\n<\/p>\n
Why can\u2019t I use gift funds on my <\/strong>down payment<\/strong><\/a>? What are the common housing market crash indicators<\/strong> that real estate investors should look out for? And why does David only invest with the short-term rental king, Rob Abasolo? If you\u2019re joining us today for this episode of Seeing Greene<\/strong>, you\u2019ll hear answers to all these questions and more!<\/p>\n David takes some time out of his day to sit down and answer arguably the most hard-hitting, specific questions we\u2019ve had to date on an episode of Seeing Greene. These questions include how to find synergy between your career and your investing<\/strong> goals, how to not cross the line when working with multiple agents<\/strong>, the best ways to purchase real estate with no (or low) money down<\/strong>, and why David rarely partners up on real estate deals<\/strong>.<\/p>\n Some of these questions may hit home for you, as most of today\u2019s guests are either rookie real estate investors or young professionals looking to get their start in investing.<\/p>\n Do you have a question you\u2019d love to ask David? If so, submit your question here<\/strong><\/a> so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums<\/strong> and ask other investors their take, or follow David on Instagram<\/strong><\/a> to see when he\u2019s going live so you can jump on a live Q&A and get your question answered on the spot!<\/p>\n David Greene: Nicole Heasley: David Greene: Jeroe Jackson: David Greene: Alex: David Greene: Anthony: David Greene: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n
This is the BiggerPockets Podcast show 609. As far as practical advice for you on the next deal, don\u2019t do it. Figure out a way to do it without a partnership. And if you have to have a partnership, don\u2019t do equity splits. This is one of the reasons that in general, I don\u2019t do equity, I pay people debt. What that means is people let me borrow money all the time and I just pay them a return that they know they\u2019re going to get. And it doesn\u2019t matter if the property completely falls apart, they get paid anyways. I don\u2019t like sharing risk with people that I\u2019m a partner with, because it ruins relationships, and it\u2019s important to me that those relationships stay healthy.
What\u2019s going on, everyone? My name is David Greene and I\u2019m your host of the BiggerPockets Real Estate Podcast. If you\u2019re not watching this on YouTube, then you don\u2019t see the green light shining behind my head, but if you are, then you know what that means. This is another Seeing Greene episode. In today\u2019s episode, I am going to take different questions from different podcast listeners or BiggerPockets members, and do my best to solve their problem, give them advice or help them scale their business faster, more safely, and in a better direction.
These episodes are specifically meant to teach you more about real estate by giving you my perspective. Now, I\u2019m a real estate agent. I run a real estate team under Keller Williams. I own a loan company called The One Brokerage. I invest in short-term rentals, long-term rentals, multi-family property, commercial multi-family property, triple net property. I own note income. I flip houses. And I write books and stuff like that. So, I have a very well-rounded perspective that I like to share with everybody here. And the goal of shows like this is to take you deeper behind the curtain to see what\u2019s really going on in real estate, rather than giving you the shallow answer that you can get anywhere else.
So, thank you very much for joining me. I really hope that you enjoy today\u2019s episode. And if you do, please consider leaving me a comment on our YouTube page. If you\u2019re listening to this on the podcast, that\u2019s great. But when you get back to a safe place, if you\u2019re watching this on a commute, please consider subscribing to our YouTube channel and leaving me a comment in the comment section, to let me know what you thought of today\u2019s show.
For today\u2019s quick tip, I just want to remind, registrations for BPCON are now available. This year, we\u2019re going to be holding it in San Diego, and I want you to go, why do I want you to go? Because I want to meet you. Well, that\u2019s not the only reason that I want you to go. I also want you to go because so many people get more involved in real estate when they develop an emotional connection to it. And in order to develop that emotional connection, you have to get involved. You have to get outside the realm of just being on the outside, watching, peeking in through the window, seeing what other people are doing. You have to get into the room and into the conversation, so you feel like you\u2019re a part of it. BPCON is a great way to do just that.
So many stories have come from, \u201cI went to BPCON, I met some people. I realized this wasn\u2019t as hard as I thought. I bought my first property. I fell in love. I bought three more. Now I have more money coming in from rentals than from my job.\u201d I cannot tell you how many times I have heard that same story, and I want you to be the next one to tell it. And if you\u2019d like to register for BPCON this year, go to biggerpockets.com\/events, and it will walk you through exactly how to do just that. Again, that\u2019s biggerpockets.com\/events.
All right, today\u2019s show is fantastic. We talk about what is the best strategy in today\u2019s market? That\u2019s always a good topic. We get into what to do when you\u2019re navigating partnerships with different priorities, as well as how to get closer to real estate when you can\u2019t go full-time, and more. Lots of really good questions. This is probably my favorite episode we\u2019ve ever done of the Seeing Greene style, BiggerPockets Podcast. I really hope you enjoy it. And most importantly, I need you to let me know in the comments on YouTube, if you did. So, enjoy today\u2019s show and let me know what you thought.<\/p>\n
Hi, David. My name is Nicole Heasley. I have been investing for five or six years. I have four deals under my belt, and I\u2019ve spent years listening to the BiggerPockets Podcast. And I\u2019ve heard you and Josh and Brandon talk a lot about moving into a career that has more synergy with my investment goals. So, I got licensed and started my career as a loan officer in February. It\u2019s going awesome. I am so glad I made this switch.
But most of the resources and conversations on BiggerPockets tend to focus on the synergy between being a realtor and an investor. I want to know more about being a lender and an investor. So, where should I look? Who should I follow? What resources are out there? And you gave us the book on being the very best realtor that one can be. I want to know who wrote the book on being the very best loan officer that someone can be, who wrote the SOLD for loan officers? And if it hasn\u2019t been written yet, I have a suggestion for your future projects. Thank you so much for everything that you do and take care.<\/p>\n
All right. Thank you very much for that, Nicole. I think this is a really cool question, because it\u2019s something that doesn\u2019t get brought up all the time. Let\u2019s see how I want to tackle this. First off, the reason I wrote SOLD for BiggerPockets is there were no good books for real estate agents. There\u2019s one called The Millionaire Real Estate Agent, which is fantastic. It\u2019s written by Gary Keller and Jay Papasan. Jay is someone that we\u2019ve had on the podcast several times. Gary is someone that I\u2019m still working on, trying to get on, because he\u2019s a fantastic real estate mind.
But that was really a high level book. It sort of is a map. It shows you the terrain. Here\u2019s where the mountains are. Here\u2019s where the stream is. Here\u2019s where the quick sand is. And it shows real estate agents how to navigate through the big picture, but I wanted something like a field manual. I want you to tell me what boots I should wear. What\u2019s poison Ivy and I shouldn\u2019t touch it. How long can I go before I need water? There was nothing that was really written at a micro level like that. So, I wrote SOLD for real estate agents, and SKILL is going to be coming out very soon, that\u2019s the sequel to SOLD. And then after that, SCALE.
