Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer. And I am joined today by James Dainard. James, what’s going on, man?

James:
Just grinding out deals, Pacific Northwest, trying to get more inventory in the door.

Dave:
How’s that going? You pretty active right now?

James:
Yeah, we are staying fairly active right now. What we’ve been doing is fixing all of our systems, pivoting all our systems. And we’re wrapping up all the inventory we’ve bought over the last year. And then we’ve been aggressively … actually, we’ve gotten contracted over on $16 million in deals the last four weeks. I just closed on two fix-and-flips. And they’re all sizes: fix-and-flips, small guys. One big one, I paid 400 for, one, 1.5 for. I just got a duplex for 1.1. And then we locked in a pretty big deal for little above 10 mil, so moving things along.

Dave:
That’s awesome, man. Well, keep it up. That’s great to hear. Today for the show, we have Ben Miller, who is the CEO of Fundrise. And full disclosure, Fundrise is a financial sponsor of this show. But Ben is an incredible wealth of knowledge. It was so fun having him on. I feel like you guys have a lot in common. You’re both deal junkies and just love talking shop about individual real estate deals and strategies. What’d you take away from the interview that you think the audience should listen for?

James:
He definitely is a deal guy, which is always good to invest in a deal guy, because when I said I stayed at the office till midnight, his eyes perked up. He’s like, “Yes, I get you.”

Dave:
He’s going to make you a job offer after this interview.

James:
Hopefully not. I don’t know if I can take on anymore. But it was just nice talking, because as small investors, we go toe-to-toe with some of these big guys. And just to see where their strategy is and how they’ve pivoted out and are doing things, I was really excited to hear about their efficiencies and how, basically, they make the return by being efficient. And that’s the kind of product they’re looking for. They’re not just looking for the best deal, what fits inside the box. And that’s so key in today’s market right now. As the market flattens out, you have to be really good at what you’re going to do to hit your return. And that’s the same with these big guys. The small guys are no bigger than the big guys. They’re doing the exact same thing. How can they be efficient? How can they deploy the money and deploy it in the right area?

Dave:
Yeah, absolutely. And Ben, in addition to talking about these efficiencies, gives some really good advice about what markets he’s investing in, a whole new asset class in buy-to-rent. We had a really good conversation about that, that I was super interested in. And just shares his thoughts on where the market’s going over the next couple of years. So definitely stick around for this interview with Ben. And we’re going to invite him on in just a minute, but first, we’re going to take a short break.
Ben Miller, CEO of Fundrise, welcome to On the Market.

Ben:
Thanks for having me.

Dave:
Thanks for being here. We’re super excited to have you. Before we get into some of the market conditions and what’s going on in your business, would love to just hear a little bit about your background and how you got started in real estate investing.

Ben:
All right. Well, so I’ve been in this business about 23 years. I started out in real estate, private equity, and then moved to the real estate development sponsorship side. So worked for a large mixed use development company in DC. We were building about half a billion of real estate right when 2008 financial crisis hit. And so I have scars and burn wounds from that experience. And after that, I came out of it thinking, “Well, there’s got to be a better way,” and conceived of the idea of raising capital through the internet for real estate. And we essentially invented that concept in 2012. And Fundrise was birthed with the idea of basically creating a future of real estate where individuals can invest in real estate the same way institutions or high net worth investors can. Before Fundrise, large real estate was only available to large investors.

Dave:
So yeah, you have experience, obviously, on the large institutional side of things. And I’m curious, what sort of advantages do institutional investors like private equity or these developers that you’re working with have that retail investors like myself don’t have?

Ben:
I think there’s two. I mean, one is just the type of products you can buy. So if you thought that skyscrapers were great investment, only institutional investors can do that. So there’s certain types of asset classes, like data centers, that basically are only institutional investors. And the separate is just the type of financing you can get, the type of operations. There’s a lot of economies of scale. So from an operations point of view, let’s say we own 20,000 apartment and residential units. That’s very different than owning three.

James:
So Ben, when I was looking at your guys’ fees and structure, because you guys are large and you’re deploying out so much and buying, is that how you guys can control your fees so much throughout, is because you’re just doing the bigger skyscraper deals, the larger deployed capital? Is that how you guys are so competitive in what you charge?

Ben:
I think it’s a combination of things. We definitely operate at scale. And that’s something that we are now. In the beginning, we had to grow into that. And in the beginning, we basically were just subsidized by our investors. So we had lower fees and we were losing money in order to basically get to scale. So our fees are super low, much lower than other institutional. If you were comparing us to Blackstone or Starwood, their fees are five, 10 times higher.

James:
Is that your typical competitor on a deal, like Blackstone or one of the bigger, bigger institutions?

Ben:
Yeah. On the buy side, when we’re buying apartment buildings, we saw Carlisle a lot. Yeah, those types of institutions were … not so much Blackstone. Blackstone buys platforms, but so other private equity funds.

Dave:
For those in our audience who aren’t really familiar with the traditional real estate private equity business model, like Blackstone or some of the people you used to work for, can you just explain how they make money, what their objective is, just in a general sense how this sort of market of raising money for private investors to buy large scale real estate works?

Ben:
Yeah. I love that question. So I put a lot of thought into that because to understand how to disrupt an industry, you got to understand how it works. So there’s really a lot of value chain in the industry. So you start with large pools of money, typically pension funds, so maybe California State Teachers, they run $20 billion … sorry, $200 billion. They have all these advisors, all this bureaucracy. They basically allocate money to private equity funds, or private equity funds raises money from those big pools. And then private equity funds turn around and invest it with real estate companies in local markets.
So there might be a local developer in Seattle who knows all about office or apartments in Seattle. And that private equity fund will back them in sort of a 90/10 deal, 90% from the private equity fund, 10% from the local sponsor. And so it’s really like the whole industry is made up of sort of three major players: the funds that allocate the money, the real estate operator who runs the deal, and then the actual large pools of capital, like the Norwegian sovereign wealth fund, for example, trillion dollars. They have to put that money to work. So it’s actually really a lot of it’s about getting those flows into real estate.

Dave:
And what are the sort of benefits that either an individual investor like myself or James, or someone as large as the Norwegian sovereign wealth fund, why would they choose to allocate funds into real estate private equity when they have every option in the world for where to invest their capital?

Ben:
Yeah. Well, I mean, okay, so these large institutions will allocate their money everywhere. So they typically diversify across every single asset class. And so, real estate typically gets about 10% of all their assets. And so, it’s really about diversification. So that’s how these big institutions think first. First, diversification. And then once they get diversification, they go inside of a subsector, like real estate, or maybe it’s venture capital, and say, “Okay, I’m going to allocate X percentage to this sort of asset class. And inside that asset class, I’m going to find experts who are best at investing in real estate or infrastructure or green power,” whatever the asset might be.
And so it’s a very special problem having to invest a $100 billion. It’s hard for most people to imagine, how is that a problem, right? It doesn’t like a problem. But when you get into it, typically, private equity is achieving pretty good returns. It’s usually beating the stock market, for the last 30, 40 years. And so, that’s why they invest in it, right, because it’s been historically better outcomes than public stocks.

James:
So on BiggerPockets, there’s a lot of active and passive approaches to how people want to invest in real estate. And obviously, on BiggerPockets, there’s a lot of new investors or people like me that we’re trying to grow our portfolios. And we’re very active. It requires a ton of work on our side. I know I was at my office till midnight the last three nights, just getting my hands dirty, getting things done.

Ben:
My kind of guy.

James:
Yeah. I will put in the hours, but it does have some wear, right? And a lot of investors are more passive where they don’t want to stay at the office till midnight worrying about their construction budget or crunching numbers and getting that next deal done. Is your typical client mix more of a passive larger fund, or these bigger institution, or do you have a lot of smaller investors too, that just are … For me, after a certain amount of years, I will be sick of keeping my hands on everything. And I just want to put the money out, right? But we’re just trying to build that huge [inaudible 00:11:08]-

Dave:
No, you won’t, James. You’re addicted. You know you’re addicted.

James:
Probably not. I am a true deal junkie [inaudible 00:11:15].

Dave:
You keep telling yourself that.

James:
That’s the theory, right, the whole financial freedom I’m chasing. Who’s your typical client that goes … is it larger funds, or is it smaller investors also looking for that passive income?

Ben:
Yeah, so we have 350,000 active investors. So we have a huge number of people. And so, that basically it’s hard to describe any one persona. There’s all different kinds of people. There’s a lot of software engineers who want to invest in real estate. There are a lot of financial professionals. I go in to meet investment banks. I was meeting with some investment bank before COVID. I was sitting in the room. And it was their investment banking group. It had the real estate group and it had their tech group. And the older 60-year-old managing partner was trying to ask me about Fundrise. And I was like, “Well, who in this room are investors in Fundrise?” Everybody under the age of 40 raised their hand, so half the room was actually my investor.
So it’s a lot of different kinds of people, but I find the thing about real estate, there are new real estate investors who are interested in learning. They want to get their feet wet. Maybe they want to take a small amount of capital risk. So maybe they’ll invest a thousand. They don’t want to go put $50,000 into one deal. But you know who loves to invest in real estate? Real estate people. So you have all these big real estate people who also like to say, “Well, I have my real estate where I’m active, but I have also other real estate I invest in. Sometimes I invested in Fundrise. Sometimes I help other people in the industry that are rising stars.” So it’s so diverse. And that’s one of the interesting challenges, because we have this range of people who want tons of information and are really sophisticated, and people who don’t know what a cap rate is.

Dave:
That’s a really good point. We talk about on the show a lot about diversification. And I think a lot of people assume that means diversification between different asset classes, like stock market bonds. But I at least, I think James is a living example of diversification between real estate assets, right, like being able to buy single families and short term rentals. And so it sounds like a good portion of the people who are investing in these passive deals might also have an active portfolio and are just trying to balance how they’re spending not just their capital, but their time, right? Because probably people don’t have unlimited time to go acquire deals at the rate James does.

Ben:
Yeah. It’s actually the easiest people for me to talk to is a real estate person. And they get comfortable with investing in things they know. So a real estate person can underwrite real estate, like, “Oh, I get this.” But if I were to bring you machine learning, “Do you want to invest in machine learning?”
They’re like, “I don’t know. I’d have no idea how to make that decision.” So a lot of times people invest in things they understand. And so, a real estate person would start with us and say, “Oh, hey. Actually, you guys really have a deep specification here. I’m interested.” And they might want to invest in a geography they’re not active in, or a product type; as you said, they’re an office guy and they want to go invest in residential.

Dave:
I invest passively, I mean, primarily at this point. And one of the things I like most about it is being able to get into geographies that I’m not in currently. What markets are you heavily invested in? Geographically, are flooding the Sunbelt, just like a lot of people are on this show, or-

Ben:
Like everybody else?

Dave:
Yeah, exactly. You don’t have to give away your trade secrets, but are there any geographies you’re particularly interested in?

Ben:
Yeah, it’s funny. So Fundrise has been around since, as I said, after the financial crisis. And we were all in on urban infill in 2012 and ’13, ’14. Anybody who was in real estate knows that the emerging neighborhood was where everybody was investing. And then 2016, we pivoted and started really investing in the Sunbelt and selling all this stuff in Brooklyn and DC, and so we went heavy Sunbelt. Our 20,000 residential units are all Sunbelt.
And so now, I still think Sunbelt’s where it’s at. It’s just I think it’s all about build-for-rent rather than multifamily. I mean, I think both are good. But yeah, I still think Sunbelt’s got the runway. I still think that an Austin or a Nashville will just keep on building. The only place I’m interested now is new. And really, Columbus is interesting. I think Columbus could be … I mean, not interesting to go to [inaudible 00:16:15] not. I work with somebody from Columbus, so I always like to tool on Columbus. But yeah, I think Columbus has got a huge amount of growth coming that’s really going to be interesting, because of the Intel chip plant they’re going to build there.

Dave:
Oh, okay. I’ve been to Columbus once. It was pretty fun. I had a good time.

James:
Hey, Ben, how often do you guys analyze that strategy and look at pivoting? Because I mean, at some point you made a pivot in 2016. Do you guys audit that once a year for your strategy, or how far down the road are you forecasting when you’re looking at making that … That’s a big change, right, going from what … that’s a totally different type of market, emerging cities to Sunbelt. How often do you guys do that in forecast?

Ben:
Yeah. I mean, back then we did it because we were investing across the country, but mostly in urban infill. And we were learning from doing deals. One of the things you do is if you invest in a deal, let’s say in a new market, you learn a lot. And if it’s going well, then you can actually double down. And so, we were invested in a few emerging markets, which at the time … I remember actually I had a person who used to work for me. And they were like, “You got to sell everything in Florida, because the next recession, Florida’s going to get killed, and New York’s going to basically do great,” because that’s what happened in every other financial … Every other financial crisis, going ’08, 2001, the sort of Sunbelt got killed. And this was totally upside down of how it normally happens.
So if you like an intuitive answer and an analytical answer, analytically, we have a hundred software engineers. So we’ve been building software into our system so we actually start getting real time data from all of our properties and also, I don’t know, like 14 million other properties, some huge number. So we can really see what’s happening on the ground and have a good sense of where growth is, and essentially where rent growth is, and occupancy delinquencies. So, that’s a huge part of it.
And the other part of it’s what I call is top down. It’s really easy to see that when something’s getting really expensive … like if you’re in New York and there was a two and a half cap back in 2017, people assumed rent growth had to go to like $8 a square foot. They just don’t believe that, right? So at some point, the Sunbelt will get too expensive relative to the gateway cities, to the New Yorker and LA. And that’s when it’s over. That’s when it’s topped. And so it’s really a question of, you do bottom up analysis in the weeds, and you do top down analysis, looking at the big picture. You have to do both.

Dave:
And how do you make decisions about that? Do you have an investment committee? I guess I’ll say I hope you’re not just making algorithmic decisions like Zillow was doing, and failing out for a while.

Ben:
Yeah, yeah. Right, right. So Fundrise is 325 people, and so we have a lot of real estate people. And we’re in a lot of markets. So it’s driven by the people first. The software just makes it easier to see the information. But the idea that software is going to replace people in investment decisions, I think that’s a big mistake. That’s not where our software will make improvements. Our software can make improvements on the operations. It’s really the operations where the software can improve, basically all the work that’s done after you buy it. But whether or not you buy it is a human decision.

James:
So you use the software to increase the return, but not analyze the return?

Ben:
Yeah, and manage it. I mean, we actually intend to roll the software out to third parties, probably in about a year, because there’s actually nothing really like it out there. But we built it for ourselves. And we know it’s good. We know it works. And so, we’ll make it available more people, but it’s like, this is going to take time. We just don’t have the bandwidth.

Dave:
You said something earlier, Ben, about build-to-rent and liking it better than multifamily. We just did a show with the national … God, I’m going to butcher this. It was Multifamily Housing Council. And they were talking about just huge demand for multifamily units. And that, I think, bodes well for the future multifamily. But I’m curious if you have a different take. What do you like about build-for-rent as an asset class, going into the future?

Ben:
So we got into that build-for-rent around 2019. We’ve been trying to get into single-family housing since 2017. We couldn’t find a way to do it at scale where it was efficient. And the reason we went into it was we saw our office is made up of mostly millennials. And the millennials are turning 30, having kids, leaving cities. They need more space, and a house. They want a house. And the second thing that happened that we didn’t expect was work from home. And work from home, I think, is the biggest social revolution happening. If you go back a hundred years, people used to work on farms. They moved to cities to work in factories and office buildings. Now, they’re leaving cities and they’re leaving office buildings. It’s that big a social change. And so work from home, I think, is going to drive residential value. It’s going to take a trillion dollars out of office and put it into residential value.
And so if you’re going to work from home and you have kids, are you going to do it from a one-bedroom apartment downtown, or are you going to do it from a house? So I think the house is a better consumer product. It has a backyard. It has light. It’s actually cheaper per square foot. And you’re willing to basically commute, because you don’t have to commute as often anymore, because you’re working from home. So basically, it’s like an iPhone is a better product than Blackberry. The home is a better product than the apartment.
And so we said we wanted to invest in that, but we didn’t want to go buy single-family homes, because basically that would put us in competition with our customer. Our customer wants to buy a home, and they don’t want to compete with a billion dollar institution to buy it. So we said, “Okay, well we can’t compete with our customer. Well, let’s build it.” And if we build it from scratch, we can build it designed to be this new thing. So it’s like an apartment building laid down on its side. It’s got amenities like a swimming pool and a clubhouse, and all the things you would have in a really cool apartment building, but instead in a hundred-unit community where you have a dog park, running trails, all these cool neighborhood features. And we run everything. You don’t have to deal with lawn care. You don’t have to deal with maintenance. So it’s like a really cool product. And I think it’s just going to become a big part of the industry.

James:
Did the build-for-rent have anything to do with implementing the plan, too, and efficiencies? Because we build 50 homes a year in Seattle. We renovate about a hundred homes a year. And I can say renovating is substantially less systematic than building. Building, you go through the plans, permit, you’re hiring professionals. It’s managed all the way through. And you can actually control it a little better. Whereas remodel, every house is so different. Does it have anything to do with that and keeping your deferred maintenance down? Because I know on our new build apartment buildings or rentals, we have way less deferred maintenance and way less issues, because the remodel, there’s always those trades that do things a little bit different, a little bit wrong. And then you have to come back and fix those things. Does that have any impact in making that decision, remodel versus … or was it all about who your consumer was and what they were trying to do?

Ben:
Yeah. Yeah, totally. So you know more than most people about this. So we started out in the remodel. We bought about 50 homes in LA. And it was a nightmare. Every home was different. The permitting was just horrible. We constantly had squatters breaking in. It just didn’t scale it. We couldn’t pull it off. And we were like, “Okay, well, we still think this is a huge macro trend.” And so we went to home builders. We actually also bought land and said, “Oh, this is zoned for 400 suburban apartments. Let’s build 200 single-family homes instead.” And so we went to a home builder and said, “Hey, we want to build 200 single-family homes here.”
And they’re like, “Oh, interesting. You want to buy homes? We build a lot of homes.” And we found that the home builders can build homes for way cheaper, because they build 10,000 homes a year. So they can build homes way cheaper than even if I sat down with a development company and did it. We might build for $200 a square foot, and they’ll build for 150 a square foot. So we partner with home builders. And those home builders basically build us. We’ve built like 5,000 homes so far. And we’ve really built a lot, and we intend to build more. And so the home builder at scale can deliver basically a bespoke product that’s designed for long-term ownership rather than, as you said, the renovations, which are mostly like, make the renovation and sell the house before the deferred maintenance comes home to roost.

