\n<\/p>\n
Investment properties are hard to find<\/strong>\u2014unless you use the tips Jonathan Greene<\/strong> mentions in today\u2019s episode. If you\u2019re like most real estate investors, you know that in 2022, it can feel like you\u2019re constantly getting nickeled and dimed over every aspect of your offer<\/strong>. The seller wants more money, a quicker closing, refuses to give seller concessions<\/a>, and acts like their often outdated, structurally unsound property is worth as much as their neighbors\u2019 new construction down the street.<\/p>\n How do you <\/strong>negotiate with these sellers<\/strong><\/a> to actually get the deal done at a price that won\u2019t destroy your future profits? Or, maybe a better question to ask is, how do you find deals already on the market, with desperate sellers<\/strong> waiting to accept any offer that comes their way? What if you\u2019re a brand new real estate investor, still looking for your first rental property<\/a>? How do you get on the same wavelength as a tough seller?<\/p>\n Jonathan Greene is known around the BiggerPockets forums as a millionaire mentor. He left his career as a criminal prosecutor to start profiting from investment properties<\/strong>. Now, he runs an agent team that has built seriously strong negotiation tactics, and Jonathan still invests heavily on the side. He\u2019s walked away from more deals than he can count. But, he\u2019s also won deals that other investors would have no chance at acquiring<\/strong>. Want to repeat how Jonathan did it? You\u2019ll hear it all in this episode!<\/p>\n David: Jonathan: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Jonathan: David: Jonathan: David: Jonathan: Rob: Jonathan: Rob: Jonathan: David: Jonathan: Rob: Jonathan: David: Jonathan: Rob: Jonathan: Rob: Jonathan: Rob: Jonathan: Rob: Jonathan: David: Jonathan: David: Jonathan: David: Jonathan: David: Rob: Jonathan: David: Jonathan: Rob: Jonathan: Rob: David: Jonathan: Rob: Jonathan: David: Jonathan: Rob: Jonathan: Rob: Jonathan: Rob: Jonathan: David: Jonathan: David: Jonathan: David: \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 Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets podcast show 667.<\/p>\n
One of the things that I\u2019m so intent on with new investors, which I\u2019m sure you guys will agree is if you buy your first property and then you\u2019re going to buy your second property before that first property is at max value, meaning like you fixed everything that\u2019s going to be a high number later. You\u2019re going to eventually get caught on all of them. And if you do that, when there\u2019s a market downturn, you\u2019re going to lose them all.
So, I like people to really fix up that first property. It doesn\u2019t have to be perfect. If you know that HVAC is going to break, you know there\u2019s a big cost coming and you can\u2019t go buy another property, because you\u2019re going to get caught on both of them and not be able to pay for repairs on either at that time.<\/p>\n
What\u2019s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, coming at you today from Scottsdale Arizona, where I\u2019m hanging out at the property that Rob and I bought and getting ready for a retreat to cook some other investors. And I got to say it is gorgeous out here as I say every time I\u2019m here and we brought you a gorgeous show. Today, we bring back Jonathan Greene, my long-lost cousin, who we had on episode 584. And we had such a good time that we brought him back for more.
Jonathan is a real estate agent and investor who buys houses for himself to flip, also invest in commercial property. And more importantly, helps other people like you build wealth through real estate. And in today\u2019s show, we talk about the different ways Jonathan does that. A big portion of it is negotiating, how he negotiates for his clients, how you can negotiate for yourself, what is happening in a negotiation, behind the scenes, as well as how to find on-market properties with motivated sellers, how to approach each deal, how to look at a house and see the things that other people are missing and more.
I had a great time today. Rob, what were some of your favorite parts of the show?<\/p>\n
All of the things you just said. You took all my points, I had them already. And I was like, \u201cDang it, those were all my favorite points too.\u201d<\/p>\n
Yeah. I basically say all the best parts. And then, I give you two seconds to think of what you\u2019re going to say after I just said them.<\/p>\n
All right. Well, I have something. I also liked that this was a, I mean, I guess this is what you said, dang it, is a negotiation master class. We hear everybody\u2019s point of view here where negotiations are a fickle, fickle beast, because if you\u2019re really, really good at negotiating, then you got to know when to take and then when to give back. You don\u2019t want to nick away at a negotiation so much so that the seller is going to try to get out of every deal that you think that won the battle on. Because you can always lose the war.
So, really fun to talk through all the different, I don\u2019t know, processes and deals that we\u2019ve all gone through. And honestly, it\u2019s always nice to have Mr. Greene back and honestly, I think it\u2019s just a beautiful thing to see too long-lost cousins, reunite and chat and chum it up and chop it out on the pod. Honestly, it brings joy to my heart.<\/p>\n
I just thought of an analogy that could fit for the negotiation tension that you\u2019re describing. You don\u2019t want to go too hard. You don\u2019t want to go too soft. It\u2019s to do with fishing. So, when I was a kid, my dad would take me fishing and I would always ask like, because I\u2019m just always in a rush to do everything, \u201cWhy can\u2019t I just overpower the fish and just reel it in when it\u2019s on the line?\u201d And he would say, \u201cBecause if the fish is swimming away and you are trying to reel in, the line will snap and you\u2019ll lose the fish altogether. At the same time, if you don\u2019t reel in and keep the line tense and there\u2019s too much slack in the line, the hook can come out of the fish\u2019s mouth.\u201d
So, fishermen, when they get a fish on are playing this game where they\u2019re trying to keep tension on the line so the hook doesn\u2019t come out, but not so much the line breaks and negotiating is a lot like that. You want to get every single dollar out of that deal that you can, but you don\u2019t want to push it so far that you actually lose the deal altogether and that fish gets away. What do you think, Rob? How did I do?<\/p>\n
That\u2019s actually really quite masterful. I was like, \u201cAll right, it\u2019s going to be a pretty good analogy.\u201d But that is exactly\u2026 dude, you have coached me. You have helped me master this art more than you could ever know. I appreciate it. That\u2019s a good analogy right there. I\u2019m honestly surprised it wasn\u2019t a jujitsu analogy, but fishing, that\u2019s good. That\u2019s left field for me.<\/p>\n
I was just thinking all of our hunter, fisherman audiences is screaming in their pickup truck right now. It\u2019s about time. I don\u2019t know about that jujitsu stuff, but I understood that.<\/p>\n
Oh, that\u2019s good.<\/p>\n
Well, we are going to get to the show very quickly. Before we do, today\u2019s quick tip. Consider using the BiggerPockets agent finder to find an agent for yourself, to help with negotiating. Now, when you\u2019re doing this, I recommend looking for an agent that is also an investor, not just an investor-friendly agent, but an agent that owns property in that area that you\u2019re trying to go. Even if they\u2019re not the smoothest, they don\u2019t have the nicest car, their headshot doesn\u2019t look the best. If they own property in the area, they usually have a big advantage over an agent that only represents other clients. Part of the reason that you want to use a high-volume agent is they have a lot of experience. That\u2019s what you\u2019re really going for.
But if your agent has that experience through buying houses for themselves, they don\u2019t have to sell 400 houses a year to get it, so BiggerPockets can help you with their agent finder feature. And the cool thing is the agent will probably be familiar with a lot of the same vernacular and vocabulary that you are using, because they\u2019re in the BiggerPockets ecosystem as well.
