Richard

Dave:
Hey, everyone, and welcome to On The Market. Today, we have a great episode in store for you where I am joined by the full cast of On The Market. We’ve got Henry, James, Jamil and Kathy to talk about the state of the market. Basically, if you have been paying attention, the market is starting to shift and we thought that it would be a great idea to have everyone from the cast join us to just talk about what they’re seeing in the market, what data are they tracking and how they are finding deals. And just a quick spoiler, they are finding deals. They’re finding more deals. So if you are curious about how to get into this market, you definitely want to listen to this episode, and we have an extra good data drop so definitely stick around to the end. Hey, everyone. Welcome to On The Market. Today, it’s like a family reunion. We have everyone here. We’ve got Kathy, Jamil, Henry and James. The entire crew. It’s been a while since we all were together. I missed you guys.

Kathy:
It’s a podcast party.

Henry:
Yeah.

Jamil:
The pajama jam-a-jam.

Dave:
Pajama jam.

Henry:
We could have worn pajamas.

Dave:
Wait, we got to do an episode where we’re all in our jamies.

Kathy:
Well, I have my pajama bottoms on, of course.

Dave:
Yes.

Henry:
I don’t have any bottoms on.

Dave:
All right. Henry, would you like to add to that?

Henry:
No, I think I’m good.

Dave:
Okay.

Henry:
Appropriately clothed for this podcast.

Jamil:
Just trying to wade past all the mental images right now, probably just move on.

Dave:
Awesome. Well, as much fun as it is to just get you all together for fun, we decided that because maybe you think differently, but to me it seems like the market has really started to shift. We had the first half of the year, we all knew or sort of were thinking that the market was starting to shift, and a lot of the data, a lot of the anecdotal stories we’re all hearing is that the market is changing. And so I wanted to get the entire crew together, the full force of On The Market to talk about how the market is shifting and how investors, people who are listening to this, can adapt.
So what we’re going to do is I’m going to first read through some market data and we’ll hear from everyone about what data you all feel is the most important. Then we’ll go into just some stories. I’d love to hear from you all about what’s happening in your individual businesses. And then we’ll talk about different strategies and how they’re impacted by the market shifts. Y’all ready?

Jamil:
Let’s do it.

Kathy:
Yeah.

Henry:
I’m ready.

Kathy:
Let’s go.

Dave:
All right. Sweet. So June data came back. This is going to air at the end of July, but as everyone knows, data comes about a month in arrears. And so we were talking about June data and the headline numbers haven’t changed all that much. Media and sales price still up an enormous amount, but it did drop. It’s down to 11.2% year-over-year. It was at 15% in May, so that represents a slowdown. And for anyone who is listening to this, if you saw 11% year-over-year growth in any pre pandemic time, you would be flipping out and extremely excited or concerned. I don’t even know, but it would be very anomalous. So just seeing it go down to 11% does represent that things are cooling, but it’s certainly not any sort of time to panic. So that’s what’s going on with sales price.
We’re also seeing that inventory, which I believe is one of the most important metrics, are starting to change. So inventory, for anyone who isn’t aware, dropped dramatically over the last couple of years and when inventory is low and demand is high, like it’s been, that can push up prices. So we see that inventory is starting to recover and it’s going up and up and up. In May, we started to see the trend of year-over-year growth. It was at 9%, now it’s at 15%. So that sounds great, but inventory, just if you look at it in absolute levels, is just a complete joke. It’s at 913,000 houses on the market in June. Just for the record, in June of 2019, pre pandemic, it was 1.6 million. So we’re still down 44% over pre pandemic level. So changing, but still really crazy.
Two of my other favorite things are month’s supply at 1.7 months. Up from a low of 1.3, but less than half of where we were in June of 2019. Days on market, only at 23 days. Normal is considered about 45, 50, depending on who you believe. So all of this data suggests that we’re still super low. We haven’t gotten anywhere near to what’s normal, but things are starting to change. So Henry, let’s start with you. What do you think of all this data that’s coming in? What are the things that you think are the most important and that you’re going to be paying attention to through the rest of this year?

Henry:
So the thing that I’m watching the most is really, one of the things I’m watching the most is days on market. So we have a lot of property right now in our business that we’re putting on the market, literally actively as we speak. And to take the numbers that you said and bring them down to a micro level in my market, we’re adding about a hundred homes a week. And so each week our competition for other homes on the market is rising. And so getting homes on the market sooner is of more of a benefit because there’s a little less competition each week that it’s out there. And so we are kind of in a push to get everything listed as quickly as possible. And we also have the expectation that those properties are going to sit on the market a little longer than they were than even six months ago.
But that’s not really doom and gloom, because things are still selling because of exactly what you said. The numbers have come down, but they’ve come down for these such extreme highs that even the numbers they’ve come down to, if those were just a blip and none of the other things that happened before that, and we saw that, like you said, 11%, we’d be like, oh man, things are crazy, 11%, that’s nuts. And so houses are still selling. They’re taking a little longer to sell, but it’s the last couple of homes I sold, I would say we got… I think the last home I sold, we got two offers and it took us about three weeks to get both those offers. And then one of them was at asking price.
And so what does that mean? We still priced that house at what we thought we would get pre pandemic. So I probably priced it higher than what it typically should go for in a normal market, because I was betting on things we’re still selling at premiums. And I didn’t get pre pandemic… I mean, I didn’t get offers like in the last six months where we would’ve got seven offers in the first hour it was on the market. It took two weeks to get two offers and I still got an asking price offer, which is higher than what I anticipated selling the house for. And so the market is still strong for someone like me, who’s an investor who’s buying, rehabbing, and then selling. But yes, things are shifting and to me, all that’s equated to is it’s just slowing down a little bit.

Dave:
You’re selling flips, right, or things you were already planning to sell or are you selling now because of market conditions things that you were originally intending to buy and hold?

Henry:
No, we’re only selling things we were planning to sell regardless of the market conditions. I mean, that’s just, that’s how we operate anyway. Even in the peak months where things were going for top dollar, we were still only selling things we were planning to sell. I’m always going to be a buy and hold investor. Now I did trim a little bit of the fat on my portfolio during that time. Meaning, there were some properties that were a little more maintenance intensive than I anticipated, and we were able to sell those at a premium and then take that money and redeploy it into other buy and holds.
But right now all the market is telling me is that there’s two things, I just need to plan for a little bit longer time and I didn’t really adjust my plan when things were crazy. It was just super cool to sell a house in a day. But things are going to take a little longer and I just want to keep an eye on that supply. That how much competition is there going to be for me? But the benefit to me now is because market conditions are changing, more deals are coming my way that I didn’t have to go market for and so I’m actually able to buy properties cheaper.

Dave:
All right. Great. I do want to hear more about how you’re getting properties cheaper in just a little bit. But Kathy, what do you make of this data? What are you tracking right now?

Kathy:
Supply and demand of course is a really important thing to look at, but it can change. It can change pretty quickly. And it surprises me when people are surprised at the changes or when these headlines acting as if this was some kind of shock. It reminds me of that scene in Austin Powers where the roller’s like a hundred feet away and he’s freaking out, all the other. The Fed had gave us warning and gave us warning a long time ago that there were going to be seven rate hikes this year, about, and that meant that their intent was to slow down the economy and that means the economy’s going to slow down. So the economy’s doing what the Fed wants it to do, which is to slow down. And honestly, it’s what most people want the housing market to slow down because it was getting out of control.
So this is what we’re getting, a slower market, and people had time to prepare for it. I would hope. I would hope people paid attention to that. So we know that there’s going to be two more rate hikes, one maybe, well, we think anyway, we don’t know, but they’re saying, and so it’s going to continue to slow of course, because inflation was high. So we do need to prepare for more, more of a slow down. And at the same time we have all the elements are still in place that were there last year, which is this massive group of people who want to buy and not enough inventory, as you said. With all these rate hikes, it still hasn’t really made that much of a difference in inventory. I just looked up where my daughter bought because I really encouraged her to buy a property just near me because she had a baby and I needed to be near that baby.
So she’s about 30 minutes away and she paid a lot. She paid probably too much for that house, but with the low rate she’s able to stay there. So I was a little worried and I looked at comps just to see, oh boy, is her house under water now? Not at all. It’s still up $75,000 from when she bought it six months ago. And this is in the LA area where they’re saying that things are slowing down, but there were only three properties in her price range on the market and they were an awful condition. So that’s just kind of an example of there’s just not houses available and if you want a place to live, you’re either going to pay high rent or you’re going to pay high mortgage, which one are you going to choose?
And if you’re able to buy, people might choose that because at least the rent, at least the monthly payment is going towards paying down that loan and not paying somebody else. So what do I look like? Look like? This is what I look like. What do I look at is definitely supply and demand. And we know it’s changing, but currently there’s still just not enough supply and still massive demand. With that said, we’re in the rental business. So we’re seeing multiple offers on rental properties because the same problem exists in rental properties. That’s why I’m so glad even though my daughter paid so much, she’s locked in and her mortgage is lower than the rents. And that’s happening a lot of places. People aren’t going to leave their homes because their current payment is much lower than the rents out there, unless they’re in a really distressed situation.
So supply, demand, that’s what we’re focused on. We’re having a hard time finding cash flow, although it’s starting to ease up and we’re starting to be able to buy properties at auctions again, and find properties we can renovate, and we’re starting to see price cuts. So from my vantage point, it’s a wonderful thing. We’re seeing more opportunity. I’m extremely excited about this market and the next six months, because there is so much fear that people who are looking for something other than not just focused on pricing or price cuts, but are really looking at a long term investment, for cash flow in a market that’s rental starved this is an incredible opportunity.

Dave:
That’s a great point. And I actually, I read it. I don’t know if you saw this article as well. I think it was in the Wall Street Journal that bidding wars are now happening for rentals.

Kathy:
Yes.

Dave:
It’s shifted from the housing market where you put a house on the market, they were seeing multiple offers. Now landlords and property managers who are just putting a normal rental, people are bidding up the price of rent where, I mean, you guys do this more than me, but I’ve been a landlord for 12 years, I’ve never had that happen in my life.

James:
It’s definitely been a trend the last 24 though. The last 12, 24 months, we’ve definitely been getting a lot more aggressive rental applications. You just have to watch out for the city you’re in because some cities don’t let you do it.

Kathy:
Yeah. For the last two years, we actually have been seeing that in the certain markets that we’ve been in, because they just couldn’t bring on supply fast enough in parts of Florida and these areas that are growing so fast and it’s been so hard to build. Now, we also have a business of syndications where we’re building single family homes and that is affected. That’s been hard for us because we’ve gone through a time where prices have gone up so much, just the cost to build a home has increased so much that in many cases builders are just hoping to break even, and if they have to lower prices now, it’s going to hurt a lot of builders. I know we’re starting to feel it. Most of our projects are already sold, so we’re getting out of them, but there will be opportunity with new homes. It’s just unfortunate for the builders. Some of our projects where we thought projects like that were hitting a 16% to 20% IRR, hit 8%. So still not horrible, but definitely not close to what we expected because of how expensive everything got and now with prices softening.

Dave:
James, I wanted to turn to you because I know you’ve been relatively, I don’t want to say bearish, but you’ve been warning and thinking that prices were going to decline for a few months now, do you see this recent data as a reflection of that, and do you think prices are going down, I guess you could say nationally, but also in your market in the Seattle area?

James:
Yeah, I think we’re definitely seeing a trend where things are coming off peak. I mean the data that you just talked about is almost identical for what’s going on in our market or nationally that’s about 35% less on the median home price down. What I’ve been tracking is I’m tracking median sale prices in specific neighborhoods from March. I want to see what was happening in February, March. And then what I’m seeing in all these markets that were jumping, the red hot markets, Boise, Scottsdale, Seattle, Austin, they skyrocketed about 20% to 25% in one single month in February. And what we’re seeing is right now pricing’s down about 10% to 11% on median home pricing on the ones that hockey sticked up, so that’s a little bit more aggressive.
The ones that over accelerated are actually down more like 50%. And so those are data trends that we’re really watching right now because we write about 30 to 40 offers a month or a week and then we’re also listing about five to seven properties a week as well. And so we have constant inventory coming on the market and so those are things that we’re trying to track. What is going on in each specific neighborhood on that median home price and then also what’s the inventory levels? For me, I can’t just use one stat, one fact. I got to take it all and put it into this, I got to mix it all up and then kind of come up with my own analysis, because what we’re seeing here is we’re seeing a trend coming down and it’s a slower trend, which is a great sign for real estate.
They jacked up the cost of money by 35% to 40% and we’ve only seen like a 10% pullback off peak, not even off of really what the median home price is. And so these rates have slowed everything down, but we are seeing homes take longer to sell. We sold five homes this weekend. Five went pending. One went pending in the first week, the other four took anywhere between 20 and 35 days and we sold those homes for about 2% to 3% off list just because we’re giving some concessions. The biggest key stat that I watch and it’s hard because the only way to do it is to make phone calls is actually traffic on listings right now. As we’re going to dispositions for fix and flip, as we’re going for development projects in new construction, we are spending a ton of time calling every broker to see how many bodies are coming through because what some of the stats aren’t telling people, besides the mortgage app request stat, is there’s a very few amount of people looking right now.
It’s not just that the transactions are down. The bodies are down by about 90% at least in our local market and so it’s very key for anything that you’re selling that you have to price well. You can’t price off what your proforma is, you have to price off the now. And what we’re doing to move properties is we’re calling through all the brokers, we’re seeing where the traffic is, we want to know where the most amount of bodies are because that will click that sale, and then we’re pricing in the cluster of all the comps. And you can do that by checking median home price, you want to check inventory levels, days on market and then making that right phone call. And you can kind of get all these magical numbers in, but as you put it together that’s how we’re writing these offers out is based on each city, whatever that trend is, we’re baking into our proforma.
So if Seattle came down, a specific neighborhood in Seattle came down 10% and we have a couple listings in the market that the brokers are saying that the showings are still one to two a week, we’re going to actually proforma in a little bit more depreciation because that’s just naturally what’s happening with the cost of money increasing so rapidly. And the good thing is we’ve seen the Fed, the banks have already kind of baked in a lot of these rates into the current cost, and so these next couple hikes shouldn’t raise rates too much more so you can kind of get these little sweet spots in the market around the median home price where the action is and then price accordingly. But we’re still selling a lot of property on market right now. Things are definitely slow, but you just have to put the right plan on it and things sell. They always sell.

Dave:
That’s great advice. That’s a data point that is not easily attainable just by Googling around, trying to figure out what the foot traffic is in a door. I’ve never heard of someone really calling around and trying to get that. That’s a really good tip. Just in absolute terms, what numbers are they giving you? Is it like a hundred people a week were touring and now it’s 10 or what are the numbers you’re seeing?

