Richard

If this conference needs to change its trademark, it is not alone.

With the latest shake-up in college sports bringing two California teams, and one from Texas, into the Atlantic Coast Conference (“ACC”), the conference name is ridiculous. Everyone sees that. It goes even further than that. In fact, a brand new entity with the mark ACC would likely struggle to be registered in the U.S. Patent and Trademark Office based on this membership of schools. At the moment, it does not seem anyone is going to reasonably (I presume) try to challenge the ACC’s mark as being a “misdescriptive” one. It has a long history and people know who are there. Any new college conference (football gets much of the attention from these realignments, though other sports and academics get involved) called the “Atlantic Coast Conference” would seem to raise the expectation that this was comprised of teams generally near the Atlantic coast, in coastal states like the Carolinas, Florida, and Massachusetts. When you include California and Texas, you might have a problem.

Terms that are geographically misdescriptive are very difficult, and sometimes impossible, to protect under U.S. law. Unless people really did not think that Atlantic Coast Conference meant “Atlantic coast,” the conference could be shut out of formal trademark registration. Some specific formalities in the trademark rules, even if the organization showed that people fully understood who the “Atlantic Coast Conference” was, prohibit terms that misdescribe geography. Other terms which describe goods or services can be registered under some exception or because they have been in use so long that people know exactly who they are, descriptiveness be damned. When an organization has been in existence for so long, it can often overcome obstacles to registration. Where the problem is considered misleading geographic associations, some technicalities in the law flatly prevent registration.

For the ACC, it has a long history, and it would be difficult if not impossible for any after-the-fact challenge to their registered rights. (By the way, I am a long-time ACC season ticket holder, but that’s neither here nor there.) But if a business owner was to adopt and use a mark like this from scratch, and try to register it under similar circumstances, they would face some struggles. (I am going to ignore other technicalities, such as the fact that a couple of the existing conference members already are not in coastal states, namely Louisville and Pittsburgh.) There is a lot about trademark law which is very intuitive. Then, there are things like this.

Geography is not the only reason colleges need to start re-naming their athletic conferences. The marks use geographic terms from coast to coast, sacrificing distinctiveness. Tradition is important, true. And these leagues are so old and highly publicized that it is hard to argue that simple names really matter (yes, the name National Football League is not a big eye-opener, and they seem to do just fine). The ACC is not alone in this respect. There is the legendary Big 10 conference, home to 14 schools. They may not have the geographic problem, but it has been a long time since the “Big 10” was a big 10. Should they update the “Big 14?” Do fans know the Big 10 now identifies a league, and the number of members is irrelevant? What if someone were to make a legal argument that some competing product comes from a place with ten members, and would be distinguished from the Big 10 because everyone knows that the Big 10 is a 14-team league? Would that avoid conflict?

The conference has a logo, which is “B1G,” where they depict the “1G” in different letters to give the general impression of the number “10.” At least it is a trademark. Is it the word “Big?” Is it the “1G?” Is it the “10?” B1G has been used for a dozen years now, and right from the start, the conference cleverly told the Trademark Office that it had a detailed description of this mark, which is composed of the letter “B” and the number “1,” followed by a stylized letter “G,” “such that when read together, the letters and number spell ‘BIG’ and the stylized number ‘1’ and letter ‘G’ spell the number ‘10’” (not even an institution of higher education can “spell” a number, but who am I to quibble with academics). The conference has stuck with this description of the logo over the years for athletics, as well as a range of university activities including scientific endeavors; apparently there were no grammar competitions.

The Southeastern Conference had itself a nice little logo back in the 1930s, which it finally got around to registering 44 years later. The registration has since expired, but this original had the words “Southeastern Conference” surrounding a wheel-like design, with the letters “SEC” in the middle, and the names of each of the member schools at that time (Alabama, Auburn, Florida, Georgia, Kentucky, LSU, Mississippi, Mississippi, State, Tennessee, and Vanderbilt) as spokes of the wheel.

Now, the SEC logo is registered with the familiar three letters, surrounded by a circle format, which they adopted back in 1981. If every conference could copy the SEC, things would make much more sense. The Southeast Conference consists of all teams which are in the south or east. Not necessarily in the southeast, but let us not quibble. There is no misdescriptive number of teams. (Or is that why they have the biggest TV contract and greatest on-field success?)

The Pacific 10, or “Pac 10,” had a number of venerable trademark registrations and a logo. Alas, they had to abandon those once (stop me if this sounds familiar) they were no longer consisting of ten schools. Those Pac 10 trademarks went all the way back to 1928, by which time they had already grown to ten members. But the “Pac 10” trademark was effectively dead in 2010 when the conference became the “Pac 12,” which it has remained ever since. At least the Pac 10 had its own mark which it has been able to perpetuate, even as the name of the conference changed to PAC 12. The mark is “Conference Of Champions,” which it has been using since 1979. This permitted the conference to keep featuring this trademark, even as the number of teams and league name changed over that time. A trademark which survives changes in the business – it is a good concept, and advisable to every business. Protect a mark which works today, but which will also be durable as changes happen. As things look right now, with California and Stanford gone, the Pac 12 might be too. Who will own this trademark? Or will it be abandoned, hence destined to be picked up by entrepreneurs down the road who can try to eke out some goodwill from the past century.

So, will the ACC change its name? Sometimes there is a telltale sign when in anticipation of using a new mark, an entity files an application to register its mark in the Trademark Office. Nothing like that is on file as of today. The ACC did start using the mark “Bring Your A Game” around 2014, and has a registration for that mark still, but it seems to have been a specialized use. Will they change it to APCC (Atlantic/Pacific Coast Conference)? Or just the Coast Conference? Will they migrate to some entirely new name? History tells us none of that is likely to happen. Although if they want to get creative, remember that the “Pac 12 Conference Of Champions” may be up for bid. If California can be the Atlantic, then Boston and Miami might just as well be in the Pacific.

No one wants to change a working trademark, especially one with the long history of the ACC. But on the other hand, names have changed, even if the changes were small. The Big10. The Pac 10. The former Big 8, which since it merged with another conference became the Big 12 (naturally, comprised of at least 14 teams). It does create issues with which a trademark lawyer can work. Like, can you really say some knockoff of Big 12 stuff would be immediately confusing, if there is also the “Big 10” with 12 teams, and the “Big 12” with 14? (Also, institutions of higher learning should be able to count.)

Almost always, using famous marks as a guide can inspire when they are good, but when they exist on the back of longevity and perhaps brute force, perhaps it is better not to look to them for inspiration for your own business.

All of those above conferences are in a grouping of college football powerhouses called the “Power Five.” That leaves five other football conferences in the NCAA on the inspirationally named Football Bowl Subdivision. (Really, is anyone else seeing a trend here?) The FBS schools not in the Power Five are called the “Other Five.” – Nope. Just kidding. It is the “Group Of Five,” comprised of the American Athletic Conference, the Mountain West Conference, the Mid-American Conference, and the Sun Belt Conference – the last of which sadly probably wins the award for the most clever and strongest brand-name among these major college football conferences.

The other divisions outside the FBS are largely more of the same, with names like Big South, Great West, the in-between and sort-of geographic Big Sky Conference, and the more creative Ivy League, Patriot League, and Pioneer League. Ivy League is full of nuance for a variety of issues, and is often defined as the premier grouping of academic institutions in the country, and maybe anywhere. It turns out they may also be in the lead for distinctive conference names.

How much do fans – or universities – care about the conference names? Maybe we will find out.

Ashley:
This is Real Estate Rookie episode 318.
We all love seller financing, makes things way easier most of the time than going to a bank and doing conventional financing.

Tony:
Say, the house is worth $300,000. Say I agree to buy her property and it’s a $2,000 a month payment. Now, she’s only paying taxes on $24,000 a year versus the $300,000 per year, that she get if she sold the property.

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

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey.
And today we are back with another Rookie Reply, as always, we’re happy to answer questions from the rookie audience. And if you want to get your question featured on the show, head over to biggerpockets.com/reply and we just might choose your question for an episode.
So Ash, I guess really quick, give me an update. What’s going on in Ashley Kehr’s world today?

Ashley:
Well, for the first time ever, one of my real estate friends that I have met across the country, I’ve met a lot of real estate people. Someone is coming to visit me in Buffalo, New York.

Tony:
Going all the way to Canada to come hang out with Ashley for a couple of days, had to get his passport.

Ashley:
Yeah. Literally only for two days, but I’ll take it. So yeah, I’m super excited about that. He’s coming in this week and I’m going to show him some of my properties and hopefully do some fun stuff. And you just had your baby shower?

Tony:
We did. We had the baby shower. So Sarah’s due here just in a few short weeks now. I think we’re about seven weeks away, so time is ticking. So we had a house full of gifts the day after the baby shower, so we’re starting to build stuff and we got to get the nursery repainted, so-

Ashley:
You got to build an addition on just to fit all your stuff.

Tony:
Yeah. Just to fit all the stuff. And then my son actually started his sophomore year of high school today also, so just lots of stuff going on in the Robinson household this week when it comes to the kiddos, but exciting times. We’re happy for it.

Ashley:
Yeah. Awesome.
Well, on this week’s Rookie Reply, we have five great questions. We’re going to go through, a couple of them even pertain to partnerships. So if you guys haven’t already check out our new book Real Estate Partnerships, you can go to biggerpockets.com/partnerships and you guys can even get a discount if you use the code, Tony or Ashley.
Okay. So one of the questions that we talk about is seller financing. So if you’ve been wondering how to structure seller financing, what are some of the pros and cons, and what you should do as far as approaching a seller about seller financing? We kind of do a little mini breakdown of the tax advantages for a seller and also how to present the seller financing to the seller too.

Tony:
Yeah. We also talk a little bit about closing costs. What are typical closing costs in a real estate transaction? Who pays for what between the buyer and the seller? And we also talk about like, “Hey, just if I want to invest in real estate, what is kind of my roadmap of steps? What should I do first? What should I do second?” And we break that down. So overall, lots of good questions. Excited to get into those.
Before we jump over to the questions though, I would love to get a shout-out to someone that’d love to say 5-star review on Apple podcast. This person goes by the name of ScottyDude2314. But Scotty says, “Every time I run into a situation, I come back here, look for the episode that relates to that situation listed, take notes and execute. Thanks so much for y’all’s help. Closing on my first 12 plex this month.” And he says, “Constantly coming back for more knowledge.”
So ScottyDude appreciates you and kudos to you on getting that first 12-unit under contract. And just last piece, so Scotty makes an incredibly important point. We have hundreds of episodes of the Rookie podcast and I can almost guarantee that most situations you might find yourself in, has probably been solved and thoroughly discussed on some episode of the Rookie podcast.
So if you ever find yourself stuck, you’ve obviously got the BiggerPockets forms, the Facebook groups, but don’t sleep on the 317 episodes that came before this one, that have tons of information about your real estate journey. So be sure to check them out, use them as a resource and share it with someone that might benefit from it as well.

Ashley:
Okay. So today we have an Instagram shout-out to Artina Marie. So Artina, A-R-T-I-N-A, Marie, M-A-R-I-E. You can follow her on Instagram at her name, and she is a serial entrepreneur obsessed with passive income and sharing her real estate journey. So go and give her a follow and check out her Instagram and follow along her journey.
Okay, today’s question is asked by Nicole Marie. Remember, if you would like to submit a Rookie Reply question, you can go to biggerpockets.com/reply.
So Nicole’s question is, “What is the first step? My credit score is good. I have about $40,000 to put down. I want to BRRRR a rental property, but I’m stuck trying to figure out if I look for properties, meet with the real estate agent or get financing first. But then it’s like how do you get financing without a property to give them numbers for? I also can’t HELOC, do a home equity line of credit or live in it for FHA. So that limits me to conventional or some type of financing that allows the rehab budget in the loan. I’ve been reading a lot and I’m just confused how you start and take the first step.”
Okay, so the first thing, awesome, you have a great credit score and that you have some cash $40,000 to put down. That definitely opens up the doors for you to have available. And then you want to do BRRRR, a rental property. So remember BRRRR is buy, rehab, rent, refinance it, and repeat.
So the question is, “Do I start looking for properties, meet with a real estate agent or get the financing lined up first?” These are actually two things you can do simultaneously. If you do have your financing and your funding lined up, when you find a property and you’re ready to make an offer, it definitely makes it a lot smoother, easier process because especially if you’re in a hot market and you put in an offer, you’re going to have to put in your proof of funds or your proof of financing. How you are going to fund the purchase of this property, and sometimes those offers have to go in quick and being able to go through the pre-approval process may not be quick enough to actually get that for your offer letter.
So Tony, let’s kind of break down as far as her options for doing a loan. So she can’t live in it and get FHA, or she had mentioned a home equity line of credit, but you have to actually already own the property and to be able to get the line of credit on the property, you can’t get a line of credit to use it to purchase, unless that line of credit is on another property.
So in her current primary residence, if she was able to go and get a HELOC, she could take that money to go and purchase the property. But she’s going to say she can’t do that and she can’t get an FHA loan, so conventional or some other type of financing, but she wants to do the rehab budget in the loan.

Tony:
Yeah. I mean there’s tons of options out there. I mean, we’ve used a lot of private money to fund our rehabs. Ash, I know you’ve used similar and hard money, so those are always good options, Nicole as well in terms of how to make that piece work.
But Ash you mind if I just want to even take it one step back a little bit and just kind of give for all of our Rookies the framework of just in general, what are those sequence of steps look like? Because obviously we give a lot of content on the podcast and there’s tons of information on YouTube and social, but sometimes it’s hard to sequence those different pieces of content correctly. So you know what to do first and what to do next.
So when I think about a brand new investor, someone that hasn’t done anything yet, but they’re in that kind of early education phase. I think the first thing that you need to do is identify your investing strategy. Now Nicole, you’ve already seems like decided on that, that you want to borrow properties, that’s a good first step. But for everyone that’s listening, the first step is, “Do I want to do long-term buy and hold? Do I want to do short-term rentals? Do I want to flip? Do I want to wholesale? Do I want to do large syndications? Do I want to do self-storage?” Decide on your type of investing in your asset class first.
Once you’ve got that piece nailed down, the second step in my mind is to identify what your purchasing power is. So again, Nicole, you’ve kind of alluded to this a little bit already, but generally speaking, your purchasing power is made up of two things.
It’s the capital that you have available or at least access to invest, and then it’s what kind of loan product can you get approved for. So when you combine how much capital you have to put into an investment with the amount of debt you can get, that lets you know what type of property you can afford buying.
I think a mistake Ash, I see a lot of new investors make is they get all enamored with this certain type of investing strategy with a certain market. Then comes to find out they can only afford a fraction of what it costs to invest with that strategy in that market.
So I think identifying what your purchasing power is first before you do anything, can save you some wasted time because then, say that you look at your purchasing power and you’ve got half a million dollars in the bank and you’ve got the ability to get approved for a $5 million loan, that gives you a lot of options. On the flip side, if you’ve got $40,000 to invest and you can get approved for a $250,000 loan, okay, that’s going to dictate what kind of markets you can look at while you’re looking to invest.
So Nicole, you’ve already kind of taken that first step of identifying the 40K, but yes, I would 100% say understand the financing piece, so you don’t waste your time looking at properties as you can’t necessarily get approved for.
Once you’ve gotten your purchasing power, the third step is market selection. And I don’t think that Nicole in this post here, in this question, specifically talked about which market she’s looking to invest into, but I think that’s an incredibly important piece is the market selection to really be able to get good at finding deals in that specific market.
Because another mistake that we see a lot of investors make, Ash, is that when they first get started, they kind of have the shotgun approach where they’re just looking any and everywhere for properties. When ideally you want to be able to narrow it down to a small of, I guess a radius as you can. So your market selection, and then you can go into the deal flow and the due diligence piece.
But I just wanted to give that overview. I mean Ash, I don’t know, is that in line with kind of what you typically feel makes sense for Rookies also?

Ashley:
Yeah, definitely. I think we can kind of go into as to how she’s going to fund the rehab now. That was the next part of the question and looking for different ways and going through a bank to actually fund the rehab. So Tony, you did do this correct on one of your Louisiana houses?

