2 Real Deals in 2023 That’ll Build Your Retirement Nest Egg

David:
This is the BiggerPockets Podcast, show 832.

Dave:
My motivation now is twofold. One is I’m looking more at retirement soon for my day job, so to have that passive income. And then two is to provide a legacy for my two boys.

Keith:
I’m an older guy. I’m 47. I’ve got a wife. I’ve got a kid. My goals were basically like, hey, I want to set something up. Cashflow wasn’t the number one thing for me because I’m looking 10, 15 years down the line when we want to retire. So getting into this deal was basically like, hey, let me see that I can do this, let me see that I can make this happen, and then let me repeat it.

David:
What’s going on, everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast. The biggest, the best, the baddest real estate podcast in the world. Every week, bringing you the stories, how-tos, and the answers that you need to be successful and make smart decisions in this current ever-changing real estate market. Today’s show, my co-host, Rob Abasolo, and I will be interviewing agents and their clients who have found deals that work in today’s market.
Both of these investors live in markets different than where they’re investing, so they’re using long distance real estate investing principles to help put these deals together. We’re going to be explaining what they found, how they found them, and how they put it together. Rob, what should investors be on the lookout for in today’s shows to help them with their business?

Rob:
Honestly, they should be looking at their relationship with their realtor and being honest and asking themselves, is my realtor this good? Is my realtor asking these types of questions? And is my realtor well versed in FSM? If you don’t know what that means, then you’re going to want to stick around until the very end because we get into it with one of our realtors on the show.

David:
That’s a great point. And if you’re interested in seeing what a good realtor looks like, check out episode 826 where we did a show where we took a realtor and a loan officer that both work with me and interviewed them to say, “How do you two work together to get clients into contract in a very difficult market?” Now, before we bring in today’s guests, I just want to remind everyone that both investors were starting later in life. These are not 21 year olds that already have a portfolio of 40 properties like you typically see in the thumbnails.
These were people that have just lived their life, saved some money, and they’re getting started investing at a later stage, yet they were able to use their experience, their knowledge, their networking, and the resources that they had to find really good deals and I’d love to see more of you do the same.
Just a reminder, before today’s show, today’s quick tip, remember that BiggerPockets has an agent finder that you can use to take your first step into a new market. Find your real estate agent who can help you calculate cashflow and find the best neighborhoods for your strategy, instead of talking about granite countertops and cute backyards. Go to biggerpockets.com/agentfinder to match with an investor friendly agent now. It’s fast, it’s free, and it’s easy. That’s biggerpockets.com/agentfinder. You can even find me there. All right. Let’s get to our first guest.
Keith and Peter, welcome to the show. Dave and Dahlia, nice to have you as well.

Dave:
Excellent. Thank you.

Keith:
Hey, thanks for having us.

Peter:
Thanks, everyone. Glad to be here.

Dahlia:
Doing great. Excited to be here.

David:
All right, Keith, let’s kick things off with you. Tell us what were your goals with this deal and how long have you been investing for?

Keith:
I was looking for just a long-term rental property. My goals for this deal was basically I was looking for a long-term rental. That was basically it. I had been investing … Honestly, I didn’t buy my first deal until February of this year, but I’d been looking at real estate and meeting with people for about a year and a half total now. But yeah, I live in Los Angeles, so I wanted to get into a market that was a little more affordable for me. And I had met through a real estate meetup, some guys who were investing in Indianapolis and that one of the partners lived there and so I got to know them. They started talking to me about what you can do in Indianapolis versus Los Angeles, and it was all very interesting. So when-

Rob:
Very cool man.

Keith:
Yeah. When I-

Rob:
And what do you do for a living now?

Keith:
I own a medical transportation company. I’ve done that for about the last decade. It’s given me an opportunity. I built it to a point where I now have enough free time and capital that I wanted to do something else with my money than just put it in the stock market.

Rob:
Okay. And so you were saving money, you have a pretty good business under your belt. You start going to real estate meetups and getting involved with the community. So you buy your first deal this last February. Congratulations on actually getting into your first deal. What were your goals? Did you set goals getting into real estate or were you sort of like, I’m just going to figure it out?

Keith:
No. I mean my goals were … I’m an older guy. I’m 47. I’ve got a wife, I’ve got a kid. My goals were basically like, hey, I want to set something up for us for our future. Something that’s going to appreciate in value. Something where we could possibly cashflow. Cashflow wasn’t the number one thing for me because I’m looking 10, 15 years down the line when we want to retire. So getting into this deal was basically like, hey, let me see that I can do this, let me see that I can make this happen, and then let me repeat it.

Rob:
Tell me, now that you’ve been in this real estate side of things and actually getting your feet wet, what do you think is more important for your personal situation? Is it cashflow? Is it appreciation? Is it a beautiful balance of both?

Keith:
It depends. If you ask my wife, she wants the cashflow so she can retire. For me, look, right now, especially because I BRRRR’d this deal, if you can cashflow $100 or $200 a month, I think you’re doing great as long as you’re in an area where you know the appreciation’s going to be there. So for me, I’m looking 10, 15 years down the line. I’m looking at appreciation more than I am cashflow right now.

