Government-sponsored enterprise (GSE) Fannie Mae announced on Wednesday that it will launch new programs and resources designed to tackle the homeownership gap experienced by the Latino community, designed to “to provide responsible access to housing and long-term sustainable homeownership opportunities.”

The company also announced an expansion of its Special Purpose Credit Program (SPCP) pilot to provide downpayment assistance to eligible first-time homebuyers living in majority-Latino communities. 

These include Atlanta, Baltimore, Chicago, Detroit, Memphis, and Philadelphia, with expansion to additional cities including those with large Latino populations in early 2024.

In alignment with the 2022 launch of HomeView, which offers a free online course with modules to guide consumers through homeownership, Fannie Mae announced Wednesday that the program is now available with Spanish-language content, described as a “digital consumer education platform providing 24/7 end-to-end access to information about financial literacy and homeownership.”

The course is designed for Latino consumers to use on their own, or in concert with trusted advisors who may assist them with decisions related to homeownership.

“HomeView en Español features a new in-language credit education course with content tailored to help Latino consumers effectively build and manage their credit – a critical component to access the traditional homebuying process,” the announcement said. “Thin or insufficient credit history is a challenge disproportionately faced by Latino renters and first-time homebuyers, according to Fannie Mae’s Latino Housing Journey research.”

The course itself was created and written by Spanish speakers, is free to everyone who registers and is designed to be taken on any mobile, desktop or tablet device. The course includes short quizzes and audio clips designed to appeal to a variety of people who learn differently while also increasing information retention, and is customized to address “key hurdles and challenges experienced by Latino consumers establishing or maintaining their credit.”

Additional HomeView enhancements are expected in 2024, the company said.

Research from the Urban Institute indicates that as much as 70% of net-new homeowners between 2020 and 2040 will be Hispanic/Latino, representing “one of the fastest-growing segments of potential homeowners.” But these consumers face disproportionate obstacles including a lack of affordable housing supply, insufficient credit and higher relative up-front housing costs.

“Fannie Mae is focused on knocking down these obstacles so that historic housing disparities can be addressed, and more borrowers can equitability access affordable housing and long-term housing stability,” the GSE said.

“We want to help people get into and stay in their homes for a long time,” said Fannie Mae CEO Priscilla Almodovar. “Downpayment assistance and homeownership education can help the Latino community and achieve both goals. We will continue to work closely with the Latino community to craft solutions to the barriers Latinos face on their housing journey.”

The company added that as of Wednesday morning, a new “strategies for healthy credit” course is now available in Spanish.



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You can retire with rental properties faster than you think. That’s right, toss out the “wait until I’m sixty-five and HOPE I have enough” mentality. That might be okay for most Americans, but it’s NOT okay for YOU. You want passive income flowing in so you can spend time with your family and friends and live a life you love. If you’re going to get there, you better take advice from Sam Dolciné.

A few years ago, Sam calculated his retirement savings and realized he wasn’t even CLOSE to what he would need in retirement. Even after the monthly contributions and employer match, Sam would run out of retirement savings in only ten years of retirement. So, he started looking up ways to boost his retirement income. Real estate investing popped up, and Sam began devouring all the investing content he could.

Now, he’s managing a portfolio of out-of-state rental properties that bring in some serious cash flow. The best part about Sam’s portfolio? It’s “turnkey,” meaning Sam was able to buy the properties and immediately rent them out, giving him cash flow within WEEKS of closing on his first couple of deals. Now, Sam is on the hunt for even more passive income. Repeat his steps, and you could be counting cash flow, too!

Ashley:
This is Real Estate Rookie episode 325.

Sam:
I pictured my retirement, working till I was 60 something, and living off my retirement. And I realized very quickly that that wouldn’t be the case. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside.” Turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much, they’ll buy a property under market value, they’ll put work into it, and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And we’ve got a great episode today. We’ve got Samuel Dolciné on the podcast, and Sam actually runs a podcast of his own called the Black Real Estate Dialogue. And as soon as he came on, I could tell that he had a little bit of experience behind the mic because he was just so smooth and he delivered his story so well. And I was like, “Man, this guy’s got a great story.” All right. So, you guys are going to love this conversation with Sam. He’s going to talk about red flags to look out for in potential tenants and how he almost got scammed by someone who wanted to rent his property. You’ll also get to hear Sam talk about red flags in a property, and you’ll hear why he pulled out of two potential deals that he already had under contract.

Ashley:
We start this podcast a little bit differently, talking about Sam’s idea of retirement. So, he actually went and pulled up his portfolio online for his 401(k) and played with the little tools and buttons they have on there to see what he would actually have at retirement. And to say it was not exactly what he wanted might be an understatement. But then, he makes one phone call, and this one phone call gets him his down payment on his first investment property. And one other thing I want to mention about Sam is this whole episode is you are going to learn all of the ways that he analyzed a market and did it so efficiently, and saved himself so much time during that process too.

Tony:
So, before we kick it over to Sam, I just got to give a shout-out to our amazing Rookie audience. And guys, Ash and I mean this from the bottom of our hearts, the Rookie Podcast would be absolutely nothing without our listeners, and we’re so incredibly grateful and thankful for you guys when you take time out of your busy schedules to leave those reviews on Apple Podcasts, wherever it is you’re listening. So, I want to give a shout-out today by someone of the username JRschmitt2012. And JR says, “The best information out there. Thank you for providing so much useful information. I haven’t made the first purchase yet, but I’m in the middle of moving to a new market and I don’t think I would be as confident as I am without this podcast. Keep it coming, guys.”
So, if you are a Rookie listener, if you’re a dedicated Rookie listener, or even a new one, and you found some value in our podcast episodes, please do take just a few minutes out of your day and leave that review. Because the more reviews we get, the more folks we can inspire to start their investing journey as well.

Ashley:
And for today’s social media shadow, it goes to Drew Breneman, D-R-E-W B-R-E-N-E-M-A-N. You can find him on Instagram at his name. And he does a great job of showcasing different real estate strategies and methods. He also has a podcast called the Breneman Blueprint. So, go give him a follow and check out his page.
I love that we do these social media shout-outs now, and it’s not to get the person followers, but it is for you to build your own network of like-minded investors. Being able to learn from them and also watch them grow. You will not believe that the motivation and inspiration and everything that you will learn just from filling your social media feed with actual real estate investors, especially Rookies, and being able to connect with them. Trust me, as entertaining as memes are, this will be way more beneficial to you. Okay, now let’s get into our show and we are going to bring Sam on.
Sam, welcome to the show. Thank you so much for joining us today.

Sam:
It’s an honor, it’s a pleasure to have this opportunity and I’m excited to get into my story, and I really appreciate you two hosting me today.

Ashley:
I want to start this podcast off a little bit different today. And the first question I want to throw at you is, what did you picture for yourself for retirement?

Sam:
Yeah, so initially, I pictured my retirement working till I was 60 something and living off my retirement, my 401(k) primarily. At the time, I didn’t have any visions of owning real estate or using rental income. I just assumed that my putting away however much percentage at work would do the job. And I realized very quickly that that wouldn’t be the case. But initially, that’s what I thought.

Ashley:
So, are you on track now to get that type of retirement? Is what you pictured actually happening to you right now?

Sam:
What I pictured at that time? Absolutely not. I came to a realization at work, at my desk, that what I was saving, projecting out my raises and things of that nature, it wouldn’t last me that long based on the lifestyle that I envisioned living with my family in retirement. And so, I kind of had a moment of panic and I realized, “You know what? I think real estate will be a great way to supplement whatever I’m putting aside from my job or whatever it is I’m doing.” And honestly, I’m glad that I came to that realization because life is a lot more different now than it was five years ago when I came to that realization.

Ashley:
Can you expand on that a little bit more of what that realization was for you, that moment in time?

Sam:
Yeah, so I was at my desk at work, and for whatever reason I decided to go check my retirement account. And they have these calculators where you can project out, all right, if I put away, let’s say 5% and these are the raises I make over the next 30 years, how much will I have? And then, the second step was how much do you want to live off of? So, I put the number in and in less than 10 years the money would’ve been gone. So, I’m like, “You know what? I have to figure something out.” So, I started reading different things. And I’m like, “You know what? Maybe real estate is the way to go.” So, I live in LA, been here about seven years. And I tried to get pre-qualified and I spoke to a mortgage guy and he’s like, “Hey, you might be able to get a condo somewhere, but you can’t get anything right now.”
And so I’m like, “All right, I don’t make enough money. What’s the next thing?” And so, I started looking online, are there other ways people are investing in real estate? And I came across some information about people investing out of state. And I’m like, “Wait a minute. I didn’t know you could invest out of state. I thought you had to live near where your properties are.” And my point of reference was the landlord where we lived at growing up, his house was right next to the building that we lived in, so I figured that’s just what it was. And so I spent about 12 months just learning everything I possibly could. BiggerPockets was very integral in that. Just learning everything I could about investing out of state. And 12 months later, I purchased my first out-of-state property. So, that moment of panic turned into research, and then that research turned into my first out-of-state property 12 months later.

Ashley:
I have to say, what a great moment of panic to create that realization. 12 months down the road, you have your first property.

Tony:
Yeah, I think a lot of new investors, they get stuck in that analysis paralysis, where they never really get to a point where they do pull the trigger. And 12 months turns to 18 months, turns to 24 months, turns to 36 months, turns to decades. So, Sam, this is a question that I always like to ask people because I think it’s super insightful for the listeners, but you have this realization sitting at your desk, realizing the money’s only going to last you a decade. You go on this journey of self-education. At what point did you realize that you were ready to actually take action? Do you remember that moment where it was like, “Okay, this is the moment where I’m actually going to submit that first offer,” or, “This is the moment where I’m signing that first purchase agreement”? How did you know that you were ready to move forward?

Sam:
Love that question. So, the first thing I did when I realized, “All right, I’m going to invest out of state,” the first thing I did was I put my student loans into forbearance, and I was paying hundreds of dollars. So, that helped me save about 6K. And so fast-forward, I’m researching, I’m trying to find markets, and I got introduced to some folks in Dayton, Ohio. And so, I went out for a visit, looked at the market, did market research, they sent me some reports. And I’m like, “All right, I need to speed up this timeline.” So, I get the bright idea to call my retirement plan. I’m like, “Hey, how can I get access to some of this money?” They’re like, “Well, you have a couple options. You can withdraw however much and pay the big tax penalty, or you can borrow up to 50% of the balance.”
And I’m like, “Wait a minute. If I combine what I’ve been saving from not paying student loans, plus what I can borrow from my retirement plan, I’ll have enough for a down payment and I can get into this Dayton market much quicker.” And so, I did that the same summer that I went on that visit because I’m like, “I got to get into the game.” And so, once I had the money, I knew I was ready. And then a couple of months later, a property came on the market that fit my criteria and I just went for it. So, I think, for me, once I had the money, I’m like, “All right, I need to make this thing happen.” But all the while, I was preparing and then that moment came during the summer where I’m like, “Okay, I can add to what I’ve been saving already. Let’s do it.”

