House Offer Accepted! Now What?

House Offer Accepted! Now What?


Offer accepted! Now what? As a rookie real estate investor, it can be anxiety-inducing to hear that a seller accepts your house offer. You’ve been working so hard to get up to this point, and now, you’re one step closer to closing on your first rental property. But what happens next? Are there steps that you should be following? And what should you be doing in the meantime as your closing date starts to creep closer and closer? If you’re in this situation (or are about to be), stick around!

We’re back with our “Rookie to Real Estate Investor in 90 Days” series, as our mentees join us for some exciting news. Last time around, much of the advice from Ashley and Tony was “make more offers!” Well, the mentees have delivered, so much so that one of our rookies already has a house under contract just a month or so after starting this series! We first talk to Melanie, who began submitting short-term rental offers in Savannah, Georgia. She’s got some solid takeaways but is having trouble finding someone who will accept seller financing.

Next, Brandon hops on as the first rookie to get a property under contract! With only a few offers sent out, Brandon has already agreed with a seller on terms but has questions about when to get a home inspection and whether title insurance is worth it. Finally, Lawrence joins us with a copy of Ashley’s newest book, Real Estate Rookie: 90 Days to Your First Investment. Lawrence has been making aggressive offers but couldn’t match a seller’s counteroffer with high-interest rate financing terms. All our rookies are inches away from getting their first (or next) rental property, and this could be the most pivotal point!

Ashley:
This is Real Estate Rookie episode 263.

Tony:
The more offers you put out, the easier it is going to become for you to find a deal that makes sense. If I only submit two or three offers a week, most likely, most of those offers are going to be rejected. If I submit 200 offers a week, I’m probably going to get at least two or three deals that actually make sense. Yeah, I think that’s a fantastic thing.

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 give you the inspiration, motivation, and stories you need to hear to kick chart your investing journey. Today I want to shout out someone by the username of Jay Biddle One. This person says, fun, educational and motivational. Ashley and Tony bring fun and motivational dynamic to the world of real estate investing. I enjoy their personal stories, especially when they don’t go as planned. They continuously show you how you need to work through issues that pop up and not give up. Keep up the great work. Jay Biddle, we appreciate you and if you haven’t yet left us an honest reading review on Apple Podcast or Spotify, whatever platform it is you’re listening to, please do us a huge favor and do that. The more reviews we get, the more folks we can help. I honestly love being able to start the episodes by reading some of these awesome five star reviews. Ashley Kehr, what’s up? How you doing today?

Ashley:
Pretty good. It’s just a gloomy, chilly day in Buffalo, New York, but it’s playoffs for the Bills. By the time this airs, we will know what has happened. Yeah, it’s exciting time in Buffalo. Everything that happened with Damar Hamlin and just the Bills Mafia is just amazing support. I was talking to someone the other day about how tragedy brings people together and I think that brought the NFL together, all the different teams, but Bills Mafia, they’ve already been so united and such a great community that it didn’t really need to bring everyone together because everybody was so… I think just having something like that happen really puts into check how short life can be and scary can be. Also, reinforces your why. As to why we’re all doing this. Why you guys are listening to this podcast right now? What you want to happen in the time that you have left. Not to start out the podcast in a downward spiral here, I just thought it was important to mention and not to… Maybe you have a reason that you want to stay motivated. I think that can touch on that.

Tony:
I think it’s a great thing to bring up, Ashley. Yeah, maybe it sounds a little morbid or whatnot, but it is the truth, right” We all never know what could happen tomorrow. More likely than not most of us will see tomorrow, but there’re called accidents for a reason and there’s something that you can never plan for. You have to ask yourself, “Are you waking up every day living a life that is fulfilling? Are you living every day in pursuit of the life that you really want? Are you waking up every day happy?” And so many people don’t. The average person is overweight, unhappy, and underpaid. I feel grateful because hopefully by listening to the Real Estate Rookie Podcast, we are giving people the stories and the resources and the tools they need to start taking steps towards that life that they actually want. I think it’s a great way to start today’s episode actually.

Ashley:
Just to touch on the real life of that stuff is like, “Yeah, there’s the real estate investors, you can really make the life that you want.” There’s also those days like last night where I’m chugging an energy drink and up till 1:00 AM because I won’t be able to sleep unless I finish something. There’s those stressors that are still in your day, it’s almost like an adrenaline rush, I guess, in a sense. Not to say that me and Tony have these perfect real estate, “Oh, we’re traveling. Tony’s in Texas right now, lies.” There’s definitely those days where it’s chaotic, but I love that every day is different.

Tony:
I feel like we’re almost always in sync when we pull these late all-nighters, because I was literally up until two o’clock last night because I was at this conference all day. I still had work to do after I got back from the mixer. I didn’t get back into my hotel room until almost eleven o’clock and I still had work to do. They’re definitely those long days. If I look a little tired during today’s episode, it’s because I only got four hours of sleep last night.

Ashley:
Before you even mentioned that, people were already commenting, “What’s your skin’s care routine, Tony? You’re just glowing.”

Tony:
I was on stage at Rob’s event and we were doing Q&A on stage, and Rob was the one reading off all the questions and it was like, “How do I found find my market? How do I deal with this guest issue?” Rob pulled out one question and it was, “What is your skincare routine?” That question is following me everywhere. I’m happy to officially announce actually on the podcast that I’m now launching a $100,000 mastermind on my skincare routine. If you want to join, there’s a link coming soon.

Ashley:
You do actually need to start a skincare routine.

Tony:
I don’t even have one.

