\n<\/p>\n
Financial freedom<\/strong><\/a> is the goal we\u2019re all after. Whether you want to replace your nine-to-five income<\/strong>, retire your spouse or family members, spend more time with your loved ones, or just have enough money to travel the world<\/strong>, reaching financial independence is truly the American dream. And the wisest, most stable way to find financial freedom? Real estate investing<\/strong><\/a>!<\/strong> For generations, rental property investing has been the foundation of many millionaires<\/strong>\u2019 portfolios, and you can repeat their path with four simple steps<\/strong>.<\/p>\n To give you the complete rundown on the four steps to financial freedom, we\u2019ve got Dave Meyer<\/strong>, VP of Data and Analytics and host of On the Market<\/em>, on the show. Dave embodies the financially-free life most people dream of. He lives abroad, chooses to work, and eats copious amounts of sandwiches every day<\/strong>. But what most people don\u2019t see is the decade of hard work and dedication that Dave put in to get up to this point.<\/p>\n Dave will explain exactly how to calculate the passive income you need<\/strong> to find financial freedom, where to start investing in real estate<\/strong>, how to analyze a real estate deal<\/strong> from scratch, and the one tool that EVERY investor can use to build a rental property portfolio<\/strong> faster.<\/p>\n If you want to become a real estate pro in 2023, <\/strong>sign up for BiggerPockets Pro<\/strong><\/a> and use code \u201cANALYSIS20\u201d for a special discount.\u00a0<\/strong><\/p>\n Dave Meyer: \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? Email <\/em>[email\u00a0protected]<\/span><\/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 742. The Four Steps to Financial Freedom is about how you can still make positive, concrete, positive steps towards achieving pretty much any type of financial goal, even in today\u2019s market conditions. The content covers really practical information like how to pick a market to invest in, what\u2019s a good cash on cash return, what sort of ROI you should be looking for. We even go through individual metrics so that you can go and research specific markets yourself. We\u2019re going to talk about how to find leads to build your deal pipeline. We\u2019ll obviously get into property analysis, because that\u2019s sort of my thing.
What\u2019s going on everyone? This is Dave Meyer, your host for today\u2019s special, different episode of the BiggerPockets Real Estate podcast. If you listened a couple weeks ago, we released a bonus episode where I went through a webinar I did recently about investing during a correction. And it was really popular. We got really good feedback about it, so thank you all for listening to it.
And we\u2019re going to go through a webinar I put together just over the last couple days called Four Steps to Financial Freedom Through Real Estate. And what we\u2019re trying to do with these types of episodes is give you more practical, step by step information about investing in current economic conditions. I think this is going to be really practical for you if you are interested in pursuing financial freedom, which I\u2019m guessing you are, because you are listening to this podcast.
Today\u2019s quick tip is, I guess it\u2019s kind of a two-parter. The first one is if you\u2019ve ever thought about becoming a BiggerPockets Pro and want to do it today, we have a 20% off discount code for you. Just use the code Analysis20. That makes a already great deal and even better deal for pro, and it really gives you basically all of the tools that you need to start scaling your real estate portfolio.
But we even have an extra bonus, which is the second quick tip. Which is that if you go Pro today using that code Analysis20, you get a free copy of the book I wrote with J Scott. It\u2019s called Real Estate by the Numbers. And it\u2019s designed to teach you how to analyze real estate deals like a pro. Normally that costs $46. But if you go and become a BiggerPockets Pro member today using the Code Analysis20, you\u2019ll get that completely for free. If you have any questions or thoughts for me about this episode, make sure to hit me up on BiggerPockets.
Settle in and focus, because the topics, and tricks, and tactics that I\u2019m going to be talking about today. They\u2019re not hard, but they\u2019re incredibly powerful tools to help you achieve whatever financial goals you might have in mind, and sort of the financial goals that got you to attend this webinar in the first place.
Before we jump into everything, I\u2019ll just give you a quick high level overview of what we\u2019re going to talk about today. At the end of this webinar, you can expect to have learned how to set your goals, how to find the right market to invest in, find the right deals within that market, and to analyze those deals to determine which ones are actually worth pursuing.
So as the topic and title of this webinar implicates, we\u2019re talking about four steps to financial freedom. And we\u2019re not going to make you wait for them. Those are the four steps. How to set your goals, pick the right market, find the right deals, and analyze those deals. And those four steps, I know it sounds really simple, but it is true. Those things can help you, and they are really the essential things to getting you to financial freedom.
And I\u2019m actually just going to add a fifth thing, that yes, you can do this in today\u2019s market. And I know we are in a weird housing market, a weird economic climate. But let me just tell you something. I have bought deals in the last couple of weeks. Every single experienced investor that I know is still buying deals right now, because they know how to adapt their strategy and to find the right deals in really any type of economic climate. The steps that I am going to walk you through today, these four things work in really any type of economic climate. And as we get through the webinar, I\u2019m going to talk about some tactics or things that you can change in your shiftings, but particularly when you\u2019re analyzing deals and finding deals, that can help you adjust and still make profitable, good long-term decisions about your finances, even during this type of economic climate that we\u2019re in.
Let me just quickly introduce myself. If you don\u2019t know me already, my name is Dave Meyer. I\u2019m the Vice President of Data and Analytics at BiggerPockets. That means I get to work at BiggerPockets for full-time, which is amazing. I\u2019ve also been investing in real estate for more than 12 years. Mostly in rental properties. I have one short-term rental. I live in Europe now in Amsterdam, and so I also do a lot of passive investing, in syndications and in lending funds.
I host the On The Market podcast, which if you like staying on top of the economy and housing market news, you should check that out. It comes out every Monday on Friday on neither Spotify or Apple.
I wrote a book with J. Scott called Real Estate by the Numbers, which teaches you how to analyze deals like a pro. But most of all, what I want you to know is that just like all of you, I\u2019m guessing a lot of you are probably relatively new to real estate. Maybe some of your experience. But just like all of you, I was once new to real estate too. I really was unsure what I was doing for the first several years that I was investing in real estate.
But ultimately, I came up with some simple frameworks that I use to pursue my long-term goal of financial freedom. And that has helped me through ups and downs, through bear markets, through bull markets. All of that is really manageable once you know some of the tactics and simple strategies that real estate investors have been using really for decades.
None of this stuff is really revolutionary. It\u2019s not new. It is proven. These are proven things that literally tens of thousands, hundreds of thousands of people have done before. You just need to do them for yourself, and that\u2019s what we\u2019re going to do.
If you do have any questions about this, you can always find me on BiggerPockets. After the webinar, you can hit me up on BiggerPockets or on Instagram where I am at @thedatadeli, I post all sorts of news, data, econ type stuff there. You should check it out.
Okay, so we talked about four steps to financial freedom. And we\u2019re just going to jump right into this right now. No more waiting. Let\u2019s get to the first step. The first step to financial freedom is knowing what you want. What does financial freedom mean to you? And I know when you think of this, sometimes people start thinking of financial freedom as being rich. Maybe you dream of buying a fancy car, or going shopping, or extravagant vacations.
But for most people, and at least for me, that is not what financial independence and financial freedom is about. And rather than finding these showy things, it\u2019s much more about being able to do the things that you want, when you want, and with who you want. And for some people like me, love traveling. That is something that it really motivates me, and my own investing and pursuit of financial independence. For some people, that\u2019s taking time with their family, or being able to start a family and not having to work all the time.
And ultimately, I think the most common theme that I see among people who want to pursue financial independence is what they\u2019re really looking for is not money, but it\u2019s actually time. They want to have more freedom in their day to do what they want. Some people like me still continue to work even once you\u2019ve achieved financial freedom, but that\u2019s because we like to, not because have to. I get to choose what I do with my time.