James:
We’re seeing about a 95% drop off. So if we were seeing 25 to 30 showings in a weekend, which is pretty common especially these markets that jumped 10% to 20% in a single month, it was about 25 to 30 showings on average through those properties. We are seeing about two to three showings now on those properties and it’s steady. And the only stuff that we’re seeing high traffic on is what was referenced is these bidding wars on rental cheap product. People are trying to place money, they want to beat inflation, the cheap stuff you can still cash flow with the high interest rates right now. That stuff’s still crazy on that side. We’re writing a lot of offers on the other side and it’s almost like we’re seeing the margins just get more and more compressed or people don’t want to look at the data downstream because on the buy side, if it’s cheap, it’s getting bid up.
Now the expensive opportunities there’s nobody playing. At least in our market no one is playing in that zone because what the biggest fear is a 10% drop, let’s say the mark comes down another 10% and decompresses another 10%. On 300 grand that’s 30 grand. That’s not good, but that’s doable. On a $3 million property that’s $300,000. And so I think we’re seeing the multiple offers on the rental properties because it’s safe. You can play with a flip, you can play with a rental and you can kind of put together a really bulletproof strategy for that property. So people are chasing safeness and they’re just being cautious. Those 10%, 15% swings are detrimental and that’s why those markets just aren’t moving right now.

Dave:
Yeah, that’s really good insight. Jamil, are you seeing the same sort of thing? Because Phoenix is also a pretty high price market like Seattle and I guess, one, if you were just looking at it on the face value of how rapidly it increased could be at risk for some sort of correction. What are you seeing?

Jamil:
So I’m listening to everybody talk and it feels like they’ve been just staring at the market that I live in and reporting it exactly as it’s been going. So super accurate representations of what they’re seeing. I’m actually living in that as well. For us, I have two businesses, it’s wholesale and fix and flip. For my wholesale business what we found has happened is there was an absolute pause. So just as you saw, people were kind of like looking, oh, what’s going to happen in the market, are my flips going to sell, are they going to go under contract, how long am I going to have to hold this? Well, those investors they paused for about two weeks. They weren’t really bullish on pulling the trigger on getting any other inventory because they wanted to see what was happening.
Well, all of those, if they were priced well, went under contract and those buyers have all come back to the wholesale business and they’re ready to deploy and ready to go again. So just as James has said, just as Henry said, just as Kathy said, if you are in that median home price range, if you’re in the affordability area, you are absolutely fine. The luxury. So we do some luxury flips and the luxury flips have absolutely, just as James has said, the traffic has gone down significantly. We would get multiple calls a day. Right now we’re getting maybe one or two a week. And I think it has a lot to do with the psychology of the type of buyer. So you guys know I’m on a television show, I have a production crew that’s following us around, and a lot of the people in the production crew it’s like regular jobs.
So they go and they wanted to participate in the housing market because they were seeing what we’re doing. Well, all that time when inventory was just flying off the shelves, they couldn’t even compete. They couldn’t write offers, they just couldn’t make it work. Everything was cash and these guys are financed. And so what we saw happen is as prices or as rates went up, the really, really sophisticated buyer or the wealthy person, they kind of stepped back and said, I’m going to wait a moment. I’m just going to wait a moment and I’m not going to make my move right now. I’m going to wait for things to sort of settle down. But it left a huge opportunity for other people who had been frustrated because they couldn’t participate in the market to step in. And so now they’re taking advantage of their turn at property that’s in the median home price.
Now with respect to pricing, what we found is what you and I discussed with Rick, where I had categorized this spike in value, which I called emotional equity, that’s the money that people overpaid for property that wasn’t backed by a lender appraisal. So this is stuff where if the appraisal came in at one price and people bid up another $100,000, I call that emotional equity because it’s not lender backed. It’s not appraised. That stuff has disappeared. Whatever that run up was, so you might have a couple of high comps in a neighborhood, whatever that extra 150,000, 25,000 that sold above list, that pricing is gone. So people are just coming back to normality. They’re just coming back to, and it’s still high, but they’re coming back and now the flippers are pricing in at where that number should actually be. They’re not overpricing the way that they might have been a couple of months ago.
And so as you just heard Henry say, we’re rushing, rushing, rushing to get everything on the market right now. My prediction is we’re going to see something really interesting happen because that mentality, that sentiment is what many investors are doing, they’re rushing. And even homeowners that need to sell, that need to move, they’re rushing, rushing, rushing. But guys, look at inventory. Right now, even with that rush inventory at a month and a half. It’s still a seller’s market up to three months of supply. So we are seeing this huge rush of all these sophisticated people trying to get the top dollar for their property. That’s like squeezing the end of a toothpaste tube.
Guys, we’re just getting the last bits of it right now and I think that the result that we’re going to see here is going to be something we really won’t understand until we’re in it. Because we’re literally pushing out all of these homes, all of this inventory right now, and this rush to capitalize on the high price and whatever buyer activity is still there, and you’re going to find that inventory, just because what Kathy said, the builders are being killed right now because of cost going up and rates going up, they’re slowing down. I feel another perfect storm coming. That’s my opinion. I think that I’m tracking right now to see if this storm is actually going to hit. Days on market, months supply, and I’m watching it like a hawk.

Dave:
Are you saying a perfect storm for prices to go up again?

Jamil:
To increase again, again, again. I know this sounds nutty and maybe I’m contrarian here, but I think what you’re going to see coming out the other side of that, and yes, it’s going to have a momentary dip, just like when the pandemic happened houses pricing started to go down, but from where? We were at ridiculously high prices, of course, it’s going to come down from the psychosis. But there’s still no inventory. It’s a joke. And you’ve got all these people rushing to put inventory on the market right now. I think the result of that, we’re going to feel it.

James:
One thing about the inventory that I think there is very little supply right now, but people do need to follow this trend. It is increasing every month and the bodies are low. And as you’re doing development, as you’re doing fix and flip, you are performing out your deals 6 to 12 months down the road, by the time you get there and that’s where you want to hedge a little bit. The short term investments are riskier. Wholesaling is a great thing to be in right now. You get in and out of a deal.
Speed is key in a market that’s a little bit transitioning. But I do hear a lot from people, it’s like, oh, well, there’s no inventory. There’s no inventory, but you have to track the trend because by the time you get into the… You’re going to be drowning by the time you realize what’s going on. And we are seeing that steady increase, we are seeing a limited amount of bodies, and we know that the Fed is saying that rates are going to increase. I think the inventory levels are going to be up to three to four months in the next three. It’s just, that is what the trend is.

Jamil:
It gets there, James, and I’m in an agreement that we’re going to see that bump, we’re going to see that bump in inventory, but I don’t know that the inventory’s actually there to support that bump. That’s my worry. My worry is that we still haven’t built enough houses to satisfy demand in a normal market. And I think what’s happening is as you’re saying right now we have fewer bodies, but those bodies are only going to sit on the sideline for so long. There’s going to be a point where they’re just going to say, I got to get back into it. Look at rent. They’re bidding up. Rent is going up and up and up and up. And just to rent a house in Phoenix right now to have a decent home, you’re talking $4,000 to $5,000 a month.
I mean, that’s a lot of money, right? So people are going to say that, they’re going to look at that, they’re going to be like, I’m not renting. This is trash. I’m going to go buy a house, even though the rate’s 6.5% right now makes way more sense for me to go buy a house. And I know I’m going to sound crazy to a lot of people, this guy just said, housing prices are going to go up again. I don’t think it’s going to happen right now, but I think that coming around the bend, that’s a definite risk. The way that we’re seeing activity right now, it’s a definite risk.

Kathy:
It makes so much sense when you describe it that way, because as people see that maybe those headlines aren’t correct and maybe there’s not going to be a housing crash, and then they realize that 5% is maybe a normal mortgage rate. It was there just a couple of years ago. So people will adjust. It’s scary to buy a house if you think the prices are going to go down, but when people start to see that’s not happening, you’re right, they could come flooding in again.

Dave:
So then what’s happening? Are you seeing the same thing in the luxury market, Kathy and Jamil, that James is seeing? And do you think what you’re saying about prices continuing to increase is going to happen across the spectrum of asset classes or housing classes?

Kathy:
I can just speak from what I see in Park City where inventory has increased dramatically. So there is opportunity in Park City right now, in fact, in our own development we’ve reduced prices. So it’s a great opportunity because areas like that always come back. There’s very few places that have the kind of snow that Park City has. It’s like gold. It’s so fluffy. So that doesn’t go out of style and so this is a great opportunity to get into luxury because there is an increased inventory, whereas literally a few months ago there was nothing to buy. There was nothing. Now there’s something to buy.

Dave:
Well, I’m going to do my best Kathy imitation and say that there is no national housing market and it depends on where you are. And as such, we actually have another data drop for you this week. This one is really good. I’m very excited about this. We put together lead indicator data for pretty much every market in the US, and it shows two things or it shows a bunch of things. So I put a bunch of metrics on there. It has median sales price, days on market, new listings, active listings, and price drops. All super important. And then what we did was compare it year-over-year, which normally in normal market conditions, I don’t know about you guys, year-over-year is sort of the reliable thing that you look at because there’s a lot of seasonality in the housing market and you want to see how, for example, June 2022 compared to June 2021.
There’s this thing called base effect in data analysis where if last years data was really crazy for some reason, you can’t really look at year-over-year data. And so that’s another factor that’s going on here and why you see these things in some markets price drops went up 400% this last year. It’s because they were at nothing and so proportionally it looks really high. And so in this data drop, not only do we give you year-over-year data, but we give you pre pandemic comparison. So you can look at data from 2019 to 2022. And of course, no analysis is perfect, but this should help you looking at those two things combined, in my opinion, help you understand, okay, what’s the recent trend and what is it compared to normal times? How does this track?
And so you’ll see it’s really different. It’s really different depending on where you are in the market. So you can download that. I should probably give you the URL. It’s biggerpockets.com/datadrop5. So you can check that out. I’m going to go on record and say, I think Boise is the riskiest housing market in the entire country right now, because not only are active listings up like 200%, they’re higher than they were pre pandemic, and so that to me is a huge shift in what’s going on. But meanwhile, places in Florida and North Carolina look great. They look completely great. So as an investor, as we always say here, you have to be a market expert and this data drop should help you become a local expert.
All right. Let’s switch gears a little bit because I do want to talk about deals. It sounds like you guys are finding deals and I want to know how you’re finding those deals and what kind of deals are working for you. Henry, you mentioned you’re finding cheaper deals. Can you tell us a little bit more about what you’re into right now?

Henry:
Yeah, that’s a great question. So deal flow for us has always been about finding off market deals. And off market deals essentially means that we’re buying things that aren’t listed from people who need to sell more than they want to sell. So there’s usually some type of distress involved and that distress is leading them to have to, or to want to, or need to cash out of their home to either go handle some situation or whatever the case may be. And so when you have this perfect storm of the economic environment is uncertain, inflation is super high, people are starting to maybe lose jobs, or get laid off, or can’t find work that they want, and then you have also interest rates rising in the housing market and you’ve got some volatility there, or from the retail buyer may not fully understand what’s happening in the real estate market and that creates some uncertainty.
You’ve got this perfect storm of people just saying, you know what? I got to get out of this house. I got to get out of it quick. I had thought about selling it six months ago, but I didn’t want to do it and now I’ve got to get rid of it. And what’s happening now is typically I’m in the business of marketing or sending out information to people and then they can reach out to me if they’re interested in an offer I might have. And I’m seeing a whole lot more of people just reaching out to me based on word of mouth. One of the last deals I bought was my title company literally called me and said, Hey, I got a lady who just wants to sell her house, she needs it gone right now, can you call her? And that’s happened twice in the past six months where people have just reached out to me and said, Hey, I heard you buy houses, can you come by my house?
And I’ve ended up buying those properties and so I’m getting a whole lot more people looking for me than me looking for people, and I think that’s due to both the real estate market uncertainty and the economy uncertainty. And so the last one I bought, it was in great shape. I told the lady to sell it with the real estate agent and she’d probably be okay. She didn’t want to take that risk. She needed it gone now. And she felt like she would get more money from me than if she listed it. And so we went ahead and we bought that property. But I try to educate everybody that I come into contact with and let them know, Hey, these are your options. And these two options here are probably going to net you more money, they just won’t be with me, but I’m happy to connect you with them. And people still even knowing that are like, well, just tell me what you can do. And to me that says that there’s uncertainty for them and they want to go with something that’s certain and quick.

Dave:
Jamil, are you seeing the same thing? Because I know in the wholesaling business you’re typically looking for these types of distress selling situations.

Jamil:
Yeah. So interesting, one of our primary lead generation techniques is actually direct to seller through agent. So we really leverage agent relationships to get a lot of opportunities. What we’ve seen is realtors six months ago were basically all on ecstasy. They were out of their mind. They’re like, oh my God, it feels so good. Wow, the housing market is crazy I don’t even have to work and give some water. That’s what was happening and they were out of their mind and totally just off their rockers with pricing. They were like, oh, price? A billion dollars. Let’s try it. And so that’s kind of what happened. And so that has absolutely shifted. The thing that we notice is that the regular home owner isn’t as up to date on market trends and stats and data as we are and we want them to be. Because they’re not really paying attention. They’re in their own bubbles, they’re in their own worlds, and until it affects them, they’re not going to read about a headline about this and that with the market.
Agents, however, absolutely have their finger on it. And they’re right now suffering the hangover from their really, really interesting party nights that they had for the last six months. And so right now, they’re in a depressed state. When we talk to them, they’re like, oh my God, everything is so bad. I can’t. I’m like, what are we going to do? So they’re so open to hearing from us what number we want to pay and they’re going and selling that price to their sellers, because they’re fearful. They’re like, look, I have no idea what’s happening right now. The rates are high, there’s no buyers, my phone’s not ringing, you should take their offer. And so we’ve been actually cleaning up because there is so many opportunities.
I feel like we literally can name our price and it’s happening. I had an agent who we have a great relationship with, but she had a property listed on the market, it was an original condition and happens sometimes, because the market was so hot, she listed it at what should be ARV, which didn’t make any sense to us because you’re looking at it and you’re like, how would you do that? This house needs a full renovation to justify that price. And she’s like, well, this is what the seller wants. And so it sat for 30 days and then she reached out to us and said, Hey, where would you guys be? And it was legitimately $250,000 below what her list price was. Done. She would’ve not had that conversation with us 60 days ago. So guys, if you have not taken advantage of the agent finder program here at BiggerPockets do so, because they will help you connect the dots on some incredible deals, work with the realtors. I’m telling you right now, they know better than anybody and they are the most fearful pack that exists right now.

Dave:
And if you want to check out what Jamil’s talking about, we have this tool on biggerpockets.com. You can go to biggerpockets.com/af and you can get matched with a investor friendly agent. It’s completely free. There’s tons of great agents on there. So you should definitely go check that out. Kathy, so you said earlier that your buying patterns are changing a little bit, right? You even mentioned that some things were coming up on auction. Is that how you’re pursuing deals right now?