Dave:
The type of development you’re describing sort of reminds me of some of these planned communities that honestly I’m more used to seeing older people, retirees live in. Are you appealing to the work from home demographic and younger families? You were talking about the impetus for this being millennials buying homes. Is that who you’re building the product for?

Ben:
Well, that’s who we thought we were building it for. It turns out it’s like everybody. It’s so diverse. Here, here’s one interesting stat. A typical apartment building, 25% to 30% of people have a dog. And in build-for-rent, 70% of people have a dog.

Dave:
Whoa.

Ben:
Right? Because you have a backyard, right?

Dave:
Yeah.

Ben:
So guess what? People who have dogs want to live in a house rather than apartment. So there’s all sorts of drivers for why you want to live in a home with a backyard and more light. So when we compete on apartments.com for renters, you’re selling basically a different experience. And I think for a lot of people, they didn’t even really know that was available, the idea of renting a home that’s not from some random mom-and-pop who’s not going to have that good of a property management capability. So it’s a new asset class.
Real estate, if you go back 20 years or longer, as long as I’ve seen, right, real estate actually births new asset classes every decade. So 20 years ago, there were zero data centers. Now, data centers are a huge part of the business. 20 years ago, cold storage wasn’t a thing, self-storage wasn’t a thing, cell tower rates weren’t a thing. Single-family rental as an asset class got birthed by Blackstone, with Invitation Homes. So these new trends show up, and the old trends like retail and office die. So it’s a key part of real estate, is being part of the new trends.

Dave:
That’s very interesting. James, I’m curious, would you ever build for rent at your scale, or does this only work at scale, like Ben is talking about?

James:
I think it works more for large short plats, because the larger the plat, the cheaper it gets. It’s like when you build a home, if you build a 4,000 square foot home versus a 2,000 square foot home, your price per square foot’s going to be a lot cheaper on the large, because your core areas are still the same. But when you have these big plats, they can really cut the cost down. So we build infill. Our largest sites’s probably 12 units, 12 town homes. We do all town homes, mostly four to 12 unit sites, because that’s what you get in infill. Our build cost around Seattle’s about 275 a foot, from development to finish. And it’s getting you a higher end product, too. But if we look at our tract home, like my clients that are tract homes that are buying more like hundred plat sites, they’re building in the low 200s.
And so it makes a huge difference in your bottom line when you can get scalability. Plus, you get the efficiencies out of the renting, the property management, the maintenance. Everything’s in one central location. And so yeah, the larger the plat, the cheaper it’s going to be.
And the other good thing about the building to rent on these large plats is the typical timeline for purchasing these is to close on permit. When you’re negotiating a lot of these deals, you get a close with the permits, and it could be a year or two down the road. But you can get building day one, whereas in infill, on the smaller stuff, it’s such a hot market that sometimes we have to close half the time that we would need for the permits. And so, you can systemize out the bigger plats just substantially better. But the downside is you’ve got to have Fundrise money. You can’t go buy it. I’m not going to go buy a 100 unit plat, because I’m going to be putting everything into one pot. And so yeah, the bigger the money, the bigger the scale.

Ben:
Yeah, that’s exactly what we found, because we have a mentality we hate to outsource anything. We always do try to do things ourselves. And we started out trying to build these things with our own capabilities, and the home builders just crushing our execution. So they’re building $150 a square foot. We couldn’t build for less than 200 a square foot. And they’re building for 150. I mean, we’re literally buying homes right now in Austin, above Pflugerville, for 130 a square foot. They just have such scale. And they buy like 10,000 countertops. They just have such control over their supply chain.
Now that I understand that business, it’s really a factory. It looks like a real estate company, but it’s actually a factory. And everything is about how something moves through the factory floor. The plumber is coming exactly on time. If you’ve done renovations at home, like one project, there’ll be this massive downtime between when the electrician is supposed to come and when the guy’s supposed to close it up with drywall. And then people won’t come, and it’ll be delayed. You can’t actually close up the wall because the electrician hasn’t shown up. And so, it’s all about coordinating the trades. And you can do that with a home builder in a way that you just can’t do that as … Even a hundred homes, it’s not scale.

James:
Yeah. It’s like the whole premise of the Toyota manufacturing plan, where they build the cars that are constantly moving; or Boeing, same thing, where you get so much more … Because your labor guys go, “Here’s my house. I got to walk next door. Here’s my next house.” Whereas with remodels, you got to drive an hour down the road, and you don’t know exactly when it’s happening.

Ben:
Right, right. So a lot of times people ask me about cap raises and stuff. And we buy on basis. If we can get a C of O for $150 a square foot in Tampa, I’m feeling pretty good about that. And exactly what cap rate it’ll end up leasing up to is … cap rates come and go. I mean, when I started in the industry, you’d be like, “Okay, we build to a 12?”
And I was like, “What? A 12?” Now, people are building to a five, maybe four, maybe a six. So cap rates will come and go, but your basis is forever.

Dave:
So I mean, just for people listening to this, it sounds like there’s not really a good way for a retail investor to go out and get into this asset class of buy-to-rent, with the exception of Fundrise, I guess, they could get in it. Or are there other ways that people can hop on the build-to-rent bandwagon?

Ben:
I mean, it’s really new. It’s a new space. I mean, seriously, there are probably 50,000 units across the country. I think there’s like 50 million apartments. I mean, this is really new. I mean, I’m talking institutions, because they want to do it too, they can come in and co-invest with our customer. I love the idea of a multibillion dollar institution investing next to a $10 investor. That doesn’t happen in normal life. But the platform we built basically is a platform that they want.

James:
And what kind of investor … for the smaller investors, they have to be accredited to invest in your-

Ben:
No.

James:
No?

Ben:
No, no. Anybody can invest, yeah.

Dave:
Oh, cool. So how does that work? Because normally on a syndication, you have to be accredited. There’s a minimum of, I don’t know, usually 50 or 100 grand. How do you get around that?

Ben:
By going through it. So our vehicles are publicly registered. So we actually go to the SEC say, “We’re going to have a strategy to invest in build-for-rent. And we’re going to basically allow the public to invest in it.” They work us over, to no end. And then we get it cleared. And so that’s why anybody can invest in it.

Dave:
Oh, so basically the reason you have to be accredited for a syndication normally, correct me if I’m wrong, Ben, is because they’re unregistered securities, right?

Ben:
Right.

Dave:
It is not vetted by any government entity, like stocks, for example, which are regulated by the SEC. And so you’re saying you register your investments with … is it the SEC, or is it a different-

Ben:
Yes, the SEC. Yeah.

Dave:
It is the SEC. Wow. Are you the only people who do that?

Ben:
I mean, it’s-

Dave:
You don’t have to tell me your trade secrets.

Ben:
No. I mean, I don’t want to say categorically there aren’t people who doing it. But I mean, yeah, the idea of going direct to consumer, registering the funds … I mean, again, that’s a scale thing, right? You’re not going to do it for a 50-person syndication, but with 350,000 investors, the cost to do it is significant, right? I mean, we have 50 accountants in house. We have five in-house attorneys. There’s a lot of grind on it. But across enough people, the marginal cost is almost nothing.

James:
Yeah, because they look under your hood a lot more at that point, right, the SEC [inaudible 00:35:46] the big difference is-

Dave:
You’re feeling violated, Ben?

Ben:
Yeah.

James:
But that’s why so many people set up these syndications with unregistered securities, because I mean to Ben’s credit, that’s a lot of work. And if it’s not worth the headache if you’re doing a 50-unit apartment building, because the cost and the audits and the qualifying is pretty good. But that means that your investor can feel pretty good about putting money with you though, because I mean, it’s getting an extra pair of eyes in audit, compared to a lot of other syndicating platforms.

Ben:
Yeah, yeah. I mean, we’ve been doing it for a while. And our CFO, my CFO was chief accountant at the SEC. So we have expertise. After a while, you know what you’re doing. And just like anything, I’m sure with real estate when you first started … You talked about doing an 80-unit apartment building before we started this show. When you started, you were like, “How would I do that? I wouldn’t know how to do that.” But once you know how to do it, it’s not that complicated. It’s just knowledge. And so, working with regulators, understanding what they care about, giving them what they need. Once you understand it, it’s not rocket science.

Dave:
I can’t imagine what the SEC would do if they looked at my personal real estate investing and the way I’ve kept my books over the last 12 years. I’d probably be in jail. Not that I’m doing anything illegal. I’m just a little disorganized, okay?

James:
We’re going to have to edit this part out. Hey, Ben, have you guys had any problems with inflation and supply chain issues in this build-to-rent? Because obviously that’s been tough for us as builders, controlling our cost. Actually, randomly, it’s been easier for us to control our costs more as a builder than a remodeler. The remodeler has been tougher, because I think the labor market’s less experienced, and so they charge more. But what’s inflation been doing to your returns if the build cost goes up, or how do you mitigate that, or how do you deal with inflation?

Ben:
Yeah. There’s a lot of complexity in what you’re asking, so let me just pick a few things because, yeah, it had a huge effect on everything. I mean, everything was going crazy last year, especially. So I’ll just give you … so the reason we broke through with build-for-rent is we went to these home builders in 2019. And we were talking to them and they were maybe interested, but mostly they weren’t interested. Then March, 2020 happened. If you remember March, 2020, when the stock market collapsed 40% and people were locked down, guess what people were not doing in March, 2020? Buying homes.

James:
Except for me. I was buying.

Ben:
Most people were not. So the home builders had all these homes. And all of a sudden, the industry just stopped on a dime. And they turned around to us and said, “Do you want to buy these homes?”
And we said, “Yes.” So we went under contract for half a billion dollars of homes that summer.

James:
That was a good month.

Ben:
Yes, because then they had to deliver them. We’d go under contract, and they’d deliver … You know home builders, we go under contract, and they deliver them over the next … It took them like 18 months to deliver all those homes. And so yeah, our contract price was like scorchy. And they would come back and they would be like, “I know we’re under contract, but every single cost is going up. Can we talk about this?” So we had a lot of complexity there.
And then they’d deliver … we’re talking about delivering 100 homes a week. We were buying a lot of homes. And they’d deliver them without refrigerators, without a kitchen. We’d go in for the inspection and it’d be missing a kitchen. They would just not be able to get certain things, like in Texas, we couldn’t get door hinges. They would deliver the home and be like, “We put these hinges on,” but you knew the hinges, the hinges opened out. And so you can’t have the hinges open out because then somebody can walk up and just unscrew the hinges and take the door off the house. So there was just all these little things that they had these problems around. We had a person driving around buying refrigerators at Costco so we could actually rent the houses, because we had these houses without refrigerators. So yeah, there was all sorts of chaos happening.

James:
When they say timing is everything, that’s the best time. So you bought it cheap. So the build costs were locked in too, when you committed to that?

Ben:
Yeah. There-

James:
Oh, that hurts.

Ben:
Yeah, yeah. There was one deal we were under contract with, and the builder had a $5 million liquidation. To break the contract with us, they had to pay us $5 million. And they literally just broke the contract: “We’re just breaking this contract. We can’t”-

Dave:
Whoa. It was that bad? Oh, my God.

Ben:
It was that bad. It was in Austin. And the price of the homes had inflated so much, they’re just like, “We’re just walking away from this contract. Forget about it.”

Dave:
Wow. That’s insane. Are you starting to see that level off now? Are things getting better in terms of supply?

Ben:
Oh, yeah. Well, supply chain’s still a little messed up, but the home building industry’s now flipped again, and sales are falling. And I’m like, “Oh, I’ve seen this movie before.” But this time, like last time, there was nobody doing this. Now there’s more money now chasing build-for-rent. So we’re not the only sort of buyer in the space. But yeah, as you know, the market is shifting a lot right now. There’s a lot changing.

Dave:
I know you don’t have a crystal ball, but where do you see things going over the next year or so?

Ben:
Yeah. I mean, in some ways, the next year’s easier than the following. We’ve been saying since January that interest rates are going to be higher for longer. And Powell last week at the Jackson Hole meeting said 4% Fed funds rate for all of 2023. So that means basically you’re going to be borrowing at 6% or more, where you used to borrow at 3%, or at least that’s where we were borrowing.
So I think the industry’s going to grind to a halt. I think most things don’t pencil at more than 4% interest rates, I mean, base interest rates, like the Fed funds rates. And our expectation is the surprise is going to be that inflation doesn’t come down as much as people expect, interest rates stay higher for longer. And it’s almost like people are like, “Well, how can that happen? That’s so bad.” And it’s like, “Because it doesn’t care how you feel about it.”

Dave:
Sorry, but that’s the truth.

James:
Well, and it’s also history repeats itself. That happened in the ’70s, right? It just stuck, and then they had to get it worked through the economy, and on to the next thing.

Ben:
Yeah. I mean, I don’t know what you’re seeing, but we have 300 people, wages. It’s super competitive for labor; food, everything. =I’m not seeing inflation come down in any meaningful way. So why do I think it’s going to all of a sudden just shift? It just doesn’t seem likely to me. So the thing we did, we really slowed down investing back in January, and we started building up cash. So we have like $700 million of dry powder right now. So we were ready and fairly ready for the shift. And then the shift’s going to be you need to go and to invest in credit. That’s another learning, because I’ve been in this for a while. In a financial crisis, all the action happens in the liquid credit markets. Like in 2020 or 2008, you couldn’t really buy properties, but you could buy the paper. And so the paper is where the pricing shifts a lot faster, and you can get way more distress. But that’s a whole different part of the real estate industry that most people don’t see, CMBS, RMBS, asset-backed securities, that kind of stuff.

James:
Oh yeah, because they’ll dump that paper cheap. I remember one of the best deals I ever did in 2009, I didn’t even know how good of a deal it was when we did it, someone came to us … they had a 10-unit in foreclosure, and it was a private lender. And they’re like, “Hey, we want out of this.” They sold it to us for 50 cents on the dollar. And then we were running it like, “Oh, okay, cool. We’re going to be able buy this. We’ll foreclose it. No one wants it.” And it ended up getting bid up.
We bought it a week before the auction. We bought the paper. We took it down to the auction steps. We foreclosed it. And then it got bid up. They were stepping it against us, because we wanted to keep the building. We had no intentions of selling it. And we made like a 300% return on our investment in 10 days, because someone really wanted it. And we had no intentions of selling it, but we’re like, “That was the easiest.” We didn’t have to touch it. We didn’t have to do anything. The guy gave it away. We got it escrowed, and it was just a win all the way around. It’s amazing what that can do.

Ben:
Yeah. So we’re all in the real estate business, but there’s this shadow real estate industry that you don’t know about, where all of the things you do where you borrow money, you buy an apartment building, you buy a house, eventually, most of that asset’s actually financed. And then there’s this whole parallel real estate world of credit markets where people are buying your paper and levering it up too, right? So actually, when you buy a house, you buy an apartment building, you’re borrowing maybe 75%. And somebody behind the scenes has bought that paper and levered it up 10 times as well. And then somebody bought their paper and levered it up 10 times more. And so, the shadow industry of trillions of real estate, just the debt, it’s become much more attractive than the equity.

Dave:
That’s super interesting. Yeah. I actually was just looking last week at investing into a note fund. It seems like a really good place to be investing right now. Ben, I know we only have you for a couple more minutes, so maybe we’ll have to bring you back to talk about note investing and [inaudible 00:46:04] the credit markets. That would be super interesting. But before we go, can you just tell our audience about where … obviously they can find you on fundrise.com, but if anyone wants to connect with you, what’s the best place that they can do that?

Ben:
Well, I am active on Twitter, so my Twitter handle is @BenMillerRise, like Rise, @BenMillerRise dot … So you can hit me out there, LinkedIn, contact at fundrise.com. Anytime anybody emails me at the main email address, I always get it. So I’m always interested in hearing people. You learn a lot. Our actual investor base is constantly communicating with us. And we’re always learning about really interesting things. We basically have people everywhere at this point. And they’re really generous with sharing information. So I love to hear from people.

Dave:
Awesome. Great. Well, Ben, thank you so much for being here. This was a lot of fun, and learned a lot. And we’ll have to have you back on the show sometime soon.

Ben:
Great. Excellent.

James:
It was good meeting you, Ben.

Dave:
Well, that was a lot of fun. James, what did you think about the conversation with Ben?

James:
It made me realize how small I am as an investor still.

Dave:
Oh, dude, don’t even start.

James:
But you know what? I don’t get to talk to these big institutional guys that often. And the only time I really get to talk to them is when I get notified their offer’s way higher than mine. And so, it was nice to talk to them and figure out … but it’s very interesting how they are moving things around, looking at things. And it has the same core principles as us, be efficient, buy the right deal, don’t let your procedures maximize yourself out. So I mean, the core principles were the same. I think the money is different, is what I realized.

Dave:
Dude. You talking to Fundrise and feeling small is how I feel every time I talk to you. So now you know what it actually feels like. Yeah, man, I thought it was super interesting. I’m really just fascinated from an economic standpoint about build-to-rent. Like he was saying, it’s this whole new asset class that just never existed before. Previously, you either built multifamily to rent or you would reuse single-family homes that were previously owner-occupied into build-to-rent. And so, it’s a really interesting phenomenon. And you read a lot about it. But to his point, he said there’s only like 50,000 units. So it’s really not like taking over the market, but that’s something I’m definitely going to be watching for the next couple of years, to see if that makes an impact on the markets they’re doing it in.

James:
I think if we go into a little stall too, and dirt gets a lot cheaper … The reason they’re not doing build-to-rent is dirt’s expensive and build’s expensive. But both those are coming down right now. So maybe it hits a sweet spot and they start doing more and more of it.

Dave:
Yeah, that’ll be interesting. For everyone listening, before we record, usually the guests and us just talk for a couple minutes to get to know each other. And James was telling Ben and I about this 81-unit deal he just did. And Ben was completely amazed at what a good deal you got. Can you just tell us quickly about this deal and how you landed it, because I’m very curious?

James:
Yeah, so we’d been looking. We do small syndications, 30 to 40 units in Seattle. And then we’ve been trying to get into 50 to 100, because what he was talking about, the efficiencies of remodeling property management, it really does make a big difference in your bottom line. And recently what we’ve noticed is those deals are now … they were trading at like a three cap, three and a half cap, because of guys like Fundrise coming in and buying them all. And that has slowed down. And so actually, it was a seller that we gave an offer to at 11.8 million about six months ago, and he turned it down, turned it down, turned it down. He went to market, found his new exchange, got tied up twice at 11.8 … or no. He went all the way up to 12 million at the time. Financing blew up both times. And we just kept … well, actually, our 11.8 number dropped to 10.8, because of the rates and the cost of the deal.
And so we just stayed consistent with him the whole time for six months. And we kept updating our offer, too, saying, “Hey, based on rate, here’s our new number.” And we always had that logic of our number has changed only because of the rate with this guy, because he’s a bigger seller. And we ended up locking it in, though, 81 units. About 10.9 million. We have to put about 25 grand, 30 grand into each unit. We’re going to be doing a soft cosmetic with windows, hitting siding, hitting roofs, but nothing too, too crazy. Mechanicals are good. And we’re excited because we have some more opportunity now. But that’s the key right now, is just stay with your numbers. And if you have to change your numbers, just educate the people while you’re changing so they don’t think that you’re just trying to take one over on them. And it all came together. But obviously I was happy to see that it looked like I blew the return socks off him.