Rob:
Very cool. And so for everyone at home that doesn’t know, just a refresher, a BRRRR is basically a buy, rehab, rent, refinance. And if you do that all well enough, you’re able to in theory, pull out most if not all of your cash. Our friend David here is the king Of that. So very, very cool that you were able to pull this off. Can you tell us a little bit about what your buy box was when you started looking into this deal?

Keith:
Yeah. My buy box started out as a 3/2. I want at least 1200 square feet, 5,000 square foot lot, something along those lines. But what Peter had to inform me about was in Indianapolis, 2/1’s, 3/1’s, 4/1’s are what you’re going to find a lot of. A 3/2 or a 2/2 or a 4/1, they’re less common than having a one bath, which coming from California, it’s just really different. It’s very rare that you find houses out here that only have one bath with four bedrooms, but out there it’s common. So I adjusted down to a 2/1 after having a conversation with Peter.

Rob:
Sure. Yeah. That’s always the bummer thing is when I feel like I find a really, really good deal, there’s always just one bathroom. David, I know that you’re a big proponent of if there’s extra square footage and you can convert it into a bedroom, let’s get that bedroom in there. Did you have a philosophy on ever adding bathrooms to your BRRRRs?

David:
Always. I think you should always look at real estate from … I call them real estate goggles. When you put these lenses on and you see what a property should be, not what it is. And it’s hard to describe. It’s kind of a philosophy. People like things explained in a framework, and I don’t know that I can give them a blueprint. But it’s like why is this bedroom so huge? I could put four beds in here. This should be two smaller bedrooms. Or why is there one bathroom and that’s it? We could put another bathroom over there. So I thought it was funny, Rob, I caught your subtlety when you said, “Every time I find a great deal, there always ironically happens to be something missing from it.” Right?

Rob:
Yeah.

David:
That’s why it’s there if anybody missed that. So looking at real estate in today’s market where we say you’ve got to make a deal, not just find a deal, is about seeing a property and saying, this is what it could be, this is what it should be. This is the highest and best use of this property. And then asking yourself how cheaply and how productively could I add a bedroom, add a bathroom, add a space, add square footage, manipulate the square footage, move the walls around, do something to make this property perform better.

Peter:
Yeah, but add on that too. So you’re right, the addition part of it’s big, but there’s also a reverse strategy to go down, especially in the bedroom count. Not in bath count of course, but in Indy especially, we see a lot of four bed, one bath homes like Keith mentioned, but they’re small. You’re talking these little closet style bedroom, eight by eight, and so it actually makes more sense to take that 1500 hundred square foot house and turn it into a 3/2. Create a master bath or a master suite with an en suite bath walk-in closet, kind of modernize it. So that can be a value add play. Where it seems like you’re taking it down a notch, you’re actually adding value by dropping down and making rooms more spacious.

Rob:
Yeah. That’s a really interesting technique. Keith, when you were looking at this deal, you’re obviously looking at the configurations of it. Were there any other particular criteria that you were evaluating?

Keith:
I mean, in terms of the house itself, again, I went down to a 3/1. The square footage of it, oddly enough, it’s a 960 square feet, but that is the same size as the four bedroom, one bath that I bought as my first deal.

Rob:
Wait. Sorry. You went down to a 3/1 or a 2/1?

Keith:
A 2/1. This deal is a 2/1.

Rob:
Okay. Cool, cool, cool.

Keith:
But as far as what I was looking for in terms of the deal was would it pencil as a long-term rental?

Peter:
Well, the ability to always lean back on that LTR strategy just in case it covered the bases and then appreciation was a big part of it because in 10 years, even if I’m breaking even, I’m going to have that equity that I can borrow against, use, whatever you might do with it down the road.

Keith:
Yeah. That’s exactly right, Peter. Peter was instrumental in giving me the direction of where I should be looking to buy these properties for appreciation. So that was the other caveat that I wanted with this property. Even if it didn’t cashflow now that it would appreciate.

Rob:
So obviously having an investor friendly agent is super pivotal in your first deal. How else was Peter able to help shift your mindset or your POV on this deal?

Keith:
Again, he got me thinking more about getting down into a 2/1 house instead of a 3/2 that I was looking at. Instrumental in helping me look at the areas that I needed to be looking at to get that kind of deal and also run the comps and ARVs in these areas to make sure that we were investing. Right.

David:
And we’re going to move on to the individual details of this deal, but I want to ask before we do, just to clarify, the reason that you went from looking at four bedroom houses to two is because even though the four bedrooms look good in theory, in practice, it’s hard to find a tenant for them or they appraise for less because of functional obsolescence. The bedrooms are too small. Is that right?

Keith:
Yes. That was one of the things I was saying earlier was that my four bedroom, one bath house that I bought is the exact same square footage as the two bedroom, one bathhouse I bought. So yeah, it’s really hard to make those work.

David:
So the tenants just go look at the house and say, “Nope. I don’t want it. It looks like a prison cell. That’s not going to work.”

Keith:
Yeah.

