June 2023

As a startup founder, effective communication and negotiation skills are arguably the most important skill for success. This short guide provides valuable insights and tips derived from our professional experience and renowned works on the subject, such as Dale Carnegie’s “How to Win Friends and Influence People” and Chris Voss’s “Never Split The Difference.”

1. Prep: Uncover The Black Swans

Active listening helps build relationships and provides opportunities to gather valuable information. Before engaging in a difficult conversation with any of the stakeholders of your startup, it’s a good idea to seek sincere feedback from other relevant stakeholders relevant to the situation. It’s likely that you will uncover unexpected insights that can contribute to your understanding of the situation you are handling with the planned conversation. Actively listening to other parties and gaining deeper insight into your counterpart and their circumstances can also save precious time by ensuring you’re not banging on the wrong door.

2. Emotional Defusion: Use Mirroring And An Accusation Audit

Most difficult conversations are difficult because they contain an emotional charge for one or both parties for one reason or another. Handing this emotional charge right at the beginning of the conversation is a prerequisite for being able to conduct a productive and rational discussion.

To do that, you can use two techniques recommended by Chris Voss. First, you can use mirroring (rephrasing what the other person said and repeating it back to them) in order to showcase that you understand well the position and feelings of the other party.

Second, you can employ an accusation audit. You can take the “blame” for the emotional charge in the conversation on yourself. This diffuses tension and encourages the other person to offer support rather than blame.

3. Connection: Employ Active Listening And Tactical Empathy

Active listening is essential for engaging in meaningful conversations. Avoid the common habit of waiting for your turn to speak. Instead, focus on understanding the other person’s point of view, needs, and desires. By genuinely listening and empathizing, you can establish a connection and incentivize action. Remember, it’s crucial to prioritize what the other person wants, rather than solely focusing on your own goals.

Most decisions are motivated by emotions. Having good rational arguments for what you are doing or what you are trying to get the other party to do is important, but it is equally (if not more) important to make them feel comfortable and understood in your company.

4. Earnestness: Beware Of A Fake “Yes”

Finally, after establishing a healthy emotional climate for the conversation and a mutual feeling of understanding and connection, it is important to lead the conversation toward the desired action after it is over.

That being said, while it is important to be assertive in what you are trying to achieve, it is also important not to be pushy and to see if there is a real desire (or lack thereof) for action in the other party.

In negotiations, there are three types of “yes”: confirmation, commitment, and counterfeit. A confirmation “yes” simply affirms a statement, while a commitment “yes” indicates a willingness to take action. This is what you are usually aiming at.

However, many people use a counterfeit “yes” as a defense mechanism to avoid confrontation. This can lead to wrong expectations, which in turn hinders progress a great deal. Encourage honesty and genuine opinions from your counterparts, even if it means hearing a “no.”

In summary, effectively handling a difficult conversation is a skill you need to acquire if you want to become a successful startup founder. Here’s a short outline of how to do it:

1. Prepare and uncover unexpected pieces of information
2. Defuse emotional tension through mirroring and an accusation audit
3. Establish trust with the other party – listen actively
4. Move the conversation towards a commitment of action, but avoid a fake commitment

When you’re in the market for a new property, one of the first things you’ll want to do is apply for a mortgage preapproval. This process can help you determine your budget, refine your house-hunting efforts, and give you an edge in a competitive market. 

Let’s walk through the basics of mortgage preapproval, how it differs from prequalification, and why it’s important when buying a home. 

What Is a Mortgage Preapproval?

A mortgage preapproval is a preliminary assessment conducted by a mortgage lender to determine the maximum loan amount for which a borrower may be eligible. It involves thoroughly evaluating the borrower’s financial background, creditworthiness, and loan repayment ability. Obtaining a mortgage preapproval is an important step in home-buying as it provides a clear understanding of the price range within which the borrower can search for a property.

Preapproval vs. prequalification

While often used interchangeably, preapproval and prequalification are two distinct terms in the mortgage application process.

• Prequalification: Prequalification is an initial assessment based on information provided by the borrower. It typically involves conversing with a mortgage lender or a quick online application. The lender reviews the basic financial details the borrower provides, such as income, debt payments, and assets, to estimate the loan amount for which they might qualify. Prequalification gives borrowers a general idea of their eligibility but does not carry the same weight as preapproval.
• Preapproval: Preapproval, on the other hand, is a more rigorous and detailed process. It requires the borrower to complete a formal mortgage application and provide the necessary documentation for verification, such as income statements, bank statements, and credit history. The mortgage lender thoroughly reviews and assesses the borrower’s financial situation, creditworthiness, and ability to repay the loan. A mortgage preapproval is a stronger indication of the borrower’s eligibility and provides a more accurate estimate of the loan amount they can secure.

Preapproval vs. approval

Preapproval and final approval represent different stages in the mortgage application process.

A preapproval is a preliminary evaluation conducted by a lender to determine the maximum loan amount for which a borrower may qualify. It gives borrowers an estimate of their purchasing power, allowing them to search for homes within their budget. However, preapproval is not a guarantee of obtaining the loan. Preapproval depends on the borrower’s financial information provided at the preapproval and is subject to further verification and underwriting during the final approval stage.

Final approval occurs when the mortgage lender has thoroughly reviewed all the borrower’s financial information, completed a comprehensive underwriting process, and determined that the borrower meets all the requirements for the loan. This stage typically happens once the borrower has found a specific property and provided all the required documentation to the lender. Final approval gives borrowers the confidence to move forward with the purchase, as it signifies that the loan is officially approved and ready to receive funding. 

How to see what you qualify for

To determine what you qualify for in terms of a mortgage loan, you’ll generally follow these steps:

• Assess your financial situation: Evaluate your income, expenses, and debts to see how much of a mortgage payment you can afford. Now is a good time to calculate your debt-to-income ratio, an important factor mortgage lenders consider when assessing your home loan eligibility.
• Check your credit report: Obtain copies of your credit reports from the three major credit reporting agencies (TransUnion, Equifax, and Experian). Review it carefully for any discrepancies or errors on your credit report that could affect your creditworthiness. If you find any issues, work to rectify them before applying for a mortgage.
• Research lenders and loan options: Explore different lenders and loan programs to find the options that best suit your needs. Consider factors such as interest rates, loan terms, and down payment requirements.
• Gather documentation: Prepare the documents lenders typically require during the mortgage application process. 
• Get preapproved: Submit a formal mortgage application to a lender and provide the required documentation for verification. The lender will thoroughly review your financial information and issue a preapproval letter indicating the maximum loan amount you likely qualify for.

How to Get Preapproved For A Mortgage

Getting preapproved for a mortgage is an important step in the home-buying process, so let’s break down some key details about how to get preapproved even further. 

Collect your documentation

Gather the necessary documents that lenders typically require during the preapproval process. These may include:

• Proof of income: Provide recent pay stubs, W-2 forms, or income tax returns to demonstrate your employment and income stability.
• Asset statements: Gather bank statements, investment account statements, and other relevant documents to show your savings and assets.
• Identification documents: Have your driver’s license, passport, or other documents ready.
• Employment verification: Prepare documents that validate your employment history and stability, such as offer letters or employment contracts.

Know when to get preapproved

Timing is crucial when it comes to getting preapproved for a mortgage. Consider the following factors to determine the right time:

Getting preapproved before you start searching for a home is generally recommended so you’ll clearly understand your budget and can focus your search on properties within your price range. This shows sellers that you are a serious buyer and can give you a competitive edge in a competitive real estate market.

Get your credit score checked

A good credit score is crucial for mortgage preapproval. Once you obtain a copy of your credit report and check it for any errors you can dispute, study your credit behavior to gain insight into what steps you can take to improve your credit score. 

If you have significant credit issues, consider seeking guidance from a credit counselor who can provide personalized advice to improve your creditworthiness.

Receive your mortgage preapproval letter

Once you complete the preapproval process, you’ll receive a mortgage preapproval letter from the lender. This letter confirms the loan amount you qualify for based on the lender’s assessment of your financial information. A preapproval letter is a valuable tool when making an offer on a home, as it demonstrates your ability to secure financing.

Understand how long preapproval lasts

It’s important to note that mortgage preapproval has a limited lifespan. Preapproval letters typically have an expiration date, usually ranging from 60 to 90 days. After the expiration, the lender may require updated financial information to reassess your eligibility. Keep track of the expiration date and proactively provide any requested updates to maintain an active preapproval status.

Mortgage Preapproval FAQs

Before seeking mortgage preapproval, ensure you understand the answers to these frequently asked questions. 

How long does preapproval last?

The duration of a mortgage preapproval can vary depending on the lender. As briefly noted earlier, generally, preapprovals are valid for 60 to 90 days. After this period, the lender may require updated financial information to reevaluate your eligibility. It’s important to keep track of the expiration date and be proactive in providing any necessary updates to maintain an active preapproval status.

What factors are considered for preapproval?

Mortgage lenders consider several factors during the preapproval process. These typically include:

• Credit score: Lenders assess your creditworthiness by reviewing your credit score and history. A higher credit score generally improves your chances of preapproval.
• Income and employment: Lenders evaluate your income stability, employment history, and current employment status to ensure you have the means to repay the loan.
• Debt-to-income ratio: Lenders analyze your debt-to-income ratio, which compares your monthly debt obligations to your gross monthly income. A lower ratio indicates a lower level of financial risk.
• Down payment: The amount of money you can put towards a down payment can influence your preapproval, affecting the loan-to-value ratio and the lender’s risk exposure.
• Assets and savings: Lenders consider your savings and assets to assess your financial stability and ability to handle potential expenses.

Why should you get preapproved by more than one lender?

