make decisions. Because if you just have no opinion or just say, “There’s, I have no idea what’s going to happen,” it’s really hard to make decisions.
Whether even if your decision is to hold off on investing, that’s okay, but that should be based on some thesis or belief about what’s going to happen in the housing market and what’s the best way to use your money in the coming months. So hopefully, this show’s going to be super helpful to you. I think there’s some really fun and interesting facts in here. We’re going to take a quick break and after that we’ll come back with these predictions.
Redfin’s first prediction for 2023 is that home sales will fall to their lowest level since 2011 with a slow recovery in the second half of the year. So I actually strongly agree with this. If you’ve been following data over the last couple of months, you’ve seen that the volume of home sales, and I just want to make sure that you know that this prediction is not about home prices.
This is about home sales, the number of homes that transact every single year. That is what Redfin is predicting is going to fall to the lowest level since 2011. And I actually agree with this. I don’t know necessarily know if we’ll fall to 2011 or something similar to that, but I do think we’re going to see a very big decline in home sales volume.
And this is really important. I think most people who are casually looking at the housing market sort of pay attention to housing prices first and foremost. But housing volume drives the entire industry. It has a huge impact on prices first of all, because if volume goes down, that usually signals that there’s less demand in the market and that can soften prices.
But it also has huge implications for all of the different services, for example, being a real estate agent or loan officers or all the different things that tangentially touch the real estate investing world. And so what Redfin is saying here is that they think that there’s going to be a huge decline in 2023.
And I agree, but let me just caveat saying why I agree with this. It’s because I think the first half of the year is going to see big declines in a year over year sense. And when we compare things in a calendar year, that’s how everyone wants to talk about things.
But when we look at 2022 and what’s happened over this last year, you see two very different markets. In the first half of 2021, things were booming, prices were going up like crazy, homes were transacting really quickly. Second half of 2022, we’ve seen a change to that.
So when we look at 2023 and we compare the first half of 2023 to 2022, it’s going to look like a huge decline, right? Because last year the first half was crazy and we all know the market is cooled and it’s not going to go crazy again in the first half of next year in my opinion.
And so we’re going to see a really dramatic change in year over year numbers for the next couple of months, but that to me doesn’t really necessarily signal that things are necessarily getting worse from where they are right now because we’ve already seen home sales volume tank. Right? Since June, they’ve been going down. We’re now, I’m recording this in the middle of December and we’re see already seeing that home sales volume is down.
And so this is why I think Redfin is saying that they’ll see a slow recovery in the second half of next year because again, first half of the next year we’ll be comparing to a crazy 2022. Second half of next year, we’ll be comparing to a slow half of 2022. And so we might see a recovery in home sales on a year over year basis towards the second half of next year.
So why is this happening? Why are we seeing this decline? Well, it’s pretty obvious, right? It’s because we have low affordability, right? Buyers just don’t want to buy right now. Sellers don’t want to sell right now. That is a perfect situation for lot, very few homes to start transacting. I’ve called it a stalemate, we’ve called it a standoff, a tug of war, whatever you want to call it.
Basically, sellers have anchored in their mind the prices from June of 2022. Whether that’s right or wrong, I think it’s a little bit crazy, but basically they’re like, “If I had sold in June, I would’ve made 20% more.” And now they’re going to hold out for that number for better or worse. That’s what they want and they don’t want to sell. Buyers on the other hand, just can’t afford prices the way they are right now.
Prices went up and they were affordable when interest rates were two and a half or three percent, but now that they’re six and a half percent, or I think they’re actually lower than that as of this recording, but they’re averaging around six and a half percent right now. Six and a half percent, it’s just not affordable so they don’t want to buy. And until one of those things change, I don’t think we’re going to see home sales volume increase. And to me, the thing that has to change is mortgage rates.
And we’ll talk about that with the second prediction. Prediction number two from Redfin is that mortgage rates will decline ending the year below 6%. To me, this is the single most important variable in 2023. And all of the other predictions that Redfin is making, all the other things that I am saying here are really predicated on what happens with mortgage rates. I just said this, right?
What is going on in the housing market is affordability is too low and that is preventing people from buying, it’s pushing down prices, so people don’t want to sell. The main thing, affordability has three components. Right? It’s home prices, debt, mortgage rates, and wages. And wages are still going up a little bit, but that happens pretty slowly. Home prices are coming down, but probably not enough to offset the increase in mortgage rates so far.
So what has to happen to restore some energy to the housing market is mortgage rates have to go down. And so this prediction, mortgage rates will decline ending the year below 6% would I think restore some energy to the housing market. But I don’t think we’re going to see this. Again, I think 2023 is going to be just like 2022 in the sense that it’s going to be a tale of two halves, right?
2022, you can’t describe the housing market in 2022 because the first half and the second half were totally different. I think we’re going to see something similar in 2023 where the first half of 2023, we’re going to still see a lot of uncertainty in the economy.
Mortgage rates are probably going to hang out where they are right now. And the mid-sixes might go up near seven, again, might hover near six, but let’s say between six and seven is probably going to be the average in my opinion for the next couple of months. But then in the second half of next year, a lot of things could play out, right?
Inflation, there is a case that inflation goes down, there’s a case that there’s a huge recession and mortgage rates go down because of that. There’s a case that the Feds cut interest rates. I think there are a lot of different scenarios where mortgage rates actually go down. And I know that is confusing to people because just two days ago the Fed raised interest rates again and actually mortgage rates went down right after that.
So let me just take a second and explain some of the different scenarios as why Redfin believes mortgage rates will go down in 2023. And I tend to agree with this. So the first is the more obvious scenario, which is that slowing, inflation slows and the Fed stops raising their Federal funds rate. Now the report that came out in mid-December reflects November numbers and shows that inflation on top level came down from 7.7% to 7.1%.
Don’t get me wrong, 7.1% inflation is unacceptably high. It is crazy. It’s still one of the highest numbers we’ve seen in decades. But that is the fifth month in a row that the CPI has fallen. And I think the most important thing to take away from the CPI report from the other day is that prices only went up 0.1% in March. That is one of the slowest monthly increases that we’ve seen.
And when we talk about the core CPI, which takes out the volatile food and energy sectors, that only went up 0.2%, which is the slowest monthly increase since August of 2021. So we are really seeing the pace of inflation start to come down. Now I know most Americans are not happy with inflation. It’s still way too high. I totally agree. But this is the beginning of potentially a trend.
And if this trend continues, for example, if we see 0.1%, month over month inflation rates will be below the Fed’s target by June. So this could signal that inflation is starting to get under control. And if that happens, the Fed could start stop raising their Federal Fund rate, which would stop putting upward pressure on bond yields and could make mortgage rates settle down. We could also see the spread between bond yields and mortgages start to come down.
So that is one scenario that is looking more and more likely right now because we’ve seen good inflation prints the last couple of months. And in my opinion, there are some things that point to the inflation coming down even more. Mostly shelter costs. So this is kind of wonky, but the way that the, this last month, the main thing that was keeping inflation high was shelter, which is basically rent and something that they call owner’s equivalent rent.
Basically, what a homeowner would buy, would pay in rent if they were renting their house instead of owning it. And the way that is collected in the CPI just kind of sucks. It’s really lag, it lags a lot. And so it’s still showing in the CPI that rents are going up really rapidly. But if you look at more current private sector data, there’s tons of it out there, RealPage is a really good one if you want to check it out.
You can see that rents are flat or falling in most markets. And so that reality has been happening since July or August, but it’s not reflected in the inflation report yet. And that is the main thing showing inflation going up in CPI. So when the real data starts to flow through the CPI in the first quarter of 2023, I think we’re going to see inflation come down even more.
So I think this is one likely scenario. The second likely scenario that could push down mortgage rates, and I’ve talked about this before, is basically a recession. And I know that is confusing, but basically what happens if the Fed over corrects, if they raise interest rates too much, which is another likely scenario right now, right?
Inflation is going down, but they’re still raising interest rates. So another likely scenario is that there they over-correct and that there is a global recession. What happens in a global recession is that investors tend to look for safe investments. And one of the safest investments in the world is US treasuries like the 10-year bond.
And when people want that bond, that increases demand and that pushes down to yields. Again, I’ve said this many times on the show, but bond yields dictate mortgage rates. And so when that pushes down yields, that could push down mortgage rates. So that is another very likely scenario. Right? We could have a big recession, bond yields could go down and mortgage rates could come down with it.
At the same time, if there’s a big recession, the Fed might realize that they over-corrected and cut interest rates. Another thing that can help bring down mortgage rates. So those two scenarios I think are probably the more likely and why I agree that mortgage rates will probably come down in 2023. There is one scenario where mortgage rates rise though, there’s probably few, but the most likely that I see is where the Fed raises rates like they are right now, but we don’t go into a recession.
They call this kind of a soft landing. But maybe they keep raising interest rates, which will put upward pressure on bond yields and mortgage rates. But if we’re not in a recession, then we won’t see this huge demand for bonds that pushes down yield. So that is another scenario that could happen.
I don’t know which of the three is most likely, but to me, two of the most likely scenarios push mortgage rates down and only one of the three likely scenarios pushes rates up. And so to me, I think the more probable outcome, and again, we don’t know what’s going to happen and you should be thinking in probabilities, that’s the best way to think as an investor, in my opinion. I think the most probable scenario is that mortgage rates go down in the second half of 2023.
I don’t think this is going to happen right away. So that’s my reaction to prediction number two, that mortgage rates will decline. I don’t know if they’re going to be below 6% too. That’s a specific forecast that I don’t know, but I think they’ll be somewhere between, let’s say five and a half and six and a half.
Right? So they will come down from their recent average, and I think that will probably reinvigorate the housing market a little bit. The third prediction, home prices will post their first year over year decline in the decade, but the US will avoid a wave of foreclosures. Strongly agree on both of these. So number one, Redfin is predicting a 4% year over year drop. I’ve made my predictions on YouTube, you can check those out.
But my estimate, and I don’t maintain financial models, I basically, I’m a data analyst. Right? I don’t have all these economic models, but I can look at historical data and trends. And my opinion is that we’ll probably see a national level decline in housing prices somewhere between three and eight percent next year. And remember that this is on a national basis.
Every market is going to behave differently and you have to really understand each of your markets. So I’m just talking about on a national basis. And I think the really interesting thing here about Redfin’s prediction is that they’re basically admitting, if you look at the details, that they don’t really know. That this is a really hard one to predict.
So in each of their predictions, they provide what they call a base case, which is what they think is going to be the most likely. They provide upside, so this is what happens if everything goes well. Or downside. Basically, if everything goes poorly, what’s the worst case scenario. In data analytics or data science, you often see something called a confidence interval. Right? Or you see basically a band of likely outcomes.
And again, this is sort of, maybe this is becoming a theme for this episode, but you want to think in probabilities. Right? People are making these predictions like, “It will be 4%.” But really when they do their analysis, it shows that it’s the most likely is 4%, but they are really confident that it’s going to be between 3% and negative 11%. Right? That’s really what the math comes out to be, and that’s actually what they say on their website.
So this is the headline that they decline 4%, but when you look at the details, what they’re saying is that they see a scenario, it’s not their most probable scenario, but they see a scenario where home prices actually go up 3% next year. That’s probably if mortgage rates drop considerably. They are base case what they think the most likely scenario is negative 4%.
And they also think the downside is negative 11%. So they also see a scenario, again, not the most probable scenario, but they see a scenario where national housing prices could go down 11%. So I think that this is a good analysis honestly. I do think that the most likely scenario is mid-single digit declines. Again, I’m saying negative three to negative eight percent is my belief. But there is downside risk.
There is a chance that things go way worse. If there’s huge job losses or foreclosures or mortgage rates go to 10%, yes, that can happen. I don’t think that’s the most likely scenario, but that can happen. There’s also a case that mortgage rates fall and home prices go up next year. I don’t think that’s the most likely scenario, but that can happen.
So I think this is a pretty good sober analysis of what’s happening in the housing market. And I am personally anticipating a, like I said, a single digit decline in national housing prices next year. Now there was a second part of this prediction, which was that the US will avoid a wave of foreclosures, and I definitely agree with that.
In the next couple weeks, we’re going to have Rick Sharga from ATTOM Data on. He is an expert in foreclosures. We already did the interview. We’re banking a couple shows before the holidays. So I already spoke to Rick yesterday and he was talking about foreclosures. And although there is going to be a tick up, we’re still far below normal levels and there’s very low risk of foreclosures.
People, very few people are underwater on their mortgages right now. Even, Redfin came out and said this, that even if their base case of negative 4% growth next year, if home prices go down 4%, only 3% of people who bought during the pandemic would be underwater. So that’s very few people would be underwater.
Being underwater doesn’t mean you’re going to go under into foreclosure as long as you keep making your payments. So that means very few people are at risk of foreclosure. And this is why Redfin, and I totally agree, I strongly agree with this, that there won’t be a wave of foreclosures. If you want to learn more about that, check out the interview with Rick Sharga.
It’s coming out in a week I think. Really fascinating conversation with Jemele, Rick and I, so check that one out. All right. So that’s what everyone wants to know, right? That’s the big headline. Right? I think housing prices are going to go down on a national level in the single digits. So does Redfin. Prediction number four, the Midwest and Northeast will hold up best as overall markets cool. I tend to agree with this one as well.
I do think that most markets are going to be impacted and go flat or even slightly negative, but when we look comparatively, it’s kind of obvious. Right? The cities that grew the most during the pandemic are at the biggest risk. You see these cities like Reno and Boise and LA and Seattle and Phoenix and Austin that grew 20, 30, 40 percent. It’s not sustainable.
The houses are not affordable in those markets. And so they have the largest likelihood of coming down, and most of them are already coming down. A lot of them have come down on a month over month from their peak. But what we really care about, again, don’t believe everything you see on the internet when people say things are crashing, look year over year.
That’s what you should care about when you look at a regional housing market. Year over year, they are starting to come down and that’s to be expected. So I do think that this is a good analysis. If you look at some of the lead indicators for markets in the Northeast and the Midwest. And lead indicators are just data points that basically help predict future data points.
I think I like to look at inventory days on market, new listings. If you look at those things in cities like Boston or Philadelphia or some areas of Connecticut, Chicago, Madison, some of these cities in the Midwest and the Northeast, they look more stable. They don’t look like they’re reverting back to pre-pandemic trends in the same way as some of these West coast cities.
Look at Denver, look at Austin, look at California. You see inventory is spiking, days on market is spiking, and that puts downward pressure on prices. So I agree with this. I do also think that there are some areas in the Southeast that are overheated, and but there are some areas that are going to do well. So think about a city like Tampa in Florida.
Florida in general probably has some markets that are going to see some declines, like the villages. I think, I don’t even know much about it, it’s a planned community. But it just went crazy. And there’s a lot of analysis out there that shows that the villages, for example, is going to take a hit, big hit. But I think areas Tampa, for example, seem to be doing really well.
So I think there are still subsections in the Southeast, in the West that are still going to hold up. Okay, but we’re just talking generally speaking. If you want to talk on a regional basis, then yes, I agree, Midwest, Northeast are probably going to do best as a whole. But there are still markets in North Carolina that are going to hold up great and in the Southeast.
In Texas, there are markets that are probably still going to do well. Even in California, even in the West, there are some markets that’ll do well, but on overall I agree with this. Brings us to prediction number five. Rents will fall and many Gen-Zers and young millennials will continue renting indefinitely.
All right, I have a lot of opinions about this. I’m going to just say I don’t necessarily agree with this. Rents will fall. Yes, I think rents are falling in some cities. We’re seeing household formations slow down. But I think the rent is going to be very, very regional. Right? Some markets are definitely going to see rents continue to go up, right?
Areas with large population growth, wage growth are probably still going to see rents go up. And I do think some markets will see rents go down, probably in areas where there’s a lot of large multi-family complexes coming online. If you look at some of the data coming out, there are areas where there’s just so many multi-family units coming on, specifically in the second quarter of 2023.
Those areas could see rents come down. I mean, it’s areas like, honestly, Arizona is one of the most guilty areas, Texas and Florida. So you might see rents come down, but generally speaking, rent is very sticky and I don’t think it will fall that much. You might see 1%, 2%, 3% drops. On a national basis, I would be surprised if we see rent go down more than one or 2%.
So that could change. It could be wrong, but rent is generally really sticky. Just for context, back in 2008, the peak to trough home prices fell over 20%. Rent fell six to eight percent depending on who you believe. So it’s a fraction, it’s a third roughly of what home prices fell. And I think that’s probably going to be true. Rent is just stickier than home prices generally.
Now I take exception to the second part of this prediction where they say that Gen-Z and young millennials will rent indefinitely. Now I don’t know what that means. Does that mean they’re going to rent for the next two years? Yeah, sure, probably. But I feel like for the last 15 years people have been saying, “Millennials don’t want to buy houses, they’re renters forever. We’re becoming a renter nation.” And it’s just not true.
I don’t know how to say it in more ways, but the data just does not support this. First of all, the home ownership rate in the United States is relatively stable for the last 60 years. It goes between 63% and 69%. Right now we’re at 66%. So we’re right in the average over the last 60 years. So saying that we’re a renter nation, not true currently. Of course things can change in the future, but right now that is not true.
And at least as of the last census reading, it was trending upward. So I don’t know if that’s going to continue, but the idea that we’re all of a sudden all renters is just not accurate. The second thing is that people, since the Great Recession have been saying millennials don’t buy homes. They don’t want to buy homes. It’s not that they don’t want to buy homes, it’s that they couldn’t afford homes.
If you look at all the data, it shows that they couldn’t. They weren’t earning enough money. This was the aftermath of the great recession. Wages were really suppressed and they couldn’t afford homes. Now when interest rates dropped and there was an infusion of cash into the market during the pandemic, millennials bought a ton of homes. It wasn’t that they didn’t want to buy homes, it’s that they couldn’t afford homes.
And as soon as macroeconomic conditions allowed them to buy homes, we saw this massive increase in demand for homes from millennials. And that is one of the major drivers that pushed up home prices over the last couple of years. So this idea, I don’t know if Redfin is saying this, I don’t know if they’re saying that they’ll never buy homes, but this idea that millennials or Gen-Z or any generation for that idea doesn’t want to own their own home, I think is really overstated.
And it’s just a matter of affordability. When people can afford homes, they tend to want to buy homes. And I think that is not going to change. So again, I do agree that given the low affordability in the entire housing market right now, young people are going to be hit the hardest by that. Right? They have the least time to save, they’ve tend to have the lowest income.
And so it’s likely that Gen-Z and young millennials will not be jumping into the housing market right now. But as soon as they’re able to, I think they will jump in. All right, last prediction. They did make 12 predictions, but I sort of picked my favorite so not to keep you forever here. But the last prediction that they’ve made here is builders will focus on multi-family rentals.
And this is another one I’m a little bit conflicted about. So if we’re talking relatively, are builder’s going to build more multi-family than single family homes in 2023? Sure. Yeah. I believe that because there is a national housing shortage and it is more efficient to build multi-family than it is single family. But I just generally think construction is going to be down in 2023.
We are seeing, I just said sort of in the last when we were talking about rents, that there is a lot of supply coming online in multi-family rents in the next year. Not so much that it’s going to make up all of the housing shortage over the last couple of years, but it’s a lot. And so I do think if I were a builder, I would sort of want to see how things play out over the next couple months with rents, with cap rates, with interest rates.
And I wouldn’t be building a lot. That’s just me. I’ve never built a house, so take that with a grain of salt. But I know I talk to a lot of syndicators, people who build, and I think that’s the general sentiment is, yes, maybe if you are building, you’re going to build multifamily instead of single families.
But generally think speaking, I think we’re just going to see lower construction, which might help stabilize the market a little bit and not see a glut of supply. But overall, the US just needs more housing. And so I hope that I’m wrong about that and I hope that we see more construction. Because generally speaking, to get the market to a place of more affordability where investors and homeowners can buy and the market becomes less volatile, right?
It’s just so volatile right now. And that’s not good for everyone. And I know people think that’s odd coming from a real estate investor like, “You don’t want to see the market go up like crazy? No, I don’t. I want it to be predictable. And that is we, for that to happen, we need a better balance of supply and demand. And that is not where we’re at. We need more supply.
And so I hope I’m wrong about this, but I do think we’re going to see construction come down quite a bit in 2023. All right. That is it for my predictions for, or I guess they’re not my predictions, my reactions to Redfin’s predictions for 2023. Thank you so much for listening. If you liked this episode, please make sure to give us a review.
We really, really appreciate it on either Apple or Spotify or subscribe to our YouTube channel. It really helps us and supports us in making the show. If you have any thoughts or questions about my reactions or thoughts of your own hot takes on the 2023 housing market, feel free to go on the BiggerPockets forums, we have an On The Market forum there. Or you can hit me up on Instagram where I’m at the Data Deli.
Thanks again for listening. We’ll see you next time for On The Market. On The Market is created by me, Dave Meyer and Kaylin Bennett. Produced by Kaylin Bennett. Editing by Joel Esparza and OnyxMedia. Research by Pooja Jindal. And a big thanks to the entire BiggerPockets team. The content on the show On The Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

