\n<\/p>\n
A cash offer almost always gets a seller\u2019s attention.<\/strong> Whether someone comes in low or high, the prospect of a smooth closing without any loan contingencies is often more than enough to get a deal done. But what if you don\u2019t have stacks of cash lying around?<\/strong> Maybe you\u2019re trying to get your first rental property or house hack<\/a> with a conventional, FHA, or <\/strong>VA loan<\/strong><\/a>. How do you set yourself apart from the hotshot who roles in and offers all cash without any appraisal necessary? Worry not because Ashley and Tony have done it dozens of times before.<\/p>\n Welcome back to this week\u2019s Rookie Reply<\/strong>, where we take questions directly from Instagram, Facebook, the BiggerPockets Forums, and our Rookie Request Line. This week, we talk about how to beat cash offers<\/strong><\/a>, what to do when tenants in the same property start disputing<\/strong>, and appraisal tips<\/strong> to get your home valued higher. We also touch on how to network, make better connections, and build genuine relationships with other investors in your area!<\/p>\n If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group<\/a>! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).<\/p>\n Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: Tony: Ashley: \u00a0<\/p>\n<\/div>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/i>sponsor page<\/a><\/i>!<\/i><\/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 Real Estate Rookie, episode 228.<\/p>\n
I know so many rookies today would consider capital maybe as one of their biggest obstacles to getting started, but you got to start thinking outside the box. It\u2019s like BPCON just happened. Hopefully, you\u2019re at BPCON, shaking hands, meeting people, because I guarantee, out of the almost 3,000 people that went to BPCON, a certain percentage of those folks are lending money on a private basis and they have a good time doing it because it\u2019s the most passive return they\u2019re ever going to get in real estate investing. You just got to find the way to connect with those people.<\/p>\n
My name is Ashley Kehr, and I\u2019m here with my co-host, Tony Robinson.<\/p>\n
And welcome to the Real Estate Rookie podcast, where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. We like to start the episodes off by shouting out folks in the Rookie audience who have left us honest rating and reviews on Apple Podcasts.
And this week\u2019s review comes from Rags321, and Rags says, \u201cGreat podcast!\u201d with an exclamation mark. \u201cThis is a great podcast for learning about real estate through so many different aspects.\u201d So Rags kept it short and sweet but still left us five stars. So if you haven\u2019t yet, please leave us a rating and review on whatever podcast platform it is you\u2019re listening to. The reviews go a long way to helping us find new listeners. And the more listeners we find, the more folks we can help and that is our goal here at the Real Estate Rookie Podcast. Isn\u2019t that right, Ashley?<\/p>\n
And you know what I was just thinking of? So this is recorded after BPCON and we talk about the benefits of BPCON throughout this episode, but we\u2019re headed there in a couple of days. And all I thought about while you were reading that review is, man, I need to get myself some muscle and force people into leaving us five star reviews while we\u2019re there. Do it now.<\/p>\n
We\u2019ll just walk around with a big QR code that links to the podcast.<\/p>\n
Yeah. Oh, Darryl and Sarah just pushing people out of the way, \u201cDid you leave a five star review? You can\u2019t enter the conference.\u201d<\/p>\n
That is such a good idea. So for BPCON next year as part of the registration process, there should be a toggle that says, \u201cHave you left a review? Yes or no?\u201d And if they say yes, then they can buy a ticket. And if they say no, then I don\u2019t know, they\u2019re not able to buy a ticket or it\u2019s double the price or something crazy like that.<\/p>\n
And obviously, this word, trademarking this idea right here. So it\u2019ll only be used for our podcast on the market, not steal our idea.<\/p>\n
You guys are on your own.<\/p>\n
But if you guys haven\u2019t already, check out BiggerPockets\u2019 newest podcast on the market with some of our good friends. It actually is a super great podcast.<\/p>\n
Such a great podcast.<\/p>\n
Still number two to us of course, but definitely really interesting. And they don\u2019t have boring banter. It\u2019s actually interesting conversation going on there. So make sure you guys check them out if you haven\u2019t already. So Tony, what\u2019s new with you?<\/p>\n
Yeah, we are shaking, we\u2019re moving. One of the things that I would love to do, maybe we can do this in front of our future Rookie Replies, is give you guys all an update on our Big Bear Hotel. So I would love to share the story behind that, but we just officially shut that deal down last week, so another buyer swooped in and took it away from us. So it\u2019ll be a lot of, I think, good lessons for folks to hear as far as what we learned, what we do differently next time.
So licking my wounds from that defeat. But nonetheless, we\u2019re still moving forward. We got a bunch of properties we\u2019re setting up right now. I think probably we\u2019re in the process of about to take live. I think what will be my favorite property in our portfolio is this really cool Mars themed property in Joshua Tree. And it\u2019s got the same aesthetic as our usual tiny houses, but it\u2019s actually a two-bedroom property. And it\u2019s like, I\u2019m just super excited for it. So we\u2019re having a good time setting that one up and just all full steam ahead, the usual stuff.<\/p>\n
Yeah, I think that would be a great Rookie Reply is talking about that deal because even me, I\u2019ve had to back out of a campground deal and it was just sickening, and I felt awful losing that deal. And then somebody else swooped in and got it. But I think that it\u2019s way better to not force a deal and that wasted time, the money, that was an opportunity cost of losing a little bit of time and a little bit of money compared to the large amount of money and time you could have wasted if you went through that deal and it not being a great deal too.