Kathy:
Yeah. We weren’t able to really find cash flow properties over the last six months in some of the markets we were in and in the cash flowing markets there just wasn’t the inventory. So it was a little bit hard to find that and now it’s coming back again. So we’re back in sort of those Midwest markets, which I think you mentioned those are kind of hot right now because it’s the one place that’s affordable still. So we’re looking at that. We are also about to start… I’ve been looking at multifamily, I’ve been looking at commercial properties, and single family and it’s kind of interesting when I’ve looked that multifamily hasn’t quite come down yet. I don’t think the way it might and I could be wrong. I was wrong two years ago. I should have bought every single multifamily I could get my hands on, but in 2020 I really wasn’t too sure how that was going to go, but some people really made out well.
Now we’re looking at some of those properties and people are still really, a lot of proformas are still betting on rents going up quite dramatically and they might, but they also might not and it just makes me a little bit nervous. And even so, even with these really high rents that are being projected, the returns are just okay. But when we were looking at another single family fund, we had a single family rental fund for the last five years, the numbers were actually pretty good and better than the multifamily that we had been looking at. So we’re looking at parts of Texas for that fund and then parts of the Central Florida area for single family. And it’s just exciting to be able to negotiate again. That was just not something you could do before for a while. Maybe Jamil and James and Henry could, but we didn’t know how to do it over the last six months.

Dave:
It’s interesting that you said about the Midwest. I was looking something this morning on realtor.com. They have this thing called the hotness ranking, which sounds like it should be on a dating app and not on real estate.

Jamil:
It’s so good. I love that. They call it hotness. Oh my gosh. Look at Wisconsin, it has a duck face.

Dave:
Well, unfortunately it’s just actually housing market data, but I think your app might take off, Jamil. And what it’s showing is that the hottest markets, and again, every one of these websites that does this has their own methodologies so you should go look at what they’re actually doing to rank these markets, but the hottest markets right now are in the Midwest and in the Northeast. It’s been years since I’ve seen hot markets in Massachusetts, in Connecticut, New Hampshire, Vermont, Maine. Central Florida is still very hot, Kathy, don’t worry. So we’re still seeing a lot of that, but it’s just, I think it’s the impact of the migration over the last few years. People have been moving out of those places or the markets have gone up, but not 40% or 50% in the last two years. And so relatively speaking, the Midwest and the Northeast are becoming more affordable and probably at least have less competition than in Florida and Texas and you might be able as a buyer to look around and actually pick a house you like, which sounds crazy given what’s happened over the last two years.

Kathy:
It’s kind of normal. It’s cyclical where the super hot markets that are where people really want to live, they’ll go up and up and up in price until they hit a peak, and then that’s as high as they can go. They hit an affordability ceiling and then we start to see the more linear markets take off. So it seems to be kind of the same as when we were buying in Texas in 2005 where that was the place to be. That’s where it was about to take off again. But if you’re starting a family and maybe you do have the ability to work from home or you could get a job, there’s so many job openings, and you’re looking around and just getting really depressed at rent and home prices, you might just start looking in markets that you hadn’t thought of before, so that could be what the trends are.

Henry:
So the super hot states are dying off and the dad bod states are starting to win, huh? There’s a chance for me yet.

Dave:
Is that a dad bod state? I’ve ever heard of that. Is that real?

James:
There’s always a trickle down effect. In 2008, the hot markets, the ones that appreciate the fastest, the hockey stick up, are the first ones that hit the brakes. The other ones keep limping along and then eventually they follow the same trends, to be honest. In 2008, every market trended with the expensive markets after about six months. And so it’s just, the expensive markets are the leaders, they kind of show you what’s going to happen. They forecast the rest of the markets six months down the road.

Dave:
I think what you’re saying too is right, Kathy, and is interesting that unfortunately for a lot of people housing in their city, whether you rent or buy, is becoming unaffordable. And if these trends continue at least there’s likely going to see some reversal in migration patterns, or maybe just some migration to some of these cheaper places like the Midwest. You look at cities like Chicago, it’s the third largest city in the United States, it’s way, way below average in terms of housing market appreciation over the last couple years, but still has a really great economy. So you could imagine places like that starting to see a revival again or at least I can.

Kathy:
Yeah. And it’s funny, I’ll just say that we mostly did our events in California and I would ask the room with hundreds of people, Hey, how many of you have been to say Indianapolis, or Birmingham, or Cincinnati or Cleveland? And maybe a couple hands would go up. So it was really funny so many Californians don’t really go east of I don’t know, Nevada. And so I would take just busloads of people from California to go see these areas and they still had this idea that it was like wheat fields or something in these cities.

James:
I just have this vision of all these Californian tourists wearing Hawaiian shirts with cameras looking like, wow, look at how they live where there’s corn.

Henry:
What’s the Piggly Wiggly?

Kathy:
I swear if we blindfolded them, they wouldn’t know they weren’t in San Francisco. And in fact, some of the areas like Cleveland their downtown has been revitalized, it’s beautiful, it’s a medical leader with the Cleveland Clinic, and it’s nicer in some ways than some of the areas that they’re living in California that haven’t been updated or upgraded. So a lot of people were shocked and we saw a lot of people actually move. So I’m sorry for being part of the California migration issue.

Dave:
Oh my gosh.

Kathy:
It was like-

Dave:
Apologize on behalf of all Californians who moved, Kathy. It’s your responsibility.

Kathy:
… but it’s like they really didn’t know that there was really nice places to live outside of California that it’s just kind of funny. Now, maybe after living a winter they might change their mind.

Dave:
That’s a Rick and Morty episode. I got to call Dan Harmon. James, I did want to ask you about the flipping market because I think that’s the only one we haven’t really touched on here. And just curious how you’re finding deals in flip? Sounds like you’re probably staying away from the luxury market or what are you targeting right now?

James:
No, we don’t stay away from any market. We just buy differently and adjust the proformas. So with our luxury stuff, we’re definitely going for much higher returns, 25% or to 30%. Or with leverage we’re targeting 50% to 60%, because we need that extra padding if the market does correct more. And also we’re just not using peak comps. We only use comps within 30 days or pendings and we’re talking to every broker. And if the comps are higher 30 days ago, than we’re using the pendings. But the best way that we are getting deals done, we’re definitely seeing sellers are adjusting their numbers, there is a slight panic going on I can tell with brokers and sellers, and so what we’re doing is we’re making mass contacts, getting in front of people, talking to as many people as possible.
As you grow your network, you’re going to get more deal flow. But the biggest thing to do is as we’re trying to get more deals done is because we have to put on a new pair of glasses. How we were flipping homes or developing or buying rental properties for the last 24 months is an old strategy. You have to switch your strategy up. We just bought a home and we closed on it about 60 days ago. It was an expensive property. We’re going to be targeting 1.9 million as the exit. We had a $250,000 budget on it to go a lot more higher end. I just re snapped my budget and we are now at $65,000 because we are going for a different thing. We saw what is trading, what is not trading.
As flippers, people got a little bit spoiled. They’re like, we can have as much fun with this, spend as much money as we want on this, and we are going to crush it and I’m going to look like a genius. Those days are over. Investors responsibilities or my responsibility is if there’s a tight market, I have to invent that return. I have to come up with the right plan that is going to make me money or rack me a return. And so that’s all we’re doing is we’re getting more deals done because everyone else is still looking at these deals the same way like, oh, well it costs 200 grand to do it that way. Yes, if you’re going to go for peak pricing, but in a market that’s not affordable, I’m not going for peak pricing anymore. We are getting back down and dirty, shopping at clearance stores, keeping what we can keep, not changing out floor plans, keeping things moving quicker and we are just making them less nice, because that’s what the market is asking for.
They want more affordability but livable product. And so again, we are just putting on a new pair of glasses, we’re hitting mass amounts of contacts and we’re just looking at deals differently. And if you don’t look at them differently and you buy on the old, it’s going to be hard to get a deal done because your rehab costs are going to be high, you’re going to be cautious on your exit price because you were using peak comps before, and you just have to change things up. So everything that we’re doing, buy and hold, we’re buying cheaper or differently, doing less work on them. Our rental properties, we’re targeting ones that we have that if the margins are still tight, we’re going for ones that have upside, development upside.
One thing we have seen is builders… Multi-family we’ve increased our buying because builders have pulled back a lot. And so the multi-family with development upside is this no man’s land to where we can buy and still get a decent cash flow, but it has a major kicker on it. And then with our syndication and development stuff, we’re just closing on permit only. And syndicating, we are not waving feasibility or large multi-family if we’re buying ourself, unless we have that secondary loan locked in. We do a lot of value add where we’re setting up a two step loan. If it is not a hundred percent commitment, we’re walking from the deal. We won’t even ask for a haircut. We need that commitment on the financing, because that can be detrimental. So we’re just changing how we look at things, how we structure our deals, and we’re doing just as many properties, if not more, than we were doing the 90 days ago.

Dave:
That’s great. I think I just want to summarize for people who are listening to this everything we’ve talked about today. The market is shifting, but none of you seem scared. None of you seem like you’re stopping or are concerned really about your own businesses performance.

Jamil:
No.

James:
I mean, there’s always the painful transition time where everyone’s like, what’s going on? And as long as you prepare for that, but at the end of the day we’re buying off math. The math’s going to work one way or the other. You just have to put the right math on it and submit accordingly. Just create your buy box, put your math on it and you’ll keep buying. You will still make money. We’ve made money 2008, or 2005 to now we’ve always made money.

Kathy:
Yeah. And I would say, I am concerned about some of the projects that we’ve been in for the last few years. It’s been difficult with the new home builds, but it’s forcing me to look at other options like what can we do with these high end homes in Park City? And I kind of put a post on Facebook and said, Hey, is there anyone out there that would want to share a vacation home in Park City and kind of do a Picasso type thing where there’s four or five or six owners and everybody kind of picks their weeks and then you short term rental it otherwise. And if we had three or four of those, then people in the industry who are doing masterminds and they want a place where there’s a bunch of homes next to each other, it’s just different kinds of ways to deal with struggle. When things don’t turn out the way you think then kind of there’s other ways to look at it and other opportunities. So that’s what we’re doing now and we had a huge response. We had like 250 people respond that they wanted that. So now I’m going to learn how to do that, how to do shared vacation rentals.

Dave:
Yeah. It’s just about being creative in any market. Over the last few years it was just so easy. You could just sort of throw a dart at the dart board and that, like James said, it’s over. But that does not mean that there are not opportunities. You just have to be a little more cautious or a little bit more creative. And thank you all for giving such good input onto some of the ways that you are adjusting your strategies and thinking about how to benefit and still grow your businesses during this transitionary time.
All right, guys, this was very fun. It’s always fun having all of you here. So for Jamil, Henry, Kathy, and James, I’m Dave Meyer, and we will see you all next week. On The Market is created by me, Dave Meyer, and Kaylin Bennett, produced by Kaylin Bennett, editing by Joel [inaudible 00:54:23] and Onyx Media, 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.

David:
This is the BiggerPockets podcast show 641.

Christian:
But you never know, right? Your next relationship, your next lead, your next investment partner could come from anywhere. If you’re always thinking of maximizing the time that you’re spending through your life, it compounds just like money does, right? Everybody has their 401k that compounds on interest every year. Time is the same exact way. And if you choose very carefully where you put that first minute, before you know it, you’re getting five or 10 minutes out for every minute you spend.

David:
What’s up, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here with my co-host Rob Abasolo. Rob, how’s it going today?

Rob:
I’m feeling good, man. I’m feeling really good. I’m closing all my rings on my Apple Watch. And that’s honestly the only goal that’s a requirement every single day is to close my rings, get my steps in, burn some calories and hopefully get a little bit towards the who I used to be physically. It’s my big project for the next two or three months.

David:
It’s no joke.

Rob:
And then it’s over. Then I’m done. I’m just kidding. Yeah. Obviously.

David:
Trying to maintain fitness while you’re able to make money is really hard. It’s so hard because you’re like, “Oh, if I take off two hours and I go work out, I might lose 10 grand.” It’s always in your head. It’s very hard to stay disciplined with that.

Rob:
Yeah. The channel, pandemic, everything just really put a… Oh, having kids put a pause on anything physical for me for the last two years. As someone who’s always on camera, I was like, “Okay. All right. All right, buddy. It’s time. It’s time to trim you up, pal.” I give myself motivational talks in the mirror every day.

David:
Well, let’s keep at it. You can always send me those gym selfies, man. We’ll keep each other accountable.

Rob:
That’s right. You send me those every so often.

David:
Today’s show is nothing short of incredible. In today’s episode, Rob and I are interviewing my business partner, Christian Bachelder, who I built the One Brokerage with, who’s also a very prominent real estate investor. Christian has bought 15 homes over the last year through partnerships and by himself. And he shares a lot of the information that helped him to do that. So we get into Christian’s buy box, the criteria he looks for, which is very specific.
He’s also my partner in the One Brokerage. So we talk a lot about how he helps with financing of my deals, angles that we see that other people don’t know, what you should talk to your real estate broker about, how you could make your agent better. I mean, I could go on and on and on. This was a very, very, very detailed show that does run a little bit longer, but I want to make sure you listen all the way to the end because we share where you guys can get some more information to help make your realtors that you’re working with better. Rob, what were some of your favorite parts of the show?

Rob:
You know, I think it was a really nice… It was nice to hear him talk through his, I don’t know, the linear progression of why he started new companies and really evaluating his time. But we spoke a lot really about the return on time, which is really, really big. I think that’s a metric that people ignore quite often. We’re always chasing the cash on cash or the return, the ROI, right? But the actual time investment and reinvesting your time so that it starts to compound, we talk all about that and how that affects his businesses. I thought it was just a really interesting viewpoint.

David:
That is a very good point, and that will lead us to today’s quick tip, which is if you’re working with a realtor and you’re not thrilled about the service you’re getting, maybe they’re good, but they’re not great. Maybe they’re not even good, but you like them and you’re loyal to them. You don’t have to be stuck with a bad realtor, and no I’m not going to tell you to switch and go with me as your realtor, because I’m not licensed in every single state. What I am going to tell you is that there are resources out there that you can provide for them that will help them be better. BiggerPockets itself is the very best one. Tell your realtor about this podcast, get them listening to this, get them on the website. Many of them would do a much better job for you if they had access to the information that you do.
I write books to help realtors. You can find them at biggerpockets.com/store. Sold and Skill are the first two books that I wrote specifically meant to help the BiggerPockets community be better realtors and get better service from their realtors. In today’s show, Christian talks about how you can send your realtor to us and we will get them a free education to help you close more deals with them. We all get better when we share information. So if you’re not thrilled about what you’re getting, instead of getting frustrated and yelling at them, just be like, “Listen, I’m texting you a podcast, listen to this thing and then get back to me.”
All right. Today’s show is really good and a little bit long. So I want to get to it right away. Rob, is there anything you want to add before we bring in Christian?

Rob:
No, no. I don’t want to make the podcast even longer. So I’m going to amp here for a little bit and let’s get into it.