This article is presented by Kay Properties & Investments. Read our editorial guidelines for more information.

It doesn’t seem that long ago when the winds surrounding the commercial real estate industry were rustling with whispers of the Biden Administation’s plans of repealing the current 1031 exchange laws and quashing alternative like-kind exchange vehicles such as Delaware Statutory Trusts. However, when Congress passed the Inflation Reduction Act with no proposed changes to section 1031 of the Internal Revenue Code, three powerful forces amplified the reality that the 1031 exchange and Delaware Statutory Trusts will likely be here to stay. 

What is a Delaware Statutory Trust and How Does It Connect to 1031 Exchanges?

A Delaware Statutory Trust (DST) is a real estate ownership structure for 1031 exchanges that allows multiple investors to each hold an undivided beneficial interest in the trust. The term “beneficial interest” means that investors hold a percentage of the ownership, and no single owner can claim exclusive ownership over any specific aspect of the real estate. 

The laws of DSTs allow the trust to hold title to one or more investment properties that can include commercial, multifamily, net lease, retail, office, industrial, self-storage, etc. Investors are keenly interested in DSTs because the IRS blessed them to qualify as “like-kind” investment property for the purposes of a 1031 exchange. 

Currently, the appeal for 1031 exchange strategies such as DSTs has never been stronger. According to the Mid-Year 2022 Market Update Report from the real estate research firm Mountain Dell—in 2021, securitized 1031 exchange programs, which includes DSTs, raised a record $7.4 billion—doubling the previous record of $3.7 billion set in 2006. According to the same report, the DST marketplace is poised to continue to grow. 

What’s driving the popularity of 1031 Exchanges and like-kind investment strategies as DSTs? We believe there are three major forces that are driving the popularity of DSTs for 1031 Exchanges now and into the near future and that these same forces will hopefully make it unlikely that Congress will pull the rug out from under the current exchange laws.

Force One: Demographics

One of the most fundamental forces helping protect the 1031 Exchange market is demographics. According to the U.S. Census Bureau, baby boomers hold more real-estate wealth than any other generation in history. Born between the years 1946 and 1964, the influence of baby boomers on all things real estate cannot be overstated. 

For example, Americans over the age of 55 own 53.8% of all the real estate in the United States, including trillions of dollars of highly appreciated real estate investments. Now, many of these aging baby boomers (the oldest of whom will be turning 76 this year) are rapidly relinquishing their investment properties via 1031 exchanges. In addition, they are looking for alternative real estate investment options that offer both tax deferral and other life-enhancing benefits. More and more, this group of aging baby boomers is employing Delaware Statutory Trusts for their 1031 exchanges in order to defer their capital gains taxes and enter a passive investment structure. 

Force Two: The Pandemic

Another powerful force that helped ignite the popularity of the 1031 exchange laws was Covid-19 and its impact on rental property owners. Because our firm actively works with thousands of commercial property owners across the country, we heard firsthand some of the challenges and pressures property owners faced during the pandemic (and continue to face). These include mandated eviction moratoriums, strict rent-control laws, and other regulations that directly impact the financial health of real estate investments. 

Now, many of these same investors are stepping away from the financial burdens brought about by Covid and the headaches associated with “tenants, toilets, and trash”. Investors by the thousands are relinquishing their rental real estate and reinvesting the proceeds into other real estate opportunities like 1031 exchanges and Delaware Statutory Trusts. 

Without the ability to defer capital gains and other taxes through the 1031 exchange rules, many of these “mom and pop” independent investors would be subject to tax bills that could amount to 40% of the gains these investors realized after decades of working hard to build a modest real estate portfolio. 

William Brown, past president of the National Association of Realtors summed it up nicely in a New York Times article when he said, “Getting rid of the 1031 exchange would hamper the opportunity of investors because most investors cannot afford to sell a property and then buy something else after paying taxes.”

Force Three: Economics

Finally, there is something inherently virtuous in the Internal Revenue Code 1031. That is, like-kind exchanges help propel commerce through a number of other industries like banking, construction, landscaping, and insurance. 

A well-known study written by Professors David C. Ling of the University of Florida and Milena Petrova of Syracuse University analyzed how 1031 exchanges encourage useful economic activity and growth that also support local commercial real estate markets and local tax bases. According to the study, DST 1031 exchange also achieves the following three major economic benefits: 

1. Like-kind exchanges are associated with increased capital investment and reduced loan-to-value ratios (in other words, reduced debt) on replacement properties. 
2. Tax-deferred exchanges improve the marketability of highly illiquid commercial real estate. This increased liquidity is especially important to the many non-institutional investors in relatively inexpensive properties that comprise the majority of the market for real estate-like-kind exchanges. 
3. 1031 exchanges increase the ability of investors to redeploy capital to other uses and/or geographic areas, upgrading and expanding the productivity of buildings and facilities that, in turn, generates income and job-creating spending. 

Conclusion

By repurposing capital and real estate in a compressed time frame, 1031 exchanges and Delaware Statutory Trusts help the economic growth of cities and states across the country, making the like-kind law a relevant and important ingredient to the preservation of wealth and the continued strengthening of the United States economy.

This article is presented by Kay Properties & Investments

Kay Properties & Investments is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have nearly 400 years of real estate experience, licensed in all 50 states, and have participated in more than $30 Billion of DST 1031 investments.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. All offerings discussed are Regulation D, Rule 506c offerings. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential distributions, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals, and risk tolerances. Securities offered through FNEX Capital, member FINRA, SIPC.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

David:
This is the BiggerPockets Podcast Show 704.

Paul:
Every day I wake up and we’re building this thing that, in my opinion, is providing so much value in this real estate space and we’re providing a real service on the front end and the back end. We’re helping fulfill people’s dreams on the back end of owning their dream property. Maybe they don’t own a home, but it’s pretty easy for them to go and put their credit card in and pay $200 a month. And in 5 to 10 years, they’re going to own this thing that they can pass down to their children. That’s a story that we hear all the time.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Podcast, here today with a fantastic show for you where I interview Paul Hersko and Willie Goldberg, two fantastic gentlemen that formed a partnership and put together a business model you’ve probably never heard of regarding real estate. These two have figured out a way to buy raw land, package it on a website and sell it to people on terms where they can put usually a couple of hundred dollars a month of a monthly payment to buy land in a contract, like a rent-to-own, and it’s been fantastic for them.
They currently own over 700 lots that they’re selling to other people and counting. They’ve got 15 salespeople alone as well as an entire backend operation. And a fascinating business model that if you’re having a hard time finding ways to make money in real estate and you’re open to something new, you might really enjoy this.
Before we bring in Paul and Willie, where we go back and forth digging deep into their business and a lot of the specifics of what they look for in a property, mistakes that they’ve made, ways that they’ve lost money, how they figure out where they should be buying, and how they’re structured, I’m going to give you a quick tip that I hope you never forget. During the show when we’re diving deep to try to figure out why is their business working so well, it comes to the surface that they focus on solving problems and making the experience better for the consumer. And they actually refer to Amazon as a company that focuses on the consumer experience instead of the owner experience.
And it has me thinking, so much of life and success in life comes down to how much value do you try to bring others versus how much value do you try to take from others. It’s very easy to look for something in life or someone in life that will give you what you want. It is much more difficult in life to look for what other people need or want and try to provide that to them. But when you think about the people that you want to do business with or you want to give the best version of yourself to, they’re always the people that put your needs first.
Here’s my challenge to you, think about how you can meet others’ needs without worrying about your own and wait and see if the quality of your life doesn’t improve. Living this life of faith will often help you in business, in life, in relationships, and many other areas. And as you listen to today’s show, you will see this theme pop up over and over and over. All right, hope that helps. Let’s get to Paul and Willie’s story.
Paul Hersko and Willie Goldberg, welcome to the BiggerPockets Podcast. How are you two?

Paul:
Doing great. Thanks for having me.

Willie:
Yeah, I’m doing super well. Glad to be here and excited to be on BiggerPockets. I used to listen to this podcast religiously when I was getting started and it really meant everything to me, so super excited to be on the other side, actually being interviewed.

David:
It’s going to be really weird when you guys hear your voice on here for the first time. I remember when that happened to me, so just brace yourselves right out. It’s a surreal feeling, but we’ll make sure that we get a good show. We actually just learned that you guys live in an area where I’ve been buying rental properties and visiting quite a bit in South Florida. That was pretty cool.

Willie:
Yeah. I’m out in Pompano Beach. You said you got a rental nearby.

David:
Yep.

Willie:
If you ever need anyone to go check it out, I’m your eyes and ears on the ground, so happy to help with whatever I can.

David:
And Paul, you mentioned you’re in Boca Raton?

Paul:
Yep. I’m up here in Boca Raton.

David:
Yeah, it looks like Florida looking in the background.

Paul:
Yeah, people ask me if it’s a real or fake background because this is where I take all my Zoom calls. I’m like, “Nope, it’s Florida.”

David:
If we’re lucky, we’ll see an iguana come running right across the road. They’re very funny when they run. I don’t know how to describe an iguana’s run. Its feet go out. They don’t just go straightforward. They go out and come in. It’s hilarious to me every single time I watch them. Have you guys grown up in that area or did you move out that way?

Paul:
No, so we actually both grew up in Chicago. We moved about two years ago and we actually didn’t know each other growing up. And maybe we’ll get into it later, maybe we won’t. But we actually grew up one town over from each other in Chicago, but never knew each other until we really started this business. It all crossed paths, but yeah, we’re from Chicago.