So social media, the impact it has on people\u2019s lives, I could care less about somebody showing me their fancy things they have that. I have no interest in keeping up with the Joneses, that doesn\u2019t bother me. But somebody talking about, \u201cI never back out of a deal, I always close.\u201d That\u2019s like, \u201cOh, I had to leave a deal.\u201d That makes me cringe at myself. But also, you never know what people are saying online, but I think it\u2019s perfectly acceptable and should be made more of the norm that it is okay to go out of a deal if it\u2019s not going to work anymore, instead of trying to force it.
And yeah, it does suck to be that person where the seller is like, \u201cGeez, I had a buyer and they\u2019re not buying it anymore. What the heck?\u201d And they can trash talk you or whatever you want or something like that, I don\u2019t even know. But I guess they\u2019re happy they have another deal, but-<\/p>\n
I got another buyer.<\/p>\n
Yeah. So it\u2019s hard to swallow that when it does happen. But lessons learned are huge, I think, from that.<\/p>\n
Totally. Well, what\u2019s new with you, Ash? What do you got going on?<\/p>\n
So I actually have a lake house that I\u2019m hoping to close on, I think, Friday. But I\u2019d leave on my flight for BPCON Friday, and so I\u2019m trying to get a really early morning closing scheduled here before I take off. So, hopefully closing on that. If not, it won\u2019t be until a week and a half later because I\u2019m pretty much gone all of next week to get it done. So that\u2019s the new thing. And it\u2019s going to be a short-term rental, just on a little lake near us here about 45 minutes from me now.<\/p>\n
Are there beavers there too?<\/p>\n
No, at least I haven\u2019t seen, but there is actually a dam. So the lake, it\u2019s cool. There\u2019s a dam there and they actually drain it. So I think it\u2019s coming up October 2nd or October 3rd. They actually drain the lake. So it\u2019s like a manmade lake. There used to be a town there and they actually picked up \u2026 It\u2019s always flooded, so they actually picked up houses and moved it and then they dug it out and they turned it into a dam.
So every year they drain the lake and then they fill it back up in the spring and then everybody boats on it and stuff like that. But I\u2019ve never been to it when it\u2019s drained, and so I can\u2019t wait to go and see it like basically this big crater. And there\u2019s still some water that stays in the bottom of it because they don\u2019t get all of it out, but you can walk around some parts of it and stuff like that.
So it\u2019ll be interesting to see. But a really nice area, nice community, a small town that the lake is in. And I think there\u2019s a lot of potential. There\u2019s not a ton of rentals that are listed there. What are listed don\u2019t have a ton of vacancy, but what I\u2019ve learned is that there\u2019s a lot of, people don\u2019t even have to advertise because they have the same families that come every single year that rent it out and things like that. So I think this actually might be a good opportunity to \u2026 There\u2019s a Facebook group for this lake and I think just even posting in the Facebook group as to, \u201cHere\u2019s this new short-term rental.\u201d<\/p>\n
Oh yeah, I\u2019m glad you mentioned that, Ash, because I feel like that\u2019s \u2026 A lot of people when they want to break into real estate investing, they always want to go to the big hotspots. But even for Airbnbs, you can find success in smaller, secondary, tertiary markets because every pocket of every single state has these little spots where people go to spend a night or two to enjoy whatever that little location has to offer.
So even if me on the other side of the country, I\u2019ve never heard of this spot, but everyone in that area knows and goes there. Then there\u2019s an opportunity for you to have a successful short-term rental there too.<\/p>\n
And I think part of the large opportunity, and I\u2019ve learned this from my arbitrage, my units, the short-term rental arbitrage where I\u2019m renting out an apartment in an apartment complex, a lot of our guests that stay are actually visiting people that live in the apartment complex. But they live in smaller apartments, one or two bedrooms and it\u2019s family visiting and they maybe have five people or whatever and they can\u2019t fit into their apartments. So they rent this unit when they\u2019re visiting. So like Thanksgiving, Christmas, always book through there people visiting family that live in the apartment complex.
I think since we\u2019ve had it, this would be our third or fourth Christmas and it\u2019s been the same woman that has rented it every Christmas to visit her family that lives in the apartment complex. So the same with this lake house, is getting people that have a lake house already but want to have people come and visit, offering people in the community a discount code or whatever if they have friends or family that want to stay at their house if they can\u2019t accommodate them into their own lake house too.<\/p>\n
I love that. Great lessons learned, great lessons learned. Well, we got a slew of good questions today as well. Our first question is all about how to fight back when an appraisal comes in short. Ash and I both dealt with that issue and no folks have dealt with that issue. What happens, and this is the second question which I think might be my most favorite, is like what happens if one tenant punches another tenant? How do you handle that as a landlord? And Ash and I kind of share our thoughts on that. And then the third question is about how to remain competitive when you\u2019re going up against cash buyers because I think a lot of folks are feeling that pressure, especially in today\u2019s environment.
