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Sundial founder Richelieu Dennis talks the racial wealth gap, getting turned away from a party at Essence Fest (despite owning the brand), and what he learned from his second near-death experience.

Richelieu Dennis sold Sundial Brands to Unilever in 2017 for $1.6 billion dollars. It was a stunning story and not just because of the price tag; Dennis escaped war-torn Liberia in 1987 and started selling shea butter out of his dorm room at Babson College. He’s now one of the wealthiest Black entrepreneurs in the country. And he’s sending the elevator back down for the next generation. As part of the sale to Unilever (the makers of Dove soap and Ben & Jerry’s), Dennis insisted the conglomerate invest $50 million in a fund to empower Black female business owners.

Dennis, 54, has since backed Slutty Vegan and invested in Monique Rodriguez’s Mielle Organics which sold to P&G in early 2023. He also bought Essence Magazine in 2018, vowing to “to serve and empower women of color.” But apparently owning the brand doesn’t guarantee admission to the best parties at Essence Festival, he admits here in a new interview series called “Cereal Entrepreneur,” hosted by Method co-founder Eric Ryan and journalist Mickey Rapkin. Over a bowl of cereal, Dennis talks big exits, bigger conglomerates, and that rumor that he’s buying BET.

MICKEY RAPKIN: Rich, you brought Frosted Flakes today. Why that one?

RICHELIEU DENNIS: First of all, it’s the cereal I like eating. I’ve always loved the commercials. And I like to fashion myself tiger-ish.

RAPKIN: (laughs) In the early 90s, you were selling SheaMoisture on a card table on 125^th Street in Harlem. What got you out of bed back then?

DENNIS: It was hunger. But that’s every entrepreneur. Rent’s due, you’ve got health insurance you gotta pay—if you could even afford it. But for me there was this overwhelming sense of responsibility: there were no real products or brands tied to [our] ancestral culture. These ingredients existed. You’d have people show up and say, “My mother made so-and-so when we were in South Carolina. And she got it from my grandmother who got it from her mother.” But because Black culture had been interrupted with slavery, that never got translated into actual products and goods and services.

ERIC RYAN: That’s really powerful. I’ve never heard you say that—about how slavery basically severed these traditions.

DENNIS: You start to think about all of these young people who have no idea what it is to actually have a product that works for your skin type or for your hair type.

Disrupting The Beauty Aisle

RAPKIN: You once said, “The only place in America where segregation is legal is the beauty aisle.” You sold Sundial to Unilever. But weren’t they the people responsible for that segregation? Did that come up in the negotiation?

DENNIS: You bet it did.

RYAN: (laughs) There’s Tony the Tiger coming out.

DENNIS: If you’re going to transform a market—if you’re going to transform a way of doing things that is wrong—sometimes you need the people that have perpetrated it to recognize that and then correct it. Unilever, to their credit, recognized that they weren’t serving a vast group of people that had the spending power and the willingness.

Repeat Offender

RYAN: One of the challenges of being a serial entrepreneur—one of the reasons we wanted to do this column—is replicating that first success. After selling Method, I had this real fear: Did I get lucky or was I good? Rich, was that your experience?

DENNIS: There was never a feeling of I’ve-gotta-do-this-again. That’s not in my nature. I’m competitive around mission as opposed to accomplishment. For me, there’s so much work to be done in bringing fairness to the marketplace. (pause) It is hard being an entrepreneur. Period. But when Black entrepreneurs have been systemically blocked out of opportunities and access it becomes even harder. There was no infrastructure, there was no ecosystem, there was no path that Black entrepreneurs had to rely on or follow.

RAPKIN: You’ve been called “the godfather of budding Black entrepreneurs”—

DENNIS: I’m old enough now that I can be the godfather.

RAPKIN: The grey in your beard looks good. But let’s talk Mielle Organics. You’re an investor. They sold to Proctor & Gamble earlier this year. But then comes this online backlash from customers saying: They’re gonna change the formulas, they’re gonna cater to white women. Was that frustrating to see?

DENNIS: I think if you’re Black, you understand it. If you’re white, you marvel at how one could feel that way. White kids grow up in this country navigating abundance. And Black kids grow up navigating scarcity. That leads to different mindsets. When you’ve been marginalized and left out and in a lot of cases abused, when wonderful things happen—thing that would be celebrated in a white community—they get scrutinized differently in a Black community.

RYAN: Say more about that please.

DENNIS: What has historically happened in this country—when we’ve seen success in our communities, that gets destroyed. You can go back to Tulsa. Black community builds up economic footing, gets completely wiped out. We come out of slavery and there’s the promise of 40 acres and a mule. Then, no. You’re doing experiments at Tuskegee on people— That leads to major trust issues. Black companies building scale and exiting them is new. We have to normalize business development over time in the Black community so people embrace what it is to actually build these businesses, take that capital out, and reinvest it back into our community. I’ve had the good fortune of building Shea, which became the largest in the category, and then had the good fortune right after that to partner with Melvin and Monique in Mielle and build the second largest. For me, that’s joy.

Welcome to Essence Fest

RAPKIN: Let’s talk about joy. You likened Essence Fest in New Orleans “to the real-life Wakanda.” Give us a great late-night story from this year’s festival.

DENNIS: OK. I come in at two o’clock in the morning, maybe three o’clock in the morning. In the lobby is T.I., Lil Jon, the folks from Target, the folks from Disney, Taraji P. Henson and Jill Scott—all these people just hanging out in the lobby loving on each other.

RYAN: Only you could have made that happen—bringing those individuals to one place, to an environment where everyone is loving on each other.

DENNIS: (laughs) I think they were there for the wine.

RAPKIN: Give us one more story.

DENNIS: D-Nice does his Club Quarantine. It got a lot us through Covid. He brought it to Essence Festival. And so here I am—another two o’clock in the morning deal—coming from the convention center. And I couldn’t get into Club Quarantine.

RYAN: They turned you away at the door?

DENNIS: Imagine that. I’m texting D-Nice, but he’s actually D.J.ing, he’s doing his thing, he’s not looking at his phone. I’m standing outside. I couldn’t get in.

RAPKIN: While we’re talking media, there were reports earlier this year that you tried to buy Vice. Now there’s talk you’re buying BET.

DENNIS: [pause] We are at a stage in the development of Black business in America where there are quite a number of Black people that can be in that conversation. For me, that’s the big win. There are multiple people who have the access, the resources, and the skillsets to pull something like that off.

RAPKIN: OK. But are you buying BET?

DENNIS: We’ve been very focused and bullish on media. We continue to look at whatever there is that’s out there that we think can really benefit from our expertise and drive the culture forward. That’s all I’ll say on that. But I’m extremely motivated by the fact that there’s multiples of people that can have a real serious conversation about this and that can actually pull it off.

[Editor’s note: After this interview was conducted, the Wall Street Journal reported Paramount Global had informed potential bidders—which included Tyler Perry, Sean “Diddy” Combs and Byron Allen—that it would not be selling its majority stake in BET Media Group.]

Getting Schooled

RAPKIN: We often talk about successes. But entrepreneus can learn more from our mistakes. Tell us about a mistake you made with SheaMoisture and what lesson you took away.

DENNIS: We were selling our products the street. We were having real success and we got an opportunity to go into Macy’s. I took great pride in the fact that I was selling a product on the sidewalk—on a table outside of Macy’s—and I was also selling that same product inside Macy’s. And that nearly put us out of business.

RAPKIN: How?

DENNIS: I didn’t understand the pricing models, I didn’t do the work to understand them, I didn’t know that I’d have to pay chargebacks. I didn’t understand that I was responsible for labor. I didn’t understand that I couldn’t schedule that labor and tell it when to be and where to be. I didn’t understand all of those other costs that went into being in a department store.

RYAN: After we had our first big Method launch at a grocery chain—it was our biggest order ever—we got a check for a few dollars. (laughs) We went and looked at all the deductions they took. My partner and I were just like, “What the f—?”

DENNIS: We grew like a weed in Macy’s. But the more we sold, the more we lost. That nearly bankrupted us.

RYAN: Switching gears in a big way: You’ve had two near death experiences in your life. How did that affect your outlook on business? Or your motivation?

DENNIS: The most recent one, the most recent near-death experience was Covid.

RYAN: I love that you said “the most recent one.”

DENNIS: I think that’s God’s way of constantly reminding me that I’m here for a reason. And I can’t forget it. But I got Covid very early on—in February of 2020. It was before the medical establishment really understood what they were dealing with much less how to deal with it. It was a horrific experience. I’m lying in the hospital, I’m in the ICU, and every day they’re wheeling people by me—people that didn’t make it.

RAPKIN: That was a scary time.

DENNIS: One day an overwhelming calm came over me. I had spent that entire day thinking of my children. And I was like, “You know what? They’re going to be all right.” Literally that got me through it. Once I realized I had done what I needed to do as a parent, I became very calm. I think that enabled me to focus on fighting as opposed to worrying. That empowered me [then] and that empowers me today.

RAPKIN: Last question. This column is called “Cereal Entrepreneur.” We’re talking over cereal. What were you eating for breakfast when you were selling SheaMoisture on that card table on 125th Street?

DENNIS: I wasn’t eating breakfast. Those were one-meal-a-day days, my friend. I ate from a lot of food trucks. (laughing) Food trucks are sexy now. There may even be a few Michelin-starred ones out there. But back then, that’s not what they were.

The conversation has been edited and condensed for clarity.

The conversation has been edited and condensed for clarity.

David:
This is the BiggerPockets Podcast show, 826. Coming at you from Las Vegas.

Lindsey:
You have to call the listing agent and find out specifically what is the seller looking for? What is most important to the seller? We can’t make assumptions that we know that it’s highest price and best terms. There might be more to it. Do they need to rent-back? Do they want smooth financing? Do they want a longer escrow? Is there certain things that they’re looking for in an offer that we’ll only find out if I make that phone call? Build a rapport with the agents, flatter them a little bit, get them to tell me all the information about their listing, so that I can take that back to my buyer and say, “Okay, here’s the scoop.”

David:
What’s going on, everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet. Every week, we are bringing you stories, how-tos and the answers that you need in order to make smart real estate decisions now in this current market. So, we’re really glad to have you.
In today’s episode, we’re talking about how to get your offer accepted and get deal terms to work in one of the most challenging markets we’ve ever seen. I have brought in Lindsey Iskierka and Christian Bachelder, two of my partners in the real estate game, to explain what we do to help put clients under contract in an incredibly competitive market. And more importantly, how you can do the same. The game has changed. The old advice of write 100 offers and hope that something sticks is not working in a market where every seller is getting what feels like 100 offers. So, if you want to win in today’s environment, you have to be strategic and intentional. In today’s show, we are going to tell you exactly how you can do the same.
If you’ve been frustrated because your offers are not being accepted or things are going wrong, or things are changing in the middle of the process that you were not prepared for, today’s show will help you a ton in eliminating some of those obstacles and hurdles, and getting rid of the snags. And even if you’re not in acquisition mode right now, this information is timeless. And when you do decide that the time is right for you to buy, this is a blueprint for how your team should be communicating on your behalf and with each other. I think your mind is going to be blown by some of the practical information that we share to give you an advantage over your competition in this wealth-building journey.
Before we bring in Lindsey and Christian, today’s quick tip is if you’ve read my book, Long-Distance Real Estate Investing, you understand the concept of the core four. This is your agent, your lender, your contractor, and your property manager. My belief is that you need those four people all working with you to help you achieve your goals. And if you have them, you can invest anywhere. Well, BiggerPockets can help you put together this team of investors. You can use the forums to find other people that are vendors, like agents, loan officers, contractors or property managers, giving advice to different BP members, and decide who sounds the smartest and the one you like the most. You can also use the agent or the lender finder to find my team as well as other agents in different places that you can vet to decide if they would be a good addition to your core four, that would help you scale your portfolio. After listening to today’s show, you will know exactly what to ask them and what the process should look like to find out if you got a stud or a dud.
All right. Without any further ado, let’s bring in Lindsey and Christian. Christian and Lindsey, welcome to the BiggerPockets Podcast. I kind of got to bring my family with me to the show today. We’re going to get into why this is such an important podcast briefly, because the market has shifted a lot. And if you’re listening to this and you’re wondering why you’re having such a hard time finding deals and putting them into contract, after today’s show, you will not be wondering. But Christian, let’s start with you. Can you explain who you are, what you do, and how we work together?

Christian:
Yeah. I am the man, the myth, the legend, David Greene’s business partner in The One Brokerage, which is our lending branch of the David Greene world. We started the company back in 2021, I wanted to say, been going strong ever since. And yeah, I’m the money guy, the finance guy, right? So, doing everything that we can to make these deals work, communicating effectively with agents, making sure borrowers have the right advice moving forward. And ultimately, trying to close deals.

David:
Thank you. And Lindsey, how do we know each other?

Lindsey:
Hey David. So, I am Lindsey Iskierka, and I am your partner for the Southern California real estate team. So, I head up the real estate sales team here in SoCal, helping investors buy and sell real estate. And I think we started the team, I want to say in April, 2021 or so, and been going strong. Even just in 2023, so far we’ve closed 68 deals, just under 50 million in volume. So, it’s been an interesting, tricky market to navigate, but we’ve done a good job in helping clients get to their goal. And we partner with The One Brokerage on our deals and it all goes smoothly.

David:
Truer words have never been spoken. This is honestly the toughest market I’ve seen in my entire career. I’ve mentioned this before. There is no clear answer out of it and there’s no indication it’s going to change anytime soon. So, you either adapt or you lose. And so, today’s show is all about different ways that the three of us have brainstormed… What’s the word that Rob always says when people come together and they… Workshop. We’ve workshopped different solutions here for what can be done, and we’re going to be sharing that with the audience today. Basically, the problem is that the supply and demand equilibrium is way off. It is a seller’s market. It’s been a seller’s market for a long time, and it’s just becoming more and more of a seller’s market every month it seems like. Sellers are having more leverage even as rates are going up.
I mean, Christian, what was it you were saying to me the other day? How much does somebody have to make to be able to afford a $500,000 house right now with where rates are?

Christian:
I mean, it’s getting there. I mean, especially with other debts and liabilities people have. I mean, you’re getting to start to need multiple hundreds of thousands a year in income to be able to afford a $500,000 house, and we’re talking 200,000, 300,000 with down payment requirements and everything like that. So, we’re a little bit out of whack right now in the balance of sellers and buyers and everything, for sure.

David:
Yeah, Lindsey and I, we were just at Mega Camp in Austin, a Keller Williams event for real estate agents. And Jay Papasan, who we’ve had on the show before, was mentioning that if you take on $50,000 of debt on a vehicle, that could rob you of $200,000 of debt that you’d be able to afford for your house. As rates are starting to slowly climb into these higher tiers, taking on additional debt is becoming more expensive. I mean, it was always foolish to buy a more expensive car than you need and to run up your credit card debt, but the consequences of said foolishness were less when rates were 3%. Now, we’re getting into the 8s sometimes, you’re really feeling poor choices.
So, in this very tough market, every decision that we make is that much more important, and that’s what we’re going to be talking about today. What can your team do, your agent and your lender that are working for you, to help put people into contract easier? Because there’s a lot of buyers that want this inventory. The sellers still have the power and the consequences are higher if you make a bad decision because rates are so high. Lindsey, before we get into some specifics, can you just share what it was like when we were selling houses in 2021 compared to what it’s like now?