David:
All right. Now, I understand you two met and you’ve built a real estate empire after meeting, so tell me what’s the origin story of your relationship. We’ll start with you, Willie. Where were you in life when you met Paul and what happened when you guys met?

Willie:
Yeah, we were still both living in Chicago at that time. We both lived down there. Actually, first office was out there. I was running basically the same version of the business that discount lots, so we rebranded when we eventually partnered. But I met Paul at a party. I had a trolley. Trolleys are super popular in Chicago. One of my buddies was leaving town and one of my good buddies from growing up, he married Paul’s sister.
And so just happened to be that he brought him to the party and we met on the trolley and headed off right then and there. And not soon after that did we form our partnership. But at that time, I was basically running the land business on my own. Paul had a very different experience and skillset than me and we recognized that when we first met. And that’s how it all started.

David:
All right, Paul, what was going on in your life at that time that you met Willie?

Paul:
Yeah, so I had Amazon eCommerce business. At that time, it was super hot when I started. Basically 2015, I was thinking about starting a business. I was like, “I’m either going to go into real estate,” because I was listening to BiggerPockets at that time or I’m going to go into Amazon. That was when Amazon was super easy, 2015, 2016 era where you could just put a product up and it would sell super well.
And I was like, “You know what? I’m going to start with Amazon,” because the barrier entry is lower than real estate. And so, I went down that path and I guess Willie went down the other path. I had an Amazon business with one employee and I was feeling pretty unfulfilled at the time. I wasn’t really enjoying what I was doing, I just felt like I was taking things, putting on the internet, making a profit and just not really providing value. That’s where I was. I was seeking at that time something new and it just happened that we crossed paths.

David:
Was it working out? Was the Ecommerce business profitable?

Paul:
Yeah, definitely. I think at that time, we were probably doing maybe $2 million in revenue a year and taking home a couple of hundred grand. It was nothing crazy, but it paid the bills and let me travel the world and do whatever I wanted, but it wasn’t like I’m rich or anything.

David:
Was the problem that you wanted to make more money or was there something else about real estate that was appealing to you when you came across it?

Paul:
Yeah, so it’s more so that it was about the fulfillment. It wasn’t really about the money. It was about providing value in the world. And I grew up around real estate. My dad growing up, he had all kinds of Section 8 housing in Chicago. That was his niche that he was doing my entire life. That wasn’t his main thing, it was his side thing. As a kid, he used to take me to all these Section 8 buildings and I would help him.
Actually, I would go with my grandpa, too and collect rent and that was my earliest memories of real estate. And then my dad sold his first business and he was flipping houses when I was in second grade for a year or two while he was in between his next thing. So, I’ve really grown up around real estate, but I never really did anything with it until 2019. But I’ve been around it my whole life.

David:
I had a similar experience where I had a mentor, Tim Rhode, when I was 18, 19 years old. We’ve had him on the show before. He was an agent that bought houses and flipped them and I worked with him for a little bit, but I didn’t stick with it. I went off and I got into law enforcement and I just bought a handful of rentals and I never really took real estate investing seriously. I think there was something about that seed being planted though, that when I did come across an opportunity to get deeper into real estate investing, it was just pouring water on a sea that was there versus a lot of people that haven’t ever had that seed planted. They first get exposed to it and it takes a while to germinate.
Willie, was it a similar experience for you? Did you already have real estate on the brain or was it when you met Paul that you first got introduced to this?

Willie:
No, so my story, I come from a financial background. I got out of school and got out of college and started my career in investment banking. So, I had the financial investment banking, like analytical experience and background and skillset. That was my background. And for me, it was I was just looking to find something. I didn’t originally know what I wanted to get into.
For me, it was BiggerPockets is what piqued my interest. Just Googling around listening to different podcasts, found BiggerPockets. And basically, what interested me about it was I was looking for a way to get out of the profession, investment banking, finance. The culture is super tough and hard to sustain over a long period. I was pretty sick of it and just trying to find something I could do that I could make a good amount of money comparable to my salary. I wanted to obviously exceed where I was.
And for me, I saw the people that were really doing well in scaling and crushing it in real estate were the ones who were thinking about it at a high level. Thinking about it differently, thinking about it from an analytical and intelligent perspective and building systems and scaling. That’s what really interested me about it was the numbers aspect to it. And I thought my experience from finance was super relevant. Not quite from looking at a deal standpoint, but from a analytical and system standpoint.

David:
That’s really good. Now, when you two met, I’ll start with you Paul, how did you meet? What was the relationship like when you guys first crossed paths?

Paul:
This is a good story actually. Met Willie at the party. We’re drinking on this party bus. And my brother-in-law is like, “Hey, come meet my friend, Willie.” Because at that time, I didn’t have hundreds of entrepreneur friends that lived in Chicago. He was like, “Meet my friend, Willie. He’s another entrepreneur. You might like him.” So, we started talking or whatever. And I think, we exchanged phone numbers, become friendly.
And then the second time we hung out, I was actually going skydiving with one of my friends. I like to do high-risk things. I have a lot of fun with it. And I texted Willie. The first time we hung out outside of this party, I was like, “Do you want to go skydiving?” And so, we went skydiving the second time we hung out. It was me, him, and another friend, so that was the first time we hung out outside of this party. I thought we just started this thing with a bang.

David:
Did you guys each have another dude strapped under your back or were you experienced skydivers to where you could do it on your own?

Paul:
We had grown men strapped to the back of us. It was hot.

David:
Yeah, that will actually create a bond between two people. I’m sure that just massive crazy dopamine rush of jumping out of a plane is going to shake you out of your comfort zone a little bit. And then you look over at that person and they just went through the same thing. And you lock eyes, and you’re like, “This is the beginning of a bro-mance.”
Now, how did you realize that your skillsets were going to be complimentary? Willie, from your perspective, it sounds like you’re very comfortable with numbers, models, even a degree of risk. I’m sure if you’re working in the financial industry that you weren’t like a typical W2 worker who says like, “Ah, you mean I don’t get a paycheck guaranteed,” and they just can’t get out of that? You are probably used to dealing with mitigating and analyzing risk as part of an overall model. So, you’re almost bred to be ready to be good at that form of real estate investing. What was it like when you met Paul? What was appealing about him as a partner?

Willie:
Yeah, so I obviously have a very different background than Paul, so financial modeling systems, analytical. Paul comes from a sales, eCommerce, marketing background, so he’s super strong from this. What I found is when I started the business is like I got started in land investing and then listing property on a website, so that’s the origin of where it started. I tried to sell a lot of properties cash. And then realized that once I created a website and offered owner financing, that’s really when things started cooking and doing really well for us or well for me. And then the eCommerce aspect is super unique to our niche and what we built. I don’t know if there’s any other real estate niches eCommerce and marketing heavy as what we’ve built.
So, just seeing it from that aspect and just meeting Paul at that party and him just talking about marketing sales ideas that he had. I mean that’s really what interested me in working with Paul because he had that experience and that skillset of optimizing listings, marketing, paid ads, that background in Amazon. It wouldn’t have worked if he had come from a finance background because that’s where I come from and that he wouldn’t have been able to provide any value from there. But the fact that he used to do door-to-door sales, he used to go door-to-door, I think it was B2B pharmaceutical sales. And coming from the eCommerce Amazon background, that’s just high-level entrepreneur doing big things from a very different perspective, that’s really what made it work. So, the complimentary skill sets is the only thing that really made our partnership thrive.

David:
Now, how did you two decide on raw land? Was that one of your proposals or did you both come into that decision together?

Paul:
No, so the story is that Willie was doing this, he had I think one or two VAs at that time. He was doing this for two or three years before we crossed paths. And then he was telling me about what he was doing and as soon as he told me, I was like, “This is the coolest thing I’ve ever seen or ever heard of.” And then I started looking into it and I was like, “Wow. There’s so many opportunities for me to take my knowledge and skills, combine it with what he’s doing and really build a true brand.”
And really take this thing to levels that we today can’t even fathom that we’re at already. But it was just seeing this opportunity because he’s doing the same thing in the space for many years and I never even heard of this thing. And then I look at it, outsider looking in, I’m like, “Whoa, there’s a lot of things we can do here.” And that’s how I got started. So, he had a lot of experiences before I jumped in the mix.

David:
So, Willie, what was it about raw land that caught your attention to the first place?

Willie:
I was originally working in Boston and I was listening to all these podcasts with house wholesalers and flippers. And so, that was the original angle that I wanted to go down because it just seemed like the natural path. The only way at that time of what I thought to make active income in real estate rather than buying a property, sitting on it, earning some residual income. So, I started looking down the wholesaling flipping path. But for me, I was in Boston at that time working and I knew that that’s not the market that I wanted to be in. And I was also listening to a lot of people struggle with the marketing side of it.
I continued to listen to podcasts and find different avenues in real estate that could potentially work. And so, I stumbled upon land and what attracted me towards land compared to houses is the fact that it can all be done virtually. You can analyze a property all behind the computer screen looking at Google Earth. I could buy a property in California, Florida, Texas, wherever, all from Boston. That was the original thing that attracted me. I didn’t have to go onsite to a home, inspect a home, make offers in living rooms with sellers.
And the second thing that attracted me towards land was the margins of what people were able to buy it and sell it for. So, I heard of people selling lots or buying lots at $0.10, $0.15, $0.20 on the dollar and flipping it for 100 cents on the dollar and $0.90 to 100 cents on the dollar. And I just from my background return on investment from, even though the numbers were maybe a little bit smaller than houses, it’s just the total return and the low barriers of entry. You could buy a lot for five grand, sell it for $25,000 for example. So, lower barriers of entry, lower capital commitments, all done remotely and the ability to scale it as well because again, it’s all behind the computer screen. It seemed a lot easier to scale than maybe some other niches because of the virtual aspect to it.

David:
What is it about land’s margins that are so favorable?

Willie:
Yeah, so I can get into why our business model exists because it leads into the margins. But basically, we’re able to acquire lots from sellers, like I just alluded to $0.10, $0.15, $0.20 in the dollar. And so, the reason we’re able to do it is, and we play in a price point that’s typically less than 50,000 bucks, so where we’ll sell a property. We play in generally on the lower end of the land market. For one, it’s a lot harder to get deals in metro areas, but two, the margins are way better at the lower price points.
Sub-50,000 bucks, a buyer will not be able to get a loan from a traditional bank. Banks are unwilling to land on vacant land. They don’t like the collateral. Administratively, it’s very difficult. If there’s a default, they don’t know how to resell it.

David:
Let me interrupt you quickly. Yeah, I need you guys to come up with the name for the moment when the newbie investor first realizes they can’t use a 30-year fixed rate Fannie Mae loan to buy raw land. There’s always this moment like, “Wait. What?” The assumptions, I mean, “Oh, I could buy it for 15 grand and put it on a 30-year note.” And then when they realize it doesn’t work like that, it’s always heart crushing. Do you come across that very often in your experience?

Willie:
Yeah. When I first got starting real estate, I thought banks would just give you money. You show up with a pen and your driver’s license, that was my impression of banks when I first got started. Turns out, it’s just not the case.

David:
Not the case, right? That’s exactly right. Okay, go ahead with where you were. I know there’s someone listening to this like, “Oh, man. I could buy a land for a 30-year and they’re doing the math in their head, their mortgage.

Willie:
“$100 a month, 30 years?”

David:
There you go.

Willie:
But yeah, banks are unwilling to lend in the space. And at the price point that we operate in, title companies charge significant costs and realtors also charge significant costs as a function of the purchase price because realtors have minimum.

David:
Yeah, they’re not going to work for 3% on a $15,000 lot.

Willie:
Right, so realtors are forced to charge a higher price as a proportion of the sale price and then, also, title companies do the same. And also, just to add onto that, realtors are not incentivized to market and sell property at the price point as well. One, it could be far for them to drive out to compared to a house that’s in town that’s closer to where they live. And then just also, they’re not incentivized to do so because the commission is so much lower.
The market from all sides is just fairly broken. Sellers are willing to part ways for a property at a fraction of what it’s worth. We deal with a lot of people who inherited properties, don’t know what to do with it as well and motivated sellers. But in addition to that, the industry being fairly broken from a financial standpoint, from a incentive standpoint, from realtors, sellers and title companies allows us to hop in there and purchase property at major discounts.

David:
Walk me through briefly and I’ll have you answer this, Willie, then I’ll get to you Paul. What is the process like at a 30,000-foot view of how you go from buying land to how you’re going to go to sell it? I’m sure there’s some developing that’s taking place in the middle, right?

Willie:
Yeah, so the process is we buy property from traditional marketing that you’ll see in most other real estate niches, so we’ll do cold calling, We’ve got a team that does cold calling. We send out a lot of direct mail as well to get offers in front of people. We actually send out, offer prices on the purchase agreements that we send out in the mail. And so, we’ve got a sales team, the acquisitions team that closes the deals, negotiates deals, get good prices. And then we’ve got a due diligence and closing team that closes the transaction or works with title companies to close the transaction.
Once we own the property, we list it on our website, discountlots.com. And from there, we basically run paid ads. We do a lot of marketing. A lot of paid marketing, organic marketing to drive traffic to the website. And then, we’ve got a sales team of about 15 people that basically just, they’re calling the leads, working the leads and closing the sale. From there, they generally enter into a contract to buy the property.
Again, the problem that we solved is that there’s no financing available for lots at the price point that we operate, so we actually offer the financing. We unlock this unlimited demand of buyer base of people who want to own property, but haven’t been able to afford it and pay cash. We offer it on low down payments, low monthly payments over a period of seven to eight years on average. And yeah, we’ve got a customer service team that handles the customer after the point of sale.

David:
Okay, so once you close on the property though, what are you doing before you’re going to sell it?

Willie:
That’s the beauty of our business is the value that we’re adding is the financing piece, so we’re not a finance company. We sell on installment contracts, 0% interest. But the value that we’re providing is we’re fixing up the property. Not that we’re adding a fence or cleaning up or paving in roads. We’re not doing any of that. The value that we’re providing is from the installment sale contract.

Paul:
Yeah, let me simplify it. In the simplest form, I guess for the audience and for what we do, is basically we buy properties off market from landowners at major discounts because of these market inefficiencies. Grandma died. Left you a piece of property in Joshua Tree, California. You’re paying taxes. You don’t want anything to do with that. You live in Chicago. You’re paying a couple of hundred bucks in taxes. You don’t want 40 acres in the middle of the desert, but there’s a lot of people that do.
So, we’ll buy it from them. Make it really easy for them to sell their property to us. We’ll buy it from them for cash. And then we have our website, which we consider almost a platform of traffic and people come to the website. They find a property they like, so that 40-acre property. Come to our website. It’s as easy as putting their credit card into our website. They can check out a full eCommerce experience. Work with a salesperson, not work with a salesperson. They check out and as soon as they check out we’ll start billing their credit card on a monthly payment and they can use the property while they’re making the monthly payments.
It’s almost I think like rent-to-own, so they’re making monthly payments and then our average note, so we’re holding all the notes. That’s what our big value add is. We have a huge portfolio of people making these monthly payments and we’re charging their cards on this monthly payment. Then, it’s almost like a rental portfolio, but the rental portfolio ends. There’s an expiration date on that unless they stop paying and we sell it again. But we’re basically collecting. We’re collecting passive income on vacant land. And then once they make that final payment, then they have full ownership of that property. Does that make a little more sense?