Ashley:
Or you need to do my skincare routine. Do a T-shirt and I’m at the back. It’s like, “Buy a short-term rental property. Cash flow, this makes you glow.” That’s like secret.

Tony:
Something like that. Whatever.

Ashley:
At today’s episode, we have brought our mentees back that you guys are getting to know. We have Brandon, Lawrence and Melanie, and they’re going to share the progress that they made. The questions that they have. Each also gives some advice you guys, that you guys can learn from them as they’re going along this journey.

Tony:
Yeah. I think one common thing we saw from all three of them was a little bit of fear and hesitancy. You’ll get to hear how Ash and I encouraged all three of them to push through that and what they should be doing on the other side. I’m excited because one of them made some really tremendous progress actually. We have probably one of the biggest updates of this whole mentee experience. I’m excited for you guys to see who that is and what steps they’ve been taking.

Ashley:
Make sure you guys reach out and congratulate them after you take a listen because it’s pretty awesome, huge accomplishment. Melanie, welcome back to the show. We are so excited to have you again. Do you want to fill us in and what you’ve been doing the last couple of weeks?

Melanie:
Yeah, thanks Ashley. So good to see you guys. It’s been a good week. I was able to submit an offer this last week, which was absolutely my most important next step. I think that was great momentum for me. I’m still very excited about finding a property, but unfortunately this particular offer was not accepted. Happy to break that down a little bit and talk about the purchase price depending on how far we want to go into it. It started with a little bit of a lowball offer as advised here to be more aggressive and not be so worried and then they countered. We did not accept the counter, but instead wrote back asking for seller financing and then they proceeded with another offer.

Ashley:
Melanie, what market did you end up making this offer in?

Melanie:
This was in Savannah, Georgia, where I’ve been focusing most of my energy. And this was in particular in unincorporated Chatham County, which is outside of the city, still very close to downtown, but just has much fewer restrictions on short-term rentals.

Ashley:
This was the first offer you put in Savannah?

Melanie:
Yeah.

Ashley:
Okay. Yeah, if you want to go through and talk about the deal a little bit.

Melanie:
Sure. This particular property had been sitting about 50 days. It was listed at 250, which was nice and low. It had just been recently updated and had a great interior, just really nice upgrades for photos at least. Of course, I never saw the property and we ended up offering 200 and asking for 5K seller concessions. It was pretty aggressive. My agent was also saying that this was aggressive and I knew that going in, but when I had run the numbers, I was just being really, really cautious and conservative. I was going to put down 10%, about 20K. With current interest rates, just going through traditional financing, I was looking at about 1600 a month for a mortgage and then factoring in property management because I’d be out of state and landscaping. I was looking at about 2100 a month in payments.
Then I started going through what various percentages of occupancy for the month would look like at the average daily rate in that area. I’ve been saying this for a couple of weeks now. In looking at a lot of listings in the area, just clicking through and looking at available listings, so many of them have less than five bookings, which has just worried me a lot. I’ve been talking to a property manager locally and asking him what his average occupancy is and he quotes about 60 to 70%. Even still, I ran the projection at 50, 60 and 70%. At 50% I’d be looking about 100 a month in take-home, 60% occupancy is around 500 a month. At 70%, I’m looking about 1,000 take-home at the end of the month, which is great, but that forces me to be closer to 70%, which I’m just not sure if that’s realistic or viable going into 2023.
When they countered at 235, I considered it 70% occupancy, slightly less income is still, I think, a stretch for what to expect in 2023 as a new Airbnb. I don’t know, I’m open to feedback there. In short, I ended up writing back to see if they could come down on the or at least work with us for seller financing so that interest rate would be lower and make all those numbers look nicer. Again, they didn’t move forward with seller financing.

Ashley:
Did they say just flat out no to seller financing or it was just no to that offer?

Melanie:
It was just no to seller financing. My agent said that he sees that pretty often a lot or most agency he speaks with are as familiar with seller financing. From his experience he sees that most of the time. They just don’t move forward with it at all, advising their clients against it because it’s unfamiliar to them. We decided for all future offers, unquestionably if it’s a seller financed offer, we’re going to add a one pager to the offer just speaking to the benefits of seller financing, which is something that I learned from someone at the BP conference, which I wish I had tried on this particular offer instead of hindsight 2020, of course.

Tony:
Yeah. One follow-up question for me, Melanie. When you’re doing your analysis of potential occupancy, I know you said that you’re looking at the Airbnb calendars, which is obviously a great free resource. Have you utilized any of the pay tools to do some of that analysis?

Melanie:
I had in the past looked at STR insights and I’ve used data.rabbu, which is a free tool. I haven’t paid for AirDNA for example. The reason being, I spoke to this property manager in the area and he recommended that we talk about each individual property, particularly because he said that Airbnb data can be really helpful, but it can also be really off the mark just based on which neighborhood you wind up in. He’s been in the area for eight years and said that for the most part he’s pretty familiar with the streets that do really well. In some sense I’ve just been leaning on my team as a resource instead of data.

Tony:
Getting that local boots on the ground is obviously super impactful. This is the PM that you’ve been speaking with, a short-term rental property manager?

Melanie:
Yeah.

Tony:
Yeah, I would also go out and get some data though to help you make a more informed decision. AirDNA, a fantastic… PriceLabs, another fantastic tool. What I do when I’m comping properties, and I actually just did this for one of my students yesterday, is I go into, and you can go into either platform, but I typically go into PriceLabs and I will download, for example, what’s the bedroom count on that property that you’re looking at?

Melanie:
Three bedrooms.