And I think that is the most important thing about financial freedom is that time, unlike money, is a finite resource. You can\u2019t make more of it. And so that to me is the most precious thing you can have in this life. And so financial freedom, although it\u2019s focused on money, what it\u2019s really about is allowing you the time to do what you want.
So I think the first step for people, and I found this very, very helpful, and I see people all the time benefit from this. Figuring out what that number is. How much money do you actually need? Because so many people come up to me and they\u2019re like, \u201cDave, should I flip houses? Should I buy a rental property? Should I do a syndication?\u201d I\u2019m like, \u201cWell, what are you trying to get to?\u201d And most people, they don\u2019t actually know what they want, and that\u2019s super hard. How can you enact a plan? How can you get somewhere if you don\u2019t even know where you\u2019re trying to go?
It\u2019s like if you pulled over on the side of the road and you asked someone for directions and they\u2019re like, \u201cYeah, I\u2019d love to give you directions. Where do you want to go?\u201d And you\u2019re like, \u201cWell, I don\u2019t know.\u201d How could that person possibly give you directions? You need to have in your mind where you want to be going. And for financial freedom, that is extremely important.
And so as you\u2019re thinking about this, I recommend you make your goal, you make a financial freedom goal. And you want to make it smart. Maybe you\u2019ve heard of this before, I don\u2019t know. A lot of people use this. It\u2019s very common in business, something called a SMART goal. And I find that making goals in this format helps you stick with them better than other types of goals.
And so when I say a SMART goal, what that means is that the goal is specific. So it has to be a very specific number. So you don\u2019t want to just say, \u201cI want to be financial free.\u201d That\u2019s not a SMART goal. To make it smart, you need to be specific.
So what is financial freedom to you? Maybe it\u2019s that you want $7,000 per month in cash flow, in passive income. So that\u2019s specific. It\u2019s also measurable. Through accounting, you can figure out how much cash flow your portfolio is making you every month. So by saying, \u201cI want $7,000 per month in cash flow,\u201d it is both specific and measurable.
You also want to make it actionable, which you\u2019re doing right now. You are making a goal that is actionable, because real estate is an actionable way to pursue financial freedom. Relevant. By most people\u2019s metrics, cash flow is what you want if you\u2019re pursuing financial freedom. And so as long as your goal is about cash flow, it\u2019s probably relevant.
And then the last one, don\u2019t forget about this, is time bound. So that means you have to put an end date to this goal. You can\u2019t just say, \u201cI want $7,000 per month in cash flow.\u201d That\u2019s pretty good goal. But if you say, \u201cI want 7,000 per month in cash flow within five years,\u201d now that is a powerful goal. It has started the clock in your head, which will start motivating you hopefully to start getting towards this goal.
So I really encourage you. You don\u2019t have to do it right this second, but you probably have a number in your head. I\u2019m guessing all of you\u2019re sitting there, it\u2019s like, \u201cMine\u2019s 6,000. Mine\u2019s 10,000.\u201d I don\u2019t know. But after this webinar, take some notes, write this down. If you don\u2019t have something in your mind right now, write it down. After this webinar, go think about what it is that you want out of pursuing real estate. Because I promise you, getting a crystal clear idea of what actually matters to you is going to be motivating. It\u2019s going to help you stay on pace, on track. It\u2019s going to help you through the difficult times.
There are difficult times in real estate investing. It\u2019s not hard, but there\u2019s going to be challenges. And having that crystal clear goal is going to be really helpful to you.
So ask yourself, are you ready to achieve that goal? I mean, once you have written that down on paper, once you know in your mind what it\u2019s going to be, are you actually ready to put in the time and the effort to do this? It\u2019s not hard like I said. But it does take action. It does take you actually doing something.
Real estate they say is passive, and it is much more passive than a normal job. But it\u2019s not like you can do nothing. You actually have to get up and take action to start pursuing that goal that you have. So let\u2019s do that. That is the goal number one guys. Sorry, that is step number one is to set your goal and come up with that intention that you have that\u2019s going to guide you through the rest of your real estate investing.
All right, step number two is picking the right market. Once you know what your goals are, you have to start backing into how you\u2019re actually going to pursue that. And the number one thing I\u2019d recommend you do next is picking the right market.
And when I say market, I\u2019m talking about a location. So you could say California or you could say Los Angeles. Or maybe the specific neighborhood within your metro area that you want to invest in. But maybe you don\u2019t know. So there are two key questions that I think you need to ask yourself when determining what kind of market you want to invest in.
So number one question: is your goal related to net worth or cash flow? So as I said, if you are pursuing financial freedom, most people want their goal to be about cash flow. Because cash flow, unlike building equity, which is the other way you earn a return as a real estate investor\u2026 Unlike building equity, cash flow can easily replace your nine to five income, or your W-2 income, or whatever your income is. So that is really important. So I\u2019m going to assume most people are talking about cash flow here.
Personally sometimes, I look at both. Sometimes I invest for cash flow, sometimes I invest for net worth. That is really up to you. But I think the important thing here is that historically, there is a trade off in certain markets between cash flow and appreciation. So there are certain markets that just appreciate\u2026 And when I say appreciation, I just mean the value of the homes go up. So some markets appreciate far more than other ones.
So some that come to mind are San Francisco, or Seattle, or Boise over the last couple years. These cities have exploded in popularity, and property prices have followed soup. The thing is though, when properties appreciate like that, it makes cash flow harder to find, right? Because rent doesn\u2019t usually grow as quickly as home prices. And so when home prices grow faster than rent, it makes cash flow hard to find. So that means that the cities that appreciate a lot are typically harder to find cash flow. It doesn\u2019t mean it\u2019s impossible, but it\u2019s just harder.
The other thing that you should consider is that some markets are better for cash flow. So when you look at a city like Philadelphia, or Baltimore, or Birmingham, Alabama for example. These cities, the property prices are not as expensive, and so they actually cash flow better.
So on one end of the spectrum, you can look at a market that really cash flows well. On the other end of the spectrum, you might have one that really appreciates well. Or you could pick one that\u2019s right in between. These are cities like Tampa Bay, or Tampa in Florida, or Atlanta, or Nashville. These are good hybrid markets, that you can consider.
The second question that you need to ask is, do you want to invest close by? So some people really just sleep better at night knowing that they can drive to their investments if they want to and they can go take care of problems their selves. Other people don\u2019t really care, and are willing to invest wherever the best deals are.
So ask yourself that question. There\u2019s really no right or wrong answer. But should know for yourself, are you the kind of person that wants to see your property physically on a regular basis? Then you should invest close by. And you should just find the best market, the best neighborhood within let\u2019s say an hour or two hour drive of your primary residence.
If you are willing to invest long distance, which is what I do now that I live in Europe. I only invest long distance. It sort of opens up almost any market to you, and you can start to examine markets for different qualities, different characteristics.
For example, I like to look at a couple of different criteria for evaluating markets. This works for long-distance investing. So if you\u2019re going to invest somewhere far away, these work. But also it also works even if you want to invest close by.
I used to invest in Denver primarily. I still own a bunch of property there. And even in Denver, certain areas had good cash flow. Even though Denver as a whole, not a great cash flow city, there were still zip codes, there were areas that had good cash flow. There were other ones that were just exploding in property price. So these metrics that I\u2019m about to show you work well both for long-distance and local investing.
The first one I love is called the rent-to-income ratio. And this is super easy to calculate. All you have to do is take the annual rent for a given area. I publish spreadsheets on BiggerPockets that you can check out. It\u2019s called the file place on biggerpockets.com. You can find these spreadsheets that I published there.
But you just take the annual rent. So take the monthly red multiplied by 12, that\u2019s annual rent. And divided by the average household income for the area. You can find this by Googling it. So again, you do have to take some action on your own. So just go Google it, and figure this out for yourself.