Lindsey:
Oh, my goodness. Well, in 2021, the consumers understood the market that we were in. Headlines were saying, “Hey, multiple offers, you got to waive contingencies, offer way over list price.” And homes were so affordable at that time that buyers felt a lot more comfortable writing whatever it takes to get an offer accepted. Now, a lot of agents in that market put their clients at very high risk by waiving inspection contingencies. That’s something we never really did. I never had to waive an inspection contingency to get a client’s offer accepted. So, I think agents just felt like they had nothing else to do, and they didn’t know how else to help their client, where we’re able to protect the client throughout.
The difference is right now in 2023, as we’re recording this, the market’s not behaving like we would anticipate it should, with affordability being much worse. And so as a consumer, if they’re reaching out to us and they want to buy a primary and stop renting or they want to buy a short-term rental or a house hack, they would anticipate that they have better negotiation power, that they have better leverage. But then, I have to be the one to tell them, “Hey, there’s already 11 offers, 27 offers, 14 offers. Here’s what we’re going to have to do.” So, the market’s not behaving in the way that the consumer would expect. So, a realtor and a lender both need to know exactly what’s going on, be immersed in the market, and know the psychology of both buyers and sellers right now, so they can put their client in the best position to get their offer accepted, without putting them at additional risk.

David:
All right, so Lindsey, that was the market before. It’s obviously more challenging now. Do you have a story of an offer gone wrong in a market like the one we’re in now?

Lindsey:
Yes, there’s many. However, I think pertinent into this episode, I want to talk about a time when lender and agent weren’t really communicating, and therefore, the client lost out on the deal. So, a client came to me, referral from a past client, they were already pre-approved. And the lender just didn’t find it beneficial to talk to me, didn’t really see the benefit in strategizing ahead of time before showing the client houses and writing offers. So, I get the client in the contract. And about five days into escrow, the lender calls me and says, “Oh, we can’t actually do this loan.” I said, “Well, why not? We’re way below the pre-approval price.” And he said, “Well, that pre-approval was sent contingent upon the client pays off their car.”
And I said, “Was the client aware of that?” And he said, “Yeah, they should have been.” Client had no idea. And had I been able to have a direct phone number to that lender, had they found it beneficial to talk to me and I can ask questions about the client’s preapproval, I could have dug that out of them, and prevented the client from wasting money on inspections and appraisals and wasting everyone’s time. So, that was a situation that unfortunately the client lost out, and they didn’t end up buying the home after that.

David:
And we’ve seen stories like that and more over the several years that we’ve all been working together. And in today’s episode with the help of Lindsey and Christian, we are going to get into what you as the investor can do at every stage of the buying process to put yourself in a better position, starting with the pre-approval, like Lindsey said. We’re going to explain what could have happened differently there that would’ve avoided that catastrophe. You’ll also learn what not to do as this ace team debunk some common misconceptions along the way.
All right, so let’s start. We’re going to talk about the five steps for getting an offer accepted in today’s very tough market with your lender and your agent on the same team. Christian, let’s start with the pre-approval process. What would you recommend that investors ask their agent and their lender to do together when they’re working on the pre-approval phase?

Christian:
Pre-approval number one, absolutely… Communication is going to be my cheat code answer of every step of the way because if mistakes are made, like Lindsey’s with the car example that she used, communication can fix almost any issue in a negotiation standpoint, whether that’s with the borrower, the realtor, and the loan officer, with each other. So, that’s number one. But other things that I’d recommend, number two, make sure you’re getting a pre-approval, not a prequalification. This is not general knowledge. The differences between those two things. A pre-approval actually underwrites you. Underwrite is just verifying a couple of things. A pre-qualification is you walking into the bank, they ask you how much you make, they ask you what your debts are and they tell you what you can qualify for. There’s not enough information in what you shared with them there for them to tell you that with any amount of confidence, right?
We need to pull bank statements, and pay stubs, and tax returns, and the real estate that you already own, and insurance policies. I can go on for 1,000 years on what I actually need to request from you to make sure that we dot all our Is and cross our Ts. Pre-approving is that process. Pre-qualifying is not. Pre-approving also requires a credit check, whether it be a hard pull or a soft pull. If you went to your lender and they didn’t look at your credit, you did not get pre-approved, your realtor’s not going to have a strong desire to work with you when you’ve been pre-qualified. And obviously, sharing the findings with the realtor, bringing this full circle, and making sure they know not only the purchase price. That’s not the most important thing on a pre-approval. I know that’s what everybody thinks it is.
It’s the terms. It’s how strong are we with the loan? How flexible are we if the appraisal comes back low? How flexible are we with the asset type? Can this person that qualified for a single family go buy a duplex, right? Can they buy a short-term rental? Those are all things that may not be in words on the pre-approval, but need to be in a conversation that the lender has with the realtor before they start going and Lindsey spends all this time going and finding the perfect beautiful house for our client, where it turns out, “Oh, I meant they’re approved for a single family, not a condo. My bad.” We don’t want to end up in that situation, and that’s where the communication makes all the difference.

David:
So, what about a couple examples of this? Can you explain some stories of where realtors don’t understand that a pre-approval on a single family is not the same as a duplex or a condo can be different than a house? Just explain what some of the things that the loan officer has to underwrite for that are different among those asset classes that agents might not know, or maybe the people getting pre-approved might not understand. To them, $400,000 is $400,000, why does it matter what I’m spending it on?

Christian:
Yeah. Yeah, 100%. I mean, I’ll give a standard example of the different in asset types. Let’s say a single family to a triplex, let’s say. There’s different loan limits. Let’s say I did Lindsey’s car lender example. If I just gave the pre-approval to the buyer, I stepped away, never called the agent, never cared. If she got a pre-approval for, let’s call it a million dollar triplex, that’s not a million dollar single family. There’s these things called loan limits that if you’re getting conventional loans, I don’t want to get too far into the weeds, but there’s only a certain amount of financing that we can go up to for a single family, for a duplex, for a triplex and for a quadplex. They’re all different. So, what Lindsey could do if she wasn’t communicating well is take that triplex pre-approval that’s at a million, and go right on a single family property where I would only be able to get her 700,000.
Unless the borrower has 300,000, it’s not happening, right? I mean it’s crazy. And that’s actually my example as well. I kid you not, we have had people do this and it’s happened multiple times where realtor won’t pick up his phone, won’t let us know when we’re writing offers. I can tell you guys, any realtors listening to this, if you can take one thing away from this episode, the strongest thing that you can do is when you go write an offer, call your lender. When you write an offer, call your lender and say, “I’m writing on an $800,000 duplex in this county. What do you think? I know what your preapproval says, but is there anything we need to look out for?” Maybe there’s an HOA, maybe there’s tax assessment. In SoCal, we have these things called Mello-Roos, which is extra payments that you have on your taxes.
Let me know about those things. And not only am I going to give the realtor the answer on that phone call, I’m also going to ask for the listing agent’s contact. Now I’m going to go call the listing agent that’s listing that property and say, “This borrower is a rockstar. We’re going to slam dunk this loan. Lindsey’s a rockstar. I’ve never had a deal fall out of escrow with her for anything in our control, right?” Obviously, if a house under-appraises or something… But we’ve already got an insurance policy selected and quoted. There’s not another choice here. When you guys were talking in the intro here about navigating difficult markets, that’s how we do it. That’s the answer.

David:
So, Lindsey, in your perspective, had you had this conversation with the loan officer before doing all the work of finding the house, negotiating the deal, the client spending money on the inspections and the appraisal, you spending money on gas and time looking into this, you would’ve realized you’re actually not pre-approved to buy a house. If it’s contingent on paying off your car, we need to make sure that there’s enough money in the bank for the down payment, the repairs, the upgrades, the closing costs, and the car note, correct?

Lindsey:
Yeah. So, going back to Christian’s cheat code answer, communication, right? Had that lender been willing to get on the phone with me and talk through this pre-approval… And I’ll add too, it is the agent’s responsibility to ensure that that lender did do a thorough job pre-approving the client.

David:
Oh, that’s good.

Lindsey:
And if they haven’t, they may not know what questions to ask and they need to know, “How deep did you go with the pre-approval? Did you verify assets? Did you verify income and employment? Are there any red flags I need to be aware of? And on top of that, what terms can I put in the offer to make this buyer the strongest buyer possible without putting them at additional risk? Can I shorten the loan contingency period? No? Okay. Can you let me know why? So, I can tell the agent I would love to do this, but I’m not going to, and here’s why.” In very specific situations with lender’s blessing for certain borrowers, we can waive loan contingency and that may result in the client actually saving money on the house because they appear to be more like a cash buyer because we can remove that financing contingency.
But a realtor cannot and should not do that without the blessing in a full conversation with a lender, ensuring that we’re working together on the same team. “If I get them into contract, can you close?” So, the realtor has to take responsibility for that as well and not just think that they need to stay in their lane. That’s not my job. Ultimately, we’re all on the same team trying to serve the client and if deal falls through, no one gets paid. So, let’s work together.

David:
Okay, so I’m looking to buy a house. I heard about Christian and his team got me pre-approved. I heard about Lindsey and I felt really good. You gave me a buyer presentation, you explained the process, and I just got an email that says, “Congratulations, you’re pre-approved. $600,000.” What’s the next thing I do? Should I get my loan officer and my agent on a group call? Should we be in a group email? What do you guys recommend that people do to get everybody on the same page, so that we know where the boundaries are, what’s okay, what’s not okay, what the plan is?

Christian:
Yeah, I mean I think both of those options are good, a group call and a group text. But more importantly, I want to correct one thing because just being pre-approved for 600,000 is not all the information we need from the pre-approval, right? So, that phone call is intended to get that information… I just want everybody to think… If there’s realtors listening to this or people who have bought houses, everything that Lindsey just said there, what asset type, what loan product do we have flexibility in the down payment? When’s the last time you had that conversation on the first day of preapproval with a lender?
So, David, to answer your question, this should be phone call immediately. And the questions that Lindsey just ran through are needing to be what’s asked, right? I mean, “It’s okay 600,000, but for what? Could we change loan products and get that higher? What if we find something for 650? Do you have wiggle room built into your pre-approvals, right? Can we buy down the interest rate if we get some seller credit?” That way, I’m now giving the realtor ammunition to go write this offer in a way that’s competitive, in a way that is going to lead to a win at the end of the day for the borrower. If we know we got to buy this interest rate down, we got to go get credit, or we got to go save some money on an insurance, or we know we can’t take on an HOA, so condos are out of the question.
All these things go into it and that conversation is the only way that information gets passed because I can’t put all this on a pre-approval page. Your pre-approval page has the county, the loan amount, and really, that’s it. It’s not really worth the paper it’s written on. That’s all the information’s there. It doesn’t say if it’s a single family. It doesn’t say if you can’t do an HOA. So, it’s got to be in that conversation. It’s the only way to properly share this information and move forward as a team throughout the negotiating process.

David:
Which is especially important when it’s an incredibly competitive market. When we were in a market, like 2010, where it was just throw spaghetti at the wall, write low offers, see what sticks, you didn’t need to have these conversations because sellers would do whatever it took to sell their house. It’s not like that anymore. It is now incredibly difficult to get your offer accepted. So, let’s sum up some of the things that we think should be talked about in that initial conversation, then we’ll move on to writing the offer.
We’ve mentioned that it should be a single family or a multifamily. What type of asset class? Is it a condo? And if it is, how does that change what the pre-approval amount is? Different asset classes have different lending requirements as well as different expenses that will affect the debt-to-income ratio of the client, and therefore, how much they can borrow. What is the down payment going to be? Are we talking about an FHA loan, a VA loan? Is this a second home? Although those have different criteria that are not wildly different but enough, especially if it’s really close and you want to go another 10 grand higher to get the deal, can you actually do that or would you have to bring the extra cash to close?
And the sustainability rule with the FHA loan. If you’re using an FHA loan specifically to buy multifamily properties, it often sounds, in theory, better than it is in practice. You have to make sure that the property you’re buying can sustain itself, which means that the rents have to be a certain portion of the income. Definitely something an agent wants to know before they go hunting down a triplex for their client to house hack because the lender never explained, “Hey, yeah, they’re using an FHA loan. Make sure that things look this way before you move on.”
Now, let’s get into what I think is maybe the most crucial part, which is writing the offer. So, we are pre-approved, we are ready to rock and roll. Everyone’s on the same page. We find a property that we like and we want to make an offer on, but a bunch of other buyers want that property as well. Not an uncommon scenario in real estate in today’s day and age. Lindsey, let’s start with you. What can our listeners do to make sure that their offer is the one that the seller chooses on a property that’s going to make them massive wealth in the next 30 years?

Lindsey:
Yeah. So, a really important piece of the puzzle that a lot of realtors don’t think about is that you have to call the listing agent. You need to call a listing agent and find out specifically what is a seller looking for? What is most important to the seller? We can’t make assumptions as agents or buyers that we know that it’s highest price and best terms. There might be more to it. Do they need a rent-back? Do they want smooth financing? Do they want a longer escrow? Is there certain things that they’re looking for in an offer that we’ll only find out if I make that phone call? Build a rapport with the agents, flatter them a little bit, get them to tell me all the information about their listing, so that I can take out back to my buyer and say, “Okay, here’s the scoop.”
You can’t just be the kind of realtor that calls them an hour before the offer deadline saying, “What do you got?” And think that the agent’s going to be divulging information to you. You got to build a rapport along the way. So, prior to even showing the house, I call the agent and I say, “Hey, my client is so excited about this house. Let me tell you a little bit about them, this and this,” and talk the buyer up. “We’re also pre-approved with my preferred lender, The One Brokerage. We’ve done dozens of deals together. They have never not closed a deal that they pre-approved a client on. We’re really going to make this smooth as possible for your sellers.”
So, that’s a really important piece of the puzzle that a lot of agents miss. And so, then when we’re writing the offer, it’s really important too that I look at the comparable sales, what our homes are on here selling for. We’re seeing more and more that listing agents are listing houses low, and it should sell for $100,000 over list price. The agent’s not some miracle worker. Market value is 100 grand more and I need to know that and prepare my client for it. And if it’s out of budget, we tell them that right away. If it is within budget still, I tell them, “This is going to generate a lot of activity. We need to come in strong,” and then we get the offer written.

David:
Perfect. So, you’re saying don’t just shotgun email an offer to the sellers and text and say, “Hey, emailed you an offer,” without even making an effort to build rapport, speaking with the listing agent, right?

Lindsey:
Right. So, many agents will send a PDF and say, “See attached. Confirm receipts.” So, we have a real detailed offer template that I use on every offer. It outlines at a glance, which realtors love, what are we offering? So, you don’t have to open up a 26-page document and figure it out what we’re offering. “Here’s what it is. Here’s the terms. Here’s what your seller is going to love.” And then, I highlight, “I got my preferred lender copied here on this email. They’re going to be reaching out to you,” and just making sure they know we’re a cohesive team and it makes the offer stand out and agents really appreciate it.