Tony:
I would look at all the three bedrooms in the city in Savannah, Georgia. I would export all those listings and I would take off the ones that have really bad reviews. If anything less like a 4.6, I’m not going to look at those. I would take off the ones that aren’t active all 365 nights out of the year. If it’s only active half the year, they’re not really running it like a true Airbnb, maybe it’s just a hobby for them. I just start peering that list down. What happens is I go from 400 for three bedrooms in that market down to like 1500, and then I literally click through all 150 of those listings. I open them up and I say, “How does this listing compare to my listing?” If it’s a good comp, I’ll keep it. If it’s a bad comp, I’ll delete it.
That 150 ends up becoming 25 to 30 comparable listings. When you export that data from a paid site like Airbnb or Price Labs, you get to see things like what was this listing’s occupancy over the last 365 days? What was this listing’s average price over the last 365 days? What was this listing’s revenue over the last 365 days? That’s data that you can use to help you make a more informed decision around what do I think this property will do in 2023? Now, 2021 data, I would probably discount that a little bit because 2021 was such a banner year for short-term rentals. 2022 data was a little bit more realistic in terms of what we can probably expect for 2023 moving forward. If you want to discount it a little bit to uncertainty, whatever it is, you can do that. Those are the steps that I would take, Melanie, to really drill down on your numbers and give yourself a little bit more confidence in the analysis.

Melanie:
That’s super helpful, Tony. I appreciate that. I definitely see the value in the data-driven approach. I think two things that are giving me pause, and I keep bringing this up. I think it’s just the cautiousness in me, is that I think it’s hard to account for two variables that aren’t present potentially in the past, which is increased competition and then just the current state of the economy. I know that you can’t measure everything. At some point you’re taking the leap, but those two things, I just am worried about. Maybe that’s just me needing to be a little bit more risk averse and a little bit less cautious because I know I do want to buy, but I want to have some sort of tool to measure for those and to anticipate that.

Tony:
Let me ask you a couple questions, Melanie. First. Those are both super realistic concerns to have about investing right now, is saturation or competition and where is the economy headed? Say you close in this property today, do you plan to sell this property in six months or less? Do you plan to sell it in 12 months or less?

Melanie:
Yeah, I know.

Tony:
Eighteen months or less? How long do you plan to hold this property?

Melanie:
As long as I can. At least, I would say five years, eight years plus.

Tony:
Let’s say that the economy goes into a deep recession today. Do you have recent to believe that that recession will last for five years?

Melanie:
No. You had provided some great information about how long they typically last, in general. I think sometimes I can go to worst-case scenario. I do value just taking a step back and getting some perspective. There’s also a side of me that’s just… I just want to have certainty about making… This is my first short-term rental. I just want to be really sure that I’m taking a leap into a high performing one. I think I will probably look back on that and laugh because the perfectionist in me wants is first one to just be perfectly cash flowing. I’ve heard so many stories about that you really do have to learn and the first one is a learning opportunity and sometimes it’s great and sometimes it’s not. It’s good perspective, so thank you.

Ashley:
I think that’s a really good point right there that a lot of people get hung up on, and even myself included as you want that first deal to be perfect because you want to maximize your profit. You want to maximize your cash flow because you are putting what you have into this property, your first property. It’s your baby. It’s your leap. It’s your jumpstart into real estate investing and you just want to maximize it. One way I see a lot of people get hung up is, “Okay, I have $20,000. Should I put it into one property? Should I get a two mortgages and use it as down payment? Should I put it into somebody else’s deal and be a private moneylender?” They’re just trying to maximize what’s the best use of their capital or the resources that they have available.
For you, it seems like it’s just getting the best purchase you can get. Getting that best purchase price and it’s going to maximize that daily rate and you’re going to have this wonderful cash flow. Think about what are the worst-case scenarios when you run these? When I like to run numbers, I’m looking at how if it is a short-term rental, currently what do the numbers look like right now as is? Then what is the best-case scenario like, “What do you think the numbers could be on the property?” Then what is worst case scenario? At worst-case scenario, are you breaking even on the property where you’re not having to put any of your own money into the property at all? Is it, maybe, you’re putting in a $100 a month into the property, worst-case scenario that it might not actually happen, but would you be able to afford that worst-case scenario and you’re still having that equity pay down that mortgage pay down in the property and building up that equity so that one day when you do sell or, maybe, daily rates change again and we get into another high period of traveling in those daily rates go up or some event happens that then you can increase that cash flow again.
Then what are your exit strategies on the property? I think trying to not focus so much on how do I get the best return because just getting into that first property, even if you break even… My first property, the cash flow was so minimal. I forgot to include snowplowing, okay. I live in Buffalo, New York, and I completely forgot to include the cost of that. That didn’t put me negative, but it still hurt my projections and wasn’t as great as I thought it was going to be. Then it was just an older home, there was repairs. We went through an eviction after a couple of years of having it and just all these little things happened, but I learned so much and once I bought that property, I bought the next property within three months because it just propelled me.
I think that’s the most important thing. If you talk to a lot of investors, I always think of J.Scott. He bought this property with his wife and it was a disaster. They were going to flip it and they had to turn it into a long-term rental. When they actually sold it. I think he made a $1,000 maybe profit so many years later. He’s, “I don’t regret it.” He’s like, “That got me started. I learned a lot of lessons.” Things like that. Just try and keep those things in mind.