Getting preapproved by multiple mortgage lenders can be advantageous for several reasons:

• Comparison of offers: By obtaining preapprovals from multiple lenders, you can compare the terms and conditions, including interest rates, loan programs, and fees. This allows you to select the lender offering the most favorable terms.
• Negotiating power: Having multiple preapprovals can strengthen your negotiating position when making an offer on a home. Sellers may view your offer more favorably if multiple lenders have assessed your eligibility.
• Backup options: If one lender denies your mortgage application after preapproval, having other preapprovals in place provides alternative options and reduces the risk of starting the process from scratch.

Does getting multiple preapprovals hurt your credit score?

When you apply for mortgage preapproval, the lender typically conducts a hard inquiry on your credit report. Multiple hard inquiries within a short period can temporarily negatively impact your credit score. However, credit scoring models recognize that borrowers may shop for the best mortgage rates and allow a grace period. Generally, credit scoring models view multiple inquiries made within a 14 to 45-day window as a single inquiry when calculating your credit score. It’s important to be mindful of this timeframe and aim to obtain your preapprovals within the specified period to minimize any potential impact on your credit score.

Can you get denied a mortgage after being preapproved?

Yes, receiving a rejection for a mortgage loan is possible even after you are preapproved. Preapproval centers on an initial assessment of your financial information, subject to further verification and underwriting during the final approval process. There are several reasons why a lender may deny your mortgage application after preapproval:

• Change in financial circumstances: If your financial situation significantly changes, such as a job loss or a substantial increase in debt, it may impact your eligibility for the loan.
• Inaccurate or incomplete information: If the lender discovers discrepancies or inaccuracies during the underwriting process, it can lead to denial.
• Property-related issues: If the property you intend to purchase does not meet the lender’s criteria, such as appraisal issues or title problems, it could result in a denial.

How far in advance should you get preapproved for a mortgage?

The timing for getting preapproved for a mortgage depends on your specific circumstances and preferences. It’s usually a good idea to obtain preapproval before actively searching for a home. This way, you clearly understand your budget and can make more informed decisions. It also gives you a competitive advantage when making an offer, as sellers are more likely to take it seriously if you are preapproved.

It’s important to note that pre-approval letters typically have an expiration date, so keep in mind the validity period of your pre-approval and plan accordingly to ensure it remains active while you search for a home. If your financial circumstances change significantly, you may need to update your pre-approval with the lender.

How long does a preapproval take?

The timeframe for obtaining a mortgage pre-approval can vary depending on several factors, including the lender’s processes, the complexity of your financial situation, and your responsiveness in providing the necessary documentation. Generally, the pre-approval process can take anywhere from a few days to a few weeks. 

It’s worth noting that you may expedite the pre-approval timeline if you promptly provide all the required documentation and respond to any requests or inquiries from the lender in a timely manner. Additionally, some lenders may offer expedited pre-approval services or digital platforms that streamline the process, potentially reducing the overall timeframe.

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

Recessions impact consumers in different ways, depending on their financial circumstances. In most cases, though, economic downturns do some harm to consumers’ pocketbooks. At the very least, signs of a slowing economy lead to changes in spending habits and priorities.

With consumer spending making up two-thirds of U.S. economic activity, penny-pinching makes business leaders start to worry. They know recessions can shrink corporate budgets as cash flows turn into a trickle. Like well-off consumers, larger companies may not be as hard hit. Those most at risk are firms toward the other end of the spectrum, including smaller businesses without substantial financial reserves.

But just because consumers are cutting back doesn’t mean they aren’t spending at all. Well-positioned brands and offerings can still win over customers when times are tough. Yes, it’s possible to grow a business during a recession. Keep reading to find out how.

1. Reinforce Brand Value

When people see their paychecks aren’t keeping up with inflation, they can go into survival mode. Layoffs and reorganizations can prompt the same reaction. Anxiety and fear may surface, driving shifts in shopping behaviors. Someone who used to refuse to go to the dollar store might have a sudden change of heart.

It becomes a game of the survival of the fittest, with more consumers strategizing rather than buying impulsively. Business leaders usually find it best to adopt a like-minded approach during recessions. This isn’t the time to abandon brand strategy in favor of piecemeal marketing ploys. Because what doesn’t change is consumers’ emotional connections with strong brands.

Sure, people are looking for lower prices. But they’re also seeking quality and value when the road ahead seems rocky. Shoppers are more likely to reach for brands that comfort them and deliver on promises. While conventional wisdom says recessions can erode brand loyalty, it doesn’t always happen if there’s enough perceived value.

It’s an approach workwear retailer Dungarees used to expand its business as technology changed shoppers’ habits. The company focused on positioning the brand as the go-to destination for hard-working, budget-minded consumers. Whether people shopped in-store or online, Dungarees reinforced its brand promise of exceptional customer experience, quality products, and value, as Mike McClung, Dungarees CEO, recently told me in an email: “When consumers start paying closer attention to the time value of their hard-earned dollars and focus on longer-term budgets, brands of higher quality start to win the buying decisions. Buying one pair of pants that lasts twice as long for $50 wins over buying two cheaper pairs for $35.”

2. Prioritize Loyal Customers

The definition of growth isn’t limited to acquiring additional customers. Businesses can also expand by leveraging relationships with existing clientele. Even in times of prosperity, the probability of converting current customers is substantially higher than new ones. Companies stand a 60% to 70% chance of conversion with existing clients versus a 5% to 20% chance with brand-new customers.

It goes back to trust and familiarity. People who know what a brand offers see choosing it as less risky. When businesses reward their behaviors, it becomes more of a no-brainer. Take Starbucks as an example. The company’s profits fell 28% during the 2008 recession, prompting a refocus on customer-centric experiences. Although the coffee giant’s focus back then was gathering feedback and streamlining operations, it’s taking a parallel approach this time.

The company’s current emphasis is on making it easier for rewards members to keep buying. This may take the form of 50% discounts on drinks for an extended weekend or extra rewards for repeat purchases. Regardless, existing customers feel as though they’re getting a personalized treat. By growing client relationships, businesses can expand sales even when overall consumer spending is down.

3. Become a Brand Partner

The likelihood of slower sales can be enough to tempt business leaders to slash marketing budgets. However, cutting spending in this category isn’t always a good idea. Nielsen research shows 10% to 35% of brand equity is marketing. And brands that go radio silent typically lose 2% in long-term revenues every quarter. It can also take three to five years to recover those losses if companies restore marketing spend levels when conditions improve.

In challenging economic times, a wiser tactic is to reallocate advertising and promotion dollars to well-performing channels. Some of those channels can be brand partnerships and sponsorships of nonprofit organizations. Companies can get more returns from partnerships that build credibility and extend reach. In the same way, sponsorships of nonprofits boost a business’s visibility while giving consumers a feel-good reason to support the brand.

One example is Panera Bread’s Day-End Dough-Nation program, through which it partners with nonprofits nationwide. Instead of throwing away unsold baked goods, Panera locations donate them to local organizations such as food banks and homeless shelters. “Some other companies may sell their day-old products the next day at a discount,” Udo Freyhofer, Florida cafe manager, said in a statement. “We don’t. I feel good about having fresh items available for our customers while helping out those in need in our community.”

The value of those donations was nearly $100 million during 2021. The program is only one of the company’s community-oriented partnerships, but it is instrumental to the brand’s identity and encourages customer loyalty.

Growth in the Face of Adversity

When consumers slash their budgets, business leaders can feel like the deck is stacked against them. How can they possibly grow sales when economic figures show spending is slowing down? The fact is, recessions usually signal a shift in shoppers’ priorities instead of a complete shutdown. As long as brands can appeal to those needs in cost-effective ways, sustaining growth is possible.

David:
This is the BiggerPockets Podcast show, 783.

Chris:
I will say the purpose or maybe the goal of this conversation is to kind of walk through the home buying process, whether you’re trying to invest, whether you’re just trying to buy your primary residence, whether you’re buying even a vacation home or something. If you’re listening and you’re thinking, “I don’t know if I’m ready for real estate investing,” one, maybe you should be, and two, this is going to be applicable to anyone, no matter what type of home you’re buying.

David:
What’s going on, everyone? It’s David Greene, your host of the BiggerPockets Podcast, here today with my co-host, Rob Abasolo, with a bit of a different episode. Today, Rob and I are sharing the mic with Chris Hutchins, podcast host of All The Hacks, a very cool podcast that teaches people how to hack their way through life, specifically with personal finance. In today’s show, Chris interviews Rob and I getting information that many of you probably never heard about how to save money in real estate through using agents, looking for deals, home inspections, really everything we could possibly think of for those that don’t own a lot of real estate. Rob, how you feeling?

Rob:
Good, good. Yeah, we broke it down really from start to finish. We talk about agents, listings, due diligence, the financing, getting insurance for the properties that you’re buying. This is going to pertain to everyone that’s looking to buy a primary residence, this is going to pertain to everyone looking to buy investment properties. We really do cover everything, and honestly, for how much I’ve heard you speak on the podcast, David, you still amaze me, my friend. You gave one of the coolest tips about disclosures, and that’s all I’m going to say. That is today’s quick tip is just to listen to the entire episode because the entire episode is quick tips, but once you get to that tip about the disclosures, I was like, “Wow, this man is… He’s done it. He has done it. He has figured it out.” Congratulations and kudos, my friend.

David:
Thank you. This episode’s going to be aired on our podcast and Chris’s podcast, All The Hacks, but it was cool that we were interviewed because we got a chance to share some of the knowledge that we have when normally we’re the person interviewing the guests to get to what they know. I kind of liked the change of pace, and I think you will too. Today’s episode is full of actual advice. It’s probably one you’re going to want to listen to two or maybe three times. Make sure that you are using the note app in your phone, or if you still use a pen and ink and paper, taking some notes because there is stuff that is guaranteed to save you money.
Today’s quick tip is listen to all three parts of this episode. There was so much good info in our conversation with Chris that we broke it into three easy 30-minute segments so you can actually absorb all the good intel instead of just being overwhelmed with one long show. If you’re listening to this on the day it airs, then we will see you back here tomorrow and the next day for parts two and three. All right, let’s bring in Chris.
How the turntables have turned. Chris, welcome to our show, and I’ll just go ahead and welcome myself to your show to save you the time there. We’ve got a cool little crossover event going on here today. For those who are unfamiliar, my name’s David Greene. I’m a former police officer who became a real estate investor and is now a real estate broker. I have a mortgage company called The One Brokerage. I run a real estate team, I buy rentals, I write books, and I host the BiggerPockets Podcast.