Rob, BPCON is coming up. It is only a couple of weeks away. How excited are you for this big event?<\/p>\n
I\u2019m really, really, really excited. I thought it was going to be like 1000 person conference. And then, I found out it was like a 2000 person conference. And then, I found out that I think we\u2019re sold out. It\u2019s going to be a packed house. So, please approach us. Take selfies with us. Give David a big hug. That\u2019s his favorite thing. He just likes hugging everybody. And come say hi and let\u2019s chat for a bit.<\/p>\n
Wow, Rob. Okay. You said a very nice thing about me in the show. So, I\u2019m going to let that slide, but the people will do that. You\u2019ll see me fighting my way through the crowds with people being dragged behind me as they got a leg. And they\u2019re like, \u201cRob said to love you because no one else does, David, and I need you to know you are loved.\u201d<\/p>\n
It\u2019s going to be a perfect opportunity for you to finally put that Brazilian jujitsu to use.<\/p>\n
That\u2019s hilarious. I\u2019m going to be like John Snow fighting through incredible White Walkers using jujitsu. All right. Without any more ado, let\u2019s bring in Jonathan, and let\u2019s learn something. Jonathan Greene, previous guest on episode 584 of the BiggerPockets podcast, and you did such a good job we had you back on. Welcome and good morning to you.<\/p>\n
Good morning to you guys. Thanks for having me back. I\u2019m excited to be here again.<\/p>\n
So, if you haven\u2019t listened to our last show, please go back and check out episode 584, where we got into some really good nuanced conversation with Jonathan about investing over a long period of time, having a sustainable career and really doing real estate, what I would call \u201cthe right way\u201d, looking at every property uniquely and trying to figure out what is the highest and best use of this property. What is the story, this property tells, what\u2019s the vision for how you\u2019ll execute it? And one of the concepts that we got into was this idea that real estate is part art and part science.
Now, we all understand the science part. That\u2019s writing numbers using a spreadsheet, calculating things, analyzing, trying to project, but there\u2019s a whole other part of real estate that is more art. And that was fascinating. And we\u2019d like to expand on that with you today, if you don\u2019t mind, Jonathan.<\/p>\n
Yeah. I\u2019d love that. I definitely have a background in negotiation as a prosecutor, so it\u2019ll be interesting to let everybody know what I do in terms of analysis and in terms of my hardline negotiation long term, which I know you guys are familiar with too. So, yeah. I\u2019m excited to get into these topics as well.<\/p>\n
Why don\u2019t we start with that? Can you explain how the negotiation element of real estate fits into the art side of the equation?<\/p>\n
Yeah. So, I was a prosecutor for eight years and a criminal defense attorney for two. And I was always doing real estate my whole life, but when I transitioned to real estate as both an agent and more of a full-time investor, I started to look back at my negotiation techniques as a prosecutor. And obviously, you\u2019re familiar, David, with some of these from your background as a police officer and, Rob, obviously in investing, we use these all the time.
But one of the things I think that was most important for me is when I\u2019m negotiating in a real estate deal, the first thing I think of is, well, nobody\u2019s going to prison and there\u2019s no victims, so why am I getting so worked up over this when I spent eight to 10 years, either sending people to prison or trying to make sure they didn\u2019t go there. So, it takes the edge off of it a little bit for me.
And I\u2019ve always had one deal to the next attitude. But I think that incorporating what I know and then using principles from someone like Chris Voss, it really helps me figure out where the pain points in the deal. And a lot of that to me is listening to what the other side\u2019s saying so that I can use the leverage that I have to combat what they\u2019re talking about.
And I think that\u2019s what a lot of new investors miss. They\u2019re just trying to do a dialogue, but they\u2019re missing the points.<\/p>\n
Do you feel like you were somewhat of a master negotiator coming out of the gate, or do you think that this is a skill that even as someone that was really experienced in your field, it really is something that you have to develop over time? Obviously, some people are going to be more naturally gifted at it, but is art of negotiation, if you will, is that something that anyone can master?<\/p>\n
Yes, definitely. And it\u2019s a great question. And I did come out thinking I would be better than others and I was wrong. My negotiating skills were great, but I was still negotiating like I did as a prosecutor when I started, which is hardline, hardline, and making sure I\u2019m drawing lines in the sand and then pulling, which we\u2019ll talk about later in terms of my offers. But I think I was a little bit, if I\u2019m negotiating that way as if somebody\u2019s life is at stake, they\u2019re going to be really off put on the other side. It\u2019s going to come off as too aggressive.
So, I did have to back down the way I did. And I do think by learning from other people, how they negotiate, and again, reading books, listening to podcasts is definitely a way you can figure out. But like I said, I think each deal is different. So, the way that you negotiate with each person is completely different based on what they\u2019re telling you. And if you\u2019re not listing, you\u2019re going to lose the whole negotiation before you start.<\/p>\n
100%. I\u2019ve always found that the more hard line you are on it, typically it does not go your way. It\u2019s a game you have to play. And I think this is where egos and pride can get in the way a lot of the time, because you\u2019ll want to drive the car here, but then your realtor who might have a little bit more experience or a little bit more know-how will try to guide you. And you\u2019re like, \u201cWell, hey, let me do it my way.\u201d So, I think this is an equally important aspect of negotiation.
And I\u2019m also wanting to know when you\u2019re working with the realtor on your end, do you feel like that\u2019s truly\u2026 is it a negotiation partnership that you should probably see eye to eye with your realtor? Or do you make it so that your realtor takes your lead?<\/p>\n
Yeah. David knows this well, because I\u2019ve been licensed for almost eight, 10 years now, but the one thing I remember when I was not licensed and I was agent, I didn\u2019t think they were being hard enough as I wanted to be because they were trying to protect their relationships. I didn\u2019t really understand that then. Some people try to get me to lowball as an agent and that\u2019s not my thing, so I\u2019m not going to do it. But yeah, I do think that it\u2019s a cooperative partnership. The most important thing I think is if you\u2019re an investor and you\u2019re working with an investor-friendly agent, that agent is there to do the negotiations the way that you want, not the way that they want.
And that was a hard lesson for me to learn. And I definitely a couple of times overstep because I was negotiating hard the way that I thought would work, but they weren\u2019t comfortable with it. And look, most regular home buyers aren\u2019t ready for that. Investors are usually more ready, but they\u2019re not ready for the level that I would do on my own. And I have to recognize that. So, I do think it\u2019s a full partnership and you have to be clear on how you want to get to the deal and then take advice or not.<\/p>\n
That is a great point, Jonathan. You can err on either side. You can have an agent that wants to make the client more money than the client wants. So, they\u2019re out there, working the deal they would for themselves. We\u2019re going to get every dollar and if they don\u2019t want it, there\u2019s another house. We\u2019ll go find that one. And sometimes your clients are like, \u201cNo, I want that house. I don\u2019t need the extra $1,200.\u201d And then, on the other hand, you\u2019ll get clients that don\u2019t really understand and through no fault of their own, the leverage in deals where you sometimes get a deal at such a great price that the seller realizes halfway through the escrow. I\u2019m giving this thing away, you\u2019re not getting another dime.
And if you do push it, you try to put some leverage on them, the whole thing will snap. So then, sometimes as an agent, you\u2019re trying to protect your client. You don\u2019t want to just come out and say, \u201cYou\u2019ve already gotten more than you are going to get.\u201d You\u2019d be very happy because now they feel like you\u2019re not on their side. But sometimes that whole, it doesn\u2019t hurt to ask thing, is not true. Sometimes it does hurt to ask.<\/p>\n
Yeah, I agree with that. I have issues with clients only if I haven\u2019t fully educated them along the way, or if they\u2019re just not going to be compliant to like what you said. I like things to be a good deal for everyone, which doesn\u2019t mean I\u2019m not adequately representing my client as an agent. But to me again, based on my background where it was extremely adversarial, someone\u2019s going to prison or they\u2019re not. Really the best deals we all know are ones where everybody gets along. Because if you don\u2019t and it\u2019s adversarial, you may get through a deal, but everyone\u2019s just going to be trying to screw each other, the whole deal over $1000 or leaving stuff in the house.