David:
Yeah, we have a certain list of phrases that are red flags in our world, like, “See attached. Confirm receipt.” Not a good sign.

Christian:
See attached is for sure, 100%.

Lindsey:
Drives me crazy. It drives me crazy.

David:
I would say a listing agent who just says, “Highest and best, highest and best, highest and best,” like a little parrot on the shoulder of a pirate-

Lindsey:
Fire that agent.

David:
… is a great sign you picked the wrong listing agent. Exactly. That they’re supposed to actually be negotiating manually, not automatically. They’re supposed to be making an intentional effort to find the best buyer and get the best price. And because there’s so many bad agents, having a good agent and lender on your team actually gives you an advantage. I mean, it’s not uncommon for us to tell the other agent, “Hey, this is why our offer is best,” and they were too naive to understand it on their own. So, what you’re getting at here, Lindsey, is these are the things you do to make your buyer stand out as the one that really, really, really wants that house.
They’re in the position of leverage. They have all the buyers that want their house. Now, after it goes into contract, that changes and we’ll talk about that. The buyer gets some leverage in most cases, depending on how an offer was written after it’s in contract. But before it goes in contract, the seller’s got all the power, and so you got to play their game. Christian, what are some things that you would recommend that lenders do or loan officers to work with the buyer’s agent, communicating with the listing agent so that the borrower/buyer that we are representing has the best chance of having their offer selected?

Christian:
Yeah, it’s funny. The biggest one that I think of right off the bat is we call it customizing your pre-approval. But in all reality, a lot of lenders across the country are hurting their partner realtor’s negotiation power, and they don’t even know it. And what I mean by that is let’s say I give Lindsey a $600,000 pre-approval. Let’s say during the search, the borrower and Lindsey determine they can find something for 500,000. Cool, perfect. It’s below your pre-approval letter. Realtor feels we’re good, borrower feels we’re good. I know I’m going to qualify because we’re $100,000 below what my pre-approval says. They find the house, they love it. They don’t call me, they write an offer. They write an offer for 500,000, but they submit the $600,000 pre-approval.
Without even knowing it, that’s hurting their negotiation because subconsciously the sellers now know you can go higher. They know you’re pre-approved for more. So, they’re going to take that $600,000 pre-approval and say, “Hey, listing agent, you think we can get 520 out of them? We already know they’re qualified. They can make up the difference because they had a down payment for a $600,000 house, so why don’t we try to get a little bit more out of them?” Versus if they came to me, I can match every single offer to exactly what you’re writing. And even more than that, I call the listing agent. I say, “Hey, I’m just letting you know, we got a little bit of wiggle room. I don’t want you feeling like we’re absolutely borrowing to their absolute cap, but I want you to know that I wrote this pre-approval specifically for your property. I work with this realtor all the time. She’s one of the best that I know in the business. This borrower, I’ve done multiple deals for. They’re very qualified. I can tell you, I’m guaranteeing we’re going to close this loan. This is the terms that we’re going to get ready to rock when you are.”
And just that, I mean I want all the listing agents listening to this to hear when’s the last time you had a phone call same day as the offer from the realtor, from the listing agent, clarifying the structure of the deal? This does happen, it’s just rare. And over a large period of time, these are the offers getting accepted, guys. We know this because we’re doing it. It’s not like we’re putting nobody in a contract. We know the tricks. That would be my guidance on the actual contract offer.

David:
Well, it works because the seller is sitting there saying not only, “How do I get the highest offer?” But, “How do I know who’s going to close?” And Lindsey, I’m curious to get your thoughts on when you’re a listing agent and a buyer’s agent is telling you, “Hey, what do we need to do to put it under contract?” It probably feels a lot like when you’re a single gal and every guy is out there saying, “I’m the guy for you.” They’re going to put their best foot forward in the beginning, but you don’t know what you’re actually going to get once you commit to that person. Are they going to back out? Do they have the resources to back up the claims that they’re making?
How often do we see buyers will say whatever it takes, they’ll go in contract. Then they drop out of contract now that that listing just lost all of its steam that it had, it’s hard to get multiple offers a second time. What are some ways that you use the loan officer as a team to get the listing agent to feel comfortable that our buyer and their borrower is the one that’s going to close?

Lindsey:
Really good question. Of course, I’m thinking of all the ways when we have listings, how we prevent all the things that you just said, right? We try to lock the buyer in as much as possible, and not give them any outs, really, as much as we can. But on the buy side, when we’re leveraging the loan officer and the realtor as a team, have to make sure that the listing agent knows that we have a daily phone call. Sometimes I’ll say, “I’m on the phone every single day with The One Brokerage going over all of our deals to ensure clear and concise communication, that you always know what’s going on. Even if I don’t have an update on the loan, you’re going to get an update every single day because that’s just how we work.”
And making sure that the lender also knows that, “Hey, this listing agent is really going to value communication. They’re going to want to make sure we hit our deadlines. Can you please be on top of it? Let me know what you need from me.” On top of that too, if the lender is having a hard time getting the loan pushed through because the borrower is dragging their feet and getting certain things, I want the lender to tell me, so I can put a little fire under the feet of the borrower saying, “Hey, we can’t help you until you get that stuff back to the lender.” So, that’s how we can really leverage our partnership to move it forward.

David:
What about when the listing agent doesn’t want to tell you how many offers are on the table or what the high price is, because agents don’t trust each other? There’s this weird ego game that gets played between agents a lot of the time. But the loan officer sort of appears like a neutral third party who can step in and get information. Is that a tactic that you’ve ever used to find out where the buyer really needs to be?

Lindsey:
It is, yeah. So, first off, and I’ll just say like, “Hey, you have a great listing. I’m sure you have offers over this price point,” almost like flatter them. “Are we even in the ballpark if I offer this price? Is there a number that your seller is looking for that we can match or exceed? And on top of that, what kind of terms do we need to write?” And if they won’t really tell me a whole lot, because like you said, agents don’t really trust each other or agents have a very blank stare towards other realtors, but if the lender calls, “Where does our borrower need to be to get this into contract? We have some wiggle room to play with. They’re solid. I have it ready to submit into underwriting.”
And sometimes the agent will tell the lender, because most lenders don’t even call the listing agent to begin with, so they’re already caught off guard. So then if the lender asks, “Where does my borrower need to be in order to get this under contract? And let’s help each other here,” the listing agent is caught off guard and they may be more likely to divulge more information to the lender versus another agent.

David:
And especially in a market where it’s incredibly difficult to get your offer accepted. These little extra efforts can be the difference between being the second or third out of 10 and the first out of 10, because like Ricky Bobby said, in the world of real estate, “If you ain’t first, you’re last.” You definitely want to be first.
Okay, so now we have met over the pre-approval. We have gotten the loan officer and the agent working together in tandem to get the offer accepted. We’ve got success. You were the best offer out of all 10. You’ve got the house and contract. Now, we are in the middle of the escrow process. So, now that the offer is accepted because you’re smart and use your team together, how can investors use their lenders to improve the terms of the deal?
Christian, I’ll ask you about this first because you and I have done this together, actually, when I was buying houses using out-of-state agents. You would even contact the listing agent and talk for me because our agent was not as good as we were, right? And we’d come up with a plan where you’d go get information from the other agent that our agent wasn’t able to get, and then we’d go back and tell our agent what should be done. And it was kind of like a puppet, but that’s what was needed to be done because the agent that we were using either didn’t know how or didn’t have the rapport to get the same information. So, what are some ways that lenders can get involved once there is an escrow to get better interest rates for their clients, closing costs covered, even information out of the listing agent that a Lindsey could use to negotiate better terms for the clients?

Christian:
First and foremost, my cheat code answer, communication. Daily updates, right? Daily updates to the buyer’s agent, the listing agent. That just builds good rapport. Maybe then when the time comes for us to ask for some credit for repairs, “Oh man, these guys have been so communicative throughout the process. They’ve been keeping us up to date well. Okay, well, hey, seller, this is a really good offer. These guys are going to close. They need $5,000 credited for repairs.” You’re more likely to get it done when their experience with you has been beneficial up until that point. So, you kind of build up some brownie points. It’s the equivalent of coming home with flowers to your girlfriend every day, and then you come home late one day, you had to stay at work, and she’s like, “Well, he brought me flowers six out of the seven days of the week. I’m going to be nice to him the day he comes home late.”
Same thing. You’re just building up those brownie points and you’re trying to get enough credit so that when you need to use it, you can convert those brownie points into seller credit. But in terms of what I’m specifically asking for, questions that I like to ask are, “Are you worried about the property appraising?” So, that means the seller’s starting to get a feel of where the house might be worth. You can kind of gauge that even pre-contract acceptance to maybe seeing where the offers are at. “Oh yeah, we’ve gotten a couple really high offers.” I can then go back to Lindsey and say, “Hey, they’re over-asking on this.”
Specifically, in contract though, let’s just stay on the trend of the appraiser. If the appraisal comes back high, sometimes it allows us, we’ve used this strategy before, we can up our offer by 5,000 or 10,000 because we know it’s supported by the appraisal, but get 5,000 or 10,000 back. It’s the same net out of pocket to the seller. It’s technically both because the buyer’s not paying any more closing costs. It’s getting credited, but they’re getting lower interest rate. So, that’s where I’m able to come, as the lender, explain, once again as a neutral third party. And explain, “Hey, there’s a way as the seller where your situation doesn’t change, but we can help benefit my buyer just a little bit here. Get them a little bit lower interest rate. It’s going to lead to this deal working just a little bit more smoothly. We won’t have to be up against the cap of our qualifying. Let’s get this done together. Here’s the number that we need. Are you guys willing to do that? I’ve already supported it by the appraisal.”
And we have a lot of success with that, and it saves the borrower 20,000, $30,000 in interest over the course of the loan. That’s the big one that I can think of.

David:
So, let’s talk about the rate stack. For people that don’t understand how interest rates work, a common newbie mistake is to go to a bunch of lenders and say, “What’s your rate? What’s your rate? What’s your rate?” Which just sets them up to be taken advantage of. Christian, if you could explain what the rate stack is and how it works briefly. And then Lindsey, I’ll let you explain how you can negotiate to get credits for the client that can be applied towards getting a better interest rate.

Christian:
Yeah, 100%. Just quick explanation of the rate stack. Everybody just do this in your head with me. If you got every rate from a 5% to a 9% and it’s separated in quarter points, so 5, 5.25, 5.5. And in your mind, just build a table of that going all the way down, like an Excel spreadsheet. On the right-hand side lined up with those rates, so 5% has a cost, let’s say that’s 0, right? So 5%, 0, 5.25 would be a lower cost. So, that would actually give you… When you hear of lender credits, that’s what it is. And what you can do is you can choose to slide up or down on this, what we call rate stack, by either spending more money at closing and getting a lower interest rate.
So, that’s, in our example, if you bought from 5 to 4.5, maybe that may cost $5,000, but your monthly payment’s going to be, I don’t know, $300 cheaper, whatever it is. We’re throwing out random numbers. Or you could take a higher interest rate, and this is something that a lot of loan officers don’t explain that could benefit people in short timeframes of owning property, you take a higher interest rate, but you get a credit and wipe out your closing costs. So, when somebody asks, “What’s your rate?” It depends, right?

David:
But what happens is lenders quote them the lowest rate on the rate stack. Don’t tell them that that rate that they quoted comes with a $35,000 rate buydown cost, and they don’t find that out until they get to the closing table. They don’t have 35 grand, so now their rate goes higher than what somebody else might’ve quoted. This is very common in the mortgage industry, which is why we’re talking about it. But when you understand the way that the inner workings of lending works, you can use them to your advantage. So, Lindsey, that’s a thing that you can explain to a client because you understand both lending and being an agent.
Your husband is a loan officer on The One Brokerage, so you have to hear this nerd talk all day long all the time. Where if the client’s really short on cash, they can get a lender credit and get a higher rate and keeps more money in their pocket that they can use to improve the property, or if they’re going to hold it for a long time, you can go use an inspection report to negotiate credits for the buyer, which can be applied to the interest rate. Again, do you know how to do that if you’re not talking to the loan officer to even know how much it would cost to buy the rate down to each point?

Lindsey:
There’s two opportunities, really, to get the buyer some closing costs credits to potentially use towards buying down their interest rate. The first one is when you first write the offer. If you’re first going to write the offer, not a lot of competition on the property, which we could see into quarter three and quarter four of 2023, we could see some seasonality in some of the demand and multiple, multiple offer situations start to ease up a bit. This might be a thing again. We did this all the time in quarter one and quarter two of 2023, is we got the two-one buydown or the rate buydown paid for by the seller upfront in the offer, but you’re mindful of the seller’s net profit because that’s what they care about the most. So, if it’s going to cost, easy math, $20,000 to buy the interest rate down to a point where the client is comfortable with that and the deal really makes sense for them, could we add in $15,000 to the purchase price?
Because then, the seller is only taking a $5,000 cut, and that might not be a bad offer. They might actually consider that. And you may see this more often where sellers are going to advertise that they will pay towards a rate buydown, but you have to be mindful of the net profit. So, upfront, when we’re writing the offer, we’ll do that. We’ll say, “Okay, $20,000 seller credit towards a rate buydown towards closing costs.” So, that’s when you first write the offer. Then, once we’re in contract, the inspection really is the most powerful tool that we have as leverage to get closing cost credits for clients. If there are certain situations where we find out there’s a foundation issue, right? Foundation is a big, oh no, kind of like the word of doom a lot of times in these deals, but we can use that to our advantage if it’s really not that big of a deal, honestly, if the foundation repair isn’t that massive, but it’s going to freak out a bunch of other buyers should this buyer walk away from the deal.
I’ll use that to my advantage and say, “Hey, Mr. Listing Agent, you are now obligated to disclose this to future buyers if my buyer walks out of the deal, which they very well could. We’re going to need $20,000 to make this repair.” And usually, we’ll have invoices or estimates to prove that and have more leverage in negotiating costs. And we can take things like that… I mean, foundation is an extreme example, but I’m just using it to make a point here. You can use things found in inspections that the seller will now be obligated to disclose to future buyers. If my buyer walks out of the deal and I’ll tell him, “That buyer could ask you for a higher closing cost credit or even a price reduction, why don’t we just do this, sign off on a $20,000 credit to my client, we’ll remove all contingencies, we’ll close next week?”
So, not trying to corner the seller, but really utilizing the fact that, “Now you’re aware of this, Mr. Seller, these issues in the inspection report, my client’s okay with it, but we do need some funds to make these repairs.” And we can allocate that towards closing costs, and usually the client can then decide, “Okay, do I want to use it to bite on the interest rate, make the monthly payment more comfortable, but then also keep some of the funds to make the repairs that we’re talking about?” But it’s all about the agent knowing how to utilize and leverage what’s found in inspection reports and throughout the transaction to negotiate better terms for the client. And clear communication throughout. And again, the certainty that, “If you agree to this, Mr. Seller, we’re going to move contingencies. We’ll close in seven days. Let’s not start this all over again. Let’s just get this closed.”
So, there’s two opportunities, really, that you can leverage getting the most amount of closing cost credits for a buyer to use to probably buy down their interest rate. That’s really what the biggest issue is for clients right now.