Rob:
Yeah, and I’m Rob Abasolo. I am the co-host of the BiggerPockets Podcast. I have a goofy YouTube channel called Robuilt where I teach people how to invest in real estate, short-term rentals, tiny homes. I’m a former ad man, if you will, just like Mad Men, the TV show is basically me. I was a copywriter and I quit all that, quit all the corporate dreams about two years ago to focus full-time on real estate and documenting the journey.

Chris:
I’m Chris Hutchins. Thanks for having me and thanks for joining me. I host All The Hacks podcast. As people listening from that side know, I’m all about trying to optimize and upgrade every aspect of your life. I want to do it while spending less and saving more, and I want to really dial things in, and so I’m glad we’re here because I’ve gotten lots of questions about just the whole home buying process and I was like, “Who could I find that knows more about this than I do?” And so I thought, “Let’s do this conversation.” You guys are the pros. I’ve listened to your show, I don’t know, countless times, and I thought this could be really fun for everyone on both sides to go through front to back how do you buy a home and optimize every step of the way.

David:
And for all those listening on BiggerPockets but who haven’t heard about Chris, his podcast, All The Hacks is an award-winning podcast that will teach you to upgrade your life, money, and travel, all while spending less and saving more, which we love because the more money that we save, the more real estate we could buy, which is what most of us are addicted to.

Chris:
So let’s jump in. Someone wants to buy a house. I always tend to ask people before you’re even thinking about this, why are you doing this. I’m curious if you guys have any frameworks you use for thinking about why you would buy a house, what’s important to you. It doesn’t even make sense before we jump into optimizing the entire process.

Rob:
Well, I mean, there’s a lot of reasons to get into real estate. I don’t think that there’s any one particular reason. Some people get into real estate accidentally where they buy a house and they live in that house, and then one day they decide to buy another house and move into that house, and then they have to decide should they sell or should they buy or should they sell or keep the home, and then they become a landlord and then decide, “Oh hey, the flow from this is great,” and then they buy more houses. Some people buy a house and then house hack and rent out rooms in their home to subsidize their mortgage. And then there are also the other side of it where people work nine to five jobs and maybe they’re not making enough money at that nine to five job and they want to create supplemental income, so they get into real estate to help create monthly cashflow. Or, maybe they just want to eventually replace their nine to five income with real estate.
For me, that was really why I got into it. I had a pretty stable career in advertising, never really felt like I was making enough money, and so my side hustle became real estate, and I just started buying more properties as a way to make more money to supplement what I didn’t feel like I was making at my career. What about you, David? What do you think?

David:
There’s a lot of practical reasons why you want to invest in real estate. Even the casual observer sees home prices getting higher and higher and higher. You watch the HGTV shows that show how people can make money in real estate. It’s kind of understood that it works, but not everyone knows the brass tacks of why you can make money with real estate. A lot of it are tax advantages. The tax code, it’s very forgiving for real estate investors, and the money that you make from real estate, you usually pay much less taxes on than if you made that same money at a job because there’s a little bit of risk that’s going to be involved in it. It’s easy to leverage, meaning I can buy a $500,000 house and put maybe 5% down on the loan, so I’ve only put $25,000 of my money, but when that $500,000 house appreciates by 10%, goes up to 550, my $25,000 just made me $50,000 of equity. It’s like I’ve doubled my money relatively quickly where it’s harder to invest in other assets where you could borrow money quite as easily.
And then there’s lots of ways that real estate makes you money. You could buy it for less than market value. You can’t really do that with a stock. You can’t go get a deal on Tesla stock or Apple stock and find some way to get it cheaper. You can add value to the property, you can make it bigger, you can make it nicer, you can fix it out, you can change its use so that it can be rented to people. It creates actual equity which you can’t do with a stock. There’s nothing I can do if I buy Tesla stock to make that company worth more. And then, like Rob mentioned, it actually generates revenue. You can rent out spaces in that home, and when you do that correctly, you earn more money every month than what it cost to own the real estate, and that differences of what we refer to as cashflow and that can replace active income.

Chris:
Yeah, for anyone listening from All The Hacks that hasn’t really got into real estate investing, you guys have done a great job. I’m going to throw out an episode that is about getting started with just $10,000, I think it was episode 730 because I tried to take some notes ahead of time, but that was excellent. I will say the purpose or maybe the goal of this conversation is to kind of walk through the home buying process, whether you’re trying to invest, whether you’re just trying to buy your primary residence, whether you’re buying even a vacation home or something. If you’re listening and you’re thinking, “I don’t know if I’m ready for real estate investing,” one, maybe you should be, and two, this is going to be applicable to anyone no matter what type of home you’re buying, hopefully is what we can get to. I don’t know, that’s a little bit of the why.
For me, I’ve never actually dabbled too hard in real estate investing, outside of like index fund REITs, but I’ve gone through the home buying process as a primary residence and I actually own a fractional vacation home. I owned one-eighth of a home through a program called Pacaso where we bought one-eighth of a home up in Napa. It’s kind of interesting because you can kind of invest, it’s kind of a lot better in my opinion than a timeshare or anything like that so that’s been great. So that’s my experience, and I’ve kind of optimized little pieces of it along the way but nothing like what you guys have. So I’m excited.

David:
Curious, Chris, how well have you done? I think you said you bought a primary residence that you live in, right?

Chris:
Yep. I’ve done that twice now.

David:
And how has that investment, if you just looked at it from a pure investment perspective, outperform some of the other things you’ve invested in?

Chris:
Yeah, I mean, I would say the first time around, yes, but I had the fortunate luck of buying in the Bay Area at the worst possible, bottom-of-the-worst real estate crap. I got quite lucky by timing, didn’t know it was going to do as well as it did. The most recent one, I don’t think it’s been long enough to see anything major differences yet. But the first one, if you layer in taxes and leverage, yeah, it was a great investment, but it’s hard, it’s hard with an N of one in a market that blew up crazy to feel like I know too much based on one success story.

Rob:
That’s how it works though, honestly. It really does work like that sometimes for people where, for me, I think every real estate or every real estate, I was going to say real estator, every real estate investor, they all have this big lofty dream of becoming a millionaire, and it’s super achievable because you can buy five properties that appreciate over the course of five, 10 years and you could just have a million dollars in equity. It wasn’t necessarily because you were a genius or because you were the most, kind of had the most, I don’t know, I already said it, genius strategy, but it happens because you just did it and you kept doing it and you keep doing it consistently, and that’s really the secret sauce.
So yeah, maybe it was by luck that you bought that house in the property or in that market, but what a lot of people end up doing is when that happens, they get a taste for it and then they keep just buying and buying and buying and buying. I think if you do that consistently, no matter what, you’ll always look like a genius 30 years from now.

Chris:
Yeah, but we could have a much longer debate maybe in a future date about debating that strategy, putting it in stock, all these other investments. But I think whether you want to build a portfolio of 20 homes, whether you want to buy multifamily homes, commercial properties, or you just want to buy a primary residence, at the end of the day, you got to find the home, you got to buy the home, you got to decide if it’s a good deal, you got to close on it, you got to fund the purchase, unless you want to buy it with cash which I’m guessing most people don’t. So maybe let’s jump into that process and kick off with just someone who’s like, “I’m not really sure what I’m doing.” You’ve been an agent. Let’s talk a little bit about that process of partnering with someone to help you go through this process instead of just trying to wing it on your own, and when that makes sense or maybe when it doesn’t.

David:
Yeah, and if you’re going to buy a property, you don’t know much about it, you definitely want to use a real estate agent in the beginning. When you’re buying, here’s something people don’t realize, you don’t have to pay your agent. If you’re buying a house off of the MLS, this would be any property you see off Zillow or Redfin, something like that, the seller has already predetermined a certain amount of money they are going to pay the buyer’s agent for bringing you to the property. You have a lot of questions, there’s paperwork you’re not going to understand, you don’t know what the process is, it’s intimidating. You find a real estate agent, and I’ll add they’re not all the same. There’s good agents and bad agents, there’s good lawyers and bad lawyers, good doctors and bad ones. You really want to find somebody who’s good at what they do. They can take a lot of the fear that you have right out of it.
I mean, it’s amazing when you take this scary process and there’s a person like me that does this so often it’s boring to me, like, “Oh, another one of these. I’ve walked this path so many times.” It’s definitely not scary. That’s something that every person who wants to buy a home should know right off the bat. Find a buyer’s agent, they’re going to answer a lot of the questions that you’re going to have and they’re going to protect you in ways you didn’t even know that you needed to be protected. Maybe we can go through what the actual escrow process looks like or the process from start to finish of what to expect would buy in a home if you’d like.
If you’re a little bit more experienced, you bought homes before, one thing that people will look at, especially in a competitive market like ours, Chris, we just realized that we’re neighbors, we live pretty close to each other, probably like an hour and some change away, is you can go directly to the listing agent and you can say, “Hey, I will let you represent me on this deal, but I’m going to need some kind of an advantage. I need you to get my offer accepted over the other people, or I’d like a little bit of a discount on the price if you’re getting to represent me here.” So there are people who buy a lot of real estate that has said, “Hey, I don’t think I need my own buyer’s agent necessarily. I still need someone to handle the paperwork,” but they go right to the listing agent and they look for an advantage, and that is pretty popular in the Bay Area where most listings are getting several offers on all of them.

Chris:
Yeah. Actually, I have bought two homes in the Bay Area and both times I’ve used the seller’s agent. We could talk about that a little bit more because I have some thoughts about it, but maybe rewind a little. You said it’s important, not all agents are the same, you got to pick the right one. Obviously, not everyone lives in the Bay Area, so you’re not going to be the perfect agent for everyone. How does someone find that perfect agent?