David:
Christian Bachelder, normally I would ask you to introduce yourself to our audience. However, because this is a special occasion, I’m going to take the liberty to do that myself. Let’s see how much of this I can get right.
Christian Bachelder is a UC Berkeley graduate with an engineering degree, a BJJ purple belt. He owns an Allstate Insurance Company. He is my partner in the One Brokerage, which might be the fastest growing loan company in the country. We just got back from a trip to Michigan, where we got invited out to learn from United Wholesale Mortgage because we did so much business with them. We got connections to the CEO and some other people within there that Christian works to get our clients better deals. Let’s see what else. You’re also a real estate agent that has sold houses. You own short-term rentals in various states.
We own one together in Tennessee and you’ve got several others you own as well as others that you have with partners. And we have plans on creating an actual lending company where brokers would come to us and we would be the one financing the loans for the investors. So what we would like to do is to create a situation where we go to the investors and we say, “We’re going to offer a product to real estate investors.” And then your local mortgage broker, if it’s not us, comes to us and we put a deal together that works for you as an investor.
Maybe most importantly, Christian and I shared a very important vision. So about six years ago, when I started the David Greene Team, I had a vision that I would like to have the real estate agent and the insurance company and the lender and the appraiser and the contractor and all the pieces that you will need under one roof so that you don’t have to worry about if the person that you’re working with is any good or not.
And I met Christian, and not only is the guy brilliant, as you guys are going to hear on this podcast, he’s got a brain like a computer, but he also had that exact same vision as he’s selling houses and he’s doing mortgages, and he’s doing the insurance and he was doing it at a smaller scale. And then like most people, we partnered and you ended up drinking from a fire hose. I will say you’re the only person that did not drown from that fire hose. So you impressed me, and we went into business together.
Now we are pulling back the curtain. For a long time people have heard about Christian, but didn’t really know who he was, and you guys are going to get to know him today. Christian, did I miss anything?

Christian:
Man, I think you cleared it all up. I think, well, that’ll be our show. That’s it, right?

Rob:
I think that’s it. Thanks for tuning in everybody, and we will catch on the next episode of BiggerPockets.

Christian:
There we go.

Rob:
Well, it’s just such an impressive resume. You’ve done a lot. You’ve got a lot of plans here. I guess my question just to get us started here in the podcast is, how the heck did you get here? You know, this is such a journey that you took to get to this point. What led you here?

Christian:
Yeah, it’s a question I’ve gotten a lot. I would probably argue that there’s not a whole lot of chemical engineer, mortgage brokers, real estate insurance brokers out there, but for the one other person that may be in the world, maybe we have some similarities. After graduating, as David shared, I did attend UC Berkeley. I was in a industry that had no fulfillment for me. I’m a people person. I can’t sit behind a computer, type in an algorithms and code all day.
Actually, I had a pretty early on mentor. A really good buddy of mine growing up, his dad kind of had a similar goal on a smaller scale of building this so-called one-stop shop, right? Where I always joke, my ultimate goal, if I reach where I’m trying to go, is to never write a referral check again, right?
If we could just create a network where people can go to, if you’re looking to invest, you don’t have to talk to anybody else. Right? We can find the home, finance the home, protect the home with an insurance policy, build your finances, maybe manage the property for you. That’s the idea. And then building a place where people can go just for a general advice. Right?
But to get back to the question, how I started, it was really just seeing every time that I sent a referral to a State Farm or an Allstate, there was never the level of service that I wanted for my client. Right? Similar to how David, David gives a lot of referrals out as well. And that’s his name, right? His name is attached to those people that he refers to. Now that I’m on the scale of him, you really feel that, right? If you refer to one person who gives the borrower a bad experience, it’s your name, right? They say, “This was your guy, your guy failed me.” Right?
I hold myself to a really high standard and it’s hard to hold other people accountable to the level that you hold yourself. So I’ve gotten really good at squeezing 25 hours out of a day, I guess, could be my best way to put it. You know, I sleep on average, I think Kawasaki said this the other day, too, sleep about five hours a day. It’s definitely a grind. But at the end of the day, if you can build processes and systems around you that allow you to maximize your time, you’re going to be able to succeed in building a company.

David:
So this is probably a good time to talk about just like transparently what my life is like and what Christian’s life is like now that we’re partnered together. We worry constantly that we’re going to let somebody down. We’re in this position where people look up to us. Rob, you’re now in that same boat. And they say, “Hey, David, can I talk to your CPA? Can I talk to your mortgage broker? Can I talk to your real estate agent?” They’re thinking in the back of their mind that that person is David. They get to know me. They hear me talking.
Podcasts are weird. I remember the first time I met Brandon Turner, who’s actually flying into San Francisco. I’m going to see him tonight. I’m like, “Hey, you don’t know this, but we’re already friends. I already know what coffee you order at Starbucks. I know all this about you. You don’t know me. So it’s kind of weird.” But that’s one of the cool things of a podcast is you get to know a personality. The downside is we are always worried. If a mistake happens and you trusted me, that takes it, it hits you so hard. But because of the level of volume that people are drawn to us about… That’s a terrible way of structuring that sentence. Because we have this platform and there’s so much volume of business we’re doing, our employees are going to make more mistake because they’re working with more people.
They’re going to be busier than somebody else might be, who’s in a similar situation. We’re constantly training them, pushing them, trying to get them to be better. But they’re not me. They’re not Christian. They’re not Rob. They’re not going to be quite as good, especially in the beginning. So we always are crossing our fingers and holding our breath like, “Oh, please nothing go wrong.” There’s a lot of stress that’s involved in that.
Part of how Christian and I have structured things is we’re not starting a business that we don’t do ourselves. Basically when someone comes to us to get a loan product, these are the products Christian found for me, because I’m probably the worst loan client in the world, which he can tell you about later. How do we make this work for David? Because if it’ll work for David, it will work for anybody. When you come to me to buy a house, you’re getting trained by agents that went through what I tell my buyer’s agents to do or when I’m selling my house, this is the way I do it. They got trained in the same thing.
Same for insurance and for the property management company will have at a certain point. My opinion is these are the best ways to run businesses is you did it yourself, you took what you learned and now you help service clients. The downside is when you have so many people you’re trying to help and your staff is new, there’s always going to be a little bit of hiccups. Maybe we could start off with just getting the downside out of the way. I’ve never really asked you this, Christian. What has your stress level been as you’re trying to keep up with the volume of business we’re doing and protecting my reputation while you’re doing that?

Christian:
Yeah, it’s a task. I mean, not only… When we first started, it was pretty much me, right? I was taking everything onto myself because I had such a high standard and I didn’t want to let you down. I didn’t want to let your customers down, your real estate team, all the people that we work with. And the most difficult part of the process was demanding that same level of work ethic and accountability from the people that we hired. Right? And the people that we joined on a team to tell them, “Hey, you’re going to get a level of leads and a level of customer access that you’re not going to get anywhere else.” Right? I mean, people come to us and they expect you, right? This is the similar struggles that you have with your real estate team.
It was about a 16 to 18-month grind unlike… You know, and this is somebody coming from arguably one of the most competitive majors at one of the most competitive schools. And that 12 to 18 months was like nothing I’d experienced. I mean, that I was driving all night mentally just through every recess of my brain to try to make this thing work. Right? I’m proud of what we built. It’s still a work in progress. But even today that’s a huge test to make sure that we’re holding up the name of BiggerPockets, the name of you, the name of everything that we represent in a good air.

David:
Yeah. And in a year we became one of the top mortgage brokerages in the country. Right? That’s very fast. It’d be like, imagine putting on that… I don’t know of the good analogy, but putting on 50 pounds of pure muscle in one year, it’s a strain on the body. It’s very difficult to do something like that. So we do take our job very seriously and we’re always trying to do things right. But I think, right, Rob? You had an experience with us where we funded the loan that we bought the property we bought together. One of the reasons Rob got, and I got a really good deal on that property is it sat on the market for a long time. I thought I was going to go buy four more of those properties after we closed. I don’t know if I told you, Rob, everything is more expensive and not as good as that house. That thing was a steal.

Rob:
Oh, yeah. Yeah. Scottsdale. Yeah, we got a good deal.

David:
But part of the reason is that it was sitting on five acres. Normal conventional lenders won’t fund loans when there’s that much land, because the concern would be well, are we funding the house? Are we funding the land? Because if we have to foreclose on land, we don’t know how to sell that. We can sell a property. So they put a limit on how much acreage, which most people would have no idea that that’s a requirement. I wouldn’t have had that idea if I wouldn’t have run into it. Well, having Christian on my side, he can go out there and he can find the lender that will do it. Or sometimes we can twist their arm and say, “Hey, we’re bringing you this many loans. You’re going to fund this one for us because you want to keep our business and we can help our clients in that way.”
The downside is just, it’s hard when you’re in Rob’s position, when the person you’re working with is also working with other clients and sometimes they’re not as experienced as Christian and I would be. So I’m noticing when you start these companies, there’s always positives and negatives. You kind of have to take both. But the benefit of, I think what the three of us are doing is we’re in the game, buying these properties ourselves, running into problems. Later in the show, I’ll talk about the 1031 problem that I just ran into when I was with Christian. He and I worked through that thing, but I would’ve never known that was even a problem. Now I’m able to come share it with everybody else. So this is the benefit of doing your business with a company that also does stuff themselves.
If you guys are going to partner with Rob on something, he has tiny homes, he has short term rentals. He’s very, very good at knowing what a person cares about when they go into the home. So if he’s helping you with what you’re trying to do, it’s experience. With Christian, he owns an insurance company. He knows angles other people don’t see. Same thing with mortgages. We can solve problems ways that other people can’t. Whoever you’re working with on your stuff, I’m always encouraging people. Try to do it with someone that owns homes. If your agent also owns properties in the area you’re buying, that’s the one that you want to use. And that’s how we’ve structured things. I went off on a little bit of a trail there, but Christian, do you feel like you are able to provide better service, solve problems, build a better business because you’re in the game of real estate yourself?

Christian:
Absolutely. This isn’t a pitch to just use us, right? I mean, there are mortgage brokers that invest out there in the world, but on just an average, working with a company with the morals and the foresight and the experience that we have, you’re not going to get that from a phone rep at Quicken. You’re not going to get that from a phone rep at better.com, right? I mean, you’re going to get that from somebody who practices what they preach, right? Who do it, who invest, who own properties. In my situation, I bought an insurance agency because frankly, I saw people get screwed with insurance coverages. Right? I saw people… I mean, David, after I reviewed your insurance policies, I was like, “You’re not insured correctly.”
Right? Like, “Let’s get this taken care of. Right? We got to get you insured properly.” I mean, that happens so much because the only advertisements you fee for insurance are say 15%. Right? People aren’t actually talking about what you’re getting.

David:
Or more.

Christian:
Yeah. There you go. You know? And a lizard’s the one telling you, right?

David:
Right.

Christian:
At the end of the day, if you’re working with somebody, it’s like that fiduciary relationship. If you’re working with a representative with your finances that is going to put your best interest first, you’re in a good spot. If they have the experience and the knowhow to know what your best interest is, you’re in the right spot.

David:
I’d like to point something about that, and then I’m going to… Rob, I’m going to toss it to you for an example. One thing that I’ve learned being in this business is how that person decides what’s in your best interest can be very different than how someone else does. So what I’m saying is if you’re going to a discount agent who says, I’ll sell your house for 1%, or a discount insurance company that says your premium will be this low. That is a way that they believe they’re bringing you value. “We’re the cheapest, we’re saving you the most money” until something happens. Or maybe a property management company that says, “I’ll manage your property for 3% or something” until something goes wrong. And then very quickly you’re like, “Oh wait, this was a terrible idea. I can’t get anyone on the phone.
I’m bouncing around in other countries. They’re denying me coverage. I’m going to come out of pocket $12,000 that I don’t have.” Your listing agent doesn’t sell your house for nearly as much money in there. Then they’re always frustrated later. I’ll tell you guys just a sneak peek. When we’re helping on the David Greene Team to buy houses for our clients, I purposely trigger listings that I know are bad brokerages or bad listing agents because we will out negotiate them. They’re not going to be as good. You don’t always realize that you’re losing out on something when you’re just looking for the cheapest thing. So in our world, we typically see like, we’ll get someone pre-approved for a loan. And then some other mortgage broker will say, “Oh, I can do it for less. Your interest rate will be less. Your closing cost would be like, not a lot less, just minimal amounts.” And they’ll go with that person.
The reason it was less is because their entire staff is in India on a different timetable that is not very incentivized to get your loan closed, and it takes them 60 days instead of 14 days. And you lose the entire deal because what you thought was you were getting value from a cheaper rate. I know before I got into the business with you, Christian, I had more than most people, but it was still a very limited understanding of how the mortgage industry even works. Like, why am I talking to you but the loans being done with somebody else over here? And why shouldn’t I just go to Wells Fargo? That’s where I bank. I could just get my loan there. There was all of this nuance that I never understood.
I’ve since become very skeptical when the first way someone says they bring value is they’re cheap. If that’s what you open with, right off the bat, I’m very nervous. Rob, this was a thing that you and I experienced together in Scottsdale, where you found an agent for us. And I was like, “I don’t know, man, that property management seems like… It seems kind of expensive what he’s looking for.” And you’re like, “Yeah, but the guy does this and this and this. And he knows all these things and he has…” And I’m like, “Oh wait, this, yeah, this is incredibly valuable. We’re not just getting his management. We’re getting his entire list of resources, the people that fix things when they break. We’re getting his expertise. We’re getting to know about the area.”
In that sense now, it becomes incredibly cheap. So I wanted to give each of you a minute to maybe give an example of a person you’ve used or an experience that you’ve had where you went with the more expensive option, but it either saved or made you much more money.

Rob:
Yeah. I got this one locked and loaded all the time. I mean, I always talk about on the channel quite a bit is hiring what I call your Airbnb Avengers. These are the people that are actually running your property when you’re doing self-management. So your Airbnb Avengers are going to be like your cleaners, your landscapers, your pest control, your pool maintenance, all that type of stuff. But the lifeblood of your business is always going to be your cleaning crew. And so very rarely do I negotiate with my cleaners because if they say that they want a hundred bucks and I say, “How about 90?” And they’re like, “Okay, I’ll take you on as a client.” Well, they’re going to give you 90% of their effort in my opinion. And so for me, I don’t really negotiate.
I had my cleaners for a long time. They were charging me $70 to clean my tiny house for about two years. And then I got the dreaded text about a month ago. He was like, “Hey man, we’re raising rates.” I was like, “All right, let’s talk about it. Why are you doing that? I want to understand.” He was like, “Well, it’s been two years and I’ve never asked for an adjustment. So I’d like $85 instead of 70.” I was like, Okay, that’s… You know, it’s significant, but I was like, “Okay, well, you deserve it because I have 293 reviews on this listing. I have a 4.95, which is really freaking hard with 300 reviews. And they all talk about how spotless the place is. So it’s worth it for me to pay an extra 15 bucks to keep my amazing cleaner, because then I know that it’s always going to be clean and I’ll always have great reviews. And thus I’ll always be more bookable.” So for me, I’m never really skimming out on cleaning when it comes to my short-term rental portfolio.