So question number one today comes from a listener by the name of Lauren Murphy Niakhu and Lauren\u2019s question is about appraisals. So Lauren says, \u201cMy husband and I are refinancing our primary residence, which was just built in 2019. We received the appraisal today and it\u2019s almost $100,000 less than the first appraisal completed in February of 2020. Given the down payment we have in the house, even with the low ball appraisal, we still have over 20% equity.
I don\u2019t want to be reactionary or emotional, but I\u2019m kind of pissed. I haven\u2019t heard from the lender yet, but I\u2019m hoping it doesn\u2019t affect our refi. Obviously, if it does affect the refi, I\u2019ll try to argue against it. One of the three comps to choose was a 30-year-old house with updates. But even if the refi moves forward, is this appraisal something that would affect the future sale of our house when we\u2019re ready to move on?\u201d
So I love a good appraisal question, Ashley, so I\u2019ll let you lead in first. What are your thoughts? Do you think this has an impact on her refi and her ability to sell them in the future?<\/p>\n
Yeah, I think I\u2019ll answer the latter question first is, is it going to affect the future sale of their house when they\u2019re ready to move? First of all, this appraisal is not public knowledge, so this will be held in \u2026 You don\u2019t have to disclose that appraisal number to anyone. When you are ready to sell your house, if the person is getting a loan when they purchase your property, they will have their own appraisal on the property.
Unfortunately, there is no consistency that the appraisal will turn out the same or turn out different. An appraisal has been considered to be more of an art than a science where it can vastly depend on who the appraiser is that is appraising the property. So yes, it could affect the future sale of your house.
So if you go and list this property and somebody puts in an offer to purchase it and they\u2019re going to be using conventional financing and where the bank would like to have an appraisal on the property and easy math, let\u2019s use a hundred thousand dollars for the purchase price, the bank is going to loan you up to 80% of that value, $80,000. But when it is appraised, it only appraises for $90,000. So now the bank is not going to loan them that $80,000 and that means they\u2019re going to have to come up with more money, a larger down payment because the bank is only going to give them 80% of the appraised value, not what they\u2019re purchasing the property for.
So to kind of go into your other question as to how to dispute this, Tyler Madden, an investor friend of ours actually did this on a recent property he just purchased where he actually was doing a refinance. He held the property for a year, rehabbed it, went through the refinance and he asked his bank to dispute it. He wrote a letter stating that he would like a second opinion on the appraisal. He had to pay to have another appraiser come in and appraise the property. But he also submitted supporting documents.
So if you can show some kind of proof as to maybe you actually have the cost of construction, your original contract with the contractor, if you know of other comps in the area that weren\u2019t included in your property or if you can find out more information about the houses that were used for comps and maybe there was inaccurate information, bring all of this forward.
And with anything, when you are confronting someone that they had made a mistake, don\u2019t throw it in their face and be like, \u201cThis is wrong, this is wrong. You did this, you should have done this, blah-blah-blah,\u201d just show them here. I\u2019d like to provide more information and kind of do it in a kindly manner. But you can definitely dispute or request to have an appraisal disputed, but it will depend on the bank. The bank can deny your request and in that time, that\u2019s when you most likely would go to another bank to ask them to finance the loan and to get another appraisal done.<\/p>\n
Yeah. Ashley, so many good things you mentioned there. I\u2019m just going to add a little bit. So she asked about, will this affect the refi? And Lauren, you said that you\u2019re at about an 80% LTV based on that, the appraisal that just came in. So I don\u2019t know how high of an LTV your bank is willing to go on that refi, but I feel like a lot of times it\u2019s going to max out around that 80%. So you might not have anything left to refi if you only have 20% equity left in the house.
So it definitely could impact the refi. If they\u2019re able to go up to like 85 or 90%, then you\u2019ve got some room there. But obviously that $100,000 difference will impact how much money you\u2019re able to pull out of the house. I think your point, Ashley, about trying to challenge the appraisal are a really good idea. We\u2019ve done that, I think, two or three times successfully now. We actually just got another appraisal that came back on a house that we\u2019re selling that came back super low. So we\u2019re actively challenging that, literally, have a call after we finish recording today to work through that issue.
And things we\u2019ve done is we pointed out some of the inconsistencies in the appraisal that came back. I think your point of them using a house is 30 years old versus a house that\u2019s four years old. Those are two totally different types of construction. And typically, appraisers aren\u2019t going to take a three-decade-old house with a three-year-old house. Those are two different types of houses that you\u2019re looking at.
If you can find better comps within the same search radius, so let\u2019s say they went out a quarter mile, if you can find recent comps that are better comps, I would use those as proof to say, \u201cHey, here\u2019s something that I think was missed from this report.\u201d And like you said, Tyler, I think given the scope of work for what he did, we\u2019ve done that as well for some of our rehab. So all these things I think help play into the fact of whether or not you\u2019ll be successful in challenging that appraisal.
And then I think, you talked about this as well, that art versus science. Anything that\u2019s dependent upon a person\u2019s opinion, there\u2019s always going to be some sort of fuzziness around how they get to that number because you can send two, three, four appraisers to the exact same property, there\u2019s a good chance they\u2019re all going to come back with a very different opinion of value. And just a slight tangential story, but somewhat related. I know a builder. He builds in Southern California and when he builds his houses, they\u2019re all the same exact property, same exact floor plans, same exact house, but he\u2019s building them in different spots around the city.