So, it\u2019s sometimes hard to get one side, whether it be seller or buyer, to understand that, look, if we don\u2019t all work together, we\u2019re never going to get through this deal. And I think that\u2019s part of where my negotiation tactics changed, where I had to say, \u201cListen, I need to build my relationships with everybody on the other side. And that includes if I\u2019m an investor, I can\u2019t be too hard. But as an agent, I have to work with the buyer as well.\u201d<\/p>\n
This is so true. There\u2019s always that phrase. You may win the battle but you\u2019ll lose the war. And this happens all the time when you\u2019re actually negotiating the deal, you keep chipping away, keep chipping away. If I\u2019m a buyer, I just keep chipping away and chipping away at that seller, hoping that they give into the negotiation tactics. And if I\u2019m successful, then the first thing I want to do is like, \u201cOh my, God, I\u2019m the greatest I did it. I negotiated the heck out of this,\u201d but then they start getting other offers because we\u2019re in this crazy, crazy market. And then, when they have four offers that are above asking, a couple of weeks after we\u2019re in the process.
The moment I start making any more demands, then they start not giving in because they\u2019ve already given everything that they can give. And the moment I try to get my way, then they\u2019re just trying to get out of the deal because maybe I\u2019ll lose my escrow money, but B, they might even just get a better offer than the one that I gave them. This has happened so many times.
So, I think that there really is a fine line to walk there and just making sure that both sides can win. Obviously, you want to win a little bit more, but you don\u2019t want to take it all, I personally feel.<\/p>\n
Yeah. I think if you look at the way deals are structured, like if you\u2019re in an attorney state, you\u2019re going to go through attorney review, that\u2019s going to be a little game of ping pong. But then, we go to where all deals go to die, home inspection. And if you get too hardball in home inspection, that\u2019s where everything goes wrong because someone\u2019s trying to get a credit for doorknobs when you should just be focused on major things. So, like I said, my job, I think as an agent and a counselor for investors is to get them fully prepared before they make an offer.
So, we make tons of videos, tons of content to just make sure that they understand we\u2019re not going on a fishing expedition because the deals that die are because someone\u2019s just asking for too much, or you already know that the seller\u2019s going to be unreasonable. And if it\u2019s fully as is, you need to make sure that your buyer investor knows as is means as is. And I don\u2019t want to go in and make an offer with already the understanding, but I can get out of it if I don\u2019t like it, because we\u2019re saying we\u2019re buying it as is.
And I think that\u2019s where there\u2019s just a lot of nuance in that. And we all have to understand it\u2019s going to be a long-term negotiation. Like you said, it will come back to haunt you later if you press them too early.<\/p>\n
I can give you a story of how that just happened to me. I had a deal where we got it a ridiculously good price. And then, after that, I came back and I got even more credits and I knew the seller was getting tense, but I didn\u2019t know how bad it was. And then, I hit a point where we couldn\u2019t get an appraiser out there in time for the appraisal contingency. They were all backed up. So, we needed an extension of two or three days on the appraisal contingency. And they said no. And they had the right to blow up the entire deal, which they were incentivized to do because they had felt screwed at every single step and just thought I was taking advantage. And there is no taking advantage in real estate.
The contract is what the contract is. You get what you get, but their perception matters in the way they\u2019re going to make decisions. And so, I had to pay $2500 to get a three-day extension on my appraisal because otherwise, I was going to lose the whole deal. Now, when you look at, I think I got that house for about $250,000 less than it appraised for, so the 2500 didn\u2019t really matter. But it\u2019s an example of how you can see.
Getting too much on one side and imbalancing the equation can absolutely cause the whole deal to topple and then everyone loses. The sellers got to go back on the market. I\u2019d be out my inspection money, my appraisal money, and all the time that I put into it.<\/p>\n
Yeah. That\u2019s a great example of you knowing when to stop pushing. And I think that\u2019s what some investors don\u2019t. They just want to keep, like, you\u2019re up to 50, relax. I myself as an investor try to give something back. We just closed a property yesterday, my business partner and I Jenny, and we have to redo an entire septic. We put that in. We knew that was going to be part of it, but they didn\u2019t want to even get the certificate of occupancy. And we said, \u201cWell, we\u2019ll pay for it and we\u2019ll put up the smoke detectors, but you\u2019re going to sit there when they come.\u201d
And these are little negotiations that helped us as other little things. Like you said, David, you get into it. Something happens the day before, they couldn\u2019t get a freeze authorization on a HELOC. And we have our demo crews set up and we said, \u201cWell, can we still get in?\u201d And we really, really massage that deal on our end. But I do think like you said, you can get to that point and you have to make a tough decision on when to stop.<\/p>\n
So, Jonathan, obviously, you are analyzing deals left and right all the time, all over the country, doing deals, galore over here, deal city. That\u2019s what I\u2019m going to nickname you right now. So, can you tell me a little bit about your buy box, if you have one, or is everything the buy box? Help us understand what your buying criteria is.<\/p>\n
Yeah. During the pandemic, I really sold off most everything on purpose to just hold and wait and stockpile the gunpowder as we say, waiting for maybe the next six months to 12 months to see what I think is going to be better leverage for me. And I had a bunch of old properties, but for me, I think the thing that I\u2019ve transitioned to this year and the way that I describe it is I\u2019m always looking for assets. So, I like a lot of different things. I\u2019m interested in self-storage. I\u2019m interested in main street commercial, which we talked about in 584. I like flipping, I buy and hold.
I like Airbnb, but I am always looking for markets where I think there\u2019s appreciation. So, I\u2019ve always been an appreciation investor. I don\u2019t really care about flow. I like it, but I\u2019m not banking my history on the cash flow because I don\u2019t have to use as much leverage. So, I think locally, I know all the markets. So, I\u2019m looking for what I think is a project that I\u2019ll enjoy honestly first. And then, I\u2019m hard running the metrics to see if they work for me. And then, when I\u2019m looking at outward deals for myself in other areas, I\u2019m looking for growing areas that can support that investment proposition.
So, if I\u2019m doing Airbnb, which obviously you guys have great experience with, I\u2019m going to go through areas where I think the regulations are either loosening or never coming so I don\u2019t put myself at a disadvantage. And then, for metro areas, I\u2019ve always said the same thing. I don\u2019t like hot areas, because I feel like I\u2019ve missed the big money. So, I take the hot areas, look three towns out and see if that\u2019s a town that\u2019s going to come up and if they\u2019re starting to do flips in that area.
So, I think because I\u2019ve had most every asset class, I\u2019m never looking for something specific, but I do like some oddities. I love two-bedroom, single families. I think they\u2019re really a good asset because you can buy them for much cheaper than a three-bedroom in a lot of markets, but they\u2019re going to rent out at almost the same amount as a three-bedroom because of the tenancy. And I just think those are smart buys everywhere, during the pandemic that the prices went up a little too high, but that was a big mark.