So, part of why I write books is because there\u2019s not a book written on that topic. When I wrote Long-Distance Investing, that was a book that needed to be written, because no one was talking about how to do that safely. Most people write books on topics that are already really popular, because they\u2019re going to sell better. I just don\u2019t like that, because if there\u2019s already a bunch of books written on it, I don\u2019t need to.
You make a very good point, there are not any books that I\u2019m aware of that teach somebody how to be a good loan officer. It just isn\u2019t very common, because the way that that industry tends to work is it\u2019s broker centric. You\u2019re a real estate agent, you hang your license with a broker, your broker becomes your mentor. You\u2019re a loan officer, you hang your license with your broker, your broker becomes your mentor. There is nowhere to hang a license as a real estate investor, because there\u2019s no license. And that\u2019s why people come to podcasts like this, or they read books, or they watch videos on YouTube, or they read blog articles, because it\u2019s set up differently. There\u2019s nobody to show you how to do this job. So, you got to learn it yourself. And that\u2019s why everybody makes content for real estate investors but not for some of these other jobs. Same thing goes with insurance brokers or appraisers, you don\u2019t learn how to do that in a book, you tend to learn how to do that from finding a mentor who\u2019s in the field, who teaches you.
Now, that being said, I would encourage anyone who wants to be a better loan officer to come work with us. That\u2019s what we do. We\u2019re mentoring people and helping them to be better. As far as your question of, is there a book that needs to be written? I like your little subtle hint that I need to write that book. That\u2019s something that I am not qualified to write yet. I\u2019m still learning that industry. Now, I think The One Brokerage is probably the fastest growing loan company in the country. We\u2019re doing fantastic. We have way more leads than we can keep up with. We have to hire new people. So, for anyone out there who\u2019s like, \u201cI\u2019m interested in a career as a loan officer.\u201d Please come to me. Especially if you already are one and you just want a better opportunity.
That\u2019s one of the things that BiggerPockets exists for. It\u2019s a community. We network, we get connected to the right people that we want to be connected to. You can find handymen, you can find contractors from being in this world. So, I\u2019m really glad, Nicole, for what you\u2019re bringing up here and for the listeners who understand you\u2019re a part of our community, you\u2019re not just peeking through the window, listening to a podcast, you\u2019re part of this. So, get involved deeper with it.
When I feel like I\u2019ve got it down and I can explain to teach somebody how to be a loan officer, I will absolutely go to BiggerPockets and see if I can write a book. In the meantime, we\u2019re creating a curriculum to teach people how to be loan officers. And there\u2019s not a lot of people doing this. I know this is one of those sources of frustration for everybody who\u2019s out there, who wants to learn how to estimate rehab costs, or you want to learn what to look for in a real estate agent. It\u2019s very difficult for anyone to say, \u201cThis is a good agent. This is a good loan officer.\u201d The industry just doesn\u2019t work that way. It tends to be very sales oriented.
So, the one that you come across is the loudest one, the one with the big, loud mouth that says, \u201cCome here.\u201d And they\u2019re not always the best, which is why relationships and word of mouth are how you get connected to the right people. And I\u2019m only saying this because I don\u2019t want to give anyone the false impression that yeah, there\u2019s a book out there you can just go read, or there\u2019s one question you can ask and you\u2019ll find the best agent that way.
You almost have to know what you\u2019re looking for. And so, that\u2019s why on the podcast, I talk a lot about the perspective of a loan officer and a real estate agent, as well as the investor, in all kinds of different asset classes. I talk a lot about what I\u2019m doing in my own businesses, and the reason I have those businesses is so I can learn what goes on in them, so that I can share the information with all of you.
Now, I also want to be able to train agents and loan officers to provide a very good service. So, that\u2019s true, I want people coming to me to say, \u201cHey, can we use your realtors? Can we use your loan officers?\u201d But even deeper than that, I\u2019m trying to learn how those industries work, so I can make them better, so I can teach all of you. If you\u2019re in an area where I don\u2019t service, these are questions you should be asking, this is stuff you should be looking for.
Okay. As to the first part of your question, when you were discussing how you got your license to be a loan officer and it sounds like what you\u2019re saying is you\u2019re not really following your way into more deals, as a loan officer. That you\u2019re in the world, like we\u2019ve said, hey, you should get more involved and you\u2019re there, but deals are not crossing your path. This is a great question and I want to be able to address it. Part of the reason that you\u2019re not exploding in your investing career, even though you\u2019re a loan officer, is the skillset to be a loan officer is different than being a real estate investor. Just like the skillset of being an agent is different than being a real estate investor.
If you\u2019ve ever heard the phrase, \u201cTo a man with a hammer, everything is a nail.\u201d You\u2019ll understand what I\u2019m getting at here. I actually think that my business as a real estate agent has stopped me from buying as many deals as I would have bought if I wasn\u2019t a real estate broker. Now, that doesn\u2019t mean I regret my decision. I\u2019ve learned a ton through the business of selling homes. I\u2019m a way better negotiator. Like the property that Rob and I just bought in Scottsdale, Arizona, we got, because I told our agent, \u201cThis is how to negotiate this deal. This is the exact timeline. I want you to say this right now. I want you to wait four days and I want you to call back. And I want you to say this script.\u201d I only learned that because I sold houses.
But to be fair, I tend to look at opportunities and say, \u201cHow can I sell this house for someone else and get them a ton of money?\u201d Versus, \u201cHow could I buy that house myself?\u201d So, in some ways you got to be very careful when you get into the industry of doing loans or selling houses or being a contractor, you tend to look at every opportunity through your business\u2019s eyes, not through your own eyes, as an investor.
The other thing that I think you should take mind of would be as a loan officer, your skillset is very technical. You are looking at memorizing guidelines for loan products, trying to learn what products might be out there. You\u2019re trying to upload the right documents. It\u2019s very accuracy based. That\u2019s what I\u2019m trying to get at. You\u2019re a bit of a sniper. You take your time, you line everything up and you make the perfect shot. It doesn\u2019t go quickly. Well, real estate investors are less of a sniper. They\u2019re much more creative. It\u2019s more about casting a wide net, getting a lot of opportunities, getting people calling you ,and then creatively looking for how to solve problems.
It\u2019s a different way of looking at the world than when you\u2019re a loan officer. As a loan officer, it\u2019s very technical. You\u2019re trying to get every single thing right. So, what you have to learn how to do is take one hat off and put the other hat on. You got to build a switch back and forth between everything needing to be perfect and having a wider vision, where you\u2019re seeing everything that\u2019s out in front of you and looking for opportunities. And the same is true for agents. They tend to look at everything from, \u201cHow do I make someone like me? How do I become nicer, friendlier, more exciting, more engaging, more interesting?\u201d And they forget to look at life from the perspective of, \u201cHow do I solve a problem?\u201d They only know one way to solve problems. They put houses on the market or they help people to buy them.