David:
First thing to look for, find a person that sells a lot of houses. A lot of agents don’t. In fact, most agents don’t. I’d say 90% of agents sell a couple houses a year or less, and it’s unpopular to say this, the agents get angry because they’re offended right now, like, “Just because I only sell two houses a year doesn’t mean I’m not good.” Okay, I know. However, tell me anything that you do twice a year that you get really, really good at. In general, that’s how life works. If you snowboard twice a year for your whole life, you never really get that good at snowboarding, or it takes you 20 years before you’re as good as somebody that just snowboarded every weekend for the whole first year that they got into it. Repetition really does develop mastery. I talk about that in the BRRRR book that I wrote. So the first thing I look for is an agent that sells a lot of homes, period.
The next thing I want is an agent that owns real estate themselves. At minimum, they got to own their own house, but ideally I want them to own investment property. It gives a completely different perspective when you’ve bought a home and you believe in it and you just get a different set of goggles to look at real estate through. I don’t have any kids. I love kids, we were talking about that before the show, but each of you as a dad, I am sure, sees something different when you look at a kid than I do, right? I don’t immediately freak out when they start putting something in their nose. I haven’t had enough experience of seeing how that could go wrong, right? Rob has seen some of that, so he’s going to have a much different emotional response to that marble or that Play-Doh getting a little bit close to the nostrils.
Real estate agents that own real estate have that sixth sense. They can recognize that’s a bad neighborhood, that’s not the right tenant, that’s not the right floor plan, that’s not the right structure, you really want to go to this house that may not look as pretty in the pictures, but will be a better deal.
The third thing that you want to look for is an agent that understands the financial component of real estate. Many real estate agents are geared to cater to their client’s emotions. They want to be liked. They’re very high on as an eye on the DiSC profile. This is how they make their money by being likable. Most people reach out to the agent who’s the nicest, the friendliest, the warmest. That doesn’t mean they’re the smartest.
So when you’re having conversations, I always want to hear agents that are approaching real estate from a financial perspective. I want to hear them telling me, “This is the part of town that’s being redeveloped. This is the next up and coming area. This is where all the money is going into. This is a property that would function as a rental if you moved out.” Even if that’s not necessarily what you’re looking for, you just want to buy a home. If your agent sees things that way, it is very good to hedge your bets in the future because you never know when you have more kids, need more bedrooms, get a new job, want to move for some reason. You don’t want to be locked into a situation where it’s hard to sell that home or it can’t be used as a rental property if you want to leave it.

Chris:
David, let me ask you something. Does the requirement of having an agent that owns real estate, is that as important if you’re just buying a primary residence? Do you weight that a lot heavier for people that are looking to buy investment properties?

David:
No, it’s the same for a primary residence. Let me tell you why. The first house I ever bought, my agent did not own any real estate, and I bought this house in the very end of 2009, great time to buy real estate, like you were saying, Chris. My agent did not tell me that the property taxes in that area had special assessments assigned to them and were much higher than the normal property taxes. In fact, they ended up being about $250 a month higher. I was expecting 300, they were 550. Now, I was buying this as a rental property, but even if I had buying it to live in, and you got to remember at the time, the total mortgage was like $1,300 so bumping it from 1,300 to 1,550 was a pretty significant chunk. It’s like a 20% increase almost in my overall payment because they overlooked that property taxes were higher.
Now, agents who own real estate themselves would be familiar with the fact that property tax bills come, there’s more expenses than just your principal and interest on your mortgage. They would see angles like insurance can increase in this area because it’s in a flood zone. I really think she missed it because she had never paid a mortgage on her own. She never had her taxes and her insurance escrowed into her mortgage payment.
The next time I bought a house, it was with an agent that had been selling houses for a very long time and sold a lot and owned a lot of real estate herself, and as we went through the process, she educated me. “You don’t want to buy on that part of town because you’re going to pay extra money to get the better school districts. You don’t want to buy over there because the taxes are higher. You don’t want to buy a house like that because with that kind of a roof, your insurance is going to be a lot higher.” I learned so much about investing in real estate just from the person that was getting paid to help me. It was free advice and free knowledge, and it really gave me a different perspective of what to look for and what to avoid.

Chris:
I love it. Okay, so I just sent a link to you and I’m… There’s this guy in Northern California, maybe you know him, Stanley Lo, number one agent in Northern California for 10 years. Looks like and is commonly described in San Mateo County as the Asian Elvis of real estate agents. And so when you first said look for someone who sells a lot of houses, I was looking at, I know this guy. I get the flyers in the mail. He sells all the houses, high volume, high throughput, not just low-income property, all kinds of price ranges. Does that mean that if I were looking for a real estate agent, would he be the right guy? Should I consider him even though it might not feel like someone… Someone’s personality, maybe that’s not the personality I would want as my real estate agent, but do the numbers speak more than a personality? How do you think about that? And if anyone’s curious, greenbanker.com is this real estate agent’s website.

Rob:
I mean, he’s got it down, I will say that. I mean, the marketing, the cowhide blazer and the big circular glasses. I mean, I’m in, personally.

David:
That’s funny because I’d be running the other way the minute I saw this.

Rob:
I’m in.

David:
He does sell a lot of homes, I’m sure, and so he probably does have some experience. My gut would tell me, as someone who has worked with a lot of clients and knows a lot of realtors, this is probably not someone who’s actually going to be representing you. He’s going to have staff that are going to be handling a lot of it. You’re not going to be talking to Stanley, and he’s going to likely make up for a lack of negotiation ability and focus on saving you money or making you money if it’s a listing with his personality. So he’s a great marketer, and the top producing agents are always the best marketers. This is a problem in our industry. The best agents don’t make the most money. The ones that are best at getting the phone to ring make the most money, but that doesn’t mean that they’re the best when it comes to representing you.

Chris:
You want someone that sold a lot of houses, but maybe you don’t necessarily want the person who markets themself as the person who sold the most houses.

David:
Yes.

Chris:
And so it’s that kind of that sweet spot of maybe like the 60th to 90th percentile, but not the very top.

David:
There’s a lot of things people fall for. I sell the most houses in this neighborhood, realtors will use that as a way of saying I’m the best. Don’t fall for that. It makes sense to our perspective when we’re listing to the home. Oh, you sell all the houses in the neighborhood, you know how to get me top dollar. You just don’t realize until you think about it, the buyers don’t care. The buyers don’t care who’s selling that house. They are never going to look at who the listing agent is when they’re writing their offer. They just care about the house.
The buyer’s agent needs to know the neighborhood. The buyer’s agent needs to know the amenities. When you’re looking to buy somewhere, you want an agent that knows the area very well. When you’re looking to sell, it will never matter how many homes in the area that agent’s sold. In fact, the only reason they sell a lot of homes in the same area is they put their sign in all their yards and then they go, we call it farming, knocking on all the doors and meeting all the people, getting their name out there. They’re just able to utilize a listing to build leverage to get more, but there’s no competitive advantage when it comes to representing a seller if you’ve sold other homes in the area.

Rob:
I wanted to add one thing to that, well, A, it sounds like if they’re putting signs in everyone’s yards, it sounds like they’re good marketers, which goes back to what you were saying, but I did want to say that one really important piece to agents just from a consumer side and as someone that relies on agents pretty heavily is them having a really thorough Rolodex of vendors that I can use to help me run my properties, whether I’m living in it or not.
If I’m buying a short-term rental, for example, I know I need a contractor, cleaner, landscaper, pool maintenance person, pest control, and probably a plumber, electrician, and all that type of stuff. So when I’m calling a realtor, and this goes into how many houses have they sold, if they’ve sold a lot of houses over the last five, 10 years, they probably have a pretty thorough Rolodex. I mean, outdated term. If they use the term Rolodex, maybe they’re not with it. But if they have a very big contact list of all these different vendors, that’s what I’m personally looking for in a realtor because a lot of the times I really need a firsthand referral to know that I can successfully either live in a property or execute a rental.

Chris:
Yeah, that Rolodex is interesting. It’s something I never saw in the contract, but once you close, I was surprised that even though it’s not necessarily required, a good agent will spend so much time helping make sure the process from I closed to I moved in, I got the yard done, I even renovated something, they’ve been super helpful there.
We have a lot to go here, but I do want to touch quickly on that negotiating piece that you mentioned earlier, David. When someone’s trying to get into this, what leverage or room is there for negotiating? I did what you suggested. I went to the seller’s agent and said, “Hey, I don’t want to mess around. I know I want this house. I don’t need to go find another agent. I feel good in negotiating. Will you work with me?” It ended up being a great situation because that agent got more commission and was a little bit more biased towards trying to get my purchase over the finish line, and in one case, rebated 1% of their fee back to me. Are there other rooms for negotiation? Are there other tactics someone can use to get a better price or likelihood of getting accepted?

David:
Well, the first thing you have to do is define a win. In a situation where the house is getting 10 offers, a win is just getting it at all. There are times in the Bay Area or other hot markets with restricted supply and lack of inventory that you’re just not going to get a home, period. It’s incredibly hard to get in contract, you’re competing with so many people. In those situations, you’re not going to get a discount from your listing agent, you’re not going to get a better price on the home. You just have to get it.
Now, in other situations, which is what I try to target my clients into, I show them properties that less people are competing with. The listing photos are ugly. It’s been in contract, it fell out of contract. Now the days on market have ticked up and people aren’t looking at it anymore. I look for opportunities to help them get into a property with much less interest, and then we can get them a discount on the price, we can save them some money there. A mistake a lot of people make is they go to the listing agent of an incredibly hot property, they ask for a discount from the listing agent and they go, “No, there’s like 12 other people that want to buy this house. I can get my client a hundred grand more going with a different offer. I’m not going to discount commission just to help you get it.” That’s a big piece is knowing when you have leverage and when you don’t.