Most finance experts, personal finance experts, budgeting people say that you don\u2019t want to spend much more than 30% of your income on shelter. So when you evaluate rent-to-income ratio, if you see that the rent-to-income is about 30%, that\u2019s pretty good. That means that the market is pretty well-balanced. If you see that it\u2019s well above 30%, that to me is a little bit of a red flag because it means that that area is \u201crent burdened,\u201d which means that people are probably stretched a little bit thin for rent as it is currently. And hopefully, that means tenants can still pay their rent, but it does increase the risk that they can\u2019t if they\u2019re paying a large share of their income for rent. That\u2019s a little bit of a red flag. And, it also probably hampers future rent growth, because there\u2019s just a limit to how much people can realistically pay for rent. And so if the rent-to-income ratio is really high, if it\u2019s 33, 34%, it\u2019s not a huge deal. But if it gets to 40%, that is a red flag for me.
On the other hand, if the rent-to-income ratio is well below 30%\u2026 Let\u2019s say it\u2019s 22%. That\u2019s to me something that looks really good. Tenants are probably very easily able to pay as agreed on their leases, and it bodes well for future rent growth. So rent-to-income ratio, great way to evaluate markets.
The second one is called the rent-to-price ratio, and this one\u2019s also super easy to calculate. All you got to do is divide the monthly rent by the average purchase price. Sorry, on this deck it says annual rent. But that was a mistake. My bad guys. It is monthly rent divided by the average purchase price, for the rent-to-price. And rent-to-price ratio is awesome because it\u2019s a proxy for cash flow, right? So when you do this, you\u2019re basically saying, how much income are you getting? That\u2019s the monthly rent. And comparing it to your biggest expense, which is the purchase price. And that ratio helps you understand how much cash flow you\u2019re likely to get in.
You\u2019re probably going to get a number when you evaluate this, somewhere between 1% and 0.5%. And the higher the better. So the higher the number, if it\u2019s around 1%, it\u2019s probably going to be a market that has abundant deals with cash flow. If you get something below 0.5%, it\u2019s probably a market that doesn\u2019t have a lot of cash flowing deals.
Again, that doesn\u2019t mean it doesn\u2019t exist. It just means that it\u2019s going to be harder to find them. Because generally speaking, on average, when the rent-to-price is below let\u2019s say 0.6%, it is probably going to be tough to find those deals. But because we\u2019re talking about averages, that means that even in a market with a rent-to-price of let\u2019s say 0.7, it means there\u2019s going to be deals better than that. Maybe 0.8, 0.9, even 1%. And there\u2019s going to be deals worse than that. But as an investor, it\u2019s your job to find the deals that are better than that average and pursue them, which we\u2019re going to talk about in just a minute in steps three and four. So that\u2019s the rent-to-price. Great proxy for cash flow.
When I\u2019m looking at markets where I want to buy, it\u2019s one of the first things I look at. Again, it\u2019s kind of a crude metric. So you still want to evaluate deals and analyze each and every one of them, which we\u2019ll talk about. But it is a good way to screen markets if you\u2019re considering a bunch of different markets.
The third one is population growth. When it comes to rent and home appreciations, everything really, it comes down to supply and demand. The more demand there is, relative supply, the higher prices are going to go. And as investors, once you buy an asset, you want the price to go up and you want your rent to grow up. And population growth is one of the best predictors of future rent growth and property appreciation, because it just means there\u2019s more demand. So check out population growth. There\u2019s tons of free websites where you can find this. The FRED website, the Federal Reserve Bank of St. Louis, they offer a lot of data for free. You can go check that out there.
The last one is economic growth. Again FRED website is another good place to do that. But basically when you want to predict appreciation and rent growth, you need people who can pay the higher rates. The coal economy in the area, in the market need to get better. So tracking economic growth like job growth, the unemployment rate, and GDP, which stands for gross domestic product. It\u2019s basically just like an aggregate number that measures all the economic output for a given area.
If you look at any of those things, you want to find markets that they\u2019re going well, right? You want to see an area with good, high paying jobs. You want to see relatively low unemployment rates, and you want to see strong GDP growth. So when you\u2019re looking for markets, these are my top four things that I recommend you look at. Again, it\u2019s the rent-to-income ratio, the rent-to-price ratio, population growth, and economic growth. So check those things out.
So that\u2019s step number two guys. So as you can see so far, these are not super hard things that we\u2019re talking about. Talked about setting a goal. That\u2019s just looking inward and deciding what you want, what you need to achieve financial freedom. Step number two is selecting your market and figuring out where you physically want to buy an asset. And the next step, step three\u2026 And again, we only have four steps, so we\u2019re moving along here. Step three is finding a property.
This gets a little bit harder, but it\u2019s not hard. This is really about developing a system where you can look at a lot of property. So the number one thing I want you to know about finding a property is that most of the properties, almost all of them are going to be bad. That\u2019s okay, so don\u2019t get discouraged. I talk to so many people who are like, \u201cI\u2019ve looked at five deals and none of them work.\u201d It\u2019s like yeah, exactly. If they were all super easy, people would all be going out and doing that.
99% of the properties, maybe 98% of the properties that you look at are not going to be right for your goals. Maybe they offer strong appreciation, but you\u2019re looking for cash flow. Or maybe the seller is delusional and is trying to sell it for a price that is not reasonable in any universe. Or maybe it has a lot of deferred maintenance, and you don\u2019t want to pay to fix up the property. There\u2019s a million different properties out there. There\u2019s actually 140 million different properties in the United States out there. All you need to do is find the right one for you, or at least the next one. If you\u2019re just getting started, you need to find the first one. But you always need to find the next one that is good for you.
So the way that I recommend that you look for deals is by using a system at BiggerPockets we call the LAPS system L-A-P-S, LAPS system. And basically, the LAPS system is designed as a fund. If you\u2019re into marketing or know anything about sales, this is similar. It\u2019s all about a funnel. Where at the top of the funnel, you need as broad of an exposure as possible. And that in real estate investing is leads, right? You need as many leads as you can possibly get.
So let\u2019s say we\u2019re trying to buy just one deal. What you need to do is find a way to get 100 leads, right? 100 leads are going to help you get to that one deal. And a lead is basically just a property that you\u2019re kind of interested in. You don\u2019t have to run the numbers yet. It\u2019s just something you see. You\u2019re like, \u201cThat\u2019s in the right market. It\u2019s a duplex. I\u2019m looking for a duplex. The price point is about what I\u2019m looking for. So that would be a lead.\u201d You don\u2019t have to even see it yet. You just need to know that it has the right, basic ingredients for the kind of deal that you\u2019re looking for.
Then step two of the funnel in the LAPS system is analysis. So once you\u2019ve got 100 deals, it\u2019s time to actually analyze those deals and see which ones make sense for you on paper. Which one offer the right cash on cash return, offer the right potential for appreciation, offer the right economics for you, for you to actually pursue that deal? And so you need to go out and analyze all those deals. Maybe not 100 of them. Maybe some of them, you look at them and you decide that, \u201cYou know what? Of these hundreds, I\u2019m going to analyze 40 of them.\u201d And if that sounds daunting, don\u2019t worry. I\u2019m going to show you how to analyze deals quickly in just a second, but just stick with me on the LAPS system right now. So you get 100 leads, then you need to analyze 40 of them, and then you need to start pursuing them.
So of those 40, maybe there\u2019s 10 that are really, really good. So we\u2019ve gone from 140 now to 10. And those 10, you actually go out and start making offers on them. And you know what? Some of the offers are going to get rejected. And again, that is okay because you just need that one.
And so this is the system. It\u2019s about going and looking at tons of deals, and being okay with the fact that a lot of them are not going to work out for you. As long as you find that one that meets the criteria that you are are going to support your long-term financial freedom goals. So that\u2019s the LAPS system. So let me just walk you through and help you a little bit with each of these things.