Melanie:
Yeah. Thanks, Ashley. The maximizing profit is something I have definitely been focusing on. I have a long-term rental in Denver. I think, especially after just spending a lot of time listening to different investors and different, I guess, podcasts, I think there was a lot of me that thought that I really didn’t maximize my profit. I definitely did my best on that property and I really was very cautious about that one as well. I wish I had done more to maximize what I put into that one. This one feels like, “Okay, I really, really want to be maximizing it.” I really hear you and when you say you’re thinking from the long term, both the learnings and the opportunity to come, that’s probably the best place to focus because the tourism industry is going to shift and bookings are going to increase. It does have an exit strategy for long-term rental. This area is growing, the population is growing. I definitely think there is potential, and maybe it’s just more about trusting myself. It’s just the risk factor.

Ashley:
To clarify, it’s not even your first property. Obviously, this isn’t your first property, but your first investment in a certain strategy because the analysis is so different that if you went and you purchased another long-term rental, you may not have that over analysis on it because you have experience with the one you know what to do. This time you’re more confident because you already did purchase in that property and there’s that opportunity to maximize the profit a little more because of that experience. Yeah, I think taking into the short-term rental, now you’re looking at daily rates. You’re looking at different ways to pull that data from than you would the long-term rental.

Melanie:
Yeah, absolutely.

Tony:
Melanie, as we wrap things up here, I just want to clarify. We talked a little bit, but based on our conversation right now, what do you feel are the most important next steps for you as we move into our next conversation?

Melanie:
I definitely need to take a little bit more of a step back from the fear and worry and just trying to maximize that potential, as Ashley saying, consider other factors, the future, the long-term viability. And from you, Tony, also be pulling in true data from PriceLabs or AirDNA and use that as more of my analysis instead of taking these superconservative approaches. From this conversation, that’s absolutely what I want to take out of it. I also have an interest in maybe seeking out some consumable mortgages in the background, just to take some of the worry about the high interest rate out. That is my plan for next week. I really want to continue making offers. I still like making those aggressive offers. Hoping to stick with that momentum.

Tony:
Yeah. How many offers do you think you can realistically submit, Melanie, between today and the next time we chat?

Melanie:
I think four is reasonable.

Tony:
How about 10?

Melanie:
10? Okay. I like it.

Tony:
Here’s why. It doesn’t matter what it’s listed at. You submit the offer based on what your numbers tell you. I think I shared this with you last time we chatted, I had an offer out on a property at 312. Property was listed at four. They came back at 350. I said, “No.” They came back at 320, I think it was. I said, “No.” They came back at 315. I said, “No.” We’re under contract right now at 312.

Melanie:
Wow.

Tony:
You have the ability to submit the offer at whatever makes sense to you. Ten, I think is super reasonable because there’s probably 10 properties that are listed. Those properties might not just be at the price point, but you submit those offers to the number that makes the most sense for you.

Melanie:
Thanks, Tony. I am going to take that on. Hopefully, I’ll be reporting about 10 offers next time.

Tony:
There you go. I love it.

Ashley:
Thanks so much for coming on with us today and sharing your journey in the past couple of weeks with everyone. We really appreciate it. Let everyone know again where they can reach out to you in case they didn’t listen in the other episodes.

Melanie:
Yeah, last time I said, “Please reach out to me on LinkedIn.” Maybe the less glamorous place to be, but definitely a place where I’m most responsive. I’m at Melanie [inaudible 00:25:17] and would love to share my journey. I think I present, maybe, a overly cautious perspective, but I hope that it’s helpful for some people. I just really value this time with you, Tony and Ashley. Thank you so much for your insight.

Ashley:
Okay, Melanie. Thank you so much and we’ll see you in a couple of weeks.

Melanie:
Thank you.

Ashley:
Brandon, welcome to the show and we’re just going to jump right into it because you have an exciting update for us and let’s hear it.

Brandon:
Yeah, big morning, under contract in a townhouse over in Delano, Minnesota.

Tony:
Congratulations man. That’s fantastic.

Brandon:
Yeah. Came together pretty quick. That was one that the investor had reached out to me on and he actually broke around this morning mid-size apartment complex that he was looking to roll this one into. Came to me at 275 and we’ve eventually settled on 255 and 6% interest.

Ashley:
Are you doing it as seller financing?

Brandon:
It’s a purchase-money mortgage. I’m not too familiar with the term. It sounded like it was more of a bank he works with a lot, offers him lines of credit that he was able to put my name on.

Tony:
Interesting.

Brandon:
Yeah.

Ashley:
Yeah, that’s super interesting. I hadn’t heard anything of that again. Yeah. Brandon, real quick, just in case anyone is jumping in new here and they haven’t listened to the other episodes. Can you just explain real quick what your goal was coming into these 90 days?

Brandon:
The goal of the first 90 days was to finally get a property, been looking for a while and just needed a nod that I was doing things right, that the numbers I was looking at made sense.

Ashley:
What was your most important next step from last week?

Brandon:
From last time it was starting making offers. Don’t worry about hurting people’s feelings because I was worried about coming in too low and then them just saying no and not even encountering, which did not happen once.

Ashley:
Since we last talked to you? How many offers did you put in?

Brandon:
Five of them. Still not as many as I would like. The first three of them actually had some interest, a couple counters and other things just haven’t lined up quite yet. Waiting to hear on some that I’m waiting for more offers as they still have a couple [inaudible 00:27:35] through as they’re about 30 days on market.

Tony:
What would you say, Brandon, was the big lesson that you learned after submitting all those offers in the last couple of weeks?

Brandon:
That they are emotional about it. I don’t know about it. If their feelings are hurt, their agent just comes back and says yes or no or a new number has been the most consistent response. Usually not too far off the asking price initially, anyways.