Ashley:
Sam, when you decided on this during your analysis, why did you pick Dayton, Ohio?

Sam:
Yeah, so it’s funny. So, I had a Google Doc with just a bunch of markets, most of them in the Midwest or some parts of the South. And I was listening to a podcast and they were like, “If you want to buy turnkey properties, reach out to us. We can introduce you to some folks.” I’m like, “Okay, let me just do this.” So, they introduced me via email to folks from Memphis and then from Dayton, Ohio. The only reference point I had of Dayton, Ohio was sometimes the NCAA tournament basketball was played there, but I didn’t know anything about the city. I didn’t know anyone there. And so, the folks from Memphis didn’t reply, the folks from Dayton did. They sent me information on the market, so just about infrastructure improvements, how much they’re investing in downtown, the percentage of renters, which was 60% renters, 40% owners at the time.
And I took that information, I did my own research just on the market and things that they’re doing to improve the city. And I also noticed that it was situated geographically in a very interesting place. So, Dayton is in between Columbus and Cincinnati. So, Columbus to I think the north and then Cincinnati to the south. And so for me, I’m like, “You know what? There’s enough information here where I think this could be a good splash. Plus it’s not popular.”
When I was on the BiggerPockets forums, there weren’t that many people talking about Dayton, even though a lot of my research was confirming that this is a good market to invest in. And so, once I went out there to visit, I got to see some properties, got to see the city and see all the things I was reading about. I’m like, “You know what? I think this is a good opportunity to make a splash.” I didn’t want to overthink it too much. I’m like, “You know what? I have the connections here. Let’s just make it happen here.” So, those are some of the reasons that I chose Dayton, and it’s paid off very well. It’s a great market and I definitely intend to invest there more.

Ashley:
What a great resource of information of getting the market data presented to you from the turnkey company that has saved you so much analysis right there. And then, you’re just going and verifying the data instead of starting from scratch. So, I think that’s a super useful tool is to someone, especially if you’re using turnkey, is to ask them for the market instead of saying, “Okay, I’m going to analyze these five markets. Do my deep dive. Okay, I’ve picked this one. Now, I’m going to go to the turnkey company and talk to them about the actual property itself. I already know I want that property.” You did an amazing thing and you went and wanted market data from a couple of them, and one got back to you and the data was great, but what a great resource and very efficient.

Tony:
Sam, actually, if you don’t mind, can you define what a turnkey provider is? What does that even mean, turnkey?

Sam:
Yeah. So, a turnkey provider, pretty much the easiest way to explain is that they flip properties to investors. So, pretty much they will buy a property under market value, they’ll put work into it and they’ll sell it to an investor who’s looking for a property that pretty much needs no work. It might need a little bit, and you can ask them to do things that come in the inspection. And they usually come with property management included as well. And so, for my first deal, I’m like, “You know what? Obviously, the downside is that you pay at the market pretty much. However,” I’m like, “this will get me into the game. This will help me to build up my confidence. And then, perhaps on my next deal I can take on a little more work and things of that nature.”
So, for me, it was a good way to get into the game. I, by nature, am very risk averse, which is funny because I’m investing from thousands of miles away. But I’m like, “I need to get into the game. This seems like a relatively safe way to get into the game, just start making some money, build my confidence up, and then I’ll go from there.” So, I’m glad I went that route. I did learn thereafter that I could find turnkey properties on the MLS. But based on what I knew at that time, it made sense. And if I didn’t do that, we probably wouldn’t be sitting here today.

Tony:
Sam, let me ask a follow-up question. First, I appreciate you breaking down the pros and cons of the turnkey approach, because for some people that maybe don’t have the time, desire, or ability to find distressed assets, rehab them, get them placed with a tenant and do all that work, turnkeys do solve a need for a lot of those people. And I’ve met some investors who all they do is turnkey. They’ve got very busy day jobs, they got maybe a high salary, they’ve got a big shovel to dig with in terms of the income they have coming in. So, for them, it’s easy to take that money, dump it into a turnkey property, not have to think about it. But I would love just to get the 30,000 foot view. Like say that Tony and Ashley wanted to invest with the same company or a similar turnkey provider. What’s the step-by-step process? Do I just subscribe to an email list? Is there a Facebook group where they’re posting all their stuff? What does this look like to buy from a turnkey provider?

Sam:
Yeah, so typically, what’ll happen is you’ll reach out to them, share that you’re interested, and they’ll get you on an email list of different properties. They’ll do some back-of-the-envelope math for the cashflow and things of that nature. So, they will get you on an email list. A lot of times they give you the option of coming out and seeing properties in various stages of rehab, which is what I did. So, I got to see some stuff that was fully gutted and some stuff that was halfway done, some stuff that was done, just to get a good sense of their work. And typically, let’s say you find a property that you’re interested in, the price is the price.
So, one of the cons is that there’s not any negotiation, like the price is the price because, of course, they have to make their profit. However, you can get your inspection and have them fix things that need to be fixed. But typically, that’ll be it. And if you decide to go with their property management, what I did was I went with their property management because I wouldn’t have to pay a lease up fee. And for those who don’t know what that is, pretty much a percentage of the first month’s rent is what you typically would pay to a property management company or to a leasing agent.
So, I’m like, “You know what? Let me do that with them. I’ll try it and if they’re not that great, I’ll get rid of them,” which I eventually did, but at the time it made sense. So, that’s typically how the process will work. And then, they’ll just hand you over to their property management and you’ll get the statements of monthly, and they’ll place tenants and things of that nature. When I purchased mine, there was a tenant there in less than a month, so I think it closed on the 15th and a tenant moved in within two weeks. So, they did the tenant placement and things of that nature as well. That tenant was great. She stayed maybe a year or two years, maybe about two years. But that’s typically how it works, high level.

Tony:
Just a quick timeline perspective, from the moment that you said, “Hey, I’m interested,” until you actually closed on that property and owned it, what was the timeframe there?

Sam:
About 30 days. So, it was quick. It was quick. So, I did buy the property-

Tony:
30 days? Holy crap.

Sam:
Yeah, it was super quick. So, I had the financing, the lender I was going to go with and everything ready. The inspection took place. The repairs that I wanted them to do took place. They turned it around pretty quickly. So, we closed in about in about 30 days, which is crazy. So, I went from 30 days before not having any property, finding a property, closing, signing all the stuff. And 30 days later, I was a landlord. So, it was pretty crazy.

Ashley:
Do you think part of the reason you were able to do that so fast was because you felt more comfortable since you visited Dayton? Can you kind of give us your opinion on… First of all, what was the cost to actually go there? Did you fly there? Did you drive there? Did you have to stay overnight and going there? And was it worth it to go and actually be on the ground and visit the area and see their properties? Or do you think that you could have done just as great of a job of picking a property and having it being sight unseen?

Sam:
Love that question. So, I found a lot of value in going out there, and it’s not the easiest place to get to. I had to get a connecting flight, I think in Chicago, and then the next flight down to Dayton from LA. But for me, it was important to visit, because again, you got to think about it. I didn’t know anybody, investing long distance. I was taking a big chance. I didn’t know anybody who was doing that. And so, to me, it was great because I got to almost put my hands on it or check the city out for myself, drive around and see what’s happening around the city. And the person from the company, she drove me all around. I got to check out the city, go to different places. And to your point, as you mentioned earlier, verify a lot of my research.
So, I verified a lot of what they sent me online, but then to see it in person, for me personally, it was great. It was great. And so, I definitely think I could have done it sight unseen. I know a lot of people do. I mean, I haven’t seen the last place I purchased yet. But for me for the first time, it was super important to go out there and see it myself. And I felt good. I felt good after I went there. I’m like, “You know what? I know 100% that this is where I want to be, this is what I want to do.”

Tony:
Sam, if I can ask, you mentioned that the turnkey, even though there were some cons to it, there were some pros as well. Getting that first base hit, building your confidence to be able to do this on your own. So, let me ask, even though you didn’t necessarily find the distressed property, manage the rehab, place the tenant yourself, I’m assuming that you probably still picked up some things along the way that kind of prepared you for that next deal. What were some of those initial lessons you learned on that turnkey property that you feel kind of prepped you for the next one?

Sam:
Yes. So, I think the first thing is to have more confidence. Because I eventually visited that particular property about 14 months later. I was like, “You know what? Let me just come back. Let me see how it’s going. Let me put my eyes on the house, see what it’s like.” And the management company was really acting like I was a nuisance. I was trying to get access to the property. And eventually, my boots on the ground, who I also met on BiggerPockets, she went with me to the house and we just checked in on the tenant. Just like, “Hey, we just want to make sure everything is cool.” And I had been debating letting go of the property manager and self-managing, and that was really confirmation that I should just try it, and if it doesn’t work out, I’ll just find another management company.
So, that’s one thing I learned, just to follow my instincts because my instinct was to move on. But after that visit, I think I sent them a 30-day notice and we parted ways. So, that’s the first thing. And then, the second thing I would say I learned is that I could find turnkey properties on the MLS. So, the next deal, I’m sure we’ll get to that, I found a realtor and we went that way. So, again, I went based on what I knew at that time, and I always tell people, know enough to get to the finish line. You don’t need to know everything. Make your decisions based on what you know.
And so, if I could do it again with what I know now, and obviously hindsight is always 20/20, I would just go with the realtor and you have more negotiating power that way, and there’s just more flexibility in what you can do and pricing and things of that nature. So, I would say those. And then, the last thing I would say is that just to get started, for me it was important to start, even if I made 300 bucks a month, at least I started and I can figure out how to get better deals over time, how to improve things over time, which is what I did. So, I would say those are the things that I learned.

Tony:
Sam, you said something, “Know enough just to get to the finish line.” And I like that saying, and I might even tweak it just a little bit to say, know enough just to take your next step because I think that’s where a lot of Rookies get stuck is that they sometimes do want to see every step straight to the finish line, but you oftentimes don’t really know what you don’t know. And as long as you have the confidence to put that one foot forward, then the next foot forward, that’s how you start to make progress. And it seems, Sam, that that’s kind how you navigated this situation.

Sam:
100%. That’s exactly what I did.

Tony:
So, I want to touch a little bit because you said that you got rid of the turnkey property management, and are you still currently self-managing that property?

Sam:
Yes. Yes.

Tony:
Okay. So, let’s talk about that because you’re in California, Ohio is thousands of miles away. So, how were you remotely managing this property given that you’ve never done it before? What were the steps you had to take to kind of cheat yourself with tools, automations? Just tell us the whole experience of self-managing from multiple states away.