So again, LAPS systems is leads. Let\u2019s say you need 100 for your first deal. Where can you find them? Well, number one is MLS and agents. So one of the great things about the economic climate we\u2019re in right now\u2026 And there\u2019s not too many great things. There\u2019s a lot of confusing, frustrating things about it. But one good thing that\u2019s happened to the housing market is that there are way more deals right now. This is because we\u2019ve gone from a seller\u2019s market to a buyer\u2019s market, which means there\u2019s much more inventory. And it means that sellers are much more likely to negotiate. I participated in a deal recently where we bought a multi-family unit for 30% lower than it was last summer. 30% lower. And that\u2019s not what they listed it for. But after a lot of the negotiation, that\u2019s what we were able to get it for. Because sellers know that housing prices are rocky right now, and they\u2019re willing to accept deals under list price.
And so it used to be over the last couple of years during the pandemic, you really had to find off-market deals, or at least that was the most reliable way to find good deals was off market. That is not true anymore. You can now find very good deals on the MLS, on Zillow, whatever website you want to use. There are a lot of good deals. So that\u2019s the number one way to do it. If you don\u2019t have an agent, I\u2019m sure an agent can help you find that. If you don\u2019t have an agent, you should check out biggerpockets.com\/agent. You can get matched with a investor-friendly agent for free there, so that\u2019s a good way to do it.
Online, obviously you can do your own searching. Either on BiggerPockets. We have a listing platform where you can find some on and off-market deals. Or you can do off-market deals as well, which is sort of like private marketing. You\u2019re looking to identify someone who would be willing to sell a property before they actually list it for sale.
You might have heard of the term driving for dollars. This is an off market strategy. You might have heard of yellow letters or mailing postcards. These are all similar strategies to get off-market deals. But basically what it is you go out and find a property that you want to buy, and you make an offer before they go and put it on Zillow, and there\u2019s a lot of other people who have the opportunity to make bids on that property.
I\u2019ve done this. Found an area where I want to buy and just called some sellers, negotiated with them, and I\u2019ve been able to successfully do that. It does work and you can find great deals like that, but it does take a little bit more effort just so you know. You have to actually go out and make a lot of phone calls. You usually have to spend a little bit of money on marketing for off-market deals. But it does work.
But again, one of the benefits of the housing market that we\u2019re in today is that you can find good deals on the MLS, on Zillow. And so that\u2019s probably the easiest way to do it if you\u2019re new to this.
The second thing of the LAPS system\u2026 So that\u2019s how to get leads, right? The second thing is analysis. And let me just tell you the three things about analysis.
So analysis is a little bit more complicated. With leads, you can find an agent, go on Zillow. You can do that. But the deal analysis actually has three components to it. The first one is the crystal clear criteria. Again, this is sort of similar to our first step in the webinar today when we were talking about coming up with a goal. The same exact premise is true when you\u2019re analyzing deals. You have to know what you\u2019re looking for. If you start analyzing deals and you don\u2019t know what a good cash on cash return is, or what a good ROI is, then you\u2019re never going to be able to actually pull the trigger. You\u2019re going to be stuck in analysis paralysis. You\u2019re going to be like, \u201cIs this a good deal? I have no idea.\u201d
The trick is to set your criteria up before you start analyzing deals. If you already know, \u201cHey, if I find a deal with a 7% or an 8% cash on cash return, I\u2019m pulling the trigger.\u201d Then you are less likely to get stuck in that analysis paralysis loophole. Instead, you could start actually going out and buying deals instead.
So when it comes to crystal clear criteria, I think there are five things that you should really be thinking about. So think about this. After this webinar, you can start writing this stuff down. But basically, one is property type. Do you want to buy a duplex? Do you want to buy a single family? Do you not care? If you don\u2019t care, that\u2019s also okay. Just when you\u2019re writing down your criteria, be like, \u201cI\u2019m open to anything under four units.\u201d Personally, that\u2019s me. I\u2019ll buy a single family if it\u2019s right, or a duplex, or a triplex. Some people if you\u2019re house hacking, you might only want a duplex or a triplex. So write down the property type.
The second is location, which we\u2019ve already talked about in finding your market. But the more specific you can get, the better. So maybe when you think about the market and go through the steps, look at those metrics that I told you about, you decide that you want to invest in Jacksonville, Florida. Once you Jacksonville, go one step further and find a great location that you\u2019re super excited about. Talk to your real estate agent. Talk to other investors about where they want to buy, and then put that in your criteria. It doesn\u2019t have to be one zip code. It could be like, \u201cI want anywhere North Jacksonville, or anywhere west of the downtown area.\u201d I\u2019ve never been in Jacksonville. I don\u2019t know anything about it.
So just write down some criteria that in your head, you\u2019ll know if you find that property, you\u2019re going to like it. Price range should be pretty obvious. But given how much money you have, once you talk to your lender and determine how much you can qualify for a loan, figure out what your price range is and write that down as well.
Condition is really important. I think this is one that people really miss. And that is, do you want something that is \u201cturnkey\u201d or \u201cstabilized\u201d? Which means it\u2019s in really good shape, and renters are going to like it right off the bat. They\u2019re going to want to move in, and it\u2019s going to be super nice. That\u2019s great. I mean everyone kind of wants that, but they\u2019re more expensive, and they tend to offer lower cash on cash returns out of the box if they\u2019re really in good shape already.
On the other hand, you can buy something that needs a little work. Those are usually cheaper, but you have to put money into it to rehabilitate it. But they tend to offer higher upside.
This is called value-add, right? If you buy something that needs some paint, and it needs a new kitchen, and it needs new carpet, and you\u2019re willing to do that work, you can usually earn a better cash on cash return because of it. And so that\u2019s something you should think about.
And then the last one is profitability, which I sort of alluded to a minute ago when I was saying, \u201cI\u2019ll know if I get a 7% cash on cash return. That\u2019s when you should get this good deal.\u201d And so profitability, let\u2019s just talk about that for a second, because I think this is a common question here.
Ask yourself, what is a reasonable rate of return? We\u2019re going to talk about the metrics in just a minute. In just a minute. But think to yourself, what do you want? Some people come out and say, \u201cI want a 15% cash on cash return.\u201d Okay, that is possible. But risk and return are sort of counterbalances to each other. So any deal that has an amazing reward, there\u2019s going to be associated risk with it. That is just how investing works.
So for example, you can buy a US treasury bond. You get 3 or 4% right now. That\u2019s super low risk, but a 3 to 4% return is not very good. If you want an 8% return, you can probably do something that\u2019s still relatively low risk, but it\u2019s not going to be no risk like a bond or a savings account.
And as you go up in the amount of return that you\u2019re targeting, you have to understand that there\u2019s more risk. So flipping, for example. You can earn a 30% ROI on a flip. But flipping houses is relatively risky in terms of the spectrum of real estate investing.
Buying a rental property, you can easily expect to get an 8, 10, 12, even a 15% total return on your property, with relatively low risk. So I think that is a great rate of return that you should target. Some of that could be cash flow. Some of that could be through amortization or appreciation. But that\u2019s something for you to think about, what level of risk and return you\u2019re comfortable with.
And then you need to think about, what\u2019s a good deal in your area? You pick a market and find out what a good deal is. Are you looking at deals, and all of your friends who are investors or every deal that you look at is a 7% cash on cash return?
Then all of a sudden, you\u2019re analyzing your 40 deals like we talked about, and you see one that\u2019s a 9% cash on cash return. That\u2019s when you know it\u2019s time to pull the trigger. That\u2019s you know what deal is the right one for you to pursue, is once you establish what\u2019s a reasonable rate of return, and what\u2019s a good deal in your area.