And so, agents have the same problem. This is one of the reasons I always say, \u201cNo, don\u2019t get your license just because you think you\u2019re going to get more deals. You won\u2019t.\u201d It goes the opposite. You spend a bunch of money. You build a business, you create a database, you actually get sucked out of the goal that you did have. And now you\u2019re in a new one. Now, some people, I\u2019m an example of this, can pull it off. So, I don\u2019t want anyone to be discouraged and think it can\u2019t happen. It requires a lot more focus.
Let me give you a real world example. I was asked the other day, \u201cHow do you get your spouse on board with your investing goals?\u201d And I chuckled for a minute, because I don\u2019t have a spouse. It\u2019s not hard for me. I forget that there\u2019s people that have to balance their relationship with their investing goals. Frequently, I\u2019ll have a client who\u2019s trying to buy a house with us and I\u2019m having a conversation, trying to explain a complicated concept and my solution for it. And in the middle of it, their kid will start crying. Their attention gets pulled away. They\u2019re not hearing anything I\u2019m saying as soon as their kid needs something, right?
That person has to learn how to bounce their balance from one place to another. Or maybe I should say, bounce their focus from one place to another. It\u2019s more difficult when you have children who are demanding things from you than when you don\u2019t. Now, that doesn\u2019t mean it\u2019s impossible. And in some ways, you might actually be more inspired and more ambitious because of that child. So, it\u2019s not bad, but it will make things more complicated.
So, in your situation, Nicole, you\u2019re going to have to learn how to bounce in and out. Look at it like the goggles that you\u2019re wearing. I have my loan officer goggles on, I look at everything from the perspective of, \u201cHow do I make it perfect? I can\u2019t make a mistake. I can\u2019t miss a detail.\u201d You take those off, you put on your investor goggles, and you look at it from the perspective of, \u201cWhat creatively can I do here? How can I reach this person? How is this property not being used well? How would I be able to borrow the money to be able to buy it? And how would I be able to rehab it? How would I find the contractor?\u201d And then you got to take those off and put on a different set of goggles.
But I really think this is something that I\u2019ve learned to do when people ask me, \u201cHow do you do everything?\u201d It\u2019s because I figured out this skill. I can take my glasses on and off, or my goggles, if you will, depending on the scenario that I\u2019m in, and emotionally I can hit a different sort of \u2026 Just like your phone has different profiles, you\u2019ve got silent mode, you\u2019ve got loud mode. You\u2019ve got all these different ways that you can have your phone act. As a human, you got to be able to learn how to do the same thing.
Also, I want to say, I love the T-shirt that you\u2019re wearing, way to go representing BiggerPockets. Please let us know if you would ever like to make a switch and talk with us about working with us. And for everybody listening, I think Nicole\u2019s got a great story. She couldn\u2019t get into the investing world like she wanted, so she said, \u201cYou know what? I\u2019m going to leave my job and I\u2019m going to get deeper into real estate. Even if it\u2019s not a full-time investor.\u201d I would highly encourage many of you, as that\u2019s the right move.
It used to be, quit your job, go full-time investing. Quit your job, go on the beach and drink cocktails all day long while you do deals from your phone. And for a handful of people that have that skillset, I do think that is a good option, but the vast majority of people, quitting your job in a market as uncertain as this, I just can\u2019t in good conscious recommend that. I don\u2019t think that right now is the time to take that risk. We don\u2019t know what\u2019s going to happen. We don\u2019t know if the bottom\u2019s going to drop out. We don\u2019t know if inflation\u2019s going to take off even more. There is so much uncertainty and we\u2019re all sitting, waiting to see how this is going to play out. That you want as much certainty as possible in other parts of your life.
So, if you\u2019re thinking you hate your job, you want to get more into real estate. Don\u2019t think just quit it and go full-time investing. How do you learn a new trade? How do you learn a new skill set? How do you get involved deeper into real estate without being a full-time investor, to make more money, to put into investing? And that\u2019s why I\u2019m giving the advice to Nicole than I am. Once you make that jump, there\u2019s another jump you have to take. You got to learn how to take off certain goggles and put on other ones. I really appreciate this question. I think this was awesome, Nicole. I wish I could have given you the name of a book to read. Unfortunately, there isn\u2019t one and might not be until I write it. But in the meantime, you got to find the right mentor.
In the world of real estate sales and loan commissions, and even maybe insurance providing, title and escrow, your mentor is your broker. So, pick the right broker carefully. It\u2019s not about the best split you can get or a title that they give you, that makes you feel special, or a business card that looks better than another one. It\u2019s the human being that you are working underneath that\u2019s going to determine how successful you become.
So, everyone here listening, if you\u2019re not super happy with the current broker you have, when you go look for a new one, don\u2019t just ask the question about what\u2019s the commission split? Ask the question of how they are going to develop you as a professional. Mentorship is still the way that people progress through life. If you look at the people that are most successful, they always had the best mentor. Sometimes, that was their parents that they got to start off with. Other times, they just got lucky and their friends\u2019 dad or mom brought them into the world. But no matter how you look at it, the mentor is huge, so make a big effort to find the right one. Thanks, Nicole. I\u2019d like to hear from you again. Let me know how your career is progressing.
All right. Question number two is from Colin, \u201cHi, David. I\u2019ve found myself surrounded by great real estate professionals. I, myself, am not licensed. I have one agent in my area that I worked with to buy my current house hack, which was a duplex. She has me on a few drip campaigns and I really enjoyed working with her. My mom, who is licensed in another state, referred me to this person. Since moving into the area two years ago, I\u2019ve made friends with several other agents. I\u2019ve got one that is a prospective business partner, so I assume she\u2019d want to represent us if we go that route. I have another friend that I\u2019d love to learn short-term rentals from. My question is, with all these real estate professionals in my circle, are there boundaries, faux pas, red lines, et cetera, I need to be careful of? I don\u2019t want to alienate any of these friends and\/or business relationships on the path to further building my business.\u201d
My goodness, Colin. I love this question. Just the fact you\u2019re asking it shows that you\u2019re a person of character and that tells me you are much more likely to be successful. I wish you lived in California, because I\u2019d love to be able to do business with somebody like you, who\u2019s asking these questions. Let\u2019s get into the macro, big view, and then we\u2019ll zoom in on your question.
Where this is coming from is you\u2019re understanding that it\u2019s not really cool to have a real estate agent looking for you to buy a house and then have four other ones that are all doing the same thing. And then, basically what people like to do is set their agents up to be like, \u201cHey, you could be one of several, whichever one of you brings me the deal first is the one I\u2019m going to buy from.\u201d That always sounds good when you\u2019re the person who\u2019s buying the house. The problem is, at this stage, it\u2019s not hard to find a buyer, they\u2019re everywhere. It\u2019s hard to find a deal for the buyer.