Chris:
I want to talk about making that offer now, right? Let’s say someone’s gone through this process, they picked their agent, they’ve figured out what they’re doing, and they find a house and they’re trying to decide, is this a good house. Let’s start with that before we get to the offer. It’s like you have a place in mind. You’re looking at this listing. Maybe you do, maybe you don’t have an agent yet, but what are the things that are really important for someone to be paying attention to when they’re looking at a listing, either online or in person?

David:
If you’re also curious about the things smart buyers look for in a listing, keep listening. The next part of this conversation will drop tomorrow. So make sure you’re subscribed into the BiggerPockets Real Estate Podcast and go check out All The Hacks wherever you get your podcast.

Don Peebles, CEO and chairman of the Peebles Corporation, joins ‘The Exchange’ to discuss a new property law in Florida that restricts Chinese nationals from buying property in the state, the health of commercial real estate in America, and more.

How can companies make applying for hourly jobs easier? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Sean Behr, CEO, Fountain, on Quora:

Think about the last time you applied for a job. You likely were using a desktop computer, had to click through dozens of pages, upload documents, and answer questions, only to receive a generic “thank-you” email seconds later. It’s hard not to feel adrift in a sea of countless candidates, all vying for the same position but never quite sure where you stand. For hourly jobs, this process can be even more cumbersome, resulting in most candidates dropping off altogether and applying elsewhere.

Happy Applicants=More Candidates

Happy applicants tend to stick around longer once hired and become ambassadors for a company’s brand, but many drop off long before day one due to slow, clunky processes. In fact, Fountain found that 60% of candidates have quit an application because of its length or complexity. Because hourly workers are usually applying to multiple positions at the same time, whoever is first to hire them will win the race for talent.

To overcome these challenges, it’s essential for companies to embrace new and innovative technologies that streamline and automate the hiring process, making it easier to find, assess, and hire top talent. Easy-to-follow steps will increase the speed with which candidates move through the process, and more transparency at each step will help the candidate feel more valued and connected to the organization, while also increasing the likelihood of continued engagement long after they’re hired.

Clear, Consistent Communication Sets the Tone

The timeliness and the way you communicate with candidates will have an impact on how your company is perceived. Every candidate should receive an acknowledgment after they have submitted an application to your company. This should be the case even if you are hiring thousands of candidates at one time.

Delays in contacting candidates or substandard communication can be reported on company review sites like Glassdoor. Job seekers who read these reviews may be reluctant to apply for jobs for fear of a sluggish or nonresponsive application process. In fact, 80% of job applicants list lack of communication or slow communication as a reason for rescinding their candidacy.

Personalization and customization are important aspects of a successful candidate experience. By tailoring the recruitment process to meet the needs and preferences of individual candidates, recruiters can create a more positive and engaging experience. This can include communication style, the recruitment channels used, and the types of information provided to candidates.

Prioritizing the candidate experience, especially for hourly workers, is critical to attracting top talent and ensuring a positive outcome for both the candidate and the employer.

Meet Candidates Where They Are, When They Are Available

With approximately 86% of hourly applicants using their mobile phones to apply for jobs, it’s a major advantage to have applications that are easy to access and complete on a smartphone. By making the recruitment process mobile-friendly, and recruiters can ensure that candidates can access information about the company from anywhere, at any time.

Utilizing technology that makes calendar scheduling faster and “self-service” is another quick way to reduce time to hire and get prospective workers into the pipeline more quickly; especially in a high-volume operation, this type of technology helps keep track of important appointments and sending automatic friendly reminders to alert applicants of due dates or information needed.

Self-service and mobile-friendly technologies can play a significant role in creating a positive candidate experience and meeting applicants where they are. By providing candidates with easy access to information about the job, company, and application, recruiters can ensure that candidates stay engaged with the process.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Ashley:
This is Real Estate Rookie episode 298. You guys a $100,000?

Tony:
A hundred thousand… Oh, this is like a paper loss a hundred K? No, this is like Tony wiring a $100,000 dollars from a business bank account into our lender’s account to be able to cover this, it definitely hurts.

Ashley:
My name is Ashley Kehr and I am 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, motivation, and stories you need to hear to kickstart your investing journey. And today we’re switching it up on the Real Estate Rookie Podcast. Ashley is my therapist for today, and I’m laying down on the therapist’s couch and I’m opening up my heart and my soul and my vulnerabilities around a recent deal that went terribly, terribly wrong.

Ashley:
And he says he’s the one laying down on the couch, but it’s actually me cozy with a comfy pillow, my blanket and a chai tea for story time with Tony today. So we are going to all learn some important lessons today. First of all, why you should always get things in writing and what earnest money deposit can actually protect you from or provide some kind of security, I guess. And then talking about pre-approval. So have you gone and gotten a pre-approval for a loan? Have you sold a property where somebody came and brought their pre-approval? What does a pre-approval actually guarantee? Tony shares his experience with that. And then also the timeline of owning real estate from acquisition to disposition of the property and how important that is in today’s market.
So you guys, I’m sure you’ve seen the headlines, you’ve seen everything in the news you’ve seen on social media, everybody talking about what has happened in the market over the past year, the past six months, and what’s going to happen in the future. We’re talking about inflation, interest rates, all those things. Tony shares a story about how he was impacted by some of these variables that are out of his control. Tony, anything you want to share before you break down in our completely vulnerable to our rookie audience today.

Tony:
I just want to tell the rookies, don’t judge me for all the tears you’re about to hear as we’re going through this. I tried my best to keep my composure, but I was just overwhelmed by so much emotion I couldn’t handle myself, but also cool. I loved that we actually learned a lot as you were riding those things off. I was like, “Man, I guess we did learn all that kind of going through today’s story.” But I guess just, I do want to give a shout-out to someone that left to say five star review on Apple Podcast. And we’ve been getting some pretty funny reviews lately. This person’s review is normal, but their username is Hilarious with three exclamation marks L-O-L capitalized with two exclamation mark so…

Ashley:
So they must have been talking about me. They made their username at to talk about me as well.

Tony:
Maybe they made their username and talk about you.

Ashley:
Oh, I’m hilarious.

Tony:
Hilarious LOL says, “These two are great. The show is great for beginners. The hosts and guests provide great insight and actionable advice that really helps get the ball rolling in your investing career.” So Hilarious LOL, we appreciate you. And for all of our rookies that are listening, please take a few minutes, leave us a honest reading review on Apple Podcasts or Spotify, wherever it is you’re listening. The more views we get, the more folks we can reach and the more folks we can reach, the more folks we can impact and help, which is what we love doing here at the Rookie Podcast.

Ashley:
Yeah, Tony, I got some boring banter to share with you real quick before-

Tony:
Yeah, please do.

Ashley:
… our show sponsor comes on. So it was just Mother’s Day and my son made this whole worksheet for me with things about mom or whatever. And one of the things was, “My mom loves to cook and he put in my dad cooks.” But in three other places he put, “My mom is funny. I love how funny my mom is.” So that just made my day. I don’t care if he doesn’t have any recollection of me ever feeding him a meal and cooking for him as long as he thinks that I am funny time-

Tony:
You’re funny.

Ashley:
… that made by day.

Tony:
That’s all the best. I love that. And Sean and I, we actually did some arts and crafts for Sarah as well for Mother’s Day.

Ashley:
I saw the scrapbook. Yeah, it’s so nice, so sweet.

Tony:
She’s pregnant right now. We’re trying to think what’s a good gift for her as a soon a mom to be. I mean like, okay, what if we introduced the baby girl to mommy? So me and Sean went to Hobby Lobby, first time going to Hobby Lobby by myself by the way. And we found the scrap booking aisle and we were at a loss. We were like, “Where do we even start? What do we do?” So we had to ask the Hobby Lobby employees like, “What do people usually buy when they’re making a scrapbook?” So anyway, the nice people that Hobby Lobby helped get us set up and Sarah loved it. And we basically wrote, we created this scrapbook where every page was us introducing our daughter, our unborn daughter to a different aspect of who Sarah is as a mom. And she seemed to really appreciate it.

Ashley:
I saw that post and I thought it was so sweet. And it was so cute as she was showing some of the pages, but I so badly wanted to comment, but I didn’t want to ruin the moment, but I wanted to comment. So this is why Tony has 200 unread messages because he said at home scrapbook.

Tony:
Scrap booking, that’s what it is.

Ashley:
That’s how you return a text to see has 200 text messages that-

Tony:
I’ve got too busy scrap booking. That’s my new passion.

Ashley:
Today, we’re going to have a very different episode. So get cozy, grab yourself a blanket, sit back in your comfortable chair. I’ve got my chai tea. And we are going to take the agony, the grueling pain of someone else’s loss and turn it into our entertainment and life lessons learned today. So I’d like to welcome my special guest, Tony J Robinson, to share how he lost a $100,000 on a deal. Tony, welcome to my show.

Tony:
I think that was by far the best intro to a podcast we’ve ever done.

Ashley:
I wish I could just riff like that every time.

Tony:
If we don’t get an Emmy nomination for that cold open ash, I quit. If we don’t get it, then I quit.

Ashley:
You know what? Good. I did forget my notepad and my pencil. So anytime you say random things, I could look at you, nod, eyes wide open and write something down.

Tony:
That was good. I felt like I was on Oprah or something, or like a Dr. Phil episode. I’m here for it. But unfortunately what you said is true, right? What you said is true. We’re here to talk about my pain and agony today. So I’ll just give the quick backstory we’ll go into, but basically the long story short is that we had a rehab project that we’re going to end up losing a little over a $100,000 on.

Ashley:
You guys a $100,000.