David:
What’s the cost of a cleaner that doesn’t show up and actually cleaner doesn’t do a good job, and your next guest walks into your property and it’s messy? What do you think that costs you when they put [inaudible 00:21:32]?

Rob:
Hundred to thousands. I mean, one bad cleaner cost us thousands of dollars one month in just refunds where they didn’t show up or they forgot, or they were really bad. We had to obviously let them go, but we had to let them go because we were like, “Look, dude, I…” We’re paying them. They’re cheap, but we’ve just refunded $900 in the last week. They’ve cost us $900. If we had just divided that over a year and just hired someone better, we would have better reviews. So it’s always one of those things that we’re learning constantly.

Christian:
Yeah. I mean, I’m just thinking as Rob’s talking here, I’m thinking their cleaning’s not worth that extra $15, that relationship you built was. Right? I mean, you’re paying $15 to keep the same people who you have two years of trust in, right? I mean, you have two years of relationship that you built with them and good work. Like you said, one bad cleaning is thousand dollar refund, $1,500 refund, depending on what your nightly rates are. I mean $15 increase, of course, nobody wants to hear it, but man, when you’re saving a relationship and trust and time out of your pocket, right? I say time out of your pocket, because it’s going to segue a little bit into this idea of your return on time. I mean, how much would you have to spend to fix a $15 error that you didn’t want to pay for?
Right? Obviously, with people like us, I’m pretty sure each of us would rather be doing a couple different things rather than trying to keep an Airbnb clean or I mean, we have a lot of different ways to spend our time and that relationship is just man, that’s… And it’s the same argument, right? Coming to a mortgage broker, coming to somebody that you trust, coming to an advisor, somebody who understands you. Okay, you’re talking about a difference of a couple thousand bucks on your closing cost or 8% or a quarter percent difference in your rate, but that other lender may not understand what you’re trying to do. Right? They may hinder your ability to continue to grow your portfolio with the product that they place you into. Right?
This is a really good example. Last time I did a video with you, David. We were talking about that loan product that came out the day that you went into escrow on your last property. If I didn’t know what you were trying to do, I wouldn’t have even told you to go get it, right? That completely changed your game plan for that property. Right? Obviously, we’re partners, but if you weren’t linked up with somebody who understood your position, that wouldn’t have even been an option. You would’ve had to completely pivot your financing strategy. I think it saved you like $300,000 on your down payment, something crazy, just because I knew what you were trying to do and I was actively thinking when I saw that product.
So a hundred percent, I mean the cheapest option… You know. We have a saying when we hire people here. Do you buy everything that you own at Walmart? Right? You could probably get the cheapest option at Walmart, but you don’t own everything from Walmart. You probably don’t want to get the things that you really care about from Walmart, right? Your finances should obviously land in that category. Right?

David:
Well, I think the average investor takes the perspective of they’re the hub and all of these ancillary companies are spokes that they need to make it happen. I need a lender. I need insurance. I need an agent. I need a property manager. That isn’t inaccurate, but that perspective creates this idea of I have to go tell them all. I have to solve my problem and tell them what I need. Right? So then I need to get a loan. What’s the cheapest rate I can get? I need to get a loan. What’s the best down payment program you have? And then they spend all their energy trying to figure out to solve their problem and then go to someone and say, can you fix it? Which isn’t bad, but it’s much better when you’re all sort of in the hub together. Like how Christian and I, we were just together for 10 days.
And while we’re there, we’re brainstorming on the most efficient way to put these things together because he knows what I’m trying to do. He’s like, “Ooh, this would be better in this situation” or “Let’s make sure we don’t make this.” Those little things he catches save us hours and hours and hours of time and money later. I guess you don’t pay money in hours, but you know what I mean? They cost money to do because we are working in it and he knows what my plan is. Those relationships are valuable. Property management companies that give me ideas. Like, we were just looking at properties in the Smoky Mountains. And when you have a good property manager that says, “Hey, here’s an idea. You could take that sleeper bed from this property you’ve got and you could move it over into this one. And if you got an extra two people sleeping here, it goes from 10 to 12. That’s probably going to be an extra $25,000 in revenue a year.”
Ideas like that that I wouldn’t have naturally thought of right away. Maybe four years later, I think of it. But in the moment, their experience is helping me a ton. It’s hard to see that when you’re just thinking like, I got to fix all my problems and what’s the cheapest option. That’s one of the reasons that we talk about being relationship based because not only do they make you money and save you time, but they let you stay focused on the things that are more productive for building a business. That’s one of the things I want to ask you, Christian, you’ve mentioned that I talk a lot about velocity of money. This concept that put your money out in the world, have it create equity, have it create cash flow, pull it back in and then send it out again.
You’re constantly sending money out in the world to add more value and then come back to you. That’s one of the ways that you build wealth, but you talk about the velocity of time. So would you mind sharing your philosophy because frankly you wouldn’t be able to do all the stuff that we do together. Run a mortgage company, run an insurance company, buy your own investment properties, train the guys. We’re working on creating a program for loan officers that want to learn how to do loans, where they can actually come to us and take a course where they will teach them. Here’s how you’d be a loan officer, similar to real estate agents. How do you put all this stuff together? What are you doing with your time to make that possible?

Christian:
Yeah, that’s a really good question. And even following up on Rob’s first question as well, this is kind of a fusion answer. We’ve hosted talks. We did one down Long Beach on that velocity time and I just couldn’t help but think when I was sitting there hearing you talk. I mean, people say time is money all the time, but really the equivalent, when somebody’s thinking of investing strategies and investing mindsets, everybody gets broken, you know just completely fed up with running analysis. You know, you get into analysis paralysis just on money, right? Like what’s your ROI? What’s the down payment requirements? Just like you’re saying, David, oh, I need the minimum down and the highest return. Right? But nobody’s thinking, man, in the time that it took you and this paralysis that you had to identify these properties, run numbers and you had to run a hundred numbers to buy one property.
You know, if you pivoted a little bit, right? And put some processes in place that allowed you to maybe buy three instead, your return would be three times as much. It’s that transition from thinking of where are my dollars going to where my time’s going? This is really the foundation of how I believe I arrived where I am now and why we continue to grow. A lot of people would look at what I’m doing and say, “There’s no way there’s enough hours in the day.” But if every hour that I spend is being compounded in the similar avenue of how David talks velocity of money, every dollar you put in investment property, whether you’re borrowing it or whether you’re long term renting it, you’re hopefully getting multiple returns on that dollar. Right? That’s how I think of time.
I’ll give a couple examples. When I first started out, the first example was I was a realtor, right? I was referring people over to a lender and I was referring people over to insurance agent. I started doing all three. So now every minute that I was spending with a client is now technically three minutes. I’m spending a minute with them as their insurance advisor, their real estate advisor and their lending advisor. Right? That was the idea. I’m maximizing every minute of time that I’m spending with the customers, and the customers felt that. They’re like, “Oh my God, I’ve never had a mortgage broker who could advise me on my insurance policy.” Right? That would lead to me getting referrals and getting people who… A real estate agent is never going to get an insurance referral, but I did. Right? Because I was maximizing the time I spent.
And even transitioning that into now with how we’re building our company, David and I, as he shared earlier, we bought a property together. So every minute that I’ve spent with David building our business relationship and our personal relationship has now evolved into a partner, a real estate investing partner relationship where I didn’t know when we first started a mortgage company that we would own property together. But every minute that we spent building this company was also building an investing relationship. Right? So my minutes have been compounded with David. And I told her, I’d give her a little bit of a shout out, but one of my… She just started as a client, Karen. Karen Skrabanik. David, you know her.

David:
Who you met because she was a client of the David Greene Team, started doing loans with us, right?

Christian:
Hundred percent. Absolutely. She came, she was a client of David’s on real estate side. We did her loan. And funny enough, I own a number of rental properties with her now. And every minute that I spent with her, I didn’t know, but I was spending it with an investment partner. Building a mindset together and analyzing properties together, and realizing that we were on the same page with a lot of our investment strategies, and eventually that led to a really good partnership forming. I can say there’s a million situations. I mean, David and Rob, you guys are co-hosts of this podcast. You guys bought a house together. You’re compounding the time that you spend with each other. Right?
So just in every avenue of life, and I know this is hyper specific to me, but the people who are listening, who are W2, when you go out on the weekends, right, you go to the beach, you go to the bar, you go out with your friends. Those could be future partners that you don’t even know yet. Right? I mean, it could be people that you buy your next property with. When you’re at your family reunion, whether you’re a salesman or you’re W2, and you’re looking to invest, your family members could be your partners, and you could be compounding that time.
Obviously, don’t make everything about work, right? You need your family time. But you never know, right? Your next relationship, your next lead, your next investment partner could come from anywhere. And if you’re always thinking of maximizing the time that you’re spending through your life, it compounds just like money does. Right? Everybody has their 401k that compounds on interest every year. Time is the same exact way. And if you choose very carefully where you put that first minute, before you know it, you’re getting five or 10 minutes out for every minute you spend.

Rob:
That’s really interesting. So I’m kind of curious, do you think of… Like, any decision you make or any business decision you make, do you ever think about the value of your time? Do you actually assign a dollar amount and thus use that to guide how you move forward or if you empower someone else, to sort of take the load off your plate or whatever?

Christian:
Yeah. A hundred percent. I mean, I wouldn’t say I’ve ever necessarily tied it to a dollar amount, although that’s really good advice. I should probably start doing that, but I just think it’s just… Like I said, there’s just so many opportunities where this could… I mean, it could be walking your dog at the park. Right? I mean, when I bought my mattress that I sleep on, I refinanced the guy who sold me my mattress. Like you never know. Right? I mean, there’s people everywhere that you can strike up a conversation with. There’s a lot of people, realtors who do it part-time and loan officers who do it part-time. They know because they’re in a sales position that every minute you don’t know where your next lead’s coming from, but if you’re really living with that, and I think that’s great advice, Rob, even tying it to a dollar amount. Like, Hey man, how much? If you had to get taken away from what you’re doing, I mean, I can even imagine with you or David.
I mean, imagine you guys couldn’t work for two weeks, how much money are you losing? Right? Imagine your phone died, you had no reception and you couldn’t leave your house. I mean, the amount of dollars that you would lose, and that’s a short period of time, that’s a week or two. Right? But the amount of impact and compounding on your time that you guys have in your networks and your spheres would be massively valuable, right? I mean, it’d be hundreds of thousand dollars probably if you guys couldn’t work for a month. Right? Not only for you, but David runs a team, right? David’s team would lose money. David’s businesses, Rob, your short-term rentals, your management companies, all that. I mean, how much would be lost there because of the way that you guys have compounded your time. I just think it’s such a valuable mindset instead of always making it about the dollar, right?

Rob:
Yeah. For sure. Well, you run that little exercise, man. I mean, I think it’s very eyeopening because that was for me, as I start to scale and really kind of run with all of the different businesses that are floating around in the ether right now, it’s tough because I have a tendency of wanting to do everything. But like you said, it’s like I’m trying to squeeze 25 hours out of a day and it’s really, really, really tough.
About six to 12 months ago, I really started calculating what my actual hourly rate, just so that I know, and effectively, it’s really eye-opening to see that because then I’d look at everything else that I do and everything else that I get cheap about and I don’t want to hire people for. I’m like, oh yeah, I’m losing thousands of dollars by just even thinking about this for two days. You know what I mean?

Christian:
Absolutely.

Rob:
It definitely helps guide me and empower me to delegate and develop teams a little bit more for sure.

Christian:
Yeah. It pushes that priority to the people that you do delegate towards. I mean, David and I have both have experiences with we hired the wrong person. Right? It took more time that we invested into them that didn’t have a reward. Right? I mean, especially if you’re teaching that mindset with people that you’re partnering with and your employees or whoever it is and the listeners’ lives that you’re using this with, if you’re also imparting that onto the people that you’re building with, now you’re compounding two people’s time. Right? And by you, whether it’s Rob, you using leverage, or David and I hiring an employee and having them do a job that we would do otherwise, if they’re also compounding their time, I mean you go four or five people deep in this mindset and you got five people doing a job of 50, right? I mean, that’s really how you build a team culture. You can build this mentality that man, time is so valuable that everybody’s now getting the maximum value from it.

David:
I think it would be valuable if we gave some practical examples of how we work this into our life. Like your example of I went to buy a mattress and I started a conversation, so I refinanced the guy’s house. I got a free mattress and I made money by going to buy something. I had the same experience where, when I bought my car, I ended up selling the guy a house, and so that paid for my car and then some. I got a free car out of it. If you have that perspective, everywhere you go, if you’re talking to people about, Hey, do you know anyone that might want to be selling a house? Do you know anyone who’s got a hoarder house or something?
Everybody remembers that weirdo in their life that has just crazy stuff in their home and their house is falling apart. When you ask those questions, they might get answered. So do you guys mind giving some… They don’t have to be actual examples. They could be hypothetical, but something that a listener who’s hearing this concept could walk away from after hearing this and say, “I’m going to start doing that.”

Christian:
Yeah. I can start. I think, everybody’s thinking of side hustles nowadays, right? It seems like everybody that we pre-approved drives for Uber or DoorDashes or whatever. It’s funny. I mean, it sounds like a joke, but everybody that we pre-approved got multiple sources of income on their tax returns. So I think of it from the analytical, like the mortgage broker side of things, right? When I see people give me their tax returns that have five or six different avenues of income, both of you guys are like this, right Rob?

Rob:
That’s me.

Christian:
Yeah. I mean, you got your courses, you got your real estate, you got businesses that you’re running, you got the podcast. Right? I mean really the easiest way for me to say that is that building multiple streams of income, maximizing the time you spend in each one. Right? I mean something like, and it doesn’t have to be driving for Uber. That’s the dumbed-down bare bones version, but it could be something as simple as that. Right? It could be something as simple as, hey, I want to… You know, if you’re good at something, right? I mean something that David and I are working on, as he alluded to, is creating this course. Right?
If you’re good at something, share it with people, right? Try to fill a niche. Try to fill your time with something that can benefit other people, and maybe you end up building a company around it. Right? I mean, I don’t think David or Rob, either of you guys probably predicted you’d be in the spots that you’re in, but because you were building a team surrounding yourself with people and maximizing your time, you guys really built something. Right? That’s the most bare bones version of it that I can think of.

Rob:
Right. You seem like you’ve gone down this… I was going to say rabbit hole, but it’s way more that. Well, it kind of is because you’re going down the intricacies of building businesses, and you’re very successful at this, and you have several businesses that are producing income for you. What was that moment… I guess in all of this sense, you have businesses and teams. What was the moment you decided to actually start investing in more real estate or more short-term rentals? Why did you do that versus continuing to pour into those businesses?