David:
But on the MLS, it shows as four bedrooms. The reason I’m bringing this up is that’s an example, but there are so many examples of things that agents know about a specific market that your buyer, especially long distance, cannot understand. The individual dynamics, the things that don’t show up on a spreadsheet. And I notice a lot of people show up and they’re told to tell their agent, “Here’s what I want. Go find it.” Versus asking, “What is working in this market? What strategies work here? What do tenants look for? Which neighborhoods are appreciating? What do you see other people having success with?” And then asking, “Can I adopt that strategy within …” You’ll have a much smoother ride if you take that approach.

Rob:
Okay. So first and foremost, what kind of property is it?

Keith:
This is a single family house. Two bedroom, one bath, 960 square feet.

Rob:
And Peter, I’m going to toss this one over to you. How were you guys able to find this deal?

Peter:
Rob, this was an MLS deal. Nothing glamorous about it, but the interesting thing was it had been on the market for a really long time. 211 days if I remember correctly. And so it got overlooked. Actually been under contract once before as well. So yeah, once Keith and I honed in the criteria, and we settled on a few neighborhoods to focus on, this one came up. Actually, sorry. We saw it because it had been sitting there for a while, but I set up the search for him, so of course emailed him all the available properties in that neighborhood and that one caught his eye so we did some digging on it. Do you want me to get into the specifics of what we did in terms of numbers there?

Rob:
Yeah, sure. Why don’t you tell us how much it was?

Peter:
Listed for 149,900 originally, so 150,000. They dropped the price over time to 145. We got it under contract for Keith at 130.

Rob:
Nice.

Peter:
Ended up negotiating a $9,000 price reduction during inspection. So ultimately he closed for 121,000 in April this year.

Rob:
Very cool. Okay. So that’s a relatively big drop in price there. Keith, were there any special tricks of the trades that you did to negotiate the price?

Keith:
That was all Peter. I mean obviously, you have to have your inspections done and all of that. But yeah, I think we lucked out with the person that was selling the place to not really knowing what they were doing. But yeah, no, I left that all up to Peter as far as negotiating the prices and what would work and what wouldn’t.

Rob:
Yeah, so tell us about that, Peter. What did you do? How were you … Seller and get effectively $30,000 off the price tag?

Peter:
Yeah, close. Yeah. What I really did here was dig into the listing itself and get all the information I could on the property so we could leverage it and strengthen our position. What I mean by that, number one, been on the market forever. It had fallen out of contract before and it had fallen out because it had a foundation, a couple issues going on, and the buyer was spooked and they bailed. There was a contractor estimate on it, so we got that in advance. It was also agent owned, so the agent was also the seller of this property. So I knew I was going to be dealing directly with the person who could make those decisions. And as Keith mentioned, it didn’t quite seem like they maybe knew what they were doing too well. Responses were slow. They didn’t have utilities on for inspection. Just some easy blunders that they made.
But nonetheless, just took all that information knowing they’d been holding it forever, they couldn’t sell it, they were running into foundation problems, and we leveraged that to get the price down as much as possible. And they made a crucial error here in the fact that that agent owner did not pre-negotiate the foundation problem. So they already knew it was there. They had a bid, they gave it to us, told us about it, but then they failed to get that negotiated upfront. They allowed us to just keep the normal inspection contingency in place, go in there, do our inspections, and then renegotiate it even though this was a previously disclosed item. And so that was their error.

David:
That is a big error and what you’re getting at there, Peter, for those that are not real estate agents and might not catch this, when there’s an issue with the house, you’re better off as a seller to negotiate it when you have the leverage, which is before you go into contract. There are no ways out of a contract for a seller. There are many ways out for a buyer. So the general rule to understand is when it’s your listing, you have all the power until you go into escrow because you can sell to other people. When you’re in escrow, the situation can never get better for you, but it can get worse. They can lower the price, they can ask for repairs, they can delay the process. There’s a lot of things that can happen. So when you know have issues, before you go into contract, say, “Hey, we have these foundation issues. Here they are.”
Don’t just hope that they’re not going to find them. They’re absolutely going to come up, especially if you know it. And try to negotiate what credit they’re going to get for that rather than waiting until you’re in escrow and now you’re two to three weeks in and they’re coming back. They’re going to get more than if you did it the other way. Great point there, Peter. And I think Keith, you mentioned that the listing agent wasn’t very good. That’s another thing to look for. I purposely target properties that have agents that are not very good because it’s a great way that you can save money. And the funny thing is a lot of the people that hire these agents brag to their friends that they only paid 1% or only paid 2% on the listing commission, and then they proceed to lose 10% on the negotiation side. That’s a frequent error. Have you seen that too, Rob?

Rob:
Oh yeah. Got to love it. Got to love it. Well, awesome. Okay. Well, congrats on the price reduction. Keith, tell us a little bit about how you funded the deal.

Keith:
This deal, I came in cash and then I ended up refinancing out into a … I refinanced out on a non-conventional loan with a local credit union on a 5/5 ARM. So five years, it doesn’t reset. It’s not like a 5/1 where it resets every year. The interest rate adjusts. The only thing that they will do since they are a small credit union is that if the rates drop more than half a percent, they will bring your rate down for a nominal fee. It was like a couple months worth of interest or something to bring the rate down. But on a 5/5 ARM, it won’t readjust up for five years.