And by trying to date several agents in a market where you\u2019re not as valuable as you used to be, because buyers are not as important, or I shouldn\u2019t say important, buyers are not as easy to work with for an agent, as a seller. You probably get none of those agents giving you their best effort and you\u2019re more likely to fail. So, I\u2019m glad that you\u2019re asking this question. I think one of the things you have to do is be very clear yourself, on what you want from the agent.
So, here\u2019s what I find being an investor and a real estate agent. Oftentimes, when I\u2019m looking, as the investor and I\u2019m going to hire an agent, I\u2019m going to talk to them about what they know about the area, what contacts they have and how they can help me. So, the agent that I used to buy the house in Scottsdale that I bought with Rob, owns several luxury properties in that area themselves and they run a property management company. So, we used them, not necessarily because they\u2019re the best negotiator, because like I said, I provided some of the information of what I wanted them to do.
But once the sale was locked up, man, they had the pool company we wanted, they had a person they put in touch with to help us come up with the design that we should go with. They had contractor recommendations. They had a security company we could go to make sure people aren\u2019t having a party. It was very, very, very helpful to have a person who owned properties themselves in that area, representing us. But I knew that was coming at the price of they\u2019re not going to be the best when it comes to negotiating.
I used them for information for the area, but I also knew this was the agent I\u2019m going to buy a house with. So, I didn\u2019t feel bad about asking them information. What you don\u2019t want to do is be the investor that talks to real estate agents and thinks that you should get free information from them without committing to working with them. This happens a lot. Now, BiggerPockets is awesome, we provide you with free information. That is why we make this podcast, to teach you everything we can about real estate. And then, I go start businesses to learn it, so I can come back here and teach you what I learned from the business. But you can\u2019t expect that same level of service and commitment from all the different professionals you work with.
It\u2019s not cool to talk to a CPA for three hours about tax strategy and then not use them to be your CPA, and go find another one that\u2019s cheaper and say, \u201cHey, you should use this strategy that I just got from this other person.\u201d I hope that everybody\u2019s understanding, these are professionals that you\u2019re not paying and it\u2019s not good to conflate the free service you get with BiggerPockets to how the rest of the world works that isn\u2019t in BiggerPockets. And a lot of people make this mistake and they rub agents, or loan officers, or CPAs, or insurance providers, or handymen, or property managers, or all the people that you need, the wrong way because they expect free information without commitment.
So, when it comes to your specific situation, Colin, my recommendation would be, the person who helped you buy your house hack is the agent that you use when you\u2019re buying a primary residence. You like that person. They did a good job there. And you continue to send them referrals for other people that want to buy a primary residence. If you\u2019re wanting to buy investment property, you use the agent who you feel more comfortable with that, and you just tell your agent, \u201cHey, I thought you did a great job helping me buy my house. I\u2019m going to continue to refer other people to you who want to buy their own house. But I found another agent who specializes in investment property and I\u2019m going to be working with them to buy the investment property I want.\u201d
You can tell that same agent that you\u2019re going to be buying investment property with, \u201cWhen it comes to short-term rentals specifically, I have somebody else that I\u2019m using.\u201d Let the agent make the decision if they want to commit to finding you a deal or if they feel that you\u2019re being pulled in three ways that they can say, \u201cHey, I appreciate that. I\u2019m not going to look for properties for you. But if you find one you want to buy, feel free to come to me and I can give you my advice on it.\u201d It\u2019s that upfront communication that is so important.
You would want to know if your agent stopped looking for deals for you. If they just put you on a drip campaign and ignored you. Every one of us would want to know that, right? So, offer that same level of respect and courtesy back to them, \u201cI\u2019m not going to be buying a house from you unless it meets these criteria.\u201d Just like you should get to decide if you want to use that agent and they shouldn\u2019t be not telling you that they\u2019re not working for you. The same is true, where you should be telling them, \u201cI\u2019m going to be using other agents for different purposes.\u201d And then everyone, as adults, can make their decision, what level of commitment they want to put towards it. And you can have that conversation and get it all laid out ahead of time.
You do that, no one\u2019s going to be upset with you. There\u2019s not an agent out there who\u2019s going to say, \u201cI can\u2019t believe that you were upfront and told me ahead of time you\u2019re going to be working with another person.\u201d What they don\u2019t want is to be spending their nights and weekends up late, looking for properties, calling listing agents, giving up time with their kids, giving up their personal time to find you a house. And then when they do, you say, \u201cOh, thanks, but I\u2019m going to have someone else represent me on this.\u201d That\u2019s what will upset people. Thank you for asking this question. I think this is very relevant and helpful to our community as a whole, as we try to learn how to deal with everybody else. And I appreciate you bringing this to the forefront.<\/p>\n
Hello, David. My name is Jeroe Jackson. I am a new investor just hitting my six-month mark now. And I\u2019m currently working on some BRRRR deals as well as getting a property under contract for short-term rentals. I\u2019m actually in two markets. I live in Florence, South Carolina, that\u2019s my primary market and I\u2019m relocating into Atlanta, Georgia. And so, soon that\u2019ll be my secondary market. My question is this, it\u2019s around getting small, multi-family properties and utilizing seller financing. There\u2019s been a ton of information that BiggerPockets has offered around how to structure these deals and how to place offers. However, more specifically, I\u2019d like to get your input on, if I know that the seller is motivated because they want to do a 1031 exchange, how can I still get into small, multi-family properties, that\u2019ll cash flow immediately, especially if the properties could use some rehab work such as electrical or roof work, while putting very little money down?
I prefer not to put 20% down. My original thoughts were A, I could try to place an offer at asking and hope that the seller would be willing to do seller financing in some form of that, at full asking price. However, again, if they\u2019re not motivated, because they want to do a all cash purchase deal, so they could do a 1031, that might not be the best case.
B, I could do a all cash offer via conventional or hard money by putting 20% down on the property and that\u2019ll help the seller out, but it wouldn\u2019t help me with my goals. I prefer not to put 20% down on a rental property. Or C, I\u2019m thinking I\u2019d do a hard money lender for 10% down and evict the tenants and do a rehab. However, that also isn\u2019t sitting too well with me.
So again, just to reiterate, I would like to get your input on how I can get into small, multi-family deals with as little money down and knowing that sellers may be motivated because they want to do 1031 exchanges. What options should I consider that I haven\u2019t thought of yet? Thanks. Bye.<\/p>\n
All right, Jeroe. Thank you for that. Let\u2019s look at this situation from the seller\u2019s perspective. So, I hear what you\u2019re saying is, what it sounds like is you\u2019re trying to balance your needs with their needs and you want a creative solution that will come in the middle. And that is a good starting point, but if you want to get practical about how to move forward, there\u2019s a way that you can approach how you are looking at the situation to determine the right scenario.