Dave:
Yeah. Ben asked James what cap rate he bought at. He said 5.8, which is just unheard of, especially in Seattle, right? You said a couple years ago it was three, 3.3, or something like that.

James:
Yeah, they were down in the low threes. Now, granted, the 5.8 is after stabilization. So after we’ve done the hard work, we’ll be at a 5.8 to six, right in there. So it wasn’t on existing.

Dave:
So that’s where you’re underwriting it at?

James:
Yeah. Stabilized, we’re at 5.8.

Dave:
But still, that’s pretty damn good.

James:
You know what? And I think we could do better.

Dave:
You’re insatiable. You got to do better.

James:
Got to do better.

Dave:
All right. Great. Well, great job today, James, as always. Always asking good questions and telling really very relevant and funny stories about your own experience. So thanks for joining us. Everyone out there, thanks for listening. And we’ll see you guys next time for On the Market.
On the Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Ascarza 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.

The Milken Institute’s Bill Lee joins ‘The Exchange’ to discuss economic implications of recent Fed policy and dampening inflation expectations in housing markets.

David:
This is the BiggerPockets podcast show 659.

Luke:
Something that’s big is we give our entire team so much freedom in the sense that if they ever need anything, if they ever want to take a trip, they can ask us, but they really don’t even need to. It’s done. It’s done. So, there’ll be times when anyone on our team, they can say, “This is coming up. This is going to do this.” Perfect. You’re gone. Have fun, enjoy it and enjoy your time with the family. And so, we’ve made sure that everyone knows how important it is to us, that they get their time with their family.

David:
What’s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, the best real estate podcast in the world by far. I’m here joined today by my co-host Rob Abasolo, wearing a John Mayer T-shirt, the first time I’ve seen him in a printed tee or anything that isn’t just a plain black tee that he got out of a plastic package at Costco. Rob, tell me, what do I owe the honor of this privilege to?

Rob:
Okay, I’ll give you the truth here. All right. So, look, I used to be a big graphic tee guy, and then people on the channel would be like, “Where’d you get your shirts?” And then, I watched this video that was like, why I wore the same shirt for the last two years. And I was like, “Man, that’s a great concept. I’m going to wear a black pocket tee every single day.” And then, I moved to Houston and everything is hot. And literally, all my black pocket tees are drenched in the laundry basket right now because I’ve been filming content outside.

Rob:
So, part of it is it’s laundry day, but also, I think it’s time to bring back the pocket tees. I think I’m going to start reintroducing that in the wild here.

David:
So, you’re doing that thing where you try really hard to look like you’re not trying hard by wearing black pocket tees.

Rob:
That’s right. It was a game for a long time because I was really trying to find the best black pocket tee. So, it wasn’t from Costco. I went to some pretty niche online stores to find them and I think I did. And also, I had a kid and I’ll tell you what, black pocket tee, while having a kid who’s always spitting up was just a really bad idea. So, I lost a lot of good shirts due to my son, Rook, but that’s all right. I’m rebuilding still.

David:
Well, on the topic of games, that’s a great segue into today’s show. Rob and I are going to be interviewing Luke Rotvold, a wholesaler, cold caller, and real estate investor, who is crushing it in the Phoenix area. Luke’s got a great system of getting properties under contract, wholesaling or flipping them, and then taking those profits and then putting them into multi-family real estate, where he is building up his cash flow, a cool little system of moving money along a conveyor belt, amplifying it every step.

David:
And part of the success to Luke’s system is turning boring, menial, and routine tasks into something fun by using games. He’s known online for getting people under contract and speaking with leads online in his wholesaling business while playing Madden. And he’s taken those principles and applied them to his company where he keeps his team members engaged and motivated by turning things into a game.

David:
I thought this was fascinating, really smart, and a way to try to take work and make it fun. Rob, what were some of your favorite parts of today’s show?

Rob:
It’s always interesting to find out people systems and his system here, the gamifying everything is really cool. And you could think, “Oh, well, that may not work for everybody.” But when you actually look at his business, he told us he was doing 75 flips a year and about 110 deals a year in total. And I think that’s really impressive. So, really fun to dive into the psychology of this and basically how to make every little aspect that could be looked at as a menial thing, fun and challenging in a good way.

Rob:
So, I think we’ll learn a lot about the way you can set a culture in your company too, and how to make that somewhat of its own game as well.

David:
Absolutely. This is a really fun show. So, I would recommend everybody who’s listening to this one to just share it with somebody else, because this is one of those things that makes people think, “Hey, real estate investing actually can be cool. It can be fun. It’s not just a grind, and it’s not just this crazy scatterbrain just run around and do a million things. There actually is some intentionality that you need to embrace to make some progress.” And we talk a lot about progress in this show and how important that is to the human experience to stay motivated.

David:
Before we bring in Luke, today’s quick tip is, look for ways to gamify your own life. Are you trying to get in better shape? Are you trying to build your cash flow? Are you trying to build your net worth? What are your goals? Are you trying to build a team? Find these principles that would work for you that motivate you and apply them to business. I’m a firm believer that business does not have to be different than your personal life.

David:
What works for you in your personal life will usually work for you in business. So, look for a way to bring those two things together. And speaking about having fun, go to biggerpockets.com/events and get your tickets to BPCON22. It’s going to be in San Diego, one of the nicest areas that I’ve ever been to, and it’s going to be a blast. Rob’s going to be there. And he might even be wearing one of his black pocket tees.

Rob:
It’s almost guaranteed. And I hear, David, you’re going to be giving the keynote there. So, a real special treat for anyone that’s joining. I think we’re not sold out yet, but I think pretty soon, it’ll be sold out. So, you’ll definitely want to grab your tickets again. Again, that’s biggerpockets.com/events.

David:
And you just got Rob scare in black pocket tee. All right. Without any more ado, let’s bring in Luke. Luke Rotvold, welcome to the BiggerPockets podcast.

Luke:
Thank you for having me. I’m stoked to be here.

David:
Yeah. We’re excited to get to know you. So, tell me, what does your portfolio look like right now?

Luke:
Oh, boy. Right now, we’re pretty much going heavily into multi-family and Airbnb. So, I know a lot of people that do strictly just single-family and just because it’s obviously easy and it’s safe. If we go single-family, the only option that we will even think about with it is going to be an Airbnb and then everything else is multi-family. So, right now, we’ve got a 10-unit being built in Sedona. That one’s actually crazy. We’re going to do 10 Airbnbs with that one.

Luke:
So, that’s going to be a pretty wild project, but we’ve got, let’s see, we’re at 39 units. So, 39 doors right now, 10 being built in Sedona. And then, we’ve got a 32-unit new build that’s being built downtown Prescott, which is a couple of hours north of the Phoenix area as well.

David:
Okay. And what about your business?

Luke:
Business-wise, we’re on pace this year to do 75 flips. So, 75 flips this year and we should do right around 110 deals is what we’re on pace for this year.

David:
Okay. That’s pretty impressive. So, let’s hear about how you got started. How did you get into your first deal? What brought you into real estate?

Luke:
Yeah, so, really, I started cold calling. I joined a team. So, that’s how some people have heard a little bit about my story is I started cold calling an hour, two hours a day. And then, obviously, it’s one of those things where cold calling is monotonous. It gets old, it gets boring. So, I started implementing playing Madden while I started cold calling. When I did that, I started cold calling like five to six hours a day, which obviously, when the average person is maybe not even calling an hour or two per day, and then you start calling five to six.

Luke:
Obviously, the amount of contacts that you’re making, the ability to perfect your craft, the ability to get better at what you’re doing is just, should blowing by people at that point. So, once that started, the deal started coming in pretty regularly and started just wholesaling, started on that team. The team that I was on broke apart. And so, then, I went and I started my company with my best friend, Jake Landis. And so, we’ve got our team now.

Luke:
Like I said, started with cold calling, started with wholesaling and we’ve just taken that path at the, I’d say that the average wholesaler takes in the sense that they would like to take where we went from wholesaling to flipping, to keeping properties with rentals into, we’re at the point now where we’re starting to do a lot more developing now. So, that’s the path that we’ve taken if you will.

Rob:
So, when you were playing Madden and making these cold calls, do you ever have anyone that’s sniffed you out on that? Were you ever like, “Dang it?” They’re like, “Oh, what?” And you’re like, “Nothing, nothing?”

Luke:
All the time. Oh, man. Unfortunately, that was the number one thing that I had to try to cut back on. So, this is the path that it went is like, okay, I first started just in arcade mode when I was hopping on Madden and I’d be like, “Okay, I’ll try to just go ahead and see how it goes. And maybe I’ll try playing while I’m calling.” But obviously, the number one most important thing for me every single time was the cold call because I’m working. You know what I mean? That’s why I’m doing this is to try to get deals right now.

Luke:
So, it started with that. And then, I was like, once I got comfortable, I was like, “Okay, I’m going to hop on and do Madden online right now. I’m going to start playing online because it’s more fun and it’s more competitive.” But then, the thing is you only got one pause, so you get one pause a game. So, you’re like, “Okay, (beep) I got to use this pause very sparingly.”

Luke:
So, whenever I’d have a lead where I had to write all the information down, that was when I’d use my pause. But there’s times where you’d start getting multiple, you get multiple leads in that calling session. So, yeah, you had to adapt and figure it out.

Rob:
I’m sure you had to take one for the team, take a few Ls in Madden to close a couple of deals.

Luke:
Unfortunately. But it’s like, at the time then, our average wholesale was probably 25K so it’s like, yeah, okay, 25K, or do I want the extra win right now in Madden?

Rob:
I think you made the right choice. I think the 25K probably pans out in the long run. You mentioned, you were taking five to six calls a day and I think that’s really important. A lot of people-

Luke:
Calling five to six hours.

Rob:
Yeah. Sorry. Five to six hours. That’s really important. I think a lot of people, they hear about wholesaling and they hear about the off-market deals and they’ll only put in one or two hours and they don’t get success and then they quit. But I remember I was talking to a buddy of mine who said that he didn’t get any sales for his first two months or something like that. He didn’t get any wholesale deals and he was working part-time. But then, he finally got his first one and started really data tracking how much time he really needed to put in.

Rob:
And so, he realized he needed to put in an average of 80 phone calls or talk to 80 people before he could close a deal. And so, as soon as he did that, he mathed out, “Okay, it takes me four hours a day to call 80 people and blah, blah, blah.” And he mathematically figured out that for every eight hours, he would get a lead or something like that. So, I’m curious, were you ever at that point where you were tracking exactly your conversions or anything?

Luke:
Oh, 100%. Yeah. There’s no doubt about it. That was actually to me when it started getting real where I was like, “Okay, I got to stay on the phones. I have to.” There’s no question about it. Because I ended up breaking it down to how much I was making per hour while I was on the dialer. And that number when I found out that number, I was like, “Bro, this is insane.” So, to me, I don’t remember the exact number, but it was something along the lines of, I was making $560 per hour that I was on the dialer.

Luke:
That’s what it broke down to for how many leads I would get, how many hours I had to be on the phone, which turned into the lead, which turned into the deal. And obviously, that was the number for me was I was making $560 an hour for every single hour that I was actively on the dialer playing Madden.

Rob:
Wow, $500 an hour. That’s like, let’s see, a full-time salary on that. I think comes out to $1.1 million or something like that. So, that’s a pretty motivating number to chase.

Luke:
Yes, exactly. So, that was when it really all switched for me.

Rob:
So, what was the moment that you started closing enough deals to where I imagine at some point, you were playing Madden, you were closing and then you got so good at this that you’re like, “Okay, it’s time to take this to the next level, ” and just hit Pause from the start. So, what was that transition like when things really started to heat up?

Luke:
Yeah. I’d say that it got to that point where it was like, “Okay, now, once you start closing some wholesale deals, you start having some money.” And so, obviously, the thing is that when most people are starting wholesaling, they don’t have any money. So, cold calling is a good way to start because it is a low barrier of entry, fairly inexpensive versus, say, a PPC or versus direct mail. Everyone knows, if you’re getting started in wholesaling and you go, the direct mail route and, say, you have couple of, goes at it and they all end up empty, that can sink you. That could literally sink you right off the bat.

Luke:
So, cold calling is nice in that sense where it is a little bit less expensive, but once we were able to basically start stacking some cash, then it was like, “Okay, you know what? Now we can start building a team because we can afford to start paying some people on the team.” And so, that was really the main time was, I don’t know if I would necessarily put $1 amount on it, but that was when we started building a team. That was also when we started looking into flipping.

Rob:
Yeah, man. So, I know that you have a few, given the background, I think this led to you creating some gamification strategies for you and your team. Can you walk us through a few of those and how those shaped your business?

Luke:
Yeah. In my opinion, if you are building a business, if you’re starting a business out, I think the smartest thing that you can possibly do, the absolute smartest thing that you can do is 100% be yourself and build your business around you and around what you love and around what you’re passionate about. Because, for instance, you can see behind me right now, I’m a child, I’m 32 years old, but I’m a kid. I’ve got all my sports cars behind me. I’ve got Legos, I’ve got a pirate set of Legos behind me. I think that what we were able to do is we were able to build this business around the things that we love.

Luke:
My business partner, Jake and myself, we love sports. So, the things that we post online and everything with our company, it’s about, we play golf in the office all the time. We’ve got this chipping mat set up. We have sports center on all the time. That’s on 24/7 when we’re in the office. We’ve got a beer tap with kegs in the corner over here. So, we’ve got a cooler with all drinks in it and stuff. So, I think that people need to realize that if you build your business around you, there are hundreds of thousands of people out there that have the same likes as you.

Luke:
They have the same mindset, they have the same things that they enjoy that you do. And so, it’s like you’re going to attract these people. There’s no doubt about it. And so, I think that so many people get, they put themselves in a box of, well, this is how business is supposed to be. This is how wholesaling is supposed to be. This is how real estate’s supposed to be. Again, we wear t-shirts and tank tops and board shorts in here every day. We could give (beep) about what people wear, what we wear in the office. We’re not a super, just, I don’t want to say we’re not professional, but again, we just run things a little bit differently.

Luke:
So, I think that we’ve been able to attract a lot of people that have the same likes and the same similarities as us. Everyone that’s on our team now, we all play golf. We all watch ESPN. We get along, we’ve built such a great bond and such a great team atmosphere. And it’s because we’ve attracted these people from the things that we’ve posted because we’re just being ourselves.

Luke:
We’re not trying to be something that we’re not. We’re not trying to be anything that we don’t like. Everything in our office right now was handcrafted by us. And it’s 100% us. So, I think that’s huge and I don’t think enough people do that.

Rob:
Yeah. It sounds like what it boils down to is building that office culture, that is, I don’t know, very vibrant within the culture. You want everyone to feel like it’s an authentic place to come to work.

Luke:
Oh, for sure. Absolutely. That’s a thing. I don’t know what the percentage is, but I’d say most people still in general don’t enjoy going to work when most of the days that I come in here, my guys are in here early. We don’t ask them to be in here early, but they’re in here early because they love it. They love coming to work. They love having our chipping challenges and then it makes work fun. You don’t even feel like you’re going to work. And again, everyone’s still working. Everyone’s still making money and everyone’s pounding the phones. But again, we make games out of it.

Luke:
We do certain things where it’s like, okay, Hey, we’ve made it a real team aspect, where one of the big things that we did as well is that when we set goals at the beginning of the year and we set goals quarterly as well, but we set team goals, we set personal goals for maybe things that, whatever, I want to lose 10 pounds this quarter or whatever. We take real-life goals that are going to be every single day type things. But then, we also have the team goals. And so, we think that’s extremely important.

Luke:
Because then, when people close deals on our team, there’s no animosity. We had built that the wrong way in the past. And we learned from that mistake. When we were first getting going years ago, we had built the team out where it was in a sense, eat what you kill, every man for themself. And biggest mistake we ever made. No question about it. If you have a team that’s set up that way, I don’t recommend it one bit. There began being animosity between team members and stuff like that.

Luke:
So, now, that we just have it all team-related, when people close deals, everyone gets stoked. Everyone gets jacked up when we take shots, when we close a deal. And so, it’s like we set these awesome goals where we’re going to go on a trip at the end of the quarter if we hit this number. We have fat bonuses at the end of the year if we hit the overall number for the year. So, we’ve really been able to make it a team aspect type thing where everyone gets excited when everyone succeeds.

Rob:
Yeah. I’d actually like to dig into that aspect a little bit because I really like a rev share model in a sense, but that’s not exactly what you’re necessarily suggesting. It’s not like one deal is closed, everyone gets a little piece of it. It’s more, if everyone’s closing a certain amount and then the entire office hits that goal, then there’s a bonus that’s dispersed from there. Can you walk us a little bit through those mechanics?

Luke:
Yeah, no, exactly. Exactly, like you just said, everyone basically has a certain number that they’re supposed to be hitting every month. So, obviously, that number comes down at the end of the year. Does everyone hit their number? Awesome. If everyone hits their number, then that’s great. And then, if our company as a whole hits the number that we set out for, we have insane bonuses that we did.

Luke:
It’s not necessarily rev sharing, but we just threw out a really high number that everyone’s going to get. So, obviously, it makes everyone super amped to shoot for that number.

Rob:
That’s really cool. So, are there times in that culture, obviously, you’ve experimented here with the bonus structure and everything like that, different aspects of culture that you like to implement. Are there times where you can point to where it’s like it wasn’t working or ways that you can identify when certain cultural things aren’t necessarily a fit?

Luke:
Yeah, yeah, no doubt about it. So, we’ve been in business for seven years now. Trust me, I’m not trying to say, sit here and say we have it all figured out. But the last year has really been a game changer for once we restructured how everything worked. The previous years were, they were still good. But the beginning years we made the most mistakes as most people do, because you’re just getting your business going and you’re learning from your mistakes. But yeah, when it was, eat what you kill, every man for themself, like I said, there was a lot of animosity built up between people when someone would get a deal.

Luke:
It’d be like, oh Hey, they’re getting better leads than I am, aren’t they? Well, you told him to call on this list and I’m calling on this list and how come this is happening? So, it got negative. And then, when that started, I don’t know if you want me to go down the road of not fun stories, but again, these are learning experiences. But yeah, we had a guy that was on our team and he was a cancer to the team. Every time we brought in new people, he would come to us and be like, “Hey, I don’t like this guy. I don’t like this guy. I don’t like this guy,” for whatever reason it was. We should have caught that early.