Sam:
Absolutely. So, the first thing I had to do was find a platform to receive the rental payments. So, how the property management works is they just send you the money via ACH, so it’s in your bank account every month. And so, I switched the tenant over to apartments.com, and sent her an email letting her know, “Hey, I’ll actually be managing the property now.” And at that point, I had put her on a six-month lease. She had asked to be on a six-month lease, and that ended early, but I’m sure we’ll get to that. And so, from the logistics standpoint, that was pretty much all I had to do, and just make sure the payments were redirected and the management company sent me her security deposit and what I had in reserve. So, from that perspective, it was pretty seamless, and it was all pretty simple until she left. So, it wasn’t that much I had to do as far as switching her over.

Ashley:
As far as the maintenance request, I’m hoping that since it was turnkey, there wasn’t a ton of maintenance. But did you have almost like a Rolodex of vendors or handyman that maybe the other turnkey providers have used, or how did you handle maintenance requests?

Sam:
I’m glad you asked. I actually did not have a Rolodex. And shortly after I took over, there was an issue with the furnace. And so, I get a text or an email on Sunday night saying, “Hey…” And this is the winter, the middle of the winter in the Midwest. So, she’s like, “Hey, the heat is out and I’m just freaking out.” I’m like, “Oh, my gosh.” So, I start googling just like, “Who can fix a heater?” And I just start calling around, calling around. I finally found somebody to go out to the property on that night and figure the situation out. As a matter of fact, I think they had to come in the morning, so she didn’t have heat that night, but they came the next morning and fixed everything. And so, I did not have a Rolodex of anything at that time. I was really starting from zero. But thankfully, that was the only incident that took place while that particular tenant was there, and she probably stayed another five months after that.

Tony:
Ash, I want to get your insights on this piece too, because when you manage your properties yourself, at least when you first start, you oftentimes don’t have a Rolodex of HVAC, of plumbers, of electricians, of general handyman to do all these things. And you do have to scramble like you did, Sam, like, “Let me just open up Yelp and find as many as I can and see who works.” And that’s been our process too. We self-manage all of our short-term rentals. And I remember the first time we had a big maintenance issue in Joshua Tree that our handyman couldn’t fix. We had to source… I think it was an HVAC issue, similarly. And we had to call a bunch of different people. And the first one that we found, they were able to get it, but we didn’t really like working with them. And then, the next time we had an HVAC issue, we found someone else.
But as these issues kind of continue to pop up in your business, you do start to build your own Rolodex. And now, we’ve got a list of all of our preferred vendors. So, now anytime something happens in our business, our VAs have a list of just who to call, who to text, who to email, et cetera. So, it does kind of build over time. But Ash, I guess I’m just curious for you on the property management side, was it similar for you as you kind of build things out or how did you manage the whole vendor piece?

Ashley:
Even today there’s different towns where a contractor will say like, “Oh, I don’t go that far,” or something like that. And then, you do have to find somebody else to fill that special skillset. Right now, my biggest tool is referrals from other investors or even just other contractors, just anybody that would use a maintenance person. My mom is actually great on Facebook. She’s in all the neighborhood Facebook groups and she’ll just send me a screenshot and be like, “Oh, this person recommended this person in this town to build their deck,” or whatever it may be. But we have the same thing. We use monday.com, and we keep just a list of people.
Anytime that my one business partner, Daryl, he sees a truck, a van, anybody driving or we’ll go and get coffee and they have the big tack board with business cards, he will take pictures of that and then he will put it into our list of different vendors. A lot of these we’ve never even used, but we have them there in case we need to. And yes, it is cold calling them. Those types of people we don’t have any referral for, but at least sometimes it gives us a starting point as to who to contact. But I think another great way, if you don’t know anybody that’s investing is going into the BiggerPockets forums, going on to the neighborhood Facebook groups and ask in there, “I’m looking for a plumber in the area. Does anyone have a recommendation?” And you will get a ton of people just listing, listing, listing. One thing I would watch for is make sure it’s not only the wife of the plumber that’s making the recommendation, that it’s actually somebody that used their services.

Tony:
Yeah. Well, I guess let’s lead into this next piece because you hinted at it a little bit, Sam, but I’m curious, what was really the journey of that tenant turnover? So, after that first tenant leaves, what does that look like? What do you do next?

Sam:
To be honest, that was the toughest experience that I’ve had, and I’ll explain why. So, pretty much what happened was the tenant ran into some financial issues and she asked if she could end her lease early. And I’m like, “You know what? Cool, she’s paid on time, fine. Just make sure the place is clean.” And I didn’t charge her a fee or anything. 30 days later she left. And so my boots on the ground, who I mentioned before, her name is Courtney, shout out to Courtney. I met her on BiggerPockets and she’s like my aunt in the Midwest, she’s great. And so, she did the checkout process with the tenant, just made sure the place was in good condition, got the keys and everything. And she said, “Sam, there is a smell here. It smells like the dogs have been doing their business inside.”
And at the time, there was carpet. And in the lease, the tenant was supposed to shampoo and wash the carpet, which they did, but there was a stench. And so, I was talking to an investor friend of mine, he’s like, “The first thing you want to do, rip that carpet up, get some vinyl plank flooring.” I’m like, “Okay, fine.” And of course, I had to paint the place. And I found somebody on Facebook inside of one of the Dayton investor groups who is a handy woman, she sent me some pictures of her work. She says she can paint. I’m like, “Cool, you can paint.” And so, the first mistake I made was, like I said, I have boots on the ground. She’s an investor there. She’s awesome. I didn’t leverage her enough.
So, the handy woman, she was sending me pictures of different rooms painted and things of that nature. And at the very end when she said the job was complete, I had the boots on the ground go there and she’s like, “Hey, Sam. She missed this wall. She missed this room.” And what I should have done is had her going throughout the week. She could simply have gone on her way back from work to verify all the information that was being shared with me. And the next thing was the flooring. So, I had to rip the carpet up. And I was talking to her, she’s like, “Oh, I could do this too.” And I’m like, “All right, cool. Let’s do it.” So, we had an agreement on what I would pay her. I bought the materials, I paid her for the labor once the job was done. That took forever because I was not utilizing my boots on the ground. And it seems so obvious, but for whatever reason, I just wasn’t doing it.
I don’t know if it was pride, or maybe being too timid, or whatever the case is. And eventually, she got that done and a couple other things, but the process took over a month. And quite honestly, it should have just taken a few weeks. And so, that period of time while there was a vacancy was very difficult and stressful because I wasn’t managing the person doing the work properly and wasn’t using my resources I had to get the job done quicker. So, eventually, we got it done and rent in the area went up like 50%, so that was great. But I fumbled big time just with how I managed that particular contractor.

Ashley:
Did you say the rent went up by 50%?

Sam:
Yes. If I calculated correctly. Let’s test my theory. So, the previous tenant was paying $900 plus $50 pet rent. And the next family that moved in, they were paying $1,395, including pet rent, $1,445. So, they’re paying $1,445. I think that’s 50%. You can check me on that.

Ashley:
Yeah, it’s close enough for me. Yeah, that’s quite a big… That’s awesome. Yeah.

Sam:
Yeah. So, that was crazy. So, that was the light at the end of the tunnel.

Ashley:
Right.

Tony:
It’s actually 52% just to be exact. So, you can [inaudible 00:31:23].

Ashley:
Of course Tony had to do the math. And Tony is so smart, he did that in his head just so you know.

Tony:
Yeah, all in my head.

Sam:
You got a genius on our hands.

Ashley:
I know. So, let’s talk about that portion of it, as to changing that rent. Now, did you go in and did you list the apartment for this after pulling comparables in the area, what other things were listing for? Did you rely on your boots on the ground? What was that process of deciding what to list the unit for?

Sam:
You know what’s funny? I had listed it before everything was complete for like $1,200, and then I took it down after a week. And I’m like, “You know what? Let me actually make sure this person finishes everything and everything is good to go. It’s cleaned out and everything.” And I looked on the market. So, what I typically do is either look on Zillow or Redfin, look at homes for rent in the zip code that are three bed, one and a half or two bath. And then, I also go to Rentometer to verify everything. I saw a property, similar square footage, in the area that was like $1,395. I’m like, “Wait a minute, this has to be a joke.” And so, I looked and I’m like, “No, this is actually a real listing.” So, I’m like, “You know what? Let me try and see what I can get at this price.”
And so, I put the price up at $1,395. And the way that I learned to do it… I used to do just individual appointments, which is a huge waste of time. So, what I do now, and what I eventually did was just open houses. “This is the day. This is the time. Come see the property.” That’s it. And so, I’m like, “You know what? Let me see if I can get this much rent.” And so, it was up on the market for maybe three or four weeks and I found the right people, after almost being scammed, and they were down to pay it. And so, I just tested the theory and that’s typically what I do.
I try to go a little bit higher and see what type of results I get. And if I don’t get a lot of traction, I drop the rent a little bit and just see what the inquiries look like. But yeah, I just put it up there and I’m like, “Let’s test it for a few weeks and see if people will bite.” And so, I’ve had the same family in there since 2021, and I’m actually sending them a new lease this year. They’re going to stay there. And they’ve been great tenants.

Ashley:
Sam, you can’t use the word scam and not educate us on how we can not get scammed learning from you.

Sam:
Yeah, I’m happy to share. So, I use apartments.com for the management and also to receive applications. So, whether the leads come from Facebook, which is where most of them come from, they are directed to apartments.com to submit their application. And so, there was this one particular applicant, and I’m looking through the documentation and the IDs and the W2 or W9s, they’re not matching. The names are all different, but they’re all claiming to be one person. And so, I kind of followed up on it, and it was just like a weird vibe. I was trying to verify it and the person was kind of pestering me like, “Hey, I really want to rent this place,” and this, that, and the third. But I’m like, “The information is not matching.” There was a split second there where I almost kind of took the next step. I’m like, “Wait a minute, something’s not right. You know what? No, I can’t move forward with these folks.”
And it’s important to, especially if you’re doing your own tenant placement, just to verify all the information. Even if you got to Google and look online. I go through everything with a fine-tooth comb just to make sure everything I’m looking at is correct. And so, basically the person tried to… I don’t know if they were putting up family members’ information or whatever the case is, but the documentation was not lining up and they were really persistent with me about their desire to rent the property, which was another red flag. So, I’m glad that at that decision point, I’m glad I decided to go in a different direction. But yeah, I mean some people will just try to do that.

Ashley:
Tony, I think we need to do an episode, maybe a Rookie Reply on tenant red flags instead of dating red flags-

Tony:
Or just tenent screening in general, right?