Christian:
That’s a really good question. Funny enough, I bought my first house, I think within the last 50 months. It’s been about two years and I could have purchased way sooner than that. Absolutely. I set a goal for myself where I wanted my businesses to be not self-running, but be a method of income that would be my safety net. Right? It would be, I can now invest with confidence knowing that if something did go wrong, I’ve built enough aside from real estate to withstand any windfalls that come. Right? I probably started investing a little bit late. Of course, now everybody goes back and says, I wish I bought more, but knowing that my businesses were my first pursuit, that’s where I felt like I got the biggest bang for my buck.
That allowed me to now grow at the level that I wanted. So I guess to answer your question, I didn’t start buying until I could buy at the speed and the level to which I really wanted to. Right? I hadn’t gotten there yet. Until I could, I mean, I purchased 15 homes in the last year, right? I mean, that’s more than one a month. Right? I wouldn’t have been able to do that.

Rob:
[inaudible 00:38:26].

Christian:
Yeah, I wouldn’t have been able to do that unless I built a really strong foundation that had enough cash flow coming in, had enough ability or had enough time where I had the ability to go dedicate time and resources to buying these properties because everyone’s an analysis. Everyone’s a partner that I partnered with or a property management company. I mean, you guys know the drill of property managers. You got to find boots on the ground, and everything that David writes in his long term investing book. I started only once I felt I had the confidence to do that, the way that I wanted to. I wanted to invest on my own terms. That was a little bit of when I made the switch.

David:
This is an awesome segue into how you take your compounding of time. I often talk about that same concept, but I use the word synergy. I always say, you want to get more than one benefit out of a single action, right? Like you and I were at dinner with our agent two nights ago, or maybe it was last night. It was two nights ago.

Christian:
Two nights ago.

David:
And we were talking to the agent and his brother is the property manager in the company. So while this is a dinner where we’re meeting to talk about the deals that I was looking at and get to know the agent, we’re also like, “The property manager’s right there. Let’s get his opinion on things. Let’s ask questions.” And then he tells us, yeah, these are the properties that tend to do the best. Now we work that into the conversation with the brother who does the sales and we’re like, “Hey, how would you find that property?”
And in one dinner, which we had to do anyways, because people have to eat, we built a relationship. We got to know about what properties perform better as a property manager. We got to learn how the buyer’s agent could find those. I honestly think, I see this all the time, that asking the right questions, we make them better. They walked away like, “We didn’t even think about that. These guys are really smart. They have the right ideas.” That’s synergy. That’s the velocity of your time. That’s improving the return you get on the time that you’re spending.
Now, as you just mentioned, buying properties is a time suck. I was just thinking on the way to the office to record this today. I have to fly to Tennessee to learn the area. And then even if I’m not flying to look at individual homes, I have to review the house, pull it up on a map, ask what the numbers are, run the calculation on those numbers, try to get a feel for what could be wrong with this property that I’m not seeing. That’s all before you even go in escrow. Now you’re looking at inspection reports and surveys and getting insurance quotes and having to talk to contractors about fixing things and having to order furniture and trying to figure out how you’re going to get that delivered.
One property is not just… You’re not just putting money into it. You’re putting a lot of time and energy to make this thing actually fruitful. Having a specific buy box that you know these are the numbers that I want to hit, these are the properties I’m looking for can be immensely powerful with saving you the time when you’re analyzing a ton of stuff and making sure that the work you do after going into escrow is not wasted. It’s actually going to turn into a return. Can you share us, Christian, how you came up with your numbers that have created your buy box and then what they are?

Christian:
Yeah, absolutely. So just to lay the foundation, I do invest in short-term rentals. That’s actually the entirety of my portfolio. This is specifically catered towards people obviously trying to follow suit in that regard, but I’ve developed what I call the 15%, the golden ratio, so to speak. That’s what I call it. But basically I want to see the gross revenue projections for the property. People are going to say, “Where do you get those?” Right? I wouldn’t say live and die by AirDNA. I wouldn’t say live and die by… I think Rabbu is the new one that’s out now. BiggerPockets has a short-term rental calculator. For those who aren’t using it, check out BiggerPockets. You can use a Rentalizer for free, pretty sweet.
But I wouldn’t say live and die by those. Especially once you form a partnership, whether it’s a property manager or somebody with some experience in the area, if you guys are looking in Tennessee and Florida and Virginia, this is something that I could help with. If you’re looking at other areas network, BiggerPockets is great, all the resources that they provide. But really getting some hands-on data of not just… AirDNA is a good estimate, but is there a comparable to my property that did this? Right? Did X percent this year. I like that to be 15% of my purchase price. So if a house is a million dollars, I want to see it gross 150,000 a year. Now, to be mindful, that does include my property maintenance. It’s not my net, right? A property’s not going to net 15%.
That would be a home run, go buy it right now. Right? But that’s before cleaning fees. That’s before taxes, all that. But I like to see a property that, just to add, let’s pull a specific example. One of my properties in Tennessee, I bought it for 650. It did right around a hundred thousand last year. That’s right around that 15% ratio. Right? It’s a little bit off, but it’s really close. The reason why I chose 15 is that 12 is where I actually want it to be. So I’m actually building in a 3% safety net. I’m building in a buffer, right? If I hit my 12, it’s a successful purchase in my mind.

David:
Can you define what you mean by 12?

Christian:
Yeah. If it’s a million dollars, I’m shooting for it to rent for 150,000. And just so everybody understands, that’s 15% of a million, right? If it rents for 120,000, that’s 12%. So I missed my mark by 30 grand and I’m still where I’m comfortable being.

David:
So you’re willing to accept a property that will rent for 12% of what you pay for it, but you make your target 15% in case you miss it by a little bit. Okay.

Christian:
The reason why I don’t make the goal 12 is that then I hit nine and I’m not happy with it. Right? So I always build in… And be careful guys with projections, with estimates. You know, I write 30 contracts to put one in escrow, right? I mean, our realtor out in Tennessee, David, can attest to this, right? We’ve put them through the grinder a little bit. Stick to your numbers, guys. I have another one as well. So it either has to fit that box, and if it does, it has to be in an area where I have no concern over the short-term rental regulations. It has to be an area that I can do. So no HOAs. I don’t really invest in HOAs unless it’s what are called condotels. This is similar to what I think you bought in Hawaii, David, where they’re protected short-term rentals.
So I would feel confident investing in there, but then you have your HOA fee, right? So that’s one buy box, 15% in an area where I have confidence in the future projections, or I have an alternative. If it’s potentially going to pivot away from short-term rental allowance regulations wise from the state government, it has to be able to pivot to a longterm rental and still cash flow. I’ll give an example. I purchased a 300… What was it? $350,000 single family in Virginia Beach in the state of Virginia. Lower property values, it’s something that I wasn’t shooting for the stars on them. However, I ran the numbers and my mortgage all in, I want to say it was about 1,700 bucks. The rental estimates was 2,200 that’s on a long term, 12-month lease, right? That was actually on the appraiser, so that was based on comps in the area.
Now it rents for, I think, four to 5,000 a month. We’re expecting it’ll do about 60,000 this year. So it’s hitting my numbers that I like, but it’ll transition well, because I don’t have a hundred percent confidence that the city of Virginia Beach will be short-term rental friendly for the foreseeable future. So I made that investment, knowing that my exit strategy is a really good long-term rental hold. That’s my second buy box. Those are the only two conditions where I’ll buy a property. I’ve said it to be super simple. I’ve given that to my realtors and I’ve given them a free for all write it, if it meets these numbers. And I work with two or three agents that I have some confidence in and not much more.

Rob:
Wow, that’s actually pretty simple. So a lot of people are usually like, okay, it’s got to be in this market and it’s got to have this bed, bath count, and it’s got to have this view or this amenity. Yours are strictly just on the numbers.

Christian:
Straightforward.

Rob:
Like you, as long as you can project it to be a 15% gross, I guess, 12 to 15%. And then your second criteria here that it can work for a long-term rental, then it doesn’t really matter. So your buy box is effectively national.

Christian:
It is, and that’s one thing. For instance, in Florida, insurance is high in Florida, right? They got the hurricanes. They got the wind. They got the water damage. So that’s something where if it’s in Florida, I do want to see it really hit in that 15. Right? I don’t want to get something in that 12 to 15 range, because I know that insurance is going to be a higher cost of owning. So you can pivot a little bit based on certain areas, especially if somebody kind of settles in to an area, you’ll be able to project those expenses a little bit more as opposed to Tennessee. I own a number of cabins in the Smoky Mountains. This is where David and I were last week actually. Some of them have indoor pools. Some of them have really good views, right?
Some of them are on lots that I believe will continue to appreciate as the city of Pigeon Forge, Gatlinburg, that whole area continue to be developed and improved and tourists keep staying high there. So I may be open to accepting a 13 or a 14% ROI there, not ROI, but this ratio, right? Because I know there’s a lot of other compensating factors that help that strike confidence in me as an investor. Right? I like the pool. Maybe we can use… David and I are considering using one of them as like a corporate retreat, right? So that may be a benefit where we can take our team there as a reward for high production or whatever the case is. That could be a really cool experience. So even if the properties don’t meet the perfect numbers, I set them that way because I’m setting a limit that if we underperform, I’m still okay with it.
Right? That disqualifies 90% of properties, because most of them don’t do that. But my realtors understand the ones that do meet this, we’re going to write competitive offers. We’re going to be aggressive and we’re going to get them in contract. Right? A realtor, David can speak to this, keeping it simple for a realtor, keeps the relationship healthy. Right? If I tell you that I’m going to buy this property, David, there’s no worse feeling than an investor telling you, “I will buy this property if you put it in front of me.” You put it in front of them and they say, “Oh, well, let me talk to the wife.”

David:
Yeah. “I don’t like the color.”

Christian:
“Let me think about it.” You know, that, right? I mean, it’s very clear. The realtors that we work with are… You know, and that’s once again, return on time, right? So I’m not spending time doing all these analysis.

David:
Here’s what I like about what you’re describing. It hit me when you were talking like, this is what’s different about working with us than with other people. It’s not a huge difference, but it brings clarity. What I think most people are doing is they’re saying, I want to hit this ROI. I want to be in this neighborhood. I want the ARV to be this much more than what I paid. They have all these criteria and it’s good to have criteria. Maybe they have seven criteria just like that. I want to be 10% under market value. I want blah, blah, blah. Very rarely does a property hit all seven. And so what happens is you just spin your wheels. You spend time, you don’t get anything. You never get a reward. You never get into the fun of this.
You never learn from swinging the bat. And so you just get stuck and you get discouraged. But what you’re describing is here is step one. I want it to be at 12 to 15% gross yearly revenue of what I’m buying it for. Here is step two. I would like it to be in one of these areas, because I know I can rent it out. Here’s step three. I’d like to have a backup plan. So the floor plan itself matters because I have to be able to rent this thing out if it doesn’t work as a short-term rental. I would also like for there to be some kind of upside. Now when I see, Ooh, this property is different. Like, I’m looking at one right now in an area where there’s not many more new construction. It works with the numbers, but over the next five years, it’s going to crush it with the numbers because they can’t build anything more. Okay?
What you’re saying is, “Hey, I may not hit my 15% number, but if I have something like what I just described, I will go down to 12 or maybe I would even go down to 10.” Right? Like there’s this balancing act that occurs in your head when you see the whole big picture. So you start with solid criteria and then you look at the pros and the cons and you weigh them out and the decisions become much less complicated, sort of become simple. And then you learn from it and you take that into the next thing. That is, in my head, the right way to be analyzing properties. It’s not letting a spreadsheet do all the work. There’s an element of creativity, of vision, right? A lot of the properties that we’re looking at, I looked at one, the one I just described, what I liked about it was it had six bedrooms and it had a game room.
It had plenty of places to put in sleeper beds to put enough people in the house and I can take one of the bedrooms and make it into a theater room. It’s perfectly set up for that. Okay? That is going to now add value to the property. People are more likely to book it and it’s not like it was a three bedroom house where I lost a bedroom. I can only do this because it’s six bedrooms. When the realtor is bringing me to the properties, they don’t see that. They just know, Hey, this one hits the numbers that you said. So I want to take that deal, and individually look at how I would maximize the value of the property.
And on that one, particularly because they’re not building them anymore up there, and I have the theater room thing and there’s a few other things that I can do to add value to the property, I’m going after it. Even if that one comes out at a 9% return instead of the 12 or the 15, it’s going to go up over time. What you’re getting into is ways that people can analyze deals without spending their entire day and getting discouraged.

Christian:
Yes.

David:
Can you share how you came up with these criteria that you operate by?

Christian:
Yeah. I came up with it with buying my first property with no mindset with no analysis, with no… I basically said I want a property of cash flows. Like most people get in Airbnb, I’d like to make some money. Right? Then I started seeing, oh, this one did pretty well. And I’m seeing on average, it seems like they’re doing 12 to 15%. I like that. Right? That helps me cash flow. That allows me to be profitable. That allows me to be able to restabilize it after a big expense, a roof, an AC. In one of my properties in Tennessee, I had the well pump go out. I live in California. I don’t know what a well pump is. You know, there’s no wells out here unless you’re outside of the main areas. Right? But that was an expense that I had to pivot from. Right?
But because my numbers were hitting my projections and where I am eventually ended up modeling this mindset after, it was very easy to cover. Right? I had, I guess 8,500 bucks, I think it cost to completely redo the well pump and it was in the account and we were able to make up for it in one month of rent. Right? I wish I could say I brainstormed this and was just the perfect analytical tool before my first purchase. But this was really built from my successes and my failures on doing it and seeing the ones that hit the numbers that I liked seeing.

David:
Which is why we’re always telling people, you got to take action. You can’t just wait till you have all the answers.

Rob:
Yeah. You got to kind of just figure it out as you go. For sure. I mean, pretty much my philosophies on what pencils on, what doesn’t just comes from really averaging out how things have really worked out for me in the past couple of years. So it’s the same thing, Christian. For me, it’s like, I don’t have this perfect set system that I developed in the lab or anything like that. Really it’s just an average or the median of what all my other properties perform at. Right? So for me, like you talk about your 15% gross. For me, just a 20% cash on cash. I keep it real simple, and as long as it hits that metric, then for the most part, I’m pretty happy with it. I agree, I don’t really take AirDNA to heart, not nor do I take Rabbu to heart.
It’s really just a gut check to be like, okay, this is the median aggregate that AirDNA is putting together. Now I need to go in and actually research the calendars of my competition. And so if AirDNA and Rabbu and Mash Buys or AllTheRooms, if they all kind of put out figures that get me to a 20%, then I’m like, “Okay, that’s a good starting point.” Now I need to actually go and examine my competition. I’ll go in and do what I call like a market audit where basically I’ll go and just look at everyone in that market and see overall, does this market tend to really level up on design or on amenities or on views? I really try to match up. You know, see where I match up against them or where the properties that I’m buying will match up against that demographic.
If I feel like I can outperform 90% of the market because I’m always aiming for top 10% of my market. If I feel like I can perform 90% of the market, then I already know my cash on cash will likely be more than that 20%. You know what I mean?

Christian:
Absolutely.

Rob:
It’s a new acronym here that I call LILS. Or no, LALS, little art, little science. You know, when we’re getting to it.

Christian:
Yeah, I like that.