Luke:
We should have caught it early on that the guy was obviously, he was the problem every single time we brought in new people. And we ended up finding out that he had been stealing leads from us for the last six months that he had worked with us. And like I said, the relationship just started getting worse and worse. But then, one day we came in and all this stuff was moved out and he was like, “Hey, I’m going to start working from home.” And we’re like, “What? You’re not going to work from home.”

Luke:
And he is like, “No, I’m working from home from here on out.” And so, we ended up finding out that he had been actually closing deals and using another company in our market to close them. So, he was taking the leads and he was finding it, he was taking the leads to this other company and he was closing them and selling them with them.

Luke:
Because how it raised an eyebrow for us was we were like, “Okay, you’re not getting any leads anymore. What happened the last three months? You haven’t brought any leads in. Something’s got to be going on.” And then, like I said, shortly after, he said he was going to start working from home. And then, we ended up finding out that the leads that we had been working, he had just been taking them and closing them.

David:
In our industry, especially I think we are more prone to that behavior than in a W2 world, we tend to draw the people who have this dream. They want more money. They want financial freedom. They want to see what they can do. It’s that personality that is pulled to real estate. It’s typically not an accountant, CPA type person who’s like, “I really want to be in the chaos of real estate investment.”

Luke:
Right.

David:
So, I’ve noticed this with real estate salespeople to a smaller degree with mortgage loan officers, not quite as much, but definitely with the investor, the flipper, the person that’s willing to cold call all day long that wants it really bad. They’re more likely to be the people that will cross those lines that will gray those areas.

David:
And there’s almost like a bit of a paranoia that you have to develop to do this well, that people that don’t work in the industry will look at it like, “Oh, you’re always afraid of people leaving you.” I’m like, “Do you know how often agents change brokers-

Luke:
Oh, God. Yeah, it’s insane.

David:
They’re constantly jumping. And then, in the investing side, it’s even worse. You get these people that say, “Hey, I see you playing Madden and cold calling. I really want to learn what you’re doing. Can I come work with you?” And their goal is, as soon as I get this down, I’m leaving this guy.

Luke:
I’m out of here.

David:
I’m going somewhere else.

Luke:
Yes, absolutely.

David:
But they don’t just want an opportunity. They want your time, your training, your attention, your emotional commitment. You get to know these people you feel like your friends, it could even be family. You’re sitting out there with these guys right outside your window. You guys are going to war together. It’s going to build this bond. And it stings when one of them leaves, especially if they leave to betray you.

David:
So, first off, I just wanted you to talk a little bit about this reality that doesn’t get brought up in the Disneyland real estate investing persona that gets put out there. Because it’s actually a little more cutthroat than I think a lot of people can realize. And then, what you’ve done in your company to try to avoid that, whether it’s looking for traits in people that you avoid or creating an incentive structure so that’s less likely to keep happening.

Luke:
No. For sure. Exactly like you said, once we did shift that mindset of, okay, we’re bringing people on, but exactly, like what you said, they’re gathering information from you and then they’re out. They might stay a couple of months. Even if it’s a year, they get as much information as they possibly can. And then, when it’s no longer fitting their needs or it doesn’t really make sense, they think that they can start making more then they’re gone.

Luke:
And so, what we’ve done to try to combat that is when we did our last round of interviews, we really asked some deep questions, some deep questions that were going to be, give us a good feel for if these people were going to stay with us or if they were literally just trying to gather information and bounce. One of the things that we said is we just asked, how long are you looking to stay in real estate? How long are you looking to be with us? Just curious.

Luke:
Because, believe it or not, even though you’d think a lot of people are just going to BS you, a lot of people will straight up tell you. We had a couple of people that were like, “Hey, I want to be here for maybe a couple of years. And I’d go try to do what you guys are doing.” So, someone that said that, no, you gave us the honest answer, but that’s the wrong answer. So, no, you’re not working with this.

Luke:
And so, it’s like, yeah, we were looking for the people that said, you know what? I’m looking for a career. I’m looking for something that I can stay at long term. So, that was huge for us. Another thing, we want our guys to grow, we want them to grow with us. So, that was another huge thing that we shifted as well, is that when we go over our goals, the personal goals and the team goals, but when we go over those, we really look to find what is it that you want? You know what I mean?

Luke:
We try to get to the deep questions of what do you want out of life? What do you want out of working here? And so, a really cool example that I can actually use that just actually happened last week. One of the guys on our team, one of his goals was that he wanted to buy three doors this year. He wanted three, wanted to pick up three rental properties, three doors. And so, one thing that we’re huge on is we like to try to fulfill these goals with people.

Luke:
And so, we like to give, we made it very obvious to them that, “Hey, we’re going to be able to provide you guys with options in opportunities that you might not get elsewhere because of how many projects we do come across.” This was only a week ago. We came across a triplex that was a seller carry with interest rates where they’re at right now. Seller carry was pretty attractive. They were asking 880 on it for triplex right downtown Prescott. The seller was asking 880 and they said they had carry at 4.7%.

Luke:
So, we went ahead and jumped on. We lowballed the (beep) out of them. We came in at 650, 4.7% interest and they accepted it. So, five-year balloon. So, it was a perfect time though, where we could see if it was something that he would be interested in jumping in on with us. And so, our team member jumped in on it with us.

Luke:
He threw some cash down to partner on it. And he is a partner with my business partner, Jake, and I on it now. So, it’s just like that. He just added three doors to his portfolio. And that was one of his big, big goals that he had wanted to do for the year of 2022. And it’s already accomplished.

David:
That’s awesome. Rob, same question to you. What are some things that you’ve done to either avoid hiring the wrong people or keep the people that you’ve got in place?

Rob:
This is something that I’m actually, I don’t want to say dealing with, but something I’m going through right now because I’ve always hired very lean and I’m at the point now where I am having to scale and hire more people. And I just want to make sure that the people that I’ve already hired are happy. So, I actually just had a one-year review with my editor, for example, the editor of the channel. And for us, we’ve had a really good, flexible relationship. Things have been going super, super, super well. And I believe he gets paid relatively well for the job that he does.

Rob:
And I think we’ve always been happy with that, but I did want him to have skin in the game because I always feel like having skin in the game is truly where the incentive comes to light. And so, when we had our one-year talk about a week ago, actually, it wasn’t really that long ago. And I said,” Look, I could give you a raise if that’s what you want. But what I would prefer is we’ll keep your salary the same but I’m going to give you a percentage of the ad revenue of the channel.

Rob:
But what I want though with this is you now have a stake in this channel in the success of it. So, if the YouTube channel goes viral, you’re super happy. If it’s tanking, I want you to be bummed about it with me.” And so, this is something I’ve figured out because I think just doing pure skin in the game has not worked in the past for some people that I’ve consulted with on this. But I actually just hired a COO for my education program. And we really went through and through trying to figure out the agreement that worked the same thing.

Rob:
It was a base salary with a percentage of revenue because basically, if he grows it to a certain milestone, he’ll make a lot more money. And so, for me, I think there’s a really nice balance there of just making sure that there is a reason that someone comes to work motivated in knowing that their work contributes to more money in their pocket.

David:
For me, long story short is I’ve noticed that I do better hiring administrators than salespeople. So, most of the problems that come in my business would be a salesperson that comes in and we want them to work a system and be structured and follow a path. And they’re a crazy squirrel that wants to run all over the place and their heart tells them, do it your own way, but their head tells them, I need systems, and it’s been very difficult keeping them passive. We’re going to restructure to where we’ve got a handful of sales leaders that are very talented agents.

David:
We’re going to build administrators around those people rather than growing agents and maybe giving them agents to support them because this has been the biggest problem with businesses. You just don’t realize that when you’re learning about real estate, it’s so exciting. It’s so fun. You’re like, “I just want to do this every day, all day.” But then, when you got to go execute, it becomes boring. It becomes monotonous. It becomes a grind that you learned how to use Madden as an opiate to get you through while that was going on.

David:
And that’s why people don’t become successful is when the luster wears off. And you’re like, “Nope, I’m just getting yelled at, getting hung up on, getting people that are irritated. And I’m just sifting through to find that one gold nugget. And then, I got to have the ability to pounce on it when I find.” It could be like that, getting a deal. We’re starting to see a little bit more deals coming our way because the market is softening. But in general, it becomes very discouraging when you’re looking at house after house especially when you’re new and you’re just analyzing all of them 100%.

David:
This is exhausting and you got to have the energy to pounce when that one comes. So, I want to switch this over a little bit. Luke, if you could give us your four tips that you use to keep people interested so that their mind is sharp, they’re engaged, they’re having fun and they don’t miss the opportunity that comes after those eight hours of calls.

Luke:
Yeah. So, another thing that we do is we incentivize our team for bigger deals. Because again, you got to keep in mind, we’ve got sales team that they are in the trenches and they’re going to be negotiating a deal. So, if they’re negotiating a deal, why not give them more incentive to try to get that deal deeper? And so, obviously, we’re not going to give the deal away. We don’t want to lose a deal because we’re just trying to get it too deep.

Luke:
We’re always going to try to make sure that we get the deal first, but we incentivize them by getting deeper deal. So, we’ll do something where it’s like, “Okay, for your first 100k deal that you get, we’re going to get you a whole new set of golf clubs.” Are you guys golfers?

Rob:
I just took my first lesson a week.

Luke:
Oh, did you? Okay. That’s a couple of grand. That’s a couple of $1000 right there to do something like that. Or your first deal over, whatever, 50 grand or 75 grand. So, we do different things like that. So, you’ll get an electric scooter, you’ll get an electric e-bike. So, we do things like that to really try to make them push, to get them deeper. So, that’s one obviously.

Luke:
Another one is we really make sure that we have an advancement. So, it’s like, “Okay, this is what you’re going to start out at when you join our company.” But we always want to make sure that people know that they can grow in our company.

David:
That’s huge.

Luke:
Yeah. Because a lot of times, I think that one reason why people will leave a company is because they just feel like there’s not any growth for them.

David:
That’s me.

Luke:
They feel like they’ve hit the ceiling and they’re like, “Okay, well, where do I go from here? I’m doing well. And I don’t really know what you guys want from me now because I’m doing everything I can do. And I just don’t.” And they just feel like they hit that glass ceiling. And so, one thing that we’ve really done is we’ve really made it a point that we want you guys to advance in our company. We have an opportunity for growth. You’re starting right here as an acquisition manager, but the next step is going to be a team lead. The next step is going to be a closer.

Luke:
We’re going to have positions all the way up to COO of our business as well. We’re not there yet. Our team’s not big enough. And I don’t think, especially with the market slowing a little bit, we’re just not really at that point where we have those upper management positions filled or anything. Or even really where we’re ready for. But again, I think that just when people know that for the future, I can step into those positions.

Luke:
I’m not going to just stay right here for my entire career with them. That’s a huge thing. And when you say gamifying, it’s like, in my opinion, it’s moving onto the next level. So, it’s like you’ve finished this level and you’ve done really well. So, now you’re moving onto that next level.

David:
I heard Tony Robbins talking about this and it never really clicked, but he was talking about how important the feeling of progression is to a human being. It’s one of our deepest needs. Actually, I think what he was saying is you’re only happy in life when you can feel like you’re progressing. And at the time I heard it, I wasn’t ready to hear it. So, it didn’t really do anything for me. But I started thinking about, actually, I’ll just be honest with this. I started playing a video game on my phone, a Marvel game, and I ended up spending money on it. And I was like, “What the hell am I doing? This is so stupid in so many ways.”

David:
But I actually deconstructed, why am I spending money on this? And they did done a great job in that game of getting it started, where it was fun and then making it too hard to progress at the pace that you want to that you got used to unless you spend money. So, you’re in this pain, I can’t get to this next level unless I spend $10 and then the pain is relieved. And I just caught myself getting sucked into just like, it’s like, “Dude, I don’t spend this much money on food. I don’t spend… why am I doing this?”

David:
And it was that feeling of progression and it unlocked something in my brain. I realized, “This is why you see so many young men that are addicted to World of Warcraft, that in the real world they don’t get that feeling of progression. They feel like they’re getting passed up in that world. They’re at level 74 Warlock. And even though they know it’s not real, your brain thinks it is. It feels real.

Luke:
Like, I am a badass.

David:
In that place, right? And I see this with investors. I’ll often hear investors say, “I have X amount of doors.” And it’s a joke in our world that the minute I hear an investor start talking about doors, they’re chasing the wrong goal. It’s easy to build up doors. Because they have nine doors. What you have is three properties or something. It’s the feeling of progression that they like people to hear. And now, I pay a lot of attention to what am I getting that feeling from. Because I will chase it if I think that I’m going to get ahead.

David:
And there’s a lot of other people that are that way. And if you’re at a company where they don’t have that feeling of progression. It’s almost like you’re forcing them to go somewhere else to find it, to get that need met.

Luke:
Yeah, no, there’s no doubt about that. I think there’s so much truth in that because this is when you just even talk to the team, when you just have regular talks with them, that’s what is important. When you have the sit-downs with them and you say, “Hey, what’s really important for you with where we’re at?” It’s always that next thing.

David:
How about you, Rob? What are some areas where you catch yourself like you feel progression and so you pursue it, but then you look back and say, “Was that even worth doing?” Or are you just a machine that isn’t making those mistakes?

Rob:
I don’t make mistakes. [inaudible 00:36:19]. Yeah. I’m the best. That’s my Ricky Bobby impression. Well, no, I was just thinking about that and I said this earlier about of the rev share model. And I think honestly, you guys are really selling me on this a little bit more simply because there is progression in that type of thing for the people on my team with my COO, with my editor. They’re directly incentivized by the performance and growth of my company. And thus, if they don’t help increase the production, they don’t see progress.

Rob:
But because of our company, because my company is in my channel, it is always growing. I think that’s probably, honestly, David, what I did not like about W2 life is that there really isn’t fast progression. If you think about your typical linear growth there, you get a job and you wait, if you’re lucky a year to get promoted, but it might take two, it might three years to get promoted. Now, you might get, like at my last job, I would get a 3% living wage increase every year or two.

Rob:
I can’t really remember off the top of my head. That’s not real progress. It’s not nothing, but on my salary, it was, a couple of $1000 for example, which, after taxes and everything was like, well, an extra $50, $100 per paycheck.

Luke:
Inflation.

Rob:
And that’s not real progress. Right. Exactly. That’s exactly what I did. It wasn’t even keeping up with inflation. But when you think about leaving one job to go to the next job, your salary jump can be very sizable. You can go from making 50,000 to 75,000 if you play your cards right or maybe 80,000. There are jobs that I went, I was able to jump. Like when I moved from Kansas City to Los Angeles, I was able to double my salary and that’s where I felt real progress. But once I was locked into the W2, there is no progress for one, two or three years.

Rob:
And I think the way you describe that is exactly what my gripe was with my full-time life was that I just never felt like I was really seeing progress because I was like, “Oh, well my employer doesn’t see enough progress to give me a raise or give me a promotion.” And thus, I always felt very stagnant for very many years. Whereas now I’m self-employed, I have different businesses, I have different employees, my revenue does go up every single month. My views go up every single month and I actually see progress.

Rob:
And so, I think, yeah, I don’t know. I probably do chase progress a lot, but maybe it’s because I was so deprived of it working a full-time career. And that’s why obviously, your mileage is going to vary there. And I didn’t mean to get so deep and profound, but I think you’ve just really encapsulated what my issue was with being a company man.

Luke:
Oh, for sure. When it comes to just talking what my main thing that I chase is for progress-wise, it sounds ridiculous, but it’s 100% cash flow. That is literally the number one thing that I find myself chasing is the number that sticks out to me over anything else is 100% directly correlated to my freedom. And the thing that correlates with your freedom for me is my cash flow.

David:
I think because cash flow is such a powerful magnet in our industry. It’s like you throw the word cash flow out and 90% of the people interested in real estate are going to run right after.

Luke:
For sure.

David:
And it’s not bad, obviously, cash flow is incredible.

Rob:
I want to make money.

David:
It becomes scary when someone goes to a bad turnkey provider or a bad market because those markets always look stronger cash flow. If you go to Indiana, if you go to some of these Mississippi, all these areas that turnkey companies tend to work in that have a very low barrier to entry on the spreadsheet, you’re like, “Whoa, this is a 28% return.” And it never works out that way. And it’s not that I’m against cash flow. I’m against cash flow being used as bait to get you on a hook, that’s going to take you in a financial ruin.

David:
And you got me thinking, one of the thing, I think the main reason people want cash flow is they see it as this magic pill to get them out of the job that they don’t like into a relationship that they don’t have, into having confidence. Just cash flow can change everything for you. The other thing I think is it’s easier to measure progress with cash flow.

Luke:
No, I think so too.

David:
Hey, I’ve got this much every month. I can get this much more if I get this many properties. It puts you on that progression system that we talk about. You can do the same thing with equity. And that tends to be how wealthier people measure their successes. How did my net worth grow? But you don’t have as much direct control over equity. You have to make the right moves and watch that it happens. But cash flow, there’s a very strong correlation between I got this many doors, I can get this much cash flow.

David:
So, I’m curious as you’re building up your own portfolio, as you’re growing your cash flow, and as you’re seeing this system of progression and how important we have to have it, or otherwise we’re not going to stay motivated. But at the same time, you can follow the wrong path and feel like, I’m making progress, and then you get all the way to the end. And you’re like, “I don’t like where I went. This was a mistake.” How often do you pull back and look at your overall plan and ask yourself if you like the direction you’re headed?

Luke:
Probably monthly. Honestly, I’d say probably about once a month I really sit back and I’ll look at it and just be like, “Okay. Is this where I want to be? Is this what I want to do? The things that we’re aiming towards, is that what I want out of life and are we going in the right direction towards those things?” So, again, like you said, whether it’s right or wrong, measuring it in cash flow, when I take a look at that, I put it in words of, with this, whatever this number is going to grow to, looking at it regularly, this lets me know where I’m at on paper in the sense of, okay, in a recession.

Luke:
And again, not saying we’re in one, but I’m just saying, if things do come crashing down, this is what I can still hang my head on that. This is where I’m at, where I don’t necessarily have to worry too much if the world explodes and your business falls apart. You know what mean? Obviously, there’s not things that you want to happen. There’s not things that you expect to happen. But there are things that can still come through your mind where it’s like, “Okay, if everything does fall apart, where are you sitting cash flow wise?

Luke:
Because this is what allows you to still survive. This is what’s going to allow you to be like, “Hey, you know what, no matter how bad it gets, this is where I’m at. And I can still go do this. I can still do this and I can still have this type of a lifestyle based on that number.” And so, that’s why I try to stay on top of that number regularly because with the shifting market right now, it’s nice to know. It’s nice to know what that number is.