And if you\u2019re saying, \u201cI don\u2019t know, I don\u2019t have friends, I don\u2019t know what a good deal in my area is.\u201d We\u2019ll get to that because that will come from analyzing a lot of deals. If you analyze 40 deals, you\u2019ll know what the average cash on cash return is for their 40 deals, right? Because you\u2019ve just done it. I\u2019m going to show you how to do that in just a minute.
But that\u2019s a great way to do it. It\u2019s just analyze a lot of deals. You\u2019ll understand what a reasonable rate of return is. And then you\u2019ll be able to spot the ones that are even better than the average, and those are the ones you want to go after.
All right. So once you know, these criteria, what metrics should you be looking at? And I\u2019ll show you how to calculate these in just a minute. But number one, as we talked about, financial freedom is cash flow, right? And you probably heard this term, I\u2019d imagine. But if you don\u2019t know what it actually means, basically cash flow is if you take all the income from a property\u2026 For a rental property, that\u2019s rent. For a short-term rental, that\u2019s also income coming from your guests. So you take your total income. And then you take all of your expenses. That\u2019s your insurance, your mortgage. We\u2019ll get into all this, but all of your expenses. You just subtract it. That\u2019s your cash flow. Super easy. So we\u2019re going to calculate that in just a minute, but that\u2019s what cash flow means. I just want you to understand what it means. We\u2019ll do the math in an easier way in a minute.
Second one is cash on cash return. And so we just talked about cash flow. But if I told you I earned $300 a month in cash flow and asked you if that was good, what would you say? Well, if I spent $10,000 to earn 300 bucks a month in cash flow, that would be great. That\u2019d be fantastic. But what if I spent a million dollars on my investment in order to earn 300 bucks a month in cash flow? That\u2019s not so good. So you need to measure the cash flow as a percentage of your total investment.
And so that\u2019s what you. Cash on cash return, basically you take your annual cash flow, you divide it by the amount of money, your cash that you invest, and you get a percentage. So one of the most common questions is\u2026 I\u2019m going to cheat. I don\u2019t usually do this. I don\u2019t usually tell people what a good cash on cash return is. But I\u2019m going to give you some rules of thumb that I use for myself.
So I would say that a decent deal with a 5% cash on cash return. Now, I wouldn\u2019t do a deal with a 5% cash on cash return unless there\u2019s some upside as well. So maybe I\u2019m doing a value-add. Maybe it\u2019s in a really good location that\u2019s likely to appreciate. Maybe I know something about the zoning where I\u2019m going to be able to add another bedroom or an ADU in the future. That\u2019s when I would consider a 5% cash on cash return.
If I\u2019m just looking at a deal for pure cash flow, I usually look for something at least 7 or 8%. If you can hit 10%, I think that\u2019s a fantastic cash on cash return. And if you can hit 15%, that is a grand slam. You\u2019ve found a great deal. But like I said, make sure that you\u2019re not taking on an excess amount of risk to get that cash on cash return. It might be in a bad neighborhood, it might be a property with structural problems, or something like that, in order to get that 15% cash on cash return.
So when you see a great deal that is way better than every other deal, you want to be interested and jump on it. But also, be a little skeptical. Make sure you say to yourself, \u201cIs this real? Is it too good to be true?\u201d Because again, risk and reward, there are counterbalances to each other. And where there\u2019s one, there is usually the other. So that\u2019s two metrics. We have cash flow and cash and cash return.
We also have equity. I talked about building your net worth earlier, and equity is the amount of money that you have sitting in your deal. So if you take the property value, which hopefully is going up over time. And then you subtract all of your liabilities, which is basically your mortgage. The amount of money that you owe the bank and any other debts that you have to pay off when you go to sell the property. That\u2019s how you get equity. And that grows over time through different ways that I\u2019ll show you. But basically, your property value going up, paying down your loan helps that. If you do any value-add and improve the property at all, you can build equity. And that\u2019s another way in addition to cash flow that you earn a great return as a real estate investor.
The last one is total profit, which is basically combining the two things I just talked about, which is equity and cash flow. So if you add your equity and cash flow together, you get your total profit. Which is at the end of the day, the highest, most important number for a lot of investors is, \u201cHow much are you making on this deal total?\u201d
All right, so enough talking. Let\u2019s actually do this. We\u2019re going to run the numbers together. That\u2019s the third step. So now we know the criteria, we know what metrics we\u2019re going to look at. And now let\u2019s do it. We\u2019re going to run the numbers. I\u2019m going to show you how to do this. So we\u2019re going to actually just do this together. We are going to analyze a real live real estate deal, and I\u2019m going to show you how easy this is, right?
Remember I said during the LAPS system that you need to be able to look at a lot of deals, you need to analyze a lot of deals. I\u2019m going to show you how to do it quickly using the BiggerPockets calculator. So I\u2019m just going to jump over here and just show this to you.
So I\u2019m just going to jump over here biggerpockets.com. You can find this if you go to the tools area, there\u2019s all these calculators here. I just hit rental property. So I\u2019m going to just hit view my reports, just to show you that I really do use these calculators all the time. I have a master\u2019s degree in business analytics, and I still use these calculators all the time, because they allow me to run deals really quickly. Which as we\u2019ve talked about, is sort of the essential component to the LAPS system. You need to look at those 100 leads. You need to analyze, let\u2019s say 40 of them. And doing a spreadsheet for every one of those 40 is going to take a long time. So I use these calculators, so I\u2019m going to just show you how to use this.
We just hit start a new report, and I\u2019ll just show you that I found a property here on the BiggerPockets deal finder. So if you just go over here to tools and hit real estate listings, you can find deals.
I was talking to an agent in Tulsa the other day. So I wanted to look for properties in Tulsa, and I picked this one right here. It is an occupied duplex that\u2019s selling for $165,000. Each side is two bed, one bath. And this again, is in Tulsa, Oklahoma.
So this is what we\u2019re going to look, we\u2019re going to analyze this deal. I have not analyzed this before. I did find the listing before, but I don\u2019t know what\u2019s going on. Dahlia is the agent I was talking to. She\u2019s a great agent if you are looking to invest in Tulsa.
Okay, so let\u2019s just go back to the property calculator. I\u2019m just going to paste in the address here, and it should auto find that and fill that in for us, which is great. And I\u2019m also going to add a photo. And you don\u2019t have to do this. But because the LAPS system necessitates that you are looking at a lot of deals, you probably might forget the address. At least I do. I will never remember 1050 North Irvington Avenue, but I will remember this photo. I guess that\u2019s just the way I remember stuff. So I add photos to it because I think it\u2019s helpful. And then next, we\u2019re moving on to purchase. So what was it for? It was going for 165.
So I\u2019m just going to assume at the beginning\u2026 And we\u2019ll talk about this, because I do want to talk about offering under list price, especially in this kind of environment, economic environment. But for now, I\u2019m just going to put it in a list price and say that we\u2019re going to buy this for $165,000. And closing costs are going to be around four grand.
And if you\u2019re wondering how I know that number of four grand, well, I\u2019ve been investing for a long time, so I have a pretty good idea. But if you don\u2019t, you could just check out these help things over here. So just click on calculate closing costs. And you could see, for example, typical closing costs are around 1 to 2% of the purchase price of the property. But it can differ. I\u2019m going to assume it\u2019s actually above 2%, because for lower price properties, actually I think it\u2019s above 2%. Check that out.
So I\u2019m going to assume then we need to discuss, are we rehabbing the property? I don\u2019t really know anything about this property, but let\u2019s just assume that we\u2019re going to put some money into it. That\u2019s one of the best ways to make money as a real estate investor. And I\u2019m making this up guys. I just want to show you how to use these calculators, how to run a lot of deals. I don\u2019t know if these are accurate. When you\u2019re running your own deals, you\u2019re going to want to think through each of these pretty carefully. I run a lot of deals, so I could do these pretty quickly. But you\u2019ll get there.