The first thing that you have to understand is if you want to use seller financing or you want to put less money down, you are probably going to be looking at an off-market opportunity. And the reason is, if you have to use a loan to buy the property, they aren\u2019t going to want you to have another mortgage in second position behind theirs, which would be the seller financing.
So, you can do things that way, if you can get the seller to agree with it and if the lender agrees with it, but in many cases, if you\u2019re trying to buy a property with the loan, it\u2019s hard to use seller financing for the next part of it. And if you\u2019re wanting to use seller financing for the whole thing, you\u2019re probably looking at a seller that doesn\u2019t have other buyers, because most sellers don\u2019t like seller financing. Now, you could find one that wants seller financing, which is the ultimate goal.
But this is the mistake I see a lot of people make. They assume they\u2019re going to find a seller of a house they want and convince the seller why they should do seller financing. And when it doesn\u2019t work, they get frustrated and they come say, \u201cHow do I make this person sell me their house with seller financing?\u201d It doesn\u2019t work. It\u2019s like finding a person who\u2019s not looking for a relationship and trying to convince them why they should date you. If they don\u2019t want to date you, they\u2019re not going to date you. What everyone would say is, \u201cMove on and find someone that does want to date you.\u201d It\u2019s like that with real estate too.
When you find off-market deals, they are more likely to be open to the idea of seller financing, because usually when there\u2019s an off-market deal, it\u2019s someone who doesn\u2019t like realtors. So, they\u2019ve got this tunnel vision where they\u2019re like, \u201cCommissions are bad. I don\u2019t want commissions.\u201d And they don\u2019t realize that they\u2019re not getting good representation. They often make bad decisions, just to be frank, when it comes to their own best interest. Those are the people that I\u2019ve seen are most likely to be open to seller financing. So, if that\u2019s something that you have to have, my recommendation would be, don\u2019t look at properties that are on-market.
Now, when you do find a seller who says, \u201cI\u2019m not interested in seller financing.\u201d Let it go. Move on to the next one. If you get one that says, \u201cYeah, how would that work?\u201d And you can come to terms on the seller financing, that\u2019s where you start having these conversations about creative options. That\u2019s where you can start looking at using a hard money loan to buy a property or having them do seller financing for the down payment and you borrow the money from a lender. So, maybe it\u2019s like 80% of the cost comes from the lender and then the other 20% comes from a loan of the seller made to you. Assuming that the lender\u2019s okay with it.
Now, regarding the part of your question that has a seller that\u2019s motivated because they\u2019re going to do a 1031 exchange. The best thing to do is to put yourself in the position of the seller. So, if I own a property and I\u2019m going to do a 1031 exchange, there\u2019s some motivation for why I want to sell my property and buy another one. Now, I\u2019ve found it really boils down to two reasons why investors sell properties. It\u2019s pretty wild, but hear me out. The first reason that they want to sell a property is they found a better one. That\u2019s when they would be using a 1031 exchange.
So, if somebody\u2019s got a property and they go, \u201cHey, you know what? I just think I have a lot of equity in this thing. It\u2019s not performing well. I want to be in a different neighborhood. I want to be in a better market. I\u2019m going to sell a perfectly fine rental property to get a better one.\u201d Now, the more common reason that people sell homes is there is a problem with it. That tenants aren\u2019t paying the rent, the tenants are giving them a headache. It\u2019s in a bad area. They think that they could do better in a different area. The house itself has deferred maintenance.
I mean, let\u2019s all be honest, think about every car you\u2019ve ever had, at what point do you think, \u201cI want to sell this?\u201d You either have a car you want that\u2019s nicer, or you know your car\u2019s starting to break down and you want to pass the problem onto somebody else. And this is something every investor needs to be aware of as a buyer. If you\u2019re buying a property from a real estate investor, it\u2019s important to know why they want to sell it, if they\u2019ll tell you that. Oftentimes, there\u2019s problems you\u2019re not aware of, that they\u2019re trying to pass on to you. Just like when somebody decides they want to sell their car.
Now, what would make more sense would be if you hear, \u201cI\u2019m selling the property because we have to move. \u201cI\u2019m selling the property because the owner just died and it\u2019s gone into probate and I don\u2019t want to own the rental property.\u201d Something like that, that makes logical sense, that isn\u2019t, it\u2019s because the house has a bunch of issues or the tenant has a bunch of issues, would be a more desirable reason for me to look into that deal.
Now, in this case, if they\u2019re going to be selling the rental property because of issues with the house, you should be aware of that. If they\u2019re going to be selling because they want a better property, that\u2019s usually good for you as the buyer. What you have to understand about a 1031 is that from the seller\u2019s position, they have two concerns. The first is, \u201cCan I sell the property?\u201d The second is, \u201cCan I meet the requirements of the 1031?\u201d Assuming they can sell the property, because you\u2019re telling them that they want to buy it, they now only have one problem to solve, \u201cCan I meet the conditions of a 1031?\u201d
And that can be split up into two things, \u201cCan I identify a property within 45 days? And can I close on a property within 180 days?\u201d So, in order for them to do that, they\u2019re going to need to be talking to a loan officer to find out, \u201cCan I get pre-approved?\u201d They\u2019re going to need to be talking to agents in different areas to try to find out, \u201cCan I buy a house in this place?\u201d What you find is their biggest concern is time. A quick close is usually not good in a 1031. So, we should all be careful we don\u2019t make the assumption that every seller wants a quick close. That comes from primary residences where someone wants to get out from underneath it and buy a better house. But in a 1031, you might want to set it up where if they give you your price and they give you the terms you want, you give them an escrow period that\u2019s longer, that they have the option of selling it under a shorter period of time.
So, if you say, \u201cLook, I\u2019ll give you 90 days before we close.\u201d And then after that 90 days is when their 45 day timeline starts for identifying property. That would be great. But if they identify property early and they think they can get it, you leave the door open that you could do a faster close in that scenario, that will help them. That approach of looking at it from the seller\u2019s perspective, makes them much more likely to work with you, because you\u2019re relieving the pressure that they\u2019re going to be feeling. And if you can find a way to give the seller what they want, where you\u2019ve relieved their pressure and they feel good about the deal, they are way more likely to give you what you want, which is possible seller financing.
Hope that helps and good luck out there. All right. I got to say, we\u2019ve had some great questions so far. This has been a very fun and I think, relevant episode for a lot of the struggles that investors are going through today. So, kudos to everybody that sent in a video or a written question. I love that. If you would like to be featured on the show, we want you here. Please check out biggerpockets.com\/david and submit your question today.
In addition to that, I want to hear, what do you think about the show? Leave me a comment on YouTube and tell me what you think about my answers, what you think about the questions, what questions that you have that are not being addressed. And most importantly, let me know, do you like how I\u2019m dressed? I dressed up for everybody today. I actually put on a shirt that has collars and buttons. And I\u2019m not going to do this all the time, if you guys don\u2019t appreciate it. So, let me know if you like T-shirt David better or collared-shirt David better. And let\u2019s see if we can get a big debate going on in the comment section of YouTube.