Tony:
Yeah. So my first two or three long-term rentals out in Louisiana, we had a bank, it was a local credit union that funded both the purchase and the rehab of those properties. Now, there were stipulations or I guess boxes we had to check to be able to get approved for that kind of mortgage. Specifically the purchase price in the rehab had to be no more than like 72% of the after repair value, but I was able to get funding for both the purchase and the rehab.
So Nicole, there are banks out there that will give you that type of loan product. I think it’s just a matter of picking up the phone and calling as many small and local banks and credit unions in your chosen market to see which ones have an option that might be able to work for you.

Ashley:
So one thing that I was thinking of when I saw that there was $40,000 to put available in this, would obviously depend on the market that you’re into as far as how much would $40,000 get you, but you could use some of that money for the down payment. So that means you are going to be able to afford less property since you now have a smaller down payment and then use maybe the other half or a portion of that 40,000 to fund the rehab.
With the rehab, you can also structure it with your contractors or if you’re doing the work yourself, that you will cover materials yourself that you will purchase them, instead of having the contractor go and purchase and then bill you for the materials. And one of the advantages of doing that, is that you’re able to get 0% interest rate credit card.
So this is usually over a period of time, you have to be super diligent about credit card usage and maybe not have a history of collecting debt on your credit cards, but in this scenario you want to be able to go and get a credit card. We did this recently for a property and we did a credit card that was 12 months 0% interest. Over those 12 months, if you made the minimum payment on time for the 12 months, they actually extended it to a 0% for 18 months. We didn’t end up needing the 18 months anyways because the project had completed, we paid it off.
But having a long time just in case something does go wrong with your project, you’re not racking up this debt of material costs and then all of a sudden you have a 22% interest rate, that you’re paying on the credit cards. But going through and putting those on and then you would go and refinance the property and then pay off the credit cards would be that last step to get rid of it.
But it can be a huge advantage that you are getting your materials paid for at 0% and not borrowing any money from anyone. And that can be a huge chunk of your actual construction costs, your rehab costs, and then you would just have to come up with the cash to pay your contractors unless some of them do take credit card.
We do work with some vendors, like plumbing companies and stuff that they do actually. They’ll send an invoice to email, which is through QuickBooks and they actually have an option to pay by credit card too if we wanted to. So it really depends on the contractor and vendors you’re using, but that is definitely a tool you can use, is the 0% credit cards to cover a portion of that rehab cost too.

Tony:
Yeah. I think the other option is to, if you did want to bring someone else into the fold, like Nicole, let’s say that you have someone in your life that maybe has whatever, say your rehab budget is 50,000 bucks. Someone in your life that has $50,000 that’s just sitting in the bank account earning whatever single digit percentage, and you say that to this person, “Hey John Doe, I’m going to give you 12% annualized returns if you let me use this money.” Then you go out, you fund your rehab with that person’s capital and then at the end of the deal you refinance and you pay that person off.
So similar to the credit cards, but the benefit I think of the private money is that it is a little bit easier to use in all situations. So like most vendors, if you’ve got cash from your private money lender, then you’re going to be able to pay that person.
So again, we’ve used private money pretty extensively, actually exclusively for all of our rehab projects and it’s worked out I think well for both parties.

Ashley:
Okay. So our next question is from Rob Malloy. Okay, so Rob’s question is “I just read Ashley Kehr’s article on finding a partner and I had a couple questions about method number one. Ashley got a partner to purchase the duplex in cash. They split the cashflow 50/50 and she pays them five and a half percent interest over 15 year for the purchase price without bio option at any time. Why go this way? Is this more beneficial than financing through a bank to begin with? Reason I ask is that I’m looking at a duplex, both sides already rented and the numbers seem to work if I go with 15% down and I just manage the property myself, what would you do? Does partner make sense? Thanks for taking the time.”
Okay, so this scenario that Rob is talking about, is my first ever partnership with Evan and I had the limited belief at this point in time that you could not go to a bank to purchase an investment property. I just thought that you could only pay cash because the investor that I worked for, that’s what he did. So I didn’t even know there was an option to go to the bank. I would not do this scenario again.
Now, Tony and I have been talking about this a lot lately as to the value of having experience and knowledge and other types of sweat equity, that brings so much value to the table rather than just the money. And I didn’t value myself enough at this point where I gave 50/50 partnership. So they got 50% of the cashflow, we eventually sold the property so they got 50% of the profit of that property and then they got five and a half percent interest plus all their money back that they had invested into the purchase price. So sweet deal for my partner on that. The thing with this is that it got me started.
So this is an option for you and this is maybe your only option, then yes, if that gets you into a deal because me making that 50% of the cashflow was better than me making no money off of this property at all.
So in Rob’s situation, he’s saying he’s able to put 15% down and manage the property himself. So he must have found a bank that would allow him to do 15% down. As far as managing the property yourself, if you’re going to do that, make sure when you run the numbers, you’re still adding in for a property management company.
So research your areas, find out how much it would cost for a property manager in your area so that later on if you do decide you have the option to be able to go and hire a property management company and it’s not going to kill your cashflow.

Tony:
I think the only thing I’d add there, Ash, is that for Rob and for everyone that’s listening. Anytime you enter into a partnership, there should be a reason why. Ash and I talk about in the partnership book about your missing puzzle piece, so ideally you should be entering into a partnership because you’re partnering with someone that has a complimentary skillset ability resource to yourself. But if you have everything you need to do this first deal, then maybe it doesn’t make sense for you to partner.
So Rob, if you are in a position where you’ve already got the financing lined up, you’ve got the capital available, then maybe giving up 50% of your deal doesn’t make sense. So I think every person should be assessing their own unique kind of personal situation, trying to understand where you feel that you have maybe a shortcoming or where you’re lacking or whether it’s experience, money, time, whatever it is, and that’s when you want to partner. But if you can check all those boxes for a deal, then it might make sense to move forward by yourself.

Ashley:
Next question is from Brett Miller, “How common is it as a buyer purchasing a cash only property is expected to pay closing cost? Isn’t the seller supposed to pay closing or is that traditional financing typically?”
So this is a great question, because it really can go either way. Before we even talk about that, let’s break down what some of the closing costs even are when doing a property.

Tony:
Yeah, you read my mind. I was actually about to pull up my last closing disclosure here to look through what those closing costs were. So there typically are just like as an aside, there typically are more closing costs when you have financing, because lenders are going to require more paperwork and there’s more things that they need and they got to get paid.
So a lot of times there is more, but I’m just going to read through here and see what some of my closing costs were on this last flip that we recently sold. So I had taxes. So there are taxes that were due that I had to pay. Me as a seller, I had to pay those. There was my payoff to my private money lenders. I had mortgage security documents recorded with the county. So before I could get paid, I had to make sure that my private money lenders were paid back, their principal plus their interest.
I had my real estate commissions. Typically, a seller will cover the commissions for both the seller’s agent, so for their own agent and for the buyer’s agent. So for this flip that I sold, that’s what it was. Mine was a total of 5% in commission. So two and a half percent went to my agent. The other two and a half percent went to the buyer’s agent.
There’s a bunch of title cost. I probably spent, I don’t know, somewhere around 3000 bucks, maybe a little bit more on everything related to title and escrow. There’s some county taxes just for paperwork and things like that. Some additional kind of inspections for septic and natural hazard disclosures and things like that. That was actually everything that was on this closing disclosure.
So some of those things are going to be present no matter if you’re going with financing or if you’re going with cash. But we actually also gave the buyer a small credit because they had things on their end like an appraisal they still have to pay for. There are points they might have to pay to their lender to close this deal.
So sometimes as a seller you might also give credits to the buyer, which is what we did in this situation as well. But I feel like that’s a decent idea of what you could expect to see for closing costs on a property transaction like that.

Ashley:
Yeah, one thing too, depending on what state you’re in, you may have to pay attorney fees too at closing. So New York State, you have to use an attorney to close on a property and usually it’s the seller’s paying their own attorney and the buyer is paying their own attorney too. And sometimes that would just be added into the closing cost or your attorney can actually bill you separately, but that’s still going to cost you and that’s still money you need to have to come up with the closing costs too.

Tony:
So I guess to answer the question in a nutshell for Rhett, because again, he’s saying, “How common is it as a buyer to place some closing costs?” So the answer is yes. There’s still probably some closing costs you’ll incur. Definitely not as many as if you have a mortgage or a lender that’s kind of facilitating that transaction.
But you can also negotiate with the seller to say, “Hey, Mr. and Mrs. seller, I’m super interested in your property, but my one condition is that you cover all of my closing costs.” And depending on where we’re at in the market cycle, they might say yes. And like I said, the last flip that we sold, we covered all of that buyer’s closing costs because it still makes sense for us to sell the property that way. So don’t be afraid to ask Brett, I think to have those costs covered. And the worst I can say is no.

Ashley:
Okay, we have a seller finance question next, and this is by Bill Rogers. “So once you have a house under contract, how long until you are able to refinance? I know you don’t want to do it right away, especially with these rates, but isn’t that one of the ways you actually get sellers to do seller financing is for tax mitigation reasons? Is this something that would have to be written in the terms of the contract?”
Hey, so seller financing, we all love seller financing, makes things way easier most of the time than going to a bank and doing conventional financing. But the first question here is, how long until you are able to refinance? So in Bill’s situation, we’re going to assume he’s going and doing seller financing and then going to refinance out of the seller financing.
So you can set it up however you and the seller agree, but you want to make sure that you have enough time that it’s not too short of a time. So some banks require a seasoning purchase from when you purchase the property a seasoning period. So it can be six to 12 months from the date of purchase. So you don’t want to make your seller financing due, you are only doing it over the course of three or four months.
You want to make sure that you have enough time to go and do the refinance on the property, but really you could set it up for… Pace Morby, we’ve had him on the show, he talks a lot about seller financing and he’s done 40-year terms where he doesn’t, he’s paying the person for the next 40 years on the property and there is no rhyme or reason for him to go and refinance. It’s really all about how you set it up.
Maybe if you do get a great great interest rate with them or you have great terms where your payment is low enough that it works for the property. When you structure the seller finance deal, you want to create an amortization schedule. So the amortization schedule is going to show you the full amount you’re borrowing, the monthly payments, how much of that monthly payment is principal, how much of that monthly payment is interest, and then what the balance would be due if you were to pay it off.
So this is one way you can kind of negotiate with the seller too is like, “Hey, look, over the course of one year, I’m going to be paying you an extra $10,000 in interest that you wouldn’t get if I went to a bank.” So Bill had mentioned the tax mitigation reason, the tax advantage of doing seller financing for a seller, but there’s also ways that the seller actually makes more money because they can make the interest off of you too.
So he said something in here about how he doesn’t know if he would go right away, especially with these rates. So if you can get a great rate and great terms from the seller, there is no reason to go and refinance, but you want to make sure in your contract that you have that.
So what I do in several of the times that I have done seller financing is I will do instead of a balloon payment. So a balloon payment is saying that you’re going to do seller financing for 12 months and then the balance that is locked after you’ve made payments for 12 months is due in a balloon payment, paying that whole chunk. So that’s where you typically go and refinance with the bank.
What I have done is I try to push it out as long as possible, but I will do a loan callable date. So this would be in three years, the seller has the option to call the loan instead of a mandatory balloon payment. This is where the seller can say, “You know what? No, keep making payments. I’m not going to call the loan.” But anytime after that year three, they can call it, but they have to give me eight months written notice to be able to call the loan. And then I would have eight months to be, “Okay, I need to figure out how I’m going to go and refinance this and pay this off.” But eight months will give me plenty of time to do that.
So when you are writing up your contract with the seller, make sure you are putting in these kind of different exit strategies or things that work for you and the seller. And that’s where I really like to get face-to-face for seller financing, sit down and go through everything.
I will send a seller the contract and the amortization schedule. And as much information as I can, the night before I’m meeting with them to give them some time to review it, and then I will sit down with them the next day and walk through the whole thing, so that way I can pick their brain as much as possible as to, “Okay, you don’t agree to this, let’s figure out what we can change, what we can do.” And I try to get down to figure out what’s their real motivation, what do they really want, and then just try to negotiate and adjust the contract right then and there to make it work. So that’s the amazing thing with seller financing is you can set it up so many different ways.
One thing I would really try to avoid is prepayment penalties. And a lot of commercial lenders will do this for banks where they’ll say, “Okay, we’re doing this loan, but if you pay this loan off within the next five years, you’re going to owe us 2% of whatever the balance is as a fee for paying this loan off early, because we’re banking on making this money off the interest.
So if you can avoid that with sellers, then you can go and refinance at any time. And that keeps your options open, especially if you decide you want to go refinance because you want to tap into more equity to pull that out of the property. Or maybe rates do go a lot lower than what you’re paying in seller refinancing, so you can go ahead and refinance to the better rate too.

Tony:
Yeah. What a world-class breakdown Ash, on seller financing. I think the only part of the question that’s probably still lingering there, and I just want to clarify a little bit, is the tax mitigation piece.
So to explain what Bill’s talking about here. Again, he says, “Isn’t that one of the ways you actually get sellers to do seller financing as for tax mitigation reasons?” What he’s referring to here is that when, say that I’ll use Ashley myself as an example.
Say that Ashley owns a property and whatever, say she owns it free and clear and say, the house is worth $300,000. If Ashley goes out and sells that property, she’ll have a taxable event on the net proceeds of that sale, right? So again, say, whatever, say she makes $300,000 if she were to sell that property in full.
What some folks, now obviously there are some ways to get around that you could do like a 1031 exchange or something to that effect. But say she wanted to avoid that big taxable event for selling that property, yet she still wanted to tap into that equity. The reason that seller financing becomes attractive to folks in Ashley’s situation is because say I come to her and say, “Ashley, look, if you sell this property to John Doe, you’re going to have $300,000 taxable event that you have to worry about. If you sell or finance it to me, the only money that’ll be taxable is the payments that I’m making to you on a monthly basis.”
So instead of say, I agree to buy her property and it’s a $2,000 a month payment. Now she’s only paying taxes on $24,000 a year versus the $300,000 per year that she get if she sold the property. So for some people there is a tax incentive to not cash out on day one and instead take those payments over time. Now, I’m not a CPA, forgive me if I explain some of that incorrectly, but at least it gives you an idea. There’s a tax benefit to deferring that big lump sum payment and instead taking it in small chunks.

Ashley:
Yeah. And there’s also some great books on tax strategies for specifically real estate investors. If you go to the BiggerPockets bookstore, Amanda Hahn has written two really great books for BiggerPockets about tax strategies.
One’s just very basic knowledge we recommend for the rookie investors. And then there’s also an advanced tax strategies book. I think it’s Tax Strategies for the Savvy Real Estate Investor is what it’s called. But if you go to the BiggerPockets bookstore, you can find it on there.
Okay. And our last question today is from Denise Biddinger. This question is, “What’s the best way to structure a first time partnership?” And Tony, I know you have our book there if you want to hold it up.

Tony:
I do. So for those of you that don’t know, hopefully you know by now, but Ashley and I have co-authored a book published by BiggerPockets called Real Estate Partnerships: How to Access More Cash, Acquire Bigger Deals Than Achieve Higher Profits. And the book is available for you to purchase. So head over to biggerpockets.com/partnerships and you guys can get all the nitty-gritty about how Ash and I structure our partnerships and use partnerships and avoid partnership pitfalls, but there’s a lot about partnerships structures.
So I guess the first thing that I’ll say is that there is no right or wrong way to structure a partnership. At the end of the day, as long as you’re not breaking any laws, you and your partner can agree to whatever terms both or at least make the both of you happy. Now, there are some things I think to consider when you’re putting a partnership together and I’ll call out some of those.
I think the first thing I’ll say though, is that there’s also two types of partnerships and people kind of, I think usually just think of one, but you have debt partnerships and you have equity partnerships. In a debt partnership, there’s the money person and there’s the sweat equity person. So one person’s just going to loan the money, the other person’s going to do all the work, and the person who’s doing all the work, we’ll pay some kind of fixed return back to the person that’s lending the money.
I’d say the majority of partnerships that we see in it that a lot of the rookie investors do are actual equity partnerships. And within an equity partnership, there’s several ways to structure, I guess at least several levers you can kind of look at.
So the first thing you wanted to think about is the distribution of labor. Every project that you think about should have some sort of distribution of labor. It could be that one person’s going to do all the work. It could be that you guys are going to split it down the middle. It could be that one person’s going to do 75%, the other person’s going to do 25%. But you want to do your best to think about, how are we distributing labor between the both of us? And the reason this is important is because if one person is doing more work in that partnership, then ideally they should be compensated more for that.
If you guys are split everything down in the middle and the time commitment on the labor side is equal, then it makes sense to have your equity and profit distributions match that. But I think the first thing to consider is, “Hey, how are we divvying up the labor?” The second thing to consider is the actual capital. Are you both bringing capital? Is one person bringing the capital? Is it split down the middle? Was one person bringing 80%, the other person’s bringing 20%? How are you divvying up the capital that you needs to purchase this deal?
The second piece of the capital is the mortgage itself. If you’re going out and getting debt, are both of you going to carry the mortgage? Is one person going to carry the mortgage? How will the actual debt be structured? So you want to start thinking about all the different roles that each person will play inside of that partnership, and then try and assign a value to each one of those roles that each person is playing. And ideally, you want to get to some kind of structure that accurately represents the amount of effort and value that each person is putting towards the partnership.
Now, I’ll say a lot of my deals are just straight 50/50, right? We have partners that bring the capital, they carry the mortgage, we do everything else, and we split it down the middle. And it’s been a mutually beneficial arrangement for both of us. We have some deals where we brought a little bit of the capital and we charge a property management fee as opposed to taking a bigger equity stake.
So there’s a bunch of different levers you can pull, but I think the most important thing is identifying who’s doing what and trying to assign values. What are your thoughts on that Ash?