So he\u2019ll go. He\u2019ll submit plans for four properties at a time. So he\u2019s submitting four sets of the same exact plans to the county for them to check the plans. Those get submitted to four different plan checkers, same exact property, same exact plans. But guess what happens when he gets his comments back? Not one set of comments are the same thing. Every single plan checker is pointing out something different even though it\u2019s the same exact build, and it makes no sense.
So he\u2019s submitting revisions on plan A that he\u2019s not submitting on plan B, and revisions on plan C that aren\u2019t on plan D. So my point is, whoever goes out there, they\u2019re going to see something that someone else might miss. So if you can point out some of those inconsistencies and things that they might have missed, I think it helps you.<\/p>\n
Yeah, that\u2019s definitely a great point. And some appraisals that I\u2019ve done too is I\u2019ll meet the appraiser when they go to the property and I\u2019ll offer them information. So some people have said that they\u2019ve tried to offer appraisers information, they don\u2019t want it. They do their own thing and that\u2019s fine, let them. Don\u2019t push information onto them. But I\u2019ve had appraisers like, \u201cOh wow, thank you.\u201d
So there was one property, I owned a house down the street and I had had it appraised fairly recent. So I gave that appraisal a copy of that appraisal to the new appraiser that was coming in for this other property also with a list of what updates we had done to the property, how much it cost, things like that. I\u2019ve also had appraisers ask me, \u201cOh, so what did you put in for new?\u201d And I just tell him. He\u2019s like, \u201cA ballpark, what do you think it cost or whatever?\u201d And just ask my opinion, and no proof. I don\u2019t want to see no receipt or anything. They just ask and I just spew out on a number or whatever it was. And so yeah, it does widely vary depending on the appraiser.
I\u2019m working on getting a hard money loan right now to purchase a property and it\u2019s kind of a hard money lender, not really. They do hard money loans, but I\u2019m actually doing a long-term loan with them. And so we\u2019re having an appraisal on the property and when the appraisal was done, they told me that I could not have a copy of the appraisal yet. And I was like, \u201cOkay, that\u2019s really weird, I am entitled to that.\u201d
But what they said was they were actually having a third-party fact checker go through the appraisal and make sure all of the information was correct. And once that verification was done, then they would send me a copy of the appraisal to look over. And I guess there was some kind of confusion and things that were missing and they had to have the appraiser revise the appraisal because of that, but ended up good. It was $13,000 over what I\u2019m paying, so instant equity right there. So yeah, it just vary.<\/p>\n
And that happens, appraisers are people and sometimes they get things wrong. Our last successful challenge, they had the square footage off by, I think it was like, I don\u2019t like a 20% difference in the square footage. They had us 20% smaller than what the property actually was. And obviously that has an impact on the value. So go through that appraisal with the fine tooth comb and if you can find some inconsistencies, point that out.
And then lastly, like Ashley said, if you can\u2019t get that challenge successfully and your lender isn\u2019t able to help advocate on your behalf, then maybe find another lender to do this refi with and maybe they\u2019ll have a better chance of getting you the right appraisal.<\/p>\n
If you haven\u2019t done an appraisal yet, get a copy of someone\u2019s appraisal. So anybody that has done a loan probably has a copy of their appraisal. So ask your friends and family if they don\u2019t mind giving you one and just go through it and look because it does show almost the formula or kind of the guide of how they do put the appraisal number onto your property.
So you\u2019ll see three to four comparable properties listed there and it\u2019ll go as to what\u2019s the bedroom count. And if your house has three bedrooms and the comparable has four bedrooms, they\u2019ll subtract some off of your house because it\u2019s not as comparable because it\u2019s one less bedroom. And so you can go through and see the things that they actually look at when they\u2019re adding or subtracting value from your property.
So take a look at that and you can probably Google appraisals too and look at them, but if you can find a friend or family member that has gone through an appraisal and get a copy of their report, it is very interesting to look through.
Okay, let\u2019s move on to question number two. This question is from CJ Caneel. Does anyone have any information regarding a landlord\u2019s responsibility for damages caused by a tenant renting a condo to another person on the premises? Specifically, if the HOA documents say a unit owner is liable for damages caused by the tenant, does that extend to intentional acts by the tenant that harm another person?
So for this question, are we assuming these are in the unit or are these in common areas even? I would think that in the unit, it would definitely be the owner responsible because a condo, you actually own your unit. But if this tenant were to go and do harm to someone else in the common area or do harm to the property in the common area, then yes it would be the owner\u2019s responsibility of that unit. What are your thoughts on that?<\/p>\n
Yeah, that\u2019s tricky because if I\u2019m reading or understanding CJ\u2019s question correctly, it sounds like one tenant hurt another tenant in some way, shape or form. He says, if one tenant causes damage to another person on the premises. So it sounds like maybe there\u2019s some kind of altercation between two tenants. Is the landlord somehow responsible if tenant A beats up tenant B or something like that? And honestly, I do not know and it\u2019s make \u2026 Are you not reading it the same way?<\/p>\n
No, no. Now, I am. I see it. So if your tenant does damage to the property as the owner of the unit, I think the documents say that you are liable for that. So he does understand that. But what he\u2019s asking is does it extend to intentional acts by the tenant that harm another person? So maybe let\u2019s say that your tenant goes and punches another tenant in the face, are you liable for that?