And again, that\u2019s not a viable opportunity for a lot because families aren\u2019t going to mostly move into a two-bedroom. So, you have a unique house that becomes a very good rental in my opinion, as just like one oddity that I like.<\/p>\n
Sure. So, you mentioned something that would probably be very confusing to most new investors, but you said when you\u2019re looking at properties and you\u2019re analyzing them, you said, \u201cWell, hey, if the cash flow is there, that\u2019s great. I\u2019m not as concerned with that.\u201d Why is that? What does that mean? Because I know a lot of people, they\u2019re getting into real estate for cash flow. They want monthly cash flow that they can use to supplement their mortgage or their W-2 income or whatever that means. So, why is that not something that\u2019s a direct focus for you at this moment?<\/p>\n
I\u2019m going to explain something that I know everybody needs to hear and they probably don\u2019t want to hear. Cash flow can go away quicker than you\u2019ve ever seen anything in your life. So, if you hear everybody banking on 10 houses and they\u2019re all making $100 a month in cash flow, all you need is one furnace to break in one of your 10 units. And you\u2019re not going to make cash flow for six months. The furnace going to be eight grand. So, to me, I just never focused on that as an entity, I like it but I always want appreciation because to me, appreciation is a present.
It\u2019s like a windfall later that you didn\u2019t expect. I like both, but I\u2019m not greedy. So, I think that the lure for cash flow, if somebody says, \u201cI want to build up a portfolio with X cash flow so I can scale out of my nine to five,\u201d that\u2019s highly dependent on the types of properties that you buy. And new investors are maybe buying C-minus houses to start off with. Those don\u2019t cash flow. You may think they\u2019re going to cash flow until everything starts breaking and then you\u2019re in trouble.
So, one of the things that I\u2019m so intent on with new investors, which I\u2019m sure you guys will agree is if you buy your first property and then you\u2019re going to buy your second property before that first property is at max value, meaning you fixed everything that\u2019s going to be a high number later. You\u2019re going to eventually get caught on all of them. And if you do that when there\u2019s a market downturn, you\u2019re going to lose them all.
So, I like people to really fix up that first property. Doesn\u2019t have to be perfect. If you know that HVAC is going to break, you know there\u2019s a big cost coming and you can\u2019t go buy another property because you\u2019re going to get caught on both of them and not be able to pay for repairs on either at that time.<\/p>\n
Agree, 100%. I think I have still to this day, not really paid myself from the cash flows of my property. I always just reinvest them. And I think you\u2019re right. I think appreciation, that is the thing that I\u2019ve realized, I\u2019m like, \u201cOh, my gosh, this is really where the wealth is created.\u201d I know you have a philosophy that\u2019s like, you will either make money on a deal or you will make money on a deal. Do you think you could maybe walk us through what that means? Because obviously, that\u2019s like, well, what do you mean by that?<\/p>\n
Yeah. It was funny. We were talking about it before. So, the way that I look at it, I\u2019m never going to buy a bad deal. I don\u2019t think I\u2019ve ever in my life bought a bad deal. I\u2019ve had losses on real estate. They were all my fault or the market conditions. But I buy really smart because I use analysis and what I would call asset hunting and what we were talking about, art more than science. I know based on my history, what the repair costs are in five minutes, barring a sewer inspection and stuff that\u2019s underground. So, when I look at a deal, I\u2019m much more relaxed because I think I\u2019m either going to make some money, which is the make money or I\u2019m going to make a lot of money.
And when I build my spreadsheet to start, I put it at the lowest possible ARV that if I did everything wrong, I\u2019m still going to get this. And then, usually, I make 50 to 150 more than that. And I like not even adjusting the spreadsheet till we start seeing the comps later and we start seeing our repair costs. And that way, what I\u2019ve always called the spread, my spread is either growing bigger for me because I\u2019m cautious about that. So, I go into every deal knowing I\u2019m going to make money. It\u2019s just a matter of how much.
So, even when everything goes wrong like it has, okay, I break even. And then, I consider it like, well, now I get the deposit money back. So, there\u2019s no loss in it for me. If I can get the deposit back money, even on a break-even, I wish I made more money, but at least I have the deposit money and then I just go get another property.<\/p>\n
Totally. And plus, if you\u2019re a long-term holder of your property too, then eventually you will make that money. It is obviously very possible to lose money in real estate, but if you\u2019re actually holding it for a long time and you\u2019re investing consistently and you\u2019re building up a portfolio, you may have a few stragglers that aren\u2019t really crushing it for you, but overall your portfolio over time should be able to carry that slack. And I know you\u2019ve been doing this for a bit.
I\u2019m curious as someone who is not Greene in the industry, but really quite the seasoned pro, do you still get any level of analysis paralysis, or do you just feel like, you can really take on any deal that comes your way?<\/p>\n
Well, I don\u2019t want to take on any deal, but I have absolutely zero analysis paralysis and I think it goes back to my history in working for the government. We have 300 cases on our table at a time. You have to make decisions on things right away. So, even with my team on market and off market, I\u2019ve always been somebody who can make decisions and not really worry about it. If it turns out I was wrong, which all of us have the investments that we cherish that we didn\u2019t get, I\u2019m okay with admitting I was wrong.<\/p>\n
Jonathan, on that note, do you have a form of a buy box? I\u2019m sure someone with your experience doesn\u2019t hold to just one buy box. You can look at every deal and see something. But is there maybe like 60%, 70% of your deals overall have these things in common that you look for that you can share with us?<\/p>\n
Yeah. Right now, I like flipping, but I took a break during the pandemic because the deals just weren\u2019t good enough. And I think the restraint is one of my strengths. I don\u2019t have to buy something, I like to buy something. So, to me, when I\u2019m looking at flips, which is my entity that I like, it\u2019s always about what somebody else doesn\u2019t see that I can see, which I know we did actually talk about in 584 as well. I think that you guys were talking about the property that you might be at now. I think that I understand the spread better because I\u2019m looking for things like the property I just bought, there\u2019s a septic issue.
So, I know that traditional home buyers aren\u2019t going to buy that. They\u2019re not going to pay 30 grand for septic. So, how am I going to leverage that? So, my buy box includes towns that I think have a big upswing. The price point is not a big part of the buy box. It\u2019s more the spread and how much I can see. And what I found is, we used to be doing, we did a lot of formula deals like that were 300 buy-ins, 60 reno and then 60 profit, which was good. But now we want more profit. So, I did 465 buy-in, 180 reno, but I made 200 profit. So, as we scale into buying in the 400 to 500 range, if we do it the right way and we\u2019re identifying the properties the same way our scale to profit is so much more. And then, we\u2019ll move that even further. If you\u2019re buying in my areas in the 600 range, you\u2019re going to put in 2250 and get out in the 12, 14 range.
So, I think that\u2019s part of the analysis too, but that\u2019s really what I look for right now. And I\u2019m always looking at that hybrid commercial properties because I just think commercial is where it\u2019s at now. There\u2019s so much available that the leverage is huge to buy commercial with commercial mortgages if you want.<\/p>\n
So, you\u2019ve got a different buy box for the different assets that you look at. If this is a flip, you said, I want to be right around 400 to 500 with hopefully less than 200 in construction. I want to profit on 150 to 200. Those are gross numbers that someone else can look at and say, \u201cOkay, I can try to find something that fits within that.\u201d And it cuts down on the hesitation of what should I do and the overthinking. And then, like you said, in commercial, I want to be in commercial, I want to be buying it for less than what it\u2019s worth right now because I think the market is soft and I can go in there and get a better deal. So, maybe 20% under market value, you\u2019re going to be excited.
That still functions as a buy box. It doesn\u2019t have to be this much price per square footage in this part of town with this is owning. Sometimes, it\u2019s just the amount of meat on the bone is what you start with. And then, you figure it out from there. So, in your opinion, you work with a lot of new investors. You\u2019re very active on the BiggerPockets forums, helping with people. Why do you think that just the generic standard newbie who stumbles upon this podcast is really excited, likes everything they\u2019re hearing?