David:
Let me see if I understand. I think I do. You guys go find properties and buy them below market value, so that you can own them free and clear from your perspective. Maybe you raise money to do that but your company owns this lot, right? That you bought with OPM of some type. Then you sell it to somebody, marked up from what you paid for it, but still probably less than they would have to pay if they went to go try to find it on the open market.
And it’s easy for them because they go right to your website. They don’t have to go to whatever realtor in town happens to sell land and try to figure it out and go through that process. Then you make it even better for them because they can pay buy it on terms, in a sense. Is there a down payment they’re going to pay or is it just?

Willie:
Yeah, it’s really easy. Basically, it’s a low down payment like the lower priced stuff. It’s $1 down, $300 document fee, so 300 bucks to get started. In our average contract, price is around like 250 bucks. I think our lowest is 180, so we’ll just charge their card 250 bucks for average eight years. Some of the terms are 10 years and it’s just on a recurring payment. And then they can go and use the property.

David:
Now, they can use the property or are they buying the property and they’re taking title to it?

Willie:
They don’t get title. It’s a land contract, installment contract, so they can use the property while they’re making the payments. If they wanted, for example, go and build a house on it today, those buyers are going to come to us and they’ll probably get a traditional construction loan and then take it out from us. Because it doesn’t make sense for them to start building if they don’t have ownership of it, because from the buyer’s perspective, it doesn’t make any sense.
We’ll get people that want to go dirt biking or shoot guns or want to just put their airstream out there, camping, you name it. Our plethora of stuff people do with the lots will bend your imagination. People want to have horses and they want to have a stable for their horses, all kinds of stuff. And it’s as easy as just charging the credit card.

David:
That was my next question is, I assume this was for real estate development, but if a lot of them are not actually developed real estate?

Willie:
It’s the opposite, opposite.

David:
This is some land that you could be hunted on that you guys buy and somebody wants to, whatever we’re going to call this, buy it, for lack of a better term, lease it from you, and then they get the right to use it for hunting or for whatever they’re going out there to do. Camping, putting their RV on, and maybe they can run a business that way. They make it into like they put several RVs there and then they turn them into glamp sites or something. Is that the idea?

Willie:
Yeah, more or less, exactly.

David:
Awesome. So, first off, I’ve never heard of anyone else doing this. You guys might be the only people in the world that thought of this, so kudos to you. Because Brandon Turner and I used to say it a lot when the market got hot and hard, you don’t find great deals, you make great deals. Now, it’s very hard to make great deals. Now, you got to design great deals. You have to be creative in the market we’re in now because resources are so scarce and interest rates are so high. You have to find a creative way to help people make money rather than just like, it used to be super simple. Go buy a house, make a cosmetic rehab, sell it for more.
And then it became buy a house, make a cosmetic rehab and a deeper rehab and add units and then rent it out. And just as this has become more and more competitive, it’s becoming more and more difficult to figure out ways to make profits. So, you guys are doing something that’s awesome here. Once you figured out this is what we want to do, what were the first steps you took in scaling what the system would look like? I’ll start with you, Paul.

Paul:
What we were talking about before, we’re not the first people to do this by any means. I just think that we do it better. We’ve created better systems and we’ve scaled it much larger than anyone else just because we’ve built this really strong infrastructure and we treat our business like a brand. And so, that’s a little bit, you know. I don’t want to take credit like that, we invented this business model. It exists. I think we’ve just fine tuned it to a really high level.

Willie:
How did we think about scaling? Started the business first couple years. Did basically 150 something deals before, 150 deals a year before Paul and I started. And then when Paul and I started, it was just myself. I had basically one full VA and a few part-time VAs who were helping with the administrative side of it. Once Paul and I started working together, we really thought about scaling from a people standpoint and a system standpoint and taking the business super seriously. So, I think we, at that point, like 150 deals to at this point we’ll try to finish this year around 1500 deals, so basically, 10X the business in the past three years.
The way we did it is largely by plugging in a lot of people into a system that works. I think one thing that we did that really changed the game for us is building out a sales team. Before, it was mostly myself handling a lot of the sales calls and then we built out this team. We started running a lot of paid marketing, getting a lot more leads in the door, driving a lot more traffic to the website. And we basically made a big mess and so we needed to start thinking through how to scale smartly, intelligently. We’ve hired a few business coaches at this point and we’ve implemented EOS.
We manage our business with a lot of KPIs and we manage over 250 KPIs that we track on a weekly basis to make sure that each person in each department is hitting the numbers that they need and so that we can oversee and understand reporting at a high level. At this point, we have over 60 employees that run all sides of the business. And so, it’s really the people in the processes that allowed us to scale from where we were at when we first started, 150 deals a year to around 1500 deals a year. I think that that’s primarily what happened.

David:
What’s some of the risk involved here? If you buy a stinker and just nothing happens with it, what are the stuff you got to look out for? What’s some of the risks that someone might not think is associated with buying this land?

Paul:
Man, before Willie and I started, he had a lot of good war stories. We don’t really miss very often anymore just because we’ve gotten so many reps in. When you buy 1500 properties a year and you sell 1500, so call it 3000 deals on the front and the back a year, it’s like rinse and repeat at this point, but there’s a lot of stuff you got to look out for. I got to see Willie smiling over there. Maybe you want to share some of those good war stories…

Willie:
Yeah.

Paul:
… before I was around.

Willie:
Paul had it easy because I basically figured out all the mistakes and things not to do before he came on. I had bought property all over the country, I can’t even tell you how many different counties and just learned that some property just doesn’t sell. Some property just sits and sits and sits and you really need to go to where there’s actually deals happening. The biggest mistake that I first made when I started was buying a ton of property in New Mexico, so I don’t touch that. We don’t really touch that state anymore, but we really got to go to where there already exists demand.
That was probably the biggest mistake that I’ve made. But from a due diligence standpoint, this niche is super forgiving because we buy these properties so cheap. If you buy a property you didn’t realize there’s a flood zone, you buy a property that doesn’t have an easement, that doesn’t have any road access, you’re still going to be okay because you bought the property so darn cheap. And since we’re able to solve a problem by offering owner financing and there’s not a lot of offers in town, the product market fit is just so strong that you’re going to be able to find a buyer for almost any property. There’s only, I could probably count the number of properties on one hand, maybe two hands that I’ve lost money on.

Paul:
I think we lost $3,000 or $4,000. It was the first time that we’ve, together, in three years lost money. I think it’s $3000 or $4000. We had this agent working for us, sorry, acquisitions guy that worked for us. This was his only deal. He didn’t make it at the company very long, but this is the one deal and we were working with a real estate agent actually to help us comp it out. It was a higher dollar property. Not one of these cheap ones. I think it was a $87,000 purchase price.
And we all misread, like in Florida, certain parts of Florida, they have this thing called a DEP study, which is a Department of Environmental Protection and these studies will tell you how wet or not wet the property is. And this agent who we had done a good amount of deals with told us, “Oh, this is a great property, super dry.” And looks at the study and she’s like, “Yeah, this is a winner. You’re going to sell this thing for 150 grand.” And we’re like, “Awesome. This kid working for us is doing great.”
Well, after we close on it, a couple of weeks later, she goes, “Oh, my God, guys. I’m so sorry I misread the study and it’s actually 87 or 85% wet. This is going to be a problem.” And I’m like, “We trusted you. Now, we don’t.” I think we had to take a couple thousand dollar haircut. It took a really long time to sell it, but we sold it. We closed on it. That was really in recent history where we took a little bit of a haircut. But Willie has got a lot of great war stories from back in the day.

David:
Willie, what are some of the big mistakes that were made that you just learned a painful lesson?

Willie:
Yeah, so one property, I remember when I was first getting started was the property, I was looking at it from an aerial view and you can’t see the back of the property but it just dips, like dips. It’s like a ditch. I bought a property. It only had the front 20% of the property usable. You can’t build on it.

David:
The rest was just-

Willie:
The rest is just, it goes down.

David:
That’s such a good point because when you look at surveys or you look at the titled company or a GPS satellite image, you’re like, “Oh, look it’s a really big trapezoid. This is a really big property.” And you can’t tell the actual, I don’t know what the fancy word is for speech here.

Willie:
Elevation.

David:
Yeah, the elevation of the property. And I did the same thing buying cabins in the mountains where I’m like, “This lot is huge.” And I’m all excited to go see and then I go and it’s like, “Oh, I have 12 feet of driveway and then a house and there’s nothing but complete drop off underneath it. It’s completely unusable land.” So, I can see how that’d be very easy to do when you’re buying out of state.

Willie:
Yeah, so that happens. And it actually happened a few times before I learned my lesson that Google Earth Pro actually has topography. You could actually look into it. Bought some lots that were in flood zones that you couldn’t build, too wet. I bought a number of properties without road access. Those actually can be okay from time to time if you buy them right. But those are the primary issues that I’ve had.
Usually, land is super simple. The inspection is nothing crazy. Unless you’re buying lots for few hundred grand that you need to make sure you don’t have any setbacks beyond X point.

Paul:
Septic issues. We learned a lot of lessons in Virginia and North Carolina. Those are states where… for example, you go to Texas or California and Florida. Florida, you got to look out for wetness. But perking and all this stuff, it’s not that relevant to the properties. It’s not really an issue. We’ve tried to do deals in, I remember, Richmond, Virginia and Raleigh, North Carolina, for example, and we got our butts handed to us in terms of buying dogs. We still, at least broke even or made a little money.
But we buy it and then the real estate agent is like, “This thing doesn’t perk.” I’m like, “How did you know that?” He’s like, “Well, if you go to this page on this website at the county level, they have all the perking information. And this is makes it a not buildable lot.” And we’re like, “How the heck were we supposed to know this?” As we’re built this thing, you just get those scars and you learn. It’s similar probably with houses and all that, but we learn it just, so now we’re like, “Do we really want to put a lot of effort into these areas where the barrier to entry is so high?” Not always, because there’s a lot of things that you could miss.

Willie:
Yeah, there’s one more thing that is common to miss that we’ve missed is properties can be in HOAs, Homeowners Associations and there’s big fees and back liens on the properties. Taxes are easy to check, back taxes. Liens are a little bit harder because you’re not always certain a property is in an HOA unless you investigate the area a little bit closer. I’ve had some properties that I’ve just had to let go to basically, go let properties go to tax auction because there have been big back liens on them.

David:
What I like about the story so far is you guys have freely accepted, “We’re going to make mistakes. We’re not going to bat a thousand.” You don’t know what you don’t know. Part of running a successful business is getting your teeth kicked in, especially in the beginning, but it never stops. There’s always a new thing that pops up or an employee that made a decision where they hadn’t seen that before. They made a mistake. There’s so many mistakes that happen in any good enterprise and a lot of investors have this, I don’t know what it is that makes us think investing in real estate or running a business in a real estate environment will be different than everything else in the world.
Where like, “Ah, mistakes shouldn’t happen here and you should just buy a property and you should go really smooth. And someone else should have been there to tell me every single thing that I would’ve needed to know. And if one thing goes wrong, they think I shouldn’t get into this.” Where you guys are like, “Oh, no, no. We could write a book about all the things that we had to learn the hard way.” But what I love is you figured out a way to mitigate that risk. You’re like, “Well, we make sure we buy at a certain price or we make sure that we have enough of these really solid ones in our portfolio to make up for some of the dogs.”
So, what are some of the things that you’ve implemented into this EOS system that you know are KPIs in your business? You’ve got to get this thing right and if you do, the rest of it will probably be okay?

Paul:
I wanted to add one thing you were going to say and then I’ll let Willie go into KPIs. We got business coaches. I think he’s out of his mind for the amount of things that Willie tracks. We have a high level executive coach and he was like, “What the heck are you guys doing?” And Willie is like, “We’re going to keep tracking these.” He’s very numbers driven.
But what I wanted to add to what you were saying is about failing and taking risks. One of the things, the way that I’ve run my life and the way that I do things and Willie is the same, is I’d rather learn by doing and trying versus reading about a theoretical thing. And we’ve implemented that culture into our business. So, now that me and Willie are not necessarily in the weeds on any of these deals, we give our employees a lot of freedom in terms of like, “I’d rather have someone go out and try some stuff and mess up,” versus having to have everything perfectly aligned and have every question answered. I’d rather let them make a mistake, learn from it.
We give our team members a lot of freedom to do stuff, so that they can try things instead of this rigid system. And I think that’s been a little bit of our secret sauce is, you know. And we also seek to hire people that are of that same mindset, not super rigid and more, they think entrepreneurial. Maybe they think like a business owner. That’s actually one of our company principles is thinking like a business owner and taking some risk. Not crazy risk, but having that company culture. And that goes hand in hand with not having this like, “Oh, my God, it has to be perfect.” And that’s when people get scared and they don’t act.
And for the people listening, it’s like some people don’t want to act or don’t want to get started because the stars have to align. When the reality is you could just jump in there. And if you take a calculated risk, okay, maybe you’re okay with losing $500 or $1000. It’s probably better to lose that $500, get that education, and learn and pick up and go again versus, “Okay, this has to work and da, da, da, da, da.” That’s the piece that I wanted to add there. And I think it’s really important that’s just how we think and I think the results are there to prove that it works.

David:
Yeah, I don’t think that it could be denied at this point that the “learn by doing” model is overall, you’re going to learn more and you’re going to learn faster than when you want to analyze something for six years before you take a step because you don’t want to make a mistake.

Paul:
It’s like people trying to time the market. You can’t time the market or stocks.

David:
Exactly.

Paul:
When’s the bottom? When’s the bottom? Well, if you would’ve just jumped in there and you average it out, you would have won anyways.

David:
That is a great point. Willie, what are some of the KPIs that you focus on from your end?

Willie:
Yeah, so basically, the way we break it down is we have 60-something processes in our business. And each process, like I think of a process like lead comes in, how does it work through the system? Or we buy property, what are the steps needed to close through a title company? What are the steps needed to close a property without a title company? Those are just some examples. We have 62 processes and each process has multiple steps. And at each decision point, and now, I’m getting a little technical and I’ll talk high level in a second. But each process has a decision point that may or may not be a KPI.
So, lead comes in, did we call them? Did we call that lead? What are the number of called leads versus uncalled leads? How many of those leads converted to an opportunity? And this is just from the acquisition side or sales side. How many of those opportunities converted to an appointment and how many leads converted to appointment to a sale? Just from that, we had X amount of leads come in, we had X amount of opportunities created, we had X number of appointments set and attended, X amount of deals closed. That’s just an example. Each side of our business has a process until we manage a lot of those KPIs.
For me, I review the KPIs once a week. Again, we have over 250 KPIs and most of them are not important. So, I think a lot of your listeners should realize that there’s only a handful that can do most of the work. For us, you can’t oversee an entire 60-plus person company by listening. You can’t listen to all the calls from sales, acquisitions, customer service, transactions, finance, et cetera. In order to just oversee and make sure that everyone is being held accountable, I just like to look, to see, “Oh, there’s been three delayed closings this week that its closing date has been pushed.” That’s one of the KPI examples.
So, just managing a business from a high level, looking at all the numbers from all the processes is for me, it gives me a little peace of mind being able to manage the business and understand what people are doing. And what numbers, where the numbers are trending to make sure that we’re going in the right direction. For me, it’s the only way to manage a company at scale and be able to understand and hold people accountable and responsible for what they’re supposed to do.