Ashley:
Yeah, and I think that’s actually the hardest thing, especially for rookie investors or even going into a different strategy where maybe it’s your first time doing the strategy and you don’t know exactly what effort or time it’s going to take for the roles that you are going to be performing for the property.
So one thing I would suggest is that when you are doing the operating agreement, maybe you could put in there some kind of clause where after one year it becomes, you have that discussion as to, “Okay, do we need to actually change things as to, now you’re going to be paid a hundred dollars per month for bookkeeping.” Or something like that.
I think leave your options open, so that in your partnership agreement there is room for change, especially if you’re going to be doing a buy and hold property where maybe you’re both doing a lot of the rules and responsibilities is to look at it every year and be like, “Okay, this is something I don’t want to do anymore. What can we do? What can we change for this?” But definitely sitting down and figuring out what your partner, what is fair, because there is no, as long as it’s legal, there is no wrong way to structure your partnership.
As we just went over, it was the second question that we went over today for Rookie Reply. My first partnership, and that was awful for me. I did all the work and I got the least amount of benefit from it, but it got me started, it got me in that deal. And honestly, that property wasn’t a ton of cashflow.
I mean, we ended up having, I had no money into the deal and I was making a hundred bucks a month or whatever. So it’s like, “Okay, if I got a little bit more equity, it’d be 20 more dollars a month.” But to have that opportunity to get into that first deal, that was what was important to me at the time, and I really wanted to prove myself and show my partner that I knew what I was doing. And the way for me to do that is to really put up more safeguards for him to get his money back, and the property and to have it be an advantage for him and the opportunity for him.
So I think just really look and understand what’s important to you, what do you really want out of this deal and the partnership that you’re going to do. And then go and talk to your partner and see what’s really important to them, and from there, you can structure it. There’s just so many different options you have. And if this is your first time partnering with this person, make sure that you’re setting it up, that you’re dating them.
Maybe you’re just doing a joint venture agreement and you’re not committing to an LLC where you’re going to buy 10 properties over the next year. You’re going to do one property and see how it goes, and then maybe you can branch off and add on from there, depending how that is.
But in the book, we do go over some case studies, and Tony has talked about before how he actually walked away from a flip he was doing with a partner, or it was a BRRRR, right? To be a short-term rental, not a flip. So he walked away from that long-term commitment with that partner just because it didn’t feel right. And having those kind of exit strategies in place I think are almost more important than the actual structure and the benefits of it.

Tony:
Yeah. Super important point, Ashley, and I’m glad you finished with that. I think the only other thing I’d add is, and you talk about this a lot as well, but it’s as you kind of think through what every person’s going to be doing, you have some options on how you compensate.
So for example, in one of our partnerships, we took a reduced equity stake of only 25%, but we also charged a property management fee of 15% of gross revenues. So we are compensating ourselves for the work that we’re doing in the property with that 15% management fee, which is a slight discount from what you see in that market. Most Airbnb, short-term rental hosts charging 20 to 25% at least. So we gave a slight discount to the property, but then we also retained 25% equity because we put up 25% of the capital.
So just think through like, “Hey, who’s going to be doing property management?” If there’s rehab, we should be managing that bookkeeping and accounting, finding the actual deals, analyzing those deals, managing the tenants, the guests or whoever. There’s a lot of different roles to go into that. And you can either say, “Hey, I’m going to compensate myself for doing this work by charging a property management fee.” Or, “I’m going to pay myself an hourly fee.” Or maybe it’s a fixed flat amount per month for doing the bookkeeping. But just try and think through what those look like and try and work that into your partnership.
I think the last thing I’ll add is when it comes to the capital side, two important things that you want to discuss, and this is me assuming I think in this question, she said, Denise said, “Hopefully finding a partner.” Because they don’t have the capital. So it sounds like you want someone to bring all the capital.
The other questions you’ll want to ask yourself, Denise, are what is your method for paying that person back if there is one? So we have some partnerships where there is no payback, right? It’s like, “Hey, you’re putting in your $50,000 and that’s your contribution to the partnership because I’m doing everything else.” We have one partnership where there is a mechanism for that partner to get paid back. And Ashley’s example of her first partnership, that partner essentially had a loan against their partnerships. So they got back a fixed amount every single month before any profits were distributed. So you could do it that way if you wanted to.
In our partnership, the capital recapture is what it’s called, only kicks in if we refinance or sell the property. So just think about like, “Hey, are we going to want to pay this person back the 50K?” You don’t have to, but it is something that’s kind of important to think through. And the last piece on the capital side is how would you handle potential shortfalls in revenue?
So one of our Louisiana properties, we had a massive shortfall because we had this crazy, you guys probably know the Shreveport story, but we had this crazy increase in our homeowner’s insurance, and then we tried to sell the house and we ended up finding foundation issues. So when things like that happen, is it the partner who contributed to the capital that’s going to be covering 100% of that cost? Will you split that 50/50? Will you split it 75/25? So just think about those little details as well to really hopefully avoid some of those more difficult conversations before they happen.

Ashley:
Well, thank you guys so much for joining us on this week’s Rookie Reply. Don’t forget to check out Tony and I’s new book at the BiggerPockets bookstore, that’s biggerpockets.com/partnerships.
Okay. I’m Ashley, @wealthfromrentals, and he’s Tony J. Robinson, @tonyjrobinson on Instagram, and we will be back on Wednesday with a guest.

Andy Walden, vice president of enterprise research at Black Knight, and CNBC’s Diana Olick join ‘The Exchange’ to discuss why home prices may be on the verge of cooling off, the state of the housing market, and more.

By Solomon Thimothy, who is on a mission to help as many entrepreneurs as possible start and scale their businesses. | President of OneIMS.

In my experience, building a high-performing sales team is not that difficult, but too many leaders are making the same mistakes and skipping the foundational principles. Here are three steps that can help you increase the efficiency of your sales department and generate higher results in the long run.

1. Empower Your Team

If you put pressure on the sales department to produce results but don’t empower them, they’ll end up using “snake oil” tactics to push for the sale and never get to building trust and rapport with customers. Do this for long enough and people will not want to deal with your company anymore.

Instead, take the other route. Think about sales as the heart of any organization. What can you do to support the heart? You can eat healthy, do aerobics every day, quit smoking and manage stress better. And what would that mean for a business? Doing lead generation, running ads to give our salespeople more leads than they possibly need and setting up automation to make their life more efficient. You can also add on an operations team to qualify the leads, score them and prioritize them.

Also, remember that salespeople come in different forms. Some are super technical but not so good at closing, while others are not technical but amazing on the phone. As a leader, you have to help them overcome these barriers and close gaps. Those who are highly technical may need to be taught how to ask better questions, while those who are less tech-savvy need to learn automation.

2. Assess Their Skills

Different people have different skills and sales is definitely a skill. However, not everybody is cut out for it. Your job as a leader is to match the skills to the job.

Some people just don’t have what it takes, and there’s a way to figure it out by putting them through a personality test. First, conduct the DiSC assessment. Once you have the results, you’ll be able to more clearly see which members of your team are suitable for sales and which ones would be more effective in other roles, such as customer service. If they are great at hosting a demo but afraid to ask for a sale, they shouldn’t be in sales. Your ideal salespeople need to be confident in your solution and assertive enough to lead a conversation.

Good salespeople also should not be prospecting. If you have a top-level salesperson on your team, hire a prospector to support them. I’d personally just have them do calls. They’re going to make way more money by making five calls a day than spending five hours trying to get one meeting (and running it, too). I recommend finding two appointment setters to feed their calendar. You’ll still make more money after paying the two appointment setters than you would otherwise if you had one person do it on their own. And your star salesperson is less likely to burn out because appointment setting can be exhausting—especially if you don’t enjoy it.

3. Train Your Team

The best way to turn a good sales team into a great one is by training them. Over the years, I’ve spent a lot of time and energy not only learning about sales but also training our people. And I really want to emphasize that sales is a skill. Your B players can definitely become A+ players if you help them fill the gaps that they have right now. But you also need to be serious about it if you want to see the results. You can’t recommend a book or send them to a one-time conference and then expect that they will become significantly better at their job. The only way to do it is through constant training. I recommend finding a professional sales trainer and putting your team on an ongoing, well-structured weekly program with role-playing exercises that give participants a chance to practice overcoming objections.

Implement these three tips to start seeing your team grow in their knowledge and skills. I think you’ll find your team will become more efficient and you’ll be more likely to meet your revenue targets.

Dave:
Welcome to On the Market. I’m your host, Dave Meyer, joined by the birthday boy, James Dainard, turning 40 years old today, in podcasting anyway. Thank you for joining us on your birthday.

James:
You know what? I wouldn’t rather be anywhere else.

Dave:
I think you’re lying, but I appreciate you saying that anyway. But how are you feeling? How does it feel to be 40?

James:
You know what? I’m actually feeling pretty sore, and I don’t think it’s the 40, it’s just because I had a little, I need to workout and just get after it this week. And I’ve definitely overdone it.

Dave:
I mean, you have more energy than most people I’ve ever met, so I don’t think 40 is slowing you down at all.

James:
No, not going to let it do a thing. Just keep growing.

Dave:
Well, James, we have an awesome show today. We brought in a couple of realtors. We have Ryan Blackstone from Northwest Arkansas, friend and partner of Henry’s, and Anson Young, one of the original BiggerPockets authors, and someone I’ve known for a long time, coming to talk about what they’re learning being an agent in two pretty different markets. As an agent yourself, what did you learn from this conversation or what do you think listeners should be on the lookout for?

James:
I think the biggest thing is to not just look at each market as one, but really just look at what is working in each market. Look at price points. The rates have spooked people, they’re kind of locking up and they think they need to look elsewhere. But the common message was, no, just break it down by price points and see where the opportunities are. And transactions can keep going on in any type of market.

Dave:
Awesome. Great. Couldn’t agree more. So we’re going to take a quick break of course, but then we’ll be back with Anson, Ryan and, of course, myself and James. Today for our realtor panel, we are of course joined by James Dainard, our resident realtor on the show. James, what’s going on, man?

James:
Oh, just enjoying the big day, number 4-0.

Dave:
Yeah, happy birthday. I was thinking about making these other guys sing to you, but I think that would be too embarrassing. But we’ll just tell you happy birthday.

James:
Only if it’s the Red Robin version, that’s the only one I want.

Dave:
I don’t know the Red Robin version.

James:
You don’t know the Red Robin birthday song?

Dave:
No. I know you were a Red Robin employee of the year. Can you sing it?

James:
Why don’t we save that for BP Con?

Dave:
All right, afterwards. Well, we also have other great real estate agents with us. BiggerPockets OG, Anson Young. Anson, what’s up, man?

Anson:
Hey, Dave. How’s it going, man?

Dave:
Good. Good to have you on the show. So Anson, for those people who don’t know you, can you just tell us a little bit about yourself?

Anson:
Of course. I’ve been investing and had my license since 2006-ish. And I mainly do residential single family real estate here in Denver, Colorado. I was briefly licensed in Arizona when we were doing some REO, so I have experience on the agent side with REO, short sales, just regular retail real estate. And then also do a lot of house hackers lately, seems to be a big market segment. But I’m also a BiggerPockets author, a book called Finding and Funding Great Deals. And yeah, enjoying life out here in Denver.

Dave:
And we also have Ryan Blackstone. Ryan, is this your second time on the show, third time?

Ryan:
Second time, yeah.

Dave:
All right. Well, welcome back. For those who didn’t listen to your first episode, can you just introduce yourself please?

Ryan:
Yeah, thanks for having me on. Ryan Blackstone, we’re in Northwest Arkansas. And we do residential, small multi, storage units and large multifamily. So, have fun on that.

Dave:
Nice, that’s great. Anson, let’s start with you, curious just a little bit about the Denver market. This is selfish because I still own property there. What’s happening in Denver?

Anson:
Yeah, man. Denver is nice because it acts like the coasts. And so when trouble comes around, we typically can weather the storm a lot better than the Sun Belt and the Southeast and areas like that, Rust Belt for sure. So yeah, looking at all the stats and everything, it’s still a seller’s market. It’s not strong, strong, but it’s still sellers market. Prices are still up year over year from this time last year. We only have six weeks of inventory, and inventory basically cures all problems, it feels like. As long as you have low inventory, it feels like things chug along no matter what. And yeah, we had a little bit of a dip in the beginning of the year, probably due to interest rates and other things. But yeah, this summer has been chugging along. And our days on market’s lower, and our prices are up even though we still have some price reductions and stuff. But overall, it still feels pretty normal and pretty the same stuff we’ve seen for the last three years. Inventory’s low, things are still selling and yeah, overall good.

James:
Anson, Denver’s market, I think it is funny, I’ve been tracking the market because it’s very similar to Seattle’s. We’ve been seeing the same kind of trend where it kind of came down, it bounced back up. Are you seeing the seesaw market, though, that we’re seeing, like every two weeks it goes up and then it comes back down? It’s like this constant up and down. And not big swings, but more just transactions wise. Are you seeing that in your guys’ local market right now?

Anson:
I don’t know about every two weeks. I think that’d be kind of hard to track. But I think it definitely does this weird thing. Obviously we’re seasonal, I’m sure Seattle is seasonal as well. Winter time’s a little slower than summer and all that. I think overall it’s been pretty strong. But there are fluctuations for sure where it feels like there’s less listings in the last couple of weeks, and then it’ll pop and then it’ll go back down. So yeah, for sure.

Dave:
What about you, Ryan? And just so everyone knows, Ryan and Henry Washington, who you all know, work together. But from what we hear from Henry, everything’s always perfect in Northwest Arkansas, and it’s just a magical place where real estate works all the time. Is that what you see as well?

Ryan:
Yeah, I think it’s the same thing that Henry’s been saying. So you guys need to invest here. But for real, I think for us it’s the same as what Anson was saying. It feels like we were climbing this mountain. And then when we got to the peak, which was like third quarter, fourth quarter, we kind of just have been on this plateau. It’s not going up. I mean, it’s going up slightly, it’s not going down. We’re just plateaued in some regard. The big change from 2022 to 2023 is seasonality came back. So typically, Q4, Q1 operates 20% less than Q2 and Q3. And so we have seen that, but that’s just signs of a normal, healthy market.

Dave:
And are all asset classes, all price ranges following the same pattern?

Ryan:
That’s a good question. No, that is not true. Small multifamily is just going nuts. I would say small multifamily is way harder than just normal single family residential. And that’s partly because, with the higher interest rates, a bigger buyer pool now is people who are wanting to house hack, where they buy a duplex, live in one side and rent out the other side. So now, small multifamily just runs and operates on retail market prices instead of any kind of cashflow price, from what we are seeing.
The other interesting thing for us is our rent rates are still double digits, like 18% increase in rents. And what I’ve heard or learned is we are so deregulated on our rent rates that, honestly, we don’t increase our rents because we don’t have to. If I needed to, to sell a property, I can double my rent rate and there’s no problem. Whereas, I heard in other big metropolitan areas where it’s highly regulated, you kind of have to keep rent increases, otherwise you miss out. And then office space I would say may be struggling, we’re not really filling that. But warehouse space, storage space is skyrocketing still. So that’s what we’re feeling.