Ashley:
… go through tenant applicant red flags. Yeah. So, Sam, I think maybe this was probably the same in your situation, but a lot of times it’s better to have a longer vacancy than to rush and take a tenant just to fill the unit. So, anyone who’s going through that process right now, really think about that. And it’s better to wait for the right tenant than just to get somebody in there, where you do have that back of mind like, “Oh, I’m kind of taking a risk here. They really don’t meet what I want, but I want to get somebody in there.” And it’s not always the case. It’s not always somebody awful.
I rented in a unit once to somebody who I was iffy about. They just barely met the screening criteria. And they lived there for two years. And when they moved out, the woman cried to me and said, “Thank you so much for taking a chance on us. We just bought our own house for the first time ever,” it was her and her two kids, “and we’re moving there.” So, that’s not always the case, but I think it would be good if we did an episode on red flags. Because there’s a lot of times I’ve looked back and been like, “Man, those red flags were there, but I didn’t see it.”

Tony:
And honestly, the message, Ashley, of patience, I think translates to a lot of different parts of being a real estate investor. Sometimes we get so focused on the money right now that we start to maybe make poor choices. Like I rushed and hired a contractor because my usual guy was like, “Hey, Tony, I can start it in four weeks.” And I was like, “I need someone to start today.” And I ended up having to pay two contractors because the first guy didn’t finish the job the right way. So, there’s a lot of instances. People who maybe pulled the trigger too soon on a deal because like, “Hey, I want a deal today.” Not realizing that a better deal might be right around the corner. So, I think that idea of just patience as a real estate investor is probably something we don’t talk about enough.
But with that, Sam, I want to transition to deal number two, because we got through some of the trials and triumphs of your first deal. But how did that first deal then prepare you for the second deal, and what did that one kind of look like?

Sam:
Yeah, absolutely. So, I actually took a couple of years and sat out, just sat on the sidelines. And in the fall of 2022, my wife was like, “Hey, when are you going to get more properties?” I’m like, “Oh, all right. Well, I guess I should.” And at the time, of course, interest rates were going up. And I consider myself kind of a contrarian thinker, so I’m sure you guys know, people are on the sidelines right now. So, for me, I’m like, “This is the best time to get in. If I can find a deal that will pencil and cashflow regardless of the interest rate, we should buy something.” And so, I started my search. In September 2022, I found an investor-friendly realtor inside of a Facebook group, and I just started looking at deals.

Tony:
Is that also in Dayton, Sam?

Sam:
Also in Dayton. Yep, also in Dayton. And so, I was looking for about six months. I was under contract twice, backed out of those deals, and I finally closed on that next property in February of 2023. But yeah, I bought that next property and the interest rate is about 7% almost, but the cashflow is great. I think it rents for $1,370, the mortgage is $690, so the spread is pretty solid on it. And again, I decided to get in because everybody was going the other direction. So, for me, it’s perhaps less competition and perhaps sellers will be willing to do more and negotiate more. And so, it was a great opportunity and got that rented a couple months after. Had to do a little bit of work on it. But yeah, it is going well. It’s going well so far. And happy to dive a bit deeper into any part of the deal too.

Tony:
Yeah, first I’ll say 7% today, honestly, isn’t all that bad. I mean, I’ve got a short-term rental we just refinanced at like 8.7%, which pains me to say. So, I’d be happy to get 7. But just really quickly, you mentioned that you pulled out of two deals before you closed on this one. Can you just run down, what were the things you saw during that due diligence, or both of those due diligence periods, that made you want to pull out?

Sam:
Absolutely. Absolutely. So, it’s funny, the two deals that didn’t work out actually inspired me to create a pretty expansive walkthrough checklist for things that I missed while walking through my realtor. I usually get on FaceTime and I don’t care if it takes an hour. I have her go through every single thing on the list. But the reason I backed out of those properties is because structural issues, they both had structural issues. So, as my inspector… And I’ve worked with the same inspector since 2019. He’s actually helped me avoid multiple bad properties. And I was actually referred to him through BiggerPockets forum. But he called me on one of them. He’s like, “Hey, Sam, I’ll stop the inspection right now. Just pay me for my time. Do not buy this house.” He’s like, “As I’m going up the stairs, it’s leaning. There’s all type of structural issues in this property. This is not safe for somebody to live in.” And so, that was one of the properties. The other property-

Tony:
Wait, I just want to clarify. You said that the inspector called you and said that?

Sam:
Yeah, he called me. He said, “Hey, Sam, I’m going through this.” He’s like, “Just pay me for my time. I do not recommend buying this house because the structural issues in here are ridiculous.”

Tony:
I’ve never had that happen. Ashley, have you ever had an inspector call you and say, “Don’t buy this”?

Ashley:
No, they usually don’t give their opinion or they tread around it.

Tony:
Yeah, it must’ve been bad for an inspector to say, “Don’t buy this.” That’s crazy.

Sam:
Yeah, I mean, I respect him because of that. Because I mean, hey, if he did the whole inspection, he gets all his money, but I think I paid him a couple hundred bucks. I don’t even think I paid him 50% of what the full cost would’ve been. But he’s like, “Hey, Sam, I know you’re out of state. I don’t want you to get taken advantage of. This is not a good deal.” And on the other property that we backed out of, it also had structural issues, and the inspector recommended that they have a structural engineer go out and verify the findings, what he found. And so, they had someone do that. And I sent the inspector their assessment, and the structural engineer was pretty much like, “It’s fine.”
And I called the inspector, I shared it with him. He was pissed. He’s like, “I can’t understand how somebody who’s licensed could make such an assessment because of X, Y, and Z. It’s very clear that this is a structurally-compromised home.” And he just felt like they were trying to just pass off the problem to somebody else. And so, I ended up backing out of that particular deal too. I mean, there were other things, but the main thing was the structural issues. And I’m like, “I’m not going to buy a property where I have to do all these things because of the structure and something that probably will end up being a money pit.” And in fact, on one of the deals, the seller discounted it by like 20, 25,000 after the inspection, which told me pretty much everything I needed to know. They’re willing to cut the price to pass on such a big problem to somebody else. And so, those two deals didn’t work out, but it led me to the final one, which did work out, thankfully.

Ashley:
And Sam, to clarify, this was an inspection from a third-party service that you hired to do this during your due diligence period. This wasn’t part of your bank financing or funding that they required you to do an inspection at all?

Sam:
Good question. Yeah. So, this was an independent third party, so I’ve used the same guy for four years, but on one of the properties… I’m glad you mentioned the bank financing. The bank let me know like, “Hey, we’re not going to finance this property with this structural issue.” And so, that’s what helped me get out of at least one of those deals, if not both. Just saying, “Hey, the bank is not going to finance this. I’m not moving forward unless you guys fix it,” and they didn’t want to fix it.

Ashley:
Let’s walk through that real quick. So, you must have notified the bank that there was the structural issue because or else they wouldn’t have known anything about your third-party independent inspection, correct?

Sam:
Exactly. Exactly. And I also was trying to find ways to get out.

Ashley:
Yeah, that’s a great strategy. Because in your contract, you must have had a contingency saying that if you did not get bank financing, that you could walk out of the deal.

Sam:
Exactly.

Ashley:
Yeah. And that’s why it’s so great to have these protections in place, and also finding ways to kind of get those protections to work for you. But yeah, that was a great strategy.

Tony:
Can we just expand on that really quick, the contingency piece? And for folks that maybe aren’t super familiar with that. So, when you sign a purchase agreement for real estate, typically there are multiple contingencies found inside of that purchase agreement. It’s going to vary from transaction to transaction. But some of the basic ones that you’ll find are, there’s typically a due diligence period and where you, as the buyer, have your opportunity to do your inspections, to walk the property, to gather additional information that you couldn’t before you submitted your offer. And if you find something that you feel is important, you can then either renegotiate with the seller or you have the ability to walk away if you guys can’t come to an agreement.
So, that’s a big one that folks use. You have your appraisal contingency. So, if the property doesn’t appraise for what you have to under contract for, again, you can try and renegotiate. And if you guys can come to an agreement, then there’s an opportunity to step away as well. Then, you have your financing contingency as well where you can say, “Hey, if I can’t get a bank to give me money to buy this thing, then I have the option to walk away.” Which is why the, quote, unquote, cash buyers oftentimes are able to submit lower offers because there’s more certainty with a deal that’s cash, because it doesn’t have the appraisal contingency or the financing contingency that some of these debt-based offers do. So, I just wanted to clarify that because we were throwing around the word contingency, but just to break it down for folks.

Ashley:
Tony, I just made a note to make that an Instagram Reel. I’ll make sure to tag you because that was [inaudible 00:45:25]. I was like, “That’d be a great Instagram Reel idea.”

Tony:
We get at least one of those per episode.

Ashley:
Yeah. Well, Sam, I’m going to take us to our Rookie request line. And anyone can submit a question to us at biggerpockets.com/reply. And you can enter your question or you can send a DM to Tony or I, or leave it in the Real Estate Rookie Facebook group. So, today’s question is from Molly Alred. “This is a question for out-of-state investors. What tools or methods did you use to determine where to invest? We live in a ridiculously expensive area and would like to invest out of state, in an area without such a high barrier of entry. My husband and I are both from Michigan, but I don’t want to necessarily limit my search only to Michigan. We live in Colorado and are currently house hacking our primary residence.” Well, that’s exciting. Congratulations on the house hack. So, Sam, what would be your advice, or what are some of the tools or methods that you have used to determine where to invest out of state?

Sam:
Absolutely. So, the first thing is narrow down your region. So, I would say look in the Midwest and look in the South just to get started. And the next thing you want to do is what are the major cities? So if you’re looking at Michigan or Ohio, what are the major cities? And then, what are also the cities that are in between? So, what’s outside of Columbus? What’s outside of Cincinnati? Because you may not necessarily be able to afford inside the main city, but a lot of times they’re like, I don’t know if you call them maybe tertiary markets or secondary markets within a particular region, that can give you some more options. So, the third thing you want to do is when you find a couple cities you’re interested in or cities outside of the major cities you’re interested in, what is happening in that market? Is the city investing in itself? Are there employers coming there? Are they improving the infrastructure? Are they putting things in, like bike lanes? Are they putting in new parks or redoing the parks?
And any city that’s investing in itself will always have a website about it or have… They’ll always want to publicize that. So, for example, in Dayton, I think the website is downtowndayton.com or.org. They show every single thing that they’re doing, all the investments that are being made. So, that’s the next thing that you want to do. Then of course, you want to see what are the prices of the homes? If you want to buy a multi-unit or if you want to buy a single family, what are the prices of the homes? Are those within your budget? And then, what are the rents? What is the cashflow that you can get? What’s the estimated cashflow that you can get based on the type of property you want to buy? And so, once you have that information, and if it looks good enough to you, then you want to build your team. You want to get an agent, or a wholesaler, or go direct to seller yourself, and then go from there. But as far as finding the city, those are the four or five things I would say that’ll help you get a good start.

Ashley:
I just Googled it and it is downtowndayton.org too. But yeah, just at a quick glance there’s, “Here’s a blueprint of what we’re doing to our city,” and things like that. Yeah.