David:
So a 5/5 ARM means the first five years you’re locked in. After that it can only adjust every five years as opposed to what we normally hear is a 5/1, which means you’re locked in for five years, then every year it can adjust.

Rob:
Oh, interesting. Okay. Yeah. That’s interesting. So why’d you choose that route, Keith? Was it just because it was a lower interest rate?

Keith:
It was a lower interest rate. Also based on where interest rates are now, five years being locked in, if it penciled as a long-term now, I knew that hopefully over five years rents would go up, my cashflow would go up. And then if rates come down enough and I want to refi out into a 30 year, the penalty for refi out of that 5/5 ARM was really, really low so for me, it didn’t make any sense to take a hire rate now if I didn’t need to.

Rob:
Totally. Yeah, that makes sense. And what did you end up doing with this property?

Keith:
I actually turned it into a midterm rental. It would break even as a long-term rental. I put it up on Furnish Finder and Zillow and even Airbnb at 30 days. And now I’m actually cash flowing pretty good on this property. So I’m keeping it right now as a midterm. If anything ever changed or I needed to, I could turn it back into a long-term rental and make it work. It would still work, but right now it’s working just fine as a midterm.

Rob:
Okay. So yeah, we usually call that … Well the term that I coined was the burster, and then we actually just came up with the barometer last week on the pod, which is a BRRRR into a midterm rental. Can you tell us the cashflow difference between the long-term rental and the midterm rental? What would you make on a long-term rental versus what’s you’re cash flowing on the midterm rental?

Keith:
I would basically break even on a long-term rental, and right now I’m cash flowing about $700 a month as a midterm. So great for me, especially where I thought I was going to be breaking even. But yeah, I’m coming out about $700 a month.

Peter:
Rob, you want me to break down the numbers for you?

Rob:
Yeah. I was going to ask. Yeah, can you tell us a little bit about the actual budget and everything on the BRRRR?

Peter:
So Keith bought this for 121,000. He had about 35,000 in renovations on it, so all in about 155. And it was appraised for 203. So after the refi he left about $2,500 in the deal and he spent about $12,000 furnishing the property. So round up a little bit, about 15K in the deal. Total PITI was a little over 1400 and obviously you got some utility expenses, some landscaping, et cetera. So $2,200 on the medium term rental. So as he said, about $700 a month cashflow. So I got to do the math exactly in my head about 50, 55% or so cash on cash return right there. And had he long-term rentaled it, as he said, it was just about breaking even. We estimated the long-term rent to be in the $1,500 to $1,600 range, so a difference of $600, $700 when he switched over to the medium term per month.

Rob:
And some people, they get caught up on leaving money in the deal, but if you would think about it, if you were going to buy this property conventionally with an investor loan for example, you would have to put 20% down. So even at the … What was it? $150,000, let’s say.

Peter:
121.

Rob:
121. Okay, great. 20% of that is going to be 20,000.

Peter:
25. Yeah.

Rob:
So you’d have to pay more.

Peter:
More money in the deal.

Rob:
Exactly. So you put it a little bit more sweat equity in this deal to make it happen, but you effectively have a much higher return as a result, so very, very cool. Did you feel pretty good about the ARV walking into this? Were you able to comp it out pretty closely to that ARV?

Peter:
Yeah, absolutely. We had estimated about 200 grand, so it nearly hit the nail on the head with the 203 valuation.

Rob:
Very cool. Okay. And just for anyone at home, ARV is the after repair value, so that is what the house is worth after you fixed it up. Now, Keith, I know you mentioned that you put it on Furnish Finder and you turned it into a midterm rental. Did Furnish Finder actually turn out to work out and get you your leads and get your place booked or are you using other platforms as well?

Keith:
No, it actually … I mean, when I put it on Furnish Finder, I also put it on Airbnb and I put it on Zillow, and Zillow was the first place I got my renter, who’s in there now, who’s been in there the whole time. He’s actually a guy doing construction work in Indianapolis and so he needed a place to stay, and he’s been there for the last couple of months and it’s been great, but it was from Zillow actually.

David:
That’s great. All right, so what lessons did you learn from this deal? Keith, we’ll start with you and then Peter, I’ll ask you.

Keith:
Especially if you’re investing out of your own market, you really need to find somebody who knows the market well, who can guide you to where to buy, how to buy, what’s going to work, what’s not going to work. Also, with this deal, people usually run when they hear foundation issues because it scares them, right? They don’t know. They can get pretty costly. But if you know can factor that into the deal that you’re going to make, then don’t be scared of things that sound that scary because sometimes they’re not. Sometimes you can get a great deal.

David:
Peter?