James:
So Henry’s not painting a picture, Dave. It really is just a magical real estate bubble. Ryan, on these small multi-families, that actually kind of caught me a little bit by surprise, because I know the multifamily market has slowed down because our investor rates are terrible, it’s hard to cashflow deals. And you mentioned that now, and those investors were acquiring all these properties for two, three years, you couldn’t really get them as a house hack, owner occupied. And I know Anson also mentioned the same thing with the house hacking. Are you guys seeing that more in your local market where the affordability as people are just going to a new strategy to buy, they’re essentially paying for the rate increase and, by renting out, subsidizing their mortgage and then going towards the multifamily. Is that majority of the transactions going on, and where people are really focused on to get their monthly cost down?

Ryan:
What I’m seeing as far as buyers in the market, period, is you need to either have cash or cash equivalent. And if you’re needing to be in specific locations, you are looking to house hack and you’re totally cool with that, right? Or it’s like, how can I live in this or sustain in this property for the next five or 10 years? They don’t think they’re going to rotate out in a quick timeframe. And so the way to get your payments down, because the interest rates are high, is to offset with rentals.
Now, like Anson was saying, the biggest problem is still supply. We have 10 to 12 new households move in to Northwest Arkansas each day, and we aren’t even coming close to building that much. And in fact, builder permits have dropped even more. So again, yes, it’s harder for buyers and maybe the amount of buyer pool has dropped, but so has the seller pool and listings and new builds. And with multifamily, there’s not much multifamily being built. So I’m not seeing a ton of multifamily transactions. I’d probably see more if there was more supply. There’s just not enough supply out there. And the only big multifamily that is being built is a hundred plus apartment complexes.

Dave:
So Anson, everything’s perfect in Denver too, right?

Anson:
Oh yeah, for sure.

Dave:
Everything cash flows. You just throw a dart at a dartboard?

Anson:
That’s how I invest. I need that astrologer’s phone number. No. So kind of like Ryan was saying, I would say the majority of our transactions are just basic mom and pop, need to move before school starts, just pretty typical transactions. The house hacking pool are people who either want to get into investing but they want to stay local. So this is kind of the only way that they can do it in Denver. They’re not going to buy a duplex over in Edgewater or something and then spend $600,000 to do that and not really cashflow. They’re looking at that value play of house hacking their own property.
So yeah, I would say the majority of our transactions are pretty normal, conventional loans, all of that. And so there’s different market segments doing different things. But when your median house prices are like $600,000 or $700,000 and that’s kind of just your average price these days, people still need to move. Kind of like Ryan said, we have a lot of influx of new people, something like 50,000 a year coming to Denver, and we don’t have anywhere near that many units being built or inventory. I think we have like 5,000 that get listed every month and then 4,997 of them sell. So it’s like, we’re super low inventory and it causes a bunch of crunches in a bunch of different areas.

Dave:
Are you seeing any sort of, Anson, concessions anymore? I feel like last year we were seeing a lot of concessions. Is that still happening?

Anson:
It is a little bit. We’re not in that seller holds all the cards. They hold most of the cards, but not all of them. So they know that they have to budge a little bit here and there. There are, I think, your kind of below median house price homes in a good school district, the seller holds all the cards. It is going to list, it’s going to be gone in four days, there’s going to be multiple offers. There’s no reason to give any concessions.
In the condo market, and then also in that normal median house price, for some reason, is the one that’s a little bit slower right now. In those two markets, there’s going to be a little bit more concessions given than just that all day long below median house price houses that just fly off the shelf. So not a ton, and definitely not as many as the winter time, but they’re still definitely happening. I just had a listing where we had to give up 5,000 on concessions on a condo, but that’s pretty normal because condos aren’t selling nearly as quick, and way less showings and all of that. So just depends.

Ryan:
Yeah. What we see in our market for concessions is it is coming back. But what’s very interesting to me is right now if you took the city and you made it a bull’s eye, there was a lot of new build new construction on the ancillary markets, the outside rim. And the new builders are offering 10% in concessions. So they’re trying to pay closing costs, pay down points, offer upgrades because what happened is when everyone could work remote, they’re like, okay, it doesn’t matter where I live, I’ll go more outside of town. I love the country, heehaw. And then what happened was those prices went up, but now it’s unaffordable because now, you need to come back into work. So the amount you have to pay for gas and living far away has changed. Now, new build in the city is still going crazy and there’s no concessions there.

James:
You guys made a couple really good points. And as investors, we’re always tracking markets and cities and going, “This market’s doing really well.” But as you’re investing in today’s market with that high cost of capital, with a little bit riskier market that’s going on right now, you have to micro cut them down. And that’s what we’re having to do in Seattle too, is the upper echelon, the luxury pricing has compressed about 10%, and they’re still having to offer concessions because it is just expensive, and the amount of people that can afford those higher end markets. I know, Anson, we have very similar median home pricing. The luxury new constructions are like 3 million to 5 million in our market, that’s not trading at all.
But then your core, right around median home price homes, if they’re in a nice neighborhood, that are cleaned up nice, people are buying those and they’re selling for over list. The two asset classes that we’re seeing the most amount of deflation in, and concessions, are either the super high-end luxury or the massive fixers. Those are getting discounted dramatically too. But the rest of the market’s kind of just chugging along. People are going, Hey, we need the housing. They don’t have a choice at this point. They need the home. They want to get into a property. They have to make it pencil.
And I know in our local market, builders are the ones offering the concessions, not the flippers. The flippers are still moving their deals. The new construction guys are still getting lined up with buying their rates down, they’re getting preferred lenders and that’s helping move product. But that’s where we’re seeing this jolt back and forth on the uber expensive. The inventory’s above, if you’re double the median home price, it is sitting big time. But otherwise everything else is kind of moving forward.

Ryan:
Yeah, I would agree with that wholeheartedly. Flippers, they’re not giving concessions. And I think the big thing is, what everyone’s saying is, if it’s fresh and clean and doesn’t need repairs, the buyer’s taking it. The thing that makes it hard for that buyer is like, oh crap, it’s expensive and I have to worry about these things breaking or these things fixing as soon as I get in.
And honestly, the number one buyers that we’re really seeing is either cash or cash equivalent buyers, meaning that they already bought that first time home and then they’re upgrading up. So our average sell price is like 425 right now. If you’re at 425 or just a little bit higher, that buyer has a little bit more discretionary income so they can make it happen. But then we’re also seeing cash coming in from family members like grandparents to help the person buy the first home, or their 401K, they’re cashing out the 401K to then buy a house as well. So it’s keeping the prices up. I don’t really see that they’re putting like 25%, 35% down, but more getting to that 20%, let’s get rid of PMI, let’s get rid of FHA, VA loans and do conventional still.

Dave:
So this great is conversation about the market in general. I want to switch gears a little bit about what investors should do in your relative types of markets. So Anson, if I were a new investor moving to Denver, what would you recommend as a strategy?

Anson:
Yeah, in these high cost of living markets, you have somewhat limited options. You can’t do the crazy cashflow plays in the Midwest or anything like that. The things that I’m seeing and the things that I would do, house hack if you can. I think it’s still a great strategy here. There’s still a lot of upside and a lot of opportunities there, whether it’s like an up, down house where the basement’s split off or you split it off yourself, side-by-side duplex, there’s room by room. ADUs, we’ve opened up a lot of ADU zoning here in Denver. So accessory dwelling unit, you could build a carriage house or a garage with a two bedroom apartment over it. Those are all value add plays that make sense.
And if you’re not into house hacking and sharing your space, there are ways to maximize your cashflow here, which midterm rentals, short-term rentals and room by room rentals always underwrite your deal with long-term cashflow as your last resort. But we do have a lot of opportunities in certain areas for short-term. There’s restrictions of course in Denver, Aurora, Boulder, kind of the big areas. But there are little pockets where you can still buy for short-term rentals, and there’s no regulations. So I would keep an eye out for that.
Midterm. We have a lot of hospital complexes, really strong healthcare center for job centers here. That’s a great way to maximize your cashflow. And since it is not very affordable to live here, a lot of young professionals are opting for a room by room type arrangement where they can be in a five bedroom house, rent one of the bedrooms, and the common areas are furnished and they are saving half as much on their rent. You can go get a one bedroom for 2,000 a month, or you can rent a room in a nice house for 1,200 a month. Most of those young professionals would take that other option. And so those rentals are doing really well.
There’s even management companies that are springing up around just room by room management companies. And so there’s ways to do that that I think make a lot of sense when you can maximize your cash flow, because you can’t change your interest rate. And if you’re good at finding deals, you can do that. But if you’re just kind of a normal investor and you take what you can get from wholesale market or on the market, then working on maximizing your cashflow would be the way to go. So that’s what I would do.

Dave:
Yeah. Those are great ideas. Rent with the room, I’m always curious about this. Do you have any concept of how much more cashflow it could generate?

Anson:
So on a five bedroom, six bedroom house just north of Denver, in kind of like Westminster area, there’s some really good areas there where this makes sense. It’s close to Boulder, close to Denver, just down the road from the airport on the highway. So an area like that, a five bedroom single family, if you just rent it long-term, probably rents for 3,000, 3,200, somewhere around there. That’s probably the max that you’re going to get. Whereas room by room, obviously if it’s decent, the common areas are nice, it’s been upgraded somehow in some way, you can easily get 1,200 per bedroom. And so you’re talking 1,200 times five versus the 3,200 a month. So there’s almost, it’s not quite 2X, but there’s a significant boost in that income that makes it worthwhile for sure.

Dave:
Wow. That is very significant.

James:
I have found the same, that renting by the room will get you a lot more money for your property, but it also brings you a lot more problems, at least I’ve dealt with. I remember last year I got a call. I had brought a property up for rent for 3,500 bucks. And this group of five approached me and said, “Hey, we’ll pay you by the room. Can we do this?” And I was like, “As long as it’s on one master lease, I’m not doing individual leases.” And I was a little worried about it, but the cashflow was so much better. And then sure enough, 90 days later I get messages from all these tenants, like, “The fifth tenant is walking around naked all the time.” And I’m like, “This is not my problem. You guys redid one master lease. If you want to remove them, that’s fine.” But it is a great way to get into the market. And it comes down to, as an investor, sometimes you’ve got to deal with some grief to get into the game.

Dave:
Oh, totally. Yeah.

James:
When we were flipping in 2008, it wasn’t easy to get in, but we had to do what we had to do. And so it comes with the problems, but sometimes it comes with what the scenario is.

Ryan:
So is the suggestion to buy in Denver, house hack it and be okay with that naked man for a year and then we’ll be golden? That’s awesome.

James:
Yes, yes. That’s the strategy.

Dave:
No, but I agree with that general sentiment, James, it is so true that it’s not 2010. You can’t just buy anything and make it easy. That doesn’t mean there’s no options, but you’re going to have to do a little bit of work, whether it’s doing a reno, a value add, that’s work, in the same way that’s additional headache, in the same way that rent by the room is an additional headache. But we talk about this all the time, real estate is not really a passive business except in some extreme circumstances like syndications. But really, it’s just entrepreneurship, and you just got to pick the business that you want to run. And this is an option to build a higher cash flowing business, but it is more operationally complex.

James:
And treat it as a bridge. When you’re looking at a property, if you have to rent it by the room, that’s going to give you high income or cash flow it, but then see how long you’re going to have to do that. If you do think rates are going to fall over the next 12 to 24 months, you can plug that new rate in. That’s what we’ve been doing, is plugging the 6% rate in two years. And then we’re going, okay, cashflow is good here. So it’s almost just bridging you through. And the good thing is right now you can get some good discounts on property where you can get the equity, you can get the cashflow to cover, and then once rates fall, you can go back to a traditional rental and get rid of the headache. And so don’t always worry about the now. It’s that short-term pain, long-term gain. You just kind of got to grind it through at this point.

Dave:
All right. Ryan, what about you in Northwest Arkansas? What would you recommend for investors if they were new to the area and they wanted to get into the market? Best possible options for them?

Ryan:
So I always say the number one winner is always, if you’re going to be proactive in finding your own off-market deals, that’s surefire number one. House hacking is great as well. And I would just make a preface, I have a good buddy, Conrad Eberhard, shout out to him, he’s a lender. He was just telling me that buyers, there’s so much fear in the market right now, and so that’s reflecting in the interest rate. And then if interest rates go down to 5.5%, it’s like a trigger rate. And so what will end up happening is everything will go gangbusters again and prices will start soaring. And so if that is happening, then anything buying right now is still good, even though it’s hard. I would still say it’s good to buy.
My big thing is, as long as you can make the payments and then you don’t have to sell, then you’re never losing in real estate. So yeah, I would say off market. I would say house hacking. And then midterm is great. We still have not much regulation on any short-term rentals. And then flipping or building still is great. But when you’re not whole-tailing, you’re flipping it. You’re making it amazing.

Dave:
Nice. Have margins changed at all over the last couple of years?

Ryan:
Yeah. I mean, Henry has to do work to make 75,000 now per flip.

Dave:
Poor guy.

Ryan:
I know. I can’t just list it and be like, “Hey, that critter comes with the house. They got a lease on it.”

Dave:
That’s why we’re giving him the day off. He’s at the spa just relaxing.

James:
But that’s a good point. If you want to put in the work, the margins are there. It’s like, go after the ones that you have to put in work, and the margins have doubled, at least what we’ve seen across the West Coast. But Ryan said, you got to put in the work. This is a full on business, you’re not going to get lucky with the rates anymore.

Ryan:
It’s interesting. Typically, I would say our smaller market, which I still think we’re a big market, but whatever. You guys are like a crystal ball, which is great for me. So whenever I see the bigger markets take a dip or go up or whatever, I’m like, okay, that’s what I get to look forward to in six months. Yay. But it’s weird. It’s kind of still the same, right? That’s what I’m hearing, right?

James:
Yeah. I think so. At least that’s what we’re seeing on a national level in most of these big markets.

Dave:
So Ryan, I don’t know, are you an investor yourself as well?

Ryan:
Yes.

Dave:
Do you have any recent deals you can tell us about?

Ryan:
I’m honestly putting too much money into our office renovation, and that’s still going and struggle busting. But we just bought some storage unit facilities down in the capital of Arkansas, Little Rock. So that’s been good. And then flipping a deal here or there. So my main focus has been growing my team on the sales side of things and taking care of that office.

Dave:
Yeah. How long have you been doing the office, just out of curiosity?

Ryan:
Oh my goodness.

Dave:
You don’t want to say?

Ryan:
April of last year, I think I bought it, and just keep dumping money into it. So we did sell two storage unit facilities in Kansas City and got some money there to put into the office.

Dave:
Nice. Well, when James and I move to Northwest Arkansas, we’ll lease some space from you.

Ryan:
There you go. Yeah, it’s a coworking space. Henry’s there, I’m there, other investors.

Dave:
Well, the whole On the Market team, it’ll be great.

James:
Henry always puts a bow on that market. I’m really interested in going to visit it.

Dave:
Yeah, it’d be fun.

Ryan:
I’ll take you around. The only thing, James, is you have to fly to your boat. Sorry, man.

Dave:
What about you, Anson? What deals are you up to these days?

Anson:
Yeah, so for the past year and a half, two years, I’ve been focused mainly out of state. The grass is somewhat greener in some respects. I think competition really kind of drove me a little bit outside of Denver to go into the Midwest. And so our deals, what they look like now is BRRRR deals in Ohio and Nebraska. And then also we’ll wholesale or we’ll flip deals that just don’t meet our criteria, mainly wholesale them just to recoup some marketing money and go back at it. But that’s been my main focus, is cashflow. And so, finally getting on the smart bus and going that route.

Dave:
Well, yeah. Is it just a balance? Do you still own properties in Denver?

Anson:
I haven’t been much of a buy and hold investor here. I’ve been mainly just wholesaling and flipping in Denver my whole career.

Dave:
Okay. Yeah.

Anson:
So I don’t really have much here. Everything is out of state these days.

Dave:
But yeah, I guess you’re still kind of achieving that balance. You get your hits of income in Denver from flipping or wholesaling with your agent business?

Anson:
Agent stuff. Yep, exactly.

Dave:
And then getting the passive stuff externally. Yeah, makes sense.

Anson:
Exactly. Yeah.

James:
Yeah. Anson, have you switched the markets in the Midwest? So as you’re starting buying in other markets or you keep your rentals, with the rates changing, have you switched all that up and forecast in? Buying rentals in different states, I’m more of a backyard investor, but it’s always been interesting, but it’s hard, right? You got to renovate them, you got to target the right market. Are you buying in different markets now than you were 18 months ago because of just rates and the cashflow positions?