Their dreams are flying out of their head. You could see it happening of everything they want to do in life, but they\u2019re stuck in analysis paralysis when it comes to getting started buying their first deal. What do you think is causing that in that demographic I just described?<\/p>\n
So, I\u2019m 100% sure that this is the reason every single time. There may be other factors, but this is it. They haven\u2019t seen enough homes. Most of them haven\u2019t seen any homes when they\u2019re in analysis paralysis or then it just becomes, I\u2019ve seen one or two, and I\u2019ll grant you that it is very hard as a new investor to get a realtor if you\u2019re not licensed to just show you a bunch of homes when you\u2019re barely qualified or using an FHA. A lot of realtors aren\u2019t going to do it. But unless you\u2019ve seen 15 or 20 homes, I don\u2019t know how you\u2019re making offers on homes.
You don\u2019t know anything and you\u2019re going to lose money because you can\u2019t rely on just the realtor that you just met to make sure that they have your best interest at heart. They want to make a good commission so they\u2019re going to tell you, and I\u2019m telling you, I run a team of 40 agents. This is not all agents, but this is common. They want you to pay the most or they may want to tell you, you want to get a property. And if you\u2019re desperate for a property, that agent\u2019s going to become desperate for the commission.
So, desperation is what will kill you, but not seeing enough homes every single time, every time I\u2019m in the forums. And somebody says, \u201cOh, analysis paralysis. I don\u2019t know what mentor to use.\u201d Or I\u2019ve been researching and running the numbers on so many homes. I ran 100 deals this week and I said, \u201cHow many did you see?\u201d And they always say zero. And that to me is everything because we\u2019re talking art versus science and art is, I need to be in the house, I need to understand how a house is constructed.
I need to understand where to look, always in the basement, what I can see, everything else that\u2019s cosmetic. You need to find the things that are going to cost you money or later, which are the hard things to find. And I think if you\u2019re not looking at homes, you\u2019re just not trying hard enough to be completely honest.<\/p>\n
What about when you\u2019re looking at a home, starter, brand new, okay, I know I need to go look at homes. Give me a playbook of overall what you think they should be looking for. And then, Rob, I\u2019m going to throw the same question to you.<\/p>\n
Yeah. Again, I look at this question as me being the agent as a guide for a new investor, a new home buyer. I\u2019m going to take them through every single thing that I see in the house. I\u2019m not going to say, this is the kitchen, this is the living room. They know that. I\u2019m going to immediately start what I call future casting, which is helping them prepare for the future. So, if I see something in the ceiling, you guys know this, you see an evidence of a leak in the ceiling. The first thing I\u2019m going to say is, \u201cHey, look, you see that discoloration on the ceiling, that looks like a leak. But most times, people repair the leak in the ceiling and then they just never paint over it because they\u2019re lazy.
So, I know that looks like an issue, but later it may not be an issue so don\u2019t get too worked up over that.\u201d And I\u2019ll do that through the whole house. But my biggest focus is away from cosmetic issues and onto all the serious issues. Like in New Jersey, a lot of 1900s, 1850-type homes. So, we see a lot of sloping. I can tell the sloping right away. And then, the first question is like, look, sometimes this is settling. And sometimes this is a foundation issue.
In five minutes, when we\u2019re in the basement, we\u2019re going to look at the beams and the structure and see if there really is an issue. And if not, it might not be a structural issue. Can these be repaired? Yes, but they\u2019re not really for first-time novices. And then, we spend a majority of our time, honestly, in the basement where they\u2019re bored because everybody likes to look at the cool cosmetic stuff, but I\u2019m opening every door. I open the electric panel. I\u2019m looking, showing them the hot water heater. If there\u2019s a permit, how old is it? How old is this furnace? Is there any knob-and-tube in here?
And again, a lot of that will fly over their head at the beginning. But then, again, if you\u2019re doing 15 showings before you make an offer, by the time you get to five and then 10 showings, you\u2019re really going to start to understand the lingo. And then, that\u2019s the exact reason why you don\u2019t fall into analysis paralysis because you feel confidence.
Confident people don\u2019t have analysis paralysis because they\u2019re able to go through the data. We probably mind the same amount of data, but like you said, I just know what I want and I\u2019m looking for assets. And if that asset is attractive to me, I\u2019m going to try to buy it but only at the price that I want to buy it for.<\/p>\n
Rob, same question. What do you think people should look for when they\u2019re walking a house?<\/p>\n
When they\u2019re walking a house, oh, man. I guess it depends on the situation, of course, but for me, I think a lot of people tend to\u2026 especially in the Airbnb short-term rental space, people are walking it and seeing it for what it isn\u2019t versus what it is. And so, I am always very understanding of what the house is for the price that I\u2019m getting. And so, I understand a lot of the times if I\u2019m buying a house that maybe is a little bit more on the affordable side, a little bit cheaper, and it\u2019s not completely remodeled. What I\u2019m trying to come in and see and analyze is, can I make this place sparkle?
Can I give it a little razzle-dazzle, if you will, with design, with furniture, with furnishings, with the staging? Obviously, what I like it to have, a remodeled bathroom and a remodeled kitchen, sure. But for me, I want to know, can I make a space shine in photographs? Can I really look at a lot of the characters and save a lot of it? Because a lot of people will come in and remodel the character out of homes. And for me, I\u2019m always like, \u201cOh, that\u2019s such a shame.\u201d But I am doing a lot of long-distance relationships, not really. That\u2019s not true.
I\u2019m doing a lot of long-distance investing. My wife would probably be like, \u201cExcuse me?\u201d I\u2019m doing a lot of long-distance investing. And so, for me, I\u2019m always coaching my realtors to be very thorough with their videos that they\u2019re sending back to me. And I always brief them. I\u2019m like, \u201cHey, I need you to be very critical of every tiny little thing that you see in the house. I want it to be as if the seller was there in the room, watching you giving me this tour, they would be angry at how petty you were being about all the little things.\u201d And it\u2019s not because I\u2019m using those things to make my decision.
I just really want to know and understand how a house feels. Is there a sag in the floor? Are there walls in a room that are inconsistent? Meaning, some have textured drywall and then another wall is completely smooth. Are there popcorn ceilings? Are the fans updated? Does it smell in there? And I\u2019m really trying to understand the cosmetics because with short-term rentals specifically, I\u2019m not trying to come in and renovate the place. I like to spend less than $15,000 on renovations.
Our Scottsdale place is an exception to this. But typically when I\u2019m going out and buying houses, I like to stay between the $5000 to $10,000 range specifically when I\u2019m buying a house. And so, I just want to make sure that, of all the things that I need to fix up there, it\u2019s very easy cosmetic because I just don\u2019t have six months to renovate a place and then carry out an entire burster, if you will, a burden into an STR.
Because I like to cash flow as quickly as I can on a short-term rental. So, it\u2019s going to depend on the asset class and everything of course, but for me, for where I am in my portfolio, time is everything. And so, I just want to make sure that what I\u2019m buying is not going to require a much heavier lift than maybe swapping out some floors or painting a house.<\/p>\n
Yeah. I just have one follow-up on that, Rob, because I think he made a great point that I know there\u2019s a lot of wholesalers listing and this is really important. When Rob was saying what he wants his realtors to do in the other areas to really find all the things, you hit it perfectly. You want the things that the seller would be annoyed that you\u2019re focusing on. And if you want to be a good wholesaler and you want to turn that into being an investor, you have to take photos of all of that stuff. The best wholesalers are ones that could present us a whole picture as out-of-state or in-state buyers and show us all the things that are wrong with it.