Peter:
I have four main takeaways from this deal. Number one, and I think the most important one, is that there’s still deals to be had in today’s market. I mean, Keith bought this in April this year, and he just refinanced out a few months ago. So this is a very recent deal in today’s market with today’s rates. He made it work. And I think it’s a big takeaway because all I hear is, “Oh, there’s no cashflow. There’s no money being made. The market’s dead.” I know you guys hear that every single day as well, and it’s just not true. He’s a real world example of it actually working out. And number two, use all information available to leverage your position. Don’t be afraid to dig into the details a bit more and use whatever you find to your advantage. Three. Keith already mentioned, take advantage of factors that may scare off other buyers.
Buyers hate the F word, they hate the S word and they hate the M word. So foundation, structural, mold. Those three things just you see panic go into people’s faces when they hear that when in reality, most of these situations are fixable and not always as costly as people anticipate. Now, with foundations, yes, I’ve seen $100,000 bids on repair and there are some ones that you need to run from, but this was under $10,000. And again, Keith factored those numbers into the deal from the get go. So there was nothing to be afraid of, and it’s fixed. Everything’s just fine. So all those other buyers missed out on this deal because they couldn’t look past that F word. And then four, don’t be able to be afraid to pivot on your strategy. Keith originally went into it, number one, looking for a three bed, two bath and a long-term rental, and he ended up with a 2/1 medium-term rental. Go figure. But as he got into it, he kept his mind open. We looked at the opportunities as they presented themselves, and again, he pivoted accordingly and it ended up really working out for him in the end.

David:
Awesome. Rob, what about you? What are some takeaways you took from this one?

Rob:
Yeah. I was just reflecting, Peter, it is really nice that you know your stuff. The F, the S, the M word. I believe those were the three. And it’s funny because when I was getting into real estate, I remember I had to sign an addendum that was the lead paint addendum, the one that’s standard with all houses, and I was like, “Oh my gosh. Am I going to die if I step inside the house?” And I called my realtor and she explained it to me and talked me down the ledge because I was ready to walk away. I was like, “Wait a minute. There’s lead paint in here?” And I think most of the time it’s right. Having a realtor that has been through that journey has been very helpful. Especially when it comes to foundations, I agree, that’s a very scary thing. For me, luckily, in most of the cases, I would say in the last five foundation issues I’ve had, they’ve all cost between $1,500 to $3,500 to fix. So it always, most of the time ends up being a lot less stressful, but it does pay to have a realtor that has experience doing it. So yeah, it’s nice. You guys both did good work. Congratulations on this deal. This is awesome.

Keith:
Thank you.

Peter:
Thank you.

David:
Absolutely. I would second it. Whenever you hear something that scares you, turn your fear into a number because math is not scary. I remember that’s advice I gave on the first ever podcast I did when I hosted with Brandon. And I said the same thing. We were talking about lead-based paint. I was like, “I don’t care if it’s lead-based paint. Don’t think poison. Think well, what would it cost to fix that?” Same thing happens with asbestos. People hear that word. They freak out. Termites, they freak out. Foundation, they freak out. Cloud on title, turn it into a dollar, work the dollar number into the deal. See if the SAT works for the seller. You can take something very scary and turn it into something very approachable. Thank you guys. That’s a-

Rob:
I’ve always found with asbestos, its bests is not ask questions. That’s always been my-

Peter:
It’s best to leave it alone.

David:
Rob, do you know how they name Worcestershire sauce?

Rob:
Worchester shire, shishashin sauce. Yeah. How?

David:
Some guy that took his dentures out was asking, “Worcestershire sauce?” All right. Peter, Keith, congrats on the deal. Thanks for being back on the show. We will see you soon.
All right, Dave, let’s start with you.

Dave:
Yep.

David:
What’s your background in real estate investing?

Dave:
I initially started real estate investing back in the early 2000s. I had purchased about six out-of-state properties. Two in Texas, two in Kansas City, Missouri, and two in Vancouver, Washington. And had bad timing, a little bit of some bad experience with a couple property management companies and I got out around the housing crash in 2008. I was able to salvage some deals to get out. And so that’s where I started and then I’ve just been sitting on the sidelines the last few years needing, I guess, another push to get back in and finally got it last year and then ended up purchasing a couple properties this year.

Rob:
What was that push?

Dave:
Honestly, it was you. I found the BiggerPockets podcast on YouTube. Watched a couple videos, joined the website, became a member, and then quickly purchased your book, Long Distance Real Estate Investing, and spent a lot of Saturday and Sunday mornings reading that out in the porch. And a lot of things you had to say resonated with me and got me off my butt and the rest was history I guess.

Rob:
Was there a specific moment in that? Was it like you finished the book and you’re like, I’m ready to do this? Was it just being part of the BiggerPockets forums and getting back into the community? What was that shift? Was it a conversation you had? I’m always curious to hear how our members are able to get to that point where they take action and get back in the game or get into the game at all.

Dave:
Well, I knew I wanted to get back in, but I did have a lot of reservations because of some of the issues I had with my prior experiences investing out of state. And back then it was a lot different than it is now. And David mentions it a lot in his book with technology is such a plus right now. Being able to keep up to date … Or actually a lot of it was really just being able to do the initial research with finding properties. Being able to look in different areas around the country, not just in my area. So using the BiggerPockets rental calculator was a big tool for me. But then throughout the book, I guess the little things here and there with push, letting us know there’s technology here to help us how to build a team. And so I just decided to take a chance and sent an email to Dahlia through the BiggerPockets website and-

Rob:
Very cool man. Well thank you for that. So tell us, you end up getting back into it, you find your fire again. What were your goals getting back into real estate? Did they differ too much from when you got into real estate to begin with?