So after-repair value, let\u2019s say we think we can make the value of this property 200 grand, by putting in let\u2019s say $15,000. So now we know what a lot of our costs are, and we\u2019re ready to move on.
There\u2019s something here that you should look at, which is this property value growth here. So we at BiggerPockets when we built these calculators, put an assumption at 2% property value growth.
And as you probably know, over the last couple of years, property values were growing insane. Sometimes we saw 10% year over year growth, 20% year over year growth.
But the reality is that for most markets, properties appreciate about the pace of inflation. Which I know inflation\u2019s really high right now, but normally, inflation averages about 2 to 3% a year.
So what I recommend for people right now is to estimate low on the property value growth to mitigate the risk of housing prices going down. We just saw so much price appreciation. I don\u2019t think we\u2019re going to see a lot of that in the next year or two. So I would say 2% is fine. Let\u2019s just put 1% in there just to be super cautious.
All right, next. Loan details. Because I\u2019m an investor, I have to put 25% down. But if you want a house hack or you\u2019re going to owner occupy a property, you can usually put 20% down. And again, if you need help on any of these inputs into the calculator when you\u2019re first getting started analyzing deals, just click on this stuff and we\u2019ll help you fill this out.
Next, we\u2019re going to do interest rate. They\u2019re about 6.5%. I\u2019m just going to put that in there. Points charged. Again, I don\u2019t think I\u2019m going to get charged points. But if you put less than 20% down on a house hack, sometimes you get charged a little bit of extra money. And then I\u2019m going to do a 30-year fixed straight loan. I love a fixed straight loan. I\u2019m going to do it for 30 years and hit next.
So as you can see over here, we\u2019re already doing pretty well on this property. We\u2019ve done property info, we\u2019ve blown the purchase price. Now I\u2019ve done loan details. Now it\u2019s time for rent.
This is one of the questions I get the most is, \u201cHow do you figure out rent?\u201d Whole thing about the BiggerPockets calculator is it\u2019s already telling us that for each of these units, it\u2019s $795 per month. But let me show you how BiggerPockets actually comes up with that.
We have this other tool called the Rent Estimator over here. It\u2019s actually a tool I helped build, which I\u2019m pretty proud of. So if you check this out, I could just type in\u2026 I\u2019m just copying and pasting the address. I\u2019m going to do this and hit search address.
So what this does is it pulls comps for rent near this property. So we can see that in this area, there are a bunch of different comps. This one\u2019s a one bed, one bath for 650 nearby. But this is a two bed, one bath. And so it\u2019s going to average. There\u2019s an algorithm that\u2019s going to look into it and tell us, \u201cHere\u2019s probably the best comp right here. Two bed, one bath, similar size for 800.\u201d
So we can look at each individual thing, we can learn some stuff about the property, like that the property taxes or $2,000 a year. We can learn all this great stuff about it.
The cool thing about the calculator that I really like is that this says the confidence level, and it\u2019s telling you that the confidence level is low. Which is not ideal. But as an investor, I appreciate the fact that this is saying, \u201cWe think it\u2019s 295, but we\u2019re not super sure.\u201d
So the best way to use this tool in my opinion, is use it when you\u2019re analyzing those 40 deals. This is genuinely what I use when I\u2019m doing 40 deals. When I get to that pursue level of LAPS, right? Remember leads, analyze, pursue. When I\u2019m making offers, I will do a much deeper dive into the rents to make sure that I\u2019m accurate, because that\u2019s a super important component of analysis. And the way I do that is, why not look at Zillow and see what other things are renting for? But I\u2019ll also call property managers or other investors that I know in the area, and get their read on what it will rent for to make sure that I\u2019m accurate. So the good thing about the calculator is it told us this. It\u2019s 795. But the important thing is that this is a duplex, so that\u2019s 795 per unit. So that would be 1590 total for gross income. So that\u2019s what I\u2019m going to put in there.
Again here, we\u2019re going to put in income growth. Annual income growth. I actually think it\u2019s going to be low the next year, so I\u2019m going to say 1%. That is very conservative. Because when I buy a rental property, I plan to hold it for five to 10 years. And I do think that income will average more than 1% per year over five to 10 years. But like we\u2019ve been talking about, I want to be conservative in this type of economic climate, and so I\u2019m just going to put 1% annual growth just to be safe. Then going on to the last section.
As you can see, the calculator knows all this public information and knows what your property taxes are. I\u2019m going to estimate insurance around 1200 bucks just to have a good sense for these kinds of things. But you could just Google this. So just Google, Tulsa, Oklahoma average insurance, and you\u2019ll be able to find this. I\u2019m going to put 1200 bucks a year for this. And then it\u2019s time to do some of the variable expenses.
So right here, repairs and maintenance. I\u2019m going to put, let\u2019s say 5%. It depends on the property condition, but the reason I\u2019m saying 5% is because I just said at the top of this calculator that I was going to put 15 grand into this property. That\u2019s 10% on the property price. I\u2019m going to put 15 grand into it to upgrade it. So I don\u2019t think my repairs and maintenance are going to be as high as they might be had I not put that initial investment in it, right? Vacancy, I like to put 5%. And capital expenditures, I\u2019ll also put 5%.
Capital expenditures are similar to repairs and maintenance, but they\u2019re for the big stuff. So it\u2019s for your roof, or the HVAC system, or the foundation, whatever. You want to make an improvement to the property, that\u2019s a capital expenditure. But again, because I\u2019m investing 10% of the purchase price back into this property, I think that the CapEx isn\u2019t going to be low. I live in Europe, so I\u2019m not self-managing this thing. So I\u2019m going to say 8% as a management fees, and then that is it for me.
I personally like to let my tenants just pay utilities directly. If they have electricity, they should pay what they owe. I don\u2019t need to get involved in that nonsense. So I put 0% here. If you get a duplex that\u2019s not metered separately, again, I just recommend Googling it. Just Google median or average electricity cost for a two bedroom apartment. You\u2019ll be able to find it. In your area. Specify the area. And you\u2019ll be able to see that. Water and sewer is usually 10 bucks a month. Garbage, I usually pay this stuff, 10 bucks a month.
And that\u2019s it guys. That is it. That is analyzing a property. I\u2019ve been blabbering on here, and this took me five minutes. So if I wasn\u2019t talking to you, I could probably do this in two or three minutes. And when you first get started, this is going to take you 10 or 15 minutes. But I promise you after you do three, five, 10 of these things, you\u2019re going to be able to do them really quickly, and all you got to do is hit finish analysis here. So that\u2019s it. Now we can see that was all it took, just that little effort. And now we can get all the numbers for analyzing a deal.
And remember what I said. 99% of properties you analyze are probably not going to be the right ones. Actually what I said was you\u2019re going to want to pursue 10 properties. So let\u2019s say 90%, you probably won\u2019t want to go past the analysis stage. Let\u2019s see if this is one that we think that we would pursue.
So at first glance, this is probably not up to the standard I personally would invest in. Because even though there\u2019s $151 a month in cash flow, not bad. The cash on cash return is a little light. It\u2019s at 3%, which is not great. But the annualized return, remember we talked about total profit? That\u2019s at 11%, which is good. Just for reference, the average stock market is 8 or 9%. So even though this is below my standard, it\u2019s still better than what most people get investing in index funds in the stock market.
So if you\u2019re thinking, \u201cThat\u2019s too bad, it\u2019s not a great deal.\u201d Don\u2019t think that just yet. Because while a lot of people think you can just go out there and find deals, and sometimes you can, sometimes you need to make your deal.