I know what the rest of it is, but if I take the time to drive 45 minutes to something I think is a good deal and then you didn\u2019t show me the structure and there\u2019s 100,000 in structural issues, you just wasted my time and I\u2019m never going to look again. So, Rob\u2019s coaching his realtors to be better, but I think what\u2019s missing, and what we talked about a little bit, it\u2019s more like transparency. If you want to be good at it, you\u2019re never going to win hiding this stuff. Because all of us who are investors, just tell me exactly what it is.
If I know I can trust you, then I\u2019m going to look for it. And I think you can train out-of-state realtors and boots on the ground to look better for you if they\u2019re just looking in the right places.<\/p>\n
In your opinion, what are some of the data points that a new investor should know when looking at properties?<\/p>\n
Yeah, the ARV is obviously the most important because you want to know what your biggest potential is if you\u2019re a flip or even if you\u2019re a long-term investor. So, it\u2019s always repair costs really in the middle. And I think that the hardest thing is that almost nobody knows repair costs and it\u2019s very, very hard to learn because you don\u2019t know if people are even giving you the right prices. So, the truth is repair costs only come with experience. And the best way to do that is make friends who are flipping, find out what they paid for to remove a wall, find out what they paid for a full sewer redo. It\u2019s just the really only understandable way to get it.
Obviously, you\u2019re going to look at your taxes and if you\u2019re buying multifamily, you\u2019re going to look at what the insurance and the rent role is for sure. But again, I think that people focus a little too hard sometimes on the numbers and they miss the asset like Rob was saying before. You want to see what\u2019s unique about this property. I love to buy properties that other people don\u2019t understand how they can best use them. Like you said about the one that you bought in California, David, I think.
There\u2019s oddities out there and people just don\u2019t know what to do with them. But understanding the block values I think is really important. One thing I do is always send and look at all the homes\u2019 values on the block. And I think that gives you an idea because you don\u2019t want to be the most expensive house on the block. You want to be safely in the middle and then help them raise that upwards.<\/p>\n
So, the MLS is one of those places, obviously, we\u2019re going to be going and looking for a deal that is the main place to get deals and there\u2019s going to be houses on MLS popping up every single day. What advice do you have for people that are actually trying to hone in on a specific deal from the MLS? Is that, A, the only place to get a deal or is that where you\u2019re sourcing most of your deals these days?<\/p>\n
Yeah. I buy a lot on the MLS. I\u2019m licensed and run a big team, so I\u2019m always on there. We buy most of our deals on the MLS just because the wholesalers in my area, their prices are too high and we\u2019re not going to pay the spread on that. So, my best tip for MLS, if you\u2019re licensed is this, and if you\u2019re not, tell your agent to look for this, it\u2019s called back on market or BOM. They\u2019re absolutely the gold mine of all properties. People focus on expireds and FSBOs and I don\u2019t really love those, especially now. But back on market means that a house was under contract. They had an agreement and it failed and there\u2019s three different times when a back on market fails.
And it\u2019s very important to identify how many days it was under. This is why. If the deal fails within the first three days, it\u2019s always cold feet. Buyer got cold feet, something happened. They backed out. That\u2019s not a big deal. You don\u2019t know what\u2019s wrong. If it\u2019s about seven to 10 days, it\u2019s always an inspection issue. So, if they say after seven or 10 days that, \u201cOh, the buyer got cold feet,\u201d it\u2019s probably not true. They did the home inspection. Something happened. One party didn\u2019t agree. So, that raises my eye. But as an investor, I\u2019m excited because I know that that\u2019s going to turn off other first-time home buyers and will help investors.
And then, if you see 30 days or more, that\u2019s always going to be a mortgage failure, commitment didn\u2019t come in. They couldn\u2019t get the mortgage. And those are exceptional deals for buyers, investors because the seller was right at the door, ready to close and ready to get a big pile of cash. And at the last second, the mortgage failed. So, a lot of times, if you just offer what they offered, you can pop right into the deal, everything, paperwork, all set, you can hop on the title and close those deals really quickly. So, back on market is definitely my jam for the MLS.<\/p>\n
Yeah. I can relate to this one. And honestly, we\u2019re talking about negotiation. We\u2019ll probably get into this here in a second, but David is really quite the negotiator. Most people probably assume this, but I got to see the masterclass in person, I guess, well, virtually on the phone when we bought our Scottsdale place, because the property that we bought out there was on the market for 90 days. And I think it probably fell out of escrow. And we came in with a very aggressive offer. I think it was initially offered at 3.4 and then I think we offered 3,000,050, something like that. So, it was a relatively large reduction.
Plus I think we asked for, I think it was like a $75,000 closing credit and they said, no. They told us to kick rocks. And so, David was like, \u201cHey, it\u2019s been on the market for 90 days. They\u2019ve fallen out of escrow.\u201d He was like, \u201cLet\u2019s give it a week. Let\u2019s not even respond to them for a week. And we\u2019ll just say, okay, hey, we\u2019ll walk away.\u201d And we did. And we did what he called putting them on ice, if you will. And so, he was like, \u201cHere\u2019s exactly what\u2019s going to happen.\u201d They are going to be annoyed that we came in with this low offer and then they\u2019re going to start perusing Zillow.
And they\u2019re going to start seeing what they could buy with $3 million if they had that large pile of cash. And then, after about a week, they\u2019re going to come back and they\u2019re going to say, \u201cWe\u2019re willing to do this deal.\u201d And I was like, \u201cOkay, sure, Mr. Greene, listen, let\u2019s be realistic. They\u2019re probably not going to go with that.\u201d And then, literally, the week later, they were like, \u201cAll right, we\u2019ll do it under these terms.\u201d And it was like a slight markup from our initial deal. And I was like, jaw dropped. I was like, \u201cWow, that is crazy.\u201d
And you\u2019re right, I think this moment comes with the seller where they have this big pile of cash presented to them, and then it goes away. And then, now they start feeling a little bit desperate and that\u2019s what happened here. They probably started looking at what they could buy, where they could retire. What could they do with $3 million? It\u2019s a life-changing amount of money. And that way, when we actually came in with a more reasonable offer, they said, \u201cYeah, sure. We\u2019ll do it.\u201d And that to me, I was like, \u201cOkay, David Greene is exactly who he says he is, a pro negotiator. It\u2019s true.\u201d<\/p>\n
Yeah. You want a Greene negotiating for you. Jonathan was a form of a negotiator in his previous career. Now, he\u2019s negotiating now. And this is one of the reasons why you always hear people say, \u201cYou got to get off market. You get all this creative stuff,\u201d And you do see incredible deals come off market. But they come from people with incredible skills that spend an incredible lot of money and time trying to get those deals.
You always forget to work that into the equation that that wholesaler that got that great deal might have spent $120,000 in six months of time to get that opportunity where those of us that are operating on the MLS, just find the soft spots. Man, we can just go in there, grab a fish and come right out with it.
So, since you\u2019re Greene and you\u2019re clearly a great negotiator, what are the skills that you think make someone a great negotiator and how can people start with honing their own skills?<\/p>\n
Good negotiation to me comes from confidence. We talked about it when we were talking about seeing houses and if you don\u2019t have the confidence in your numbers or what you\u2019ve looked at and what the ARV is, you\u2019re going to be a poor negotiator. And the only way that you can attribute or move your confidence to the next level and get that same confidence on the other side with the person you\u2019re trying to buy the house from is by building the relationships. So, I\u2019ve found over the years that the more that I just build one-on-one relationships with sellers, especially when it\u2019s only me in the game, I can soft play that for a year because I\u2019m not in a hurry.