Tony:
Sam, what a great breakdown of how to choose a city to invest in. I think just one thing I’d add to that is that typically when people invest in real estate, they’re balancing three different motivations. You have cashflow, you have tax benefits, and you have appreciation. And people will rank those three motivations differently depending on your unique situation. If your big focus is cashflow, then yeah, maybe going to the Midwest is a good play for you. If you want appreciation and tax benefit, then maybe some of the more expensive markets make more sense for you. So, I think before you can even try and whittle down of the 19,000 cities in the United States, which one is the right choice for me? It’s really getting clarity on what are my motivations, what are my goals as a real estate investor? And then, from there, you can start to make some more informed decisions.
And I love listening to people that are smarter than me when it comes to data and economics. And like Dave Meyer, he runs the On The Market podcast, employee of BiggerPockets, wrote the book Real Estate by the Numbers, incredibly smart guy. And there’s tons of blog posts that he’s written on the BiggerPockets blog about different markets that investors should be looking into. He’s done YouTube videos about markets. There’s a lot of content out there about where should you look, that people who are smart, Dave Meyer, have already looked into you to give you a leg up. So, loved your answer, Sam, just wanted to add that for folks as well.

Sam:
Love that.

Tony:
All right. Well, let’s finish things off here with our Rookie Exam, Sam. So, you’ve killed this interview so far, but I’m sure you’ll crash it with the exam well. So, these are the three most important questions you’ll ever be asked in your life. So, Sam, are you ready for the Rookie Exam?

Sam:
I was born ready. Let’s do it.

Tony:
There you go. All right, man. Number one, what’s one actionable thing Rookies should do after listening to your episode?

Sam:
So, if you want to invest out of state, start looking for a market. Tony and I gave a couple tips. Start looking for a market as soon as you finish this episode.

Ashley:
I think that is a great piece of advice. And Sam gave you guys every possible way to actually take action on doing that. Okay. Next, what is one tool, software, app, or system in your business that you use?

Sam:
Apartments.com. It’s free. It’s pretty simple to use. Tenants pay their rent that way, and there’s no checks or anything like that, and it’s pretty seamless. So, that’s one tool that I use that I really like.

Tony:
Gotcha. And then, last question for you, Sam, where do you plan on being in five years?

Sam:
That’s a great question. So, in five years, I definitely want to have picked up a couple more properties. I love real estate. It’s a wonderful thing. And I also realized that I don’t necessarily want 20, 30 doors. I want the fewest number of doors with the highest amount of cashflow, so that’s my goal. And so hopefully, in five years I’m closer and have a handful more properties in my portfolio.

Ashley:
So, Sam, what are you most excited for in retirement? Now, that you have your blueprint to achieve it, because we started the episode out with what you thought retirement was going to be for you, and now that that’s changed and you’re kind of on a different path, what are you excited about most?

Sam:
Yeah, I’m excited to just relax and hang out with my family. Hopefully, my wife and I have some children, and maybe even some grandchildren by then. But I would say I want to use real estate to buy time. I think that’s the most important thing. That’s the most important thing we have. You can’t make more time. So, hopefully, my wife and I can retire earlier through real estate and other ventures. And I’m just looking forward to just enjoying life, doing what we want to do, traveling where we want to travel and living where we want to live. And I think it’s possible through real estate, especially if you look further down the line. I mean, rent’s only going to go up. We’ll pay down debt even more. So, that’s what I’m looking forward to.

Tony:
Awesome, Sam. Well, hey brother, we’re excited to see you go on that journey, man. And hopefully, we’ll get you back here on the Rookie Podcast When you’ve reached that retirement milestone and you can give us the update. But I want to finish things out by shouting out this week’s Rookie Rockstar. And this is actually a name you might remember from episode 297 of the Real Estate Rookie podcast, but it’s Olivia Tati. And Olivia says, “Just went live almost two weeks ago on our first out-of-state long distance real estate investment property, which we used private money to fund.” So, they had someone else fund this entire deal for them. “My best friend and I DIY renovated this property ourselves.” She said, “Two little ladies changing toilets, vanities, electrical receptacles. We had no clue what we were doing, but thankful to the BiggerPockets and Real Estate Rookie community, and the podcast for lighting this fire in us.” So, again, if you guys want to hear Olivia’s full podcast episode, head back to Rookie 297.

Ashley:
Well, Sam, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out some more information about you?

Sam:
Absolutely. It was a pleasure to be on the platform. Like I said, BiggerPockets was really integral in me getting started and building out my network, and boots on the ground and all those things. So, I just want to say thank you for the opportunity. And if anyone wants to keep up with me, you can find me on Instagram @blackrealestatedialogue. Send me a DM after you listen to this. Let me know what you think and would love to connect. And if I can answer any questions, would love to do that. And happy to come back at any point if I could be of service. So, really appreciate this opportunity, and thank you two for a great interview.

Ashley:
Thank you for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram, and we will be back on Saturday with a Rookie Reply.

Speaker 4:
(singing)

 

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Plunk, an AI-powered home analytics platform, has partnered with two real estate industry marketing companies, Union Street Media and Realforce, to scale its real-time data and analytics across multiple digital channels. 

Plunk’s platform offers real-time insights into home valuation, risk assessment, and remodeling possibilities.

The company is partnering with Union Street Media, a leader in business strategy marketing, providing integrated campaigns across web, mobile, voice, search engine optimization and social media, and Realforce (previously Adfenix), which simplifies and streamlines the technology stack for real estate marketing.

“We believe that AI-powered and real-time data and analytics will become the industry standard within the next five years,” Ted Adler, founder of Union Street Media, said. “With Plunk, we’re getting ahead of that adoption curve and delivering home valuation, remodeling analytics and market insights to our target audiences across every digital medium—right now.”

Meanwhile, Philip Hegge, U.S. director at Realforce, said that the partnership would tackle a longstanding challenge in the real estate industry: having, on the one hand, high-quality leads and, on the other hand, measurable and positive returns on investment.

“Not only does this enhance the consumer experience, but it also simultaneously delivers top-tier leads that drive business for brokerages and agents,” Hegge said.

Recently, Local Logic, a location intelligence platform that digitizes the built world, announced a partnership with Plunk to empower end-users with the technology and insights they need to accelerate and improve home purchase decisions. 

Prior to that, Plunk also introduced a new tool called Plunk Pro that aims to transform the real estate market by offering real-time insights into home valuation, risk assessment, and remodeling possibilities.



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Available inventory of homes for sale is on the rise in late September, which is very unusual for this time of year. In fact, inventory is growing faster than this time a year ago.

This is a demand-driven slowdown, because new listings supply is still running 9% to 10% fewer homes for sale each week than this time last year. We’re seeing fewer new sellers each week, but inventory is building as homebuyers wait to see if mortgage rates will come down to make purchases more affordable. 

What’s happening with inventory?

Fewer new sellers also means that inventory can’t grow too much; the real trouble develops when demand drops and supply surges. There’s no supply surge, but there is a notable demand drop. Consumers are very sensitive to changes in mortgage rates, and rates are still rising. 

We can see these slowing changes build up each week. It’s a pretty sharp change from what was a surprisingly strong first half of the year. There are now 528,000 single-family homes on the market. That’s an increase of 1.8% from last week. 

Normally by this point in September, available inventory is declining slightly each week. It’s late in the summer, so normally new listing volume drops as the last few sales of the peak summer months are concluding.

The fact that inventory grew by nearly 2% this week and last week is telling of how homebuyers are reacting to the highest mortgage rates in over two decades. 

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In this chart of each year’s inventory curves, you can see that the number of homes on the market is climbing faster now than this time last year. This year is the dark red curve, and last year the light red. Mortgage rates continue to climb, so there is no immediate relief for homebuyers on the horizon either.

At this point, it looks like we may see inventory grow to the end of October like we did last year. Look at the divergence in the curves from this year and the tan line from two years ago when we were still in the middle of the pandemic housing boom and record-low mortgage rates.

Pending-home sales continue to lag

New pending sales each week continue to run 10% to 15% below last year’s pace. If you follow the National Association of Realtors when they publish their existing-home sales report each month, you know that the latest report for August showed a sales pace of only 4 million seasonally adjusted annual home sales.

We can already see in the NAR data that there are no signs of improvement for the sales count through September and October. The home sales that are in contract now will close mostly in October. It’s not hard to imagine that next month’s seasonally adjusted home sales data from NAR will come in under 4 million. 

national data video 092523 (Page 3)

In this chart, each bar is the total number of home sales pending on any given week. The shorter the bar, the fewer sales that are in progress. The light portion of the bar is the count of new pendings each week.

There are now 344,000 single-family homes in contract to close in the next couple months. That’s 14% fewer than last year and almost 30% fewer than in September of 2021.

Home sales are limited by the decreased demand, of course, and they’re also limited by the very low supply of new listings. You can’t buy what’s not for sale.

We’ve been talking all year about the market being supply constrained. Right now, sales are limited by declining demand from still-climbing mortgage rates.

Price reductions climb again

We can see the impact of weaker demand starting to creep into the pricing indicators. In the chart below, we look at the leading indicator of this trend: price reductions. This is the percent of homes on the market that have taken a price cut from their original list price. 

national data video 092523 (Page 4)

For a while earlier this year, demand was exceeding supply in residential real estate, and you could measure that demand with the price-reductions curve improving each week. As mortgage rates lurched over 7% to their new highs, suddenly there are fewer offers.

And home-price reductions are climbing again, with 37% of the market taking a price cut. That’s more than any recent year except last year at this time. Price reductions are accelerating now, which bodes negatively for future sales prices.

A normal, balanced market will have 30% to 35% of the homes for sale that have reduced their asking price in recent months. As this dark red line approaches 40%, that’s a clear indicator that buyers are making fewer offers. Remember, the slope of this line captures how many properties are taking new price cuts each week. And this slope is increasing now.

These are transactions that will happen in the future, so it implies sales price weakness in the fourth quarter, which you’ll hear about in the headlines after the new year. But you can see it in the data now.

Median home prices show weaker year-over-year gains

national data video 092523 (Page 5)

The median sales price of single-family homes in the U.S. right now is $440,000. That’s down 1% from last week and it’s just a tiny fraction higher than this time last year.

We can see the pressure on home prices in recent weeks. Home prices step downward in September for the seasonal change every year, and you can detect strength or weakness relative to changes in other years.

What we see now is that year-over-year price gains are just barely positive. And the comparison is getting weaker, not stronger, as our current mortgage markets deteriorate. There are fewer offers, and those that do happen are doing so at slight discounts each week. 

Last year at this time, there were big price discounts being applied. So, our October comparisons may get slightly easier, but I sure haven’t seen any signals of price strength now.

Looking ahead to the end of 2023

So the question is will Q4 this year be a little better than Q4 2022? The median price of the new listings is fractionally higher than last year at $398,500. It will be fascinating to watch the light colored line here over the next couple weeks.