Lastly, please, if you like these shows, hit the subscribe button. It\u2019s super easy. We at BiggerPockets love it when you do that and you\u2019ll be notified when new episodes like this come out. So, you don\u2019t have to think to check it. YouTube will just tell you, \u201cHere you go, hot and ready, another Seeing Greene episode of BiggerPockets.\u201d All right, at this segment of the show, I like to read some of the comments that people have left on previous episodes, so you can see what you could be doing yourself.
The first one comes from S. Adams, \u201cI too, stopped listening to the BiggerPockets Podcast for two-plus years until David took over. The new content is something I can relate to. I\u2019m almost able to take something away from every episode. That was a huge change for BP. Thank you, Dave.\u201d Well, awesome. I\u2019m glad that you feel that way. Hopefully, there\u2019s more people like you that also agree.
Next comes from Joe Picasso, \u201cYour show has all the questions I didn\u2019t think to ask.\u201d That is a pretty cool comment. I like that. And that\u2019s actually what the goal of this is. Most podcasts just ask the same questions, tell the same stories. It\u2019s all the same stuff you\u2019ve heard a bunch of times before. From my experience as a real estate agent, as a real estate investor, as a triple net investor, as a short-term rental, as a long-term rental, as multi-family, as a note holder, as someone who flips properties, and as a loan officer, I like to bring the questions people don\u2019t know they should be asking. So, I really appreciate the advice you\u2019re giving there.
And the last one from Tessa Higgins, \u201cI love the format. Even if I don\u2019t listen to the other episodes every week, I always listen to the Seeing Greene one each week.\u201d Well, that\u2019s nice. Thank you for that, Tessa. If you\u2019re trying to figure out if it\u2019s a Seeing Greene episode or a non-Seeing Greene episode, just check out the light behind me. I try to turn it green every single time we\u2019re doing Seeing Greene. That\u2019s not a coincidence.
And shout-out to all the people who take some time to submit these questions. I love that. And to be frank with you, those are people that are more likely to be successful in their investing, because they are getting involved in the community. I\u2019m really on a campaign right now to take people out of, I\u2019m just peeking in through the window and I\u2019m looking to see what everyone\u2019s doing, to opening the door and stepping inside to this community. Getting more involved and taking the journey that we\u2019re all taking together. All right.
It\u2019s scary to think about jumping off a cliff and hoping that you like where you land. And that\u2019s what it can often feel like when you\u2019re trying to invest in real estate by yourself. But it\u2019s much more fun when you join a group of 10, 20, 30, two million other people, that are all walking the same path, that can help each other out on that path. So, please get yourself on the path. Go to BiggerPockets, make a profile there, consider becoming a pro member. I think that that\u2019s a great way to get yourself involved. Subscribe to this podcast and leave me comments. Let me know what you think. All right, let\u2019s take another video question.<\/p>\n
Hey, David, big fan of the show. My question is regarding receiving gift funds in making real estate investments. So, I\u2019m a young guy and I bought my first property last year with gift funds from my parents as part of the down payment. And that was as a primary residence. And now when I went to buy my second one as an investment property, the lender told me that I can\u2019t do that, because you can\u2019t provide gifts funds for an investment loan. So, now what we\u2019re thinking of doing is using a hard money lender and then refinancing into traditional loan for a lower rate. You think that\u2019s a good strategy? Any other thoughts regarding gift funds for investing in real estate? Appreciate it.<\/p>\n
Thank you there, Alex. From my understanding, you were actually told the correct information from your loan officer, gift funds are allowed for a primary residence when it\u2019s from someone like a family member, they\u2019re not allowed for investment property. And the reason is, the lender\u2019s looking at your debt to income ratio and they\u2019re determining your ability to pay something back. Well, if you\u2019re taking out a loan from someone else, which you may call a gift fund, but it isn\u2019t always an actual gift, they expect it to be paid back, that creates concerns about your ability to pay off your mortgage, if you also have additional debt where you have to pay back the person you borrow the money from.
So, that\u2019s where the whole gift funds things comes from. And it does apply to investment properties, where that\u2019s not allowed. Your strategy as an alternate was basically describing the BRRR. And that\u2019s exactly what I do think that you should do. Another thing that you could consider, instead of having your parents or your friends give you money as a gift payment for this investment property, see if they can be a partial owner. See if you could put their name on the title or create an LLC with them in it together, and use that LLC to hold title. And what they would\u2019ve given you as gift funds can just be their contribution of the down payment. Talk to your loan officer and see if that strategy would work. That\u2019s another pretty viable option for you.
Now, the last part of your question was, what advice do you have regarding gift funds? And I\u2019m going to go back to the same thing I keep saying, that people might be tired of hearing, but it\u2019s just this important, I got to keep hammering it out. This is the broccoli that no little kid wants to eat, but everybody needs to hear. This is why house hacking is such a superior strategy to everything else. It\u2019s better than BRRRR. It\u2019s better than long-distance investing. It\u2019s better than everything.
Just consider that if you house hack with a 3.5% down, FHA loan, many BRRRRs leave much more than 3.5% in the deal. I\u2019ll hear people say, \u201cI want to BRRRR my primary residence.\u201d And my question is, \u201cWhy? Why go through all that work, if you can just put 3.5% down and be done with?\u201d It\u2019s basically a pretty good BRRRR right off the bat, because you\u2019re not having to get money back. You only had to put a little bit in down. You didn\u2019t have to put a ton of money in. And when you house hack, you get the primary residence loan, so you can put less than 20% down. You get a better interest rate. You can use gift funds.
All the things that make real estate ownership easier to acquire, happen when you\u2019re buying a primary residence. And if you buy the right one, when you leave, it becomes a rental property that you didn\u2019t have to put 20% down on and you didn\u2019t have to use the BRRR strategy for. Do you see what I\u2019m getting at? I call this the sneaky rental tactic, because you end up buying a rental property that you just have to wait a year before you can use it for that. But in the meantime, you save a bunch of money on your mortgage.
Now, I hope you guys can understand, I wrote Long-Distance Investing. I wrote the book on BRRRR. I use both of those strategies. I still think house hacking is better than all of them. You can just only do it once a year. So, that\u2019s why I tell people house hack one house every single year. Anything in addition to that, consider some of these other strategies like long-distance investing, BRRRR investing, some of the other stuff that we talk about. Moral of the story, house hack whenever you can.