And that usually leads to windfall properties later. Traditionally, my agents, my investor friends always think it\u2019s funny, because I\u2019ll call people for a year and maybe only four or five times will I ever talk about the house. And they always say the same thing, the clients will always say, \u201cHey, you didn\u2019t even ask me about the house. I\u2019m not ready to sell it. I said, \u201cI know. That\u2019s why I didn\u2019t ask. I figure you\u2019d call me when you\u2019re ready to sell and just tell me what your price is and what I\u2019m doing in terms of negotiation,\u201d as I always want them to lay the price on the table first and never me. Because if I lay the price on the table, what if it\u2019s too high?
What if they were willing to accept less? So, you\u2019ll never ever once in the history, have I ever made an offer first unless it\u2019s in a traditional setting. If it\u2019s off market, I\u2019m always telling them, \u201cTell me what your number is. If I like your number, I\u2019ll just pay it. I don\u2019t want to negotiate back and forth. That\u2019s boring. If you give me a reasonable number, I\u2019ll buy your house.\u201d And then, they give me a stupid number and I just leave. And I think to be a good negotiator, and I\u2019m sure we\u2019ll talk about this more is you have to be able to walk away.
And that\u2019s the thing that I think the best, that I don\u2019t want the deal, I\u2019d like it, I don\u2019t need the deal. And I like walking away because just like you were just talking about in David\u2019s masterclass on negotiation, sometimes you put an offer down and their ego gets in the way. And they need a week to go lick their wounds and feel bad about themselves and come to the realization that they were never going to get what they thought. And you just don\u2019t bother them during that week.
You just leave them alone and that you wait for them to call you back. And I did the same as you were saying, Rob, was going to happen with David. I won a contest with my best friend and partner in flipping, Jenny, because I did the same thing. I said, \u201cI guarantee you what\u2019s going to happen is they\u2019re going to go take the second offer that\u2019s not ours that\u2019s going to be a market buyer. They\u2019re going to do inspections. It\u2019s going to fail. And then, they\u2019re going to come crawling back. And they did.
But I told them when they came crawling back, that my offer was going to be 10,000 less and they came crawling back. And then, they said, \u201cWell, we want the first offer.\u201d I said, \u201cThat\u2019s not how it works. I told you that if you went and used my offer to leverage another, it\u2019s going to be less.\u201d And so, then they walked away again with ego and then it took another three weeks. And then, they crawled back to say, \u201cOkay, we\u2019ll take it now.\u201d And they still tried to ask for more, but we ended up buying that house. And that one, I think I made 200.<\/p>\n
So, if I\u2019m understanding your route here, Jonathan, just to clarify for me, because you say, \u201cHey, give me your number. If I like it, I\u2019m going to pay for it.\u201d And then, if they give you a dumb number, you\u2019re like, \u201cYeah, okay. It\u2019s not even worth it.\u201d If it\u2019s in the wheelhouse, if it\u2019s at least in the wheelhouse, will you negotiate it if it\u2019s maybe a little high but it\u2019s not stupid? You\u2019ll be like, \u201cAll right, let\u2019s work through this.\u201d But if they\u2019re so highly-priced and it\u2019s a really dumb number, that\u2019s not even worth nickel and diming them down to the price that you actually want. Is that about right?<\/p>\n
Yeah. I wouldn\u2019t say that I\u2019m mean, but I don\u2019t like to have my time wasted. My time is pretty valuable. So, if I go out there and I have a good conversation and then they throw me a price, I know it\u2019s worth 450 and they say they want 700. I just say, \u201cThis was a waste of my time, but thanks, please don\u2019t call me again.\u201d And I just leave. They will call obsessively over weeks and I\u2019ll never answer and never contact them again. But yeah, if they\u2019re in the ballpark, my first question always is how did you arrive at that number? And it\u2019s always, \u201cI just pulled it out of the air.\u201d
So, I\u2019m already prepared with all the comps and I know what\u2019s sold in the neighborhood and what the repair value is. So then, when I say that, \u201cThat\u2019s okay, but where did you come from?\u201d And they say, \u201cNothing.\u201d And I said, \u201cWell, let me tell you where I got my number that I\u2019m looking for.\u201d And then, that\u2019s when I use my number against them. I usually don\u2019t go off my number much. I mean, look, if someone\u2019s nice and they\u2019re negotiating fairly and they want like $5,000, I don\u2019t care at all. That $5,000 is not breaking my renovation.
But I\u2019ll be very clear if I give you what you\u2019re asking for, you\u2019re going to sign right now. We\u2019re going to go into attorney review. There\u2019s no you get me to agree and then use it to leverage other offers. That makes me walk away every time. And again, the strength of negotiating is not letting people screw you around because you\u2019re desperate for the property.<\/p>\n
You hit on another good point. And it\u2019s that you need to make room for the emotions when you\u2019re negotiating that when we as the investor come in and we say, \u201cThis is our number that works. It\u2019s very logical, rationale. We\u2019re operating out of our neocortex.\u201d The seller is probably light years away from understanding the deal from our perspective at that point. They still have these pie-in-the-sky dreams. My neighbor\u2019s house sold for this much. Well, I need this much because I have to go do whatever. And they think that their needs somehow equates to their asset that they own.
And time does a nice job of marinating emotions. The knee-jerk response, a lot of sellers will give you will change over three to four days of not sleeping so well, because they\u2019re not sure what\u2019s going to go down. So, I love your method that you have this number in your firm and that if they come back to you again later, it\u2019s going to be a little worse. They come back to you again later, it\u2019s going to be a little worse. It eliminates them feeling like they\u2019re in a position to jerk you around. You\u2019re actually the prize. You have the money, you can get them out of this problem that they have, and they\u2019re going to need to play by your rules.
One of the things I\u2019ve heard you mentioning is just urgency in the situation. Can you briefly describe how urgency in your offer makes you more effective?<\/p>\n
Yeah, it\u2019s what you said. And I don\u2019t use it every time. I use it when I think the other side is trying to play games. I\u2019ll put a 24-hour window, but I love to tell people what the number is going down to so that they\u2019re very clear on the terms. So, if I say my offer\u2019s 480 today, if you don\u2019t answer within 24 hours, the offer\u2019s 470. If you ask me after that, the offer\u2019s 460 and I won\u2019t negotiate it. So, these are the terms, you don\u2019t have to like them. You can never call me again. But if you call me after 24 hours, you\u2019re not getting the same offer. There\u2019s no excuses, I had to do this or that.
I don\u2019t care about that because I\u2019m just trying to buy at the right price. And the way that I always describe it to people is this. I\u2019m pushing a pile of money on the table over to you. And most of my offers are cash. So, I\u2019m really pushing a pile of money on\u2026 it\u2019s sitting in front of you. If you want it, take it right now. If you don\u2019t want it and you ask me to push the money back, I\u2019m going to push a little bit less back next time because you\u2019re wasting my time.
I\u2019d like to come to a fair agreement, but also, this is just how it works. And again, they may be emotional and I am okay with understanding that, but I\u2019m an investor. I\u2019m not here to hurt your feelings but I\u2019m also not here to waste my time.<\/p>\n
This reminds me of that iconic scene in the cinematic masterpiece Dodgeball when Ben Stiller is like, \u201cHave you ever seen $50,000 in person?\u201d And he opens a big briefcase and it\u2019s just $100 bills that\u2019s like an inch tall. You should try that. I hear that that actually works all the time too, actually bringing that to the table. It\u2019s got to be in a silver briefcase though.<\/p>\n
I\u2019m doing to work on that.<\/p>\n
Awesome. So, I got to say urgency for sure is one of those things that, oh, I love to use it and I hate when it\u2019s used against me, because it works, in this market, especially. When you\u2019re talking about looking at MLS deals and they\u2019re like, \u201cAll offers due by Monday, end of day.\u201d And it\u2019s like Saturday morning and the house was just listed and I\u2019m just like, \u201cOh, come on. I can\u2019t even eat my breakfast. I got to go analyze a deal right now.\u201d But it works. It really does work. When there\u2019s a deadline, it causes you to mobilize. It causes you to put pressure on the realtor, it causes you to contact your loan officer and really get all that going.