Ashley:
What would be your advice to rookies who are in the same situation as you and maybe were stuck as to where you were last week?

Brandon:
Yeah, biggest lesson I learned is making offers did work. They got me more responses and eventually got me a property.

Ashley:
Say that louder and again so everybody can hear that lesson.

Brandon:
Making offers does work even if you’re worried about hurting their feelings and it’s way off the asking price.

Tony:
There you go man. We were just talking with Melanie about this as well. The velocity or the volume of offers, the more offers you put out, the easier it is going to become for you to find a deal that makes sense. If I only submit two or three offers a week, most likely most of those offers are going to be rejected. If I submit 200 offers a week, I’m probably going to get at least two or three deals that actually make sense. Yeah, I think that’s a fantastic thing. Brandon, what was the shift in mindset? You touched on a little bit about not getting emotional. What was that shift in mindset you had to make to be able to increase the number of offers as you made?

Brandon:
Biggest shift was just looking at numbers, not looking at pictures of the house in between the analysis on it or the area or what it would be like to own three of them when I don’t own any of them at this point. Just getting analytical about it.

Ashley:
Walk us through what’s next for you? This morning you went and did the walkthrough of the property. What’s the plan going forward?

Brandon:
As of right now, closing sitting on February 1, as there is a tenant in that property already until May 24. That’s next up on that property. Walk through it and there’s a couple of things that could be done, but biggest things looked fine. Windows, furnace and air is older, but it did sit vacant when it was built for about two years. Those things weren’t running as much. Hopefully, a few more years out of those.

Tony:
Is that from your own walkthrough or is that from the property inspection report? Some of these things you’re calling out.

Brandon:
Those are my own walkthrough.

Tony:
Got it. Have you had an inspection done on the property yet?

Brandon:
No. That was something that we had debated on, but with the history of it and being a townhouse, it’s liability on the bigger stuff is a bit more protected just through the FHA stuff instead of having to worry about replacing the roof, sidings and windows and stuff like that. The structural things weren’t as big a concern. It was more looking under sinks for wet spots. How old’s the furnace, the air. What shape are the plumbing fixtures in.

Tony:
Brandon, are you thinking about potentially moving forward without doing the inspection?

Brandon:
Yes, as of right now, that was the plan.

Tony:
Got it. Ash, what are your thoughts on that? Do you typically buy with no inspections?

Ashley:
Yeah, I’m had an inspection in a long time just because I’m usually buying such dumpy, dilapidated properties anyways that I don’t know what difference an inspection is going to make. This old place, it’s going to be gutted. I’m curious as to why did the seller say that that was something they wanted? They didn’t want the inspection, or did you feel pressured that your offer would be better if you didn’t move forward with having an inspector there or just that you have the knowledge?

Brandon:
It was the train of thought, was that if something does come off with the furnace, isn’t any good. That’s not a big deal for me. The water heater’s older, that’s not a big hurdle. That’s materials in a few hours since I’d be able to tackle that.

Ashley:
Since you’re naming off these things, I actually got a text when this podcast recorded that I have to put in a water softener for a property that’s going to be $4,500. Maybe after this episode I can pick your brain on something like that because I was just like, “Oh, here we go, another expense on a property.” Yeah, sorry, go ahead. I just had to mention that because that is such a great resource that you have that you know a lot about the mechanics of a property and you can go in yourself, engage, and I think that’s important to mention that. Maybe somebody thinks they have no experience or no knowledge or way to contribute to a deal, especially if they’re looking to partner to someone. You being able to assess some of these situations, I think, is a great advantage.

Tony:
Yeah, I think I actually would suggest, although Brandon, that you do move forward with the property inspection and here are two reasons why. First, I think that the property inspector, if you find a good one, this is someone who’s highly trained in identifying deficiencies within side of properties. Even though you do have a background in the trades, they do this all day, every day. Their ability to maybe pick up on things that someone like me, Ashley, or yourself might miss is there, right? I think they can work as a really solid set of second eyes for you. Second, if something major does come up in that property inspection report, you now have leverage to go back to that seller and say, “Look, Mr. And Mrs. Seller, here is an unbiased third party that identify this potentially major issue that you and I need to come to an agreement on how we resolve.”
It’s good that it’s coming from the inspector and not just from you, because if you walk it and you point out, “Hey Mr or Mrs. Seller, here’s this issue.” The seller could say, “Well, you’re biased. Of course, you’re going to point those things out because you’re buying this property from me.” The property inspector, they’re like an appraiser. They get paid regardless of whether or not you’re actually closing that property. They have no skin in the game in terms of whether or not you actually move forward with it. Their only job is to report the facts. I do think, especially with you being new in the game, that there probably would be some value in you doing that. Hopefully, it comes back and it’s all clear on things that you feel aren’t a big deal, but it would be a really bad situation or a regrettable situation if you uncovered some major issue after the fact.

Ashley:
Yeah, Brandon, did you get a quote at all as to how much it would cost to have an inspector come to look at the property?

Brandon:
Not for that size unit specifically, but I heard about 380 to about 450, pretty consistently.

Tony:
You’re buying the house for a few hundred thousand bucks, investing another 400 up front to make sure that everything under the hood is working well might be worthwhile. I think that would be my only bit of advice for you.

Brandon:
I do have another question in regards to paperwork stuff.

Ashley:
Yeah.

Brandon:
I’ve been asked this morning if I’d prefer a attorney’s opinion on the title or if I want the full title insurance coverage. Title insurance is about $1,200 and the attorney’s opinion is about 400.