The new listings are where you see price weakness first. And last year, they were already headed lower.

The price of the new contracts this week came in at $370,000. These are the pending-home sales that went into contract in the last week. Prices of the homes going into contract are lower than last year by a fraction.

The next few weeks will be interesting to track this stat, too. Last year in mid-September is when mortgage rates jumped from 6% to 6.5% to 7.5%. By early October, any offers that were made for purchases came in at notably lower price points.

By September 2022, new pending-home sales prices fell by 3% per week. Will that happen again? Mortgage rates are even higher now than they were last year.

national data video 092523 (Page 6)

In this chart, you’ll notice the light-colored line started a big decline during this week in 2022. That’s when buyers reacted to newly increased mortgage rates. So, we’re watching to see where the new contracts come in over the next few weeks.

The macro trends impacting mortgage interest rates and the Fed have not given us any reprieve yet. The signals are that mortgage rates are still headed higher.

Consumer expectations for future mortgage rates have moved higher, too, so potential homebuyers are less optimistic than they were at the start of the year. And that’s what we’re seeing in the data each week now.

However, it’s important to point out that while buyer demand has backed off this fall, there is still no sign of any surge in new supply coming to the market. It can be very easy to focus on the negative momentum.

People on the fence should also know that while their competition is lessening, there’s no sign of an inventory flood. That may be an important factor in their home-buying decisions.

Mike Simonsen is president and founder of Altos Research.



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Right-to-list agreement firm MV Realty has filed for Chapter 11 bankruptcy in 33 states. The story was first reported by CBS News.

MV Realty currently faces lawsuits in multiple states for allegedly misleading consumers and homeowners. In addition, the Florida-based firm has been essentially banned from operating in 14 states through legislation.

MV Realty operated in 33 states and has more than 500 real estate agents.

The firm’s legal troubles began in late 2022 when it was sued by attorneys general in Florida, Massachusetts and Pennsylvania over its 40-year contracts.

Under MV Realty’s Homeowner Benefit Agreement, the homeowner signs over the right to list their home for the next 40 years to MV Realty in exchange for a cash payment ranging from $300 to $5,000. This means that if a homeowner decides to sell their house sometime in the next 40 years, the company is entitled to list the home for a 3% commission, which is separate from the commission earned by the buy-side agent.

If the homeowner breaks the agreement or decides to terminate it early, they must pay the firm 6% of the appraised value of the home.

Since starting the program in August 2020, MV Realty says it has enrolled more than 35,000 homeowners in 33 states and has paid homeowners nearly $40 million.

Over the past year, the American Land Title Association has worked to pass legislation at the state level to ban right-to-list agreements, such as those used by MV Realty.

“The property rights of American homebuyers must be protected,” Elizabeth Blosser, ALTA’s vice president of government affairs, said in a statement. “A home often is a consumer’s largest investment, and the best way to support the certainty of land ownership is through public policy.”

“We must ensure that there are no unreasonable restraints on a homebuyer’s future ability to sell or refinance their property due to unwarranted transactional costs.”

MV Realty did not return a request for comment.



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Just weeks after New York-based digital lender Better Home & Finance Holding went public, Better issued pink slips to employees in early September in a new round of layoffs, Insider reported.

Better laid off about a quarter of its U.S. mortgage sales and origination team, according to the news outlet, citing two former employees who were affected by the latest downsizing.

The layoff news comes on the heels of Better going public via special purpose acquisition company (SPAC) Aurora Acquisition Corp. in August.

About 75 employees are left on the mortgage origination team in the U.S. as well as some employees in India, according to Insider. 

While Better didn’t respond to HousingWire‘s inquiry about the number of affected employees, spokeswoman Jessica Schaefer told Insider the firm has more than 100 people left on the team. 

Better plans to fill some vacant positions from the layoffs.

“As a publicly listed company, we’re focused on making prudent and disciplined decisions that account for market dynamics so that we can continue to serve both customers and shareholders for the long-term,” Better’s spokesperson said in an e-mailed statement to HousingWire.

“We are hiring more seasoned professionals who can sell in this tough mortgage environment and then making them 10X more productive through our continued investment [in] technologies such as Tinman and One Day Mortgage, which have created efficiencies that streamline and automate nearly every major function of homeownership,” the spokesperson said. 

As of June, Better had 950 team members, a 91% decrease over an 18-month period from 10,400 in Q4 2021, according to its previous filing with the Securities and Exchange Commission (SEC). 

While Better was an efficient refi shop during the pandemic years when rates hit record lows, the lender and other independent mortgage banks (IMBs) were hit hard by the Federal Reserve‘s monetary policy.

The digital lender reported a net loss of $45.5 million in Q2, an improvement from a net loss of $89.9 million the previous quarter.

In Q2, Better’s origination volume was $900 million across 2,421 loans, compared to production of $800 million across 2,347 loans funded in Q1.

When Better debuted on Nasdaq in late August, the SPAC deal unlocked $565 million of fresh capital for the unprofitable company.

The digital lender has pivoted its strategy from being a one-stop-shop to becoming a “mortgage-as-a-service” company or a white-label provider of mortgage tech.

“For things like homeowner’s insurance, title insurance, and Realtors, we’ve now just become a marketplace. We match the consumer with a partner capable of delivering the best product to them. So, we ended Better Real Estate for the sake of efficiency and savings for the consumer. We partner with best-in-class agents, insurance companies and title companies,” Better CEO Vishal Garg said in an interview with HousingWire in August.

Better will invest in tech-driven products like One Day Mortgage, a program that will allow customers to apply for a mortgage, get preapproved, lock their rate and receive a mortgage commitment letter within 24 hours.

“We are committed to further developing this technology during an interest rate environment where customers need it the most,” Better’s spokesperson noted.

Better was ranked as the 59th largest lender in Q1 2023, plummeting from the 19th in 2021, according to Inside Mortgage Finance.



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If you know how to use your home equity, you can retire MUCH faster than most Americans. For the majority of homeowners, equity is just something to sit on, not something worth using. But what if you could convert your home equity into rental properties, cash flow, or even more appreciation? Where would you be in a decade if you used your equity to make even more equity in other properties? You could retire early, make more than you’ve ever imagined, and KNOW that your wealth is working FOR you.

It’s Sunday, and David remembered to turn his green light on…you know what that means. We’re back with another episode of Seeing Greene, where real estate investors, rookies, and business owners shoot some of their most pressing questions at David. In this show, a young business owner wants to know how to sell (without sounding salesy). Then David describes how to use your home equity to buy even more properties, the best way to pull “wealth” from your rentals, how to retire in ten years, and why no one talks about the “BEAF” strategy of real estate investing.

Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can hop on a live Q&A and get your question answered on the spot!

David:
This is the BiggerPockets Podcast show 822.
If you want to make sure that every property you buy will fund the next property, you have to focus on equity because equity is financial energy kept within a real estate asset and you draw that energy out and then go use it as the down payment on your next one. And this is the way you scale a portfolio.
What’s going on, everyone? It’s David Greene, your host of the biggest, the best, and the baddest real estate podcast in the entire world where we arm you with the information that you need to start building long-term wealth through real estate today. This is where you’re going to find current events, new legislation, new strategies, and what’s happening in today’s market so you can stay equipped and up to speed to crush it with the information that you need to navigate what’s, quite frankly a very tough market. But I don’t need to tell you that. You’re out there feeling it yourself.
Today’s episode is Seeing Greene. And if you haven’t seen one of these, these are shows where we take questions from you, the listener base, and I answer them directly. They can be anything from specifics to generalities. It’s really good stuff. In today’s show, we’re going to focus on strategies that work today, primarily what buying equity and forcing equity means and how you can make money in any market if you understand those two things, what to look for so that you can buy in the right area that accelerates your own wealth building. Yes, the location you choose does matter. How to make money in real estate even when cashflow is hard to come by, and advice for starting a small business and increasing sales. All that and more in today’s Seeing Greene episode. I can’t wait to get into it.
All right. Before we do, today’s quick tip is simple. When making decisions on what to spend money on in your property, there’s the goal of saving money and then there’s also the goal of increasing revenue and you want to balance the two. I tend to lean towards wanting to only replace items that will last for a very long time. I don’t like to put carpet in rentals and I don’t like to put in things that look nice but get beat up really easily. When it comes to short-term rentals, I’m willing to budge a little more if I think that guests are going to choose my rental over other ones. So when you’re making decisions on what to replace, what to upgrade or what to buy in your short-term rental, remember to think about it from the lens of how the pictures will look because that is the primary thing that most people will be looking at when they’re choosing what to book.
All right, that was today’s quick tip. Now let’s get to our first question.

Jed:
Hi David. My name is Jed Forster. I’m 19 and I live in Green Bay, Wisconsin. My question is more of a business question. I have a small gutter contracting company and I’m looking to grow and scale it. I know what’s holding me back is being inexperienced in sales, so my question is, what is some advice you have for someone looking to become a better salesman and what are some books that have helped you improve as a salesman and a real estate agent? I really appreciate all the advice and the great content that you guys put out. I’ve listened to every single BiggerPockets episode, literally every single one since Josh and Brandon’s first episode. So I really appreciate you taking my question and answering it. Thank you and have a good one.