David:
Okay, great stuff. So, to recap, talk to your loan officer about what the whole rate stack looks like, and make sure they even understand what that is. And then, have a conversation with your agent about what potential possibilities you have to get the seller to give credits to buy down the rate. Ask about the two-one buy down because it’s basically free money. And have a conversation if contingencies need to be extended so that the loan officer can call the listing agent, and put them at ease if they’re worried that the loan is falling through, because oftentimes, agents lie. But if the lender calls and says, “No, no, no, it’s fine. We’re just waiting on underwriting for these things. I’m expecting it to be resolved within the next five to six days.” You can get that contingency extended much more likely than if the agent is just sort of sending a form to have signed and not explaining what’s going on, or the listing agent doesn’t trust the buyer’s agent.
Okay. Moving on to the fourth stage, which is going to be funding the deal. Is there a role the agent can play here that people might not know about? Lindsey, what is your experience when the deal’s in escrow, you are moving to the finish line, we are waiting on the lender to get clear to close? What can you as an agent do to ensure that that process goes smoothly?

Lindsey:
One of the biggest hiccups as we’re getting near the finish line of a deal is possession of the property. We have to be crystal clear as to when the buyer expects to get keys to the house and when the seller needs to be out of the house. This should be negotiated upfront. If there’s some situations where the seller needs more time as we’re getting closer to funding, you want to make sure two things. One is that the seller is actually preparing to move out. The worst thing is when you’re doing your final walkthrough, which you’re entitled to here in California, within five days of closing, you should be doing a final walkthrough, making sure the house was in the same condition as it was when you wrote the offer. That’s the point of it.
If you notice the seller hasn’t even started packing yet, or there’s an occupant there that’s supposed to be moving out or things like that, that’s a hiccup that needs to be addressed. And we need to communicate that to the lender to make sure they don’t fund the deal without these negotiations and without these hiccups being resolved. That’s one of the biggest hangups as we’re getting close to the finish line. So, the agent needs to be proactive in negotiating possession, not assuming everyone’s going to do what they’re supposed to, or that the listing agent understands that the buyer is entitled to possession day of closing. So, start to work out those details.

David:
We say that often don’t assume best case scenario, that is what amateurs do. They assume everything will go great, and when something goes wrong, they’re shocked. Assume worst-case scenario, plan for everything that could go wrong, and then if it all goes smoothly, you’re pleasantly surprised. But that’s what I look for in the professionals I want to work with. They’re constantly saying, “What are we going to do if something goes wrong?”
Christian, what about when you have a funding hiccup and you’re trying to work on getting clear to close or some condition an underwriter has, you resolve it with the borrower, but nobody tells the real estate agent? Have you seen situations like that, where nobody updates the agent what was done, that there’s actually another three to four days that need to be added onto the timeline, but they don’t get the right paperwork filled out and the borrower’s actually at risk of losing their deposit? What’s your recommendation for how loan officers can keep agents in the loop in those situations?

Christian:
I mean, I hate to just sound like a broken record over and over, but it’s-

David:
Communication.

Christian:
… communicate.

David:
I knew it.

Christian:
Yeah, I know over and over. But I mean literally something for something as simple as, “Hey, we’re clear to close. Hey, just letting you know we’ve cleared underwriting. I just want to let you guys know I’m going to reach out to the borrower. I’m going to be scheduling the notary. Lindsey, when is time of possession? Is there a seller rent-back in place? Is there a tenant that’s going to be vacating? Even though we’re ready to close early here, is the day that you want to keep closing on for peace of mind of the seller or whatever situation’s going on?” Because I can structure that. I can make sure our funding day is going to take place on the right day.
Where do they want to sign? It’s a question that not a lot of people ask. They just assume the seller’s going to figure it out, right? Like, “Hey, is there a place that your borrower would want to sign? Do you want to be there with them? Do you want attend closing with them? Do you have a showing assistant that wants to attend closing with them just to be there to answer questions? Do you care about that? I can structure all of those things. Let me know. I can send you where the date and time is of signing.” So I mean, there’s a million things that can come up, of course. I am not going to be able to hit every example, but communication is just the trump card that allows you to knock out anything that happens, just a phone call.

Lindsey:
Agents need to be aware that they’re not sitting on the sidelines during this time. Just because it’s between the escrow and title company and the lender, the agent needs to be proactive in making sure people are moving this thing forward. If we’re behind in closing, put a little fire under escrow and title to make these resolutions and keep communication open with the lender. Our job is to make sure people are moving things forward. We can’t take a backseat and say, “Well, not my problem. That’s not my job.” No, it is your job to make sure people are moving things forward. So, the agent really needs to make sure they’re taking a proactive role in facilitating the funding, recording, closing, possession. Can’t just assume it’s lender and title escrow’s job to get that done. The client is looking to you, the agent, really, to hold their hand through this process. So, we can’t be passive in that process.

Christian:
Yeah, I mean, even something as simple as like you’re on the funding date and the borrower’s going to go to Ashley Home Furniture and get a furniture credit card, or they’re going to go get a new… Whatever you’re furnishing your house with. They’re going to go open up a really large line of credit. In the event the lender hasn’t fully underwritten yet and they haven’t announced clear to close, that could mess you up. Our lender that we’re getting your mortgage with could see your new line of credit and could ask, “Hey, what are you doing? What’d you buy?” And if you just went and bought 20 grand to furniture, that could kill your loan. So, if I was making sure to get ahead of that and the agent was knowledgeable and letting them know, “Hey, close first, then furniture, because if the furniture presents the house, where are you going to put it?”

David:
But no one tells the clients about this. They don’t realize that they weren’t supposed to go buy a new car to put in their new garage or open a line of credit at a furnishing store.

Lindsey:
I was just going to say.

David:
Yeah, Lindsey’s seen this before.

Lindsey:
Don’t buy a Tesla for your new garage.

Christian:
We’ve literally had it happen. Oh, my gosh.

Lindsey:
Yes, we have.

David:
Yep. Or even a HELOC on an existing home that you didn’t have before is a new line of credit that affects your DTI.

Lindsey:
That’s something going back to even the pre-approval stage, right? Hey, if the buyer gets excited and goes and opens a line of credit with Living Spaces or Target and makes a big order, it’s going to kill the deal. So, we need to know how close the borrower is to potentially losing the deal. So, we can know that upfront and remind them throughout the transaction, “Don’t get excited. I know you want to buy the furniture, but just wait until closing to open any line of credits or have any hard inquiries on your report.”

David:
Now we know communication is important, yet it frequently doesn’t happen. So, Christian, can you just give a brief explanation of the system that we’ve created so that loan officers, processors, real estate agents, pretty much everybody working on the transaction can be in the same location, communicating with each other easily and quickly?

Christian:
So, internally speaking, we have apps that allow us to never have to make phone calls internally. That means the loan officer never has to wait for an email or a phone call back from their processor, right? They’re in voice channels all day. It’s actually up on my side monitor here as we record this podcast. In terms of our real estate team communicating with our loan officer team, if you guys are in California, you work with the David Greene team as your realtor, and The One Brokerage is your lender. We have a daily meeting every day of the month. 10:30, whatever it is, Lindsey, whatever the time is, at 10:30 every morning we are on a 15 to 30 minute call breaking down every contract that we have in escrow. Breaking down updates, where they are in underwriting, where they are in closing, where they’re on funding. All these five steps that we just went through, we talk about that without having to make a phone call every day.
On top of that, we’ve built a process of seven touchpoints throughout the process of escrow, where the loan officer is required to make a phone call to the realtor. This is even if you’re not on the DGT team. This is what we do with every single realtor that we work with. I can go through those seven real quick. Intro call, first point of contact, pre-approval call, in contract, underwriting conditions, appraisal back, funding and recording. Seven times where it is mandatory. No situation where we don’t make those calls when each of those seven milestones passes in the loan process. That’s mainly because that’s when the negotiation possibilities are there. For instance, when the appraisal comes back, that’s when the updates that, “Hey, you went and bought the wrong type of house,” happens. That’s in the event of a duplex instead of a multifamily that we talked about earlier. So, those have to be had, but that’s the systems we have as The One Brokerage.

David:
And remember, if your loan officer and your agent are not communicating this way, the onus is on you, as the buyer, to put everyone together and then just make better choices on the next deal with who you have representing you.
All right, moving into closing. People might not normally think about this last phase, the fifth one, but what about after closing? Lindsey, is there anything investors can lean on their agents and their lenders for help with once they’ve closed?

Lindsey:
Yeah, so once we’re closed, I mean our communication is not done with the client, right? It’s still continuing. I want to make sure if things gone smoothly with them moving in, if they’re doing renovations and value adds, I’m here to help them with references and vendors and resources. I love to see progress of the renovation. And also consult with the client, “Where are you going to get the best return? If you update this versus update this, where should your money be spent if you are going to improve the property?” So working with them through that, keeping them up to speed about what their property is worth after closing is really important as well.
In Southern California we have great appreciation, and so it really helps the client to feel at ease with what they bought the property at if they find out six months later that they’ve got 80 grand in equity, which is not uncommon here. So, there’s that. And then, also just making sure that they’re connecting with the lender if it makes sense for them to refinance. “Have you saved enough money? Now we can get you that short-term rental. How do you want to scale your portfolio? Who can I introduce you to?” They’re part of our family once we close and communication doesn’t end there.

David:
Christian, what about you? Post-closing what are some things that the loan officers should be communicating with the client about?

Christian:
Yeah, absolutely. I like to call it something kind of silly. I call it a save the date, but I call it a save the rate. So, on a buyer, I’ll usually put a rate in their file. The buyers don’t see it, but we do it in our CRM, where we’ll put a rate where it makes sense for them to refinance. Whether that’s saving 500 bucks a month, 1,000 a month, whatever the metric is that we’re analyzing based on their purchase, we’ll set a save the rate. And what we do is that we have a log of months and months and months, and years of clients that we’ve done loans for that we have saved the rates for.
We track the market, just because of what we do, when the market unavoidably hits whatever that rate is again, we’ll reach out and say, “Hey, we’ve already done the math for you. We can shave off 500 bucks in your mortgage. Would that help you cash a little bit more on this house hack? Would that help you be a little more successful in this short-term rental? Would it just help you save money on your primary?” Whatever they bought, obviously. But that’s a big one, just helping the borrowers stay up to date with the state of the industry without them having to be on mortgagenewsdaily.com tracking rates, because nobody does that. Like you said, David, it’s nerd stuff, right? Nobody does that in their day-to-day life.
And then, second of all, if they’re working on a BRRRR, a loan is two steps of the BRRRR process. It’s the buy and the refi, right? So, we need to follow up and make sure, “Hey, how did your renovation go? When are we good to order an appraisal on the new property that you’ve renovated? And ultimately, when do you want to get this refinance open?” Because typically, BRRRRs are done with hard money upfront. So, let’s get you out of that. So, just follow up. Once again, communication. But making sure that they have the services and education that they need even after they close is equally as important to before they close.

David:
Because it’s all about building a portfolio, not closing a deal.

Christian:
Correct.

David:
That’s the idea here, right? So, if you’re in this for the long haul, you want your agent to be reaching out and saying, “Hey, your house is worth X. What’s the cashflow like on that? What headaches are you having? Do you think you might want to redeploy that capital into something that could perform better for you, or might see more appreciation?” We talk a lot about the different ways people make money in real estate on our team. I’m working on a book about that right now. And two of the big ways are buying equity and forcing equity. Could you sell this property that may be tapped out and buy into a market that could be growing in the future at a really good price, and then add value to it somehow?
And as far as your loan officer, you should be staying in touch with them. Rates could be dropping, new programs could be coming out. I can’t tell you how many clients we’ve had that assumed they could not buy a house because they didn’t have 20% or 25% to put down, that assumed that their debt-to-income ratio wouldn’t work for buying a house. And then we found DSCR products that were 30-year fixed-rate terms where they could go buy real estate. They just didn’t know it because they had talked to the wrong lender. So, I think it’s very important you stay in touch with your lender and your agent, communicate your goals for the portfolio you want to build and make them work to figure out how to help you. That’s the most healthy relationship between the professionals that should be helping you build your portfolio and yourself. Works much better than when you go tell them, “Hey, this is what I think I need,” when you don’t know as much about the industry as they do, because they work in it every single day, at least they should be.
All right. Thank you guys for sharing such good information. As you’ve seen, you got to be better and better and work harder and harder to make deals work in this environment. But I think the wins are even bigger for the clients when you do. Getting a property closed, rented, in your portfolio and being paid off over time is more important than ever because it’s getting harder and harder to buy real estate, and that’s the dirty truth that nobody wants to talk about. Lindsey, are there any last thoughts that you want to share before we let you get out of here?

Lindsey:
Yeah, I think if I can give advice to listeners out there, make sure the agent that you choose understands what you’re trying to accomplish. I think that’s a big piece of the puzzle here. When they come to us and David Greene Team SoCal, I have house hacked, I have long-term rentals, I have short-term rentals. You get to benefit from the mistakes that I’ve made as an investor. And I look at this like a fellow investor, not just a realtor. So, you need to make sure whoever is helping you, that they get what you’re trying to accomplish and that they have your best interests at heart. They’re not chasing transactions and make sure that you feel like they really can guide you through this process, I think that’s a huge determinant of your success here.

David:
Wonderful. And for people that want to reach out to you specifically to see what you could do to help them, guide them through their process, wherever they may be, what’s the best way to get ahold of you?

Lindsey:
Yeah. So, they can reach me on Instagram. I’m @LindseyIskierkaRealtor, or they can email me at socal@davidgreene, with an E, 24.com.

David:
Perfect. And if you can’t find Lindsey’s Instagram because of her last name, DM me and I’ll get you connected. And you said the email was [email protected]?

Lindsey:
That’s correct.

David:
Beautiful. Christian, what about you? Any wrap up thoughts that you want to share for advice that our listeners can benefit from when they’re trying to scale their portfolio?

Christian:
Yeah, in the same way that Lindsey shared she’s experienced the hiccups that come from being an investor, right? You can learn from her experience as a house hacker, as a short-term renter, as a long-term rental investor. We do David Greene’s loans. And if I have not learned something from lending to you, I don’t know what to tell everybody. If I can close a loan for David Greene, nobody is a challenge.

David:
That’s funny. I’m the diva of loans. I hate how high maintenance I am. But Christian has frequently said, “If it wasn’t you, I would never take this on. I would never do this for anybody else.”

Christian:
100%.

David:
Yeah. But thank you for that. And something, Christian, that you say that I think should be shared quite often is that you want a lender who’s helping you achieve your goals, not just a one stop, “Hey, what’s your rate? What can you do?” You want someone who’s like, “Hey, I’ve got all of these products and all of these strategies and all of these resources that can help. You having a hard time finding cashflow? We have 160 other clients that have found properties that cashflow in different areas. I can put you in touch with somebody over there. Are you stuck getting something put in contract? We can help overcome that.” You definitely want to find people on your team that care about your goals, that only make money when you win. And if they can help you win, they can make a life for themselves.
So, thank you two both for being here. Appreciate you coming on and sharing things, especially in this really tough market. Oh, Christian, where can people find out more about you?