Rob:
That’s interesting because I would’ve imagined that the, I don’t know. Yes, I agree with a lot of that. I guess I would think of it this way. Your cash flow is your daily tracker. That’s what you’re looking at. That’s what’s on the scoreboard. But you got to look at the season like what the season, where you net out. And that’s where I look at net worth, which again, net worth isn’t something that I’m really looking at and saying like, “Great, boom, box checked.” But that is the ultimate for me, the tracker of the overall success. Because cash flow can change. You can sell a property.

Rob:
There are a lot of times I’ve had a great Airbnb that lease might have ended or I might have sold it or whatever. And I’m like, “Dang, that just took off $7000 of my cash flow. And now I’m back down to, three steps back or whatever.” And again, net worth is not something that I’m like, “Oh yeah, this is it.” But that is how I track really a lot of it because for me, I always say, cash flow makes you rich, but equity makes you wealthy.

Rob:
So, there is a little bit of a dance that you have to play on which one you’re paying attention to. And I think it’s equal, honestly, on my side.

Luke:
I was going to say, I absolutely still pay attention to my net worth as well, but I pay more attention to my cash flow regularly. Like I said, I’m probably paying attention to my cash, checking on my numbers for cash flow monthly. And then, my net worth is probably quarterly where I’m really diving in and saying, “This is where I’m at right now. How am I going to grow this number right now?”

David:
All right. So, let’s summarize your four tips for gamifying things. And I think before I do that, what I love about this is that you’re taking the same things that make video games fun and addicting. You are applying them to business so people can actually make money with that skill, right?

Luke:
Hell, yeah.

David:
You’re taking this thing that is trap to so many people and now you’re using it in the fight for financial freedom and good. So, I like that.

Luke:
Absolutely.

David:
Number one tip, make work a game. When you were using Madden, that would make an ordinary boring task actually seem a lot more fun and challenging. Number two is look for ways to incentivize people and you have to have weekly ones and a quarterly ones, different forms of incentive. Number three is leveling up. That’s where we get into that feeling of progression that’s so important.

David:
Number four is bring in a multiplayer element. So, get other people involved, make them feel like they’re in a group on a team. Anything that you want to elaborate on that before we move into the next segment of the show?

Luke:
No. Honestly, one other thing that we’ve really done with our team as well is we’ve made sure that they all know that to us, one of our core values is obviously just the importance of family. And so, something that’s big is we give our entire team so much freedom in the sense that if they ever need anything, if they ever want to take a trip, they can ask us, but they really don’t even need to. It’s done. It’s done. So, there’ll be times when anyone on our team, they can say, “This is coming up. This is going to do this.” Perfect. You’re gone. Have fun, enjoy it and enjoy your time with the family.

Luke:
And so, we’ve made sure that everyone knows how important it is to us, that they get their time with their family. And again, that’s not gamifying, but that’s just one of those things to us where again, it’s a core value that your family comes first. So, anything you need, go for it.

David:
And if they’re hitting their numbers, if they’re doing their job, if there’s accountability, I see that you’ve got these people that are in your office as we’re recording. I think that’s really important.

Luke:
Oh, yeah.

David:
You know they’re working every day and you track your numbers. So, you see if they’re successful. So, of course, if they want some time off, they can go do it. That only becomes a problem when someone’s not contributing. They’re not helping move the ball forward. And then, they’re saying now, “I need all this time off as well.”

Rob:
I agree. I’m jealous. I’m jealous. You have a workspace with people. I do miss that. The studio gets a little lonely sometimes.

David:
Rob’s coworkers are his children. How old are they?

Rob:
One and two.

Luke:
There we go.

David:
And every once in a while, an exciting thing happens where one of them sticks playdough up their nose and you get-

Luke:
Perfect. There we go.

Rob:
And do reverse CPR. Yes.

Luke:
We had a peanut incident about six months back. So, peanut up the nose.

Rob:
Up the nose?

Luke:
Up the nose.

Rob:
What happened? Did you do reverse CPR?

Luke:
We had to break out the tweezers. Had to break out the tweezers to get the peanut out. I’m like, “Babe, what are you doing?” She’s like, “I put a peanut up there. I thought it would come out.”

Rob:
My sister did that with the bean one time.

Luke:
Yeah. We’ll get you peanuts and beans.

Rob:
She was 32.

Luke:
Yeah. Right.

David:
All right. I’m going to move us on to the next segment of our show. In this segment of the show, we are going to ask you details about a particular deal that you’ve done. Luke, do you have one in mind?

Luke:
We’ve got one flip that we just did.

David:
The first question is what property is it? Was it a single-family home?

Luke:
So, it’s a single-family home, but it has a guest house, five minutes from downtown Prescott. So, it’s in a really, really sought-after area. And so, it is on 1.2 acres. And again, you don’t typically find many houses with guest houses in this area. House is 2400 square feet. Guesthouse is 600 square feet, completely separate.

Rob:
And how did you find it?

Luke:
This was a cold call.

David:
And you mentioned the price. How much did you pay for it?

Luke:
Bought it for 480,000.

Rob:
And how did you negotiate that price?

Luke:
So, the guy wanted 550. He was going to list it on the market for 550. So, obviously, we broke down all the numbers for him. Just let him know that by the time you actually list it and after all the numbers come out, it needed everything. It was really rough. So, after an inspection and everything, we’re like, “Hey, there’s a good chance you’re not going to walk with 500.” So, went back and forth there. We got them down to 480 on the deal.

David:
All right, how did you fund this deal?

Luke:
This one, we did a hard money loan and we did a hard money loan for the construction on it as well. And then, the construction ended up getting a little out of hand on us. So, we actually had to bring in a gap funder. We didn’t have to, but we brought in a gap funder for the extra construction loan.

Rob:
And what did you do with it? Was it a flip, rental, BRRRR?

Luke:
It was a flip. So, yeah, we ended up putting 260,000 into the flip.

David:
All right. And what was this outcome?

Luke:
So, we just listed it last week, which again, in this market right now is a little bit scary, just because we talked about it a little bit before, but the numbers have come down. There’s no doubt about it from where they were versus six to eight weeks ago. So, obviously, that’s something that was scaring us as we were getting closer to getting this thing listed. We’re just watching the market, watching interest rates going up. We’re like, “Okay, we’ll just have to see how this goes.”

Luke:
But we’re pretty confident in our product that we put out. We put some money into our pro projects and we got a pretty good design in our opinion. So, we listed the property for 1.1 mil last week, and we got a full-price cash offer three days in.

Rob:
Wow. That’s awesome, man. What lessons did you learn from the deal?

Luke:
It was a little bit scarier deal, because it took a while because we gutted the entire thing. It was rough. It was really rough. But what I learned, man, we trusted our intuition that this was going to be, just because of what it was. It’s a really cool house. It’s old, unique. It’s got a lot of history behind it. It had a guest house, it was on a big lot. So, it had these things that you don’t find in this area. And so, we’re like, “I think we should be able to push this thing.” And obviously, the market just continued to climb over the past year that we’ve owned this property.

Luke:
So, really, the thing I learned I’d say is that we trusted our intuition that this was going to be a banger and it was. So, we just got through the inspection and they didn’t ask for very much. It sounds like things are moving forward and they waved an appraisal, which was awesome.

David:
All right. On this deal, who was the hero involved?

Luke:
I’m going to say it was our lender. Our lender just kept giving us funds. I think we’d originally said that our rehab was going to be like, I think we said it was going to be like 120. And then, once we started getting into it more, you’ve had those projects where you’re like, “Oh, damn, this thing. Once we’re opening this thing up, we’re going to really get into this.” So, he trusted us the whole way through. We do a stupid amount of deals with him. So, I’m happy that he trusted us, but he just kept cutting the checks left and right. So, it was nice.

David:
That’s nice.

Luke:
Yeah. So, find yourself a lender that will do that. Yeah, exactly. I think it’s super important in my opinion to have a lender that if you want to get to that next level, you got to have a lender that you can just trust and they trust you that you can feed off of. Because if you don’t have that, it’s going to be tough.

David:
And if you want to be Luke and get the same results, remember BiggerPockets can help you do so. There are tons of resources and people waiting to be your hero on the site. Just go to biggerpockets.com. Look for the nav bar, click on Tools or Resources. And there is plenty there that will help you do the same thing. All right. Luke, we’re going to move on to the last segment of the show. It is the world famous-

Speaker 4:
Famous four.

David:
All right. In this segment of the show, Rob and I will fire questions at you and we are going to see how you respond. Same questions we ask every guest every week. Question number one, what is your favorite real estate book?

Luke:
Ooh, favorite real estate book. I’m going to have to go, I say that it’s real estate wise, but The Top Regrets of the Dying. The Top Regrets of the Dying is huge for me because it’s one of those things where again, it lets you know you got one life and it’s about someone who interviewed a bunch of people that were on their deathbed. And just the things that they had brought up that they wish they would have done looking back and the tears that had brought to them.

Luke:
Oh, man, it’s one of those books where every single, every page, you’re thinking about it, and you’re like, “Oh my God, I got to change something. I got to go after it now. I got to do what I want to do right now.” So, that was huge for me.

Rob:
That’s awesome. What about your favorite business book?

Luke:
Favorite business book is probably going to have to be The Monk Who Sold His Ferrari.

David:
Josh Dorkin really likes that book. He’s mentioned it several times.

Luke:
Yeah. That’s an amazing book. That’ll shift your mindset as well. It’s about a big wig, lawyer and just the changes that he made by basically stepping away from his business and taking a deeper look at everything in the macro of life, I guess, and how it changed everything. It’s amazing.

Rob:
And when you’re not finding ways to gamify the game of real estate, what are some of your hobbies?

Luke:
I like to play golf. I like to spend time with the family. We’ve got a boat, so we’re on a little lake in our neighborhood here. So, we’ll take the boat out, take the kids and the dog. So, that’s a lot of fun, in Arizona. I know it sounds really weird. Most people are like, “There’s not lakes in Arizona, right?” So, that’s fun. Golf. I enjoy playing basketball. So, like I said, I love sports.

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

Luke:
Consistency, man. You’ve heard that question when people ask, what’s your superpower? Consistency, if you have the ability to just stick with it, even when things aren’t going well, just pound the phone, whether it’s the phones or whatever it is, pound the pavement and just continue to work. There’s so many people, like you said, that when things get tough, they quit. They’re just like, “You know what? This isn’t for me. I’ll do something else.” That’s not pivoting. If you’re completely getting out of that industry, you’re quitting.

Luke:
And so, we have been able to stay extremely, extremely consistent in the things that have worked for us. And then, once they maybe start to not work as well, we have done a very, very good job of pivoting. So, whether that’s a market shift. That could be anything. Something happens with your marketing sources or whatever it might be, where things are just not working how they used to work.

Luke:
Making those changes, being able to pivot quickly and staying consistent, those are the top two things for me that if you can do those things in any market, in my opinion, I think you’re going to be fine. I think you’re going to do, not even be fine, I think you’re going to excel.

Rob:
Well, very wise words there. Lastly, can you tell us where people can find out more about you on the internet?

Luke:
Yeah, absolutely. So, on Instagram, my Instagram handle is luke_ro_, and on Facebook, just Luke Rotvold. That’s my full name. And then, on YouTube, we are under the Viking Boys and we have a bunch of cold call videos, just live cold call videos on there while playing Madden, which is a blast. So, yeah.

Rob:
Don’t stick to your roots.

Luke:
Exactly. So, yeah, so those are the three places you can find me.

Rob:
Awesome. What about you, David?

David:
You can find me @davidgreene24. There’s a whole lot of imposters, so be careful that you look exactly for the right spelling, especially if you see me follow you. Nothing personal, but I’m probably not likely to be following someone that I haven’t been interacting with before. There’s a lot of people getting taken advantage of. And then, you can check up my YouTube channel @David Greene Real Estate. And Rob, what about you?

Rob:
Yeah, man, I’ve been waiting for you to follow me back now for the last six months. I try not to take it personally, but honestly, don’t know how else to take it at this point.

Luke:
It’ll come soon.

Rob:
You can find me over @Robuilt on YouTube, Robuilt on Instagram. Little curve ball here, Robuilto on TikTok because someone took Robuilt. But then, scammers got a hold of Robuilto on Instagram. It’s a little confusing. So, I’m Robuilt on Instagram and make sure that you, I mean, I won’t send you a message first. I can pretty much guarantee that. So, if you get a message from me that says, “Hey, have you considered forex trading,” it’s not me. It’s a bot.

Luke:
Come on. That’s what you’re actually doing. Let’s be honest here.

David:
Luke, I got to ask you. With your name being Luke Rotvold, how often do people think that you are Luke Rockhold, the UFC fighter?

Luke:
I know. Trust me. Oh, my God. Okay. So, funny story, the first time I ever heard that name, I was at a restaurant with my wife and they had ESPN or something on where they had highlights going on. And I just heard that name over, whatever the speakers. It was something about Luke Rockhold. And I’m like, “Wait, babe, did you just hear that?” And she’s like, “Yeah, I did hear that.” I’m like, “Come on, Luke Rotvold, that’s not a very common name.” Rotvold, it’s a very strange name, is Norwegian.

Luke:
But the first time I heard it, I was shook. I’m like, “What the hell was that?” So, I don’t get that very often. But I think that guy is also 6’4″, freaking 240, yoked-up. I’m not 6’4″, nor am I 240 or yoked up.

Rob:
Not yet.

Luke:
Right. Hey, I can get there. I can get there. You put your mind to it.

Rob:
Anything could happen.

David:
You don’t need to do that. Just get enough cash flow. It’ll solve every problem you ever have. Why get in shape?

Luke:
Boom. Exactly. That’s what I’m talking about. See? That’s exactly what I’m talking about.

David:
All right, Luke. Well, we had a great time talking to you. I really appreciate you sharing what’s going on in your business that’s good, as well as what’s not going well. It’s very rare you get someone that will come in a podcast this big with this Mitch influence, and share, hey, I got taken advantage of, I had people leave me, here’s what went wrong in the business.

Luke:
Absolutely.

David:
So, I appreciate you being authentic there. Everyone, please go follow the Viking Boys and learn more about how you too can make eight, what was it, $5000 an hour while playing Madden?

Luke:
Five sixty.

Rob:
Five hundred and sixty-three.

David:
Five hundred sixty-three dollars an hour while playing video games. You’re not going to get that in World of Warcraft.

Luke:
No, you’re not. No doubt about that.

David:
Rob, any last words?

Rob:
No, that was a really, yes. No, I’d like to make $560 playing video games. So, I’ll reach out on Instagram soon.

Luke:
Boom, do it. We’ll play a little Madden with mono.

David:
All right. This is David Greene for Rob reverse CPR Abasolo, signing off.

CNBC’s Diana Olick on the plunge in mortgage applications and refinancing. With CNBC’s Melissa Lee and the Fast Money traders, Steve Grasso, Tim Seymour, Guy Adami and Dan Nathan.

Ashley:
This is Real Estate Rookie Episode 215. My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.

Tony:
And welcome to Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, information, and stories you need to hear to kick start your investing journey. Now, I usually like to start the episodes with a quick shout out from folks who have left us a review. And this week’s review, five star review, comes from Solitaire Phantom Maniac. And this person says, “I love this podcast because I learned so much while I’m working. I’m really hoping to use these lessons soon to start my own real estate journey.” And that’s why we do this podcast, to help people, to inspire them. So if you are listening, if you’ve enjoyed, please you leave us an honest rating and review on whatever podcast platform it is that you’re listening to.
So with that out of the way, Ashley Kehr, what’s up? What’s new in your world?

Ashley:
I don’t know and how much. My son’s been playing football. So my Saturdays are now consumed with football. And it’s actually been fun. So I’m enjoying that element.
So today, I went to an apartment where the person had been evicted. They actually went to prison in April and it is now the end of August. And so they actually received a full rent payment from the county, so we received direct deposit payments from the county every single month on their behalf.

Tony:
Even while they were in jail?

Ashley:
Well, it stopped the month after So May, it stopped May was their last payment. So June, July, August, we didn’t receive payment. The eviction went through everything. The marshals came. Obviously, no one’s been there. So the apartment’s been considered abandoned. And no contact with this person at all. They’ve had no contact with the property management company, anything like that. So the lockout was done, we held their contents. And now, it’s time to get rid of everything.
So Darryl and I went through the property and it is just disaster. The one bedroom, you can’t even walk in there unless you’re walking on six inches to a foot of just stuff on the floor. So Darryl and I made the best of our time there while we’re waiting for the junk removal company to come and we made about 10 Instagram reels. So I’m going to release those slowly throughout the next week. So if you guys want some entertainment on what a destroyed trashed apartment looks like, head over to my Instagram @wealthfromrentals.

Tony:
Yeah, saw that first one you posted today. I got a good laugh out of that one.

Ashley:
Yeah. I tried to make it humorous as much as the situation is unfortunate. But, yeah.

Tony:
With me, nothing else too crazy happening either. I mean, we’ve got a bunch of projects in motion. We literally just yesterday wrapped up our last rehab. So now, we’re just waiting on a safety inspection for this new one. So hopefully, that’ll be another successful property for us. But just putting one foot in front of the other and trying to keep growing, keep things moving.

Ashley:
Well, I think today, we have a great podcast for that. It’s basically about, keep going to become a millionaire. So how to become a millionaire and what those steps look like. And I think it can seem like daunting to get to whatever that next step is for you. So this is going to be a great webinar for you guys to listen to if that is your next goal to become a millionaire. And you guys are in for a treat today.
We have Dave Meyer, who is going to be taking over this podcast episode. So Tony and I get to sit back and relax. You don’t have to listen to Tony’s boring monotone voice or hear me laugh throughout the whole episode. So I’m excited for you guys to be able to enjoy yourselves, relax, and learn a lot.

Tony:
And Dave is like literally … If you guys don’t know Dave, he’s the host of the On the Market Podcast. He’s also the VP of data and something.

Ashley:
And analytics.

Tony:
And analytics at BiggerPockets. But Dave is also literally one of the smartest people that I know in the world of real estate investing. So if you want to get some really good information about how to be successful, take notes, enjoy this content, because it’s coming from a super, super intelligent guy.

Ashley:
So before we bring Dave on to the show, let’s hear a word from our show sponsor.