David:
If you had to sum up, “If we get this part of it right, we can make mistakes and the other parts will be okay?” What are the most important parts of the business?

Paul:
I think and this is applies to anyone that’s in real estate, and it’s a cliché saying, but if you buy the property, you can’t lose. If you buy it at the right price and you buy it at the right location or whatever it is, it’s in my opinion, if you do the work upfront, you’re going to probably be safe. It’s doing it right in the beginning versus trying to fix it on the back end or you’re going to sell it because you got better marketing. No, you bought it at such a low price and your basis is so low that it’s hard to lose.

David:
That’s a great point. Just buying it right. If you buy it in the right area where there’s demand, every other mistake can be figured out and your business is going to be okay, right?

Paul:
I guess. Everything will be okay.

Willie:
Yeah. The key to our whole business is that we’re buying land at discounted prices. The product is good. We’re buying good land at good prices. And so, a lot of our mistakes are going to be forgiven because we did the only thing that mattered.

David:
It’s a mistake that not just forgiven, but it doesn’t collapse the entire business if you make that mistake. Whereas if you pay too much for the land and you can’t sell it that would collapse the whole business. The whole thing would freeze. I’ve just noticed there’s certain mistakes that you’re going to make. And a lot of people put their attention on that part. They just focus on the wrong thing. They try to get operations perfect or they try to make the experience as smooth as it could be and they don’t actually buy the properties right or they don’t buy the right areas.
And so, that’s why I’m asking that question because every business has a thing, you get a better return on for doing well. And many people focus on the wrong part of that thing or even worse, they end up just following someone else’s blueprint that is completely unrelated to their own skillset and their own strengths and then it doesn’t work for them. So, with you two, what would you say each of you has to do well for the business to thrive? Paul, I’ll start with you.

Paul:
I think for me on my end, it’s changed over time as we built a team. When we first started, it was doing the marketing, doing the sales, and making sure that all that’s running smoothly. And now, that we have a sales manager and we have a whole team for marketing, it’s shifted. So now, it’s more like being the visionary. I’m more of the visionary. Willie is the integrator. So, where’s the company going? So, we decide, it’s going this way. Willie is the one that’s going to make sure as the operations, that the operations are going there.
My primary role is visionary and figuring out where do we need to march towards as well as, “Okay, we want to march towards this.” What relationships do I need to create outside of our organization that will help us get there? And who do we need to be networking with? Where do we need to be going? Who do I need to be reaching out to help us get to that destination? That’s what my primary focus is.

David:
And Willie, when you get to that destination, what are you doing?

Willie:
When we get there? Doing a little dance. No. What do you mean when we get to where? Like hit our goals or how do we get to our goals?

David:
The story that I heard Paul saying is basically you have this army and he’s going to go like survey, “Where should we move the troops? Where’s the opportunity? How am I going to speak with the locals when I get there? What alliances do I need to make?” It’s like, “This is where the biggest opportunity is.” And then it’s identified and he’s going to figure out, “How do I get us from where we are to there?”
And then when you get there, Willie, you jump in and you’re like, “All right, I’m going to make sure that when we’re here, we’re doing things the right way. We’re buying the right properties. We are getting enough stuff in the pipeline. We’re selling them at the right margins and we’re tracking what’s going on.” Do I have that wrong?

Willie:
Yeah, well, I guess the getting there is a journey in itself, so I think making sure that we have the right data systems. I also handle finance. Making sure that everything is we’re well-capitalized, our reporting is good. Just making sure that our CRM is what we needed to do. Right now, a lot of my time is spent dealing with, we’ve got three to five developers working on our CRM at one point. So, making sure that we’re building it, making sure that we’re hitting our KPIs, making sure that nothing gets lost. There’s a ton to do and a ton of organization that’s needed for us in order to just keep building and keep chugging and keep growing to hit the goals that we want to hit.

David:
All right. We’re going to move on to the next segment of our show. It is the Deal Deep Dive. In this section of the show, we’re going to dive deep into a deal that you guys have done and learn the specifics of it. So, question number one, what property is this?

Paul:
Sure. I just pulled up a random property that I think we sold right before this show. One second. This is a property in Southern California and this is Los Angeles County. I’m just pulling it up on my scree, so I can look at it. I have the numbers in front of me though. This is a property in California that we purchased for $6,300 and we purchased it with cash. It is located in a… let me see, I’m just pulling it up. It’s on a paved road in California. It is two and a half acres.

David:
And how did you find this particular property?

Paul:
This property, for example, is in one of our areas that we just have been doing deals in for probably five years. It’s just an area we know super well in basically, outside of Los Angeles, California. The way that we run our business is we have different areas. We treat our business, properties like inventory, like as of a store was stocking it. California is our main markets in certain areas, and so, this is an area that we “restock.” We look at each property as like a stock. This is just an area that we do business in regularly.

David:
Okay. And then you mentioned you paid $6,500 for it?

Paul:
$6,400. That’s great.

David:
Okay. And then is there a story how you negotiated or did someone on your team do that?

Paul:
Yeah. This property, I think we probably sent out a mailer and then our mailers go to either a live acquisitions member or it will go to our answering service. And then from there, we basically have a system to review the deals and if we like the deal, someone will go and call them and negotiate. And so, it’s probably negotiated by someone from the team.

David:
And then you’ve already mentioned you funded it by being cash. So, what did you do with it? How did you exit this property? How did you sell it?

Paul:
Sure. We sold this property for owner financing terms, so like we talked about before. We posted it on our website and maybe it was featured. Maybe it was a featured property of the week, I’m not really sure, but property was posted. Someone, a sales agent, helped the buyer find this property and they went to the website, put their credit card in and started making monthly payments on it. So, we sold it on owner-finance terms.

David:
Okay. Awesome. Now, I see the outcome there. Was there any lessons that you learned from this deal?

Paul:
This particular deal, no. This is just a cookie cutter deal for us. This is a little bit higher of a purchase price than our average. So, just I’m sure you want to go over the economics of it.

David:
You mentioned that okay, you bought it for $6400.

Paul:
I only told you what I bought.

David:
That’s true. What did you sell it for?

Paul:
Sure. This property, the person checked out and the terms were, had it in front of me, I think it was 269 x 120. Sorry, $269 for 120 months, which is $32,000.

David:
They bought on a 10-year note, basically?

Paul:
Exactly. They’ll make the monthly payments.

David:
And that’s 0% interest you said you guys are doing?

Paul:
Yeah.

David:
That’s pretty cool. So, we’re done with the deal deep dive, but I want to ask you, how big of a concern do you guys have with inflation when you’re selling most of what you’re selling on terms?

Paul:
Inflation, in what aspects?

David:
Like if you’re selling it for $32,000 but they’re paying it over 10 years, the money you’re collecting 6, 7, 8 years from now could be significantly less than what it’s worth today if inflation continues to get bad. Is that something you guys are taking into consideration when you’re doing these deals or are you just, “No, we’re going to make our money back in the first two years, so anything on top of that is just icing on the cake?”

Paul:
Yeah. That’s actually great. We talked to investors and all these people, no one has actually ever asked us that question before. It’s a great question, so maybe Willie has a different answer because we’ve never been asked it. But my response to that is that we look at it like, “Okay, we’re going to make our money back in one and a half to two years on average, and then every payment after that is profit.” I wouldn’t say it concerns me very much and I’d love to hear what you have to say about it, Willie.

Willie:
Yeah, so I think mean there’s two sides of it. We carry the note, yes, the value of the note decreases with inflation, so that is a consideration. But one, like you said, we do get our cost back super quick. On average on our whole portfolio, we’ll get our cost basis back in about 16 to 18 months, so we’re de-risked from that standpoint. Margin is super good. Everything after that is profit.
And the second thing is, the other side of it is that, and we can get into how we’re financed, but we carry a lot of debt. So, you can think of us, our model is that of a finance company. We raise debt and then we issue basically credit. It’s an installment contract, but we’re holding notes in a portfolio, so the value of our debt also goes down with inflation. It’s two sides of it. And the one thing that always goes up is the value of our inventory, the land that we own. Right now, we’ve got 700 lots that we own that as inflation happens, the value of those properties are only increasing.

David:
Which decreases your risk in the case of someone stops paying and you have to go, “Take it back.”

Willie:
Right, so from that standpoint, I could also talk about that and touch upon it. But we don’t take on really much credit risk at all because we own the property while customers are making payments. We keep the title. Like we said, it’s a rent-to-own type contract, so in the event of a default, we already own the title. There’s no foreclosure costs, there’s no legal fees. Maybe some operational costs, but nothing substantial. We retain the payments and a lot of times the property has appreciated in the timeframe, the buyer has been making payments.

David:
What you’re basically describing is you don’t have to go to court and go through a foreclosure proceeding to take title away from the person who owns it because they stop making the payments. What is the process like if you actually have to? Do you just file paperwork and you immediately take it back if you can show that they violated their contract by stopping their payments?

Willie:
Right, so I just want to be clear, by all means, we want people to continue making payments. It’s better for us, it’s better for them. We want everyone to start to finish the contract. But for us, operationally, we send out a certified letter in the mail once they’ve missed a payment or they’ve entered into a event of default and then they have a cure period. After that cure period, we can remarket and sell the property if they haven’t finished making their payment.

David:
Yep, but the point is it’s super easy to do, so I like what you’re saying. It’s, “Yeah, inflation might hurt us on the upside, but it protects us on the downside because the money that we’re borrowing from other people we’re paying back with cheaper dollars than what we borrowed.” And in a sense, you’ve tied the risk, like every smart personal finance manager does. No shock, Willie, that that’s what you did. You’ve tied the upside and the downside to the same place. As one goes up, the other does and as one goes down, so you keep your risk low and that’s very nice.
Plus you’re doing so much volume. I don’t think it matters as much as you guys thinking, “How much can we scale? How many of these properties can we buy and how many can we sell?” As when you’re only getting six or seven properties, how much inflation hurts you is very significant. But when you’ve got 700 lots in counting the impact of that on your actual personal financial situation is not nearly as prevalent. So, it’s very, very smart. I’m impressed with what you guys are doing and I’m also impressed with the creativeness of it.
Part of me is feeling like some of the secret sauce might be the website you’ve created where it’s actually incredibly easy for someone to just go in there and buy land with a credit card. I didn’t ask you about that, but do you guys feel that’s part of your advantage?

Paul:
I think there’s not one single point of advantage. I think it’s just probably just the reps that we’ve put in and the stuff that we’ve tried. And the finance piece of it, the platform piece of it of how we treat this a brand and this robust website with a full eCommerce team. And I really don’t think it’s one single thing. It’s all of these things combined together and our drive to improve it every single day and have the best possible experience and people ask us about it.
And coming from the Amazon background, Amazon, when they started Amazon, their most important thing was the customer. For us, we’re always thinking about the customer. How can we make this easier? How can we make it better? How can we provide better properties that people really want? And so, it’s like if you look at it from there and then walk back versus “How can I make the most amount of money?” Then you’re going to make bad decisions that aren’t good for the customer versus doing what the right thing is. And then if you do the right thing for the customer, it’s going to make you infinitely more money than only worrying about driving profits.

David:
That’s how life works. It’s just what questions are you asking. Are you asking, “How do I make this easier for me?” or are you asking, “How do I make this easier for the customer?” And that applies to every business or vocation anyone can be in. If you’re the title officer or the real estate agent or whoever who’s like, “Oh, this guy is always asking for something else. How do I make it easier for me?” No one wants to work with you. When you’re the one that’s always trying to figure out, “How do I make this easier for someone else?” All the business comes to you and you can actually scale it like you guys have. So, I wanted to highlight that because I wish more people would hear it.
I really think that’s the number one cause of most people that are frustrating economically is they’re taking the wrong approach to how to make money. They’re looking for a solution that does not require them to serve other people or so.

Paul:
And that goes back to my origin story of not being fulfilled or providing value. Every day, I wake up and we’re building this thing that in my opinion is providing so much value in this real estate space. And we’re providing a real service on the front end and the back end. And we’re helping people that want to that maybe they have land and they just don’t know what to do with it, or they’re having a hard time getting rid of it.
So, we’re helping people there and we’re helping fulfill people’s dreams on the back end of owning their dream property. Maybe they don’t own a home, but it’s pretty easy for them to go and put their credit card in and pay $200 a month and in 5 to 10 years they’re going to own this thing that they can pass down to their children. That’s the story that we hear all the time. And we’re making those dreams a reality all the time. And we have awesome reviews. People leave us awesome reviews just about fulfilling their dreams.
And for us, I think that’s super powerful. It’s not about the real estate. It’s not about making the money. It’s like we’re literally helping to change people’s lives through real estate. And as corny as it sounds, it’s really true. And we’re providing a product that is super easy to have an impact on someone’s life. Maybe they’ve been a renter their whole life. Well, now, they have an opportunity to own something. And maybe, they don’t have the financial acumen to buy a house, but they could buy this property. And now, they have something that they’re proud of. They’re fulfilling their version of the American dream.

David:
All right, we’re going to move on to the last segment of the show. This is the Famous Four. In this segment of the show, I’m going to ask each of you the same four questions we ask every guest. Question number one, we’ll start with you, Willie, what is your favorite real estate book?

Willie:
Favorite real estate book I would say is, Am I Being Too Subtle? by Sam Zell. He’s someone I’ve looked up to for a long time. Great investor, maybe the best real estate investor of all time. I thought that book was super valuable, super inspiring story.

David:
All right. How about you, Paul?

Paul:
I don’t know if this is weird, but I’ve never actually read a real estate book. Is that that okay?

David:
Yeah. Of the people you network with, what’s their favorite book?

Paul:
I don’t know. I know what podcast people like. I know what YouTube channel is. I know all that stuff. You want to talk business books, I’ve read a lot of them, but I’ve actually never read a real estate book.

David:
Not a problem at all. You guys are writing your own book right now, so that’s fine. The second question, you’re going to like this, so Paul, what’s your favorite business book?

Paul:
I like the business book, The Hard Thing About Hard Things by Ben Horowitz, who’s from Andreessen Horowitz. Because there’s a lot of books that I’ve read that are maybe business, but they’re like how to change your life. This is a hardcore business book of what’s it like running a multi-thousand person company. And you’re going public and then your stock prices tank and how do you manage that outcome? So, that’s my favorite business book.

David:
All right. Willie, same question. What’s your favorite business book?

Paul:
I was thinking about that one, too. That was definitely a good book. I like that a lot. I’ll go with Made in America by Sam Walton, the story of Walmart. I guess I like these stories of super inspiring people doing cool things. It was very well-written and another inspiring business book.

David:
All right. Paul, what about your hobbies?

Paul:
Hobbies? I am an avid tennis player, so that’s one of my hobbies. My other hobbies is doing any water sports. I do a lot of wake surfing and jet skiing and stuff like that. That’s one of the reasons why I moved down to Florida, so I could do more of that.

David:
All right. How about you, Willie?

Willie:
I have a few. I like playing chess a lot. I probably played chess every day after the Queen’s Gambit. My uncle started playing, my dad started playing and they got me hooked, so I’ve been playing a lot of chess.

David:
Do you have a score? Was it the Elo score?

Willie:
Elo?

David:
Yeah.

Willie:
I don’t know what Elo is, but my chess.com score is just above 1500. So, good enough.

David:
I’m going to smile and nod like I know 1500 is good or not. I have no idea. I’m assuming it’s pretty good because you seem like a smart dude.