Christian:
First and foremost, on BiggerPockets Mortgage Mondays on the YouTube channel. Every Monday we got a little 15-minute episode where David and I talk nerd. So, go check that out if you like the mortgage segment of this. Otherwise, on social media, I’m @The_One_Broker, underscores in between. Or you can find us at theonebrokerage.com, which is our website where you could get in touch with us as well.

David:
Thanks both. Really glad we had you here. And if you like this type of content, a couple other BiggerPockets episodes for you to go check out. Look up BiggerPockets Podcast episode 805 for agents from two cash-flowing markets, or podcast 817 for two agents who really came through for their investor clients. We at BiggerPockets are here to help you grow in knowledge, build your portfolio and do it the right way. So, we really appreciate your views and your downloads. Thanks so much. If you don’t mind, give us a comment on YouTube, tell us what you thought about the show. And leave us a review wherever you listen to your podcasts. This is David Greene for Lindsey and Christian, I’ll see you on the next one.

By Nathan Beckord

You need to raise capital for your startup. It’s something you can do on your own, but what if someone could show you the ropes and boost you up?

Eva Dobrzanska is the go-to expert for adding that extra oomph to your raise. She’s a seasoned professional in the field, well-known to founders seeking venture capital funding. Whether it’s providing ad hoc guidance or sourcing deals for Block Dojo’s blockchain startup accelerator, Eva Dobrzanska walks founders through every step of the investment process.

Her expertise covers a wide spectrum; she advises founders on equity fundraising strategies, investor outreach, and targeting, scaling a business and expanding internationally, and accessing the right funding. Notably, her popular “Capital Raising Mind Map” recently went viral on LinkedIn.

In this article, Eva shares exactly how she likes to communicate with investors—plus how having an alternate pitch deck can be just as important as the main deck.

The best way to communicate with investors

Cold calling and cold emailing can be daunting, but not necessarily effective. However, warm intros aren’t always possible. What’s a founder to do? With plenty of practice in the art of engaging investors, Eva offers up some tips for how she likes to communicate with investors to get results.

Create urgency

“I always tell founders that in fundraising, they have to be able to create the feeling that ‘the train is leaving the station,’” Eva shares. This means cultivating a bit of FOMO by highlighting your startup’s upcoming launches and other news. If the next quarter will be big for the company, talk about why. Also helpful: any tidbits on why your company presents a hot opportunity for a limited time.

With that, she encourages follow-up anytime a new milestone is achieved. She gives the example of opening a new distribution channel—the kind of deal that increases a startup’s revenue potential. Often, an investor who’s been loosely following your progress will bite after seeing that your success is climbing.

Do your homework

Look sharp from the jump by showing investors that you know about them. Yes, this does require some legwork, but it’s time well spent.

“You should know the most recent investment they made. If you’re a sustainable fintech business and you are reaching out to a VC who just made an investment in a sustainable fintech business, chances are they’re not going to go ahead with you. They already invested in your competitor,” Eva says.

However, you can look for investments in businesses that are adjacent to yours as representing an opportunity to put your foot in the door. Even if you’re not raising at that moment, it’s a good time to introduce yourself and share how you might work well with that company in the future.

“If you can spot a way that you could help this company, or maybe your products are complementary, or maybe you could become partners in the future . . . that’s what you should say in the follow-up email,” says Eva. She recommends writing something like: I saw you invested in this company. We are building a similar product that could open up a new delivery channel for them.

This strategy shows that you’ve done your research and you know what’s happening for the VC.

Stay visible

There’s no easy way to do this one, but Eva promises that it’s important. Maintain a solid online presence if you’re looking for an investment (or plan to do so in the future). That means having a good website and active accounts on whatever social media channels are most popular in your industry. Establish yourself as an authority, whether that’s on LinkedIn, Twitter, or Reddit.

Keep a personal touch

Eva doesn’t believe in automated communication with investors. Even if messages are disguised to sound personal, investors can usually tell what’s automatic and what’s truly customized for them. Yes, writing individual messages takes longer, but it also creates more authentic relationships.

And while you’re being personal, don’t communicate in a stodgy and buttoned-up way if the investor doesn’t. “I always try and match the tone,” she says.

More articles from AllBusiness.com:

Pitching for success

A typical investor spends three minutes and 44 seconds looking at a pitch deck. Sound short? That’s because it is. With so little time to make an impression, it’s important to hit the high notes first. Include only three key points per slide, with no more than 10 slides.

Eva has a few more tips to make your pitch deck shine:

Prepare a secondary deck for the conversation

Eva advises that founders not read from their pitch decks when they get coveted meetings with investors. Most investors will likely breeze through the pitch deck you send ahead of time.

Instead, consider each meeting more of a discussion than a presentation. Create a second pitch deck to guide that conversation. Include details like your current progress with the company and any news updates. This allows the investor to dig deeper before diving into due diligence.

Don’t give too much product detail

We know: Your tech is cool. Your cool tech got you a meeting. And yes, you should explain the basics of your product, but keep it brief.

What’s more important is the opportunity at hand. A pitch deck is not the same thing as a sales deck. You’re not selling the product to the investor. You’re selling the opportunity.

Metrics

Eva always likes to see a company’s margins. If it’s a SaaS company, she wants more than the user count. While a high total user count is impressive, investors are really more interested in the number of active users.

Make connections with investors

Eva has one simple way to sum up all of her advice for founders: “Put yourself out there,” she says. She encourages founders to attend events with other founders, like pitch nights and tech meetups. If geography is a limitation, she also recommends having a X (formerly known as Twitter) presence and using Slack channels for founders, like Gen Z VCs.

Every way you can connect with others in your innovation community before you start to raise will help you in the long run.

Article is based on an interview between Nathan Beckord and Eva Dobrzanska on an episode of Foundersuite’s How I Raised It podcast.

About the Author

Nathan Beckord is the CEO of Foundersuite.com, which makes software for startups raising capital. Nathan is also the CEO of Fundingstack.com, which is a new platform for VCs and investment bankers to both raise capital and assist clients and portfolio companies. Users of these platforms have raised over $9.7 billion since 2016.

RELATED: Should You Raise Corporate Venture Capital? Plus, the Movie Trailer Pitch

Carlos von Hardenberg of Mobius Capital Partners says while there is a lot of conflicting information and views on China, the Chinese economy is still very significant for global economy and has potential.

This article is the third in my three-part AI Showdown series, a competition in which I put the top generative AI chatbots—ChatGPT, Claude, Bing Chat, and Bard—to the test for a content marketing use case.

In the first piece, I introduced the AI Showdown contenders, covering how I use them, what I see as their weaknesses, and how you might use each tool for content marketing purposes.

In the second piece, the showdown began. I walked through the process of asking ChatGPT, Claude, Bing, and Bard to write a blog post on a content marketing topic.

Hint: I was surprised at the outcome!

In this article, the final in the series, I share the rest of the showdown, in which I have the AI chatbots create social media posts and an email designed to lead readers to click in and read the blog post from the AI Showdown, Part 2.

Let’s dive right in.

Writing social media content to promote a blog post

In this part of the experiment, I asked the chatbots to create social media posts.

I didn’t want them to lose sight of the instructions from earlier conversations, so I prefaced my request for the posts with this text:

Can you now write the social media posts to drive people to this blog post? I want one post each for LinkedIn, Twitter, Facebook, and Instagram. Recommend images and incorporate hashtags and emojis where appropriate.

Let’s see how each chatbot performed.

ChatGPT’s social posts

At first, ChatGPT provided me with CSS and other forms of code for the social media posts.

That’s not what I wanted, so I asked it to rewrite without code.

Analyzing ChatGPT’s social posts

In reviewing ChatGPT’s outputs, here’s what I found:

• The hashtags #innovation and #leadership don’t fit the content.
• ChatGPT should know that we can use more than one emoji per post.
• ChatGPT also overpromises in the social posts. For instance, it refers to 10 ingenious ideas, but I saw no ingenuity.
• The word leverage is too formal and stuffy for social media content; I use it in my writing only when discussing exerting force with a lever—or the TV show.

Overall, I gave ChatGPT a passing grade—perhaps a B-minus. It’s not an “A” or possibly even a “B.” But I could work with the content, editing it and enriching it to make it better.

Now, let’s see how Claude’s social content turned out.

Claude’s social posts

Claude jumped right in and provided its social content in seconds.

Analyzing Claude’s social media posts

Perhaps Claude finished so fast because the content was sparse. Here are my other findings:

• Claude seems to have used Twitter’s character count for all social platforms, as the posts are short.
• Emoji usage is sparse; hashtags are few.
• Claude pulls out the we voice whereas the blog post uses the I voice.
• All Claude’s graphics suggestions involve light bulbs; I expected more creativity here.

Claude disappointed me. The model is supposed to be more business-savvy than the others but failed to live up to its reputation.

Next up—Bing Chat.

Bing Chat’s social posts

Bing Chat blew me away with its blog post. Would it do the same with its social posts? I was eager to find out.

Analyzing Bing’s social media posts

I was immediately excited by the size of Bing’s response; it took three screenshots to show it all to you. Other findings:

• Except for its Instagram post, Bing didn’t use emojis. It also didn’t use hashtags.
• The length of Bing’s posts seems right on target, with LinkedIn and Facebook allowing for more content and Twitter/X requiring just 280 characters.
• With warm, passionate phrases like, I’d love to hear from you, Bing’s social posts feel more human than the other chatbots’ posts. Such passion also makes Bing’s posts feel like an actual content creator who cares about their work wrote them, whereas the other AIs’ social posts feel as if a time-strapped assistant who’s just doing their job did.
• I love the Twitter graphic suggestion for a meme of a man looking at a blank paper with the caption, Me trying to come up with new content ideas. That image will resonate with content creators.

Overall, I was surprised by and happy with Bing’s output. Coming into this experiment, I considered Bing to be third on the usefulness hierarchy, with ChatGPT on top, followed by Claude and then Bing and Bard. But Bing provided the best blog post draft, and it won again with its social posts. Would Bing take home the crown? You’ll soon find out.

First, though, look at Bard’s results.

Bard’s social media posts

Bard has been an underperformer in every way and every experiment. Let’s see if it can create solid social media content.

Analyzing Bard’s social media posts

Bard hit one high note with its social content because it was the only chatbot to suggest headlines for its social posts. And those headlines are good because they speak to the benefits readers want—leads and sales.

Here are my other thoughts about Bard’s performance:

• Bard used just one emoji—a lightbulb. And it was for Twitter. In my feeds, emojis are more prevalent on LinkedIn, Instagram, and Facebook.
• For Twitter, the body content is poor, as is the suggestion to add a short video or GIF as the image. More details, please!
• The Facebook body copy leaves much to be desired. I’m a content marketer—the target audience for the content—and would not click to read content promising basic tips on how to research industry trends and the like.
• Bard did not create a carousel post for Instagram—a missed opportunity.
• The body content is too short overall, especially for LinkedIn, Facebook, and Instagram, which allow far more copy than Twitter.

Overall, Bard did what it’s always done for me—fell flat.

Which gen-AI chatbot won the social media post showdown?

And the winner of the social media part of this competition is… Bing Chat.

Although I expected ChatGPT to walk away with the social media content trophy, Bing Chat surprised me by coming out on top, primarily due to its ability to write with passion, making it sound more human—or at least more like this human.

Which tools followed?

1. Bing Chat, first place
2. ChatGPT, second place
3. Claude, third place
4. Bard, fourth place

Now, let’s see how the chatbots performed with the final element of the AI Showdown—an email to drive traffic to the blog post.

Writing an email to promote blog content

As with the social posts, when I asked the chatbots to write the email, I gave them the same instructions:

Great! Now, can you write the text of the email? I’ll send it to my tribe. The goal of the email is to drive people to the blog post.

Let’s look at their outputs.

ChatGPT

ChatGPT’s email came in at 194 words, a good length for my list of busy executives and business owners.

Analyzing ChatGPT’s email

ChatGPT somewhat redeemed itself in my eyes because all my feedback was positive:

• I like the curiosity-piquing subject line.
• The first two paragraphs are what I call “warm-up” text. I could remove it without harming the message.
• “The cursor blinking back mockingly”—a friendly show of attitude that makes the email feel as if it came from a human.
• ChatGPT used bullet points to tease what’s in the blog post, a good tactic.
• ChatGPT also created an engaging sign-off: “To crafting magical content experiences”; I would leave that in if I were sending the email.

However, the overall email is meh—average. There’s nothing offensive about it, but nothing great, either.

Let’s see how Claude did.

Claude

Claude’s email was also a short-enough length for busy readers.

Analyzing Claude’s email

Claude’s email left me holding a mixed bag.

• The subject line—Unlock Content Ideation—puzzles me. Why ideation? Who speaks that way?
• I like the salutation—Hey friends. It’s pleasant and personal but would be even more so if it were in the intimate singular—Hey, friend.
• Claude gets to the point in the first sentence: I just published a new blog post I think you’ll love. (I wouldn’t be so bold as to say love though; like would do it for me.)
• I dislike the essential pathways language, which Claude also used in the blog post.
• Claude did a great job of creatively highlighting unique reasons why the reader might want to read the post—to develop thoughtful evergreen content, uncover inspiration through curation, or inject creativity into your editorial calendar.
• I also like how Claude wraps the email by asking the reader to let me know what they think and offering to brainstorm content ideas.
• I don’t like chat soon as a close, though, because it’s unlikely that I’ll be chatting with more than a handful of people from my list.

Despite several negatives, Claude’s email still comes out on top over ChatGPT’s. I prefer its brevity, creativity, and tone.

Let’s see how Bing Chat performed.

Bing Chat

After Claude’s email, I wondered if Bing might be about to lose the lead, having won both the blogging and social media elements of the AI Showdown.

Also, because Bing’s email is double the word count of ChatGPT’s and Claude’s, I wondered whether the extra words would be worth it.

Analyzing Bing’s email

Bing’s email has pros and cons:

• Pro: I like the subject line; it’s clear and concise.
• Pro: The writing style is friendly and conversational.
• Con: Bing misspoke in saying readers learn how to do the bulleted items; they don’t.
• Pro: The bulleted items will let readers know whether to click in.
• Con: I’m never one to end a list with And much more, exclamation!
• Con: I also don’t like the What are you waiting for? language.
• Pro: I like Bing’s closing, To your content success.
• Pro: Bing invites readers to respond to the blog post and to book an exploratory call.

To answer my question from earlier, yes. The extra words from Bing were worth it. Even so, I still considered Claude in the lead because its email was shorter and more personable.

Now, let’s turn our attention to the final contestant in the final competition of the three-part AI Showdown series.

Bard

Bard’s email was the lightest, coming in at 149 words. Were those words useful?