Dave:
Hey, what’s going on, everyone? My name is Dave Meyer. I am going to be your host for today’s webinar, where we’re going to be talking about how to become a real estate millionaire. And if you’re sitting there wondering if this is for me, the answer is yes because this includes becoming a real estate millionaire is possible for anyone. And that means if you have no money, if you have no experience, you don’t have a network full of high net worth people. This is true for anyone. I genuinely, genuinely believe that anyone who really wants to achieve financial freedom to become a millionaire can do so through real estate investing.
I know that because I’ve done it and I’ve seen hundreds, if not, I’ve seen thousands of people accomplish this by following the same systems and processes that I’m going to teach you today. So I want you all to pay close attention to what we’re talking about today because these really are the things that establish successful real estate investors’ use. And as you’ll see over the course of this webinar, it’s really all about systems and processes. And basically following the path and following the things that other real estate investors have already done.
And I’m going to teach most of what you need to know to get on that path to being a real estate millionaire by the end of the next hour. So please pay attention. Super glad you’re here. And with that, let’s get into it.
I want to first just start by telling you a little bit story about myself and my own personal journey to real estate investing financial freedom. This is a restaurant and it’s called the Cherry Creek Grill. I worked there when I graduated college in 2009. And at that time, I was living paycheck to paycheck. I mean, not even, I guess it was like day to day because it was just the tips I took home every day. All the money I had, literally all the money I had, was in cash in my bedside table. And I didn’t really know what I wanted to do with my life. And I wasn’t spending time the way I wanted to. I wasn’t feeling fulfilled.
And not shortly after that, I got introduced to real estate investing. And fast forward 12 or 13 years later, now I am financially free. I get to live in Europe. I travel. I have my dream job working at BiggerPockets where I get to host a podcast, I get to talk to all of you about investing in real estate. And, yeah, I am a real estate millionaire. And that is wonderful, don’t get me wrong. But to me, it has always been about time affluence, about being able to spend my time and my life doing the things I genuinely care about, about the things I love with the people I love. And real estate investing has given me that and it’s an incredible gift. It is something that I am so tremendously grateful for. It’s something I’ve worked very hard to attain. But it’s not like I was out there on my own doing this making things up.
I followed a system and path that many others have followed. And that’s what we’re here to talk about today. And I genuinely mean this. If I could go from waiting tables 12 years ago to being a real estate millionaire, I promise you, so can you. This is not … I’m not special in any way at all. I don’t have any skills that you don’t possess. This is something that anyone could do and I really want to help you get there, and it’s something I’m extremely passionate and excited about.
And like I said, it’s not just me, you can see that other BiggerPockets members have become millionaires by following these same steps, too. Check this out from Kurt. He said, “I bought one duplex in 2003, house hacked it, realized it was awesome, continue to slowly accumulate duplexes over the years, went from negative net worth, negative net worth, to multimillion over the next 17 years from CAP appreciation, reinvesting rates, cashing out equity. Quit job, retired in 2012.” That’s amazing. You can also see Sergio, started with a triplex, just a triplex in 2012 on W-2 savings. Got another one, got another one, and now has a net worth of over $1 million in real estate alone. It’s incredible.
And Mario says he read Rich Dad Poor Dad, that’s how a lot of us got started, right, and decided to start small. Bought his first house in 2011 with FHA financing, only put 3.5% down. Check that out. So everyone who’s thinking you need 20% down to get started, not necessarily true. He was scared as hell like we all are, but made it work. And then I decided to get a bit aggressive, bought a couple more units. And now, he has a net worth of over $2 million in equity alone, operates several profitable businesses and generates over $750,000 a year. And I love what Mario ends this on because that’s why I put this in here. The most important part is still in love with every minute of it, right? Because, of course, we all want to get that amount of money, we want to become millionaires because it feels secure, right, and it gives us that time.
But it’s fun to become a real estate investor. And it allows you so much freedom to do the things that you love. So again, I’m super excited to teach you these systems. We’re going to get into all of that today. But first, I do want to address the elephant in the room because I know a lot of my job here at BiggerPockets is studying the housing market. And when I do that, I recognize that there are some scary things out there in the economy right now. I mean, let’s just talk about it. Recession, people are talking about interest rates have gone up a lot over where they were during the pandemic, and there are super high prices on houses. And all these things are true. That does make it a little less obvious, I would say, how to get into real estate investing.
But let me tell you something, every single, experienced investor I know, and I really mean this, every single investor I know is still buying right now. And that is why … And I know that seems counterintuitive because there are people on YouTube or on social media are saying, “The housing market is going to crash, I’m selling everything.” That’s a lot of hysteria. The people who actually are real estate investors and who do this for a living are all buying and active right now because they know, like I know, and like you will know, is that you can make money in every type of market. Doesn’t matter if the market’s going up, if the market is going down. There are always opportunities. And yes, you do need to change your strategy a little bit and you have to be disciplined in this type of market. You can’t just go out there and buy anything.
But if you know how to buy the right properties, in a down market, it’s actually a great time to buy because sellers are more motivated, people are on the sidelines, they are scared, there is less competition. And so there are great opportunities to buy right now, as long as you learn how to identify the right properties. If you can run the numbers and be confident in what you’re buying, you can buy in any type of market. And I genuinely believe that. I’ve done several deals already this year. I’m doing due diligence on two more right now. And so this is true of everyone I talked to, and I just want you to not be discouraged and say that you’re going to get out of real estate investing before you ever get in because that’s just what happens with people is they think there’s all these barriers and they construct these barriers in their head, but that’s not necessarily true.
You can find good deals right now. I’m 100% sure of that. I’m going to teach you how to do that today. So just keep that in mind that in every market, there are opportunities. Which opportunities you find might change, but there are always opportunities. And by the end of this webinar, you’re going to learn how to do this. You’re going to have the tactics, the strategies, and tools needed to become a real estate millionaire. And that’s even if you’re brand new to real estate, like I said. That is even if you’re starting with zero money, that’s what I did, and it’s even if you live in expensive and competitive market, which is pretty much every market right now, they’re all expensive and competitive. Well, not all, but a lot of them are expensive and competitive. And we’re going to talk about still how to find great deals in that type of market.
Today’s agenda is going to be first following this simple four-step strategy called LAPS. This is what almost every real estate investor I know uses to find great deals. We’re going to talk about how to get crystal clear on the best property for you, so that when you analyze a deal and you get the numbers you want, you know exactly when to execute and you can jump in. Third, we’re going to talk about how to finance real estate investing because I know a lot of people are probably thinking, “I don’t have money.” That’s how I started. I thought … I literally had no money for a down payment. I had never applied for a loan before. But you can figure out how to do this, millions of people have, and I’m going to show you how to do that today.
Then we’re going to talk about how to analyze deals, which if you know anything about me, I’m a data and numbers guy at heart. And so I’m excited to talk about analyzing deals because I think, personally, that’s the most important part of learning how to be a real estate investor is running the numbers. So we’re going to go deep into that. And then we’re going to talk about BiggerPockets Pro and how we here at BiggerPockets have built tools to help you become a real estate millionaire.
All right. So I’ve talked a little bit about this at the beginning. And the reason I’m talking about this is I want to talk about your why, basically, why you’re doing this because a lot of people when I develop these webinars and I say millionaire, maybe people think about these kinds of things, right? Like going out on your yacht, or buying a Ferrari, or a Lambo, or going shopping. And you could do all that. If that’s you, go for it. But for me, that’s not what [inaudible 00:14:09] has been about. To me, it’s about traveling the world. I get to live in Europe right now. That’s awesome. I get to spend time with my family. And maybe if you have kids, you can watch your kids grow up and spend more time with your siblings or your nephews or your parents. You can take them on adventures. You can help them see the world and explore and empower them to do the things that they want to do.
It’s really about being able to do what you want, when you want. At the end of the day, it’s about time freedom for me. And I keep talking about this at the beginning because real estate investing, it’s not complicated, but there are going to be times where it gets hard, where you have to figure something out. And for me, that why has always been what continues to motivate me. The money is great, but I love to daydream about traveling or spending time with friends and doing something amazing and feeling like my life is purposeful and valuable. And that’s what has always made me feel excited.
And so today, we will talk about how to make that dollar number in your bank account read $1 million. But I also want you to think about why do you want that million dollars. Why are you going to work hard for the next couple of years to take action and pursue this? Because, really, that’s what it takes, it takes action and consistent action. And there will be times when you’re feeling a little lazy or not motivated, it happens to everyone, and having that why crystal clear in your head is going to help you.
BiggerPockets. If you want to know why you should be listening to me, I just want to … And you’re not familiar with BiggerPockets, I want you to know that BiggerPockets has been around for 17 years now. We have over 2 million members, big podcast, and we have helped literally tens of thousands, if not, hundreds of thousands of people become real estate millionaires. And the reason we’ve done this is because we have very firm beliefs. And here’s what they are.
Real estate investing is the greatest tool. This is what we believe, that real estate investing is the greatest tool on the planet for the average person to build wealth and passive income. Now, we also believe that it’s not a get-rich-quick scheme. And that’s what I was just talking about. This is going to take years of hard work. It’s not crazy. It’s hard being broke, right? It’s a lot easier to be working towards something that’s going to make your life better in the future. But if you think … If you’re here to make a quick buck, real estate investing is probably not for you. There are probably other, I mean, really high-risk ways to do that. But real estate investing is a much more safe, proven, consistent, slow build kind of thing.
For me, it took about nine years to get to financial freedom. And I actually went slower than most people. But at BiggerPockets, we really believe in all of these things that you see on your screen here that anyone can do it, it’s just about consistent action and a long-term perspective. For me, just so you know who’s talking to you and why I’m qualified to lead this webinar, my name is Dave Meyer. I’ve been a real estate investor for 12 years, like I said. And my full-time job, I work because I like my job, I love my job, is as the vice president of data and analytics here at BiggerPockets. I mostly invest in rental properties. Since I moved to Europe about three years ago, I do a lot of passive investing. I invest in syndications. So these are large multifamily, complexes, value add kind of things.
I also have the great pleasure of hosting On the Market. It’s a podcast talking about what’s going on in the world of investing. We talk a lot about the housing market. We talk about interest rates, businesses, everything you need to know to make informed investing decisions. So if you are into that kind of thing, check out that podcast. I have a book coming out this fall all about deal analysis. And just like you, I was once a newbie. I had no money, I had no experience, and I still figured it out, thanks to BiggerPockets and countless other real estate investors who showed me the path. And now, I get to pass that along and to give back to this community. And that’s why I’m here leading this webinar today.
If you do want to connect with me after this, you can do that best on Instagram. I am @thedatadeli because I love sandwiches and just generally any kind of food.
All right. With all of that, hopefully, I’ve given you a good introduction about why you’re here, why you should be paying attention to me and to this topic. And now, let’s get into the meat of this thing. The funny thing about becoming a real estate investor and hopefully becoming a millionaire through it is that it’s actually boring. It’s not like all glitz and glamor. There’s really not that much to it. It is a time-tested system, right? And I’m going to show you a little bit about it. Here’s the math behind it. You … I guess this isn’t math, these are the steps and then I’ll show you the math in just a second.
But first things first, you buy a property with a loan, right? That’s what everyone does. You go out, you find a great deal, we’re going to talk about that, then you get a loan. Then over time, you pay off that loan. And the great thing about real estate investing, unlike buying your primary residence, is you’re not actually paying it off with your money. You’re paying it off with rent. You’re paying it off with … Someone else is paying off your loan over time. Hopefully, your property goes up in value over time. We’ve seen that like crazy over the last few years. But even if it goes back to the average, which is what I think is going to happen of about 3%, your property value does go up over time. And if you do this with multiple properties, you’re going to become a millionaire. It is really that simple.
Let me give you some simple examples here. First, take this chart here. When you buy a house and you put 20% down, let’s just use really simple numbers and say that you’re going to buy a house that’s worth 100,000. And you’re going to have a loan that’s worth 80,000, right, because you put 20% down, that’s 20k in this scenario. And you have a loan for 80,000. Then over time … So you have 20,000 in equity, right, that’s your down payment. Over time, two things happen here. First, the value of your property, that’s that green line, starts to go up. That’s your net worth. But at the same time, because like I said, you are paying down that loan, the amount you owe on that loan has gone down.
So in this graph, we see that our value of our property went from 100,000 to 105,000. And the amount we still owe the bank went from 80,000 down to 70,000. So instead of having just $20,000 in equity, now we have $35,000 in equity. That’s pretty good, right? I mean, I haven’t put yours on here, but that just happens over time, right? Then it keeps going. We owe the bank less, the property is worth more. We do it again. We do it again. We do it again. And the spread, how far apart these two lines get, that is your net worth. That is how much money you have, right?
So now that your property is worth … Let’s just keep going. Now that it’s worth 135, 140, 145, once you get to 145,000 and you owe the bank only 65, let’s do some quick math, now your equity in that property is $80,000. So this isn’t even including cash flow, right? You went from $20,000 in equity to $80,000 in equity just by buying a property with a traditional mortgage and holding it over time. That is why investing in real estate, specifically rental properties, can make you a millionaire so easily.
Let me just give you an example, right? I bought this single-family home a couple of years ago. I put 20% down when I did and I bought it for about 400,000. So my equity was 80,000. Now, just a couple of years later, I’m making $800 a month in cash flow. And I have $140,000 in equity. So that’s $60,000 in additional equity. That’s an example of a single family. I also did it with this triplex here. So we have this triplex that I bought a couple of years ago. Originally, it was about 650 grand, I think. So that’s probably about 120 in equity, now 220 in equity, so over $100,000 in equity gained off this all while I’m making $2,500 a month. Sounds pretty good, right? So just between these two properties, I have a couple 100 grand in equity and I think over $3,000 a month in cash up.
What about this? Short-term rental. You can do it with short-term rentals as well. I bought this short-term rental three years ago maybe. This one’s done incredibly well for me. I’m making about 1,500 bucks a month. And I think I’ve gained, this is a conservative estimate, at least 100 grand in equity, maybe 150 on top of what I put down. So I hope you can see that this isn’t anyone’s strategy. You can do this with small multifamilies. You can do it with single families. You can do it with short-term rentals. And I’m including my cash flow here. But that chart I showed you before doesn’t even include cash flow.
The way to build long-term wealth to get to that million dollar number, in my opinion, is not through cash flow. You do want cash flow, that is also important, but that millionaire number is going to come from building equity in your property over time. The truth is, it doesn’t take that many properties to become a real estate millionaire. I just showed you three properties, three random properties I own, that’s probably about halfway there, right? I just bought three properties, I’m generating almost all of my monthly expenses in income from those three properties and have made almost half a million dollars off those three properties. And that’s just the truth is that it doesn’t take that many properties, it just takes the right ones. You have to be able to identify the properties that are going to go up in value, that are going to provide consistent cash flow and are not going to cause you a million headaches because at least, for me, that is a big deal. I don’t want to have a lot of headaches.
So in addition … I should have mentioned. In addition to buying the right ones, not headaches, and it’s just time, right? Just buy good properties and wait. It’s … People say this all the time. Don’t wait to buy real estate, buy real estate and wait. Dennis, I love that saying because it’s so true. People get so concerned about the market fluctuating, but over 10 years, over 20 years, your property’s going to go off, you’re going to pay off your loan and you’re going to be a millionaire. It’s almost guaranteed.
So if you look at this, going back to this, it’s a perfect example that I was showing you earlier one example of one property at a time, right, but think of this at a portfolio because you don’t become a millionaire of one property, you become a millionaire by assembling a portfolio over time. And so this is just random numbers here. But if you bought $2.6 million worth of real estate, which sounds like a lot, right, but that’s maybe five properties worth $500,000. And you would only need to put down $800,000 for that. And again, that sounds like a lot of money. But we’re going to talk about how to get that money in just a little bit. And over time, you went from having 800,000 equity. Remember, it’s 2.6 minus 1.8, that’s 800,000 to having $3.5 million in equity, and you are well into being a millionaire.
So that is how … That’s where you need to get to and to start thinking about is just buying good properties, holding them over time, you will become a millionaire, it’s pretty much guaranteed. So … Oh, I got ahead of myself, you can see here 3.5 million less closing costs, that’s about your equity. So just think about it this way, right? Think about it like a stack. You don’t need to do this all at once. You just start with one property. It could be a single family home, it could be short-term rental, or I started by getting a small multifamily. I bought a quadplex first. And that’s honestly before I really knew what I was doing, it was just the best deal that I found. I would have bought a single family. Short-term rentals weren’t a big thing when I first started, but I started with a quadplex, but I still buy all three of those things.
Then maybe in the next year, you buy two properties, or maybe it’s even two units, doesn’t even need to be two separate properties, you buy duplex. Then buy a quadplex or four units or whatever. Then eight and then 16. And that’s it, right? Then you’re a millionaire. And it’s not that hard. You can actually do this one per year and become a millionaire in probably five to 10 years. So buy one single family, I’ll just go in reverse, right? You buy one single family, buy a duplex, buy a triplex, maybe buy two quadplexes and then buy a small commercial property with 16 units, five years, one deal a year. You can do that.
I know thousands of people who do this. I’ve done it. You can absolutely do it. It’s not that intimidating. So don’t think about, “How do I get to 100 units?” And on the podcast and social media, you hear these people who have thousands of units and it can be intimidating. I understand that. But you don’t need to think about them. Just think about this. It’s so much easier. Just be, “What’s my first deal? I’m just going to buy a deal, buy a deal and wait.” Next year, what are you going to do? I’m going to buy a duplex and wait. The next year after that, I’m going to buy four units and wait. And I’m going to buy eight and wait. Like I said, it’s boring. I know this is boring, but it is true. That is how it’s done.
The key here is really being able to find good deals. So … And I know that’s what a lot of people are at. So hopefully, you understand the stack. Hopefully, you understand it’s about buying good properties over time. Now, let’s talk about how to find good deals. And we call this here the crystal clear criteria, Triple C, or you might hear this often referred to as a buy box. I like to call it the buy box as well. It’s basically identifying the criteria that you want to see in a property because we’re going to talk about the systems you need. And the systems require you to see a lot of deals, analyze a few deals, and then being able to execute on them when you find the ones you want.