Tony:
A $100,000. And my producers asked me like, “Oh, this is like a paper loss a $100,000.” “No, this is Tony wiring a $100,000 from a business bank account into our lender’s account to be able to cover this.” And it definitely hurts. But talking over with Ashley and our team, we figured it could be a cool instructional thing for all of our rookie listeners as well to know that it’s not always rainbows and butterflies when you’re investing. And sometimes you make the wrong decision and you got to lick your wounds and write some checks and learn some lessons and hopefully move on from it.

Ashley:
And it’s not even only about wrong decisions, it’s about other things that are out of your control too. And that’s why we want to do this episode so that you guys can learn and educate yourself and what are some things that you should be watching for. So we’ll go into Tony’s story, he’ll set the table as to what exactly happened and then we’ll go back through and what are the things he would’ve done differently? What should you be watching out for? There’s no reason to create the same mistakes that other investors have made.
So Tony and I both try to share as much as our wins, also our losses as to lessons learned. You’ll probably hear me rant a lot about property management over the next couple of months as I’m transitioning away from my property management company and the things that I learned that actually hurt me in the long run with my investment portfolio. But today, let’s start off with Tony’s story. Sit back, get your cozy blanket on and relax. And if you are listening to this on a podcast, you might want to pop it open on YouTube to see a tear. Slowly stroll down Tony’s face.

Tony:
The single tier. So let me give some backstory first, listen to how our business structure kind of works. So a big part of how we scaled our short-term rental portfolio was we found properties both turnkey somewhat, but a lot of them were properties that needs to be rehabbed. And what we would do is we have one entity, one business that we use to purchase and renovate homes. And then that entity would basically sell that property to a partner who then our long-term holding entity would partner with.
So basically I have LLC-1. LLC-1 one sells that property, or they find that property, we raise private money to rehab that property. Then once the rehab is complete, it’s a fully furnished, ready to go, turnkey, short term rental, everything down to the forks, the knives, the sheets, everything you need to run that property is inside of it.
By the time you finish the rehab, LLC-1 number one then sells that property to Ashley. Ashley enters into an agreement with my LLC-2 to say, “Hey, we’re going to buy this entity jointly together.” And then Tony’s entity will be the one that’s in charge of managing it long term. So it’s a really sweet deal for our partner because they get a turnkey property, they don’t have to worry about managing it. And it’s a sweet deal for us because we’re able to sell that property as a flip. So we get some cash up front, but then we also get the benefit of manage. You get long term.

Ashley:
Tony, how many of those deals have you done so far? I just want to set the table for experience. Was this the first one you ever did this? Have you done several?

Tony:
In total I want to say we’ve done I think seven or eight of those.

Ashley:
Sp quite a few, yeah.

Tony:
Yeah, we’ve done quite a few and most of them worked out pretty well for us. We had one that we barely broke even on. It was four grand that we made instead of what we were initially projected. And that one was same around the same time as this one. So that’s our business model. We know how to do it. We’ve done it successfully multiple times and we’ve made multiple six figures with that process as we’ve done it successfully. But there were a few things that went wrong with this one that I’ll detail. So I’ll give you guys the timeline and Ash, feel free to jump in as I’m going through this with any questions that you have. We closed on this property at the tail end of February, 2022. So a little over a year ago is when we closed on this property on the front end.
So our rehabbing entity bought this in February of 2022. The rehab itself went pretty smoothly. We finished it in, I don’t know, maybe four or five months, which is our typical timeline for a turnkey short term rental. So say we started it in February, we were probably done with this property by, I don’t know, June or July of 2022. Once we finished the property, we started shopping it around to some of our potential partners, which is again what we normally do. And we had some interest, but people weren’t super stoked about it for whatever reason. And while we were shopping it around, we turned it into a short term rental itself just so we could generate revenue while we were waiting on the partner to potentially flip it to. And when we took that listing live, it got off to a rough start for one reason or another.
So we took the listing down as a short-term rental. We invested another $12,000 into the property just to really take it over the top and we re-list it as a short-term rental. As we’re doing that, we’re still shopping ground, we ended up finding a potential partner to buy it from us. She was someone that we had a relationship with before she had looked at working with us on a previous deal.
So we had a relationship with her. But she was in the process I think, of selling her primary residence or there was something going on in her personal life where she said, “Look guys, I’m super interested, but I need about three to four months to be able to be in a position to actually buy it from you guys.” And we’re like, “You know what? It’s fine. We’re already renting it as short term rentals. So we’re generating revenue there. We can wait 90 to 120 days.” But as we get closer to that timeframe, she starts to go, the responsiveness starts to decrease, and the amount of communication we’re getting starts to slow down as well.

Ashley:
Did you have her put a deposit down? Were you still keeping this property open to other people to invest in it? What happened during that timeframe that she’s asking to hold it?

Tony:
That’s a great question, Ashley. And probably one of our first mistakes was that there was no EMD. We didn’t even have her sign the purchase agreement. It was just like a handshake deal where she said, Hey guys, yeah, I’m super interested and I’m here. But again, just to give some context, this person had participated in our big bear deal that we tried to take down as well. So she had actually wired a six figure check-in for big bear. So we knew that this person was legit. It wasn’t just some person that we didn’t know. So we knew that she was legit. But yeah, probably having them sign the purchase agreement upfront would’ve made more sense. Just so you know, there was a little bit more accountability on both sides. But we didn’t do that. And for one reason or another, after those three, four months had expired, that person came back and said that they weren’t in a position to move forward anymore, didn’t have the desire to move forward anymore.
So now we’re in the back half of the year at this point. It’s like, I don’t know, fall of 2022. So now we have to shuffle to try and find another partner to sell this property to. Luckily, there’s still a ton of interest. The property had been performing really well as a short term rental up until that point. So we had revenue that we could show, we could show how well it’s performing, especially after we invested that additional 12K to really take the property over the top. So we ended up finding a partner pretty quickly at that point. We get the property appraised and it ends up appraising for $580, I think $9,000, which is cool because we had it under contract at 5 85. So we had appraised for more than what we had under contract for. And our numbers going into this, we had initially bought the property for $355,000. That’s what we bought it for.
We put about another, I’d say after we invested that last 12K, maybe like $125 into it. So let me just do that math really quickly. So we’re all in it for $480 and that includes our holding cost, utilities and all that stuff, all in it for $480. But we still have these interest payments from our private moneylenders that are racking up every single month. So every month we’re accruing about 4,000 bucks in interest.
So up until that point, when we got that second appraisal, which came back in December, we had already accrued about $40,000 in interest. So we had our four, whatever. So we were about 4 89 totals what we had at that point. Now the second partner that we had lined up, they were happy, ready to move forward, they end up not being able to get approved for the mortgage. So now this is the second person that steps in to try and buy this property and they’re just not able to do it. So at this point it’s like, “I don’t know, I think that was January, mid-January when we got the news.” So that person wasn’t going to be able to get approved and now we’re resetting and starting this whole process over again.

Ashley:
And Tony, is there really a way to… When you’re flipping a house or even just selling a house in general, I mean a preapproval letter, maybe asking for something like that, what would you have done different in that situation, I guess? And how long did they hold up the deal then when they couldn’t get the financing?

Tony:
That one, honestly, I don’t know if I would’ve done anything differently because whenever we flip our homes, we have a lender that we always use. That’s part of the requirements of buying one of our properties is that you have to use our lender if you’re doing it as part of our partnership. So this is something that we’ve done a ton of business with. This person that was our buyer was pre-approved, but as the underwriters did a little bit more due diligence, there were some things that came up that just the underwriters didn’t feel comfortable with. And there was weeks and weeks of back and forth of trying to get the underwriters to give us a thumbs up, but we couldn’t get there. And then the buyer ended up having to back out. So sometimes you don’t know until you get to that point that a person won’t get approved.

Ashley:
That is so important to talk about is just because somebody has that pre-approval doesn’t mean they’re actually going to get the loan on the property too.

Tony:
And just generally speaking, everyone should be careful. Don’t take pre-approvals at face value. I can go, there are private moneylenders who have websites right now where I can go in and within two minutes of me just plugging in some basic information, I can have a pre-approval letter from a hard moneylender. So just definitely take those with a grain of salt.

Ashley:
The same too goes with cash offers. Like, “Oh, if you need proof of funds, like hey, we’ll give you proof of funds.” You see a lot of hard moneylenders doing that too.

Tony:
So there’s a little bit of both of that. So the second buyer ends up pushing us back, I’d say another, I don’t know, two months or so. We went back and forth with that buyer. So now we’re in early 2023. And for folks that have been paying attention between mid 2022 to early 2023, we saw interest rates go up dramatically during that timeframe. And when we went to go shop this property for a third time, the interest had diminished pretty significantly because hey there were some policy changes in the city of Joshua Tree that took place that spooked some buyers. People didn’t really understand what these new policy changes meant, and they thought that there was a ban on short term rentals.
So we had to do a lot of educating the folks to say that that’s not what’s happening here. And the interest rate increase made it more difficult for us to structure this as a partnership where we were still able to give healthy returns to our investors because when we first had this property in their contract, we were looking at a 5% interest rate. Maybe now we’re looking at a 7%. And that difference between a 5% and 7% can really squeeze returns, especially when there’s multiple parties involved.

Ashley:
And during that time too, were there some changes on vacation home loans too?

Tony:
Yes.

Ashley:
Going from 10% to 15% because I feel like that would greatly impact it.

Tony:
That also hurt.

Ashley:
You’re buying $500,000 houses. That 5% does make a difference in the capital someone has to bring.

Tony:
So the 10% second down home loans are still an option, but they now come with more points attached to them. So even though technically it’s still a 10% down payment, if there’s two or three or four points being added to that, it almost feels like a 15% down payment at that point. So there were all these things that were happening, interest rates going up, loan products becoming less desirable, uncertainty around the policy landscape in that market. So it took us even longer to find that next partner for all of those reasons.

Ashley:
And all things that were not in your control. Yeah, I think is very important to point out, yeah.