Analyzing Bard’s email

No, I did not deem Bard’s words useful. Here’s the rest of my feedback:

• Bard pulled in the boost leads and sales language from the social posts, which is good; perhaps I’d tweak the subject line so those words came first.
• I don’t like how Bard simply listed all 10 topics as bullet points; it’d be better to list three or four and provide more detail for each because I crave specificity. I find it’s often better to share more details about fewer things than fewer details about more things.
• The email doesn’t do a good job of selling the blog post, which makes sense because Bard’s blog post was not worth selling.

Bard, not surprisingly, lived up to my expectations of coming in last place.

Which generative AI chatbot won the email-writing challenge?

Although Bing and ChatGPT were closer competitors than they were in the blog-post and social-post writing challenges, neither pulled ahead of Claude. Claude wins first place this time, for all the reasons I outlined.

1. Claude, first place
2. Bing, second place
3. ChatGPT, third place
4. Bard, fourth place

But which AI chatbot won overall? There were four contestants, each performing three tasks. Let’s take a look.

Summary: The winners and losers

In this three-part series, I asked ChatGPT, Claude, Bing Chat, and Bard to write a blog post, along with social media content and an email to drive readers to that post.

To determine the overall results, I assigned points to each placement. The winner of an individual challenge would receive 4 points. Second place would receive 3 points; third, 2 points; and fourth, 1 point. Then I tabulated the results, which follow.

Based on the total points, the overall winner was Bing Chat, with 11 points. ChatGPT and Claude both tied for 2nd place, with 8 points. And Bard brought up the rear with 3 points.

The results were a surprise, as I hypothesized that ChatGPT would win, followed by Claude and then Bing Chat. I was confident that Bard would come in last place, which it did.

The takeaways: How to use each generative AI tool in your content creation workflow

Based on my experiences, including the experience of this AI Showdown, here’s how you can best use generative AI chatbots for content marketing purposes.

Use ChatGPT to:

• Generate initial drafts and raw content you can refine.
• Provide outlines and topic suggestions to spark creativity.
• Answer research questions to help inform content.
• Summarize or expand on information.
• Transform information into different formats.

Use Claude to:

• Review and edit content drafts to improve accuracy, clarity, and flow.
• Check facts and citations to ensure content is correct.
• Give alternative wording suggestions to improve tone and style.
• Evaluate whether the content meets goals and guidelines.

Use Bing Chat to:

• Research the web to find data, examples, and quotes to incorporate.
• Aggregate information from different sources.
• Carry on basic conversations and answer questions for content creators.

Use Bard to:

• Tap Google’s knowledge graph for insightful research.
• Generate fresh perspectives and angles based on broader connections.
• Identify related topics and questions to cover for audiences.

The key is combining each system’s strengths to enhance different parts of the content creation process, from generating ideas to drafting and refining.

And never forget—your human creativity, critical thinking, and oversight are still essential for quality results.

David:
This is the BiggerPockets Podcast, show 825.

David:
I think we all need to get rid of this virus that’s gotten into our minds that money should be passive, that we should just exist and we did hard work in the past and now money just flows to us and it just comes. That is not how it works. You don’t get really fit and then never work out again and just stay fit forever. You’re always working out. However, the work it took to get in shape is much harder than the work it takes to stay in shape. And business is the same way. You’ll work very hard to get in good business shape and then it’s just about maintaining it and it’s not that difficult.

David:
What’s going on everyone? It’s David Greene. Your host of the BiggerPockets Real Estate Podcast. The biggest, the best, and the baddest real estate podcast in the world. Every week, bringing you up-to-date content stories from other investors or episodes like today, which if you can tell because you’re watching on YouTube from the green light behind me is a Seeing Greene. Or if you just read the title to today’s show, congratulations for being smart.

David:
In these episodes, if you’ve never heard one, we take questions directly from you, our listeners, and I answer them, giving you the Greene perspective on what I think people should do, what should be considered, or what options they may have. My sincere hope is that my nearly 15 years of experience investing in real estate could benefit you, following behind me on the same journey.

David:
Today’s episode is awesome, high energy and a lot of fun. We get into, if someone can use a down payment that came from another property and if that’s a smart idea. Advice for a late starter and someone looking to diversify their W-2 who has an illness. When it makes sense to scale a property management company? Who that is good for and what should be expected and if to invest in RE or lend privately?

David:
All that and more on today’s show. And remember, if you want a chance to ask a question on Seeing Greene, I’d sure love to see it. Head over to biggerpockets.com/david and you can submit your question there and hopefully have it answered on one of these shows. And lastly, please take a minute to like, share and subscribe to this channel, if you found value in today’s show, if it was entertained, if I made you smile, just send this to someone else that you love, because I want to make them smile too.

David:
And one of our questions today made reference to my Batman voice. Awesome. Glad to hear that there’s still people out there that love it, which brings us to today’s quick tip. Batman here says, “Go order David’s new book, Pillars of Wealth: How to Make, Save and Invest Your Money to Achieve Financial Freedom.” It’s available at biggerpockets.com/pillars.

David:
And most importantly, this book is a no-nonsense straight shooting blueprint to becoming a millionaire that anyone, and yes, I mean anyone can follow. It’s the secret sauce that most people don’t get told. That includes a three pillar approach to building wealth, being good at saving money, and yes, that is a skill. Being good at making money, that’s an even better skill and then investing the difference. If you’re somebody who is tired of failing and wants financial freedom, I highly suggest that you join the movement that so many other people already have. Go to biggerpockets.com/pillars and pre-order the book.

David:
And I almost forgot to mention, there are some pre-order bonuses you can get if you go buy this now. That’s right. If you get the book now, you’re going to get my Wealth Building Cake Recipe, a workbook to get yourself started and in the right direction, access to a coaching call, and one of you lucky pre-order specialists will get a private call with me, which will give me the ability to look into your personal financial situation and give you custom-built advice for where I think you should start, where your skills are and what path you should be following.

David:
I love helping other people succeed in life, and because money is such an important part of life, it’s one of the big things we have to talk about. In today’s show, I get to share some of that insight, but if you want my advice put directly towards you, go pre-order Pillars and get your chance for a private coaching call with yours truly.

David:
All right, let’s get to today’s show. Our first question comes from Chris Connell.

Chris:
Hey David. My name is Chris Connell. I’ve been investing in Winston-Salem, North Carolina for the last three years. Thank you, and Rob and the rest of your squad. You guys have done such incredible job.

Chris:
All right, here’s my current situation. I own three MTRs, one is paid off, two cash flow at about 1300 a month with mortgages, and my wife and I would like to add to the collection. So I might add, I’m an actor and cash flow ebbs and flows. I’d rather not put 20% down on a conventional loan, so we have the idea, maybe she could bring 50% of the cash from an account she has and I could put 50% from a cash-out refi on that paid off property, we’d buy our next property in cash.

Chris:
Is this a good idea? Does it make sense? Is it absolutely insane? I’m sure you have some great thoughts about it. I love your input and direction. Thank you guys so much.

David:
Thank you Chris for the question. All right, so here’s something that you got me thinking about when you said it. You were considering doing a cash-out refinance on a paid off property to buy your next property with half of the money from your cash-out refinance and half of it coming from your wife. I believe you were saying, if I got this right.

David:
It sounds like what you’re thinking is if you pay cash for the new property, you won’t have a loan and you’ll have more cash flow. The problem is you still got a loan, you just got a loan on a property you already had, not the new one. It might be tricking your mind into thinking that you’re getting cash flow, you’re really not getting, because even though the new property will cash flow more without a note, the previous one will cash flow less, right?

David:
So are you robbing Peter to pay Paul here and not considering that? Because you’re going to be losing cash flow on a property you already have. Another thing is that a cash-out refinance will usually have a higher interest rate than a rate and term refinance, and I’m wondering if you might get a better rate on a new purchase than you would on a cash-out refinance.

David:
We’d be happy to look into that for you. If you want to send me a DM, I’ll connect you, but whoever you’re using that is a thing you should think about is, “Am I going to get a better rate on a cash-out refi or on a purchase?” Because if you get a better rate on a purchase, I don’t think you should do a cash-out refinance. You should go buy the next property getting a loan on it.

David:
Now that does sort of beg the question of, “Well, how do you come up with the money for it?” Which might be why you’re thinking that you’re going to do the cash-out refinance in the first place. I’m just… In today’s market, okay, this isn’t a hard-and-fast rule. Generally speaking, I’m not a huge fan of putting debt on existing properties to buy new properties. I’m not against it. It could work, especially if you’re in the medium-term rental game, short-term rental game where you typically can get more revenue, sometimes you can make those work.

David:
What I don’t like about it, is it’s hard enough to find cash flow in properties as is, now you’re taking on extra debt and trying to find a cash flow in property has cash flow even more. It becomes harder and harder to do. The strategy that I’m seeing this working in today’s market is taking a delayed gratification approach.

David:
You’re buying real estate in good locations, expecting it to make money later. But you’re looking to make money right now. You’re looking to sort of offset the income that comes from acting. I just want to make sure you’re making smart decisions buying real estate, and you’re not buying stuff that’s not intelligent because you feel like you need cash flow. I’ve said it before, I’ll say it again, real estate’s really not a great way to generate extra income. It does that. It can work for that. It’s not what it’s intended to do.

David:
A Lamborghini can tow a boat if you set it upright. It can do it, but it’s not intended to do that, and there will be a negative impact on the performance of that vehicle if you do it for too long. Cash flow is intended to come from commercial real estate, which is very risky right now, because we don’t know where rates are going. And from work, from starting a business, from having a job. My philosophy, what I’m telling people is if you need cash flow, you need to start a business or you need to take another job or you need to learn a skill in addition to your acting.

David:
And if you want to build long-term wealth, you need to buy real estate. I think things work better that way. I think real estate inherently has an architecture that benefits long-term ownership. The principal portion of your payments goes up with every payment over time, making long-term ownership beneficial. Inflation makes dollars worth less, which makes values go up, making long-term ownership beneficial.

David:
Rents tend to go up while your mortgage expenses will stay roughly the same, which makes long-term ownership beneficial. It’s a great retirement plan. It’s not a great right now, plan. And that’s why I’m usually telling people the opposite of all the other influencers that say, “Take my course, quit your job and live off the cash flow.” I don’t see anyone making it happen and I see a lot of heartache coming from the people that tried to force that.

David:
So I’ll sum this up by saying I like what you’re thinking. If you want to buy more real estate for future gains, for your future retirement, for delayed gratification, go through with what you’re doing. If you’re looking to just offset the ups and downs of the acting business, this would be a poor strategy to use. I don’t think that buying real estate for the cash flow it generates in year one is a super simple bet. Right now, you’re also exposing yourself to risk, just in the same way that it makes income, real estate can lose income.

David:
The traveling professionals may stop going, your market could get saturated, there could be a lot of other people that do the same thing, and now you’re losing money every month, which makes your problem of inconsistent income amplified. That’s even worse. So I’d rather see that you took a different approach of making money within real estate.

David:
If you love it, getting a job within the real estate industry or some other type of business opportunity to supplement your acting other than real estate, but keep buying the real estate, just don’t buy it because you need to supplement your income today. Also, killer hair, bro.

David:
All right, let’s check out a clip from Greg Miller in Rochester, New York.

Greg:
I’ve been an avid listener since way back in the Josh and Brandon days, but I have a bit of a unique situation. I have a W-2 job and I own three homes. I live in one of those homes. I rent out the other two as short-term rentals.

Greg:
One of those two is a duplex, so that’s a total of three short-term rentals and last year I grossed about $150,000. I’m 53 years old, but a few years ago I was diagnosed with multiple sclerosis and then last year they tell me I had a stroke.

Greg:
Even though I like my W-2 job, I’m in a situation where I want to leave it behind so I have time to enjoy my life. Because of my health conditions, I obviously want to do that sooner rather than later. And earlier this year, I inherited close to $900,000.

Greg:
I would like your advice on how I can use those funds in today’s market to generate immediate cash flow and also to provide an nest egg for my family. Thank you so much and keep up on the Batman voice.

David:
Gregory Miller, thank you for your question and congratulations on being featured on the BiggerPockets Podcast, episode 825. Glad to see a longtime listener finally getting to make their way into the show. I got a good question here.

David:
There’s an advantage that you have to getting a late start if you’ve got capital saved up, right? Everyone’s jealous of the 22-year-old that figures out about real estate investing gets an early start. Yeah, it’s great for them. However, they usually have no money.

David:
When you’re 53 getting started, you’ve got almost a million dollars to put into play. You got some pretty cool options that I’d like to get into as far as building up that nest egg that you’re talking about, and thank you for indulging the glory of the Batman. Many people don’t know that Wayne Enterprise has actually had significant real estate holdings and that’s how I got to where I am today.

David:
So let’s talk about what you could do here, my man. First off, we want to see that $900,000 grow. We don’t want you to just take it and plant it somewhere and only think about the cash flow. I’d like for you to take that $900,000 and look at some BRRRR opportunities. What I’d like to see you do is to target properties with a lot of square footage that are not priced very high. Okay?

David:
If you could find a 22, 24, 2600 square foot home next to a lot of 1200 or 1300 square foot homes, you have a lot more room to work with. You could create different units in the same house. You could make that house worth more by fixing it up. You have different ways to what I call forced equity, which is just really value add opportunity, and the reason I like that is because you’re going to put some of that $900,000 into this deal, maybe paying cash for it, fronting the rehab costs on your own, and then you’re going to get a lot of it back out.

David:
So it’s not all going to stay in the property. You’re going to be able to get it out and put it into new properties because even though $900,000 is a lot of money, it goes faster than you think when you’re buying $500,000 homes. That’s one thing that I’d like for you to look into is value add on every single deal you get. I also don’t want you to turn away from flip opportunities.

David:
There’s ways that you can maybe buy a place for 300,000 that needs a ton of work, put a hundred thousand dollars into it, so you’re all in for 400, sell it for 500, sell it for 475. There’s going to be some pretty good opportunities if you’re in the right area to grow that 900,000 at the same time that you’re buying properties with it. Don’t just get a one track mind and say, “I’m going to buy a whole bunch of duplexes.” Make sure you’re looking at all the options that you have to use that to create some money.

David:
Lastly, if you really want to build generational wealth, I need you to be thinking about location. Avoid the risk to say, “Well, I can get 30 houses if I buy $30,000 houses.” No, no, no, no, no. You want to be buying in the better areas and you have the luxury of being able to put more money down if they don’t cash flow.

David:
So oftentimes when we say a property doesn’t cash flow, what we really mean is it doesn’t cash flow with 20% down, but if you put 40% down, 45% down, 50% down, a lot of them will cash flow pretty good. You’re going to get a smaller ROI on the cash flow. That’s true because you’ve got a higher down payment put in there, but you are going to get more money over the long-term in the appreciation and the rising rents.

David:
So though 53 may seem like a late start, it’s really not. Hopefully you’ve got a lot of years under your belt and you want to make wise decisions so that when your family does inherit this real estate, someday they’re inheriting real estate that they want, not real estate that they were forced to take over. You’ll also find that your headache factor goes way down when you’re buying in better areas because you have more selection of tenants to choose from and you have a higher quality of tenant that wants to live in your property.