The first thing I think of though is I feel like that\u2019s not really an HOA issue. I feel like that\u2019s a civil case.<\/p>\n
Or a criminal case.<\/p>\n
Yeah, a criminal case. So I could see if there was maybe damage to the property where the HOA would come back after you, in which case you in turn would sue the tenant for the damages. So yeah, that stinks that you have to go and try and get your money back from the tenant. But as far as an intentional act to harm another person causing physical harm or emotional harm, I would think that would be a civil case against the tenant as the landlord.
So for example, if someone in my property that\u2019s a tenant went and punched the neighbor, the neighbor would go after the tenant, would call the cops on the tenant, not on me. I could see the HOA moving for you to remove that tenant from the property. I could definitely see that in which if the tenant is doing this, it might be a good idea to get the tenant out.<\/p>\n
Yeah. And CJ, we don\u2019t know what state you\u2019re in or what city you\u2019re investing in, so definitely consult with a local attorney if this is something that you\u2019re concerned about. But yeah, I think I\u2019d agree with Ashley where in most cases, if there\u2019s some sort of physical altercation between one tenant and another, those two tenants would be held responsible, not necessarily use as a landlord now.
If someone is walking in the common areas and they trip over a step and hurt themselves, that\u2019s a different scenario. But just one guy or girl walking up to another and called in some issues, I don\u2019t think that would fall into your lap. But definitely consult with some legal professionals because Ash and I are, either one of us are attorneys or pretend to play one on podcasts.<\/p>\n
The only way I can think of is if that person decides to sue you because you rented to that person, because people will sue for anything nowadays.<\/p>\n
That\u2019s true. If this person had a history or something of violence and you didn\u2019t catch that and maybe they were a threat to the community, who knows?<\/p>\n
Yeah. So I think, Tony, is the best advice is consult an attorney. Better to be proactive than reactive. But I would think that it would be very hard for an HOA to monitor. That\u2019s like saying that you\u2019re responsible for another person\u2019s actions. Why would anyone ever want to rent out their property if you are liable for their actions on another person? That\u2019s a huge responsibility there.<\/p>\n
That\u2019s a huge responsibility, huge responsibility. But it does make me wonder now though, like for Airbnb properties, I wonder if let\u2019s say that my guest gets into a fight with the neighbor next door, I wonder if I could be held liable as the Airbnb owner for maybe something that the guest did like that, so something for me to think about. I got to make some phone calls after this to see what kind of liability we have.<\/p>\n
Tony, along those lines, so I\u2019m trying out new software for short-term rental. And one of them has the option where if you want to send almost a lease agreement or rental agreement to the person renting, that is probably something you could put in there. Obviously, there\u2019s still ways people can sue you, even if you have them sign a waiver or something, but put in there that you\u2019re not responsible for their actions or whatever, something like that. And they\u2019re responsible for themselves and what they decide to do. But the second part of that is do you do that?<\/p>\n
It\u2019s so funny. So we just had our short-term rental summit a few weeks ago and one of the speakers or two of the speakers were Sarah and Annette from the Thanks For Visiting podcast. Great podcast, you guys should definitely check them out. But they\u2019re super dialed in with all their systems and they send rental agreements before every guest checks in. And they have it as part of their house rules on Airbnb and Vrbo, that if the guest doesn\u2019t sign the rental agreement 24 hours before checking in, they can cancel their reservation without any kind of penalty.
So essentially someone will pay for the reservation, not fill out the rental agreement, they don\u2019t get their money back. So we\u2019ve been having some discussions and turned it around like, does it make sense to add a rental agreement as well? So we don\u2019t do it yet, but after talking to a Sarah and Annette a couple weeks ago, it\u2019s something that\u2019s on our roadmap to add in for sure.<\/p>\n
Yeah, super interesting because I really hadn\u2019t thought about that. But then I did see their talk at the summit, it was really great information and then when it came up again with checking out the software. So yeah, I was just interested in that.
But I think that if this is something that you are worried about is being responsible for your tenant\u2019s actions that especially short-term rental or even in your long-term leases, putting in some kind of clause that protects you. And the best place to get the proper wording for a clause like that is from an attorney. And it also probably varies based on what state you live in too, because some states, it\u2019s a lot easier to sue people for frivolous things than it is in others.<\/p>\n
Awesome. All right, well, let\u2019s keep rolling. We got one more amazing question to dive into and our third question today comes from Anthony Emerson. And Anthony says, \u201cAs a first time buyer, what are some ways to beat out a cash buyer?\u201d This is a great question, Anthony. I think one that\u2019s popped up multiple times both in the podcast and the Real Estate Rookie Facebook group. Here\u2019s what I\u2019ll say.
So a seller is motivated by one of three things. Its convenience, its speed and its price. A cash buyer, typically they\u2019re going to beat you out by speed because if you\u2019re a cash buyer, you don\u2019t have to jump through all the hoops that a typical mortgage-backed buyer has to go through. There\u2019s no appraisal process. You don\u2019t have to if you\u2019re paying cash. You can skip on a lot of inspections and you can close tomorrow if you really wanted to.