Anson:
No. Because once you’ve kind of built up teams and marketing and everything else and kind of pushed that snowball downhill, there would have to be something more catastrophic than just a couple of points in a rate increase to have to shift that hard, to take a huge right turn into a different market. So we’re still in the same exact markets that we were, we’re investing in the people on the ground and the market itself and still making it work through trying to buy as low as possible, trying to maximize the cashflow on the other end. And like you said, James, if the interest rate comes down to six in two years, then we’re golden for that. And in the meantime, we can still pencil deals now. And so we’re just focused on that. And so we haven’t had to shift too hard. We’ve probably pulled back in expanding into a couple of markets. But in hindsight, we probably should have just gone full bore into one or two other markets as well.

James:
Arkansas.

Dave:
Arkansas.

Anson:
I don’t know. Between James and Dave, it’s too much competition there.

James:
Nah.

Dave:
No. We’re going to all do it together.

James:
Yeah, and I love that because what Anson just said is he built good systems over the last three to five years in different markets. And no matter what’s going on, you’re still buying the same type of deal flow. You’re just kind of adjusting your mindset behind that. I know in Seattle we’ve had to do the same thing. It’s like, we don’t really care what’s going on, we’re just buying. We’re going to be always be buying. And you just have to tweak your systems. And if you have that set up correctly, you just have to more tweak it rather than rebuild. And for us, we’ve been buying a lot of value add and getting a lot bigger deals done because that’s just what’s available right now. And as long as you have those good systems, you can make your pivots. And every market still has an opportunity. It doesn’t need to be an affordable market. It can be an expensive market, they all have opportunities. You just got to switch on how you’re looking at them right now.

Dave:
That’s a good way to wrap it up, James. I think you just put a bow on this entire episode. So let’s get out of here. Anson, for people who want to learn more about you, obviously they have your book. You can find it in the BiggerPockets bookstore, which is biggerpockets.com/store. Where else can people interact with you, get to know more about you?

Anson:
If you want to connect with me on BiggerPockets, just search my name there, I’ll pop up. On Instagram, @younganson. And that’s me.

Dave:
All right. And Ryan, what about you?

Ryan:
Yeah, same. BiggerPockets, you can find me there, just type in my name. Or YouTube, we got a channel called Blackstone and Co. We’re starting to throw stuff on there. And then Instagram, I’m not on as much, but @ryan.blackstone12.

Dave:
All right, great. James, what about you?

James:
Probably the easiest place is Instagram @jdainflips or check me out on Jamesdainard.com.

Dave:
All right. And I am always on BiggerPockets, or you can find me on Instagram where I’m @thedatadeli. Anson and Ryan, thank you both so much for being here. Really appreciate it. Hopefully we will have you back on sometime. Tell us how your markets are shifting in a couple of months from now.

Ryan:
Sounds perfect.

Anson:
Love it. Thank you.

Dave:
On the Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, Research by Puja Gendal, copywriting by Nate Weintraub. And a very special thanks to the entire BiggerPockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Logan Mohtashami, HousingWire lead analyst, joins ‘Squawk on the Street’ to discuss Mohtashami’s reaction to the morning’s pending home sales data, would-be sellers who now don’t want to move, and what it’ll take for new homes to be built in America.

The prevailing wisdom is that there is a shortage of venture capital (VC). Is this “wisdom” true? It depends on how you measure the shortage. If the “shortage” is measured based on entrepreneurs seeking capital, then yes. There is a shortage.

Entrepreneurial hopes always exceed the capital available. Entrepreneurs want growth. Growth requires skills or capital or both. Instead of skills, most entrepreneurs seek capital. Specifically, they seek early VC, which, unfortunately, is the wrong strategy:

· Early VC is scarce and has been used by only 6% of billion-dollar entrepreneurs. Entrepreneurs should be using the vast array of potential financing sources that are more readily available.

· 94% of billion-dollar entrepreneurs took off without VC by using finance-smart skills. Business schools and all the assorted venture experts should focus on this method.

Is there a shortage of capital?

As long as entrepreneurs focus on capital over skills, there will be a shortage of capital. Is there also a shortage based on the productivity of capital, i.e., based on financial returns?

#1. Only about 2% of VCs earn 95% of VC profits. 98% are average or mediocre.

20 VCs are said to earn about 95% of VC profits. Since the number of VC funds in the U.S. is estimated at about 1,000, this suggests that about 2% do very well and 98% are average or mediocre – they fail to live up to the lofty reputations of financial genius that VCs have self-promoted. Interestingly, SPAC promoter Chamath Palihapitiya notes that only about 10% of VCs make money. The rest are said to be money losers with a lot of their profits being phantom profits that their investors really do not see.

#2. VCs need homeruns if they want to succeed. VCs finance very few home runs.

Even the top VCs fail on about 80% – 90% if their ventures, according to one of the most successful VCs in the U.S. The top 2% earn high returns because they finance home runs. VCs need home runs to do well, and most VCs stink because they do not fund home runs. If there were a real shortage, wouldn’t more VCs finance home runs?

#3. VCs mainly succeed in Silicon Valley. VCs outside Silicon Valley are not as productive.

Most data shows that the Top 20 VCs are in Silicon Valley. This suggests that VC outside Silicon Valley do not do well. Silicon Valley has developed an ecosystem that churns out unicorns. The others have many experts and governments wasting money hoping to emulate this ecosystem.

#4. Entrepreneurs need to get to Aha! VCs do not know how you can get to Aha!

VCs finance after Aha, i.e., after potential is evident. Before Aha, many can point out all the flaws – but identifying potential winners is a guess – even Steve Jobs and Google were rejected by more than 10 of Silicon Valley’s finest VCs. You must get to Aha on your own – with your strategy and your skills to beat your competitors and create venture value. The problem is exacerbated by entrepreneurs who follow the VC method of focusing on the opportunity, entry strategy, and VC – rather than on the Unicorn-Entrepreneur method of finance-smart skills and bootstrapping growth strategies.

#5. Business schools focus on the VC-method, which helps about 20/100,000 ventures.

Can business schools be more productive? Most business schools teach opportunity analysis, strategy development, and VC financing. As noted above, this VC-method helps few entrepreneurs and few VCs, mainly in Silicon Valley.

#6. VC analysis seems to be deteriorating. Is too much VC creating FOMO?

VC Brian Grossman invested $96 million in Theranos and lost a lot of it. His due diligence is said to have raised a number of questions. But he still went with his instinct, due to FOMO (fear of missing out). Are these VCs sacrificing their analysis due to desperation – due to too much VC chasing hype?

#7. Are VCs sticking to the knitting?

VC has succeeded in emerging industries, such as Uber, or in high-margin ventures, such as Google. Masayoshi Son has lost $32 billion in VC. Without the circumstances of an emerging economy (China) or an emerging industry (telecom), even a great entrepreneur like Son has struggled. Is that because of too many VCs chasing too few great deals?

#8. VC returns and funding fluctuate with stock market exuberance. Is this skill or luck?

The Top 2% seem to have the talent to build unicorns at all times. The others seem to need Wall Street exuberance.

TechCrunchAs the value of startup exits craters, poor liquidity may be harming VCs’ ability to raise capital | TechCrunch

.

VCs love hype because it creates profitable exits even for turkeys.

MediumHow VCs and founders are riding the SPAC wave into 2021

MY TAKE: Entrepreneurs should focus on unicorn skills to build real unicorns. But this is hard work – and most seem to prefer the hype and salaries of VC – even though very few entrepreneurs benefit from VC. It is unfortunate that business schools are following this hype and neglecting finance-smart skills.

The VergeTheranos drained $96 million from an experienced investor – plus some blood
Startupsavant.comVC Firms – Top Venture Capital Firms for Startups | TRUiC
NytimesVenture Capital Firms, Once Discreet, Learn the Promotional Game (Published 2012)
TechCrunchChamath Palihapitiya: It could take three years for the market to ‘accurately’ reprice late-stage cos | TechCrunch

Wealthfront BlogDemystifying Venture Capital Economics, Part 1 | Wealthfront

David:
This is the BiggerPockets podcast coming at you from the Spotify Studios in downtown LA with episode 812.

Jason:
I think it took about a thousand conversations before I actually got a really good lead. You can’t take the rejection personally because every single person that gets in a real estate, you get rejected. Everyone’s going to tell you no in the beginning, and it’s just a part of getting into the game. It’s the gate you need to walk through in order to become a real estate salesperson or an investor.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast here today with my co-host and partner in Multifamily Investing, also, one of the smartest guys I know, and incredibly funny for a smart guy, we’ll say that as well. In addition to being good-looking, you’ve sort of hit the trifecta of what we want in a podcast host. So thank you, Andrew Cushman, everybody.

Andrew:
I don’t know what to say after that, man. That’s untoppable.

David:
I left you speechless. That’s how I keep more mic time. I just say everything you were going to say, like Eminem and 8 Mile, and you have nothing you can do to reply.

Andrew:
Yeah. You’re out right now. I’m doing well. Glad to be here in person. Glad to be back in California. Been traveling a lot so good to be home, especially since they dropped the charges.

David:
Oh, good to know. And also thank you for pretending like you understood that Eminem joke, which I know you’re going to ask me later, what the hell that meant.
In today’s show, you and I are interviewing Jason, who’s sitting here with us right now who has an incredible story that has gone from being a very hardworking student in school, to a hardworking broker, to a successful broker, to a badass real estate investor, which is why you’re being interviewed on the biggest, the baddest, and the best real estate podcast in the world. So glad that you’re here.
Andrew, what should our listeners keep an eye out for to help them in their own investing journey?

Andrew:
There’s a whole lot. Throughout the entire show, Jason dropped all kinds of knowledge and just inspiring things, but I would say two that really stood out to me, was one he talks about he just worked his tail off to get that first deal, got it right to the finish line, and then it seemed like the whole thing blew up on him, and it almost took him out of the game. It almost emotionally crushed him.
And what he did, part of how he got past that is he zoomed out and looked at the big picture and the skills that he had learned in the business and the pipeline that he had built, and that helped him carry through and make sure you listened through to find out how he did eventually end up saving that deal.
And then also in line with that, is he focused on learning the skills. He wasn’t focused on, “Okay, I got to get this deal.” Or, “I have to go over here.” Or, “I have to get this partner.” Or, “I don’t have the money.” His focus was, “I am going to learn these skills necessary to become an investor, to become an entrepreneur, to learn real estate, and everything else will come from that.” I think that’s a huge part of why he’s so successful at such a young age in a very difficult market.

David:
There you go. So listen all the way to the end of today’s show. If you want to hear more about how Jason has been able to build a portfolio with a very impressive worth, which we’re not going to reveal here, you got to listen all the way to the end.
Before we get into the show with Jason, today’s quick tip. Pick up the phone, not once and not twice, but a lot of times by building in the reps that you need to get the deal. Andrew, how many phone calls did you have to make before you got your first flip?

Andrew:
4,576 rejections.

David:
And Andrew will tell you all why that is like taking the stairs, not the escalator in today’s episode.

Andrew:
That’s right.

David:
All right, my brother, let’s get into it.
Jason Lee, welcome to the podcast. For everybody listening, Jason has 119 units across 17 different properties. He’s been investing for just three years. He got started in 2020. So for everybody who says all of your guests made a bunch of money in the past, well, not this one, this has happened over the last three years.
Once lost a hundred thousand dollars to a terrible contractor. And as a fun fact, he loves dogs and plans to start a nonprofit that helps dogs who need homes and veterinary care. You just got a collective, “Aww.” From a huge percentage of our audience there. Well done, Jason. Welcome to the show.

Jason:
Thanks for having me, David.

David:
Yeah, so before we get into your backstory, tell us briefly how are you adapting or pivoting your strategy in today’s market?

Jason:
Yeah. Today’s market, it’s definitely tougher than it was in 2021 and 2022. It’s definitely slowed down considerably in my world. So I think to pivot, what I’ve been doing is reinvesting a lot of money into marketing, going all in on marketing because usually when things slow down, companies tend to shrink and lower their marketing budget. But I’ve been trying to reinvest my earnings into more marketing, to try to take more market share while some people might be claiming up while the market is slow.

David:
All right. And then what about the price of the properties? Are you kind of like, “Hey, whatever it is, is fine.” Or are you really narrowing down on what you’re paying?

Jason:
So definitely been a lot pickier lately with pricing. I think, I invest in San Diego. So in San Diego things are very economically sound. There’s a lot of great fundamentals to where nothing points to a big crash.
We’re over 70,000 homes behind on being the amount of demand of people that want to live in San Diego. We have no inventory. So in that sense, we’re not scared about our exit. But then again, interest rates is a huge question mark and some other global economic factors. So just because of that, we’ve been definitely put a bigger pad in our underwriting to make sure that the numbers will pencil no matter what.

David:
So before we move on, when you do that, that obviously means more deals won’t work. Have you found that that means nothing’s working or are you still finding something even with that bigger pad?

Jason:
So with the bigger pad, you’re 100% right. More deals are not working, but we’ve been able to do four deals in the last six months. So we’re still seeing deals that work in our newer, more strict underwriting.

David:
Okay. Excited to get more into this real estate success that you’ve been having, but before we do, let’s go back a bit in time first. What was life for you like, growing up?

Jason:
Yeah. So life growing up, I was born in Seoul, Korea. I was born in a US territory. My dad was in the army and my dad actually met my mom there. She spoke no English, was just Korean, grew up there. And then my dad, when he retired from the army, decided to move us to California, a small town in the East Bay. Clayton, California. I don’t know if you know where that is.

David:
Wow. I live in Brentwood, man. I’m very close to Clayton.

Jason:
Oh, no way.

David:
We sell houses out there.

Jason:
That’s awesome.

David:
I was a deputy in the county where Clayton is.

Jason:
Oh, cool. Yeah, so that’s where I grew up. I grew up in a little, you know where Ed’s Mudville Grill is?

David:
Yeah.

Jason:
I grew up right behind there. So I lived there until I was 18 and moved there when I was seven. And my dad was a full-time security guard. My mom jumped around from business to business and then eventually her last business failed, which was kind of like a small juice shop.
And then from there she started a house cleaning business, and from that, I think that really shaped how I wanted my financial future to look and how I wanted to give back to my family, because growing up, every single conversation or every fight that my parents had, it was always about-

David:
The money.

Jason:
“How are we going to pay the mortgage next month?” Every single month. And ever since I was eight years old, that’s kind of what was ingrained into my brain. So I actually was very fearful of money and was scared to actually even do anything to make money just because I knew that money was a big trigger for my anxiety.

David:
Very similar story for me. Sounds like Andrew might’ve been the same case for you, right?

Andrew:
A little bit different. We are solid middle class. We didn’t have struggles, but we also had a tight budget to fall and pay attention to.

David:
What I noticed in my childhood is that lack of money equals pain. That’s what the cause the fighting, is they’re scared, there’s fear. Where there’s fear, there’s pain. Little kids don’t like to be around their heroes who are supposed to keep them safe, being afraid. So you probably recognize money as the monster. If you don’t have it, you’re in trouble.

Andrew:
Everyone says money can’t buy happiness, and that absolutely is true, but it can eliminate a lot of the things that cause unhappiness.

David:
Good point.

Andrew:
And stress.

David:
Yeah. So did you make an inner vow, “I will never be broke?”

Jason:
No, I did not. I think the first thing that kind of really got me motivated was when I grew up and kind of grew my empathetic side of my brain, when I went to college and moved away, that’s when I actually got closest to my parents because I saw how other people grew up. I saw how good some people had it, and I saw how much my parents struggled compared to some of these other families at San Diego State University.
So I just really just made a pact one day, middle college that I was going to somehow give back to my family. And I’ve been able to do that, fortunately, still am, but that was kind of the first pact I made. I never wanted to be just rich for myself. That’s not how it started.

David:
So you mentioned going to college. What were your expectations when you first got there?