Tony:
Yeah, those were things that we just had to roll with the punches on. Now luckily we did end up finding another buyer and we’re hopefully going to be closing here shortly with that person and they’ve been done. But now the final hangup is the appraisal. So remember we had this property appraised in the fall of last year, in the fall of 2022 and appraised for $589,000. That was about six months ago. Now, we just got an appraisal back and appraised for $440,000 is what it appraised for. And if we were to close this month, we’d owe our private moneylenders $510,000. So just between what we are, private moneylenders and the other, that’s a pretty big difference right now. But when you tack on our closing fees and all the other things kind of come to closing, it’s going to be close to about a hundred thousand dollars check that we’re going to have to write to pay this whole thing off.
So it’s definitely been, I think a frustrating experience for us and seeing that, I think our lack of urgency early on has really come back to bite us in the butt. We just saw this situation where the markets that we were investing in had been doing so well, we didn’t anticipate how quickly things would shift, but to lose, we’re talking $589 to 140,000, that’s %140,000 almost $150,000 in equity that we lost over the span of just a few months. And I don’t think any of us saw that shift coming in that market and now we just have to deal with those consequences.

Ashley:
I saw something similar kind of happen. I had done my first flip in Seattle about the same time period, bought it last February, and then we went to sell it in, it was about May, I think, April, May. And it sat on the market for a long time and we ended up breaking even on it. And at one point, it was during the rehab process, we’re like, “Oh my gosh, the comms, I could make a 100% return on my money.” I invested into this like, “Oh my gosh.” And then boom, it drastically changed. So Tony looking, actually the first question I wanted to ask is, did you end up still partnering on this deal? So do you have equity in this deal as a short-term rental? And what will be your return on that? So have you actually figured out your cash on cash return of basically, say you invested a $100,000 of capital into this deal.

Tony:
It’s going to be pretty nominal, right? Because we had to give up a pretty healthy chunk of equity to still make it palatable for that partner. Typically, on our deals we’re going to own like 50%. That’s where most of our partnerships when we do this, we still retain 50% ownership, but because the appraisal came back so low and where interest rates are in order for the deal still to make sense for that partner, we still have to give a pretty healthy chunk of equity. So the returns, it’s going to be terrible, right? We’re almost going to be managing this thing for pennies on the dollar, so our partner’s getting a solid deal because he’s got a really experienced management team that’s going to take care of everything and make it profitable for him. But for us, it’s just one of those things where we got to look our wounds and deal with it.
But I think we still have some optimism because we know that that real estate valuations are cyclical. And we saw Joshua Tree as a market, it was super affordable for a really long time. And then between early 2021 through mid 2022, you saw prices just go on this astronomical tear and now they’ve come back down to a more reasonable rate, not quite where they were before 2021. I wouldn’t say it’s as low as it was in 2020, but definitely not as high as it was in peak 2022. So we’re seeing it start to stabilize, and our hope is that as that market stabilizes over time, we’ll recoup some of that value. And when it makes sense, whether it’s five years, 10 years from now, that portfolio that we have out there are properties where maybe we would’ve liked to have sold them, but we had to hold onto them. We can revisit at that point of getting them sold.

Ashley:
So what are the things that looking back maybe you would’ve done different and then maybe we can go into here’s the things you should be watching out for that maybe you can’t control. But what are the first of all the things you would’ve done different?

Tony:
So there’s a few things. Honestly, I think the first thing is one of the things that I’m most concerned with now as we continue to flip in this market is our… I don’t know what you want to call it. Basically our stop clock from close to close, how much time are we spending? And when that window gets too wide, you open yourself up to more fluctuations in the market. Had we closed in this property, the resale 60 to 90 days after we finished the rehab, we wouldn’t have been as exposed to the fluctuations in that market. If we closed in it in February and we were selling it in July, even in that timeframe, it’s five months, but the market’s going to shift, but is it going to shift as heavily as it did on us this go-round? So I think trying to really decrease that timeframe.
For example, we just finished another turnkey flip and JT and we bought that property nine weeks ago and we already have it under contract to sell right now. We just got it into escrow yesterday. So that’s us learning from that mistake of, “Hey, we want to make sure that we’re protecting ourselves.” And even in that one, I underwrote that at what I felt was a conservative number and prices even dipped bit since then. So I think being able to go quickly from your initial opening escrow where you purchased the property to your closing escrow, where you dispositioned that property, keeping that as tight as you possibly can, that’s one of the big things I’d say we learned.

Ashley:
To close that gap are you taking on properties that don’t need as much rehab?

Tony:
So we’re just not taking on as many so one of the challenges that we had in that market was that we really only had one crew that we trusted to take on our rehab projects. We had tried out a few different crews, but every time we did that, it happened to us twice where we basically had to stop these other crews and in the middle of their jobs and say, “Hey, you’re fired. And then bring back in our main crew to finish it off.”
So what we realize is that it’s probably in our best interest to work at the capacity of our crew and however many jobs they can effectively take on at one time without necessarily slowing down is what we really want to focus on. So this flip that we just had, that was our only project. We just had that one project going and that allowed our team to just burn through that job super quick, whereas before we might’ve had four or five rehabs going on at one time, but they had to spread their resources out across. So really just getting back to the basics of, “Hey, we’re going to do one project at a time, we’re going to knock it out, then we’ll roll into the next one.”

Ashley:
So what’s next for you guys? You’ve taken this loss, very painful loss. Tony’s been sobbing uncontrollably this whole episode if you guys haven’t noticed, but what’s kind of the future? You’ve said you just recently did another flip, but what are some other things that you’re going to be maybe pivoting or changing with your business model, if any?

Tony:
Before I answer that, I just want to talk really quickly, Ashley, about the private bunny, because that was another, not a mistake, but just like it was a rough part of this. I think that was the hardest part for me was our private moneylenders because most of these folks, this was their, actually all the folks in this deal, this was their second time lending to us and that first flip in and out, we knocked it out, they got the return, they were so happy to say, “Hey, let’s roll into the next one.” And usually we’re able to give them their money back in six months, and now we’re going on month 14, I think, with this deal.

Ashley:
So how did you structure it with them and did you have to go and ask for an extension?

Tony:
So our original promissory note stated that it was a 12-month term, but that we had the option to extend beyond that. But if we did extend that, they got an increase in their interest rate. So it went from whatever it was. I think they got an additional point on their interest rate if we had to extend beyond 12 months. But honestly, when I was talking to folks in the up at the beginning, I said, “We haven’t had any deal get close to 12 months, so I don’t even think we need to worry about that, but we put it in there.”
Luckily my real estate attorney was the one that said, “You should probably just have it in there just in case.” And it really came back to save us. But I still had to, we had to communicate to those folks and say, “Hey, look, things aren’t going as planned, kind of here’s where we stand, here’s what we’re looking to do.” And obviously not all of them were happy because sometimes they have other plans for these funds and it’s not something that’s super liquid. It’s not like a stock they can just go out and swap out with someone else. But I think having those tough conversations sooner rather than later is a route I would encourage people to go.

Ashley:
And I think as investors too, if you are listening and you’re planning on being a private moneylender, that it is very important to know that this can happen and your money can be tied up. And Tony has stayed within the realm of his contract, but there may be times where an investor says, “You know what? My loan is like due now, but I cannot pay it.” And then have to go and ask for an extension that wasn’t even in the contract either. And it’s like, “Okay, as the private moneylender, do I go and start the foreclosure process on this or do I wait three more months now for it to sell?” So definitely, I’m glad that you brought this up, it’s talking about the private moneylenders.

Tony:
And most private moneylenders don’t want to deal with the hassle of going through a foreclosure. They didn’t get into this business to be active if their private money lending is typically because they want a passive return. So I think most are probably going to be understanding, but I think how you communicate that situation makes all the difference because my hope is that even though this deal, the timeline took longer than we anticipated, that we’ve still handled it well enough to keep that relationship open for future opportunities. But it definitely does require, I think having some tough conversations. And it reminds me of our guest, JP Desmond, and he lost a quarter of a million bucks across a few flips, and he talked about how he had to go back and have some tough conversations with his private moneylenders around, “Hey, how can we make this still a win-win situation? How can I get you paid back without crushing myself financially and trying to pay all you guys back all this money at one time?”

Ashley:
I wanted to share a story of my own as far as the appraisal and the impact of appraisals have had lately. So there was a property I was rehabbing, I had a hard money loan on it, and I needed to do an extension on the hard money. And it was written in that that was fine. The only thing I needed to do to extend the hard money loan was to have a broker appraisal done where they don’t actually send a licensed appraiser. It is a broker that is somehow trained and certified to do appraisal. So a real estate broker. And I don’t think banks really use them since they’re not an actual appraiser that does them. And this is the first time I’ve ever had that done. And this was back in December of 2022, and the property came back at $327,000 between December and March put there was two houses on the property and in the one house we put in a brand new kitchen, a bathroom, there wasn’t even a bathroom in it before.
And then flooring and then some other finishes and into the property, the actual appraisal in March came back at $320,000, so $7,000 less. And we added a kitchen, a bathroom, and flooring throughout the house. So it was a huge shock to us. So we talked to a couple of people that had disputed appraisals before and we actually went and disputed it and we showed we had that broker appraisal and they ended up matching it. So they did match it and say that it would now appraise for $327,000, and they lend to us on that. I think we had wanted it to appraise at $380,000, the $327,000 and appraised that our hard money on it was only $171,000. So that was more than enough to pay that back. So it was still fine, but it was just crazy, the difference in value from December to March as to how that could change. And it just, as soon as you had said your experience, it’s almost like a very similar timeline and the same thing to happen.

Tony:
Yeah. So I think the big lesson there is to never let Ashley renovate your kitchen because you end up with negative equity as opposed to positive equity. No, I’m kidding. No that was-

Ashley:
No, it’s okay. I think this is the best jam you’ve ever told Debbie, the only jab you’ve ever given me.

Tony:
Yeah, I can’t even take credit for that because Eric, our producer, put in it in the chat, so I’m just reading what he wrote.