Rob:
But yeah, I mean, it really… I wish it could be super objective because I teach this every day obviously to my students, but it really is just leaning on your experiences and the more you have and the more you can lock up and add to your portfolio, the easier it is to use that as anecdotal evidence on how you’re going to perform in the future.

Christian:
Not to beat the dead horse, but the only thing that… I mean, you don’t even think about it when you bought your first one, but you’re actually building a tool to better analyze future properties. So getting back into that velocity of time thing, the time that you spent buying those three properties is saving you exponentially more time buying the fourth one now. Right? And you didn’t even plan for that. Right? It’s like, “Oh, now I have a portfolio to create my own business.”

David:
Then you get to where they’re just bringing you a deal that you didn’t even ask for.

Christian:
Yeah, absolutely.

David:
Look at that. Right? They just bring it right to you. You don’t even have to go look for it.

Christian:
Yeah.

David:
I think, Rob, the only thing stopping private capital, hedge funds, BlackRock from buying every single property is the art component. If it was purely objective, we would all be getting pushed out of it. Right? That’s what’s beautiful about the real estate we’re buying is it takes time to look at it. And even though that can be frustrating, that’s what’s protecting you from having some computer algorithm to step in and buy every single house.

Rob:
Yeah. That’s very true. I was joking with one of my partners yesterday and I was like, it’s only a matter of time before BlackRock calls and they’re like, Hey, we were wrong. We don’t know how to do this. Can you please artfully choose our houses for us?

David:
It happened to Zillow, right? Some of those iBuyer programs that we’re just scooping them all up thinking a computer program could beat the actual investor. That’s the advantage that the BiggerPockets listener or the mom and pop investor has is they see angles like that that are not going to show up in the MLS listing. A lot of the properties Christian and I are looking at are literally in the MLS listed as a one bedroom house. So the property he owns that we stayed in is listed as a one bedroom house with 3,000 square feet. The reason is because of regulations regarding septic size and they’re only allowed to market at a certain bedrooms and the septic tank is a certain size, but he’s got a 3,000 square foot house. Right?
So how many big names are just going to skip right over there because it doesn’t show up in their search at all? Whereas when we look at this, we’re like, “Holy cow, you can sleep a lot more people in here.” So I’m always grateful that there’s errors and inaccuracy in the way that real estate works, because it gives you an opportunity to hit stuff like this. Christian, you mentioned helping me on a deal where you found creative financing that dropped my down payment from like 25% to 12%. You and I run into problems constantly. Well, really I run into the problem and I hand it to you and you have to go fix it. I’m like, “Here’s the round peg, there’s the square hole. What you going to do?” And then you get to figure out how we’re going to solve that, and you do an amazing job.

Christian:
It’s like you’re saying I have the fun job. Gotcha. Okay.

David:
Yes, that’s exactly right.

Rob:
I can confirm you guys always pull it off for sure.

Christian:
There you go. Appreciate that.

David:
That’s one of the things that I want to talk to you about are, can you share some of the creative ways that you get loans to close, maybe the advantage you have with the one brokerage and then loan programs that a person might not know about that we can help to get them to close on a deal with better terms or just close that all, that if they were just going to a retail bank and saying what’s your loan product, they would have no idea this exists.

Christian:
Yeah, really, really good question. I think what really differentiates us is the time that I put in with, I don’t want to call it the ownership, but that’s basically what it is, the ownership of the lending entities. I mean, I sit down with CEOs, David and I were just at a private broker event for UWM, who’s one of the biggest lenders in the nation. Right? We were invited and we got some FaceTime to give direct feedback into programs that they have. Right? So when you’re going to regular lenders, they’re not… You know, your loan officer at Wells Fargo probably isn’t sitting down with the head of Wells Fargo, right? I mean, we have a really unique opportunity, and this is why it’s so important also for people to respect these programs.
And if we get you a loan, we want you to analyze the property correctly because if we end up having all these default rates and all these things, it may not be a product that we can offer much longer, right? So we underwrite these things and work with the lenders to really build these products because of not only our experience, right? I want the products from me and David and Rob, and we’ve done loans for all you guys, but I want this product to then go maybe trial run and then really give it out to people and say, “Hey, this is an opportunity for you guys to buy where you couldn’t otherwise.” You know, our DSCR product is a really good example of that. There’s not a whole lot of lenders who will allow you to substitute in short-term rental income on a lot of loans.
That’s a big one, right? Especially people who are not completely new to short-term rentals, because a lot of the products want to see some experience there. But you go to a regular conventional lender and they’re not going to care what AirDNA says. They’re going to say, “There’s no way you’re going to rent.” You know, Rob, I mean that place that you guys bought in Arizona, no lender would ever buy that you’re renting it for what you guys are. Right? I mean, it’s just not reasonable with conventional mindsets. But I mean, that’s a really good one. We have some fun bridge products. That’s one where if you are able, this is a market that’s going to swing. If you are able to start getting things under market now, which hasn’t been possible the last two years, but we’re starting to see some price drops, some more competitive offers, being able to be accepted.
You know, we can lend on the appraised value as opposed to the purchase price. Right? We can say, this is the deal that we discuss on the past video for David. If you guys haven’t seen that, check that one out because we go into depth on this product. But David was able to shave off 10% of his down payment because the property over appraised by so much, right? We were able to treat that appraised value as the value of the property instead of the purchase price.

Rob:
I’m jealous, man. That’s crazy. That’s such a…

Christian:
It’s a sweet one.

Rob:
Can you do that for me, too?

Christian:
If you find a property that you’re under buying, right? I mean that’s absolutely… Obviously, that’s the unicorn property, right? That hasn’t been available for the last three years but…

Rob:
Well, I actually think the Scottsdale property, the second appraisal on that came in about $175,000 more than we paid for it. That was a nice little surprise.

David:
I found out, Rob, side note, I haven’t told you this. When I was out there looking at additional property, we bought that thing for less than what the land would cost if we just bought a lot that size.

Rob:
Whoa. Really? Yeah. Let’s double it and sell it.

David:
Yeah. Here’s something to think about. What I notice a lot of clients do, and I want to get your opinion on this, Christian, is they say, “Hey, can you get me a 12% down payment loan? Yes or no.” And if the answer’s no, then they make another phone call and they ask someone else, “Can you get me a 12% down?” Right? You don’t get that on every single deal. You work and you buy houses, and then this falls into the situation. We’re like, oh, I can maximize your deal this way. Other deals, you maximize in a different way.
So one of the things that we do since the David Greene Team and the One Brokerage works together and the One Brokerage gets to hear all of the cool strategies that we use when we’re working with the David Greene Team and vice versa is we will say instead of, “Hey, I’ll give you 900,000 for your house.” We say, “I’ll give you 875 for your house.” And they say, “Okay, deal.” And we say, “Actually, let’s make it 900 with 25,000 in closing costs.” Then we take the 25,000 in closing costs and buy your rate down. Like what, on a normal six and a 5% interest rate on a $900,000 house, can you spitball what you think that might buy the rate down to?

Christian:
Buy down to the fives. Yeah, for sure.

David:
Okay. So now you’re in the fives instead of six and a half. So that’s significantly cheaper than anybody else would’ve been able to pay, even though you paid $25,000 over, but because your rate is in the fives, that extra 25 you’re borrowing is very minimal. It doesn’t make your payment go hardly at all. Right? So now that deal works for you. Where it didn’t work for you or anyone at 6.5%, and what everyone else was doing was trying to bring the seller down on their price.
Well, we actually gave them more, but got you the house for cheaper. There’s a lot of strategies that when you’re working with the right person, they will recommend to you, what if you do this? What if you do this? It’s not always going to be the same thing. I think that’s a mistake people make as they heard about, “Oh, can you do this down payment? Or can you get this rate?” They’re the ones asking the questions rather than saying, “Here’s my goal. What do you think you could do to help me?”

Christian:
Yeah. That’s something that we pitch a lot. I mean, I think probably 50%, at least, of my properties that I bought during a really hot market were actually purchased with substantial seller credit. I mean, David, the deal that we got, we had a massive amount of seller credit, right, on the property in Tennessee. That’s a great point. This is where partnering us up with a realtor, we’re going to coach them on that. Right? So if you say, “Oh, my realtor doesn’t know how to do that.” Or “I don’t know how to do that. How do I word that?” Like, just give us their contact, right? I mean, we’re a brokerage that once again, practice is what we preach.
We know how these things go especially if you’re working on David’s team. This is something that with the market kind of we’re starting to see price drops, this is something that’s even more attainable now. Right? I mean, you can get the seller to pay for your rate, buy down. So all of you guys who are monitoring the market and oh my God rates are crazy. Have the seller buy down your rate, right? You’re getting the rate from a month and a half ago and that wouldn’t be available now if the seller didn’t credit you that money. Absolutely a tactic in a rising interest rate environment to kind of reset yourself prior to the last few rate increases.

David:
Which is why we get so excited when we see… It’s not that we’re happy rates are going up, right? Everyone’s a shock to everyone. Nobody likes it. But the effect of that is the market softens, other buyers, your competition, that everyone forgets they’re competing with other buyers. They always think they’re competing with the seller or they’re competing with their uncle that tells them not to buy a real estate. No, you are competing with all the other people that want that asset. They get hesitant and it opens up this window. That’s why I went and put eight properties under contract in a couple weeks here because I’m seeing, oh, this thing is in a great area. Great thing. It cash flows really well.
Everything works, but everybody else is afraid. They’re holding their breath and saying, “Is everything going to collapse? And I don’t want to jump in too soon.” But this softening gives us the opportunity, that’s what I’m trying to get at here, to use these techniques, to use these strategies, right? For the last six years, the only strategy has been write a higher offer.

Christian:
Yeah. Basically.

David:
That’s it. You pay more than the other buyers are paying or you don’t get the house.

Christian:
And waive your appraisal contingency.

David:
Yeah. Yeah, exactly. Now we’re keeping appraisal contingency. We’re keeping inspections. We’re keeping loan contingencies. We’re shopping around to find you better loans. We’re looking for ways to get your rate lower. Or a lot of the times we get people 15% down on investment properties instead of 20% down. There’s things like that we can bring into play. I think you have to be grateful that the market is softening because if you saw some of the tricks that we’re using to maximize what we’re doing, I think a lot of people would be really pleased.
More importantly, buyers are happy about what they’re paying to get the house. No one’s been happy for what they had to pay in the last six years. They’ve been happy afterwards, right? A year later, you’re like, “Well, this is great. I wish I’d bought more.” But at the time, no one felt good about it. This is finally a period of time where you can actually feel good about what you’re buying. I feel pretty good about the one we got, Rob. What do you think?

Rob:
Yeah. I mean, I was going to say like, we got a $75,000 seller credit on that. I think there’s obviously certain rules on how much of a seller credit you can get with a property and everything like that. We were like, “Man, 75,000 might be, we might be maxing this out. So we had to creatively shuffle things around. I think we might have bought down our rate.

David:
That’s what we did. Yeah.

Rob:
Yeah. I mean, we got that. We got full on, we got it fully furnished, which was halfway beneficial, halfway a bit of a torturous journey, getting rid of a lot of the grainy knickknacks, but it did end up… I think it’s a net positive on that one, but we negotiated pretty heavily on that one. And then we played hardball and we got it. And yeah. Then we got the appraisal back and we came in 150.

David:
Like I told you, the land is worth more than the land with a 6,000 square foot house on it. And the furniture thing you mentioned… We could do this all day because this is so fun. Let us know in the comments in YouTube, if you guys would like to hear more of these type of shows, where we talk about our deals. But you didn’t love the furniture on the Scottsdale property, which is fair because it wasn’t the best.

Rob:
Yeah.

David:
But we were also able to buy furniture relatively easy because it’s Scottsdale. They have a lot of stuff.

Rob:
Yeah. Yeah.

David:
Some of the properties that Christian and I are buying in different areas or that I’m buying in different areas, getting furniture is a pain in the butt because of supply chain issues. So being able to-

Rob:
Oh dear, especially Tennessee.

David:
A hundred percent, right? Being able to get that negotiated into the deal, not only saves you a ton of money because furniture’s very expensive, but it also saves you three or four months of waiting to get it furnished before you could book it, which could turn into five to 10 grand a month. Right? There’s a lot of ways that I’m seeing this is awesome for me. Could the market go down more? Sure. Will it go down more on some properties? Probably so. Does that mean that these are bad buys? No. Not at all.
It’s going to go back up again at some point, too. If it’s making a lot of money and I’m getting into the best areas, I think it’s a mistake to try to time a market because markets are all so different. What you’re seeing in Scottsdale in the luxury of really expensive space, that’s slowing down a little bit. What you’re seeing in Southern California, Los Angeles in the first time home buyer space has not stopped at all. It’s just as hot as it’s ever been. That’s another thing to keep in mind.
Christian, is there any last words you’d like to provide before we move on to the next segment of the show? When it comes to advice for a real estate investor who is trying to calculate like I’ve got the lender and the agent and all these strategies they talk about and I read Brandon Turner’s book on No (and Low) Money Down Real Estate. I really like what Rob’s doing. Like there’s so many things going around, where do they start? And when they walk into that position, what is it they should be looking for.?

Christian:
You’re saying with their first ever investment property?

David:
Or maybe just a newer person who wants to start buying it or maybe wants to buy more, they’ve got two or three and they’re like, these are going good. I want to scale. Give them an idea of where they should go, who they should start with and what they should be looking for.

Christian:
Yeah. I mean, I’m biased. I’d say our company, right? But aside from just who you’re talking to, the mindset is really, I believe we’re headed for a place in this country where if you don’t own property in the next three or five years, I don’t think you ever will. I think real estate is going to become such a hot asset and it’s going to be so hard to get competing with investors and corporations, everything. I really think, and this isn’t fear tactic. I’m not trying to preach that. So please don’t misrepresent, but just not be afraid to jump in. You know, I mean you can always… People are talking rates right now. America’s awesome with our finance strategy because you can refinance, right? I mean your six and a half percent rate that you have right now is not the rate that you’re going to have for 30 years.
Right? I mean, you refinance the moment the rates get low again. I mean, historically speaking, a 6% interest rate is not like this catastrophic interest rate.

David:
[inaudible 01:09:30].

Christian:
It’s a fairly healthy market rate on a mortgage. It’s not, you know. I mean, granted prices are high right now, but you pay down some equity if you, and obviously buy what you can afford. I’m not telling people to throw every last dollar they have into real estate. But if you can comfortably afford, don’t get caught up. Create a buy box. If you want to copy mine, awesome. If you want to copy Rob’s, awesome. But create something that you’re comfortable with.
If it hits these numbers, link up with an investor. If you’re buying short-term rentals, please talk to a short-term rental agent, right? Don’t go to the first time home buyer, down payment assistance person and say, I’m looking to buy an investment property. Surround yourself with investment-minded individuals, ourself as a lender, a short-term rental agent out in whatever area you’re looking at. And if you’re surrounding yourself with people who can correctly advise you, you’re going to end up in a better situation. It’s just surround yourself with that mindset.