Willie:
It’s good, it’s good. Yeah, so I like playing poker as well. I like playing tennis, being active, going to the beach.

David:
Do you guys play double’s tennis like you play double’s business?

Willie:
I’ve actually only played tennis with Paul once, surprisingly.

David:
What would the strategy be if you two were playing tennis together? How would you be attacking the other team?

Willie:
I would just be demolishing Paul. Trying to shove the ball on his side of the court.

David:
No, no, no. You’re on the same team in this.

Willie:
Oh, we’re on the same team?

David:
Yes.

Paul:
I don’t know. I feel like Paul has got a good serve.

David:
I think Paul would probably be distracting the opponents, talking to them, finding out what their goals are in life, what they’re interested in. And you would be a cold calculated, anticipating the trajectory of the perfect shot and putting spin on the ball and finding their weakness and exploiting it, while Paul gathered the intel that you needed to do. That’s how I see this relationship working.

Willie:
You’re not wrong.

David:
All right. In your opinion, Paul, what sets apart successful investors from those who give up, fail, or never get started?

Paul:
Yeah, that’s an awesome question. The big difference between that is just I think what we talked about earlier is the willingness to try things. The willingness to be okay with failure. And I won’t go into super cliché like a thousand, every shot you miss is a shot in whatever that quote is. But the biggest difference is like I said, is like you can go out there and you’re willing to lose money or okay with the outcome of failing. But just taking every single opportunity that’s put in front of you and treating it as a learning experience, whether it’s a win or a loss. It’s at the end of the day, it’s something that’s going to get you closer to your goal in the future. So, that’s what I would say sets people up differently. It’s just mindset.

David:
All right. Willie, same question to you.

Willie:
Yeah, I mean, I think it’s pretty similar. Just when you have an idea or opportunity to take something on, just if you’re educated enough and think it might work, just take the action, do the thing, and then learn later. I think one of the best things that Paul and I do is we have an idea and then, or how do we do the idea? And then we don’t put too much thought into it. I think just execution without too much thinking. Don’t overthink things. Being persistent.
Having courage. I think making good decisions while things are hard, while you’re in the trenches and things might not be working right now and you still have to turn the corner to figure things out requires a lot of courage. So, I think having courage. Knowing that things are going to go wrong and embracing it. And just having the mindset and the opportunity to overcome it, I think that’s how you get through things.

David:
All right. Paul, where can people find out more about you?

Paul:
I made a little website, paulhersko.com, and it’s one of those link tree things. And there’s a link to our fund if you want to do investing or there’s a link to my Calendly if you want to chat and my LinkedIn. And I’ve made it simple. Just go to that and you can contact me. All my info is there, paulhersko.com.

David:
All right. Willie, same question.

Willie:
Yeah. Same answer. You can go to williegoldberg.com, W-I-L-L-I-E-G-O-L-D-B-E-R-G, williegoldberg.com. We do have an investment fund if you’re interested in investing in discount lots. We have Sunny Capital Group. If you’re a credit investor, schedule a call with me. Go there. You could also shoot me an email. My email should be on there as well, just click the link. And look forward to connecting.

Paul:
I’m curious if I’m going to get more link clicks or will Willie get more link clicks?

David:
You’ve got a competition. I can tell you guys might be lightweight competitive based on the tennis. All right, so if you would like to ask a question about raw land, now that we’re going to be having Willie and Paul on scene Greene, go to biggerpockets.com/david and ask your question about raw land. We will pick the best one and we will bring back Willie and Paul to answer it and then we will see who won the Click Wars.
All right, guys, thanks a lot for being here. I’m going to let you get out of here. This is David Greene for BiggerPockets, signing off.

Jay Farner, CEO of Rocket Companies, joins ‘The Exchange’ to discuss the process of mortgage buydowns, diversifying mortgages investment portfolios with technology and housing inventory struggles.

Ashley:
This is Real Estate Rookie Episode 245.

Tony Clark:
Got into real estate after I got engaged. I think, a lot of the listeners and a lot of us kind of we go through our high school college years and then realize we have to be financially responsible and figure out how to build a life. And for me, just wanted to get into real estate or look for financial independence, but didn’t know where to start. But got into real estate a couple of years ago and moved across the country. I’ve bought a sprinter van, I’ve lived in a trailer, done a few just like out there things.

Ashley:
My name is Ashley Kehr and I’m here with my co-host Tony Robinson.

Tony Robinson:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today, I want to shout out Becky Sue, Elder Becky left us a five-star review on Apple Podcast and Becky said, “I love the dynamics between Ashley and Tony. They keep it fun and always interesting. I learned so much from this show and it’s given me the education and confidence to invest in real estate. Keep it up. I appreciate you both.” No, Becky, Ash and I appreciate you. And if you guys are listening and haven’t yet left us a five-star review on Apple Podcast, please do. The more views we get, the more folks we can reach. The more folks we can reach, the more folks we can help. And that’s always our goal here at The Real Estate Rookie podcast. Ashley Kehr.

Ashley:
I am so happy you’re finally saying leave us a five-star review instead of leaving us an honest rating and review. You slipped up that time.

Tony Robinson:
I’m looking through and we have not gotten a five-star review in quite some time. Actually here’s one, we got a four-star back in November, everything else was a five-star. So even when I say honest, most people are honestly leaving us five, so it’s not a bad deal.

Ashley:
Yeah, thank you guys so much, we really do appreciate it, it makes our day. We pour a lot of our heart and soul into the podcast, so we hope that you guys really are finding value from, and our producers do a great job of finding our guests to bring them onto the show too.

Tony Robinson:
Yeah. It’s been so cool. I mean, we’re at Episode 245 and my first episode was, what, 37 or something like that, so we’ve done literally over 200 episodes together and it’s just so crazy. It’s so crazy like the number of stories we’ve heard, the messages that we get, the impact that the show has had. People all the time, they thank you and I as the host for everything that we do. And so often, we have to remind them that, hey, we’re just the people asking the questions, it’s really our guests who bring the stories and bring the experience and bring the value, and we’re just lucky enough to be able to ask all the questions to people.

Ashley:
And they take the time out of their day to sit down with us with all of our tech issues we have and patiently wait for the podcast to get going. So yeah, we appreciate every single one of our guests so much. If you guys do leave us a rating and review, please let us know what guest had such an impact on you, what was your favorite episodes because I think it’s about time, we’ve hit over 200 episodes, maybe have some follow-up episodes and really see where everyone has been the last two years that they’re doing.

Tony Robinson:
Well, speaking of guests, we got our great one for you today. He goes by the name of Tony also, not Tony J. Robinson, but Tony Clark. So Tony Clark is our guest today. And funny enough, Tony applied to be on the podcast and then in between his application and today he actually ended up getting hired by BiggerPockets. So he’s now part of the BiggerPockets family. He’s on the agent sales team, so he is doing some cool stuff on the agent side. But Tony has got such a crazy story and we’re going to get into it, but he talks about how immediately after getting engaged even, he convinced his wife to move out of their home into a trailer and across the country. But how that decision really set him up for the success, it brought him to the podcast today.

Ashley:
Yeah. And the part that I really liked is him talking about how they chose their market and then how they built out their criteria too, and once they chose their market too.

Tony Robinson:
And near the end, he also plugs a really cool piece of advice on how he got some lending, even though he was essentially unemployed, and his wife was almost employed, but he was still able to find a bank to lend money on that first deal there. So really interesting story all the way around.

Ashley:
Tony, welcome to the show.

Tony Clark:
Thank you. Just say, which Tony? I know we got two of us today.

Ashley:
Well, as I mentioned earlier before we started recording, I don’t acknowledge the other Tony on the show, so it shouldn’t be a problem at all.

Tony Robinson:
It’s actually true. We don’t talk to each other a lot during the podcast, most of it is like us talking to the guests.

Ashley:
Yeah. Every once in a while we’ll throw a question to each other like, Tony, what do you think about that? But very rare I’d say.

Tony Clark:
Oh, nice. Well, hey, thanks for having me. I’m excited to be here and excited to talk with you guys.

Ashley:
Yeah, so let’s get a little bit into your background.

Tony Clark:
Yeah. So basically, I grew up not knowing anything about real estate. I grew up out in Colorado, so a lot of skiing, a lot of snow, a lot of just hanging out. My dad was a small business owner, my mom is a teacher and just really, for me, got into real estate after I got engaged. I think, a lot of the listeners and a lot of us kind of we go through our high school college years and then realize we have to be financially responsible and figure out how to build a life. And for me, just wanted to get into real estate or look for financial independence, but didn’t know where to start.
I know we’ll get into a little bit of my journey and how it happened, but got into real estate a couple of years ago and moved across the country. I’ve bought a sprinter van, I’ve lived in a trailer, done a few just like out there things. My wife spent along for the ride the whole way, but it’s been a lot of fun. And now I’m out here in California where she grew up and where I went to college.

Ashley:
Well, we’re going to have to talk more about that sprinter van because other Tony knows that it is my dream to capture him and Sarah into a camper van, and the three of us do a rookie road trip across the country doing live podcast with a vinyl wrapped camper van with the rookie podcast all over it, and Tony’s face across the path.

Tony Clark:
That’s a dream right there.

Tony Robinson:
She’s been pressing hard to make this happen. So we’ll see if one day.

Tony Clark:
2023, and I could see it, the whole tour.

Ashley:
Okay. So Tony, before we get into too much, what does your overall portfolio look like today?

Tony Clark:
Yeah. So right now, we’ve got three units where we’ve got a duplex out in Nashville, Tennessee. We actually just sold a rental that we had out there. And then I’ve got a house in California that we’re currently living in and might be splitting into a house hack.

Ashley:
Awesome. Congratulations on those.

Tony Clark:
Oh, thanks.

Ashley:
So before we get into your story, everything like that, tell me about what sucked about your life before real estate? What made you decide, I need to change something, I’m going to become a real estate investor?

Tony Clark:
For me, I realized how expensive life really is once you get into things. And I straight out of college, I was working at a church, I was making about $50,000 a year in Los Angeles, which, Tony, you know well is like making $30,000 somewhere else in the country. And then I met my now wife and we started dating and things started to get serious and I was like, “Wow, how can one provide for future family someday, but also how can I not have to work at a job where I’m working a lot of nights, a lot of weekends, long hours for the next 30 to 40 years?” And it was really then that I just realized that I had to do something different or I had to figure out a way to escape that grind.
I had one mentor growing up, or not even mentor, he was one of my dad’s friends who was a real estate guy. And I just remember being able to go golfing with him on a Thursday afternoon and he had the time freedom, he was someone that I really looked up to, and I was like, “Wow, maybe there’s something to it. So I should look into real estate and see if there’s something there.”

Tony Robinson:
Tony, you said your dad was a small business owner, what kind of business was he in?

Tony Clark:
Yeah. So he runs a moving company out in Colorado, just a local moving and storage business.

Tony Robinson:
And why not follow in your dad’s footsteps versus going down this other entrepreneurial route of becoming a real estate investor?

Tony Clark:
My dad always told me growing up, when I turned 13, he was going to throw me on the trucks to show me exactly what I didn’t want to do for the rest of my life. That’s been his thing. He loves what he does, he’s been very successful at it, but he just kind of said, “Hey, it’s tough work, it’s backbreaking work. It’s not going to be the path for you unless you really, really want to.” And I learned very early on that I didn’t want to lift furniture and drive moving trucks full-time.

Ashley:
My one business partner, Joe, his dad has owned a landscaping company and was kind of the same thing. He’s worked for the landscaping company for a really long time, since he was young, probably the same age as you at 13. And his dad is also a very successful real estate investor, he’s invested into stocks and everything like that, but he wanted to show his kids too as to like, “Okay, you can work hard, you can use your body to do physical labor and you can make a lot of money how they were doing that, but is it really sustainable?” And now we laugh because his dad, who still owns the landscaping company, he has these young kids working for him and he’ll be like, “Oh, you know what? It’s raining today. I’m going to head out to the lake, pop a movie in and I’ll be back in a couple days.”
And it’s like he has shown them that you build this other kind of income streams that are more passive that you could still have your business that you started out or whatever. But I think that concept of, do you want to be successful but you have to show up every day, you have a job. And it’s like the Robert Kiyosaki thing where you can own your business, but do you really just own the job and always think of a chiropractor. The chiropractor most likely isn’t getting paid unless they’re their cracking backs. And I’m assuming for a while was probably like that for your dad and maybe he’s built it out now where he doesn’t have to actually be the one that’s doing the physical labor and things like that. But not everyone can always get to that point, and starting out. With Joe, the strain on his body, I mean, he complains every single day about the backbreaking work, but this is the money that he is using now to fund all of his real estate deals and his investments so that he doesn’t have to break his back every day going forward.

Tony Robinson:
Tony, I want to talk a little bit because you started the story off with this super crazy camper van journey that you went on. So how do we go from living in Southern California making $50,000 a year, working for this church, getting engaged to being in a camper van somewhere else on the other side of the country? What happened in between in those steps?

Tony Clark:
Yeah. So really when my wife and I got engaged, it was fall of 2019 and so we were just getting ready to head into basically COVID and the world shutting down and everything that came along with that. And I’d started to think about, what can I do to make extra money on the side? I don’t have more time that I can spend. And so, what’s something basically I read Rich Dad, Poor Dad and said, how can I own an asset that somebody wants, and I can’t afford a house right now, so let’s just find something. And so, I bought a Ford Transit van. So when you think of the sprinter camper vans, you think of the really cool big ones that people drive around in and you size that down to the food delivery truck van size, that’s what I could afford. And so, I bought one of those and then just built it out, put a bed in it and put some flooring in it and turned it into a camper van and then rented it out on Turo. It was essentially Turo just for camper vans and…

Tony Robinson:
What’s the name of that site?

Tony Clark:
Outdoorsy.

Tony Robinson:
Outdoorsy.

Tony Clark:
Yeah. And so, rented it out on Outdoorsy and then basically wound up selling my car and just driving that when it wasn’t being rented. And so, that for me was really a way to just kind of say, well, I can make some money, I can own an asset that now people are paying for my car and paying for my gas money and that can at least help me start to pay off part of the ring that I just gave to my fiancé or try to start bringing in some passive income.

Tony Robinson:
So, Tony, how do you go from, okay, you have this transit van on Outdoorsy to eventually getting into your actual real estate investment?

Tony Clark:
So basically the camper van was the first step and then the next in between step is somehow my wife looked at the camper van and said, “Wow, that’s super cute. We can live in a trailer in Southern California because it’s cheaper than renting.” And so actually when we got married, we moved into this trailer that her parents had bought some property and they were getting ready to build a house.

Tony Robinson:
That’s so interesting. So it was your wife’s idea to move into the trailer?

Tony Clark:
It was either her idea or she just went along with it from the beginning. I think I brought it up offhand one day and I was like, “Oh, this would be kind of fun.” She’s like, “Yeah, let’s do it.” And I found a good one, that’s all I could say.

Tony Robinson:
But, Tony, were you the one that was driving the initial interest in real estate or was she also going on this journey with you?