David:
I hope that makes sense for you. I would recommend checking out my book Pillars of Wealth: How to Make, Save and Invest Your Money to Achieve Financial Freedom because it’s going to have some ideas in there for you to make that $900,000 stretch out.

David:
Let me know what you think after this video. Please submit another question at biggerpockets.com/david and let me know what you’re doing and what your plans are and feel free to reach out to me directly on whatever social media platform that you use if you want some more advice. But thanks man.

Maxx:
Hey David. My name is Maxx Jackson from Wilmington, North Carolina, and I must ask you a question about property management. I currently manage three short-term rentals while owning only one. I’m a realtor, so I do get leads from it, but it also is pretty time-consuming.

Maxx:
My question to you is what in your eyes is the best end goal for property management? Should I continue taking on properties that people want me to manage primarily because I’m a Superhost on Airbnb, until I can’t do it anymore? Do people ever scale their property management business and then sell them entirely, or should I just keep leveraging out as much as I can and grow as much as I can, until I do not have any more time? I have some of my own ideas, but I thought it wouldn’t hurt to ask the expert.

Maxx:
Keep up the good work. I listen every week. I appreciate you and next time you’re in Wilmington, North Carolina, stop by and we can play some pickleball at my newest property. Thanks, David.

David:
Maxx Jackson. Maxx Jackson. First of all, what a cool name. I’m not surprised to hear you’re successful with the Maxx Jackson and I did notice the, I mustache you a question. If you guys are not listening to this on YouTube, Maxx has a pretty prominent mustache, looks kind of like one of the bottom of a push broom that you might see at a warehouse. Definitely makes a statement with that. So go check us out on YouTube if you want to see Maxx’s good-looking face.

David:
All right, Maxx, what I love about this question is that it’s not purely real estate. This is a business question and real estate is a form of business and you’re thinking the right way. Let’s break down the reality of how business and real estate works that most people that don’t actually invest in it, at a significant level won’t tell you.

David:
Scaling is often explained as a concept, not as a practice. Scaling is hard. In fact, in my own personal life, I am going to be firing several property managers and hiring an in-house property manager that’s going to manage my whole portfolio for me because of scaling issues. I hire the company and I love the owner. Then the owner leverages out the work to one of their employees and now I’m getting a low talent, low level motivated employee that’s not doing a good job with my short-term rentals. And after months of having them do this, you finally start to see a pattern in the numbers and you realize the problem. “I’m not getting to work with the talent, I’m working with an employee who doesn’t have the right mindset.”

David:
Now, Maxx, you’re doing well managing other people’s short-term rentals because your talent, you also realize you can’t scale because it’s hard, but the fact it’s hard is why they hired you. If it was easy, they wouldn’t give you the job. So lesson one, to learn from this, quit looking for easy everybody. If things were easy, it wouldn’t be given to you. They would be doing it themselves. We literally make money doing work in real estate because we’re doing something that’s hard. So you got to embrace the hard.

David:
Now, Maxx, I don’t think you have a problem with the hard. What you’re asking is because it’s hard, how am I going to scale this thing? And that’s where the challenge comes in.

David:
If you want to get good at scaling, the key is you have to build skills that are different than what got you good at where you are now. So I call this the three dimensions of leadership. The first dimension is learn. You’re doing that. You’re learning how to be a good short-term rental host and people like it so they’re hiring you and like you said, there’s some synergistic benefits, you’re getting leads, that’s good. But if you want to scale, the second dimension is leverage.

David:
By the way, this comes out of my book Scale, which you can find at biggerpockets.com/scale if you want to check that out.

David:
Leverage is building the skill of hiring other people to do the work. You have to hold people accountable. You have to be a good manager, you have to check in on what they’re doing. You have to have difficult conversations. Everything that you acquired in learning the skill yourself is largely useless to you when you’re trying to be good at leverage.

David:
It’s very different, and that’s why most people never grow a business because they get good at doing something and they don’t want to start over at zero and have to acquire the leverage skills. And it’s only after you’ve done both of those, you’ve learned and you’ve leveraged. Now you have to lead, which is starting over at zero all over again, developing a completely different skillset.

David:
Most people are just not willing to pay the price to scale. But Maxx, I’d like to see you do it. So here is what I want to warn you about. As you try to scale, you will have new challenges that will cause you to pull that mustache right off your face. It’ll drive you nuts. It’s okay, it gets better. You acquire the skills of leveraging other people and eventually leading them with time. But no, it’s not like, “Hey, if I could do it with two, I could do it with 20, I could do it with 200.” That’s not the case at all.

David:
Every time you stake the next step-up in business, you have new challenges that you have to take on. It’s constant personal growth all the time. I’d like to see you do it. You just need to understand that you’re going to be very busy, you’re going to be stressed and that’s the price that people pay to be wealthy.

David:
If you look at the top loan officer in the one brokerage, the last couple months, he’s literally made more money than the company has because he doesn’t have any overhead. The company has a ton of it, but he’s working 12-hour a day. We just interviewed him on Mortgage Mondays on YouTube if you guys want to go check that out.

David:
He gets up at six, he’s in the office by nine, after his workout and he works until nine o’clock at night or later. That’s what it takes to be a top producer. Now he’s crushing it, right? He’s going to have a six figure month here pretty soon, but he’s earning it. Just like you have to put in a lot of work to have a good body, you have to be very disciplined with your diet to have a good body. Wealth works the same way.

David:
Now, over time you will get better at it Maxx and it will not seem as hard in year 10 as it did in year one. But the point is it’s still going to be hard and that’s okay. We don’t have to run away from hard. We should actually run towards hard because that’s where the opportunity is.

David:
So to sum this up, yes, I do think that you should take on more short-term rentals. I think there is a really big opportunity in that space. If someone is good at being a host to make money in what I believe is going to be an economic recession, I think people should look forward to it. I think we all need to get rid of this virus that’s gotten into our minds that money should be passive, that we should just exist and we did hard work in the past and now money just flows to us and it just comes. That is not how it works.

David:
You don’t get really fit and then never work out again and just stay fit forever. You’re always working out. However, the work it took to get in shape is much harder than the work it takes to stay in shape. And business is the same way. You’ll work very hard to get in good business shape and then it’s just about maintaining it and it’s not that difficult. So as long as you’re ready for that journey Maxx and your mustache is locked in and ready to accompany you, I want to see you keep it going.

David:
All right, hope you guys have been enjoying the show so far. I love this stuff and you can expect to hear more about business in the future, because as real estate investing is getting tougher and tougher to do, because there’s more and more competition for these assets and cash flow is getting harder and harder to find. We can either sit around and cry about it and go watch Dancing with the Stars and numb ourselves with our pain and look for sympathy from everyone and just wallow in self-pity.

David:
Or we can pivot, we can look for different ways to make money. We can gain business practices and principles and experience and get out there and change careers and get into a job in the industry we love, which if you’re listening to this, it’s probably real estate.

David:
At this segment of the show, I like to get in comments left to previous shows on YouTube. I read you guys the comments that people have left. And remember, if you want to have your comment read on the show, I’d sure love to read it. Just head over to BiggerPockets YouTube, follow us over there and leave your comment.

David:
From episode 816, from yourpersonalagent7243. “Hey David, wondering when your house hack at 3.5% FHA, do you have to refi out of that to qualify for another FHA after a year?” Not a comment but a question, yet still a good question and the answer is yes, you do. You typically only get one FHA loan at a time. So you could either sell the house, pay off the loan and use an FHA loan to get your next one, or you can refinance and keep the house refinance into a conventional loan and then you have another FHA loan that you can use by your house.

David:
A common misconception is that FHA loans are for first time home buyers. This entire concept of first time home buyer was really born out of the crash. The 2010 no one was buying real estate thing. It became a marketing concept for lenders to draw someone in who hadn’t been scarred and didn’t have PTSD from the crash.

David:
So they’re like, “Okay, we don’t want to get someone to come buy a house that already bought one because they’re scared. Let’s get a first time home buyer to come buy a house because they’re not going to have the same trauma and fear about doing it. Well, what incentives can we come up with for first time home buyers?” And then they took stuff they were already offering and sort of said, “Hey, this is a perk for a first time home buyer.” Maybe they had some new stuff, but in general it wasn’t all that great.

David:
People get that confused with primary residence, you can get a 5% down conventional loan on a primary residence. You can get an FHA loan on a primary residence, you can get a VA loan on a primary residence. It just means a house you live in. And you might have nine houses on one another primary residence, you might have 15 houses on one another primary residence. You can use these low down payment loans for those, but you can only have one FHA loan at a time.

David:
Now, the good news is yourpersonalagent7243, that if you don’t want to get rid of your low interest rate on your FHA loan, you can get a conventional loan at 5% down, which is only a little bit more than three and a half percent down. So reach out to us and I will put you in touch with my crew or find a loan officer using the BiggerPockets lender finder tool and they should be able to answer these questions and if they can’t, they’re not good. Run away.

David:
All right, from episode 816, we’ve sparked a chain of comments from everyone. So thank you for helping this person get the info that they need. From 50calpulse76. “On a house hack meaning buying is a primary home. Is there a timeframe that you have to live in it before you rent it out or can you buy a home with the intent there and then immediately change your mind and not live in it?”

David:
The first comment came from Richie1317 that said, “Dude, that’s fraud and no, you can’t just change your mind. The regs require you to live there for at least a year before you can get your next loan.” Then Rullau said, “No one ever cares or checks who lives there unless the payment is not coming.” Thrivinglife said, “At least two years. Then you can move out.”

David:
Lots of different feedback here. I will do what I can to try to set the record straight. Remember how I just said that there’s a misconception with first time home buyer with primary residents? They’re not the same thing. The same exists when it comes to when you can get a primary home loan after you’ve already got one.

David:
What we tell people is buy a house, live in it for a year, then buy a new one and rent out the first one. That doesn’t mean that’s the only way to do it. The reason that we give that advice is that you typically can’t get a primary residence loan until after a year from the last one you got. So if you buy a house as a primary residence, most lenders in most cases will not let you get another primary residence loan until you’ve waited 12 months. We get exceptions at the one brokerage all the time. There is ways around it, but it’s very difficult. Okay?

David:
Now, people confuse that with, you have to live in the home for a year. There aren’t regulations from lenders that say, if you buy a primary residence you have to live in it because they legally can’t do that. If you buy a house to live in and then you lose your job and you can’t make the payments, they couldn’t stop you from renting it out to somebody else as you move back in with mom because you can’t make the payments.

David:
If you buy a house and take a job and then get fired and you have to move back to take a job somewhere else, they can’t force you to live in a house and commute by plane to the new place. So there isn’t a rule that says at least in almost all the loans I see, conventional ones definitely, that says, “You can’t rent it out.”

David:
What they’re looking to avoid is you buying a house with a primary residence loan that you never intended to live in at all. Okay? It was clearly meant to be an investment property. You lied and said it was a primary residence. That would be considered fraud. If you move into it and then something happens that you don’t like. Okay? I’m not giving you guys specifics on case law because I haven’t seen this myself, but I’m explaining my understanding as it’s been told to me.

David:
Let’s say, you move into a property and the dog of the neighbor is barking nonstop and you can’t sleep at night and you talk to the neighbor about it and they’re like, “Yeah, go kick rocks. That’s my dog. He barks, not my problem. I don’t care. I can sleep through it.” You’re not getting any sleep at night. There’s nothing that I’m aware of that a lender could compel you to stay living in that house.

David:
Lots of things like this happened. You can’t anticipate all the problems that could come up. What would be mortgage fraud is if they could show you never intended to live in there at all. You didn’t make any effort, you didn’t move into the house. “You were defrauding us from the very beginning.” That is fraud. That should be avoided. Do not do that.

David:
But when it comes to, “How long do I have to live in the house before I move out?” There actually isn’t a law that I’m aware of and I don’t know of any case law where a judge has looked at this and said, “Six months, three months.” They don’t look at it from this hard-and-fast rule like our brains look at it from, they look at intent.

David:
So if your intention was to live in the house and something changed in your life, circumstances changed. There was something wrong with the property, you didn’t like it. You are allowed to move out of it and go live somewhere else. But no, you probably won’t get another loan to buy another primary residence until 12 months had passed since you bought the first one. That could be tricky. But really good conversation we had there. I’m glad I got to weigh in on that.

David:
Guys, we appreciate the feedback and mostly we appreciate the work that you’re all putting in to pursue your goals and your financial freedom.

David:
I wanted to reveal a recent review that came in on the Apple Podcast app. “I love listening to the show, but, I regularly listen to your show. But my biggest problem is that there are so many real estate investment gurus that I don’t know who’s real and who’s fake. And I suffer from buyer’s remorse after spending $10,000 plus on, quote, unquote, “training.” Everyone agrees that we should start with training, but no one breaks down what is actually real training and not just flashy noise, bragging and motivational stuff.” This comes from Deborah via the Apple Podcast reviews.

David:
This is an amazing review, but you gave us 3-stars. I’m not the one that took your $10,000. Why are you punishing me with a 3-star review, Deborah? I think you’re mad at the industry. You’re not mad at BiggerPockets. You got to fix this. You didn’t say why I only got 3-stars. I’m pouring out my blood, sweat and tears for you Deborah, and it’s free. If anything, we should be getting six stars out of five because we’re giving you free content, not taking your $10,000. Oh, this is so sad. Hurt people, hurt people, right? That’s exactly what just happened to me.

David:
All right, on this topic of the $10,000 scam, first off, no one talks about it. I call it course shame. When someone spends a bunch of money and gets ripped off, they don’t want to go tell everybody that they know that they got ripped off, so they just silently suffer. They keep it inside. The glassy look in their eye and their lack of eye contact is they stare at their shoes at a real estate meetup, awkwardly swirling their watered down drink is how you know that someone is taken advantage of by a course, but if you don’t look for the subtleties, you will miss it.

David:
Here’s my 2 cents on the whole thing. Whenever somebody sells me on an idea and the way they’re selling it doesn’t line up with other things I’ve seen in life, I know I’m being deceived. When I’m watching a commercial for a truck and I’m seeing the thing bouncing all over these rocks and I’m seeing a really hot girl in the passenger seat staring at the guy driving at it lovingly with desire in her eyes, because he’s so cool that he has this truck and I hear this music playing and I see this dream being painted. I ask myself, “Have I ever seen this in real life? Have I ever seen a woman that fell in love with an average looking dude because he had a cool truck?” No I haven’t. I’m being sold a bill of goods.

David:
Look at influencers that are doing the same thing. Are they saying, “I will teach you how to make,” Insert ridiculous sum of money here, “for only” Slightly smaller sum of money to take their course, “and it will be easy and you can do it and you’ll make 10 extra money back.” Do you see that happen at other times in life? Have you ever signed up for a gym and said, “I want to get in really good shape.” And they said, “Oh, this is the gym to go to when you walk in the doors, it’s like magic. A six-pack just happens to come and you don’t have to do anything.” It’s not how it works.