Dave:
Quite a bit different now. I’m a few years older now. I have two sons that are 15 and 16. So I think my motivation now is twofold. One is I’m looking more at retirement soon for my day job, so to have that passive income. And then two was to provide a legacy for my two boys.

Rob:
I love that, man. So, all right, let’s hear about this property a little bit. Tell us about the property. What kind of property is it?

Dave:
It’s a single family home, three bedroom, two bath. It’s built in 1983. It’s in the outskirts of Tulsa, Oklahoma. One story. Needed some work. I think the seller had been in there a while and it definitely needed some updates. So I went in there and did some updates, but pretty simple.

Rob:
Yeah. Cool. And so this property showed up and did you take it to Dahlia? How did you even come across it to begin with?

Dave:
Actually it was the opposite. Through Zillow, I had been looking at properties in that area and when I contacted Dahlia through BiggerPockets’ website, I actually had came to her with a property and she had told me no. I think it had some structural damage I think or some problems initially.

Dahlia:
Yeah. There was something going on with it and I remember I was like, “I can get you a better property in that same price point in a better location.”

Dave:
And she did.

David:
That supports the point we just made with the previous guests where we talked about going to your agent and saying, “This is what I want. Go get it.”, is not as beneficial as saying, “Tell me about your market. Where are there opportunities?” Because Dave, there’s no way you could have known that there was a better neighborhood where you’d get better tenants and better rent and have a better experience for the same price without having that boots on the ground expertise that your agent brought.

Dave:
You’re absolutely right.

David:
So Dahlia, from your position, you’re a real estate agent and people come to you and they say, “Tell me about this house.” I get the screenshot, what about this one? That’s our favorite as an agent because we don’t know what you’re asking. What about it? Right?

Rob:
Or they just send you the link. They don’t even ask.

David:
Yeah, just here. That’s funny. That’s exactly right. When you get that kind of information, what goes through your head that many clients would never know a realtor’s thinking?

Dahlia:
Well, I mean I’m always very transparent with my clients, so when they send me a property, I’m going to tell them exactly what I think, just like what I told Dave. So if somebody sends me a property, I’m going to quickly pull disclosures, let them know anything that’s going on with the property. I’m going to tell you if I think it’s worth what they’re asking. I’m going to tell you I think this one’s going to go quick. All those things that are going to affect me telling you, yes, I think this is a property to pursue. And that’s going to be a question for the buyer as well. If there’s any repairs, for instance, that come up on the disclosures, that may be something that’s a deal breaker for them.

David:
And the property that you found him, where’d you find that one?

Dahlia:
That one was in Broken Arrow. I found it on MLS. I think it was maybe a week after he had first reached out to me about that other property and I told him, “You know what, I can find you something better.” I think a week later this one came up and I told him, “Hey, I think this could be a good one. It’s priced well. It’s going to go quick.” I knew he was a cash buyer, which is always … If you can use cash, it’s always to your advantage. So I was like, “Let’s get in there and make an offer.”

David:
All right. And then how much did you make the offer for on this house?

Dahlia:
I believe they were asking … Do you remember, Dave, exactly how much they were asking?

David:
I think it was 155.

Dahlia:
We came in maybe 6K over. It was 149 and we offered, yeah, 155 I believe.

David:
Why did you choose to go over asking on this one?

Dahlia:
Because I knew it was going to go over. The tough thing is how much can we go over? It’s always like the lottery, I feel like. How much can I get over and get this property? But I don’t want to go over too much. I want to spend the least amount of money possible, but-

David:
What you’re describing is the dilemma that everyone has in a hot market. In California, this is a common issue. So the house is listed for 800,000, it’s got 20 different offers. You know it’s going over the 800, but nobody wants to pay 900 if they could have paid 875.

Dahlia:
Exactly.

David:
You always end up in this odd, well, I don’t want to lose it, but I don’t want to go too much. And it creates this paralysis that will probably knock out 75% of buyers. And that’s where having an agent that’s experienced … Sometimes I can just get the listing agent to say, “If you write this offer, we’ll accept it right now.” And at least then the buyer knows I could choose yes or no. It removes that throw your name in a hat and hope type of a thing. Was it a situation similar to that for you?

Dahlia:
What I always do is I always feel the agent out. And technically we’re not supposed to disclose price, correct? But I like to do a few little fun tricks and I like to put a number out there and say, “Hey, is this number competitive?” And a lot of times I’ll get a yes or no.

David:
Is that a Tulsa thing that you’re not supposed to disclose price, what your buyer would pay?

Dahlia:
It could be an Oklahoma real estate thing. I don’t know about the other state laws, but we are not supposed to disclose price of offers unless the seller tells us that we can and that just really never happens.

Rob:
Yeah. I always just go with the blink twice if this is a competitive offer that would be accepted.

David:
Yeah, it could get tricky when you’re going that route. And every state has their own laws, so I can’t speak to all of it, but I know in general-

Dahlia:
Sure.