But when you\u2019re buying with a traditional loan, you\u2019ve got to go through the appraisal process. You\u2019ve got to get your title work done. There are so many things that a traditional lender will want to see, which adds to that escrow period. So if a buyer is looking for speed, someone with cash will typically win.
The other thing that cash gives you, and I guess this is the fourth reason, is certainty. A lot of times, people can get pre-approved for a loan, but when they go out to actually close, some things pop up that prevent them from getting to the finish line. But if someone has cold hard cash in the bank, there\u2019s a certain level of certainty that comes along with someone that has cash in the bank. So with cash, you get speed and you get certainty.
On the other side, ways that you can be competitive are with the actual price and with convenience. I met an investor one time that got a crazy good deal on a property because they offered to help the seller move. Seller had been in the house for her whole adult life, had accumulated a bunch of stuff and the thought of her having to leave was just overwhelming for her. But the seller just offered to hire a moving truck, and because they offered to help that person move, they added a certain level of convenience that allowed them to get that deal.
So if you can find what the pain point is for that seller and find a way to soften the blow or make that pain point a little bit easier, you\u2019re giving them a level of convenience that might make them choose you over another offer.
And then the last thing you can do is the actual price. Some sellers are just motivated by what is the highest dollar amount that I\u2019m going to give. You have to remember, on the seller\u2019s side, they\u2019re just going to get a check when you close. It doesn\u2019t matter if it\u2019s cash or if it\u2019s with the loan, right? They just get a check at closing.
And even though the cash might come faster, even if that buyer has a loan that they\u2019re getting on the property, the seller is still going to get a big fat check at the closing table. So if you can give them a bigger, fatter check, some people are motivated by that. So, speed and certainty, maybe you lose out to on the cash side but you can beat them out with offering a higher price and giving them a certain level of convenience.<\/p>\n
Tony, that was great, great information. And to tell you, whenever you go off and giving this great information, all I do is imagine this turning into a nice Instagram reel on your Instagram account.
Oh, I only have a couple things to add to that, but I think those three things apply to any kind of property you\u2019re going after. Every seller has one of those three things, or maybe a couple of those things that motivates them. So the advice I would give is to go for off-market deals. So you\u2019re going to have less competition because it\u2019s not listed on the MLS.
So, off-market deals you can find by driving for dollars, sending out mailers, calling people, word of mouth, telling anyone and everyone what you\u2019re trying to buy. And maybe somebody\u2019s cousin will come and say, \u201cHey, you know what? My cousin is selling this, and blah-blah. I thought of you because you were talking about it.\u201d
I wouldn\u2019t rely on that as your only lead source. I\u2019m waiting for people to bring deals to you, but also wholesalers too. So the thing with wholesalers though would be is that a lot of times they will only accept cash purchases, but that\u2019s not always the case. So that\u2019s something to talk to a wholesaler up front is if you are financing the property if they would accept terms when purchasing a property.
What you can do is if you do find an off-market deal, and I think this is a big misconception sometimes, is that because you\u2019re buying the property off market, the seller is going to expect you to close fast and to bring cash. And that is not true. That\u2019s not the case. You can give them an offer of any type of financing that you have available to you. And it doesn\u2019t mean you if you are getting a conventional loan, that you have to buy a property on the MLS.
So I think that\u2019s a great route to go is to actually do some deal sourcing yourself, find a deal, and then make an offer on it where it\u2019s just you offering and nobody else. So that there is that, they don\u2019t have tons of people submitting offers by 10:00 PM on Sunday evening for whatever.
Another thing too I like about off market deals is that you\u2019re talking direct to seller. So it\u2019s a lot easier to find out what their motivation is. Where when you\u2019re on the MLS, it\u2019s you talking to your agent, talking to their agent, talking to the seller, and it\u2019s like playing telephone. Even now I\u2019m in New York state, you have to use attorneys to close and I\u2019m doing an off-market deal on a lake house. And it\u2019s like me to my attorney, to their attorney, to them.
And finally, we just called them and it\u2019s like, \u201cWhoa, whoa, no that\u2019s not what\u2019s happening. I don\u2019t know why our attorney said this and your attorney said that,\u201d like no. And we were able to, within 24 hours, get the deal back on the table and the ball rolling and moving. So I think there is an advantage sometimes to having a middle man when you\u2019re working on a deal, but other times, it\u2019s even better just to go directly to the seller and be able to talk to them and figure out what they want and what their motivation is.
And then you can negotiate from there, sit down with them, give them your offer. And if they\u2019re like, \u201cNo, we don\u2019t want to do it,\u201d you can talk to them and say, \u201cOkay, well what would be some things that would maybe make this deal happen for you?\u201d Maybe it will work out, maybe it won\u2019t, but don\u2019t go into the deal just because you want the deal and don\u2019t agree to their terms just to make it happen, because there will be other deals out there.
So definitely, try finding your own deals by going off market. There\u2019s a lot of ways to do that, just even driving around looking at properties. One thing you will have to be careful of is that when you are looking for off-market deals, you will have to make sure that the bank will finance the property if you are using a loan. So if you\u2019re using your FHA loan, you have to go through and do a kind of an FHA inspection. So this is separate from the inspector you hire. This is completely separate from that where they want to see the property as up to code.