David:
Have you ever had a situation where you paid a bunch of money to have someone fall in love with you and they just stayed in love with you forever? Nope, probably not. That’s something to look out for with these courses. There’s always going to be people that are going to be telling you they can help you and selling you and why you should go with them. They’re rarely ever going to be honest with you.

David:
This podcast is for people that want the honest truth, that want it straight from the horse’s mouth, that want someone to tell them what they need to hear, not what they want to hear. And the majority of you guys love that. So Deborah, I’m so sorry that happened, but don’t blame us. Don’t punish BiggerPockets. We are here for you for free and everybody else that’s listening, please continue to listen to our podcast.

David:
Spend 15, 20 bucks on a book. Don’t go spend $10,000 on a course unless you have a preexisting relationship with the person that’s teaching it. You know them and you trust their word and their integrity. I’ll give one last piece of advice to Deborah and everyone listening here.

David:
I have the one brokerage, we do financing for real estate all across the country. When people say, “Why should I do the one brokerage?” My answer is usually, “Why don’t you talk to one of our other clients and find out what loan officer they had and ask what their experience is like?” Because of course if you ask me, I’m going to say, “You should use us.” Every influencer out there is going to say, “Yes, you should take my course.”

David:
So ask the people that have taken the course. Go to someone that has used the service and say, “What did you get? What did you not get? Would you do it again?” I think that’s smart. So before anybody signs up for a course that costs money, it would be wise to ask other members of the group, “What is your experience and what can I expect?” And all of us in the real estate investing community can kind of look out for each other and help steer us towards the right people and away from the wrong people.

Rob:
David, my name’s Rob Browning. I’m from Escondido, California and my question today is, when is a good time for somebody entering in their later stages of their career to get into the real estate market, based off of current conditions in the marketplace? And I can tell you a little bit about what I’m looking for that might be helpful.

Rob:
I’m looking to build cash flow up over the next five or 10 to 15 years and I’m looking to become a full-time investor in real estate in the next three to five years, which would allow me to leave my current position.

Rob:
I do have money right now to invest. I’m okay withholding that and waiting for a better opportunity while I build up more cash. But again, I would like to get going as well. So that’s my question and look forward to your answer. Thanks, bye.

David:
Thanks Rob. The good news is I love your question. The bad news is these are hard to answer. I feel like I’m always the bearer of bad news in the real estate world, but it doesn’t have to be that way. Here’s what I mean. This phrase full-time real estate investor became popularized over the last 10 years, okay? So think about 2010 to right around 2020, 2021. There were deals to be had definitely at the latter end of that they were tougher, but like 2010 to 2015, there were deals everywhere, and by deals I mean cash flowing real estate.

David:
It was like a person who wanted to catch fish and there were so much fish, you just threw your lure in the water enough times, you were going to get a fish on the line. You’re going to reel it in. The people’s ability to be successful catching these fish and landing these deals was inhibited by the time that they spent at their job and you could literally make more money, as in acquire more wealth. I look at money like energy, right? So if you look at the energy that you could make at your W-2 job versus the energy that you could make accumulating real estate at good prices at cash flow, that was going to grow in value, it was clearly a better move to be a full-time investor.

David:
If you had the skill to catch the fish, if you had a lapse funnel, leads, analyze, pursue success. If you knew how to purchase these properties, if you had the financing to do it. If all those things were in place, you had the lure, you had the fishing pole, you had the skill as an angler, being a full-time investor made a lot of sense for a lot of people.

David:
Here’s the challenge. We don’t have a lot of fish to catch like we did. That doesn’t mean that there’s no fish to catch. That doesn’t mean that fishing doesn’t matter. Please don’t assume the extremes of the argument I’m making. I’m not saying there’s tons of fish or there’s zero fish. There’s just less, which makes it harder to make sense to be a full-time investor. If what you mean is a full-time acquisition specialist, there are some people that do it, but typically they are a part of a big enterprise and they focus full-time on acquisition, while somebody else focuses full-time on management, while someone else focuses full-time on capital raising these syndications.

David:
Yes, they do full-time real estate investing, but they’re doing a piece of a puzzle which sort of puts you back into the employee category. You see where I’m going with this? Becoming a full-time investor is not leaving a job, it’s getting a new job and there are less deals to go after now than when we first started to use that phrase.

David:
So the question Rob that I think you need to ask yourself is, “Will I build more energy at the job I have now or will I acquire more energy if I go to become a full-time acquisition specialist with real estate?” And maybe you make less energy doing real estate full-time but you enjoy it more. That’s something to factor into the equation as well.

David:
If we’re speaking practically, what I see people making work right now, is becoming a full-time short-term rental manager, okay? If that’s what you mean by full-time real estate or full-time investor, I don’t think it’s fair to say a full-time investor because even though you do own the property, you’re functioning in the role a property manager and you are absolutely trading one job for another one.

David:
I’d rather have you look at, “Okay, I could pay someone X amount of money to manage the properties and I could do this much acquisitions with my free time. Am I making more money and having a better life keeping the job or am I willing to make less money but I get to work with in real estate that I love?” And get very specific on what it means. Not trying to discourage you.

David:
You might live in a part of the country or in an area where there’s deals everywhere and you can still make it work. I don’t know the names of those places right now, but I’m sure there’s areas in the south and the Midwest where other investors just haven’t found yet. And there’s people out there that are crushing it and there’s tons of fish to catch and they are full-time investors. They’re probably not talking about it because they don’t want the competition from all of us that are like, “Where’s the deal? Where’s the cash flow?” I just want to make sure I clarify for everyone that’s heard this phrase full-time real estate investor, that they understand what that means.

David:
That really meant full-time acquisition specialists, and if there’s not a lot of deals to acquisition, it doesn’t make logical sense for you to quit your job to jump into that. So Rob, let me know how it goes. Let me know what questions you have after hearing this. Don’t get discouraged. Just ask yourself the question, “What role do I want to play in real estate and would I rather trade my full-time job for that?”

David:
And our last question comes from Chris Feno who says, “I have around 600,000 in equity. What’s more effective in the long run? To buy investment properties using a HELOC or use that HELOC to fund local investors projects for returns over and over?” All right, Chris, it looks like what you’re asking here is, “Should I take out my equity and use it to own real estate or should I fund other investors flips so to speak, or maybe they’re BRRRRs and earn a return on my capital?” So let’s kind of look at your two different options.

David:
If you go the route of being a hard moneylender or a private moneylender, that’s what it sounds like you’re asking here. First off, you’re going to be taxed on those gains and it’s going to be most likely short-terms capital gain taxes. I’m not a CPA, I don’t know for sure. That’s what my gut would be telling me.

David:
If there’s a way that you get away from the capital gains, you’d still be taxed at a income level and the more money you make, the higher taxes are. When you earn equity in real estate, it’s not taxed until it is sold. So even when you pull it out on a cash-out refinance, that energy still isn’t taxed. It’s a more tax efficient way of building wealth, not the case when you’re going to be making money by lending it to other people.

David:
Number two, there is risk associated in lending that money. We just never hear about it because one, no one wants to share their losses, and two, we’ve had one of the best markets for real estate investing in the history of the world in the last 10 years. So not many people were losing money because it was tough. The person that borrows your money to flip a house could do everything wrong, and the market was so strong that it would overcome. They would sell the property, even if they sell at a break even or a small loss, they still had plenty of money to pay you back. But what happens when the losses get to be big? It becomes harder and harder and harder to make the flip work, so that you could get your cash back and a lot of that equity is going to start to go down.

David:
Number three, if you take the equity out of the houses and you use it to give to the people that are going to be flipping or BRRRR-ing you’re also paying interest on that. Okay? So if you’re lending it to them at 15% or 12%, but you’re paying eight or 9% on the HELOC, it starts to look like a much less desirable proposal for you.

David:
So most hard moneylenders, at least the good ones, really anyone that’s in the lending business focuses on yield spread and margin. What they say is, “All right, X amount of these deals are going to go bad, X amount are going to go good in order to make enough money to cover my losses, I have to charge 15%, 12%, two points.” Whatever, and out of that profit, they’re going to have to pay for the losses. So if you’re paying your hard money 15%, that doesn’t mean they’re earning 15%. After all the people that don’t pay them back or the money they lose, maybe they’re earning 8% or 9%. I don’t know the exact numbers, but I hope you get the point.

David:
If you’re already paying 8% on the HELOC and your true spread, it ends up being 10%, if you’re able to get 50% on your loan, you’re taking all this risk for a potential 2% spread. That doesn’t sound as good as what you’re probably thinking in your mind when you’re thinking about what I call the gross.

David:
In my book Pillars of Wealth, I talk about spending from gross. It’s this mindset virus that we acquire, when we say, “Hey, I make $90,000 a year. I can afford a thousand dollars a year car payment.” “Hey, I make 90 grand a year. I can afford that $3,500 vacation.” When you’re trying to make a decision on spending and you’re thinking about the gross money you earn, the amount you’re spending seems like a very insignificant portion.

David:
But if out of that 90,000 you get taxed 25,000, so you’re only keeping, I believe that’d be 65,000, and out of that 65, you’re only saving $15,000 a year. That thousand dollars car payment is $1,000 a month out of $15,000 a year, that’s 12 grand. That’s almost the whole thing. All of a sudden, that looks like a really foolish decision to make. It depends on if you’re looking at the net or the gross. I think when it comes to this opportunity to do private money lending, you’re looking at the gross, not the net. I don’t think the net will be as attractive as you’re thinking. And lastly, there’s some extra risk here.

David:
If you lose your money that you pulled out of the properties to flippers, because the market goes against you or you make bad choices or you make some beginner mistakes that everyone makes, but that ended up being all your capital, you’re putting the properties themselves that you put leverage on at risk. What happens if they need some repairs? What happens if the tenant stops paying the rent? You might end up losing the properties and the money that you pulled out of them going into a new business that you’re not familiar with.

David:
So those are the risks and the upside doesn’t seem as big. When you look at pulling out the money that you have in the properties to buy new real estate, the risks are going to be if the new real estate you buy doesn’t cash flow. If you end up losing money on those new properties, that’s not good, but that’s about the only risk I can see. The upside would be a lot of inflation and a lot of gaining equity through rising home values. The rents, if you buy in a good area, should be going up every year, which means eventually every year that you keep the property, it gets sweeter and sweeter and sweeter.

David:
You can also take the equity out of the property, say $600,000 and add leverage by borrowing money from the bank. So the $600,000 of your down payment would be the equivalent of buying $3 million worth of real estate. So if you’re doing good at investing and you’re buying in the right areas and the properties are supporting their debt service, you could take 600,000 and turn it into $3 million of real estate, which after 30 years has been paid down and now you have $3 million of real estate plus whatever it’s appreciated by. It’s tough for me to see you hitting those same returns, becoming a private moneylender.

David:
The last thing that I’ll put in here is that private money lending sounds simple and it can be simple, but that doesn’t mean it’s easy. There is a skill to analyzing who you should lend your money to and at what rates, and then take it over the projects that they screw up. And it’s not a skill that you probably have right now. You have to build it, and if you’re going to lose money in building the skill, it might not be worth doing.

David:
So those are the ways that I would analyze your two decisions there. I know that there is no easy options anymore because the market’s so tough. There used to just be like, no-brainer. “Go do this.” That’s not the market we’re in anymore. We had it good for a long time. Hopefully all of you listeners took action at the time just like Chris did. That’s why he’s in the position where he has $600,000 of equity, and if you didn’t take action during that time, that’s okay. Don’t sit around and cry about it. You can still take action today. It’s just tougher than it was before, but it might be even tougher than this in the future, we may look back at these times and say, “Hey, there was a lot of opportunities. We should have taken advantage of it.”

David:
All right, that was our show for today. Just to recap what we went over, we talked about a lot of things including how another property should be bought when you don’t have the 20% saved up, is it makes sense to take from one property and use the equity to buy another? What to do when getting a late start in real estate? What strategies to use to really grow that nest egg to hand it off to the next generation? If we should scale a property management business or not, because frankly, it’s a lot of work and to own RE or two lend privately. That was our last question there, and we got to look at the two different options.

David:
I hope that our advice today gave you a clear picture of what the next best step for you is, and even more importantly, help build your confidence when it comes to moving forward in your own real estate business and portfolio.

David:
Thanks everybody for checking out another Seeing Greene episode. Love having you here and love doing these. Remember, if you would like to be featured on the show or you’d just like to support us, head over to biggerpockets.com/david and submit your question there so that I can answer it.

David:
I’m David Greene. You can find me @davidgreene24 on social media. So please go follow me on Instagram, friend me on Facebook, follow me on Twitter, and check out my website, davidgreene24.com. If you’ve got a second, check out another BiggerPockets video and if you don’t, we’ll see you next week. Thanks everybody.

Businesses in rural communities typically fall under the radar of growth-equity investors. “Traditional sources of venture capital don’t go to these markets,” says Melissa Obegi, president of impact investor Conduit Capital, U.S. “They often stick with a more tried-and-true footprint.”

That’s why RuralWorks Partners was formed. Launched last year by Community Development Financial Institution (CDFI) Community Reinvestment Fund, USA and Conduit, it aims to build wealth and economic and climate resilience in rural communities, along with the number and quality of jobs, by investing in growth-stage businesses with the potential to expand. “These companies are starved for the capital critical to bringing their full potential to bear on community resilience and job creation,” says Obegi, who is also a board member of RuralWorks.

In August, it launched its first fund, RuralWorks Impact Partners 1.

A Focus on Agribusiness and Food

In 2021, the folks at CRF and Conduit started mulling over a possible collaboration that could address the dearth of financing in rural communities, providing a way to improve local economies and expand the use of climate-smart agricultural practices. What was needed, they decided, was money that could allow agribusiness and food industry businesses to thrive and grow. Investments of $1 million to $5 million would target such areas as sustainable and regenerative agriculture, local and regional food systems and circular economy, to name a few examples. And the enterprise would also provide other services, like business advice and access to markets.

Last year, they received certification for RuralWorks as a Rural Business Investment Company (RBIC), a USDA program that licenses for-profit developmental capital funds. The move allowed the enterprise to raise equity from the farm credit system.

A three-person management team runs RuralWorks. There’s also a four-person board and an advisory council with experts in rural innovation, consumer and food businesses and private equity and blended finance.

Building a Pipeline

As for investments, since launching their fund—the size has not been disclosed—they’ve been evaluating potential targets. “We’re building a robust pipeline of opportunities and preparing to deploy capital,” says Obegi. While the primary focus is businesses operating in the Northeast, the Great Lakes region and Upper Midwest, RuralWorks also considers investments anywhere in the country.

Tech companies are likely to be in the mix. “We’re very interested in the kinds of technological developments that are being created in rural communities,” says Obegi. To that end, RuralWorks works with organizations like the Center on Rural Innovation, which promotes rural regional technology hubs, for deal sourcing. Plus, thanks to the rise of remote work, Obegi sees the potential for more talent to relocate to rural areas. In addition, a federal government focus on rolling out rural broadband should improve web access.

“It’s an example of the kinds of collaborations across non-traditional parties that address fundamental systemic and critical challenges we face,” says Obegi. “We can contribute to a blueprint for a rural renaissance.”