Jason:
It’s a great question. So when I first got to college, all I cared about was rugby. Rugby was my first passion. So in high school I started playing rugby. I played football as well, but I really fell in love with rugby. But I was excited to go to San Diego State to play for the rugby team there. And then that ended up not working out because I had about seven or eight diagnosed concussions in high school.
So I told the honest truth to the trainer at San Diego State and she couldn’t clear me. So that was gone right away. So I kind of had that loss of identity when I first got to college because I didn’t know what I wanted to do. I had been an athlete my whole life. All I cared about was eating right and working out and playing sports.
And when I got there, I knew no one. I just found out I can never play rugby again. And my parents were my ear saying, “No matter what happens, you’re going to go to grad school for whether it’s being a lawyer or a doctor or an engineer, whatever it is.” So I was just a very confused kid with a lot of bad and good influences, I guess you could say.
And my expectations, I really didn’t have high hopes of college. I just thought I was going to be studying all the time and going to grad school and have a normal life. So I thought I was just be going through the system like a usual person.

David:
What was your college experience like Andrew?

Andrew:
Mine? I was living in Texas at the time, and my parents suggested, “Hey, why don’t you go to Texas A&M?” And I quickly responded and said, “I won’t be caught dead at that redneck school.” Well, a couple of years later, guess where I was going? And I went there, and I knew in high school I wanted to be an entrepreneur, but I just didn’t know how or what that looked like, I had no clue.
And so I figured, “Well, I like chemistry and I like problem solving, so I’ll go get a chemical engineering degree, that’ll give me a job that’s tolerable and I’ll always have something to do until I can figure it out.” And so I did that. I went and got a chemical engineering degree, double majored in meteorology for a while, and then also decided, “You know what? If I complete this, they’re going to send me to an outpost in the Alaskan wilderness, and I don’t want to do that either.”
So I graduated with an engineering degree and I guess it was an amazing four and a half years, but the freedom and creativity that you get to do as an entrepreneur, I would never want to go back, of just being in that environment of studying to take the test and not really to necessarily learn, and I found I was really good at that.
I could study something, remember it for two hours, write it back down, and then leave and completely forget all of it. And just looking back, that kind of feels like an empty thing to do. And I love being in this environment. Jason, you’ve absorbed so much in a few years, and that’s all self-taught, right? And self-learned, and from mentors, and that to me is much more exciting. So I had a good college experience, but today like what you’re doing, what we’re doing is just so much better.

David:
Okay. So Jason, you show up at college, prepared to be a good son, get good grades, get into grad school. What was your experience like?

Jason:
So my experience in the beginning, I was basically completely lost, like I said, didn’t know what exactly, if I wanted be a doctor, going to med school, going to grad school, whatever it is. But I chose the path of going down biology and trying to be a doctor, a physician.
So I took all the core science classes and there’s a lot of pressure on me because you have to get an A or B minimum to get to grad school, to go to med school. So I was living in the library, I was studying all the time, and there was this one class that eventually broke me and that was organic chemistry and that, if anyone’s taken that class, it’s the worst class I ever, have you taken it?

Andrew:
I have.

Jason:
You have?

Andrew:
I have organic chemistry 1 and 2.

Jason:
That was 1 and 2. Yeah. I’ll tell you why it’s terrible. So all day long, you’re drawing shapes with just different chemicals like carbon and nitrogen, whatever it is.
And I just had a thought in my head one day when I was studying for four hours straight for a test like, “Why am I learning this stuff? I’m never going to use this when I’m trying to actually help a patient.” So eventually, and it was just hard. My brain doesn’t work like that. And the way that organic chemistry works, you have to just, I don’t know, put different puzzles and stuff together. I can’t really explain it, but-

David:
Did you hate geometry?

Jason:
I hated geometry, yep. It’s kind of the harder version-

David:
It’s the chemistry version of geometry.

Jason:
Yeah, yeah, yeah.

Andrew:
It is. Yeah.

Jason:
I hated geometry.

David:
I’m guessing you liked geometry.

Andrew:
It was okay. Yeah. I mean, I was decent at it, but again, I kind of went into that stuff as something I could tolerate until discovering real estate.

David:
Did you also have a terrible teacher?

Jason:
No, my teacher wasn’t bad.

David:
Oh, that’s good.

Jason:
It was on the teacher, no?

David:
I had a horrible chemistry teacher in high school and I was like, “I just can’t do this.” I thought I was dumb. They were a terrible teacher. Then I found half the class failed. They were an intern that they stuck in there because they couldn’t find a real teacher. They was not good at teaching. And that whole time I thought I was terrible.
It was that, “Oh no, the teacher was really bad.” But sometimes that’s a blessing because this opened up doors for something else. So what was the light bulb moment after organic chemistry where you realized, “I hate this”?

Jason:
Yeah. So like you said, like Andrew said I could tolerate most of my classes, but that was the one thing I couldn’t tolerate. And that’s when I started looking around, like, “What else could be there, what other paths are there for me?” Because I never even thought about business going to college because my parents never really taught me much about business. I didn’t really know what that whole sales, real estate finance world was about. I knew absolutely nothing about it.
But every single, all of my friends in school, they were all business majors. They were all finance, marketing, entrepreneurship, every single one of them. And I just started asking questions, “What are you looking to do when you get out of college?” “I’m looking to go into real estate, be a financial advisor.” All that stuff. So I think just through networking and meeting people at San Diego State, that’s what kind of got me the light bulb running around, like, “What else could be there for me when I graduate?”

Andrew:
And is that how you discovered real estate? How did you, it sounds like they started kind of planting those seeds. Where did you go from there?

Jason:
I mean, to be honest with you, the huge moment where I eventually found real estate, I don’t know if this is PG enough for the show. It was-

Andrew:
I think they can bleep things out, right?

David:
I’m curious how on earth you’re going to turn real estate into something. PG-13, I think everybody wants to hear what you’re about to say.

Andrew:
Now we really want to know.

Jason:
Yeah, yeah. So it was finals week, my first semester of junior year for organic chemistry. And by this point I’d already been like, “I’m going to do something else. I have to do something else.” And I started investing in stocks, a little bit of finance stuff here and there, like Forex trading, bunch of BS.
And this one before finals, we go out to a concert in San Diego, and my friends and I decided to try magic mushrooms the first time. And we went to the concert, hit me like a train, and I became like a philosopher for the night. My whole world opened up. I started telling people what I was going to do with my life, “Dah, dah, dah, dah.”

Andrew:
Just like a Binance meetup.

Jason:
My left and right brain just connected. I swear. I got home. I gave my roommates a speech on how my parents are holding me back, on how science is a terrible path. I’m never going to be a doctor. And I woke up, changed my major to communication, and I went to every club on campus the next week and found real estate.

Andrew:
I think that’s one of the more unique paths to real estate I’ve ever heard.

David:
You just make it sound like psilocybin was, if everyone just took it, they’d immediately figure out what they want to do in life. There was nothing else that occurred in there. It was literally just left brain, right brain connect. You check every class or every course available, and then, a club you said, and then the real estate one just stood out, like, “That would be good”?

Jason:
Yeah. I joined the Real Estate Society. I joined the finance club, and my first event at the Real Estate Society was like a speed dating thing. So 20 professionals from San Diego met with 20 students, and we each had three minutes to meet every single professional.
And I connected really well with this guy named Brian, who was my old mentor, who hired me to be a commercial real estate agent. And he was talking numbers, talking about potential and what I’d be doing. And it just really resonated with me, my personality. I have a very type a go, go, personality. That’s what brokerage is. As you know David. So after that event, my first event at my school, I just started working in this company and that’s how I got into real estate.

Andrew:
How did you either convince him or get him, how did you go from a 3-minute meeting to working with him and his company?

Jason:
That’s a great question. Yeah, it didn’t just happen after a 3-minute meeting. So after 3-minute meeting, after the event ended, I was extremely scared to go talk to him after the meeting, but he said, “Feel free to come back and discuss more.” But I was in a corner thinking for four minutes on what I was going to say, because I knew nothing about real estate at the time. “What am I going to say to this guy when I come back?”
But I basically just came back and said, “Hey, I really enjoyed our conversation. I’d really like to work for you and see what you have going on.” And he told me it was a non-paid internship, no salary, no pay. Basically I’d give up my time for knowledge and skills. At the time, I didn’t understand that, but I said, “You know what? I really like this guy. I’m going to go for it anyway.”
So he invited me to his office and I met some of his employees, some of his agents, and I really liked the company culture there. I really liked what they were doing. There was guys that were doing very, very well at the company and the rest was history, I guess.

Andrew:
Awesome. Does he play any kind of role in your life or business today still?

Jason:
No. After I left the company, him and I haven’t really talked much. We ended on very good terms, but him and his partner, they’ve kind of taught me the whole business. But since we broke up, it was a good breakup, but we haven’t really talked to each other since.

David:
It’s a tricky thing, when it’s like you bring this person into the world and then they go and do their own thing. Sometimes if there are expectations where that’s going to happen, it’s okay, but it can hurt also, when you get an emotional connection with someone, that’s what no one talks about with partnerships. There’s an emotional component to them as well. So what time in history was this when you are moving up to be an intern?

Jason:
So, this was March of 2018. This was the second semester of my junior year. I just turned 21.

David:
Okay. And then when did you get your license?

Jason:
I got my license five months later, so in August.

David:
All right. And you’re still in college while this is going on?

Jason:
Yeah, still in college.

David:
Okay. So what are you doing there?

Andrew:
Failing organic chemistry?

Jason:
No. Yeah, no. Surprisingly I got a decent grade in that, but after that I changed to communication, like I said. So that was such a night and day shift from science. I didn’t study at all, just got through and got straight B’s. So I was focusing five hours a week on school, just going to class. And then Monday, Wednesday, Friday and Saturday, all day I would be at the office making calls.

David:
So you’re going to school, you’re studying, you’re doing your homework, and then when you have time, you’re just banging out stuff on the phone.

Jason:
Yeah. So I stacked all my classes on Tuesday and Thursdays, and then I would work four days a week.

David:
I did that too when I was in college. Same thing. Was it difficult to accept that you’re going to be making cold calls and getting rejected? How did you handle that?

Jason:
Yes. It was very tough at first. I had never ever gotten rejected like that before. I had no sales experience. So when I first came into it, I was the worst salesperson ever on the phone.
I got rejected really quick. People got me off the phone really fast. They knew how young I was just by my voice. So no one took me seriously and it took a lot of reps to eventually become good at what I was doing.

Andrew:
So that’s a really good point. So I’m in my mid-40s. I’m at the point where my once unlimited potential is starting to seem somewhat limited. You’re in your mid-20s, hopefully many decades ahead, which is a huge advantage, you’re starting early, but a lot of people in the audience, that’s one of the challenges is, “Well, hey, I’m young. I sound young. I have no experience. I barely know the language. How do I get people to take me seriously? How do I break into this?”
So could you speak a little bit more to that? So the person who’s listening who maybe just graduated college or just starting off, what did you do when you’re cold calling an owner of a 5-unit in San Diego? How did you get that person to take you seriously? And I’m sure a lot of them didn’t, right? And so that was part of what you were talking about, just pushing through.
But what would you say to the person who’s trying to do what you did in terms of having the internal strength to push through and to get people to take you seriously? Did you just own it and say, “Yep, I’m just getting started, but if you’re my first deal, you’re going to get more attention than anybody’s going to give you because your deal means everything to me.” Or was there, what tactics did you take?

Jason:
Yeah. So I think it took about a thousand conversations before I actually got a really good lead.

Andrew:
Been there.

David:
He knows his number. Ask him his number.

Jason:
What’s your number?

Andrew:
It took me 4,576 cold calls to get my first deal.

David:
Nice. That number makes it cameo in Long Distance Real Estate Investing, and if anybody wants to check that out. So you had to say a similar experience. You’re just getting rejected. Rejection sandwich every day for lunch, breakfast and dinner, with snacks.

Jason:
With snacks and dessert. Yeah, but eventually, I think the biggest thing that I want to mention is you can’t take the rejection personally because every single person that gets into real estate, you get rejected. So everyone’s going to tell you no in the beginning, and it’s just a part of getting into the game. It’s the gate you need to walk through in order to become a real estate salesperson or an investor.

David:
It’s like hell week, but it lasts for a lot longer than a week. It was dragged out for a 4-year period of life.

Jason:
Exactly, 100%.

David:
I was rejected by my own hairline. I got exposed to this earlier in life. I can relate.

Andrew:
Basically, it sounds like what you’re saying is, is just put in the reps and you’ll learn the language and you’ll be able to connect with people, and then you’re still going to get tons of rejection, but if you just hang in there eventually you’re going to make the connection and not get the rejection.

Jason:
Yeah. But there’s two more things that really helped me besides the reps. The first thing was I had a really good sales trainer. I had a really good broker that was teaching me on what to say, how to say it, teaching me how to be an expert in my market and how to analyze deals, how to understand the lingo, know what you’re talking about because if you sound like you know what you’re talking about, no matter how young you are, people are still going to take you seriously. And deal by deal, your track record gets better and better. So you can use that to your advantage, your testimonials.
But the thing that really moved the needle for me that I think is mandatory for anyone that’s young watching the show, that’s graduating out of college that wants to be in real estate is you got to have an older, wiser partner to go to meetings with you, to be on calls with you in the first year of your career no matter what.
Because if you go into real estate without a team just on your own and you’re trying to sell properties or buy properties and you have no guidance and no one by your side to go to those meetings to close sales with you or to close deals with you, you’re going to have a really hard time compared to the person like me that had that partner by my side.

Andrew:
Yeah. I mean, I would concur 100%. I had that too when I started off. It still took me 4,500 calls, but without that official mentor and my wife sitting next to me and I’d hang up and she’d be like, “Honey, that was good, but next time try this instead.” Yeah, you’re absolutely right.
Finding that person, whether it’s a paid mentor or you’re working for free or someone in your office or even a family member, is absolutely critical. It is so hard to see yourself objectively and fully enough and develop it all on your own.

Jason:
Commercial real estate brokerage is a revolving door and it’s a revolving door, not because of the lack of talent, it’s because the lack of mentorship, the lack of time people are willing to spend into these new agents, because if you just tell them to give them a script and a call and you don’t give them any guidance until they bring you a lead, which is what most commercial real estate brokers in the industry expect, a lot of your agents aren’t going to succeed.
And I’ve taken the opposite approach of my agents and give them a lot of guidance, a lot of training, being on every follow-up call to make sure that they know that I’m here and I care about them.

David:
So what came first? You’re banging the phones. Did you get your first deal or did you get a client first?

Jason:
So I got my first client from banging the phones. I didn’t buy my first property until I was three years in two brokerage.

David:
All right. So tell me about your first client. What type of a deal was it?

Jason:
I’m glad you asked. It’s a horror story. So the client was great. The client was amazing. It’s a horror story because of the circumstance. So this was six months into the business. Keep in mind I had no money in my bank account.
I had finally got a great lead and after doing my side hustles, going to school and trying to spend time into brokerage, I’d finally gotten my first really good listing appointment after six months and my senior broker crushed the meeting. We got the listing, I was on top of the world.
This was November of 2019, I want to say, no, 2018, sorry. November of 2018, four or five days after the appointment, the owner unexpectedly passes away and the owner didn’t have a trust for the property. So you know what’s coming next. It went into probate.

David:
It goes to the state, the state has to determine where it gets messy, process takes forever.

Jason:
Thank you.

Andrew:
Yeah, not fun at all.

Jason:
Not fun at all. So through a probate attorney, they told me it would take at least six months to a year to get it out of probate into the son’s hands and to be able to sell it. And when I got that news, I went home from the office that day, cried the entire way home, and I told myself I was going to quit real estate. I was done. “My family was right, my friends are right. I should not have gone into real estate. It’s way too risky. It’s a terrible business. I need to get out of this.” But something in my gut just told me to stay.
Something in my gut said, “You’ve learned so much in these last six months. You have a great team behind you. You have a lot of potential.” And for some reason I came in the office that day and just kept doing what I was doing, but I was very, very close to quitting the business forever.

David:
Those are some key linchpin moments in our lives. I can look back and remember several of them. And as you were talking, what I realized with a little bit more wisdom is it wasn’t just the experience that was so bad, it was my interpretation of the experience.
So what you were interpreting was, “I was told not to do this. I was told to take the safe route. I thought I knew better than everyone. I told them all, I know what I’m doing, get out of my way and now I’m wrong. I failed. I should have listened. Why did I trust my gut?” And that’s so dangerous because if you lose confidence in yourself, you’ll become a slave and live in the matrix for the rest of your life.
That’s why that was such a powerful moment that you didn’t quit because if you had quit, you would’ve been empowering the interpretation that you don’t have what it takes. And that would’ve become your identity and maybe the story of your life for a very long time, maybe 20 years before you give it another try. Maybe that’s why all these middle-aged guys end up getting Corvettes and it’s because they’re having to come out of that identity.