Ashley:
I would do the title insurance because you don’t want to run into the situation where you go to sell the property and somebody who’s purchasing it requires title insurance. Maybe they’re doing some type of financing or they have an investor that wants title insurance. If there is that gap in insurance policy, then a new title company may not come and cover that property and you’ll have to wait a period of time for claims to be made or whatever before they will actually put a policy onto the property again. That would be my opinion on that is I would go ahead and get that title insurance on the property for sure.

Tony:
Totally agree.

Brandon:
Yeah, title insurance would be what I was thinking. I didn’t know if it would be slightly different for townhouses, since it’s a group of 20-30 people that would… If it was land disputes or something like that, would also be fighting that.

Ashley:
Yeah no, just for the fact of an exit strategy for you, I would go with the title insurance so that you have more options of to how people can purchase the property from you.

Brandon:
Okay.

Ashley:
Brandon, have you started to gather a list of things you’ll have to do during the acquisition of the property? Just switch the utilities and things like that? I do have an acquisition checklist that I use if you want me to send it to you. It’s just little reminders like, “Get insurance on the property. Switch your electric. Make sure the property taxes are now in your name.” Things like that, if you’d find that useful.

Brandon:
Yeah, I definitely would. I actually did get started on property insurance this morning because there’s an insurance agent who also owns an investment property in that section of townhouses. He actually reached out to me already.

Ashley:
Oh, awesome. That makes it easy for you.

Brandon:
That was a good reminder. It was something I hadn’t really thought of until this point.

Ashley:
To be honest, and I think I’ve probably said this a couple of times on the podcast, it’s probably maybe my fourth or fifth property, my real estate agent called me the day before closing was like, “You got insurance. You got the utility search?” I was like, “Oh my gosh, no, I didn’t get insurance. I got to do that right now.” That’s definitely the benefit of having a great agent where they can do it for you that day. That’s why I have the checklist is just so every single time it’s the same things over and over again. Tony, I’m sure with you, there’s a lot of things that are repeated and especially with the short-term rentals having to furnish, everything like that.

Tony:
Totally. Just a quick side note. Amazon has the ability, if you have… Maybe, it’s with a personal account, but if you have an Amazon business account to create reorder lists. Literally all of our household essentials, we just have a reorder list. We have one for the kitchen. We have one for the bathrooms. We have one for the bedrooms. Whenever we launch a new property, instead of having to go through and look for all these items, we click three buttons and we’re able to reorder everything for an entire house. Then we have a larger property launch checklist. You guys can actually download that for free if you go to the realestaterobinsons.com/checklist, I think it is. It’s like a bunch of steps that we go through to get our property up and running in a repeatable way.

Ashley:
Brandon, is there anything you’re doing right now to document and keep track of some things that are happening during this process for you that maybe you want to keep track of going forward?

Brandon:
Yeah, right now it’s just on paper, writing down addresses, offers, how many days since I’ve heard from them, keeping track of days on market. Stuff like that. As far as the acquisition checklist, I haven’t done too much about that yet. Other than insurance, which I got around to about this morning. Utilities are in the renter’s name already, and then just have to check everything over with the title company to make sure everything’s good on my end for closing.

Ashley:
One thing with the utilities too, to find out about is sometimes you can put the utilities, you can be listed as the landlord. When that person moves out of the property, the utilities are automatically put back into your name. One benefit of that is around here, a lot of the properties have natural gas. Well, if a tenant moves out and they cancel the gas, to have the gas turned back on, you have to set a day and it’ll be between 8:00 AM and 4:00 PM and you have to be at the property and they’ll come. It’s like a whole wasted day for them to come and turn the gas back on and someone has to be there because they’ll check the stove and stuff like that to make sure that there’s no leaks. You can maybe look into the utilities too and see if there’s that program. Also, it just saves you time so that when people do move out, you’re not having to call and say, “I need to put the utilities back into my name.” Give your information and things like that where it’ll just automatically revert to you as the landlord anytime somebody moves out.

Brandon:
Yeah, that’s a good bit of information. I’ll have to ask about that.

Ashley:
Okay, cool. Well, Brandon, thank you so much for coming on with us this week and sharing your information. We’re super excited for you and can’t wait to see how it goes.

Tony:
Yeah, super pumped for you, man.

Brandon:
Yeah, I’m really excited.

Ashley:
Well, Brandon, thank you so much and we will see you in a couple of weeks.

Brandon:
All right. Looking forward to it.

Ashley:
Lawrence, welcome back to the show. How have you been?

Lawrence:
Thank you so much for having me back. I would probably say the most exciting thing thus far, which I want to congratulate you, Ashley, on your book because I have a copy of the Real Estate Rookie 90 day book and I am so excited to dig into this book, especially chapter nine, which talks about making offers because this episode with me will talk about how I definitely took action to make offers. I’m excited to dig into that book and I think everyone should get a copy of it.

Ashley:
Lawrence, thank you so much. That just made my day. Also, I appreciate all your love across Instagram too today.

Lawrence:
Of course. It takes a village to be a real estate investor.

Tony:
Lawrence, we will send you your check for that promotion after we cut this episode.

Lawrence:
Tony, you just did another joke. We were just talking about that in the last podcast recorded. Tony’s had two jokes for the year now.

Tony:
Now I’m at three.

Ashley:
Lawrence, before we actually get into what you’ve done the last couple of weeks, just remind everyone what your goal is right now, what you’re trying to reach?