I remember when my cousin purchased a property with an FHA loan, she had to install handrails going up the one stairs because it didn\u2019t have it and stuff, before they would actually finance the property. So, do be careful of that that you\u2019re looking at properties that would pass an FHA inspection or that the property would actually finance. Because if the property is too dilapidated, a bank may say, \u201cYou know what? We\u2019re not going to touch that.\u201d
And banks also have lending limits. I found that very common. A lot of banks won\u2019t even give you a mortgage if it\u2019s less than $50,000 too on the property. So watch out for those kind of things when you are going for those off-market deals. The best way to find out what property won\u2019t work is to go directly to the lender that you\u2019re using and ask what are properties that you stay away from or you won\u2019t lend on. If it\u2019s inhabitable, there\u2019s no running water yet or anything like that, the bank probably will say, \u201cYeah, we don\u2019t finance those type of properties. You have to get it livable, at least for us to finance.\u201d<\/p>\n
Yeah, so many good things, Ashley. As I just want to piggyback on what you said about playing telephone, where it goes from you to your agent to their agent to them. The same exact thing happened to me on a deal we\u2019re negotiating on this past summer where I wanted to present some updated terms to the seller. And the agent, he was a dual agent, so he was representing both the buyer and the seller in this situation. I was the buyer, the other person was the seller. And I said, \u201cHey, just pitch this to them and let\u2019s see what they say.\u201d And the broker was just so hesitant. He\u2019s like, \u201cI think I might make the deal fall apart and the seller is really antsy and I don\u2019t want you to lose this deal,\u201d so whatever.
I hang up from him, I just called the seller. And I say, \u201cHey, here\u2019s what I\u2019m thinking. What are your thoughts?\u201d Without hesitation, they\u2019re like, \u201cYes, let\u2019s do it.\u201d So it\u2019s like sometimes if you can skip that middleman, it does help I think bring a more creative deal together. And it also helps build that relationship, I think, if you can talk to that person directly.
The other thing too is that it doesn\u2019t necessarily have to be your cash. So Anthony, if you have friends or family or even hard money that you can go out and get, that will give you an opportunity to be a cash buyer in a way. Because cash just means like can you buy it without getting a traditional loan? So if you can go out and raise $500,000 from friends and family or go out and get hard money, now you\u2019re able to close within the same timeframe that a cash buyer will.
And if you think about, I looked it up while we were talking, the S&P 500 is down 22% year-to-date. So the people that have had their money majority in the stock market are down 22% this year. So do you think that there might be an appetite for someone to say, \u201cHey, I\u2019d rather give you a private money note at 10%, 12%, whatever it is, as opposed to leaving the stock market right now that\u2019s taking a nose dive\u201d? So there\u2019s probably an appetite in today\u2019s environment to say maybe private money lending is a better way for me to get a return on my investment because the S&P 500 has taken a nose dive.
So I think get creative, Anthony, doesn\u2019t necessarily have to be your cash and see if there\u2019s some other ways where you can get some cash but not be yours.<\/p>\n
I\u2019m going to give some unsolicited advice on the stock market right now. I am going to say if you do have money in the stock market even though it is down 22%, I would say-<\/p>\n
Don\u2019t pull it out.<\/p>\n
\u2026 leaving your money in there and let it ride it out, because if you look at the history of the S&P 500, it will go back up. And if you are losing money right now, you will lose money if you pull it out.
So a lot of people don\u2019t follow that advice, they panic. So just to Tony\u2019s point is those people that do pull their money out, great opportunity for you to make the money. And there are going to be, and probably already are tons of people that are pulling out of the stock market and kind of panicking. Just like in 2008, a lot of people did that. And if they would\u2019ve left their money in, they would have a lot more than what they do have now because they did pull their money out.
So yeah, I think that\u2019s a great point is you can offer a better return right now than a savings account, money market account, things like that, and even just someone putting their money into the stock market.<\/p>\n
And there\u2019s probably a lot of people just sitting on cash too. It\u2019s like a lot of people had equity. A lot of people sold homes over the last year. A lot of people refinanced over the last year. A lot of people pulled HELOC. So they just have this cash that they\u2019re sitting on that they would like to put to work. They don\u2019t want to put in the stock market because of how things are going. So if you can present them with a safer alternative investment strategy that gives them a better return, you can be a lifesaver.