Tony Clark:
Yeah. So I was initially interested in it. I’ve always been a numbers nerd, I was the kid that was selling baseball cards to his friends on the playground at recess and that translated into then real estate. I was really interested in real estate and I brought up house hacking to her first and just said, “Hey, we could buy a duplex and rent out half and it’ll cover our whole mortgage, or even in California cover most of it.” And it took a little bit of time to get started, but really the big thing that I brought up when I was talking to her about real estate is I said, “Hey, I want you to be able to be a stay-at-home mom with our kids.” That’s always been her dream is to not have to work and not be away from the family.
And so, I was just kind of like, “Hey, babe. Here’s something that I think, I’ve read some books on it but I don’t really know what I’m doing, but if this works, this might be a way for you to be able to stay home with our kids in whatever five, 10 years and I’ll be able to be there too and not have to be working all the time and we’ll really get to have some family time.” Because that’s something that’s really important to us. And I think that was the light bulb moment that went off for her where she said, “Okay, I see the vision, not just you want to go buy some houses and make money doing it. It’s no, this is actually chasing freedom for us instead of just another kind of passion project or something you’re working on.”

Ashley:
I think that’s something that a lot of people struggle with is when they’re approached with an idea is seeing the actual vision. And a lot of times that can be a spouse or a significant other, especially if you’ve started a lot at different side hustles or a lot of different hobbies, things like that. I mean, even myself, when my son was first born, my oldest, I had a little sweat shop in my basement where I was sewing baby clothes and selling them online and that was my side hustle. And then it got to the point like, “Oh my god, my fingers hurt and I couldn’t stand out there already or couldn’t be on my sewing machine anymore.” I’m like, “This is not sustainable.” So it’s finding people who are like, okay, you need to understand like, yeah, maybe I’ve tried these 30 different other things, but here’s why real estate will work. So were you that type of person at all where you had started lots of other businesses and you had that entrepreneurial spirit within yourself, but you just hadn’t found the right thing yet?

Tony Clark:
Yeah, totally. I always had some side hustle or something I was doing where I think… My wife’s a champ for going along with all of it, but it was even in high school, I remember I started a lacrosse equipment company. I played lacrosse and learned how to sewing baby clothes, I learned how to string lacrosse sticks and so I’d hand out brochures to my friends and then I was like, “Oh, this is great. I can actually email people in China and they won’t know that I’m 14 years old and I’ll say, Hey, can you send me X amount of this kind of lacrosse stick and then I’ll go sell them.” And probably if I did that now it would not end well and I’d go, it’s probably all sorts of fraud or something I don’t know.

Ashley:
But also how old were you when you did this that you actually found somebody to actually email in China? Even now, I wouldn’t even know where to start with kind of producing a product.

Tony Clark:
I don’t know. It was one of those things, but I’ve somehow found it and I was like, “Okay, here’s a factory that I can get in touch with.” But I think what I really learned from it and what I’m still learning is that entrepreneurial mindset can take you pretty far, but it can also hold you back from a lot of things if you’re always jumping from one thing to another, to another. And that’s where that whole lacrosse equipment company in high school, when I went to college, it started to die off because my time was taken up by something else and then I jumped to the next shiny object and the next, and the next.
I think it was until I found real estate where it was a vehicle where instead of saying, oh, I’m going to go create a product, sell it this week and make a bunch of money and then have to go find something else to do, it’s saying, well, here’s something that’s actually a long-term investment or a vehicle that I can use that is stable and that is simple and easy to understand and I don’t have to go reinvent the wheel because that’s what gets you in trouble as opposed to just doing the same things over and over.

Tony Robinson:
Yeah. Tony, you mentioned a couple of really insightful things that I want to circle back on. So first, in terms of your wife and how you got her on board, I get that question all the time because my wife is my business partner, we are side by side in a real estate business in so many ways and people always ask me, they’re like, “Tony, how did you get your wife on board? How did you get her to be okay with you investing?” And I think the approach that you took, and this is what Ashley said earlier, of really selling that vision about, hey, here’s what our life is going to look like once we can make this happen, that’s the way that you get your spouse on board is that you appeal to something that’s not just like, this is what Tony wants to do, but hey, this is what’s best for our family and to allow us to reach our goals.
But in order for that to happen, I think there has to be a certain baseline of trust, I think, between you and your spouse to where they have to believe that if you say that, hey, I’m going to commit to doing this thing, that they actually believe you when you say that. And I think in this conversation to my second point about the whole shiny object syndrome, I know I struggled with the same thing a lot my early 20s as well, where it’s like every couple of months I was jumping to a different business idea and if you log into my Blue Host account from 2009 to, I don’t know, a few years afterwards, there were so many different URLs in there because I was just trying all these different things over and over and over again. And it wasn’t until I got later in my 20s and I’d said, “Okay, part of the reason that I haven’t found success is because I haven’t really focused in on one thing yet. And once I really committed myself to this one thing, that’s when the success started to show.”
So wrapping up my point here, if you are someone who is in Tony’s seat and you want to get your spouse on board, first, I think pitching them on the vision of how it positively impacts the entire family and not just you is the first step. But secondarily, you have to prove to your spouse, you have to give them a reason to trust you when you say, hey, this is the thing that I want to do. And that trust comes by showing them that you’re actually committed to this. So that’s reading a bunch of books, going to the local meetups, going to conferences, talking to your spouse about what you’re going like. When they see that you’re invested, when they see that you’re taking this seriously, that’s how you build that trust that they believe you and when you finally do push that vision to them.

Ashley:
So to move on to the next thing based off of that, now that you’ve gotten your wife on board, you’re ready to jump in, how did you build out your criteria? What kind of things do you look to invest in? What are you setting your strategy up?

Tony Clark:
So really when we started to set our criteria, we kind of said, “Well, what are the limiting factors that we can’t do anything about?” First is, “Okay, we don’t have 20% down, we don’t even have 3% down in California, so let’s go ahead and take California off the board, either we need to go invest out of state and buy a rental property and keep living here, or we need to go move somewhere where we can go invest.” And so, that was the first thing that we wound up saying is, “Okay, well, we’re limited by how much money we have. We’ve been able to save up some, but where could we go, where we would enjoy living, where we could start to build up a portfolio and where the numbers make sense for real estate where once we move out of a house hack, we’re not in a negative cash flow situation?”
So we settled on a few different cities. We looked at Charlotte or Austin at the time, wasn’t as expensive it is as it is now and Nashville, and wound up settling on Nashville. And then once we got there, really started narrowing our criteria down to even from there, okay, what neighborhoods would we like to live in where there’s house hacks available, where we knew that we didn’t want to live in some of the parts of town that either we thought were unsafe or boring or a million different reasons, but it’s just like, okay, let’s figure out where we would want to live where the numbers also make sense. And then from there, really just kind of said, okay, let’s set up a search for properties in this area and then once something comes up, we’ve just got to be smart about putting in a good offer.
I was working in real estate at the time, I had just gotten my license and so I was like, well, we might have a leg up in getting the property as opposed to other people and just went from there taking what we were given and finding a property based off that criteria.

Ashley:
Tony, I think that is such a valuable piece of information you said that you looked at where you were limited first and started your criteria off of that instead of just looking like, okay, this is my minimum cash on cash return, I want a single family, things like that. You started with what your limitations were, and honestly I don’t know if we’ve ever talked about that on the podcast really when building out your criteria is a way to do that. I think that is an amazing way to get started as to building out your buy box, your criteria as to what you’re going to be focusing on. So when you did decide on Nashville, did you build a team out there?

Tony Clark:
We did. So first, we’d moved out there for a few months and spent that time really trying to build a team where we knew I had shifted jobs, I’d taken a job with a private equity fund that was doing residential real estate so that I could learn the business, so that I could run numbers on lots of deals and come in as basically the realtor on our team. So we didn’t need to find a realtor, but we did need to go find experts in different areas for property management, eventually contractors, other investors. And really what that just came down to was those first few months in Nashville, I would just go to every single meetup I could or ask anybody I knew in real estate if they had friends who I could talk to or just basically pulling the, “I’m new in town card, who should I meet?”
And it was really surprising in the best way of how generous people were with their time and willing to meet with me. And that was really how we built out our team. It was just, hey, I’m going to get there. I’m going to take time to meet people and get out of my comfort zone, and people were willing to jump on board and help us.

Ashley:
Did you think having your real estate license was a huge advantage in getting started?

Tony Clark:
So having my real estate license has helped us on one of the five properties that we have bought now, I’ve only taken a commission once. So it has helped, but what we normally wind up doing, and if you’re debating getting your real estate license and trying to figure out if it’s worth it or not, you can get your license and it does help. I think it’s beneficial to be able to run numbers and to MLS access and different things. But you don’t necessarily need it because what we wound up doing is I would call the listing agent and say, “Hey, I’m willing to waive my commission if you’ll accept our offer on this property.” Or in the case of our first property, because our down payment was a limiting factor for us, I said, “Hey, I’ll waive my commission if you can just give us this money in closing cost credits, so you’ll pay for part of our loan fees and make some upgrades to the house for us.” And that helped us more than just getting a commission.
So I think it’s 50/50 if you want to be entrenched in real estate or you think that you’re going to be buying a lot of properties. It doesn’t hurt, it could cost $600 a year, $1,000 a year to maintain your license, but you don’t have to have it to get started or to build a massive real estate portfolio. It’s really a personal preference thing.

Ashley:
I love that answer though, just getting your perspective on it and your opinion because we get that question so often.

Tony Robinson:
Yeah. I just want to go back before we keep rolling, Tony. Also, Ashley called it out already about how you started with your limiting factor. There’s a book called Good to Great by an author named Jim Collins and one of my favorite business books, I’ve read it a couple times and one of the concepts in that book… Sorry, let me take a step back. The whole premise behind Get to Great was that… We got Ashley’s kids who just got home from school maybe in the camera and all dressed up. The purpose of the book Good to Great was they did a study on all these companies that had made the leap from doing average or well in their market to doing exceptional and they had maintained that level of exceptionalism for some predetermined period of time. Anyway, one of the common things they saw amongst all these property or all these companies that took the leap from Goods to Great was that they all did what’s called confronting the brutal facts.
And what they did was they were super honest about where they were today, about what their limitations were, about what their constraints were, and having that brutal honesty about where they were, allowed them to create plans that were best suited for their unique situations. Where a lot of new investors get into trouble is when they start making these plans without really realizing the limited resources they have available to themselves. But when you can compare both this extreme optimism around what you’re capable of with this extreme honesty about where you’re currently at, combining those two things allows you to really tap into your potential. And it seems, Tony, that’s exactly what you and your wife did.

Tony Clark:
That’s such a great point. That’s one of my favorite business books too. And I love the confronting the brutal facts because there’s two ways to look at it and I hear a lot of people that are on the extreme ends of both sides where the one way is, I’m going to make this happen and not confront the facts that I don’t have any money in any experience and I just want to make it happen. It’s like, well, okay, let’s bring you back in a little bit from there. But on the other side, I think there’s a lot of people who get stuck in the, oh, well, here are all of the limiting beliefs or the limiting factors that I don’t have money, I don’t have experience, I don’t have this, I don’t have that.
But if you never move past that and say, well, this is what I don’t have, but what do I have or how can I get started, then you can get stuck in that analysis paralysis for years. And I think it was in Rich Dad, Poor Dad, where Robert Kiyosaki says, “Don’t ask can I do it, ask how can I do it.” Or something along those lines where it’s just saying, okay, here’s what I do have, here’s what I don’t have, how can I make what I want for my next step? How can I make that possible?

Tony Robinson:
Yeah. So, Tony, I just want to go back to the story here. So you and your wife get engaged, you convince her to move into the trailer or she convinces somehow you guys agree to do that. How long were you guys actually staying in that trailer before you make the move across country? And how much were you able to save by doing that? I think is a bigger question.

Tony Clark:
So the numbers behind the trailer and why we wound up doing it is we walked onto the trailer lot and we said, “Okay, we don’t know what we want to buy, show us some trailers.” And so they showed us some and they said, “Well, we’ll give you a 10-year loan on this trailer. Whatever you want to buy, you’ve got good credit, whatever.” And it was like, okay, cool. That sounds good. I was thinking on the real estate investment side where I don’t know why somebody would give you a loan to just go buy a trailer for 10 years that you’re paying off, but for us, it worked out where we wound up paying about $250 a month on that trailer and we had to put maybe $2,000 down or something like that. And so, to park it on her parents’ lot, we had a generator for power and had to get pour gas in the generator. And all in it was probably $400 or $500 a month that we were paying to live in this trailer.
I say it was a trailer, it was a nice fifth wheel kind of bougie trailer thing. And so, it wasn’t like we were roughing it in this something you’d see at Coachella. So that was helpful. But we were in it for eight months. So basically we bought it the day that lockdown started, so March 9th, I think, 2020 through Thanksgiving, we were there and then we packed up right after Thanksgiving and moved to Nashville.

Ashley:
So after that has happened, you’ve moved to Nashville, you’ve figured out your criteria, everything like that. Are all of your investments in Nashville besides your house hack at home in California?

Tony Clark:
Yeah. Yeah.

Ashley:
Okay. So once you’ve built out this team and you’ve got your first property down, what did you think about growing and scaling? Is this something where you want to be small and mighty, you want a thousand units and a huge team? What do you kind of see for the future? And actually what something we didn’t ask, are you still self-managing or did you ever hire a property management company?

Tony Clark:
So we started off self-managing and what we wound up doing, because I was a real estate agent out there and working primarily with investors is I wound up starting management company. And so, I took on a few clients in Nashville, so I was managing for them and managing for myself and I started to build a team. I brought on a virtual assistant and a couple of agents on my real estate team who could help with operations there, so we just wrapped our rentals into that management company. So it’s kind of a both, and we’re self-managing because I’m involved, but I would never want to self-manage if it was just us trying to manage everything that can go on with a rental property. I think there’s a lot of value in having a management company.

Ashley:
Well, that’s awesome. Congratulations with the startup of that. That’s very cool. What software are you guys using and what kind of systems do you guys have that you’ve implemented into that management company that might be beneficial to someone else?

Tony Clark:
So when we were just self-managing our properties, I was using RentRedi, which I think is probably the best software out there for any landlords who are self-managing. We now use Hemlane because it allows you to split up rent really well being a manager and has some cool systems there where it allows us to scale. Those two systems, and then really we post on Zillow and I post an MLS link anytime there’s a property for rent and then use a showing service called Showami or Showami, I don’t know how to pronounce it, but it’s basically Uber for real estate agents where you say, “Hey, I have showing at this property at this time, who wants it?” And other agents can say, “Yeah, I’ll take it.” And you pay them whatever you set a price and they accept it.

Ashley:
That is so cool. I’ve never heard of that before. I’ve heard of the companies where you give the person that wants to look at it, the key code and then it takes their ID and sets the key code for only that window of time, but to actually have a real estate agent come in and meet them, and I think you described it perfectly, the Uber hub showing units, I think that tells exactly what it is. So that’s a really cool. And then Hemlane was the property management software, I haven’t heard of that one either.

Tony Clark:
Yeah. It was when we looked at AppFolio, and AppFolio looked like it would work once we hit about 50 to 100 units, but we’re still small enough that we just said, “Hey, we need an option to split rent up.” We don’t like taking rent in and then paying the owners like a lot of management companies will, and Hemlane allows us to say, okay, rent comes in from the tenant and 8% comes to us for management and 92% goes to the owner so that we never have to have an account that’s rotating thousands of dollars on it. And then it really allows us to customize it. It works well for a small business like we are.