And so the first step in that process is to find that what do you want. So first thing here is location. Location, something I talk a lot about on the podcast, this can be within your own town, it can be in your own sub market. I really recommend you try to pick two to three different markets that you’re interested in. You can read some of my writing on the blog about different markets that I like. But you can really do it almost anywhere. You can go find a start at a broad level. So I mostly invest in Denver. So let’s say I pick Denver and then I want to find a couple sub markets. Go drive around and find areas that you think are really good, that have good potential to appreciate, that have good quality of life. People are moving there, there’s good jobs, those are the things I really like to look at.
Economic growth and job growth, super, super important and population growth. If I had to narrow down to two things I care about when I’m talking about location, those are the things, economic growth, usually measured as job growth, and population growth. Those are super important. You can check out more of my writing about location somewhere else on BiggerPockets to talk about this a lot.
Next, property type. Do you want to buy a short-term rental? Cool. Do you want to buy a small multifamily? I recommend it, I really like them. But I also buy single families because in Denver, there aren’t that many great single families and they’re really high demand so they get excellent rent. So I buy those two. But you can decide, especially if it’s your first deal, I recommend you just focus on one property type. And that can be small, I would say either a small multifamily, two to four units, or a single family are probably the best if you’re just getting into this.
Next, condition. And listen, if you are experienced and you want to do BRRRR, you can buy some properties that need work. But if you’re new, again, I recommend buying something that’s not a lot of complicated work. You don’t want foundation issues. You don’t want to buy a new roof. If you can do some cosmetic work, I recommend that for your first deal.
Now, if you’ve done two or three deals and you’re ready to scale, then doing value add can be really great. And when I say value add, I mean buying a property that needs work, renovation, add a new bathroom, fix up some of the tile, whatever. That can really add to your net worth quickly. And so I do recommend that for people, but not necessarily on your first one. If it’s your first one and maybe you have a background in renovation or construction or design, maybe you’re ready for that. But you don’t need to do that stuff if you are brand new, you can find a deal and properties that are already in pretty decent condition.
Next, set your price range. And we’ll talk about this a little bit. But if you want to buy with your own equity, then you might want to just estimate what 20% down would be or what you think a good price range is in your neighborhood. Maybe you think that there’s a lot of demand for homes that are in the $300,000 to $400,000 price range. And that’s going to be your price range. But generally speaking, if you had $80,000 to invest and you divide that by 20%, that would give you your estimated price range, which would be about $400,000. So you take 80,000 divided by 20,000, that would allow you to at least get your traditional mortgage.
Last is profitability. Think about what you care about. For me, I am usually willing to accept a lower cash on cash return, maybe 5% or 6%. If I think it’s in a neighborhood that’s going to appreciate a lot, because for me, I want that spread that we were just showing to keep going up and up and up, I still work full time. So cash flow is not as important to me. I want to see my net worth grow as quickly as possible. But for other people, it could be different. So you might prefer to have more cash flow. And usually, that comes at an expense of appreciation. That’s not always true. You can find ones that are good, but think about in your head what’s most important to you.
And if you … You can read about this and think about this. But over the next couple of days, let’s say in the next week, I want you to think about where you’re going to buy, what type of property you’re going to buy, and what your price range is. And that is going to help you understand because if you know, “Hey, I want a single family in Denver, I want it to be at least in pretty good shape where I don’t have to do a heavy renovation, my price range is 500,000. And I want at least an 8% cash on cash return.” That’s the level of specificity I want you to have so that you know where you’re going to buy, what you’re going to buy, and what return you’re looking for because then the systems I’m about to show you are going to help you a lot.
It’s going to help you analyze deals. And when you find … Because when we learn how to analyze deals in a couple of minutes, and you get all those numbers, then you’re ready to go, then there’s no questions about what’s going on in the market, is there a better deal out there, because your buy box and your crystal clear criteria are already set. And then there’s a match, right? You’re like, “This is what I want. The deal calculator tells me that I have it, it’s time to jump in and buy that deal right now.”
And I want you to remember, especially if this is your first deal that you want to set these criteria, but don’t be so ambitious, right? You don’t say, “I want a 15% cash on cash return.” You’re not going to get that. If you even get a 5% cash on cash return, I would argue that that’s a good deal because what else are you doing with your money? As long as it’s improving your financial situation, I’d still think getting your first deal is all about momentum. It isn’t that you’re not going to hit a homerun on every deal. You don’t need this to be the best deal you ever do. What you needed to do is, one, improve your financial situation. So is it going to get you cash flow? Is it going to help your net worth? Great, because what it’s really going to do is start that stack and start building and teaching you how to get those next five or 10 deals that are going to get you to the financial freedom that you really care about and that you really want.
I love this quote, it’s more important that you decide than what you decide. And so that’s why I want you to think about this criteria is it’s not like you have to get the perfect thing and pick the perfect neighborhood and the exact right return. It’s all about picking so that you’re ready to act. It’s not about making sure that you have the best deal of anyone ever. That’s not going to happen. You’re new to this. It’s about knowing what’s good enough so that you can get started and jump into this.
Another way of putting this, I love this quote, is more is lost from indecision than the wrong decision. I absolutely love it. It’s so true, right? It’s like you just sit around and can’t decide and you wind up doing nothing forever. Well, you’re not going to make a wrong decision if it improves your financial situation. And you can do it, jump in, you’re going to learn, it’s going to be great, I promise you.
So now, you’ve identified that you have the right topic to write, but how do you find those, right? People are always talking about, “There’s no good deals out there.” Well, to find incredible deals, all you have to do is follow a process that me and millions, I don’t know, thousands of other millionaires who are getting wealth through real estate have followed. It is called the LAPS system. And it is really just coming down to a numbers game, right? It’s all about this funnel. And you start at the top, that is the broadest part of the LAPS system, it’s called leads, right? So how many total properties can you see? That is a lead. A lead is like you think there’s a good deal out there, it’s a house, it’s a link to Zillow, it’s your neighbor telling you that they heard someone selling you, all those are leads. It’s just a threat, it’s a whisper that there is a good deal out there. You need a lot of leads. That’s why it’s the top of the funnel is you need a lot of leads.
Next, you need analysis. So if you get 100 leads … We’re going to use simple numbers, right? If you get 100 leads, that’s a good number. If you had 100 leads, you’re going to find a great deal. Then maybe of those 100 leads, you follow up on them and you analyze 20 of them because you’re like, “Some of these are going to work, but I really need to run the numbers to know which one is really going to work.” Then you have to pursue them, right? Not all of them are going to work. Maybe you need to raise money and you can’t find a partner. Maybe the seller doesn’t take your offer or someone else bids higher, right? So you’re not going to be able to get every one of them. But one of them is going to work. And this is the process I want you to think about.
Real estate is ultimately a numbers game. Start with 100 leads, you go down to 20 to analyze, you go to five to pursue and just one of them, all it takes is one of them to work for your stack to grow. Remember before I was saying that if you just bought one property per year with escalating size, you could be a real estate millionaire in five to 10 years. That’s 100% true. You just need to follow this system. It’s really not all that hard, right? You can absolutely do this.
So here’s another example. I threw a picture of Brandon in this because he loves the LAPS system. But basically, he uses a different number, 300 leads, 42 and analyze, 12 to pursue and one to succeed. And if you think, “How am I going to get 300 leads?” It’s not that hard. A real estate agent can send you dozens of deals a week. If you want to use an off-market deal-finding app, you can find hundreds a week. And analysis, how we’re going to analyze 40 deals? I’m going to teach you to do that today. So don’t get intimidated by these numbers.
So where do you get leads from, right? That’s the most important because we have to start broad and get a lot of leads. So here’s where we get them. The MLS, people love to say the MLS doesn’t have deals, that’s absolute nonsense. Listen to my podcast, On the Market, there are people out there and far more prolific investors than me like James Dainard, Henry Washington. They are getting dozens of deals off the MLS every single month. This just happens. So go find a real estate agent in your area, preferably an investor-friendly agent. We have a tool on BiggerPockets, it’s biggerpockets.com/agent. And you can get matched with an investor-friendly agent 100% free. They will start sending you deals, it’s a great source of leads.
Next is off-market deals. You can drive for dollars. This is when you go out and you try and buy a distressed property. So my friends have a good way of saying this. It’s like you’re not buying a property, you’re buying a situation. I love that because in every town, in every market, there are sellers who don’t want to put their house on the market on the MLS for some reason, right? Maybe they had an unfortunate family situation or they don’t have the time to fix up the property. You hear a lot about quarters or absentee owners who inherited a property and they don’t want anything to do with it, right? These are situations where there are motivated sellers.
And as a real estate investor, you can go, be proactive and find them, and you might be able to get a better deal by going off market. And if you want to go and become a Pro member, I’ll talk about this later, we actually have a masterclass on finding deals that comes with the Pro membership, which we’ll talk about.
Next is direct mail. This is a different version of off-market. The first thing I should have clarified is the first way to do off-market deals is driving for dollars, where you actually drive around and you find distressed properties. And you’re like, “Oh, that one was tall grass,” and like, “Oh, no one’s living there. Let me find that owner and talk to them. So that’s one way. The other way is you could just start sending out mailers to properties that you like. And this is a numbers game, right? You’re going to send out mailers and you might send out a thousand and only get 10 leads, but those 10 leads might be the ones that ultimately get you that really good deal. And it’s worth it. Honestly, a lot of real estate investors I know do this very, very successfully.
The last is relationships, right? And real estate … People think it’s this independent lone wolf game, but it is not. It is all about relationships. Sometimes people who I know who are real estate investors will pass me deals. And if you’re thinking like, “Oh, why would they do that if it’s such a good deal?” Well, sometimes they don’t have the money. They’re between deals, right? They’re saving up for a bigger deal. Or maybe they’re working on flipping right now. Or they’re really into short-term rentals and I’m into small, multifamilies. If you have relationships with people, they will pass you deals and leads if you reciprocate, right? I do that for my friends. I don’t flip houses personally.
So if I found a deal and I have friends who flip houses, I would pass that along to them. And I would hope that they would reciprocate in the future if they found deals that they thought met my crystal clear criteria, right? Again, that is why it’s so important to have your criteria because I know what deals work for me. If they’re not going to work … If I have a lead that’s not going to work for me, I’ll pass it along. And other people are going to do that for me as well. So these are just some of the ways you can get leads. Again, if you go Pro, we can get you this masterclass, it’s going to teach you dozens of ways to find deals and it’s great.
Next, let’s talk about money because this is a big one, right? Everyone is like, “How am I going to get leads? Am I going to save for it? Do I have to save up?” Yeah, that is a good way to do it. If you have a high-paying job or a sufficient income where you can save, you can save up enough money. Personally, I’d in. If you want to BRRRR, in BRRRR, you do need money down, but it is a good way to recycle that money quickly. So if you had 100 grand to put into a property, you could renovate it, refinance it, and take out, let’s say, 80 grand and use that 80 grand to buy another one. And you can do that over and over. And you can recycle the capital that you’re using to buy multiple properties. That’s a great method.
If you want to do low money down, the occupied loans. So this is like house hacking, owner occupied, you can put as little as 3.5% down. One of the examples I gave at the beginning of this webinar, someone used 3.5% down. So you can do that, too. Also, partnering. This is how I got started, just so you know. I got started … I found the deal. And I had three partners who we each put in a quarter of the down payment, right? But remember, I said I had no money. I further partnered and I borrowed money from one of the other partners for my down payment and paid them a 6% interest rate on my down payment on my one quarter of a down payment until I could get enough money to pay them back. So just think about that.
I found three partners, so four of us split a deal. And then I didn’t even have any money. So I went out and borrowed even more money to be able to put my quarter of the down payment down. And listen, I am lucky, I knew some people who had enough money to be able to lend and to partner with me. Not everyone has that, but you can network and meet those people. But I knew some people and I was able to do that, right? I had no money, but I thought creatively about it. And most importantly, I had a good deal. And investors, no matter who they are, will not turn down a good deal.
So these are some good options. But you can … So just to summarize here. And again, actually, if you go Pro, we have a how to invest with low and no money down workshop that Brandon Turner put together that you can check out because there are so many more ways here. But I want you to focus on these, right? So I would say focus on partnerships. That’s how I got started. So I think that’s a really great way to do it. If you have a high-income job, you can either do a low. Not even high income. If you have a W-2 job where you can get a loan, you can save up for it or you could do an owner-occupied house hack. So those are my three personal favorite ways to get started because putting 3.5% down is super easy. If that’s on a $400,000 property, it was probably a nice property, that’s only 12 grand, right?
So if you have a W-2 job, you hopefully can save up 12 grand. And if you can’t, go partner for it. That’s what I did. So these are good things to do. But I want you to focus on something that I just said and it’s really important. If you find a good deal, you will find the money, right? Everyone thinks, “I need to find the money first and then I go find a deal.” No, it is the complete opposite of that, right? Imagine going to someone and asking, “Hey, can I borrow some money? I want to buy real estate.” They’re like, “Sure, yeah, what’s the property?” And you’re like, “I don’t know, I’m going to go find it.” The partner is going to be like, “What? I mean, I have no confidence in that.”
If you think about it the other way around, if someone came up to me and they’re like, “Hey, I have this amazing deal, it’s going to generate a 12% cash on cash return and you’re going to get a 20% annualized ROI over the next 10 years,” I’d be like, “Yeah, okay, that sounds like a great deal. Where do I sign up?” So think about this when you’re thinking about money, it’s about getting the deal first and then you can have an opportunity to go partner. And this is if you don’t have the money to buy up on your own. So think first about finding great deals and, second, about finding the money because if you have the deal, you’ll get the money, but you have to be able to analyze the property, right?
If you’re going to come up to me as an investor and say, “Dave, I want to partner with you on this project, I have this great deal,” and you don’t have an analysis for me to look at, then what are you doing, right? I don’t know if it’s a good deal.
So next step is to analyze deals so that when you go out and partner or if you’re just going to fund it yourself, you can go and show them what a great deal you’ve found. So one way to do it is by hand, you can build an Excel spreadsheet. And I used to do this because I have a master’s degree in analytics and I know how to do this stuff. And other people do do this. But honestly, I use the BiggerPockets calculators just because it’s so much easier. And I don’t want to have to build a new spreadsheet for every single property I analyze because, remember, when we talked about the LAPS system, we need leads and then analysis. And you might be analyzing 20 or 30 properties a month and you need something to do quickly. And the BiggerPockets calculators, honestly, let you do this in five minutes.
And so if you’re doing that volume, if you’re trying to follow the LAPS system, as I hope you do, you’re going to want to find a tool that works quickly. So I highly recommend using the BiggerPockets calculators. We’ve got tons of them. And I’ll show you how to use it. Let’s just do this right now. We’re going to analyze a deal together.
Okay. So all I’m going to do is go to tools. And then I’m going to click on rental property here. And I’m opening this in another tab. And you can see … Just so you know, guys, the rental property tool is part of BiggerPockets Pro, which is an amazing tool for people who want to get into real estate. Talk about that in a minute. But you can use it five times for free. So if you want to follow along or test this out, you can do that. I came to this page first because I just want to show you that I really use these. I actually don’t always use pictures until I’m going to show them to a potential partner or to a lender. I don’t usually put pictures in, but I do this all the time. You can see, hey, look, good deal or cash flow, 5,000, this one was not so good in Austin for negative 14,000.
So show you all sorts of different kinds of deals, different cash flow. I’m using this all the time. But let’s get into this, we’re going to run our deal together. So this deal, I’m just going to copy and paste this here, street address and in Kentucky. And I’m going to add a photo. And this is really important because, remember, in the LAPS system, a lot of this about finding a partner, maybe you want to find a lender, and it’s super cool to just show them a really professional-looking report because they’re going to want to know what they’re investing in, what they’re lending on. And these calculators are a great way to do that.
All right. So that’s it. Next, we’re going to move on to our purchase. Let’s assume that we’re going to buy this at asking … This was for 240,000, was the asking price, and closing costs is 5,000. Now, you’re probably thinking, “Dave, how do I know purchasing closing costs, how’s that 5,000?” Well, I’ve been doing this a long time. But if you haven’t, you can just click on these help tips over here. Just click on calculating closing costs, and you can see around 1% to 2% of purchase closing costs. I’m going to use 2%. You can use whatever you want, you can talk to a loan advisor, that’s a good way to know, for sure. But if you just want to estimate it, 5,000 is great.
Let’s just say we’re going to rehab this property. We’re not going to do a big bird calculation, but let’s just say we’re going to put some money into it and we think if we put 25 grand in, it’s actually going to bring the value of the property up to 300,000. Again, after repair value, that takes some time to get good at it. But look at this, we have all of these tools for you to learn how to estimate ARV. I highly recommend you read these so you can get good at estimating it. But for now, I just want to walk you through the calculator and how easy this is to use.
I’m just going to say, let’s just say, it costs us 30 grand, I don’t know, sounds about right, for repair costs. And that’s it. So now, what we’ve done just so far is all we’ve done is put on that property information, we upload some photos, we got purchase price, closing costs, our ARV and repair costs. Next, it’s time to talk about our loan. I’m going to say that we’re going to put 25% down because as an investor, I’m not living in them. Usually, if you’re not living in, you have to put 25% down. Depends on your lender. But for me, that’s usually what I put down.
And I’m going to put 6% interest rate. I think that’s actually higher than interest rates are right now, but I’m going to just say 6% for this. We’ll be conservative, right? We don’t want to buy the wrong things. We want to buy something that fits our crystal clear criteria. And I’m going to put a 30-year fixed rate loan because I love 30-year fixed rate loans. Again, you want to learn more about it, just click on these super easy things, right? We’re flying through this, guys. We’re more than halfway done.
Now, it is time to put in our rent income. And I know that this can intimidate people. But lucky for us, we just go to the BiggerPockets rent estimator and we can just put in our rent, our area. So we’ll search this address, we know that this is … I’m actually going to do this as two bed one bath. If you remember, this was four units, they were all two bed, one bath, and I’m going to search this address. And look at this. So 725. That’s what we’re seeing. And look, confidence is high. This is one of the things I love about the BiggerPockets rental estimator is that it tells you how confident it is because there are some places where there just aren’t good comps, maybe if it’s like super rural, or it’s a seven-unit, a seven bedroom or something random like that, it’s hard to estimate, but a two bed one bath usually get high.
And you can see on the low end for maybe a not great property, you’re getting about 507. For a high-end property, you’re getting almost 1,100. I’m going to assume this property, again, I’m just making this up, I don’t know that well, is right in the middle. So I’m going to use 725. If you want to look around and see the comps, wow, this is near a place called Spaghetti Junction, which is hilarious. I love that. So this property is near Spaghetti Junction apparently, great sounding place. And you can click on any of these comps if you want to see. But look, there’s a lot of comps over here. So you can see that’s why we have this high confidence is that there’s a lot of properties around here.
And listen, this is a great way to estimate rent. But if you really want to know for sure, call a property manager in your area or you can go on Craigslist, or Zillow, or whatever and just see what things are renting for in that area. Or maybe you’re a renter right now in your neighborhood. And you might be able to do that. So 725 times four is 2,900. So I’m going to do that as our gross monthly income. And that’s it.