I know so many rookies today would consider capital maybe is one of their biggest obstacles to getting started, but you got to start thinking outside the box. It\u2019s like BPCON just happened. Hopefully, you\u2019re at BPCON, shaking hands, meeting people, because I guarantee out of the almost 3,000 people that went to BPCON, a certain percentage of those folks are lending money on a private basis. And they have a good time doing it because it\u2019s the most passive return they\u2019re ever going to get in real estate investing. You just got to find a way to connect with those people.<\/p>\n
Yeah, I think to add on to that too, if you do have money to invest, actually right now is a great time to put into the stock market because you\u2019re getting stocks on sale. But once we get a lot of people will do that. But also if you are planning on retiring in the next couple of years, the stock market may not-<\/p>\n
Rebound.<\/p>\n
\u2026 rebound in time when you are ready to retire. So this is also a great person to go after. Somebody who\u2019s retiring in the next several years maybe doesn\u2019t want to put any more money into the stock market and they want to put it into a nice safe investment with you. So what did we learn? We want to go after old people that are on the verge of retirement.<\/p>\n
We got to start doing presentations at the senior home, the geriatric centers. It\u2019s where the best private money lenders are.<\/p>\n
And you know what? It seems like, not even old people. If you\u2019re retiring, hopefully you\u2019re not that old because you guys are rockstar real estate investors and you were going to retire at the age of 30, 40 you a lot sooner than \u2026<\/p>\n
So that\u2019s the hot tip for today\u2019s episode. You got to go to the senior citizen, local senior citizen, like community center in your city and do your presentation there to find your private money.<\/p>\n
Okay, let\u2019s really break this down and let\u2019s go through the sold homes. Let\u2019s look up people who have sold their homes. So look for the Dorothys, maybe the Carols, all of the old fashioned names that have sold their homes for cash for way more than they bought it for 30 years ago. They\u2019re sitting on their lump sum of cash. Search what nursing home they\u2019re at or long-term care facility and then that\u2019s where you\u2019re volunteering.<\/p>\n
There you go. That\u2019s million dollar plan right there. You\u2019re welcome to everybody.<\/p>\n
Okay, so Tony, we\u2019ve been our last episode, our first one doing these longer extended episodes, we had a little bonus content kind of talking about market interest rates. So did you have something that you wanted to touch on today that we could boring banter about?<\/p>\n
So BPCON just wrapped. And I know we\u2019ve talked about this in the past before, but I think it\u2019s always good to put networking front and center because I really do believe that that\u2019s one of the most important things that a new investor can do to kickstart their investing journey. So I\u2019m just going to share what someone can do if you are hesitant to network or maybe you feel like networking isn\u2019t quite your cup of tea.
So first thing I\u2019ll say is that you don\u2019t have to be an extrovert to enjoy networking. I think I\u2019m naturally an introverted person because I know I re-energize by being by myself. I need alone time to have my energy levels come back up. Whereas if you\u2019re an extrovert, you need that people connection, that energy of other people being with you to feel re-energized. So I\u2019m by nature an introvert.
But I still find joy in networking, and here\u2019s typically what I\u2019ll do. So even before I was Tony J. Robinson from the BiggerPockets Real Estate Rookie Podcast, and I was just going to meetups as Tony Robinson with the nobody-listens-to-my-podcast podcast, I would go into a room and I would find a group of people. And all I would say is like, \u201cHey, do you mind if I join you guys?\u201d
And a hundred times out of a hundred times, they\u2019re going to say yes. I\u2019ve never been told, \u201cNo, you can\u2019t join us.\u201d And once you join into that group, it\u2019s a simple question, \u201d So, hey, what brings you here today?\u201d Or, \u201cHey, where are you at on your real estate investing journey?\u201d And then people kind of go off and start telling you their story. And that\u2019s how you build connections with people. And it\u2019s not necessarily about meeting as many people as you can in the room, it\u2019s more so about like, can I build a genuine connection with any of these people? And you never know where these little conversations or where these little connections might lead you.
I\u2019ve shared in the podcast before that the only reason that we started investing in Airbnbs was because Alex Sabio \u2026 His name is Alex Sabio. He\u2019s another investor here in southern California. He started buying Airbnbs and he and I met at a meetup. And after he bought his first one, he said, \u201cI think you guys should buy one too.\u201d Three weeks later, we close on our first cabin. So you never know where those connections will lead you.\u201dSo hey, can I join you guys? And where are you out in your investing journey?\u201d Those two sentences will take you so far when it comes to networking.<\/p>\n
The point you made about establishing a genuine connection was right on. I do think that sometimes people get over-concerned with, \u201cOh, I got to build my list of connections. I collect as many business cards as I can and enter them into some kind of data collection software so I can track the people that I\u2019ve made a touch point with.\u201d
But having, instead of meeting 20 people that night, talking to three people where you actually were interested in what they\u2019re saying and the same back to you and you built a connection with them, that may be on your way to a friendship instead of just that business connection, that networking. That will be so much more valuable to you than looking at a list of 20 people that you met that night but can barely remember or put a face to a name as to who these people actually were.
You may make a note on the back of their business card, what they do or something like that, or one thing you learned about them. But the genuine connections are really what are going to help you. And also you can provide so much value to those people too.
And because you have that genuine connection, they\u2019re actually going to want to help you and the same, and you\u2019re going to want to help them because you truly care about them and you become friends or whatever that relationship has turned into. So I think right there was a huge takeaway. And sometimes when we talk about things on this podcast that are business-wise, I think of it too as even just in life in general.
As I\u2019ve gotten younger but yet wiser, I\u2019ve somehow learned that in life, I would rather have that core group of friends that are super genuine and best friends than have 50 friends that you don\u2019t have that genuineness from because you\u2019re just like trying to keep your friendship going with 50 people instead of those four or five people where you build that genuine connection. So I think that works in all aspects of life, I guess.<\/p>\n
So true.<\/p>\n
Well, you guys, thank you so much for listening to this week\u2019s Rookie Reply. My name is Ashley, and you can find me at WealthfromRentals, and he\u2019s Tony at tonyjrobinson on Instagram. And please, if you are loving the new Rookie Replies, leave us a five-star review on your favorite podcast platform. We\u2019ll see you guys back on Wednesday with a guest.<\/p>\n