Lawrence:
Of course. My major goal is to add a property this year using seller financing, owner financing. Right now I have two rental properties that were used with traditional bank lending. Right now with interest rates being higher, if I’m able to put together an advantageous deal that worked for the seller and myself, I would move forward. My overall goal is to purchase a property using seller financing because I definitely want to utilize that tool and in my real estate investor toolbox.

Ashley:
Fill us in as to what has happened.

Lawrence:
Yeah, of course. Last week my most important next step was to actually put the offer in through seller financing and I submitted an offer. I jumped in and did the offer for 7% because listening to my very first homework from you guys, Pace says that he likes to get properties for no more than 7% down. I was like, “Hey, I’ll just submit the offer and see what happens.” My offer was 7% down payment for the full asking price, 8% interest with a 30-year term, three year hold whatsoever. They countered with a 9% rate and at minimum 10% down. When I ran my numbers in my rental analysis, it was coming to that breakeven. Also, this particular property was redone as a potential flip. Some of the finishes are really more in line for someone to rebuy it.
I have to make sure that I’m not going to have a rental that would be out-priced in the rental market. When they counter with that, I was like, “Hey, is there any way we can revisit it?” He was like, “No, that’s what we want.” The interesting thing was when I first finished my talk with you all, it went pending. I was like, “Ah.” That was my opportunity. It was just pending. Then within maybe 72 hours it came back on the market and that’s when I was like, “That’s my opportunity to submit my offer.” Within 15 minutes the realtor replied and was like, “Hey, we’ll counter with this amount.” Then when I was like, “Oh no, it looks like it really won’t work for me. Is there any way we can revisit it?” He was like, “No, I’m adamant that my seller wants these terms.” Originally, he wanted 20% down, which is a big gap from 20 to 10, and I was offering seven.
Definitely it’s a flip gone bad and they’re trying to recover some funds from it. I get it. Within the last seven days, now the property is on contingent. I don’t know exactly what they’re trying to chase with that property. I definitely did my homework and did that. Moving forward, another thing that we talked about was reaching out to listings that have been on the market for 30 days. I put together a spreadsheet that I can track data where I have one sheet that’s rental properties that are over 30 days on the market. Those I’m going to start to put together on my mailers. I’ve already started to draft them and I’ll be sending those out. Then another sheet on the Excel sheet will be the properties that are for sale that’s over 30 days. Right now, that’s not a long list in my market because it’s such a rural area. That list is less than about seven properties that fit my buy box. Honestly, maybe four to five. My [inaudible 00:45:17] for next time will be to put in those offers for those properties that have been on the market for over 30 days for sale.

Tony:
Yeah, I think for my side, Lawrence, first I just want to congratulate you, even though you didn’t get an accepted offer, you submitted that offer and you got a counter offer back, right. There was some dialogue that was going on between you and that seller. If anything, even though it wasn’t a closed deal, it is proof of concept that there is interest from sellers in your market to potentially explore a seller finance deal. I’m noticing a similar theme between you, Melanie and Brandon, that all of you need to potentially just increase the number of offers you’re putting out so that the conversations you start having start to increase as well. I think don’t let it pass you by, Lawrence, that you did have a bit of success by at least having that conversation around the seller financing.

Lawrence:
A question that I have for you all would be, that was a big numbers difference of them wanting originally 20% down versus me offering 7% and then they’re countering with 10%. Have you all ever encountered that as well? It’s a big numbers difference where essentially they’ll be leaving half on the table, 20% down versus 10% down upfront.

Ashley:
Yeah, I’ve seen people want 50% down and it’s like that defeats the whole purpose of doing seller financing for me. That’s where it comes into play as to what are they going to be doing with the money? Why are they selling? Is it because they need a down payment on a primary residence or something? Or they need to fund their kids’ college? Is this a situation where you could get face-to-face with the seller and talk to them directly?

Lawrence:
Possibly not because a broker does have it. If there’s a will, there’s a way. I may be able to see if I can get in contact with that person because like I said, it truly seems as though it was a flip gone bad in this particular climate of a market that we’re at because it’s a beautiful property. Everything is brand new and like I said, it’s really one of the properties where it will definitely stand out as a rental with more of finishings inside to sell. If I can possibly be able to talk directly with that seller, I feel like I could be able to just do the deal. Again, I don’t want to undercut or burn bridges in such a small town that I’m in with any type of brokers or realtors, but I definitely feel as though we could possibly work something out.

Ashley:
You definitely don’t want to do that and overstep that boundary. I think it’s worth asking if maybe you could have that conversation with the seller and ask that to the broker. I think it’s a lot easier to figure out what their motivation is as to why they want to sell and come to that agreement or have that negotiation in person and just say, “Is there a time that we could sit down together and talk about this? I’d like to see this work.” Then you can figure out do they have a number? I’ve sat down with the seller before who just said, “I need $3,500 a month.” Okay, well let’s slap 25 year amortization on that three and a half percent interest and that gets me to 3,500. Boom. We’re both happy. I think if there is a way that you can find that out, or even just asking the broker as to what is the reason they want such a large down payment? Maybe it’s because they’re scared of doing seller financing and someone not paying.
What are some ways that you could make them more knowledgeable about how this is a benefit to them also and that you are not a risk? Can you give your tax return to them? Can you supply a credit report? Can you give them a sense of security if that is their issue? There’s some way that you can find out why they want that larger down payment. If they need that money for something or if it’s the risk part. I think that may be able to help you tailor your offer to come to an agreement.