And so when we were looking at this deal, I assumed at first that I would just pay full asking price. But I think the cool thing about the BiggerPockets calculator is I can actually say, \u201cAll right, 3% isn\u2019t good enough for me. What happens if I offer 155 instead?\u201d I can drag this here and now I can say, \u201cAll right, now it\u2019s at a 4% cash on cash return.\u201d That\u2019s not bad. Let\u2019s just say I can get it down to 152. What are we at here? All right, 4.5% cash on cash return. Probably still too low for me, but now we\u2019re getting closer. So in my mind I\u2019m thinking, \u201cAll right, maybe I can pursue this deal if I can get this seller to accept,\u201d whatever I put in here. 151,700.
How about this? During today\u2019s current market conditions, this is a trick for you all. Because we are in a buyer\u2019s market, a lot of sellers are willing to buy down the interest rates of their buyers. That means they pay three grand or five grand so that the buyer gets a lower interest rate. It\u2019s really cool. Ask your real estate agent about it. A lot of sellers are willing to do this right now.
So let\u2019s say our seller will buy down our rate to 6%. All right, now we\u2019re talking. Now we\u2019re getting a 5.3% cash on cash return. Maybe they\u2019ll do a two one buy down where I actually get my rate bought down by 2%. So let\u2019s say it goes down to 4.6%.
Now these are temporary. You would only get that rate buy down for a couple of years, not permanently. But a lot of people think interest rates will go down in the next couple of years, and then you could refinance. So now, we\u2019re looking at a deal that I would consider.
So these are big assumptions, but let\u2019s just say I can get it for 150. And I could get that seller to do a two point buy down where I can get 4.5%. Now we\u2019re talking about, first of all, an 18% annualized return. That\u2019s almost double the stock market. A cash on cash return of over 7%, and you\u2019re making $360 a month. That to me, is a deal that is very much worth pursuing. Will the seller accept this? I have no idea.
But this is what it\u2019s about, that LAPS system. You need to analyze these deals so that you know what you\u2019re willing to accept. This is all about that criteria. I knew, I said to you before that I would accept something around seven or 8% cash on cash return. And I\u2019m going to stick to that and I\u2019m going to go to the seller and then say, \u201cI will offer you 151 and I need a two point pie down for the next two years.\u201d If the seller says yes, great. But that might only happen one out of 10 times. Remember the LAPS system? You might have to pursue 10 deals before one seller accepts it. And if nine sellers reject it, that\u2019s okay. Because you have your crystal clear criteria, and you need to stick to that. Absolutely need to stick to it. So that\u2019s what you got here.
So that\u2019s the power of these calculators. It\u2019s super helpful. You can not just analyze deals quickly, but you can play with them to see what you should actually be offering sellers right now. If you scroll down, you can see some of those other metrics that I was talking about, like how much cashflow you\u2019ll be earning per year. The profit if you sold.
So if you held this property for five years, you would earn $73,000, which is amazing because you\u2019re not really investing that much into it. Remember, you\u2019re putting 25% down on $150,000 property. So you\u2019re probably putting 40, 50 grand into this. And you would more than double your money in five years, which is phenomenal. And you could see your analyzed return after five years is almost 18%, which is incredible.
I have one more thing to show you. So one other thing here is this share button. And this is super important when you\u2019re going to negotiate with a seller, or you want to find private money to help you, or bringing your spouse on board. But if you hit enable share reporting and then to hit download pdf, if you click on that button, you get a super nice looking PDF that shows you all of the numbers.
And I think this is super important because when you go to a seller and you\u2019re like, \u201cThis is what I can pay you,\u201d they might take offense to that and say, \u201cYou\u2019re just trying to work me over. You\u2019re not willing to pay what it\u2019s worth.\u201d And you can show that, \u201cListen, I expect a 7% cash on cash return.\u201d And these are the numbers that make it work. You can convince people. You can show them that you\u2019re not just making this number up. You are actually putting together a thoughtful offer, and you are offering them what you think the value is worth.
And so I think that is super important. It\u2019s just the last thing I wanted to show you here. Again, if you talking to a lender, you can bring these reports or anything like that. So that\u2019s analyzing deals guys. This is the LAPS system. I\u2019m going to get back to our PowerPoint here.
But as you can see, if you use the BiggerPockets calculator, it is not really that hard. You can do all the analysis that you need to do. So again, this is the last system, just as a summary. You got to get all those leads, analyze as many of them as makes sense to you, pursue the ones where you think there is a realistic path to a good deal for you. And then all you need is one. Every time you run the system, you just need one.
So now that we\u2019ve talked about you, I just want to talk to you a little bit more about buying in this type of market, that it\u2019s super hard to time the market. I spend my whole life basically analyzing the housing market, and I don\u2019t try and do it because it\u2019s super hard.
I will try and offer below asking right now. If I\u2019m looking at a property that\u2019s 200 grand, I\u2019m not going to offer 200 grand right away. I\u2019m going to offer below asking, to provide myself a little bit of a cushion. But what I know and other experts know is that timing the market is nearly impossible, but time in the market is what really matters.
So over time, if you get that amortization, that cash flow, that is what leads to financial freedom. Real estate is not a get rich quick scheme. It is about building property and portfolio over time.
And when I encounter people, and I guide people, and coach people on investing right now, a lot of people say, \u201cWhat\u2019s happening next year? What\u2019s going to happen six months from now?\u201d I don\u2019t know. No one knows, but that is okay because real estate is a long-term game. It\u2019s about where your property values and where your portfolio is going to be five years from now, seven years from now, 10 years from now, 20 years from now. So if you can find deals that you think are going to help you over that life period, that lifespan, that 10 years, then it\u2019s not as important what happens next year.
Again, don\u2019t go out and buy anything. If you think the property value\u2019s going to go down 5%, offer 5% below asking. I\u2019m not saying to just go spend willy-nilly, but I\u2019m telling you to focus on the long term, because that\u2019s what financial freedom is all about. You\u2019re not going to get there in a year or two unless you have several million already. But if you concentrate on the systems that I\u2019ve talked to you about today, you can get there in the next couple of years.
So let\u2019s just quickly review. One, do you have a goal in mind? Do you have a crystal clear idea of what you want and why you\u2019re pursuing financial freedom in the first place?
Number two, do you know some strategies for evaluating real estate markets? There are four metrics. Hopefully you wrote them down, but you can go check those out or you can watch this webinar again to get those again.
Do you know how to begin analyzing your next deal? Hopefully that demonstration I just did shows you that this is not hard, and you can do that. You can run dozens of deals in a single day if you just commit yourself to it.
Well, I hope all those things are true and that you know how to do those things. But unfortunately, knowing those three things, it\u2019s just not enough. It\u2019s super important, but you have one more thing you need to do.
Because if information was the answer, we would all be rich, right? We would all be billionaires with perfect abs as Derek Sivers says, but that\u2019s not the reality. Instead, you actually have to start going out and doing stuff. Yes, it\u2019s important to learn the four steps that I just gave you. But you actually have to start taking action.
So for some people, the right next step to start taking action is BiggerPockets Pro. BiggerPockets Pro is a set of tools and services that we have created, and it really provides you everything you need to succeed in real estate investing. We have tools, we have premium content, we have access to our community, and services. It is all part of BiggerPockets Pro. When we design these tools\u2026 And I\u2019ve helped design these tools over the last seven years. What we focus on is creating a one-stop shop where you have basically everything you need to start, and scale, and manage your portfolio over the long term, up until that point you hit financial freedom and beyond. So if you were wondering how one subscription can really provide you with all the tools that you need for everything, let me just quickly explain some of the features and values that it has.
So the first thing is those calculators. You can go try them for free, and I recommend that you do that. But after you use them five times, you do need to pay for them. But as we talked about with the LAPS system, you need to analyze a lot of deals, and that\u2019s what these calculators are built for. And so if you are interested in getting your first deal and you want to analyze a lot of deals, calculators are super helpful.