David:
Well, Jed, first off, kudos for asking what might be my favorite question that I’ve had in quite some time on Seeing Greene. I freaking love this. I love it because you’re asking about self-improvement. I love it because you’re focused on making money the right way. You’re saying, “How can I be better at sales?” I love that you’re a small business owner and you have your own gutter cleaning company, I believe you said at 19 or 20, 21 years old. Very young. You’re doing everything that I would tell someone to do, man. So you should feel really good about yourself. Kudos for that.
And as a side note, I really think in the future on Seeing Greene and maybe in BiggerPockets in general, you’re going to be hearing more advice that’s not just about how to acquire the next property, it’s about a stronger financial position in general. You hate the job you have, you hate your commute, you hate your cubicle. There are lots of options for you other than chasing the cash flow that is very difficult to find. We here at BiggerPockets want you to have a life that you enjoy more that we can help you build, and financial freedom is a part of that. So let’s get into your killer question.
All right, how to be a better salesperson. The first thing that you have to understand is sales does not need to be convincing people to buy something that they don’t want. That is the wrong definition of sales. We all hear it. We go, “Ew, slimy salesperson.” That’s not what you sound like, Jed. It’s not what I want you to be. Sales is more, in my mind, healthy sales, the way that I teach it to my agents, is about understanding how to communicate and articulate why what you have is best for the client, which means a part of sales is listening to said client. It is not showing up and saying, “Here’s why you should buy my vacuum cleaner.” It is finding out what is their problem, determining what your solution for the problem would be, and communicating effectively why it’s in their best interest to take it.
Now, that’s not slimy. My favorite book of every book I’ve read when it comes to doing this is called Pitch Anything by Oren Klaff. It looks like this and I read this book all the time. I teach on this book all the time. I use the concepts that are in this book when I’m teaching people how to retreat, an event I’m having my own sales team. I’ve referenced it constantly. There’s lots of things in the book that will help you, but let me talk about the three main things that I think you should understand.
When a human being is receiving information, perhaps I’m saying, “I’d like to sell your house. I’m a real estate agent,” or “I’d like to buy your house. I’m an investor,” or you’re approaching a tenant that’s already in a property and you’re saying, “Hey, we’re going to have a new property manager” or for you, you’re going up to a potential new client saying, “Hey, I’d like to clean your gutters,” there are three ways that their brain is going to receive the information that you are giving them. You’d think of them like gates. And in order to get to the second and the third gate, you have to get through the gate before. And where most people mess up with communication is they don’t respect the way that other people process the information.
The first gate is what they call in the book the croc brain or crocodile brain. This is also called the amygdala by other people, but basically it’s a part of your brain that functions like a reptile. It thinks, “Everything’s going to kill me.” This is the first way that all information will come into anybody’s mind. So you hear a loud sound, everybody jumps. Ever noticed that? Everybody jumps when there’s a loud sound. Nobody jumps and thinks, “Yay! Santa Claus is coming down the chimney to bring me presence early.” We always think, “Oh God, it’s going to kill me.” Human beings are wired this way. So your first step in communication is making sure people understand, “I am not a threat. I am here to be helpful to you, not to take away from you.”
The second step of the brain that the book talks about, it’s called the mid-brain. Now, the mid-brain’s job is to take the information that’s being given whatever stimulus that is and evaluate it through a social context. What that means is it wants to look at all of the other times it’s seen something like this and say, “Well, where does this fit in?” So this comes up with door-to-door sales. You go knock it on someone’s door, somebody sees you’re there and you look like a solicitor. What do they think? “Every solicitor before that knocked on my door was trying to sell me something, therefore I don’t like this person.” So if you’re going to do door-to-door sales, you got to figure out some way to look different than the other people if you want them to even open the door at all.
Now, the last part of our mind that analyzes information is what we call the prefrontal cortex. This is the part of our brain that analyzes things logically, uses math and uses reason. This is where you can communicate to people the most effective. If you can get into the prefrontal cortex, they’ll really listen to the thing you’re saying. This is where you can make your argument, “Hey, if you don’t clean your gutters because you’re trying to save money, it can cost you more money in the future.” Or, “If you don’t hire me, you’re going to pay more money paying for somebody else.”
Now, I’ll sum it up by saying the mistake most communicators make is they start the conversation at the prefrontal cortex level. They show up and they’re trying to say, “Hey, person I’ve never met before, let me tell you why you should give me your money because if you don’t, you’re going to lose more money later.” The person doesn’t trust you. They think that you sound just like every other salesman they’ve seen. They’re not listening to a word you say because you walk around in your own prefrontal cortex because you know yourself and you know you’re safe, but that doesn’t mean that you’re in theirs.
So remember, when you’re meeting somebody, you start off with the croc brain and you show them you’re not a threat. You move into the midbrain where you have to stand out from other people and the human has to believe that they’ve seen all of their other options and you are the best. And then you move into the prefrontal cortex where you could actually give your pitch, your slide deck, your PowerPoint presentation, whatever it is that you’re using to try to close that sale.
Thank you for the question. I hope that this information helped you. Go check out Pitch Anything and then Google sales advice or YouTube sales advice and listen to everything you can get your hands on. Sales is all about psychology. If you would like to listen to the interview that Rob and I did with the author of Pitch Anything, Oren Klaff, you can check that on the BiggerPockets podcast show number 663. And keep an eye out for BiggerPockets podcast number 827 where we interview Keith Everett as he covers a few of the sales books that he used to grow his sales-based business.
Our next question comes from Tiffany in Ohio. Tiffany says, “My husband and I are using our savings to pay off my mother-in-law’s house. We will double our net worth by doing so. We want to use the equity to purchase an Airbnb in Florida. This is our first time. I’m worried about the ability to get a home equity loan on the house to purchase an investment property. I’m also looking for advice on the next steps. How should I set up my first deal to continue to finance my next? And when do the lenders start to see my W2 income is not funding my future investments, my investments are funding each other? Hope this makes sense. Thank you.”
All right, Tiffany, good question here. First off, this is pretty simple. If you want to make sure that every property you buy will fund the next property, you have to focus on equity. Now, I know this sounds different than what you’re used to hearing because typically, especially when people are new, we teach them how to analyze cashflow, but we just stop there. “Here’s a calculator. Here’s how you determine the cash on cash ROI. Go.” Right? And that works for a deal as long as it’s done well, but it doesn’t work for a portfolio. If you want to build a portfolio, you really have to be focusing on building equity because equity is financial energy kept within a real estate asset and you draw that energy out and then go use it as the down payment on your next one. And this is the way you scale a portfolio.
Now, there’s different ways that you can create equity in the properties you buy. The first is what I call buying equity. This is a framework I have about the 10 ways you make money in real estate. Buying equity just means buying the property for less than what it’s worth. Next is forcing equity, and this is the one you should really focus on. Forcing equity is all about adding value to the property. So buying a big house, an ugly house, adding square footage to it, adding bedrooms or bathrooms. Doing something to make that property worth more will give you more energy to draw out later when you want to continue to scale.
And then there’s also something I call natural equity and market appreciation equity. Natural equity is just what happens when the fed prints more money, makes real estate become worth more. And market appreciation equity is when you’re very wise and you buy in a market that grows faster than the national average. So my advice would be to take a combination of those four different approaches and apply it towards whatever you’re buying. And as long as you do that, the equity will grow. You’ll be able to buy the next house.
Now, I’ll also add a caveat. You probably heard us talk about this five, six years ago when everything was exploding in value very quickly because there was so much natural equity occurring because of the Fed approach of basically quantitative easing and economic stimulus. We’re not seeing as much of that right now. So I would not expect to have the growth happening as quickly as it happened in the past. I mean, it literally used to be you put a house in escrow and before it closes, it’s gained $20,000 in value. It was insane for a period of time there. That’s not the market we’re in now. So if you’re not buying a new property every six months or every 12 months based off equity from your previous one, that doesn’t mean you’re doing something wrong. You’re just working in a different market. So instead, I advise people to focus on forcing equity and buying equity since the natural equity is a little bit harder to come by.
Now, another part of your question here was, “When do the lenders start to see my W2 income is not funding my future investments, but my investments are funding each other?” The first part of my answer to that will be when it reflects on your tax returns. When you show income from the property that you netted cash flow, you can use that as income to help you buy future properties. Unfortunately, there’s no way to track equity on a tax return, so lenders will not even look at it. It doesn’t mean that it’s not valuable, it just means that it’s not going to show up on your tax return when it comes time to helping you get funding. So it usually is a couple years before a property is cash flowing strong enough that that will help you to buy the next one.
But something else to think about would be different loan products like the DSCR loans. This is something that my company does a lot. We find people who are buying property, we help them find properties that are going to cashflow positive. We use that positive cashflow to approve them to buy the property, and now their personal debt to income ratio isn’t slowing them down, especially during that couple year timeframe that I was telling you where your income needs to show up on your taxes. Once it is, we can switch you back to a conventional loan and you can get a slightly better interest rate that way and still have plenty of income coming in to help you get approved.
And if you were wondering what a DSCR loan is, it’s an acronym that stands for debt-service coverage ratio, which is a very fancy way of saying it’s a loan that’s based off of the income that the property makes, not the income that you make. This is the way that we have financed commercial real estate since as long as I’ve been in the game. Commercial lenders don’t really care what you as a person makes. What they care about is what the property is going to make. And there are now products that use that same analysis method with residential real estate, but it’s even better than commercial because we have 30-year fixed rate terms. Whereas with commercial loans, you’re typically going to get a three or four or a five-year period before a balloon payment is due and you have to start all the way over with a new loan at a new rate. And as you’ve seen as rates have gone up, that’s really bad news for a lot of commercial investors like apartment complex owners or triple net investors.
Hope that that helps to answer your question. Very, very happy to see that you asked it. Keep us in touch with what’s going on with you and your husband’s journey. All right, let’s take another video question.

Tyrone:
Hi David. It’s Tyrone here from Basel, Switzerland. My question is about your future strategy. You always say that the idea is you build long-term wealth via property, and my question is how do you get access to that wealth? Do you intend to sell your properties in the future? Do you tend to remortgage and pull out that wealth and live off that? Or is the idea that you pay down your mortgages enough that you can then live off the rent? So my question is, how do you actually intend to use and leverage that long-term wealth you’ve built up if maybe you intend to sell or maybe you don’t intend to sell? Thanks a lot and keep up the great work. It’s fantastic listening to. Thanks.