Andrew:
Finally, getting out of it. Yep.

David:
Yup. That they developed. But that didn’t happen with you. How did you respond instead?

Jason:
I showed up, put my big boy pants on and just said, “I’m going to keep doing what I’m doing.” I had a decent pipeline built, so I knew I wasn’t just like, “I had nothing going for me.” So I knew I had something going for me. And when I talked to my mentor about it and really just ran through what I was feeling, that it’s been six months I’ve made a single paycheck and I just lost any sort of chance I had of making one soon. And from that conversation and a lot of upbringing from my peers, I ended up just sticking with it.

David:
So your boys picked you up?

Jason:
My boys picked me up, the property went out of probate much faster. They did a really good job. It was actually out in two months. That ended up being my first deal. The check was a whopping $3,000. Huge check.

Andrew:
Still a check.

Jason:
Still a check.

David:
It’s funny that that’s what you were crying over, right? Like 3000 is nothing, but it’s the interpretation that was causing all the pain. It’s not the actual reality.

Andrew:
And Jason, you said something that I think it’s critical for everybody to listen to and remember and that you told yourself, a part of how you kept yourself going. You said, “Well, look, I know I’ve developed a pipeline. There’s more behind this.” And I think a lot of people underestimate the importance of that, is don’t focus on, “There’s just this one deal. I got to get this one deal.”

David:
It’s zooming in.

Andrew:
Yeah. You’re getting too far zoomed in. You were zoomed out in the big picture saying, “All right, you know what, this might fail. It’s like a gut punch, this sucks. But you know what? I’ve got more coming. I’m going to keep going and zooming out and keeping that perspective.” Is absolutely critical, especially when you’re getting started and is just build that pipeline out. So that was really good on your part.

Jason:
And I mentioned earlier, and this is when I got the best advice I ever got from my mentor is you’re learning the skills now, don’t worry about money. You’re learning the skills right now in your career to be able to become a great broker, a great agent, great investor in order to make more money in the future.
Because in commercial real estate brokerage or in any brokerage, when you’re an agent, David, your first year, it’s your toughest year, right? It’s the hardest year of your career, but your income can literally two x every single year just because of the skills you’ve learned in that first year.

David:
If you learn the skills.

Jason:
If you learn the skills.

David:
Yes, a lot of people focus on the money, not the skills. It’s like a leap of faith. You’re just constantly building skills and believing eventually that’s going to turn into money for you.

Andrew:
All right, so you told us the story of how you got your first brokerage deal. Tell us the story of your first investment deal, how you got it, what kind of deal it was, where it is, all those kinds of things or where it was.

Jason:
So like usual, day-to-day, I was calling people as a broker, as an agent, and this was three years into the business. And I finally saved up a little bit of money to go to buy my first property. And I called this owner who lived in San Jose. He just inherited a fourplex and a duplex in San Diego. And he told me that he was listing the properties with his property manager and I give him a call, gave the property manager a call, and the fourplex was extremely overpriced, but the duplex was actually extremely underpriced.
They listed it at $750,000 and it hadn’t gone to the market yet. It was a three bedroom, two bath house in the front and a little one bedroom, a studio house in the back with a two car garage in the front and a one car garage in the back. And at the time, the property was probably worth about 800, $900,000. So I knew it was a good deal and it had ADU potential because the garages can be converted into two units.
So I let the property manager represent me. He made an offer on my behalf because when the listing agent represents you, I believe at least that you have a much higher chance on getting the deal. So I let him do that and went into contract for 750. I went into contract and did my inspections, did my due diligence, and got some really tough news that the entire foundation basically had to be replaced. The electrical system was old knob and tube, which if you don’t know what old knob and tube is-

Andrew:
That’s not good. Yeah.

Jason:
Yeah. You can’t get insurance. It’s the worst kind of electrical, 1920s wiring and needing a new roof. It was ridden with termites and all the windows need to be replaced.
So when I got that news from my inspectors, my contractors, I almost backed out of the deal because this is the first deal I was going to buy. I was too scared to take on a massive renovation project. I was like, “There’s no way I can do this. I have no idea how to manage a contractor, how to run anything.” But took a risk like most investors do.

Andrew:
How did you get over that fear?

Jason:
I got over that fear of buying the first deal just because the numbers were so good. I just knew I trusted in the underwriting. I knew even if I was a 100K, 200K above budget, I still would make a lot of money on the deal.
So I think just the deal being so good itself made me feel comfortable that even if I screw everything up, make every mistake in the book, I can still come out of this a little bit positive.

Andrew:
Did you find a mentor or someone to help you manage the contracting element of it? How’d you get past that piece or did you just go for it?

Jason:
I just went for it. I never had a mentor for managing contractor. I had some clients who kind of gave me some info. I actually had a client who gave me the referral to the person that scammed me, which I’ll talk about later. But I have a lot of horror stories with contractors just because I learned the hard way.

Andrew:
And you said this thing’s in San Diego, I thought, you can’t make investments in California.

Jason:
I said that?

Andrew:
No, no, no, no, no. That’s the running narrative is can’t invest. And candidly, that’s one of the things I say is I love living in California and I love to live where I love to live, but invest where I get the best returns, and for me, that’s not in California, but to me… So you’re doing a different business model. You are making it work. And the reason I want to highlight that is because again, I think a lot of people say, “Oh, I live in San Diego. It’s too expensive. Well, I guess if I bought in San Diego 20 years ago.” Well, you live in San Diego and you just did this in the last few years.
So is there anything you think that’s different that, again, it sounds like you got it at a great price, but is there anything else that if someone is trying to invest in a market like that, that they should be pay attention to or that can say, “No, I can invest here.”

Jason:
Well, I think when most investors who are starting out think of California, first off, a lot of people like yourself probably say, California’s a bad place to invest. So they hear from all the YouTubers, people on podcasts that you want to buy in a red state. California’s a blue state.
And when people think of California, a lot of people think of the strict laws in the city of San Francisco and in the city of LA. Not all of California has extremely strict laws on displacing tenants, on doing a renovation, on executing on what you want to do. And investors do it every single day. And something that California has that no other state has is we have the best weather in the country. People still want to move here. We have a great economy. Companies are still coming here. Apple just invested millions into an office park in San Diego.
So if you’re not investing in the city of San Francisco and the city of LA, I think you’ll be just fine. And the thing that I look for when I buy properties even in California is that I make sure that no matter what, I understand that my basis is going to be significantly lower than what properties are going for right now in my location. And that’s how I’ve been able to scale pretty quickly.

Andrew:
So you’re looking at basis versus not to say you’re ignoring cashflow, but you’re looking at basis which is going to create equity, which as David you say, is really what builds your wealth, not necessarily cashflow.

David:
Yeah. Over a longer period of time.

Andrew:
Over a longer period of time. And so that’s how you’re making it work, so awesome. Thank you. Appreciate that.

David:
So, explain what that means by how you’re focusing on basis and why you feel that’s beneficial.

Jason:
Yeah. I mean I actually learned a lot about it from listening to you. So in a lot of shows you say your money’s built on gaining equity, not gaining cashflow. So you make your money on appreciation, and California arguably appreciates faster than any other estate in most cities.
So when I buy, I don’t buy for cashflow because I’m in a career that I love. You guys always talk about, you want to buy for cashflow if you’re in a career that you hate because you want to get out of the career as fast as possible, but that’s not the case for me. I love being a real estate broker, so I don’t need cashflow. So I don’t really pay attention to that as much.
I care about what am I buying it for and what can I sell it for or what can I refinance it for? What’s the appraisal value after I’m done? And the super simple rule of thumb that I use, is if I know I can sell a property for a million dollars, I want to buy it for 60 to 70% below that million dollar value. So I want to buy it for 700 grand or less. That’s my first stress test. And then I go deeper into things.

David:
So let’s break down. First we’ll talk about the area, then we’ll talk about the actual properties, little many economic lesson in supply and demand for people who are listening that have been told, California’s bad or expensive is bad because that’s the objection. “California is too expensive. I will go over here and buy something else.” But they don’t ask the question of, “Why is California expensive?” Okay, so let’s break into this. San Diego, is that a terrible place to live?

Jason:
Horrible.

David:
Do people hate it?

Jason:
They hate it so much.

David:
Absolutely. I don’t know anybody that sticks around in San Diego. They’re like, the running joke is I called the Bermuda Triangle, because all my buddies from high school that moved to San Diego to be bartenders and stuff, they never came back. I don’t know what they’re doing or where they are now, but no one does. You go to San Diego and you just get stuck there. It’s very, very difficult to live anywhere else.
It’s some of the best weather, some of the best locations of anywhere in the entire world, first off. There’s also only so much land out there. So you have a constricted supply because it’s a very small area, which is something people fail to look at when investing. Yes, you can get a cash-on-cash return if you go buy a single family house in Kansas, you’re never going to have a constricted supply in Kansas. They can just build houses ad nauseum forever. So the prices can’t go up.
One of the first things I like is a constricted supply. Austin, Texas has a constricted supply. They’ve got a river that runs through the city. There’s only so much within that river. It’s not shocking to me that you get appreciation there when everyone else talks about it, like “Appreciation is just luck. It might happen, but you can’t bank on it.”
Well, we can’t bank on cashflow either, but the odds are, if a property is newer, in a better location, has wages that are rising, in better condition, it’s going to cashflow better than a property that you have no idea. You can still put the odds in your favor. So constricted supply, you can build more, and a rising demand as more and more people want to go live in San Diego and people that go there don’t want to leave. That is a formula for appreciating assets, first off.
So you’re going to make money in equity investing in a market like that, but you might have to wait because everyone else wants to buy it. Cap rates are going to be very low in areas that everybody else wants to get into. If you look at that and say, “Oh, it’s too hard to make money here, I’ll go somewhere else.” You’re missing out on why everybody wants to be there.
The other area we have to look at is cashflow. Of course, it’s not going to cashflow super strong because cap rates are going to be low. Demand is going to be very high to get into that space. There’s going to be a lot of competition for every building because it’s desirable. But what do rents do in an area with constricted supply? It’s very difficult to find somewhere else to rent and wages keep rising because tech companies and other wealthy people keep moving there. Do they go down or up?

Jason:
Up.

David:
Right? So if you wait long enough, rents are going to be going up. The properties you buy in San Diego, 10 years ago have insane cashflow versus the stuff that everyone was saying, “It’s too expensive. You don’t get any cashflow. You have to go to Wichita, Kansas if you want to get cashflow.” Wichita, Kansas cashflow, and I’m generalizing right now, is roughly the same in 10 years as what it was when you bought it versus that San Diego property. You look like a brilliant genius.
It’s that to me, my perspective is how much gratification are you willing to delay? Does it need to make money now or can it make money later? Now, part of that’s the model. If you’re raising money as a syndicator, you’re on a timeline maybe five years before you got to pay back your LPs. You do not have the, what’s the word I’m looking?

Andrew:
Luxury?

David:
Yes, thank you. The luxury of delaying gratification for 10 years. So that property falls outside of your buy box to no fault of yourself, but if you’re buying it for yourself, you’ve got some other partners that are involved in this that don’t need to pay off really well, it can work. So are you using some of those ideas to find inefficiencies in the market to make these deals work that other people miss?

Jason:
I think one thing to note is that right now in the market, it’s much less competitive than it’s been in the past five years, six years I’ve been in the business in San Diego. So there’s a lot less buyers that are sharpening their pencil in San Diego right now.
Competition has gone down, but inventory’s still gone down. But the inefficiencies in San Diego are that everyone just looks on the market and thinks that that’s what San Diego is and there’s no better deals.

David:
Oh, I see where you’re going. You got that superpower of being able to call people on the phone.

Jason:
Yeah. And I’ve been able to find my clients some very good deals and myself by just picking up the phones, doing marketing, sending postcards, doing a lot of social media, digital marketing and bringing leads to me.
So you have to find leads in a competitive market before they get listed in order to have a chance at getting a deal that pencils, because I’m telling you right now, if you look at every property in San Diego right now, none of them are buys on the market, but there’s a lot of buys that are potentially off market right now.

David:
Buys by your metric of 70 cents on the dollar or buys period?

Jason:
I personally think buys period, I think a lot of I mean, no, I mean, everyone has different goals. So if you’re looking for a buy and hold, a very stable investment and you don’t need to get that uptick in equity right away, it’s a good investment.
So it’s a lot of old money. A lot of people are going to park cash into San Diego, but I’m not that kind of investor. I’m looking to grow the portfolio. I’m young, I don’t have that much money yet. So I’m looking to early quickly-

David:
That is a good clarification. And the reason I ask is when people hear that, “Oh, it doesn’t make sense to buy there.” And they just take it at face value, they expect prices will have to come down. Because if it’s not a buy, no one’s going to buy it. So they’re going to have to drop the price and then prices don’t drop.

Andrew:
Right. And I think another key point, and you mentioned this earlier Jason, is you have an income from something that you love to do. So you’re okay buying something that maybe doesn’t cashflow. So that helps enable you to do that.
One thing I don’t want to miss is you, I think you mentioned something about getting scammed by a contractor. Could you dive into that? Tell us about what that was, how it happened, what you learned?

Jason:
Yeah. So like I said, the contractor referral was a referral from a client of mine in the business. But after I bought that first property and a couple months went by and I actually bought four more properties in the span of three months when I bought my first one. And all five of those properties, me and my partner, they were complete full gut renovations and I was really dumb. I was young and stupid, still am young and stupid.
But I trusted this contractor to take on all of these five properties at once and no work was being done. He didn’t have a contractor’s license, he wouldn’t put anything in writing really, and I didn’t know if that was a good thing or a bad thing at the time. It’s the worst thing you can do is not put things in writing as you guys know.
So nothing was in writing, didn’t have his license. I later found out that he lived in, I mean we’re close to Mexico. He lived in Tijuana, so didn’t find that until deep into the process. So basically-

David:
Was he licensed in America?

Jason:
No.

David:
Okay. So he was using the phrase contractor, but he’s like a contractor in Mexico.

Jason:
He’s like a handyman.

David:
Yeah.

Andrew:
Yeah. Here you go.

Jason:
Yeah, he had a crew. He had a crew of people. Now they did do work. They did try to get things done but didn’t have the manpower, didn’t have the skill sets to do all the work that we required. And eventually I think he just blew up one day and just started covering up stuff.
Didn’t do the plumbing right, put drywall over it, kind of put crappy showers in. Didn’t do any of the plumbing, didn’t replace the electrical. He said he fixed the foundation, but all he did was stick a wooden post and pier under it. That’s all he did.

Andrew:
Might not pass code.

Jason:
Might not pass code. Yeah. It was actually worse than if he had just left it alone. It would’ve been better than what he did.

David:
He’s like, “Throw a two by four in there and we’ll say that it’s braced.”

Jason:
Yep. That’s what he was doing. He said everything was getting done. I didn’t know how to, at the time I didn’t know what was right and wrong. So I just kind of believed that at face value, I was just cutting him checks left and right. $25,000 check here, $40,000 check here.
And eventually if you add up the work he did versus what I paid him, I was probably at like 125, $130,000 loss on what he did before he just walked away and just ghosted me. So one day he just stopped answering his phone, stopped talking to me and just fled.

Andrew:
I bet a hundred grand goes pretty far in Tijuana.

Jason:
Probably does.

David:
That is a scary thing. You learned a lesson there. Definitely. When I wrote Long Distance Investing, one of the things I said is you can give your contractor a little bit of money up front to do the work, but then you don’t want to pay until it’s been done and you just probably didn’t have the experience to look and see that the work is being done right. You’re like, “Yeah, that looks like plumbing. I guess,” You had a person-

Andrew:
I wouldn’t know either, right?

David:
Most of us don’t. But if you had a person with a little more experience involved, kind of like you said, brokers that are helping out newer agents, they would’ve said, “Yeah, that rough and looks terrible. We’re not going to move forward with this.” Or you’d recognize you were scammed.
Luckily it didn’t stop you because you haven’t quit. That’s the story here is you just paid a hundred thousand dollars to get a very, very, very valuable education that you’ve now turned into much more money in the future, which has allowed you to help your parents out. So tell us about how you’ve been able to help your parents out with your success.