We also have the Rent Estimator tool, which I walked you through as well. That is hard information to find, but BiggerPockets makes it super easy.
We also have premium content. BiggerPockets puts out a lot of content. But for our Pro members, we have curated videos, we have courses. We have webinar replays that really help you get to that next step, get to your first deal, and build that financial freedom.
We also have a couple workshops that you can attend. So David Greene and Brandon Turner put together an Investing with Low or No Money Down workshop. It\u2019s worth 200 bucks. But if you go pro, that\u2019s completely free.
We also have a Finding Great Deals Masterclass. As we talked about in the LAPS system, finding deals, finding leads is super important. And we have a masterclass for you that has been sold in the past for $1,000, that is part of the Pro subscription. So you can check that out.
You also get to show the community you mean business with your Pro badge. And I think this is super important. Because personally, I get asked for investing advice all the time by people, and I never know if they\u2019re really serious. Are they just tire kickers? Are they wantrepreneurs, or are they actually people who are going to take action and start investing in real estate?
And the print badge is one way. I know when I\u2019m interacting with people on BiggerPockets, that they\u2019re serious. That they are willing to put some skin in the game and start working on their financial freedom. So that\u2019s I think a really overlooked value of the BiggerPockets Pro membership.
Next, we have lawyer approved lease documents. So if you need a lease, if you need a break lease form, a pet addendum, whatever it is. Every state in the country, we have up-to-date legal forms for anything you need as a landlord. So that\u2019s super valuable.
We also have tools and services, which are incredible. This is new stuff. It\u2019s so valuable. It\u2019s kind of crazy that we include this in the Pro membership. But you get free property management software for Rent Ready, which is one of the most reputable, best property management softwares. You get that completely for free. You get discounts on AirDNA, which will help you if you want to be a short-term renter. You get discounts for CPA courses. And you even get access to Invelo, which is a tool for finding off-market deals, which is really incredible. All these things cost honestly hundreds of dollars, but you get them for free.
The last thing I\u2019ll mention about our BiggerPockets Pro is boot camps. So you can learn from some of the most experienced investors in the world. These are only open to Pro members. But if you want to learn from Ashley Kehr, or Tyler Madden, or Avery Carl, or Craig Curelop, or Matt Faircloth, any of these experienced investors that you hear and see on the BiggerPockets platforms. They teach courses that are only available to pro, and you could do that if you join pro.
But all these features, all the things that I\u2019m talking about, they\u2019re great. But the number one reason to consider Pro after all this, the number one reason is just simply because it works.
Guys, I have worked at BiggerPockets for more than seven years now. And I genuinely mean that I have seen tens of thousands, probably 30, 40, 50,000 people pursue, and get close, and achieve financial freedom through BiggerPockets Pro, because it works.
Let me just read you a testimonial from Aaron C. who said that, \u201cThe BiggerPockets calculators are my go-to for analyzing potential properties. There\u2019s no way I could analyze the volume of properties I do without being a Pro member. I locked up my first three unit almost a year ago, and I\u2019m now selling for almost a 70K profit that will go towards something larger. The BiggerPockets calculators were a huge factor in making sure my numbers were right.\u201d
I also got a note from Patrick M who said, \u201cBack in June, I attended one of your webinars. Right afterwards, I signed up for Pro. And the next couple weeks, I analyzed a bunch of deals.\u201d Note that guys, right? Remember, analyzing a bunch of deals is important. \u201cEventually I found a fourplex. I got under contract three weeks later after signing up for pro, and a week later closed on another property that was six units. Big thank you to you and the entire team. Final quick tip, sign up for Pro Annual. I made my money back at the closing table.
So as you can see, this is a system that really works, and I do believe that it can work for you. If you\u2019re curious how much it costs, you probably are used to seeing real estate coaching and mentorships that are in the thousands of dollars. BiggerPockets Pro, because of what we believe at BiggerPockets, is only $390. And that might be shocking. It\u2019s honestly an incredible value. Because at BiggerPockets, our whole mission is to help anyone achieve real estate investing. We don\u2019t believe that you need to have thousands of dollars to get started. We believe that if you can afford $390, a very reasonable amount for the amount of value that Pro offers you, you can pursue financial freedom.
That said, just for attending this webinar, we\u2019re going to actually even make it cheaper for you. We\u2019re going to give you 20% off, and you\u2019re going to get it for $312 if you go Pro right now. So you can save 20% off BiggerPockets Pro by just using the code Analysis20. That\u2019s Analysis20. A-N-A-L-Y-S-I-S 20. Just use that and get 20% off.
If this isn\u2019t convincing enough. I have one more thing for you guys. I have one more bonus for you, and it\u2019s my book. I wrote a book Real Estate by the Numbers with the incredible J. Scott, and it\u2019s all about deal analysis. That\u2019s what this whole book is about.
And as we\u2019ve talked about, financial freedom is about being able to run the numbers and identify which deals are right for you. This book has everything you need for it. It\u2019s normally a $46 value, because you get the audiobook, you get the Kindle book, you get the physical copy. That\u2019s all for free if you go Pro today because of this webinar using that code Analysis20.
So I hope you guys will consider it. It is an incredible deal that we\u2019re offering you. I if you want to do it, just go to biggerpockets.com\/pro. So that\u2019s where you can go and get all these bonuses that we\u2019re offering to you on top of the normal Pro value. So biggerpockets.com\/pro, enter the code Analysis20. If you are already Pro and you want some bonuses, go to biggerpockets.com\/pro\/videos, where you can look for boot camps, or get some of the other content there.
The last thing I\u2019ll just say guys, is we at BiggerPockets want to stand behind the Pro membership. We truly believe that it is the key to following the four steps to financial freedom that I\u2019ve walked you through today.
And so if you go Pro and you don\u2019t love it, we will give you all of your money back. We don\u2019t care. We\u2019ll give you 100% of your money back. If you\u2019re not using it, if you\u2019re not actively working towards financial freedom, we don\u2019t want your money. We don\u2019t want you to be Pro. So you can try it for free for 30 days. We are very confident that you\u2019re going to see the value in all of the things that we\u2019ve created for you in the Pro membership, and think that you\u2019ll love it.
So I\u2019ll leave you with some parting words from the very wise Jim Rohn. He said, \u201cIf you really want to do something, you\u2019ll find a way. If you don\u2019t, you\u2019ll find an excuse.\u201d So I encourage you, whether it\u2019s going Pro or some other way, to start taking action. To take the knowledge that you\u2019ve learned here today in this webinar, and then start applying it in your life every single day. If you do consistent actions every single day, I promise you, you will get on that path towards financial freedom. And you\u2019ll get there faster than you think.
That\u2019s it for me today, guys. Thank you so much for joining. I hope you learned a lot. If you have any questions for me, you can always find me on BiggerPockets or on Instagram where I\u2019m at @thedatadeli. I appreciate you all, and I\u2019ll see you again soon.
All right, thanks everyone for listening. I really hope you enjoyed the webinar. Again, if you do want to go Pro today, it is a great time to do that. You can use the code Analysis20. And in addition to all the benefits of Pro we just talked about, you will also get a free copy of the book I wrote with J. Scott, Real Estate by the Numbers. Thanks again for listening. I really hope that you\u2019ve learned something about pursuing your financial freedom, your financial independence, whatever those financial goals are for you. I hope you learned and have some ideas on how to take some practical action towards those goals.
If you have any questions for me, again, you can always find me on BiggerPockets, either in the forums, or you can just send me a direct message. Or you can find me on Instagram where I\u2019m at @thedatadeli. Thanks again for listening. We\u2019ll see you next time.<\/p>\n