David:
Agents can have a discussion about would this work without saying my buyer would pay this. That’s the way I always try to frame it. I usually say, “Hey, my client’s going to listen to whatever I tell him. So let’s see if you and I can make this thing work and then we’ll go back to our clients and we’ll propose what we came up with.” That alone, if you get an agent that will do that, it puts you in the top 1%, 2% of chances of getting that house. Because most agents just email off an offer and say, “I hope we get it.” Literally, like you said, the lottery. Just pick numbers. So it sounds like your experience recognizing I think six grand over asking would make it so that the seller would jump on our offer without having to pay 30 grand over asking and that was just a result of you knowing the market, right?

Dahlia:
Yes.

David:
Dave, how did you feel when that first got brought up? Hey, I think we should go six grand over when most investors are asking the question of, well, how much under can I get it for?

Dave:
At that point, I had a lot of confidence in Dahlia. She had been really transparent with me in how the market in that area is performing. And the crazy thing is she told me this is what I think we should offer and this is what I think they’ll come back at. And she was spot on. So I think to answer your question, I had a lot of confidence with Dahlia before she made the offer. And two, I was hungry enough where I didn’t want to lose a deal over $5,000 or $6,000.

David:
I commend you, man. And I’m not here as an agent telling everyone just pay a million dollars for every house, okay? But let me just bring up the other side of this. In 2015, 2016, I saw a lot of people walk away from $500,000 homes because they needed to pay 510 and they all bragged they didn’t want to overpay. And now these houses are worth $800,000, $900,000. We see this a lot when you’re in real estate for the long-term that you can step over dollars to pinch pennies and I’m just asking people to have a mature view, not getting sucked into the details and the ego of feeling like you won. Because sometimes paying less than asking price is a viable option like with our last guest. Sometimes you win paying over. It’s what the property’s worth and what it produces, not what it’s listed for. So Dahlia, you then had to go in and negotiate this. In addition to having to pay a little bit over asking, was there anything else that you recognized when you felt out the agent that made you think this was a good opportunity?

Dahlia:
I just knew that price point and that location was very hard to come by. And that was earlier this year. And now at this time of year, it’s really non-existent. So I’m sure he’s already gained some equity on that property. But as far as being able to secure the deal, I think we did as is and I think we did quick close because I know those are always the things that these type of sellers are looking for.

Rob:
Yeah. Just really quick, out curiosity, Dave, you brought a property to Dahlia. Dahlia’s like, “Eh-eh. I’m going to find you a better deal.” Obviously for you, I’m sure you were ready to take action. You probably were a little impatient because you’re like, “Dang-it. It’s going to take so long to get it.” So how long did it actually take to get this new property under contract?

Dave:
I looked at that number this morning and we were under a week.

Rob:
Oh, nice. Okay. Wow. Superfast. Okay. How did you fund it?

Dave:
Paid cash for that property.

Rob:
Okay. And what did you end up doing with it?

Dave:
I’ve got a long-term renter in there now. Actually, before I got a renter in there, we did some rehab work, roughly about $17,000 worth of rehab work.

Rob:
Okay. So was it a total BRRRR or was it just a remodel that you paid for out of pocket?

Dave:
A remodel I paid for out of pocket.

Rob:
Okay. Did $17,000 of repair get you a lot? What did you actually do with that budget?

Dave:
Living in California and seeing prices for materials in Oklahoma and labor in Oklahoma, I felt like I didn’t pay a lot at all, but-

David:
I know that feeling. Every time I travel and I get to get gas and it’s in the threes, you’re like, it’s like free.

Dave:
Yeah, it’s a crazy feeling. So we tore out all the flooring, put in new flooring, new appliances, new windows, paint, water heater, did some work in the garage.

Rob:
So not a full-on remodel, but definitely sprucing it up and getting it market ready basically.

Dave:
Exactly.

Rob:
And what was the outcome with it? Once you got it all ready to go, you rent it out long-term basis. Give us some numbers.

Dave:
The crazy thing was I ended up using a property management company that Dahlia had referred to me, and so we went in on a Friday, I think, and listed it on the MLS for rent. I heard back from the property manager on Monday that we had 75 interested parties and 25 physical applications in her hand. So we had a renter in there within then 10 days or so. Less than that actually.

Rob:
That’s crazy, man. That’s a lot.

David:
Dave, it sounds like having cash actually put you in the driver’s seat for this deal. Gave you a big advantage. Do you mind sharing where that cash came from and what gave you that advantage?

Dave:
About seven or eight years ago, my wife and I decided to purchase some land in northern Idaho. We had purchased 44 acres in a spot that we had felt we wanted to retire at, build a home on that property. And fortunately the price of real estate and especially land in that area just has skyrocketed. So got contacted by a realtor early last year wanting that land and he didn’t give up until he got it. So we ended up selling that land. And then just about that time I was reading Robert Kiyosaki again and the liability versus asset, and I thought, “Wow. We need more assets and real estate’s the perfect asset.”

David:
Would you say that the choice to delay the gratification of having a dream house or a dream car or a dream yacht or all the things that you tend to see on social media actually led to you being in a position where you could invest that money, make it grow, and then maybe someday this property could buy some of those things for you?