All right. Our next question comes from Davis in Georgia, \u201cOn the mortgage side, the rising interest rates have been making predicting cash flow a little difficult. Do you see increased availability of fixed rate mortgages with longer amortization, for example, 35 to 40 years in the future? Would this be a benefit for investors to increase cash flow or do you think it would increase risk? I appreciate all your wisdom.\u201d
All right, let\u2019s break this down. Davis, I assume that you are talking about commercial multi-family type property. In residential properties, we\u2019re not seeing adjustable rate mortgages very often. There\u2019s actually products that my loan company offers and other loan companies, I believe, are starting to offer them as well, where you can get a 30-year fixed rate, but it\u2019s still based on the income of the property, not the income of the person. So, from that situation, it\u2019s still low-risk. It\u2019s not going to change your cash flow, if you know what your interest rate is, it\u2019s the same for 30 years.
My assumption is that you\u2019re referring to when interest rates adjust on some of these commercial properties. So, you get a 3\/1 ARM or a 5\/1 ARM. If you\u2019ve ever heard people talk about these ARMs, that stands for adjustable rate mortgage. And when you hear them say 5\/1 or 3\/1, the first number is how long, in years, the period will be where you get the same interest rate. And the second number is after it becomes adjustable, how often can it adjust? So, a 5\/1 ARM would mean for the first five years, your interest rate is locked in place, and after that every one year, it can adjust to a higher rate.
Now, what I like about your question is I think you\u2019re looking the right way when it comes to a crash. Okay? Here\u2019s my personal opinion. I can\u2019t state this as fact, because none of us know what the facts are, but here is how I see crashes tend to happen in real estate. They are not as related to the price of homes as people think. Home prices going up quickly or very high is more of a byproduct of what causes a crash. It\u2019s not what causes the crash. What typically causes the crash is either the entire economy tanking, in which case real estate is not crashing, the whole economy is crashing. So, everything tends to crash when that happens.
And I don\u2019t think it makes sense to worry about that scenario, because it doesn\u2019t matter where you put your money. If you put it in crypto, if you put it in NFTs, if you put it in stocks, you put it in bonds, you put it in Treasury bills, whatever it was, it typically all crashes when the economy crashes. So, the specifics are, it\u2019s usually related to debt and the cost of debt and the availability of debt.
So, here\u2019s how I see it happening. This is what happened during the last crash and this is what I\u2019m always looking for in my position as a real estate broker and loan broker, to see if I see another crash coming. Home prices are this hand, this is my left hand. And home affordability is my right hand. All right? They tend to move up at the same pace, and people have to be able to afford the house they\u2019re buying. Well, if demand gets so high and supply is too low, what you see is that the price of a house gets higher and higher and higher than the average person can afford. I don\u2019t think we\u2019re there yet. We haven\u2019t had that problem. All the loans that we\u2019re giving out are still based on debt to income ratios.
Now, it\u2019s probably wealthier people that are buying houses. I will agree, that\u2019s a problem. It\u2019s harder for the people that aren\u2019t super wealthy to buy real estate. But those that are buying it, are not buying real estate they cannot afford. And that\u2019s one reason I don\u2019t see a crash coming anytime soon, they can still afford what they\u2019re buying. But here\u2019s what you\u2019ll find, at a certain point home prices are much higher than what the average person can afford. And what that means is that banks that make these loans or the lenders that are giving out money are like, \u201cMan, we got all this money to lend and we got no one to lend it to, so we\u2019re not earning interest on it. And our employees aren\u2019t making any money because they\u2019re not getting any commissions from doing loans. There\u2019s only a handful of people buying all the real estate. We need to increase the velocity of how often people can buy a house, so we can make more money.\u201d
And at that point they have to be creative in solving the problem of what a house is worth on the free market and what the average person can afford. And the gap between those two things is typically what causes the problem. So, when they start coming out with loan products where they say, \u201cWell, you can only get approved for a $600,000 house, but all the houses around here are $800,000. What if we give you an adjustable rate mortgage for the first three years at 0%, because you could afford the house at 0% interest rate, but then after three years, it\u2019ll adjust. What if we find some way to not make you put as much money down to come up with the difference? What if we let you cross collateralize this with some other asset that you own?\u201d
When you see tricky creative solutions in the financing department, starting to be applied to make real estate affordable, because by its very nature, it is not affordable, that to me, is the beginning of a crash. That is what I\u2019m looking for. So, what we\u2019re seeing right now is a lot of loans that are being made based off of an income that a property produces. That\u2019s not crazy wild. Okay. I don\u2019t agree with the people that say, \u201cOh, they\u2019re giving out debt service loans. That\u2019s bad.\u201d We\u2019ve bought commercial property like that forever. As long as I\u2019ve been around, that\u2019s how they determine how much you\u2019re allowed to borrow for a commercial property. It\u2019s, what is the property producing?
In some ways, that\u2019s actually smarter and safer than making it based on the debt of the human being, because they could just go out there and load themselves up with debt, buying cars or stupid things. And now they can\u2019t afford the payment. The problem would be if they made these adjustable rates or other creative solutions with financing. And they\u2019re not, they\u2019re still 30-year fixed rates. So, to me, you know what your payment\u2019s going to be, you can budget around it. That\u2019s not any riskier than a different kind of loan that\u2019s based off your personal DTI.
But if I start seeing them say, \u201cFor the first couple years, your rate\u2019s only whatever.\u201d That scares me. Those are sales tactics, right? When you see a furniture store that\u2019s like, \u201cYou pay this much for a couch,\u201d and it\u2019s really high, \u201cbut no payments for the first year.\u201d Oh, I don\u2019t like that at all. What kind of a person is that drawing? It\u2019s usually a person that can\u2019t afford a couch. Not always, but often. When I see car companies doing that, \u201cGet 0% interest for the first three years, and then it\u2019s going to jump up to 9%.\u201d But they put that in the fine print. What that makes me think is they\u2019re targeting people that can\u2019t afford that car or that truck. All right?
Now, they can get away with that, because if you can\u2019t afford your payment, maybe you sell it back to them at a big loss to yourself, but now they can go lease it to someone else. It makes sense for the car companies to do that, not for the person buying the car. Well, in real estate, lenders don\u2019t like taking back homes. If your loan is being given to you by a company that understands real estate investing and they want to own your property, well, shoot, if you can\u2019t make the payment, they\u2019ll foreclose and they\u2019ll just manage it themselves. We just don\u2019t have that happening right now. That typically leads to foreclosures. They get put back on the market at reduced rates. And then when that starts happening at a grand scale, boom, we have a recession.
So, to sum all this up, what I\u2019m concerned about in the future is creative financing that shouldn\u2019t be making sense. If you start to see banks that are like, \u201cMan, everyone we\u2019re pre-approving is not getting pre-approved for enough to buy the house. We have to figure out a way to make up the difference.\u201d That\u2019s bad. You\u2019re asking me, if I was President of the United States, rather than having loan companies create creative, tricky financing, I would be incentivizing people to build more rental properties, to build more homes, to build more supply, to balance out the supply with the demand. That\u2019s the healthy way to approach it. It\u2019s just not always the approach that we end up taking.<\/p>\n
Hey, David, how are you? My name\u2019s Anthony Zato. And my question is about multi-family strategies and partnerships. So, I am 24-years-old and I am 50\/50 partners on four separate duplexes. One of my deals in particularly, I am partners with my father. He is in his late 50s and we have a lot of equity in the property and I would like to cash out, refi the property to purchase more rentals. And he would like to pay off the property to experience higher cash flow.