David:
Yeah. I wasn’t saying you should just come to us, but if they do come to us or they go somewhere else, what questions should they be asking to get the ball rolling in the right direction?

Christian:
Like David was saying, don’t come and say, you got David 12% down. Let’s get it. Right? But really working with us, and we do consultation calls with every single person that reaches out to us. It’s 15 to 20 minutes of us understanding the roadmap that you’re trying to achieve toward success. I don’t know many agencies that do that like that, but that’s really how we have it built. Our first conversations should be come prepared, have us have a outline of what you’re trying to accomplish, and allow us to build the path for you. But when we build that path, you can’t be afraid to walk the path. Right? I could lay all the concrete brick in front of you that I want. If you’re not ready to take that first step, that meeting was in vain.

David:
I like that. The here’s what my goals are. Here’s what I want to do. Here’s the capital I have. Here’s my concerns. The person you’re working with should be able to paint a decently clear picture of several options, right?

Christian:
Absolutely.

David:
If their answer to you is, I don’t know what to tell you. What do you want? You want to get pre-approved? That’s not the right person, right?

Christian:
Yeah.

David:
Your agent says, so do you want a three bedroom or a four bedroom search? Not the right person. Right? You’re looking for that person that goes, “Oh, have you considered this? Or what we’re finding in this market is this is the case, and I can help you with all of these different things.” I think that’s a much better approach to take, especially if you’re trying to get into the market at a time where there’s a little bit more uncertainty.

Christian:
Absolutely. Yeah. An agent, a lender, even an insurance agent that really understands what you’re trying to accomplish is invaluable in this time right now, in this economic climate that we’re in. It’s vital to your success.

Rob:
Yeah, for sure. So you said you’re not trying to be a alarmist or anything like that. You think we should not make the thumbnail like all red and then we give you like red sort of demonized with like flames behind you and big title printed over.

Christian:
Buy right now. Yeah.

David:
Yeah. Let’s clarify that. Because I know in the comments we have something coming, he said, in three to five years, you won’t be able to buy real estate. They’re trying to get you to buy. There’s a crash coming. We’re not saying in every market in the entire country, you’ll never be able to own a home. Okay?

Christian:
Correct? That is true.

David:
I think that was a bit of an aggressive statement. But what you’re describing is there are changes happening that we see that the average person doesn’t, where institutional capital is a bit of a Godzilla. It’s coming in and smashing people and paying way more money than anyone realizes. And if some of those companies buy Airbnb, buy Vrbo, then they go buy all the properties. All of a sudden you put yours up there at Airbnb and it shows up as number 97 and the 96 above it is all the ones they own becomes very, very difficult for the mom and pop investor to compete.
I think in the hottest markets where they feel the safest, like the best areas with the best weather, the best travel, the best amenities, they will go in there and bully people out. Absolutely, I do agree with that. Real estate’s very local. So if you’re living in Virginia Beach where Christian bought his first property, I don’t think that this is going to happen there. Right? That’s not the same scenario, but I do think over time, real estate is becoming an asset class like a stock. It used to be so much labor to own real estate that the big companies didn’t do it. They just traded in easier things to own like stocks. As they are learning how to make this more automated, it is turning much more into something like a security. And when that happens, it’s a lot harder to buy it because your competition ramps up.
So just to be clear, I’ve got a lot of properties I’ve been looking at that that I’m slow playing. Okay? The one I described earlier is listed at 1.5. It’s dropped down to 1.45, and then 1.35. It’s sitting at 1.25. I’m going to write an offer at a million-fifty. Okay? I don’t expect I’m going to get that property, but it’s been on the market for a hundred days. This isn’t me going after a property that have been on the market for two days. Right? However, that million-fifty is a jab I throw and I look to see what are they going to respond with? What if they counter me at 1.125? Well, now they’ve come down pretty significant from their one. That’s more of a motivated person. Right? If it stays on the market, it’s moving in my direction. So in some scenarios, yes, take it slow. See what you can get. And then in other scenarios, depending on the property, you’re going to have to move quickly.
All right, Christian, we’re going to move on to the next segment of the show. It is the deal deep dive. In this segment of the show, we are going to dive deep into one particular deal that you have done. All right. This is the part of the show where we dive deep into one specific deal with our guests. Remember you two can do more deals with the help of BiggerPockets tools, and resources. All right, Christian, do you have a property in mind?

Christian:
I do.

David:
All right. Question number one. What kind of property is this?

Christian:
It’s a single family home in Bradenton, Florida with an additional casita, two bed, one bath, additional dwelling unit.

David:
Like an ADU or a granny unit.

Christian:
It’s an ADU. Correct.

Rob:
How did you find it?

Christian:
I found it through one of my local short-term rental agents out there who brought it up to us. It was on market. Wasn’t some special off market deal. So yeah, standard MLS.

David:
All right. How much did you pay for it?

Christian:
Original contract was for 830. We dropped it to 818 was our… Oh, I’m sorry. No, it was purchased for 830. It appraised for 818. So I actually overpaid slightly for this house.

Rob:
How did you negotiate the house?

Christian:
Negotiated, used a standard agent. It was when the market was very, very hot. I purchased it in 2021. So it wasn’t a whole lot of negotiating power there, but we didn’t negotiate, I believe four or $5,000 just for minor repairs, but it was a pretty clean cut deal.

David:
Okay. How’d you fund it?

Christian:
Funded it 15% down, DSCR loan, and actually our kind of flagship product that we use utilizing the expected rental income that it was going to produce as a short-term rental.

Rob:
What did you do with it?

Christian:
Yeah, so obviously, a little bit of foreshadowing there, but I’m using it as a short-term rental? This one is unique because it’s in Bradenton, Florida, which is a kind of a vacation destination. It’s about 45 minutes to an hour south of Tampa on the Gulf Coast of Florida. The numbers have been even higher than we expected. In six months, it did $97,000 in gross rent. We anticipated it would do about 150 to 160. So it’s on track for 180.
It’s by far and away out producing. The reason being we’re actually running it as two separate listings. You can either rent it out as a full six bedroom or the main house is a four and the casita is a two. So in the days where the main house is not rented, we just rent the back unit. It’s a shared backyard, so we have it kind of segmented where they could be two separate rentals. So really maximizing the occupancy rate on it and keeping it booked. You know, even if it’s a couple day filler, we just fill in the two bedroom casita there.

David:
What was the outcome?

Christian:
Outcome? Awesome short-term rental opportunity. If we sold it as an Airbnb right now, it’s probably already appreciated by 150,000. We got a realtor reach out to us to try to sell it. And listing price was going to be one million five. A million 50,000, I should say. So very satisfied with how that’s gone. We’re going to hold it for a short-term rental for the foreseeable future, but it’s doing very well for us. We’re very excited about it.

Rob:
What lessons did you learn from this deal?

Christian:
This was my first kind of bigger purchase. Everything prior to this time had been 700,000 and below. This was kind of my dipping my toes in the water of higher value properties. It made me realize if you have multiple units… This is the David Greene special, right? If you got multiple units, if you got heads and beds, added rental capacity, I knew it would have some benefits, but I did not forecast the level of the benefit that it would have with being able to fill up the days that were unrented instead of having it go four or five days unoccupied. Maybe you fill up three of those with 150, 200 bucks a night for the two bedroom. And it really, really made a difference for us. It’s going to do $30,000 more than we anticipated when we first reviewed it.

David:
All right. And this deal, who was the hero on your team?

Christian:
The hero on my team was for sure, my partner, I shouted out earlier. This is one that I purchased with Karen and we have a partnership where she manages for me. We self-manage, but she’s taken on the majority of it, everything from scheduling the cleaners to go in, to communicating with clients. We do have a perfect five star rating on that property on Airbnb, which we’re excited about. She got super host status and yeah, just that property has had a lot of really good reviews. It was remodeled. It did come furnished, which was a big one, and it was an active Airbnb. I forgot to add that. It was already a existing, running Airbnb, but yeah, Karen was absolutely… Couldn’t have done that one without her.

David:
All right. That’s going to wrap up our deal deep dive. We’re going to head over to the last segment of the show. It is the world famous.

Speaker 4:
Famous for…

David:
All right. First question for you, Christian. What is your favorite real estate book? I’m curious to hear you answer this because I know you don’t read.

Christian:
No, I don’t read. There you go. Showing my dirty secrets. Well, I think if I came onto a podcast hosted by my business partner and I didn’t shout out one of his books, I think the partnership would be concluded at that point. So I’m going to shout out any book written by David Greene. I do like the BRRRR one. The BRRRR method has blown up to a level that I don’t think anybody who originally thought about it intended, but yeah, BRRRR book just taught principles and concepts along… You know, that partnered with the long distance real estate investing. You know, those are morals and ideas that we teach in our company and that we do ourselves. I think the influence that those books had on the market is invaluable. I think it’s really, really awesome books.

Rob:
Good answer. Good answer. Favorite business book?

Christian:
I will say, I have read this one. Never Split the Difference, Chris Voss. I think just seeing things from the side of a hostage negotiator. If you guys haven’t read that book, absolutely recommend it. It just teaches you how to negotiate in an avenue that I didn’t think a whole lot before, but negotiating for people’s lives obviously is a different level than negotiating for real estate, but a lot of really good principles in that one.

Rob:
Great. When you’re not off buying 15 short-term rentals in a year, what are some of your hobbies?

Christian:
I love snowboarding. I had a pretty bad accident a couple years back that I actually haven’t snowboarded since, but absolutely love snowboarding. I’m one of the best five-foot-six basketball players that are out there. No, I’m kidding, but I love playing basketball. I’ve played it since I was very young and I’m a five foot six, five foot seven with shoes on white guy. So you can imagine the challenges that I had to go through, but absolutely love my basketball time.

David:
The books that Christian mentioned, if you want to buy those or any of the other BiggerPockets books, there is an entire library of stuff that will really help you get your investing career off the ground. You can find those at biggerpockets.com/store. That’s where you can buy any of the books that we have for sale.
My last question for you, what, in your opinion, sets apart successful investors from those who give up, fail or never get started?

Christian:
Gosh, I would just say action. Obviously, it’s easy to say, act and don’t have fear, but really just maximizing opportunity. Like David said earlier, when a market downturns or when things slow down, people like David and myself get really excited, right? We’re not scared of the rates. We’re not scared of the added risk of the market right now. We see this as a buying opportunity, right? We see this as an opportunity to get things that you couldn’t get last year.
So I think when the world presents you with lemons, try to get them squeezed. Make some lemonade out of them and make the best out of the unfortunate situation of our government printing 80% of the money supply, right? Let’s try to at least benefit a little bit from it.

Rob:
And lastly here, tell us where people can find out more about you.

Christian:
This is an interesting one. I do not have any social media. We have our website, the onebrokerage.com. It can be spelled out O-N-E or the number one. If you’re looking to get in contact with the team, I do have a BiggerPockets account. So if you just type in BiggerPockets, and put Christian Bachelder, you’ll see my account.

David:
How often do you check that, Christian?

Christian:
I check it actually pretty frequently. So I’m fairly active on BiggerPockets. If you guys direct message me, I will respond. But yeah, I don’t have an Instagram or a Twitter to shout out, but I prefer to keep it that way. Yeah. And if you find yourself on our website, the onebrokerage.com, navigate to the About Us tab, you’ll see my personal contact there, my email to reach out. Anything you need, advice, guidance, or to get pre-approved, I can definitely help you out.

David:
All right, Rob, what if people want to find out more about you?

Rob:
They can find me on YouTube over at Robuilt, R-O-B-U-I-L-T. And then you can also find me on Instagram at Robuilt, too and TikTok at Robuilto. Now, let me just take a moment to say that someone was smart enough to… So I captured Robuilto as a handle on TikTok because someone took Robuilt and someone then took Robuilto on Instagram, and they’re scamming people. So this is very confusing, but Robuilt on Instagram, not Robuilto, and then Robuilto on TikTok. I’m like, man, this is my life now. This is what we have to preface for everybody. So just make sure you’re not sending crypto to me or David. Okay? With that, what about you, David?

David:
I’m davidgreene24 and on YouTube I’m David Greene Real Estate. So please go, give me a follow. I still have way less followers than Brandon Turner, who’s not even on the podcast, and he lets me know every single time he sees me. And then just to hammer this point home, do not send me or any of these guys money on social media. When Christian and I were having lunch, I got a call from a cop friend of mine, who’s not the most tech savvy, a little bit older, and he got scammed. He sent a bunch of money to someone thinking he was sending it to me. It’s freaking heartbreaking.

Rob:
Oh, man.

David:
I’m doing everything I can to get the blue check mark on Instagram so that this won’t work. Instagram has denied me about 20 times that I’ve asked for it. I’m still trying to make that happen, but please tell everyone you know, they may have our pictures. They may have the… It looks just like our Instagram. It’s not us. It’s easy to copy those and create a fake account. The screen name will be a little different. They’ll put an underscore a period. They’ll add like an extra E in Greene or they maybe take one of the E’s and put three. Just something where you wouldn’t recognize it right off the bat. But please be careful because it’s the worst feeling ever when somebody that we know gets taken advantage of because they trusted us.

Rob:
Stay safe, peeps.

David:
All right, Christian, last question. If people would like to follow up with you and learn more about creative financing strategies, what it’s like to work with us as a mortgage broker, they want to know more about the short-term rentals you’re buying. They want to hear more about your buy box. They like what they heard and they want more. What do you recommend they do?

Christian:
Yeah. If you navigate to our website, the onebrokerage.com, top right, there’s an option for all our mastermind series. Feel free to enroll in them. There’s a little RSVP button. Those will be opportunities for us to share both what we’re doing personally, as well as to offer you guys some advice and guidance on potentially pursuing your next investment as well.

David:
I really like what you said about if they have a realtor who doesn’t know what we’re talking about, introduce them to you, right? Those realtors can go to these webinars. That’s free. We will teach about these loan products. Now your realtor has more information than they would’ve had. They’ve learned how to make a buy box for you. That’s really what we’re trying to do is help the whole overall experience be better because realtors aren’t really that great. Most loan officers are saying, I’m the cheapest, I’m the cheapest. They’re not understanding what investors are trying to do and we’re trying to correct that. That’s a great idea.

Christian:
Yeah. We’ll make your realtors better free of charge. We want to work with good realtors, guys.

David:
All right. Rob, anything you want to say before we get out of here?

Rob:
No, no thanks Christian, man. It’s always nice to hear from you. I can vouch for One Brokerage and everything. You guys have been really great, and give me a run for my money if you acquired 15 short-term rentals last year. So good on you. Good on you.

Christian:
Yeah. I appreciate you, guys. Yeah. Thanks for having me. Awesome. Awesome being here and yeah, hopefully we do it again soon.

David:
All right, guys. Great job. I’ll get us out of here. This is David Greene for Rob, our favorite client, Abasolo signing off.

Krishna Srinivasan of the International Monetary Fund says the two key factors it has taken into account are the country’s frequent Covid shutdowns and the worsening outlook of the real estate sector.