Jason:
Yeah. So that was the big why on why I got started in real estate and it’s amazing to say I’ve come full circle with it. It’s probably the biggest accomplishment in my life so far. Like I said, my mom was a struggling immigrant that came to America, had a lot of failed businesses. And the last two Christmases, I think altogether I’ve given them about over $200,000 just as like a thank you card, and also I bought them a triplex in Oceanside, North County San Diego.

David:
Awesome.

Jason:
So they cashflow a little bit off that each month too. But I’m looking to buy my mom a house here in San Diego next, coming up soon.

Andrew:
All right. So you told us about the first brokerage deal. You told us about your first investment deal. You certainly had some tough challenges in those first deals, which both cases you very much overcame.
Where are you today? My understanding is you’ve done quite a lot since then. So give us a snapshot of what your portfolio and investments and business looks like today.

Jason:
Yeah. So on the real estate portfolio side, I’ve acquired a total of 26 properties. I’ve sold off about-

Andrew:
All San Diego?

Jason:
All San Diego, yeah. When I first started it was all small, like two to 4-unit buildings, but a year or two went by and I 1031 those buildings into larger assets. So I’ve done about 26 acquisitions, sold a good amount of them to trade up into bigger assets.
Now we have 17, so we’ve never actually cashed out on a property except one. We’ve kept reinvesting the profits into larger assets. So that’s how I was able to grow pretty quickly. A lot of people ask me if I raised money to start and because I bought a lot of properties quick, but I’d actually just saved up a good chunk of change and I had the perfect partner to start with me.
So I was the deal guy, I was the front lines guy and my partner, he had a debt fund, like a private money, hard money fund. And me and him put 15% down, 50/50, got debt, renovated it quickly, and then refied out or sold it. So we just did that over and over again in 2020 and 2021 and eventually built our portfolio pretty quickly without outside capital from LPs.

Andrew:
Quick aside, how did you find that partner and how did you, for lack of a better term, convince them that you were investible?

Jason:
Yeah, so here’s why I think being a commercial real estate agent is so valuable. If you want to get into multifamily, if you specialize in selling multifamily investments to clients for a living, eventually you’re going to get pretty damn good at underwriting those assets and know your area pretty well.
And eventually you’ll develop some really good client relationships where you do deals with them over and over and over again. And when you build that trust with a client and you build a good friendship, like I did with my partner. After we built that friendship, I had four or five properties tied up in escrow that I couldn’t buy on my own.
And he actually offered me to, he asked me to partner with him. I didn’t even ask him because he knew I was a hard worker. I sent him deals every single day. I’m on the phone with him constantly, so he knew I’d get it done. So I built that relationship with my future partner just by being in the business as a broker.

Andrew:
What’s the, back to your portfolio, what’s the current value? What would you estimate is the current value in today’s adjusted market and cashflow?

Jason:
Yeah. I mean we’ve sold some stuff and prices are still steady, but right now it’s like I sent an REO to a lender. It was about 48.9 million portfolio value and we have 117 units, 119 units around town.

Andrew:
Nice. Well done. So you mentioned getting to know your market, underwriting deals as both a broker and an investor. Can you share your formula for underwriting deals?

Jason:
Yeah. I can share with anyone. It’s an easy one-page sheet. So if I’m buying a property, I want to know the current cap rate, what the cap rate can be after I’m done with it.
So I have the current rents, the pro forma rents, which is the market rents after I’m done rehabbing it. And then I have the GRM, which is a gross rent multiplier. And I like the gross rent multiplier a lot more than the cap rate just because a lot of brokers can mess with the cap rate because you can lower the expenses to make it look like the building’s actually operating-

Andrew:
David can do that.

Jason:
… better than it is. And a lot of the times when you get these offering memorandums and marketing packages from brokers, a lot of the times the expenses are estimated. So I like going off of GRM because it’s just the rents and that’s the metric that I go off of because you can’t really mess with it.
So I go off the GRM cap rate. If I can stabilize at a cap rate that’s two points above the going cap rate, I know it’s going to be a pretty good deal. And if it fits that 70% or 30% below market value stress test. So if I buy a property for a stabilized seven cap or I can get it to a seven cap and the market’s selling for a five cap or under, I know the deal is going to pencil. So I’ll make an offer at that point.

David:
All right, Jason, what advice would you give investors who are experiencing how hard it’s gotten to find a great deal right now?

Jason:
I think, I mean myself, a lot of people are struggling with this. Are you having a tough time finding deals?

Andrew:
Absolutely. We’ve only closed one large acquisition this year and we’ve underwritten probably 400.

Jason:
Got it. I’m excited. I want to hear your take too. But my take is I’m not super technologically fancy. I’m very simple and I just think for me to get more deals, just because there’s less inventory, the market’s not moving as much. You just got to put in twice as many reps as you were before.
And one of my mentors told me it was one of the best advice I ever got was in a great market, any average person can make money. But in a slow market, in a down market only the superstars can make money and the superstars emerge in markets like this. So I think that if you’re telling yourself there’s no deals, there’s deals closing every single day in every state, in every city.
So if you tell yourself that deals aren’t going to move, then that’s what the world’s going to give back to you. But if you tell yourself that the market’s still moving, I’m just going to work harder to get a deal and do what I’m doing because it works, eventually you’re going to make it happen.

Andrew:
Yeah. I was in the airport this weekend and cross country flight, got off the flight with tons of people and this is LAX coming back to California. You got off and you come to that place where you’re on the ground floor and there’s just this massive escalator up to the second floor, and for some reason the airports, each floor is 30 feet tall instead of the normal amount.
And so I’m standing there looking and I see seriously probably 120 people on the escalator and on the set of stairs right next to it, zero, not one person. And I stood there and I thought, I’m like, “Okay, that escalator represents the real estate market for the last 10 years.” If you basically had the courage to at least get on it, you probably had a fairly easy ride to the top.
Now, we’re in a market where you got to put in, you got to take the stairs, you can still get to the top, but it’s going to be a whole lot more work and a whole lot more effort and doing the kind of things that you’ve been doing and are still doing.

Jason:
It’s a really good analogy.

David:
Yeah. And you’ll be better off for it, right? Taking the stairs is healthier.

Andrew:
Absolutely.

David:
Even though you sweat a little bit.
All right, so any advice on turning leads into deals once you find a lead?

Jason:
I think one of the highest paying skill sets is being able to close a lead because you can hire people to find leads for you. You can have a marketing budget and get leads, but when you actually have to convert the leads that come through your door, that’s what separates a great business from a mediocre business.
And the thing that’s worked extremely well for converting leads in my brokerage business and in my investing business is that we always lead with credibility. So we always lead with, here’s what we’ve done, here’s our track record and we have a nice little package on our reviews, 5-star reviews work extremely well for us and our deal history works very well and we lead with that.
But then after we kind of say who we are, a huge mistake that a lot of salespeople make because in real estate we’re all in sales, is that they do a lot of the talking like me as the professional, a huge mistake that people make is you do 80% of the talking. But the University of Harvard did a study that the best salespeople actually only spoke 20 to 30% of the time and the client spoke way more. And it’s your ability to ask the right questions that actually lead you to your destination much faster than you just blabbering along.
Asking the client from a place of caring on how you can help them, what their goals are. “If we did this for you, what would your dream place be looking like?” So asking tactical questions. A question that works really well for me is when a client kind of comes to us and says, “I’ve been thinking about selling.” I always ask, “We don’t want to waste your time. What would be the perfect scenario for you if you were to sell your property? And what would you do with the money?”
Because in the real estate world, whenever you sell, no matter what, the biggest issue on why people don’t sell or do sell is, “What am I going to do when I sell? Am I going to cash out? Am I going to exchange? What am I going to do with it?” So if we can tailor the process to where their goal is matched with the actions we provide.
For example, if a client cashes out, they want that money as fast as possible. So we want to try to find a buyer listed as fast as possible and do a quick close. But if they want to do an exchange, which is a huge rebuttal, a lot of clients don’t want to sell because they’re scared of not finding a property, is that the huge thing that we do that benefits our clients is that we bill in two to four 30-day extensions after the close of escrow, after the actual close of escrow.
So if escrow is 30 days, if the buyer removes contingencies in 17 days, the seller can exercise two to four depending on what we can negotiate with the buyer, 30-day extensions to have more time to go shopping for a property.

David:
That’s smart.

Jason:
So that is just two examples of how we can cater a scenario to what our clients are looking to achieve. And that’s really helped me convert leads is coming from a place, like, “What can we do to help you?”

David:
Solving problems.

Jason:
Solving problems.

David:
That’s what we’re here to do.

Andrew:
That’s what you get paid for.

Jason:
Yeah.

David:
Awesome man. Well, we appreciate you sharing your story. I’m very glad you didn’t end up an organic chemist. We would all be worse off for it. Same for you Andrew. Glad that you’re not still a, you were a-

Andrew:
Chemical engineer.

David:
Thank you. I think word chem was in there, but I realize it wasn’t the same type. Yeah, chemical engineer, this is great.
Where can people find out more about you if they want to follow up?

Jason:
Easiest way is to find me on Instagram or YouTube. It’s just jasonjosephlee, and then I also have a free multifamily investing course if anyone’s interested in hearing about it as well.

Andrew:
And should also point out if anyone’s just trying to look up Jason Lee, this is not the Jason Lee who starred in My name is Earl back in the early 2000s.

David:
That was a great show though.

Andrew:
It was a great show.

David:
You don’t remember that, do you? Not old enough.

Andrew:
He doesn’t, he.

David:
It was funny.
All right, so reach out to Jason if you are in the Southern California area and want to buy commercial real estate and reach out to me if you’re in the Southern California area and want to buy residential real estate and reach out to Andrew Cushman, if you’re just in Southern California. Where can people find out about you?

Andrew:
Go to BiggerPockets and give me a colleague request so we can connect there and then follow me on LinkedIn and of course, just look up Vantage Point Acquisitions and there’s a handful of tabs there to connect with us that way.

David:
That’s such an Andrew thing to name your company. Vantage Point Acquisitions. Have I ever told you this?

Andrew:
No, but I have a follow-up comment. Go ahead.

David:
It’s so accurate but yet incredibly hard to spell. And you never thought about the fact that most people are not going to know how to spell acquisitions perfectly and they’re never going to find you.

Andrew:
Well, and also it shows that what shows when my early mistakes, and this is something I think most beginners make, I was too focused on. “I got to get a deal. I got to get a deal. I got to get a deal.” So I named the company, it should have been Vantage Point Capital, not acquisitions, right? But, so every time I say Vantage Point Acquisitions, I think I’m like, “Oh, it should be capital.”

David:
I made the same mistake with my social media. I called myself davidgreene24 because that was my high school basketball number and there was already a David Greene. Looking back, people are always like, “Why do you call yourself that?” I have no good answer. It was just pure laziness, because I had no idea that it was going to become this big of a thing.

Andrew:
Yeah, I just wanted to acquire deals, so there you go.

David:
So speaking of that, you can find me on social media @davidgreene24 or check out my website, davidgreene24.com. I put a chat feature on there. So people don’t realize this, but they can actually chat with me directly going to that site. I talked to some of them and then I’ll pass them off to the right team members.

Andrew:
So it’s not David GPT. It’s actually David?

David:
Yes. I am going to have some kind of a stamp of guarantee that you will never get. You may get a form of AI at some point. I can’t say it will never happen because it works into operations, it works into things. And I even think that that chat system has AI that starts the conversation, but I get a notification on my phone and I will talk.
So at some point I’m going to have a little cheesy seal that’s like, “It will always be a human that you talk to, not a bot pretending to be human.” Because-

Andrew:
I like it.

David:
… everyone’s excited about AI, saving them time and no one’s thinking about the customer. I’m not super excited for AI to take over all the conversations I wanted have with Jason and instead I’m talking to a computer that’s telling me what I want to hear. So you still talking to your own clients?

Jason:
I am.

David:
All right. You hear that. Andrew, Jason and David all talk to real people, so.

Andrew:
Yep. No chat functions here.

David:
There you go. So check out that site. Go give me a follow and check out BiggerPockets on YouTube. If you’re not listening to this on YouTube, you could be and you can see three very good-looking guys, or at least two good-looking guys and me on YouTube here for your viewing pleasure. Let us know in the comments what your favorite part of today’s show is.

Andrew:
Well, they say handsome guys are eye candy. I think that puts you and me more in the category of eye broccoli.

David:
That’s right. This get your visual vegetables here on BiggerPockets, cheese scoop. Jason, you’re like the cheese whiz to put on the broccoli man.

Andrew:
Yeah. There you go.

David:
You make us look good.

Andrew:
You make us look good.

David:
Yeah. That’s how we eat it.
This is David Greene for Andrew, my partner in Multifamily Investing, Cushman signing off.

When a member of the C-suite leaves their position, it can have a ripple effect throughout the whole company. Because they’re a key leader of your business, their departure may leave employees wondering whether they were let go or left of their own accord, whether their own jobs will be affected, whether there will be significant changes to the company culture or whether new policies and procedures will be put in place.

While change is often necessary in order for companies to grow, key changes in leadership must be handled thoughtfully to help quell these fears and answer employees’ questions. To do so, consider the following advice from the members of Young Entrepreneur Council. Here, they offer their best tips for how to ensure a smooth transition and avoid any negative impacts after a C-suite exec leaves your company.

1. Open Lines Of Communication

Keep a pulse on employee morale. Humans are creatures of habit, and we often struggle with change. When members of the C-suite leave their positions, it can create uncertainty and anxiety among employees. To avoid this, you can open lines of communication and remain empathetic to their concerns. This will help non-management employees feel heard and supported during transition time. – Bryce Welker, Crush The CPA Exam

2. Involve The Entire Team In The Transition

To avoid any negative impacts on the business, I would suggest involving the entire team in the transition process. For instance, at Rainfactory, we scheduled one-on-one meetings with the replacement hire as soon as we found the candidate. This not only helps streamline the process, but it also ensures that there is no loss of valuable information or expertise. – Kaitlyn Witman, Rainfactory

3. Avoid Creating More Change

Creating stability companywide is the best way to avoid negative impacts and ensure a smooth transition when an executive leaves their position. While long-term change is inevitable, try to avoid other drastic changes in the short term. The rest of the organization will feel more stable in their own positions if most of their day-to-day work life remains unchanged. – Ian Blair, BuildFire

4. Outline And Communicate An Action Plan

Outline and communicate an action plan to fill in the gap. This will show that you are equipped with everything you need to handle the transition, and it will boost team confidence and morale since they will know operations won’t be disturbed. Of course, you also want the exec’s departure to be on good terms, so communicate that. In doing so, you put everyone at ease with the new change. – Firas Kittaneh, Amerisleep Mattress

5. Provide Access To Support

There’s no question that when a C-suite team member leaves, this can cause stress among your employees. The best way to reduce the negative impact is to create a support web designed to help employees who are feeling a little worried and anxious. If there’s someone there to help and guide them, they are far less likely to get overwhelmed when there’s a significant change in management. – Chris Christoff, MonsterInsights

6. Onboard Someone Who Can Navigate Change

To avoid any negative impact when a member of the C-suite leaves the company, you need to seek and onboard a better replacement. The goal here shouldn’t just be to hire a professional who is best suited for the role—it should also be to hire a “people person” capable of keeping up with chaotic situations. Doing so will help you fill the skill gap and address the questions that others have been asking along the way. – Stephanie Wells, Formidable Forms

7. Prioritize Transparency

When a member of the C-suite leaves, transparency is the best policy to deal with the situation. Start by conveying the news to all key stakeholders and announce that you’ve been looking for a suitable replacement. Remember, rumors and speculations are bound to follow. The only way to control the narrative is by catering to the looming queries and concerns in a straightforward way. – Jared Atchison, WPForms

8. Facilitate A Smooth Transfer Of Knowledge

My top tip for ensuring a smooth transition would be to facilitate effective knowledge transfer. Encourage open communication and documentation of key responsibilities, processes and contacts. Facilitate collaborative handovers, where departing executives share insights and mentor successors. This knowledge transfer minimizes disruption, empowers the incoming leaders and fosters continuity within the company. – Ian Sells, JoinBrands.com

9. Step In To Help Temporarily

I’ve found that it’s helpful to step in personally and manage things for a while until a new person is in place. This helps your team because they’ll know who to turn to, and this also helps you get back in touch with the daily workings of your company. Plus, you’ll find loose ends that you can step in and fix. So, get in and support the transition personally to keep things running smoothly. – Blair Williams, MemberPress