I can definitely see how that\u2019s a negotiation tactic that can work. That\u2019s something that you do on a personal level, but even as someone who\u2019s representing people as a real estate agent and with your team and everything like that, are there any other types of urgency tactics or strategies that you\u2019re using on a grander level?<\/p>\n
Yeah. It\u2019s really modified because in a seller\u2019s market, you have to know who has the leverage. So, if I\u2019m representing buyers in a seller\u2019s market, I have to know that they have the leverage. And I can\u2019t say, if my clients are like, \u201cWell, I want them to respond by tomorrow.\u201d You\u2019re like, \u201cLook, that doesn\u2019t work right now. You don\u2019t have the control.\u201d So, what you want to do is find out everything that the seller needs and make sure you incorporate that into your offer, whether or not you\u2019re the highest price is whatever you\u2019re willing to do on price. But I always find out if there\u2019s no guidelines, everything that the seller wants, closing date, what things are important, if they need a use and occupancy.
And so, my offers always have everything that\u2019s a seller requested. So, even if it\u2019s less, I\u2019m using that as a tactic. So, on urgency, if they need to close earlier, I\u2019m making sure my clients can close earlier. If they\u2019re doing it on some other level, I\u2019m just trying to match what they want. But I think we\u2019ve been two years in a very, very hot seller\u2019s market. So, it\u2019s very hard as a buyer to use urgency. And I think people try to overuse it and not understand who really has the control, which is sellers. It\u2019s changing now. And I think it\u2019s going to be real nice for us who\u2019ve been wanting to use it and now can use it again.
But you have to remember that, similar to what David said before about maybe they just are emotionally attached. Sellers are still thinking that the prices from three months ago are valid, we have to slowly show them that it\u2019s not by letting them sit on the market a little. And like we said, nothing more than days on market to get a seller start to come around to your offer. And sometimes you can just be nice. And sometimes I use the reverse urgency, which is, look, if you want to use my offer to leverage other offers, go for it, but nobody\u2019s going to close the deal quicker and easier than I am.
So, I\u2019ll leave it out there for a week. But if I don\u2019t hear from you in a week, I\u2019m never going to offer it again.\u201d So, that\u2019s it. I use it modified and that\u2019s to put pressure on, but also be like, \u201cHey, I\u2019ll give you a week.\u201d So, there\u2019s different versions. Like I said, I\u2019ve used it to hardline, in situations before and now I\u2019m learning to really listen to who\u2019s on the other side, including agent, seller, what they need and then leverage that as best as I can. And if I can use some type of urgency, I will, but it\u2019s been tough when sellers are in control.<\/p>\n
Yeah. Awesome, man. Well, as we close out, I didn\u2019t want to end the podcast without talking briefly about your 25 Malvern negotiation in Verona. Can you tell us a little bit about that story and all the juicy details there?<\/p>\n
That\u2019s the one that I actually was talking about, but the dynamic was so interesting because it was between not just the agents. Agents had an ego. The sellers were a little bit crazy and they had an ego. So, it was listed for like 599. And it sat on the market for maybe 30 days. We went and saw it. I made an offer of 465 and they were appalled. I mean, just appalled. And this was a good offer or maybe it was. I might have offered higher. I think I offered maybe 475 at the time. And they said, \u201cOh, well we have other people interested.\u201d And I said,\u201d Who else is interested?\u201d And they said, \u201cOh, regular first-time buyers.\u201d
And I said, \u201cCome on.\u201d I said the house needs 40,000 in structural minimum. And remember, most real estate agents have no idea about anything renovations. It definitely needed 40,000 in structural. I said, \u201cYou\u2019re going to get to inspection. It\u2019s going to fall out.\u201d And then just like you said with David, they said, \u201cNo, our client is offended by what you said.\u201d And I said, \u201cWell, I\u2019ll leave it open for today. And then if not, I\u2019m going down to 465.\u201d And that\u2019s when they got even more offended. They ended up taking the other offer. They did the inspections, it went exactly how I said.
And two weeks later again, they called back. And it\u2019s what I was saying before, I said, \u201cLook, it\u2019s 465.\u201d And they were then again, incensed that I wouldn\u2019t give them the 475 that I originally did. So, I said, \u201cOkay, well call me in three weeks when it doesn\u2019t sell again.\u201d And it didn\u2019t sell for three weeks and there were co-agents on the transaction. So, the one that I was dealing with the whole time never called me back, but his wife called me back and said, \u201cCan you please give us the 465?\u201d And I said, \u201cSure.\u201d
And I made about 180 or 200 on that. And it was a tough renovation, but I was right about the structural. And I was right because I did my due diligence and most people aren\u2019t doing their due diligence.<\/p>\n
You were also right with how you foresaw it falling out of contract if they went with the other buyer. And it\u2019s half satisfying and half frustrating when you can see exactly how it\u2019s going to play out and you can\u2019t just get the other side to skip ahead and do it. You have to wait for the painful dominoes to fall before it finally comes to where you knew it was going to come in the first place. But that\u2019s why you want an agent like Jonathan representing you. Because when you\u2019re thinking, \u201cNo, no, no, let\u2019s give them the number they want.\u201d
Nope, let\u2019s hang on. Let\u2019s do it this way. And if somehow it does get through inspection, there\u2019s another house we\u2019re going to find. And you just keep that steady pressure. And eventually, you will take these deals down.
Thank you very much, Jonathan. I really appreciate not just for being with us on the podcast today, but for the work you\u2019re putting in on the BiggerPockets forums and helping fight the good fight of others building wealth through real estate every day. Did you have any last words before we let you get out of here?<\/p>\n
No, I always appreciate being on. It\u2019s always a pleasure to talk to you guys. And I was just going to pub my new podcast when you\u2019re ready.<\/p>\n
Yeah, yeah. Let\u2019s hear about it. Where can people fight out about you?<\/p>\n
Yeah, spurred on by years of listening to BiggerPockets and loving this, I started my own podcast. It\u2019s called Zen and the Art of Real Estate Investing. As of today, when we\u2019re recording, the ninth episode came out this morning, but it\u2019s about the mindful approach to real estate. And we\u2019ve talked about a lot of that and that includes these type of negotiation techniques, because I think that investors can get so much overwhelm of information.
You can get like 50% say yes, 50% say no, but if you\u2019re mindful about the way that you approach real estate, which is really all the three of us have talked about on this podcast. I think that you\u2019ll just find it a lot easier to get through. If you approach mindful, you\u2019re going to have less analysis paralysis, because you\u2019re going to do the work to get to the right parts.
But again, thanks so much for having me on. I always appreciate being on BiggerPockets. I\u2019ve been around the site for so long and I still enjoy being in the forums, answering questions and taking inbox messages, and returning them when I can.<\/p>\n
Well, thank you for what you do. And, Rob, thank you for being here with me today. This was a great show. I appreciate you sharing the wisdom that you did, Jonathan, and we hope to see you again. I\u2019ll let you guys get out of here. This is David Greene for Rob, cool as cucumber, Abasolo. Signing off.<\/p>\n