So, I guess my question would be, is there any way to satisfy both parties? I\u2019m happy either way, but I just feel like making my money work more efficiently for me would benefit me, because I\u2019m a little younger and I have some more time to experience the benefits. Thanks.<\/p>\n
Hey, Anthony, thanks for asking. Life is good right now. And I love that you asked this question. To be completely honest, this is one of the reasons that I rarely ever partner with other people. It\u2019s only happened a handful of times in my life, and even then only recently, and even then only on really big deals. And even then, only with people that I have other business interests with in other areas. And here is why, partnerships always sound like buying real estate is less scary. My friend, Daniel Del Rio, likes to make the claim, \u201cNobody likes to take the jump alone.\u201d It\u2019s always more fun if you got a person there to do it with you.
The problem is, once you\u2019ve taken the plunge and you\u2019re in the water, you now have to do a lot more work and keep a lot more people happy. And what you\u2019re describing is the quintessential problem with partnerships. Somebody wants to play offense, like you, where they want to keep building and scaling. Somebody wants to play defense, like your partner, who says, \u201cNope, let\u2019s pay them off and let\u2019s have cash flow.\u201d And there is no way to reconcile that. And this is just one of the things when you\u2019re choosing your partner, it\u2019s not that age is the relevant factor, but in general, people that are older want to play defense and people that are younger want to play offense. And so, you got yourself entangled up in this situation with somebody who has completely different goals than you.
So, now that you\u2019ve taken the plunge, they\u2019re swimming this way, you\u2019re swimming this way. The further you get apart, the more tension starts to come in the relationship. So, as far as practical advice for you on the next deal, don\u2019t do it. Figure out a way to do it without a partnership. And if you have to have a partnership, don\u2019t do equity splits. This is one of the reasons that in general, I don\u2019t do equity. I pay people debt. What that means is people let me borrow money all the time and I just pay them a return that they know they\u2019re going to get. And it doesn\u2019t matter if the property completely falls apart, they get paid anyways.
I don\u2019t like sharing risk with people that I\u2019m a partner with, because it ruins relationships, and it\u2019s important to me that those relationships stay healthy. I also don\u2019t like a person who isn\u2019t me, having some input in what direction we should take the property. If they\u2019re a genius, of course, I\u2019d rather have them putting in some input, but most geniuses don\u2019t need to partner with me. They would set it up to where I was getting paid debt instead of equity. In general, you don\u2019t want two CEOs. You don\u2019t want two team captains. There has to be a person whose vision that the group is going to follow. And unfortunately, in your case, when you have equity partners, which always sounds good, you end up with this problem of vision.
Now, how you can salvage. What I like that you said is you\u2019re a half owner in four duplexes. Assuming they\u2019re all relatively valued the same, what if you split up your partnership and said, \u201cI\u2019ll take these two and you take these two. You pay off yours. I\u2019ll refinance mine to go buy more.\u201d Both people get to be happy. And most importantly, you get out of this partnership that isn\u2019t a bad partnership, it\u2019s not like you guys are fighting, but you have different visions. And if you have different visions, you don\u2019t want to stay long-term with those same people.
This is what human beings need to understand when they want to partner. If you go for the emotional security of having a partner, it makes it easier in the front end, it becomes much more difficult on the back end. And I know I have people listening to this that are nodding their head and saying, \u201cYep, that\u2019s exactly what happens. Nobody ever thinks that was what would go down, but that is what goes down.\u201d And for a lot of the people that do business with me, they\u2019re confused at first as to why I don\u2019t want to be 50\/50 partners. And this is why, they will do better, they will make more money if they let me stay in the position where I\u2019m the visionary and they\u2019re following my vision. They will be happier. Our relationship will be better.
The minute you have the 50\/50 thing, you have people\u2019s egos getting involved. You have people saying, \u201cWell, why can\u2019t I get to have advice?\u201d Even though they\u2019re not someone who logically should be putting in their 2 cents. Or you have the problem of someone saying, \u201cI think we have a crash coming.\u201d And someone else say, \u201cI think the market\u2019s going to run up.\u201d Does that sound familiar? That\u2019s pretty much where we are right now. So, I\u2019m sorry to hear about your situation. It could be worse, but I do think what you should try to do is dissolve the partnership. Each of you take two of the duplexes. Maybe you get appraisals on them and if somebody\u2019s side has $30,000 more than the other, you figure out some way to make payments to that person until that 30,000 is paid off or something like that. Let them do what they want to do and you go do what you want to do.
Luckily, you\u2019re able to get out of this situation, I think, because it\u2019s a family member and because you have an even number of properties, but it might not be that easy in the future. So, you\u2019re better off to cut it off now. Thank you for your question and let us know how that goes.
All right, everybody, that was our show. Another episode of Seeing Greene, and maybe one of the best ones that we\u2019ve ever done. I don\u2019t know, maybe I\u2019m biased, but I like these difficult questions. This wasn\u2019t the typical, \u201cWhat kind of loan should I use?\u201d Or, \u201cWhat areas should I invest in?\u201d These were some deeper, nuanced, more difficult questions that are super relevant to being successful in real estate investing. \u201cWho should I partner with?\u201d \u201cHow should I dissolve this partnership?\u201d \u201cWhat\u2019s going to make the market crash?\u201d \u201cWhat do you think about the future of financing?\u201d \u201cI\u2019m a new loan officer. How can I be better at my job?\u201d That might be my favorite question ever. Someone saying, \u201cHow can I be a better human?\u201d Whether it\u2019s, \u201cI want to be better at my job.\u201d \u201cI want to be in better relationships.\u201d \u201cI want to be better in fitness.\u201d Whatever it is, I love the question of, \u201cHow can I be better?\u201d And on the other end of that, tends to be success.
So, thank you all who submitted a question. If you\u2019re listening to this, I want to hear from you. Please go to biggerpockets.com\/david. We would\u2019ve come up with this earlier, we just couldn\u2019t figure out what URL to use. Luckily, we figured that out. I\u2019m David, so go to biggerpockets.com\/david, and leave your question there for me to answer. And one more time, I just want to remind you, please leave me a comment on YouTube. Tell us what you think. Tell us what you\u2019d like to hear more of. Tell us what you loved about the show and then subscribe to the channel. Thank you very much for being here. I will see you on the next one. This is David Greene for BiggerPockets, signing off.<\/p>\n