So again, use the rent estimator on BiggerPockets that it’s a Pro feature, call a property manager if you don’t know, go on Zillow. Those are all great ways to estimate rent. But, obviously, if you’re using BiggerPockets, that’s an easy way to do it.
All right. Down to our last one, expenses, property taxes. This one, I’m going to estimate it at about $2,500 per year. And you can determine this a lot of ways. A lot of times, it’s public data. So if you see here public data, you can probably go … This is in, where was it in, Frankfort, Kentucky, in Frankfort, Kentucky, you could probably go on their government website and look up what the taxes are. So you don’t even have to estimate, you can just go know, for sure, which I recommend you doing.
Insurance is usually a little bit trickier. But for a single-family home, it’s usually around 1,200. For my multifamilies, I usually pay around 2,400. So I’m going to estimate that again. These are just for running the numbers quickly. If you get to the point where you’re going to offer on a property, you’re going to want to call an insurance broker and know exactly what your numbers are. But in the context of the LAPS system, if you’re running 40 deal analysis, you can use these rules of thumb just to narrow it down, which ones you’re going to offer on and then refine your search, which I’ll show you had to do in a second, overtime.
Repairs and maintenance, vacancy, CapEx, all these are a percentage, and I like to just use fives, 5% for repairs and maintenance, 5% for vacancy. Vacancy in the US is 2% right now, but you should look up your local area because it can really depend on where you are. A lot of high-priced cities, where there’s not a lot of rentals available, have really low vacancy. Rural areas sometimes have higher vacancy rates. So you definitely want to check that out for yourself.
Again, I just want to show you how to use the calculator here. CapEx, which is like repairs and maintenance, but it’s actually for the big ticket items. If you needed a new boiler, you need a new roof, it’s treated a little bit differently in your taxes. And so you want … That’s why we have them separately here in the calculators, but it’s 5%, I think, is probably pretty good. For repairs and maintenance and CapEx, you want to go by the condition of the property. If you have a brand new build, you can estimate on the lower side. If you have something that’s rundown and needs a lot of work, you’re going to want to jack that up to make sure you have a cushion and that you’re not putting in yourself at risk for needing to have to come out of pocket to make those repairs.
So for some people, it might be 10%. Let’s just make the 7%, I don’t know. I’m just making numbers up here. And management fees are the last one. So if you want to self-manage, you can put zero. I recommend that, honestly, for people who are just getting started because you learn so much and you generate more cash. But let’s just say this is my deal, I don’t live in Kentucky, so I’m going to estimate 8% on management fees. That is a personal decision whether you want management or not.
Now, for me, my personal preference is to find properties where I can bill electricity, gas, water, all of these utilities as separate, that I can just bill them directly to my tenants. They sign up with the electric company. They sign up with the water company. I don’t even have to get involved, right? It’s so much easier. So I personally just put these down to zero because the tenants take care of it. They pay for what they use, it’s fine. I don’t need to be involved.
Next is HOA. I don’t buy properties in HOAs personally. I do not like them. I don’t like the idea of this like governing board of people who I don’t know, who may have no experience at all in real estate investing, dictating what I’m allowed to do at my property. That’s not for me. Some people do it, not for me personally. But if you are going to do a property with an HOA, I recommend you do a lot of due diligence on the HOA, learn about who’s on it, what the rules are, what their power is, or try and get on the HOA, right? If you’re going to buy a property in an HOA, try and get on the board so you can have influenced the decisions. That’s up to you, though.
Garbage, I think I usually pay this stuff. So I’ll just say [inaudible 00:56:00] 50 bucks a month, it’s 25 bucks a month. And that’s it, guys, we have done everything we need to do for property analysis. And I know that probably took me, what, five, seven minutes, but I was talking a lot. So if I was just doing this on my own, I could have done this in probably two or three minutes. And that’s what’s so cool about this is if you’re doing this LAPS system and you’re getting deals from your agent and your deal machine or whatever, you can run these deals in an hour, you could probably do 15 of them.
So let’s check out this deal. Where does it come out? Oh, that’s a pretty good deal, right? $662 per month in cash flow, a cash-on-cash return of 8%, which is … For me, I would love that. This is great. Annualized return of 17%. All this is excellent, right? So we can see here that for most people, this is probably going to be a great deal. And if you come down here, you can start to see the long term of what I was talking about.
Remember, on those slides before, we had this green line that was going up, that’s your property value. And then we have this purple line, which is how much you owed the bank. And you can see the same exact thing here as we showed in the slides on our chart here that shows our value is going up and up and up over time. And you can see the profit if sold, at first, it was 33k. By year 30, it’s not $125,000, [inaudible 00:57:22] a millionaire from this one property guys, right? It’s incredible. So that’s why these calculators are so helpful.
But I also want to show you one thing. We got lucky here, I picked this random deal. This turned out to be a good one. But say in your crystal clear criteria you only want a 10% cash on cash return. Okay. So maybe what you need to do … The thing I want you to know is that every deal has a number that works for it, right? You want 10% cash on cash return. So maybe this deal isn’t for you. But let’s just see, let’s see what else happens. What happens if you can increase your rent to 3,000 a month or 3,045, right? Maybe you make some more repairs. And you can do that.
All right. Now, we’re at 9.75 for cash on cash return, not bad. Pretty good. So let’s put this back. Maybe instead of 2,900, maybe I keep rent, and I don’t think I can raise rent. What if I offered the seller 220 or let’s just say 225? What happens then?
Now, we’re at 9.94. Let’s … Okay, I’m just going to go to 223. Okay. Now, we’re at a 10% return. And I’m, obviously, fudging these numbers, but that’s what real estate investors do. If you need a 10% cash on cash return, don’t just say, “Oh, this is a bad deal. I’m not doing it.” Go offer, what was it, 223. That’s going to get you your 10% cash on cash return, right? They might not accept it, but like I said, it’s a numbers game. Remember, you do 100 deals and then … 100 leads, analyze 20, pursuit five, if you’re getting five people this offer, maybe one of them accepts it and you got a deal for 10%. And that’s why I love these calculators because you can make it work for you.
I think there’s something that a lot of real estate investors say is that you don’t find great deals, you make great deals. And this is a perfect example here. If you wanted a 10% cash on cash return, that was your crystal clear criteria, then you make it a great deal by offering 223,000. They don’t accept, fine, that’s fine. That’s why you have so many leads. That’s why you’re analyzing so many deals. You’re not attached to this one deal. But if you could do it, great. That’s what’s so cool about this. And that’s what’s so important about being able to analyze the deal accurately.
Last thing I want to show you about this is you can share these things, which I think is really cool. So you can enable report sharing and hit Download PDF here. And you’ll be able to download these entire PDFs. And when you’re going to partner, remember we talked about using this deal analysis, if you have a great deal, people will want to partner with you, people will want to lend it to you. And so look at this, it’s a great deal. I can now show this professionally developed analysis to people and say, “Look at what I got, I have a deal that’s going to produce 10% cash on cash return.” Over the 10 years, you’re going to get an annualized return of 13%. Look at how I’ve estimated my expenses, look at how I’ve estimated my income. I’ve done this in a professional way and you can share this with people to great way to help you raise money. So don’t overlook this part of sharing these deals.
And let me … I should just mention that people come to me and ask for money in partnership a lot. And they offer me these Excel spreadsheets, and I know how to do this stuff. But I don’t want to learn how you did Excel, I don’t want to look through every cell and see if you made all these mistakes or how you’re calculating cash flow, if you do CapEx, right? When someone comes to me with something like this that’s professionally created and as a system, I’m much more likely to believe them because I know that a team of people here at BiggerPockets or whatever have vetted them and have created this.
Okay. So that’s analyzing a deal, right? So what we’ve talked about today is the LAPS system. We’ve talked about how to find these deals, just get an agent, look at off-market deals, then analyze these deals and pursue them. Is it really this simple? Is real estate really as easy as just following this simple? Well … I mean, this simple step? Yeah. Yes and no. I mean, first thing you need to know is that, yes, the number one thing that holds most people back from their true potential is fear. So, yes, it is really as simple as following these steps, but it’s not so simple because fear is real, right? It is a lot of money, it is a big step that you need to take. And there is fear.
I get that real estate often feels like jumping off a cliff. You’ve saved off this money, and it’s this huge decision, and it’s going to change your whole life. And it will change your life for the better, but it is not like you’re doing this alone and jumping off a cliff and it’s this risky, unknown thing. In fact, it’s much more like this. It’s like hiking. And it’s like hiking with friends, you have people to support you. There are people who have done this before. You are not jumping off a cliff. You are doing a slow climb to the top of a hill. And it’s a well-worn path that people have walked before.
At BiggerPockets, we know all about this because this is what we do. We build tools to help investors on their journey towards their goals in life. So, yes, is it this simple as following this path? Yeah, it really can be if you can get over the fear and if you are inspired to take action and to take control of your life to become a real estate millionaire to earn the time and financial freedom. I’m guessing if you’re sitting here that you really want that it really can be that simple.
So as we’re winding down here, here are three big questions that you need to ask yourself. First, are you prepared to define your crystal clear criteria? Because that focus is what’s going to help you run the LAPS system. If you know what you want, you’re going to know what are good leads, you’re going to be able to analyze good deals, and you’re going to know which ones to act on.
Number two, do you know how to use the LAPS system funnel to build your pipeline? Hopefully, right now. It’s pretty simple, right? Go out, find great deals, analyze and act on them. I keep saying it over and over because it’s that easy.
And lastly, do you know that by finding a great deal, drill this into your head, by finding a great deal, you will be able to finance those deals because people like lending and they like partnering on deals that are really good deals. So hopefully, you said yes to all three of those things. That means I’ve done my job here today and taught you how to run these systems. That’s all great. But if all it was is about information, that would be great. If all it took was knowing how to buy it, then we’d all be millionaires, right? I love this quote, if more information was the answer, we would all be billionaires with perfect abs, right? It’s not just about knowing those things.
The key to success is also about taking action. It comes down to consistent practice. This isn’t a get-rich-quick scheme, remember. This is something that you have to do every day. And the LAPS system is all about numbers. You need to be consistently working your deal funnel.
Next, it is about continued education. Congratulations by being here on this webinar. You’re already doing this one. But keep in touch with BiggerPockets, listen to podcasts, read books, blogs, most of these things are completely free and can help you continue on your journey.
Next is accountability. I love this one. Because if you have people who are also investing in real estate, who are also pursuing the same goals that you are, you’re much, much more likely to be able to achieve the goals that you set out for.
And lastly, it’s all about action, right? Really, you can sit here and a lot of people are going to come and listen to this and think, “This isn’t for me,” and that’s fine. Or maybe I’ll do this one day, but there are some of you out there sitting there right now thinking that, “This is for me, I am ready to do this.” And if so, all I can recommend, the thing I can recommend is go start taking action right now. Take the momentum that you’ve built by sitting through this webinar and go to find your crystal clear criteria, go start getting those leads right now today, go find an agent today, and start building that action and momentum.
So I just wanted to show you guys that this works. Dennis said that I want to thank you and BP after attending your webinar on how to make 1 million in real estate, I got inspired to take action. Last week, I closed my first deal, now have a triple that has rented and will cash flow very well for me. Can now call myself a real estate investor, have a plan for moving forward, and will make my business a success, right? That’s what it’s all about, guys.
Also, I love that they’re saying that they did it a week later. That’s what I really think is important here is that he kept up that momentum and was able to keep taking action. So if you are ready to keep taking action, what is the next step? Well, I would recommend becoming a BiggerPockets Pro member. BiggerPockets Pro is a suite of tools that are designed to help you analyze properties and get to your next deal, whether that’s your first deal, your second deal, or your third deal, get to your next deal faster, right? Because that’s what we want, right, is to get to that financial freedom faster. It is not a get-rich-quick scheme real estate, just to make that clear. But if you use tools like BiggerPockets Pro, doesn’t need to be 10 or 20 years in the future. It can be three years or five years into the future. And that’s what BiggerPockets Pro is designed to do.
Now, this isn’t for everyone. If you’re at home and you learn this information and you’re like, “Oh, maybe I’ll do this one day,” we want people only to go Pro if they’re ready for this. If you’re ready to take action, and you’re ready to pursue this financial freedom, BiggerPockets Pro is a great tool for you. If you’re not ready for that, that’s totally fine. But I’m going to assume that you are one of those people who wants to start taking action and just show you what we got here.
So number one thing you can do with Pro is confidently run the numbers, right? That deal analysis tool I showed you is just pure gold. It is so incredibly valuable to investors. That’s the one of the core features of BiggerPockets Pro. We also have the rent estimator that I showed you because to analyze good deals, you need to know what they’re going to rent for. And you can do that using the rent estimator.
Next, show the community that you mean business by being a pro. There are so many one wantrepreneurs … Have ever heard that term? It’s like people who want to be an entrepreneur and they talk about it, but they’ve never done anything. They don’t have any skin in the game. They’re wantrepreneurs. Well, show people that you’re serious by signing up for Pro and accessing these tools, and being someone who’s in it, who’s in the game. I promise you by being a pro and by having some skin in the game, people are going to be more likely to answer your questions, they’re going to show you deals, they’re going to want to partner with you, much more than if you’re someone who’s just sitting on the sidelines and kicking the tires a little bit.
Next, you also have access. I love this. You have access to our boot camps. I know so many experienced investors who are going to BiggerPockets boot camps because they’re so valuable. They have this accountability element, right? It’s like people who are doing the same things on the same timeline as you, which is just really cool. And you’re going to learn from experts like Ashley Kehr and Tyler Madden. There’s just so … And Matt Faircloth. All these really experienced investors teaching you and you can only sign up for boot camps if you’re a Pro. So it still costs a little bit more, just to be clear. It’s 199 per course, which is an absolute steal.
Do yourself a favor, go look at what other people’s mastermind’s boot camps cost, $499. That is an incredible deal. And that’s because at BiggerPockets, again, we believe that anyone can do this and everyone should do this.
You also get all these Pro exclusive videos and webinars, you can watch the whole archive. There are hundreds and hundreds of webinars, just like this, teaching you different strategies for real estate investors. We have landlord forms. So I love this because I own property in Colorado, but I also have been looking at deals in other states and we have landlord forms like leases, pet addendums, break lease forms, whatever it is, in all 50 states and they’re updated every single year, so you just get to stay on top of things.
When I first started investing in real estate, I paid 500 bucks to have a lease written. This just comes free for part as Pro for as many states as you’re investing in. We also have BiggerPockets partners, huge companies like Mashvisor, Roofstock, AirDNA, that have great information for you and you get discounts by being a BiggerPockets Pro. And these are all really nice features. I use pretty much every single one of them. But the number one reason to consider going pro today is because it works. I know, it sounds stupid. Sounds simple, but it does. It really works. We have spent years, decades crafting these tools around being a successful real estate investor.
BiggerPockets believes that every single one of you, if you want it and you are ready to take action, can become a real estate millionaire. And we have built BiggerPockets Pro to support you on that journey. It just works. I’ve literally seen tens of thousands of people … I’ve worked here for seven years, I’ve seen tens of thousands of people become successful in real estate investing, thanks to BiggerPockets Pro.
One of those people is Aaron, he said, “BiggerPockets calculators are my go-to for analyzing potential properties. There’s no way I could analyze the volume of properties I do without being a Pro member. I locked up my first three unit almost a year ago, and now I’m selling for almost a 70k profit that will go towards something larger. The BiggerPockets calculators were a huge factor in making sure my numbers were right.” That’s awesome. That’s exactly what we’re going for.
Patrick said, “Back in June, I attended one of your webinars. Right afterwards, I signed up for Pro. In the next couple of weeks, I analyzed a bunch of deals.” See, I love that because he’s taking action immediately and getting that momentum. Eventually, I found a fourplex. I got it under contract three weeks later, it’s after signing up for Pro. It’s amazing. A week later, close on another property that was six units, big thank you to you and the entire team. Final quick tip, sign up for Pro. I made my money back at the closing table.
I love that. And these are just some of the thousands of people who have done it. So if you are ready to take action, you can do that. And you can actually save 20% today by using the code, millionaire web, that’s millionaire W-E-B. You can just do that by going to the Pro checkout page. And I should mention that it’s normally $390 a year, which is an incredible deal in its own right. Again, if you want to, you should … If you’re curious, other courses, other things out there on the internet literally costs like $10,000 for a weekend. But because of our core values at BiggerPockets, and that we believe that everyone should have access to real estate investing, we have priced it so that anyone can afford it.
So 390 bucks is what we charge. But because if you’re here today, you get that 20% off, it’s only $312, which is even more of a screaming deal. So use that code, millionaire web. And on top of that, I got some more gifts for you just for going Pro today because we really want you to start taking that action if you’re ready.
Number one, you’re getting a $40 value of the intention journal. This is awesome. Brandon created it. It is a way to keep track of your thoughts for the next 90 days. I promise you, if you follow what I just taught you and you use this journal for the next 90 days, you’re going to get your first deal. I promise you, I’ve seen it so many times, you can absolutely do it. And so we’re going to give you this intention journal for free if you go Pro in the next few days.
Next, I mentioned this earlier, you can get the investing with low or no money down workshop with Brandon and David. That is a $200 value as a nine-part video series. If you want to talk about … If you’re thinking, “I don’t know how to start that LAPS funnel, the top of the funnel,” this is a great way to do it. You can learn all about investing with this and how to build that lead funnel, how to get a ton of leads with this. We also have finding great deals masterclass. We also have … So we have all of these tools here. We have low or no money down, we have finding great deals masterclass, all this adds up to thousands of dollars in bonuses.
So we have a cheap product to start with. It’s 20% off, $1,000 value and bonuses, all a great reason to start taking action and go Pro today. Again, we really want you to do this because we believe, we truly genuinely believe that this is the best way to financial freedom, to becoming a millionaire, to living a life that you are excited about and that has purpose for you. So if you’re interested, go to biggerpockets.com/proupgrade. That’s where you do it, biggerpockets.com/proupgrade. Make sure to use that code, millionaire web, is going to get you 20% off and it’s going to get you access to all the bonuses I just gave out.
Last thing, if you go Pro and you don’t like it, we’ll give you your money back. No questions asked. You have 30 days and 100% refund. And if you start using it and think, “This isn’t for me,” we’ll give you your money back. But we are confident that if you start building that momentum, if you follow the steps and the systems that I taught you today, you are going to love it. You’re going to love BiggerPockets Pro, and in the next 90 days, if you follow that journal, you’re going to be on the path to becoming a real estate millionaire.
All right, everyone, I will leave you with some parting words from Jim Rohn. He says if you really want to do something, you’ll find a way. If you don’t, find an excuse. So get out there and find a way. Take action, start building that momentum, and you will be on your path to becoming financially free. I promise you, I’ve done it myself. I’ve seen thousands of people do it and you can absolutely do it, too. So good luck to you. I hope you’ve learned a lot on this webinar.
Again, if you have any questions or you want to reach out to me, you can do that on BiggerPockets or on Instagram where I’m @thedatadeli. Thank you all so much for watching and good luck out there.