Ashley:
Yeah, awesome. It’s always nice to hear of new property management software. There, I feel like in just even in the last maybe five to 10 years, it has tripled, maybe even quadrupled in the options that are out there for especially small real estate investors. And of course, we love RentRedi because if you are a BiggerPockets pro-member, you get RentRedi for free to be able to manage your property. So if you haven’t taken advantage of that opportunity yet, make sure you go to biggerpockets.com and get that free membership if you’re a pro-member to RentRedi. Okay. So then let’s go to the first part of my question that we put on the back burner there is, what is your goal for your portfolio, small and mighty, you want to grow and scale?

Tony Clark:
So our goal with our portfolio is to have a few properties that have really high quality tenants who we don’t have to worry about and don’t have to have a lot of headaches while we’re trying to manage them. We wound up not opting to buy properties, try to get $10,000, $40,000 properties to start off and then sell those off and go buy a multi-family property or try to stack that way. We just kind of said, “Hey, we want a duplex in a nice area of town where we’ll house hack and then we’ll go try to pick up another one and maybe another one.” I think for us, it’ll just kind of be, let’s keep collecting properties where we’re at or we’ll buy properties in Nashville. We’re going to keep doing that. I love the market there.
I’m in real estate for the long term, and really we’re going to keep buying there because I’ve seen even in the last couple of years, the appreciation on those properties is so much bigger than some of the houses that I was looking at in that $40,000 to $50,000 range a couple years ago where, with our first duplex that we bought in Nashville, we were able to pull a HELOC out for all of our down payment plus some after we renovated it and do a burr that way, which is ridiculous. Even with the COVID spike in house prices, it was like, “Wow, this makes a lot of sense because we’re in a good area of a growing city.” And so I think I just want to keep collecting more of those properties and even if we scale a little bit slower, it’s less headaches along the way, it’s going to give us more freedom because we don’t have to manage managers or deal with a lot of evictions or stuff like that. And at the end of the day, we get to own properties and places that we enjoy visiting.

Ashley:
Well, that’s awesome. Thank you for sharing that with us. Do you want to go over one of your deals that you have and we can go through how you bought it, what happened with it, and the numbers on it?

Tony Clark:
Sure, yeah. I’ll run through the duplex that we have in Nashville right now. So we wound up buying this deal. We found it was a for sale by owner, so it had been put up on Zillow. We went to the for sale by owner tab and my wife found this one and she was like, “Hey, we should go look at this.” And there were no pictures. There was the Google Street View, was from about five years ago, and so looked like this really kind of rundown area of Nashville and we were like, “Well, we like the park that it’s near and so let’s go check it out.” And we went and looked at it. There was a brand-new development that had gone up right around the corner. It was this really cool little pocket of town. So we called the owner and said, “Hey, can we meet you? Can we talk about what’s going on with this property?”
And so we went out and we met the owner and I think that was ultimately what wound up getting us the deal because it was a duplex that was a three bed, two bath on each side. It was built in the ’90s. He built it himself. He built five or six rental houses around Nashville and that was his retirement. And so, he’s like, “Yeah, I’m starting to sell them off and I’m going to go move to Destin, and this is one of the last ones.” And he said, “I’ve got two or three builders who are looking at it to buy a lot and you can tear it down and build two homes.” And so he is like, “If you can beat the builder offers, it’s yours.” And we’re like, “Okay, sure. Let’s talk about it and we’ll get back to you.” And wound up submitting an offer.
We went in and there were a couple of things wrong with it, so we got our offer accepted. So we put in an offer at $460,000. It was listed at $425,000 and we knew that that was a steal. If we could get it at $425,000, it shouldn’t have been priced there. So then it wound up getting bid up to $460,000 but when we ran our numbers, we realized that still made sense, where we looked at what else was around, it was still a good deal, so we put in the offer at $460,000, it was accepted and then closed on the property. We started renovating one side. There were tenants in one side of the property, the market rent for that side was about $3,000 a month, and they had been there for 10 years. They were paying $900 a month and had 11 months left on their lease.
So we just picked the side that we were living in, we fixed it up while we were living there, let their lease expire, and then wound up renovating that side once we had fixed up our side and we basically house hacked, put up with the $900 a month for that amount of time, then we could renovate the other side. And now we’ve got one side rented at $3,000 a month, and the other side is going to be rented at about $2,500 a month. Here, we’ve got some showings this week.

Tony Robinson:
So, Tony, I want to make sure I’m understanding this. So you said originally that unit was renting for $900 per month and now it’s renting for $3,000 per month?

Tony Clark:
Yeah. It was 10 years in Nashville. I think one of the properties down the street, it was very similar duplex sold at like $120,000 in 2013 and is now worth $500,000 and the rents have doubled or tripled in most areas of town, it’s wild.

Tony Robinson:
That’s amazing. So one follow-up question for me. So I guess the question is, how did you fund the purchase of this property? I know you had saved up some money when you guys were staying at the trailer and when you guys got to Nashville, how much funds did you guys have saved up? Was it easy to get the loan? What was that process like?

Tony Clark:
Yeah. So this deal was actually the second one that we did. So the first house hack that we bought, we had saved up about $40,000. And that was the combination of, I wound up taking on a second job in California, we had our savings from living in the trailer, just a bunch of different things, and then I sold off my car. And so it was like, “Hey, we’ve got about $40,000 that we can put down on a property.” And I was starting a new career. And so our kind of limiting factors there was we had $40,000 saved up. I had just switched from a W2 job to a 1099 job where I was a real estate agent and my wife was just starting as a nurse. She’d finished nursing school, she had just gotten an offer letter and was getting ready to start.
And so, when we went through the financing process, banks didn’t like us very much for our first deal. They were like, “You want to do what? You want to put 3% down and you don’t really have a job. You’re a realtor and your wife almost has a job. She’s getting ready to start.” And we said, “Well, yeah, but look, we’re going to house hack and there’s going to be rent coming in. We’re basically going to pay zero for housing, it’s going to be great.” And we gave that pitch to, it was 10, 12 different banks that I was like, “Hey, how can we make this work? How can we figure out a way to do this” and they just said, “Nope, nope, nope, it’s not going to happen.”
And eventually we found a small local bank where we got to talk to the VP of lending there and I said, “Hey, here’s what we’re wanting to do. Here are the numbers of this specific property that we’re looking at. Is there anything that you can do or can you write a loan for us?” And she said, “Well, okay, let me see what I can do and how I can make this happen.” And she wound up saying, “Okay, if you can put 10% down, I can basically run everything off of your wife’s income and the income from half of the property and we can make it work as long as you feel comfortable with it.” And it was not the best loan terms. We were getting a rate in the fours when everybody else was high twos, low threes, but it was like, “Hey, here’s what we need to do to make it happen.” And thankfully we were able to talk to that local bank and they said, “Yeah, we’ve got some flexibility so we can do it.”

Tony Robinson:
All right. I’ve got a few follow-up questions here, Tony. First one, how did you find that bank, the one that finally said yes?

Tony Clark:
Honestly, I think I just Googled local banks in Nashville. It was because of the BiggerPockets podcast. There was a guest who had come on and they said, “Hey, I fund all of my deals through local credit unions and banks.” And I said, “Okay, well, that sounds good. Let me go start making some phone calls.” And it was really just Googling local banks and local credit unions in Nashville.

Tony Robinson:
So when you found this bank, did you say, hey, can I speak to the VP of lending, or how did you get to that person at the bank?

Tony Clark:
So I called the bank and just said, “Hey, I have a really unique situation. Do you have somebody who handles essentially non-qualified mortgage products or mortgages for self-employed people?” Just kind of strange situations, and that’s who they directed me to.

Tony Robinson:
So a couple illustrative points here for our rookie listeners. First, and Ash and I have said this time and time and time again that the smaller local credit unions and banks are some of the best places to go to get your financing because they tend to have more flexibility. Second, explain to them your situation and what it is you’re trying to do and not necessarily the type of loan product that you want because you wouldn’t even have thought to ask like, hey, can we just use my wife’s income, and can we pay 10%? Do you guys have a loan that can do that? But when you explained the situation, they were able to give you the loan product that match your unique situation and your goals. So two really important things for our rookie sender, and I just wanted to make sure we didn’t close over that.

Ashley:
Well, Tony, thank you so much for sharing the numbers with us and for sharing just everything in general. Your story is very inspirational for everyone, and I think there was a lot of value from that. But I want to take us to our rookie request line where you can answer a question and continue to add value for our listeners. So anyone can leave us a message at any time at 18885 rookie. And Tony and I actually get the voicemail sent to us directly and we may choose your voicemail to be played on the show.

Alex:
Hi. My name is Alex. I’m from the San Francisco Bay Area. I have money for a down payment for a property that I want to house hack. I don’t know what strategy I should go with. Should I go with a small multi-family, duplex, triplex or a single family and try to make it work and wall up walls and put some fixtures in that way? Thanks.

Tony Clark:
Yeah. It sounds like you’re thinking exactly the right way where you’re looking at your options and trying to figure out what works best for you. My first question would be, where do you stand on the comfort versus cash flow spectrum? It sounds like you’ve got a lot of options ranging from multi-family to single-family and walling off bedrooms or putting up curtains or whatever you got to do. What is your goal in buying this house hack? Are you wanting to live for free? Because if so, in San Francisco, a lot where I am in LA, that might mean a single family house or a duplex where you’re renting out everything possible and maybe sharing a bedroom with somebody, but then you’ll live for free. And if that’s your goal, absolutely do it.
I think there’s a lot of value in that. Or if you say, “Well, I’m okay with paying a little bit of money per month on this property, but I want to have my own space, or I want to have at least my own room.” Or whatever that looks like, I think that’s a very valid point and that’s something that you can navigate with saying, “This is what I want,” versus having to share a bedroom.
So I’d say that would be your first thing, just figuring out what your goals are outside of the finance side and then figure out, and maybe I would say your next step would be talking to a bank and seeing what kind of financing they’ll give you. Because the down payment is one thing, banks will probably look at multi-family properties more favorably than single family where if you go to the bank and say, “I want to rent out bedrooms in a single family house,” they’re more likely to say, “Well, we can’t use that rental income to help you qualify for the loan.” Whereas if you go and say, “I’m buying a four unit property and I’m going to rent out three of the units,” they’re more likely to say, “Okay, we can use that rental income or part of the rental income to help you qualify for the loan,” and that will help you buy a more expensive property if you want to.

Tony Robinson:
Love that answer, Tony.

Ashley:
Yeah. And the only thing I would add onto there is just if you’re going to put up some walls, just make sure you know if you need to get any kind of permits to add bedrooms or what you’re doing there, whatever town you’re doing this in. But I have seen it a lot, like when I was in college where dining rooms were turned into bedrooms so that they would easily turn a three bedroom into a four bedroom and be able to rent out those four rooms, and then all you had left was the kitchen and a living room. So that’s definitely something you could easily do is turn a dining room into a bedroom or even if there’s an office somewhere, any kind of extra space beyond living room or kitchen. And I’m sure there’s probably people out there that house hack that there’s not even a living room provided that you have your bedroom, and then there’s the common area kitchen, because, I mean, it really don’t need a living room, you can hang out in your own bedroom, I guess.

Tony Robinson:
All right. So I want to take us now to our rookie exam. So Tony, Mr. Clark, these are the three most important questions you will ever be asked while sitting in front of a microphone. Are you ready for the exam?

Tony Clark:
I’m ready.

Tony Robinson:
All right. So question number one, what’s one actionable thing rookie should do after listening to your episode?

Tony Clark:
I think the number one thing that you can do after listening to this is figure out what your next best step is, where you don’t need to become an expert investor overnight, you don’t need to know everything. There is to know about real estate investing to get started, but you do need to figure out, okay, what is my next step? Whether that’s saying, “I’m going to start driving a couple times a week for DoorDash to make extra money,” or that’s, “I’ve been putting off writing offers on properties because I’m scared.” Figure out what that next thing is that you can do to get you one step closer to your goal.

Ashley:
Tony, what is one tool, software, app or system in your business that you use?

Tony Clark:
I’d say the most important app that I use is actually Zillow. And this is something that anybody can use, is just setting up keyword searches in Zillow and not saving properties, but saving searches in Zillow where if you go in and you search certain keywords like separate entrance or mother-in-law suite, or if you’re looking for a house hack, kitchenette is a good one. Setting up keywords that are in line with what you’re looking for, I think that’s huge. And then you can really do everything you need to on Zillow, this is a little secret from a real estate agent. Anytime a real estate agent tells you they have coming soon listings that aren’t on the MLS yet, those are the ones that have the big coming soon banner on Zillow, those don’t exist unless they’re not even listed anywhere yet, and then maybe there’s a little lead time. But all you need is to have a login on Zillow and then you can do 95% of the stuff you need to to get started.

Tony Robinson:
All right. Last question for you, Tony. Where do you plan on being in five years?

Tony Clark:
In five years, my goal is to be able to work three to four hours a day doing something I really enjoy. Right now I work for BiggerPockets as a part of their featured agent sales team, and that’s been a lot of fun. I get to work remotely, I get to help a lot of people, and then I do some consulting on the side for real estate systems, CRM stuff, all the that boring stuff that I enjoy. I’d love to be able to just spend three to four hours a day working and then spend a lot of time with my family, and then get to invest in real estate deals that are interesting to me. If somebody brings a deal and they say, “Hey, there’s a 50 unit tiny home community that we’re looking for partners on.” I’d be like, “Great, let’s go check it out,” or whatever that looks like. Just be able to do things because I want to, not because I have to. I think that’s the goal.

Tony Robinson:
That is an amazing goal. Yeah. We would love to get to the point where I’m more than working four hours a week too, man. We’re not quite there yet, but hopefully. All right, so before we wrap things up, I want to give a shout-out to this week’s rookie rockstar.
So today’s rockstar is Alfred Chung and Alfred Chung posted this in the Facebook group. He said, “How I went from an underpaid employee with zero net worth to owning $1.8 million in real estate.” So number one, he says, “I analyzed hundreds of real estate deals and also developed a system to quickly identify the best markets and the best deals. Number two, “I increased my active income by almost 2X by working smarter and providing more value to my employer. And number three, I invested every dollar I could into cash flowing real estate that appreciates over time. I’m not a real estate mogul by any means, but using the strategy has completely changed my life and my family’s future. I now have peace of mind knowing that my kids will be taken care of long after I’m gone because of the single decision I made for years ago.”
Alfred, congratulations. What an amazing journey, and we are so excited to be a small part of that success, man, and just wishing even more success as we get into 2023.

Ashley:
And Tony, thank you so much for joining us today. We really enjoyed having you here on the podcast and welcome to the BiggerPockets team. It’s been, what, three weeks since you’ve been working with BiggerPockets.

Tony Clark:
Three weeks, still brand new.

Ashley:
Yeah. It’s awesome. So thank you so much for taking the time to come on here and share your journey and any advice that you’ve given us has been great. So where can people reach out to you and find out some more information about you?

Tony Clark:
I’m pretty active on BiggerPockets, so Tony Clark on BiggerPockets, Instagram, Facebook, TikTok, Tony Clark on all of those. Just reach out to me, shoot me a DM, I’ll send you my number and we can hop on a call or happy to help in any way I can.

Ashley:
I’m Ashley at Wealth Firm Rentals and I was joined by Tony Clark and Tony Robins at Tony J. Robinson on Instagram. Thank you guys and we will see you on Saturday for Rookie Reply.