Dave:
Yeah, exactly. That’s exactly what happened.

David:
Yeah. That is a principle that we believe here at BiggerPockets and I love to see that highlighted. It’s that delayed gratification. If you set yourself up right, it’s not this or that. You could have this and that. It’s all about timing. So Dahlia, any takeaways from this deal that you’d like to share with our audience that maybe they should consider when they’re reaching out to talk to a new agent?

Dahlia:
I feel like the biggest things are first, making sure that you’re ready financially. So if that’s going to be you using financing, get pre-qualified right away. If it’s cash, we need proof of funds. All those things are important. I can’t submit offers without it. And sometimes these deals come up and there’s a sense of urgency and you can potentially miss out if you’re not ready and don’t have your ducks lined up, I guess you could say. That’s one of the biggest things. Just knowing the market that you want to be in, researching it a little bit and then really finding a great agent that has the resources that are going to be imperative for investing out of state. Boots on the ground is the most important thing really when you’re investing out of state.

David:
Now, it can be very frustrating to find those people. To find the agent, to find a contractor, to find the property manager into a smaller degree to find your loan officer or your lending source. But once you find them, you can scale a lot faster. Dave, I understand you bought more than one property with Dahlia. Is that correct?

Dave:
That’s correct. I ended up buying a second property about two and a half months after purchasing that first property.

Rob:
Cool. That’s fast.

David:
It’s not always a linear process. It’s kind of like you walk around trying to find the well and you keep digging and digging and digging and there’s no water, but then when you finally find it, you have all this water and your wealth grows exponentially.

Dave:
Definitely. And I think having Dahlia … In your book, you mentioned a lot about setting up your network and it’s hard to do when you’re investing out of state, but luckily I found Dahlia and she had a network already in place and she brought me into that network and that’s made all the difference. That’s why that second property went so smooth as well.

David:
Awesome. Well Dave, if people want to reach out and talk to you more, where can they find you?

Dave:
I’ll give you my company website. It’s DRD Insurance Agency. I’ve got my email on there. Yeah, if anyone has any questions or anything, please reach out to me.

David:
All right. And Dahlia, how about you?

Dahlia:
You can always find me on BiggerPockets on the Agent Finder. You can also find me on Facebook at ASN Realty Group. You can also email me at [email protected].

Rob:
If people want to find you on there, how do they find you on the Agent Finder?

Dahlia:
Yeah, just go to the Tulsa market and look for Dahlia Califf. And I’m going to pop up on there.

David:
Before you go, where can people find out more about you, Keith?

Keith:
I’m on Facebook. Just Keith Lall. Or on Instagram. KLaller1, L-A-L-L-E-R one. But that’s basically it.

David:
All right. Go give Keith a follow. And Peter, how about you?

Peter:
Oh, you can find me right on the BiggerPockets Agent Finder. And if you have any troubles with that, I’m right at peterstewartrealty.com. And Stewart is S-T-E-W-A-R-T.

Rob:
Great. So the Agent Finder, if they type in Peter Stewart, they’ll be able to find you?

Peter:
Peter Stewart, Indianapolis, I should pop right up.

Rob:
Perfect.

Keith:
That’s how I found him.

Rob:
Okay, awesome.

David:
Rob, how about you? Where can people find you?

Rob:
You can find me over on YouTube. Topical, I just released a video called How I Self-manage my Properties without living in the same city and I talk about, not the core four, David, but the Airbnb Avengers, which is my version of the core four for short-term rentals. So go check that out. That’s the only thing I’m going to plug. What about you?

David:
If people want to see your chiseled new body, which platform is the best to find it?

Rob:
Instagram. Instagram where I do silly dances and silly reels.

David:
That’s where they’ll get the body shot, not just the face.

Rob:
I do want to clarify, I don’t want people to get to peek on and be expecting me to be ripped. I’m just slimming down, but we still have some padding that we’re working on.

David:
That might be why I’m doing this subconsciously. I’m like, look, if I can create such a high expectation for Rob, they’ll be disappointed. And then when they see me when they’re not disappointed, that by proxy looks like-

Rob:
Equals it out.

David:
I overwhelmed their expectations and exceeded them. This is psychological warfare, folks. You’re learning more than just real estate here at BiggerPockets.

Rob:
Lovable and huggable. That’s all that really matters for me. That’s what I’m going for.

David:
There you go. You can find me at DavidGreene24 on your favorite social media. Instagram is where I’m most active. Or davidgreene24.com to see all that I have going on and how I can help people.
Well, thanks you two. Love hearing about these deals. Love hearing that people are still finding ways to buy real estate that makes sense, even in an impossible market. So we hope to see you here again. I hope you keep buying property, Dave. And Dahlia, keep crushing it. Dahlia, also, if you haven’t checked on my real estate agent books, I’d love if you would, and then let me know what you think.

Dahlia:
Oh, I have checked out your books. I love all the BiggerPockets books.

David:
Oh, all of them. We got a real true fan here. Well, that’s great to hear. Thanks for that, Dahlia.
All right. I’ll let you guys get out of here. This is David Greene for Rob Lovable and Huggable Abasolo, signing off.