Lawrence:
No, that definitely makes sense because like I said, you never know. You really can’t be in the mind of the seller until you actually have conversations and understand. One thing that I would be doing with any of my offers first, seller financing based upon my homework that I learned from Pace was that I would include a performance deed into it. With that performance deed, it pretty much lets them know, “Hey buddy, if I don’t pay, it’s yours. We don’t have to go through this crazy foreclosure process.”

Tony:
Well, it seems like you’re making fantastic progress, Lawrence. Like I said, I know it’s not a deal under contract, but it definitely is a step in the right direction. As we look the next time that we chat, what do you feel are some of the things that you want to focus on to help increase that deal flow?

Lawrence:
Definitely the biggest next step would be to increase those number of offers. That would be a big takeaway to increase the number of offers. Then like I said, I’m going to definitely dig into chapter nine of Ashley’s book about the offers because it’s always good to see stuff on paper. I like to read stuff as well and see those gems that she’s included in that book. I would say the biggest one would be increasing the number of offers and then if I can be able to get directly in touch with sellers, I’ll have a more push for that if possible.

Ashley:
Geez, I hope we put a cap on the affiliate spending I’m doing here on this podcast. No, I’m just kidding. I appreciate it very much.

Lawrence:
You’re welcome. Again, my goal if possible would be to, if I can have a chat with Pace Morby. That would be awesome to be able to run through some things because I know from the videos that I watched with him, he’s like, “You can definitely get a seller to say yes.”

Ashley:
Lawrence, what’s going to be the next step? I think one thing is go back and try to work with the seller more and not give up on this. Are you going to be continuing looking at other deals? Where’s your head at with that?

Lawrence:
Definitely, like I said, I will be sending out those mailers as well. The only thing about mailers is that you never know when they are going to come back and then I don’t want to have to pivot. I would say if I did have to pivot, the only other option would be if I were to purchase another property like owner-occupied, because I have three properties, one primary residence and two rental properties. The only thing about that is my primary has so much equity in it and I’m able to have a equity piggybank, like a HELOC on it. That would be like my final resort if I have to pivot to be able to go and do owner-occupy and put 5% down.

Tony:
Yeah, I think my only last piece of advice, Lawrence, is maybe also look at folks in maybe different situations, because right now you’re looking at people… The listings that have grown stale, things like that. What you need is someone who is in a distressed situation potentially, right? I don’t know if that’s like a divorce or something that’s in probate or some of these other situations where there’s like, “Hey, I just inherited this house.” The houses in where you live, but I live in Buffalo, New York and I don’t want to manage this property from 3,000 miles away. Maybe as you start to think about who you reach out to, maybe start to open up that criteria a little bit and then see if you can find some more folks to chat with.

Lawrence:
Yeah, I definitely know that there’s an opportunity for that because unfortunately we are in a military town and people get divorced and stuff of that nature, or they are not a native of this area and they bought a house, but now they don’t want to turn into a rental. There is some possibilities there that I can definitely probably look in to see if there would be somebody that’s in a distressed situation.

Tony:
It’s just last idea, and this is super crazy, but since you are in a military town… We actually did this for one of our properties in Joshua Tree. There’s a military basin in 29 Palms, which is right near Joshua Tree. We were looking for someone to midterm rent one of our properties while we waited for the permit to come in. We reached out to the base and we said, “Hey, we have a property. Are there any folks at the base that might want to come rent this out?” They literally sent someone out to our properties. They scoped it out. They said, “Hey, here’s how much we can give you for rent.” Obviously, we ended up getting our permit before they placed someone. I wonder if you could go to the base and say, “Hey, is there anyone that’s in charge of people that are leaving this city and they’re maybe getting transferred somewhere else and they need help to sell their property or they need help to do something else?” It might be a little more difficult because they probably bought with VA loans. You’re looking at lower interest rates. Like you said, assumable mortgages, maybe that’s something that you could assume on their behalf. Maybe you reach out to them and there’s something there that you can pull on to get some more insights.

Lawrence:
Yeah no, that’s definitely an opportunity, especially if I’m able to that, easily I can try to see if I can get to as many captains as possible because they normally have soldiers who are in those distressed situations. PCS season is coming up, which is normally when they have a permanent change of their duty station. Other than that, I’m definitely going to keep rocking and rolling. The biggest takeaway that I would give thus far to rookies is that you have to put the offers in. You just have to.

Ashley:
Well, Lawrence, thanks so much for coming on with us this week. Besides that little last piece of advice, can you share something else with us? I feel you’re very much someone that can instantly learn something in a situation and you hold onto that and you’re also very good at sharing what you’re doing.

Lawrence:
I would say, definitely, you always want to make sure that you are adding value to people. I think that’s the biggest takeaway. I have had so many unbelievable and endless opportunities in real estate because of adding value to people. For me, that’s something that has allowed me to buy properties beating out cash buyers or whatsoever. I would say your integrity is very important, and to add value, because we’re all in this together. We have one common goal, and that’s to build a real estate portfolio. None of us can buy every single property in the world.

Ashley:
Tony, this is what I love about our group of mentees is that they’re not only asking questions and they’re grinding and doing amazing things, but they’re also adding value to our listeners. That’s why I love you guys. You guys contribute so much to our listeners too with sharing your journey and also giving the advice and the life lessons that you’re learning along the way. Well, Lawrence, thanks so much for joining us and we’ll see you in a couple of of weeks.

Lawrence:
Awesome. Thanks for having me.

Ashley:
I’m Ashley @wealthfromrentals, and he’s Tony @TonyJRobinson, and we’ll be back on Saturday with a rookie reply.

Speaker 6:
(singing)

 

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