Ashley:
Do you know what? The kitchen didn’t have backslash, and actually I’m sitting in that unit right now while we’re recording and it still does not have the backslash. So maybe that’s the big mistake there is you need backslash.

Tony:
Yeah, but I just want to talk a little bit about it, the appraisals as well, because the appraisal process is a very, very subjective process. Appraisals are an opinion of value by the appraiser that’s going out there. And two appraisers could walk the same exact property and come back with different opinions of value. And we had a property that we were trying to purchase last year and we ended up having to challenge the appraisal two times. We had three total appraisals done, and each appraiser came back with a different value of what they thought that appraisal or what that property was worth. So I think to Ashley’s point, being able to challenge an appraisal was really good thing. But just to give some insight, and this is something that my lender shared with me when we got back that $440,000 appraisal on a property that had recently appraised for $589,000.
What he said was that during the 2008 financial crisis, a lot of that was driven by these outrageous appraisals that were being done. And appraisers were in cahoots with lenders to just come up with these property values that would allow people who shouldn’t be getting qualified for mortgages to get approved for it because there was so much equity in the deals and a lot of appraisers were held accountable for their recklessness quote and how they appraised properties. So what you’re seeing now is that as markets start to pull back and sales slow down and things of that nature start to happen, appraisers are starting to become more conservative because they don’t want any blow back on them if there’s an inflated value on specific properties. So the fact that the velocity of sales has slowed down so much in this market, I think hurt us.
But then also there’s this combination of appraisers, thinking back to 2008, understand that there’s risk involved to them personally, professionally, if they overstate the value of some of these properties, that they’re being even more conservative than what they probably need to be. So there’s just a lot of things that come on and I think that that can kind of impact what we’ve got here.
So you asked Ashley kind of like, “What’s next for us?” So I mentioned one piece, right? We are still going to continue to flip. I think that there’s still a need for it. I still think that it’s specifically for the kind of product that we have where it’s a turnkey short term rental where people can take it and day one, they’re 99% ready to go. I still think there’s a need for that, but now it’s just, “Okay, how do we make sure that we’re protecting ourselves?”
So one of the things I said is the time that we’re taking to do projects, we want to make sure that we’re keeping that timeline super short from closing to closing. The second thing that we’re doing is we’re just being a little bit more patient with the volume of deals that we’re doing. So there’s properties that are listed right now that our agents, wholesalers, whoever has sent to us that we think would make good flips. But I told the team like, “Look, we’re not going to buy anything else until we disposition this flip that we currently have.”
So we really have proof of concept on what we think we can get because if we end up getting another property in our contract and we’re tying up more private money and then turns out that the property values go from four $440,000 to $375,000 or $350,000, now we’re back in the same position all over again. So I’m trying to talk internally to make sure that we’re approaching these things with the ultimate amount of conservative or conservatism, conservativeness, I don’t know what the correct word is, but that we’re being conservative and that we don’t move forward until we’ve got our own kind of numbers in house to prove what we think that these values should be worth.

Ashley:
And if you end up doing multiple and then that does happen where it decreases anymore, that’s the couple checks you have to write out instead of just one.

Tony:
Instead of one, instead of one, right. But overall, I still think the business model makes sense. And I think what we’re also trying to do now though is expand to different markets. I think not necessarily a mistake that we made, but we definitely have gone really narrow and deep into one market and now we’re thinking, “Okay, does it make sense to spread that risk out across different markets and can we potentially rebuild the team that we’ve built in this market and take it elsewhere? Can we take it somewhere else?” Because honestly, as a short term rental, that market is still doing really well. It’s just the resale values where we’re seeing this market get hit. So from a revenue perspective, most all of properties are still net positive, but it’s like how can we balance out that equity loss potentially by going into other markets as well?

Ashley:
Well, Tony, thank you so much for being raw and honest and sharing this struggle because you see all of these people on Instagram that only share the wins and never share the bad that actually happens. And there are so many challenges in real estate investing that it is so important to learn from other investors that are willing to share those experiences. And one thing that I have found too is that it can actually be somewhat inspiring and motivating to hear about something that really sucked for someone else as to, here’s Tony, he lost a $100,000, but he’s still going a real estate investor. He didn’t quit. He’s making it work. He obviously had reserves and capital in place to be able to write that check, to pay that. And so these learning experiences are amazing. But also the mindset too as to why have you not got your first deal or why have you not got your next deal? Is it because you are scared of that exact situation happening?
Well, maybe not take on such a big deal at first, start smaller on a smaller scale so that if you do lose, it’s maybe not such a big loss. So maybe you need to look at different markets to be able to find something that’s on a smaller scale or whatever that may be. But as you listen to more and more of these horror stories from investors, there are very few that give up. And one thing too, Tony, is you have different, they’re real estate, but different kind of income streams from your real estate. So you have the flip business. Are you wholesaling some houses too?

Tony:
Yeah, we did-

Ashley:
We do that for a little while, but yeah. Okay. And then you are managing short-term rentals, you are also designing short-term rentals partners-

Tony:
Yeah, we have a cleaning company.

Ashley:
… designer. You’re cleaning, and then you’re also partnering with people to own the short-term rentals too. So I think having these different multiple streams, but the building that foundation first and Tony’s foundation was buying short-term rentals and building that and then branching off and going, Tony didn’t start out with, I’m going to flip, I’m going to buy short-term rentals. I’m going to start a cleaning company, I’m going to start a management company. All from day one. He started out with the one thing short-term rentals that strong solids of foundation. And Tony would like to ask you as our closing question here today on my therapeutic show as to do you think that if you would’ve started all these income streams at once, would you have been able to be as successful as you are today? And would that loss of hurt you a lot more? And do you think that building, that strong foundation had a great impact in you being able to weather the storm of a $100,000 loss?

Tony:
Yeah, I think one of the best decisions that I’ve made as an entrepreneur was narrowing down on one specific niche. And when I made the decision, I literally told myself like, “Okay, if I’m going to do this, I want to commit five years of my life to just this one thing, and I only want to do this one thing for the next five years.” And it wasn’t until I really started to go down this rabbit hole that I started to identify other places where I needed support of that main goal of building my short-term rental business. So design was a critical part of building out our short-term rentals. And then we recognized, “Okay, if we’re doing this really well internally, can we offer this to other people.” Cleaning, we literally just couldn’t find good cleaners in Joshua Tree so we built our own team. And once we had that team built and stabilized, then we said, “Well, hey, if we have these processes internally, can we give them out to other people?”
Property management. We had to build out and become really good at managing short-term rentals at scale. Okay, now we’ve got these systems, can we pass that off to other people? So all of these kind of secondary tertiary subsidiary businesses only came because we were so laser focused on building our own thing first and getting really good at it. So for all of the rookies that are listening, don’t try and do a thousand things at once to start with focus on getting really, really good at one thing, and then naturally you’ll start to figure out where the other opportunities are. So guys, I know this is supposed to be Ashley’s talk show moment where she’s the host here, but I just want to give a few takeaways before I let you guys go. So first thing I’d say, is to make sure that you get all of your agreements in writing.
Again, I think one of the mistakes we made was not getting a signed purchase agreement, was not collecting an EMD when we found that first potential partner. And I think doing that upfront could have alleviated some of these challenges that we ran into down the road. Second, a pre-approval from a buyer doesn’t always mean they’ll actually end up closing. The reason it’s called a pre-approval and not a final approval is because there’s steps in between that pre-approval and when they actually get funded from their lender. And things could definitely change in between the pre-approval and that final process. So just know that there’s always some risk there, and obviously you want to try and do your best to vet that person, but sometimes things come up that are out of your control and that buyer’s control. Second, and this is a big one for us, is to not hold flips for too long, especially in a time where the economy is shifting and moving as fast as it is right now.
The quicker you can be at getting in and out of a rehab property, the better. And this isn’t not just for flips, but even for your BRRRRs. If you’re doing a BRRRR property and you underwrite with a certain ARV and the market shifts on you where you lose $150,000 and your ARV, your BRRRR could be in trouble as well. So whether you’re flipping, whether you’re reducing the amount of time you spend in one single property is going to help you tremendously. And then as a kind of add on to that one is working at the capacity of your crew. I think part of the reason why this one took so long is because we had our team working above their capacity, so they were jumping from project to project as opposed to being able to focus just on one. And again, I think that there’s value sometimes in working in smaller batches, but just more frequently than in bigger batches to take a long time.
So be focused on your crew and what they’re actually able to do. And then two more points here. Appraisals are subjective and you don’t always have control over what that opinion of value is. So as much as you want to research the market and look for comps and do things like that, there’s always still the opportunity or the possibility that the appraiser walks in there and they want to be conservative to cover their own butts. Because remember the appraisers, they get paid regardless of what happens after the appraisal’s done. So they have no incentive to make sure that your appraised value is close to what it is under contract for. They just want to make sure that they’re protecting themselves and giving what they feel is the safest value of opinion. And actually, you can always try and go back and challenge, but just know that appraisers are working subjectively and with the primary focus of protecting themselves from a liability standpoint.
And then last, just to be patient. There were some scary moments I think going through this, especially when we realized how much money we were going to potentially lose here. But losing is part of growing, and I think every successful real estate investor I know has had some failures along the way and it made them better investors because of that. And my hope is that I can take this failure, this loss and turn it into a $100,000 lesson on how to be a better rehabber. So just a few takeaways. I hope you guys get some value from hearing my sorrow and seeing these tears fall down my cheeks and when the next bad flip happens, you guys will be the first one to know.

Ashley:
Thank you guys so much for listening to this week’s rookie reply. I’m Ashley at Wealth From Rentals, and he’s Tony @tonyjrobinson, and we will be back on Wednesday with a guest.

Maya Vander, Florida real estate agent and former ‘Selling Sunset’ cast member, joins CNBC’s Robert Frank and ‘Last Call’ to discuss Florida’s new law banning some foreign buyers from purchasing property in the state.