David:
Tyrone, what a great question. And awesome that this is coming from Switzerland. Good to see that the BiggerPockets arm has reached all the way over there. I love your question and it proves to me that you are listening to the stuff I’m saying and you’re really trying to understand the framework or the philosophy that I’m sharing with our listeners about how to look at wealth. Sometimes understanding how to look at it is more important than just having someone say, “Tell me what to do. What’s the step-by-step color by number approach?” Because that doesn’t work for everybody the same. And as market conditions change, the step-by-step approach would change too. So if you’re listening to content from a year ago, it might not even apply if you’re looking at things that way. But if you’re trying to understand the fundamentals of wealth building, well that’s timeless. That’s always going to apply.
Also, keep an eye out in October, October 17th for Pillars of Wealth: How to Make, Save, and Invest Your Money to Achieve Financial Freedom. That is a book I wrote that was the trickiest book I’ve ever had to write. Kicked my buttocks trying to get that thing done. But I did my best to really articulate analogies and visuals of how you can look at building wealth so that if numbers and words and log run-on sentences tend to confuse you, this book will really simplify what the process is like. Now your question was, once you’ve built up all of this wealth, how do you access it? What’s the plan? There’s basically two main roads that you can take and that shouldn’t be surprising because real estate tends to build wealth in two different pathways, the equity pathway and the cashflow pathway. So let’s get into that.
And this isn’t unique to real estate by the way. This is all businesses. Business have a value of what they would sell for to somebody else, which is equity. And then they have cashflow that they put off, which is obviously cashflow or net operating income. So real estate follows the same principles as other businesses. If you’re taking the cashflow method, your best option is what you said to pay them off. So this is buying them, slowly paying down the loan or putting extra money towards the loan to pay it off quicker so that when you get later into life and your income producing ability has decreased, you don’t have as much energy, you’re not interested in being super ambitious and building up a business like you once were, your priorities have shifted to family, to children, to grandchildren, to maybe giving back, and you’re not this young hungry business woman or businessman that you were at one point, that you’re still taking care of financially.
That is probably the easiest, safest, most boring pathway. It doesn’t mean it’ll be the biggest, but it’s probably the one that no one can mess up. So that is a pathway that I’d recommend for a lot of people. Just plan on that. And then if the second one I’m about to describe makes sense, well then pivot and you can look at some of those techniques or strategies. But the just buying real estate and paying it off over time is a really solid way to ensure that you do have cashflow when you retire.
The second pathway is the equity model, which I like because you can scale it faster, and that’s just because I have more control as an investor over the equity that I build in a property and in a portfolio than I do over the cashflow. I don’t control rents. Rents are going to be whatever the market determines. I don’t control when rents go up. I can’t control if they stay the same. I also can’t control what my tenants do to the house, if they decide they don’t want to pay, if they leave after being in there six months and they trashed it and I got to go put in new flooring and new carpet. I can’t control a lot of the variables that are tied with cashflow, which is why it tends to be less reliable than equity.
Now, equity is not completely reliable. There are market fluctuations where the market goes down and your equity evaporates. That can certainly happen. But in general, there’s more things that affect equity than just the market going up or down. You can buy properties below market value. You can pay attention to when the Fed is printing money and you can buy more real estate at those times. You can choose the market you invest in and determine which markets are more likely than others to go up in value. And my favorite, you can force equity by changing the structure of the home and improving its value itself. You can add extra bathrooms, extra bedrooms, extra square footage. You can add ADUs, you can refinish basements, you can refinish attics. You can build new properties on the same lot. [Inaudible 00:18:44] the lot have two different properties. There’s so many options, which gives you more of an influence in creating wealth over equity.
When you’re trying to access the equity that you’ve built or the energy that we call equity when it’s stored in real estate, because that was your question, you’ve got, basically I can think of like two or three main ways. One, you can sell it, that’s inefficient because you’re going to pay taxes on it unless you do a 1031 to defer those taxes. But then again, you’re not actually exceeding the wealth. You’ve got to reinvest it into something else. So while 1031s are great tools, they aren’t a cheat code. There’s still a price that you pay when you do a 1031 exchange and you will not get the energy out of that property.
You’ve also got a cash out refinance. Now that is probably the most efficient way because when you sell, you’re going to owe capital gains taxes, you’re going to owe closing costs, you’re going to owe realtor commissions. There’s going to be some inefficiencies as you take the energy out of the equity in the home and into your bank account.
I like this visual of I have all of this water in a bucket and I call that equity. Well, when I move the water out of my equity bucket into my savings account bucket, a lot of it’s going to spill. That’s just an inefficient way. These are closing costs. These are commissions, these are taxes. So in order to avoid that, instead of just dumping the water from one bucket into the other, which would be selling, you can do a cash-out refinance. That is putting another lien on the property, refinancing it and pulling some money out. You’re only going to spill a little bit of water when you do that because you’re going to have some closing costs that are associated with the cash-out refinance. The money you pull out is tax-free. You don’t pay any taxes on that. It will usually decrease your cashflow. So that’s a downside of if you want to take the energy out that way because you’re not actually creating wealth, you are transferring wealth. I should say you’re not creating energy, you’re transferring energy.
You’re taking energy you’ve already created within this equity bucket and you’re transferring it into your savings account, and so you’re not creating something new. So even though you’re not taxed, there’s a price to pay. It’s not a cheat code. You still got to pay a higher mortgage payment in most cases because you’ve taken out a higher mortgage balance.
Now, the third way that you can get that energy out is what we call a home equity line of credit or a HELOC. For now, these products are around. It would suck if in five years or 10 years people stopped offering these, and now you don’t even have that option. But that’s another way that you can get the energy out. However, you’re going to pay for that too. Whenever you take the energy out that way, there’s still a payment that has to be made on the energy that you took out. So as you can see, if you’re using the equity pathway, there’s going to be inefficiencies. There’s going to be closing costs, there’s going to be capital gains taxes, or there’s going to be reduced cash flow. That’s the downside. The upside would be that you could create more equity in that path and more energy therefore in general.
And on the cashflow side, the downside is it takes a long time to pay off a mortgage and you have a ton of energy that’s in that asset versus the teeny tiny bit that you get out every month in cashflow so it’s less powerful. But the upside is that it is more efficient. You’re not losing as much of that energy because it stays in the asset. Your equity stays in the home as you paid off the mortgage, you’ve actually increased that equity, but the only part you get to live on is small. So as you can see, the upside to real estate investing in general is you can create big energy. This is why we recommend people do it, and you create energy in many ways.
The downside is it’s not the same as energy that you have in your bank account. The upside is that the energy in real estate isn’t taxed as much as your W2 job, which is where most of the energy in your bank account came from. The downside is it’s not as useful when it’s in real estate. So useful way of looking at this would be to understand that there aren’t necessarily better or worse ways. There are trade-offs. And ask yourself the question, what are the trade-offs that you are most comfortable with and how do you design a life around those trade-offs so you can get the most out of the work you do building your portfolio?
By the way, my man, great question, Tyrone. Thank you so much for asking this. Thank you for being a student that’s on the pathway of trying to understand how to build wealth. And feel free in the future to submit another follow-up question, I’d love to hear from you again.
Thanks to everybody who has submitted a question so far. We’re going to get to more of these questions just like you heard in one second. But before we do, I’d like to take a minute to read comments from previous Seeing Greene shows so you can hear what other BiggerPockets listeners are saying about the show. If you’d like to leave me a comment to possibly be read on a future show or just to let us know what you think about this show, please do go to YouTube and leave a comment. Let me know what you think, what you liked, what was funny, what you wanted to see more of, whatever’s on your mind.
All right, here is a listener comment from episode 798 where Rob and I interviewed Alex and Leila Hormozi from BrandonSmith6663. “Love this episode. Each jump at business is really hard. Even if you’re a handyman and you hire another handyman and turn it into a handyman company, it is difficult. I love this insight.”
Such a good point. BrandonSmith6663, if you’re listening to this, this please go to biggerpockets.com/scale and buy my book that I wrote to teach realtors, but really it works for any business person, how to take a job and turn it into a business where you’re hiring other people because like you said, it is very difficult, but it is also very rewarding and is a much better life once you get it right.
All right, here’s a review from another Sunday episode number 810 that we did with Tom Brady’s performance coach Greg Harden. Bishop51807 says, “I rarely leave a comment on this channel, but this has got to be one of the best episodes since I subscribed.”
Well, awesome, Bishop, thank you for that. What nice comments that you guys left me here. Again, if you would like to leave a comment, head over to BiggerPockets’ YouTube channel. Listen to the show there, log in and leave us a comment. We appreciate the feedback and mostly we appreciate the work that all of you are putting in to pursue your goals and your financial freedom. If you would like to leave me a comment to read on a future show, head over to the BiggerPockets’ YouTube channel and leave a comment on today’s show.
All right, let’s get back into it. Here is another video question. This one comes from Cole Peterba.

Cole:
Hey David, this is Cole from Shanghai, China. Well I’m from mid-Florida, but I’ve lived in Shanghai for about 10 years even through COVID and all of that jazz. We’re selling one of our houses here. We own three properties here. I’m under contract for one place in the States, a multifamily unit in Ohio. Our house here that we’re selling is worth about $350,000. That’s what we should net from it. It’s fully paid off. We’re going to take all that to the states, dump it all in real estate. Let’s say we have a 10-year plan of retiring. How can we leverage $350,000 cash in whatever real estate markets we need to in the states and what would be our game plan to make that play out so that we can retire in 10 years? Thanks for taking my question.

David:
Thank you, Cole. All right, first step is I recommend you read Chad Carson’s book, the Small and Mighty Investor. He’s got some strategies in that book that help detail if you’re not trying to be a super-duper deca millionaire, but you do want to have enough money coming in from real estate to fund your life so you can retire, check out that strategy. It’s going to be basically two pieces because the name of the game is how you build up cashflow. That’s what you’re looking to do.
My advice would be, step one, you build as much equity as you can because in the future you’re going to convert that equity into cashflow. How do you build equity? You buy real estate in markets that are going to be appreciating. You don’t focus on cashflow right now as much as you focus on where you’re going to see the most growth. You pay the lowest price possible for the house. You buy in the best areas and you add value to every single thing you buy. Remember, not only do property values appreciate, but rents tend to appreciate when you buy in the right area.
What’s the right area look like? Pretty simple. You want to find something with constricted supply so you have less competition where wage growth is going up, so jobs that pay more are moving into that area and that population increases are going up as well. What you’re trying to do is own properties in areas where there are less other properties to rent and the people that are renting from you are wealthy themselves and they can afford to pay higher rents and you’re trying to time this so that 10 years from now you maximize the rents. Now, where people make this mistake is they go buy a bunch of cheap property where rents don’t go up because the cashflow looks better right off the bat in year one. Then they find that 10 years later their rents have risen by $11 a unit and they’re in roughly the same position they were in when they bought them and they can’t retire.
So remember the tortoise and the hare. The hare came out the gates fast, they got cashflow really quick, but it was the tortoise over the long term that ends up winning that race. So when you’re buying the real estate you’re buying, I want you to think about the future, looking into the future, delayed gratification. Where are rents and property values going up the most? The other thing that you’re going to do is you’re going to have to pay these properties down. So that’s another thing I want you to think about. As you’re forcing the equity that you’re building right now, you’re going to have to keep working hard. You’re going to have to have a lot of money that’s coming in so that you can pay those mortgages down and you’re going to have to balance, “How many new properties do I buy versus how much do I pay off?”
My advice I’m going to give you as much like everyone else, and I’ve been saying it to everybody that will listen, for some people it makes sense to quit their job and focus on real estate investing, but for the majority of them it doesn’t. Don’t quit your job right now. In fact, work harder. Start a business. Keep a job and start a side hustle. Once your business is taking off and you have revenue coming in, like earlier in the show when we had the young man who started a gutter cleaning business, if he busted his butt for 10 years and built that thing up, maybe four or five years into it, he could quit a W2 and he could focus solely on that business. You could do the same thing, but you’re going to have to do that.
You are going to have to create a massive amount of energy over a 10-year time period that can then be converted into cashflow later, which means you can’t just rest on your laurels and trust that the real estate that you bought previously or that you’re buying now is going to magically turn into what you need it to if you really want to retire in 10 years. So start a business, develop something that could be sold to somebody else. Create systems so that you’re not going to be working incredibly hard forever. But you are going to be working incredibly hard in the beginning. I would also recommend that you check out my book, Scale, to learn how to do that better. Keep us in the loop with how things are going. And remember, if you want to retire in 10 years, you’re going to have to sprint right now, but it’s totally worth it and I’d love to hear how that works out.
All right. Heidi asked our next question. “Hello. I’m currently living in my fourth house. The first three were live-in flips. I bought them, lived there while fixing them up, and sold them for a profit. I bought this house specifically to live in while finding a forever home for my growing family, which will also need TLC since that is my comfort zone. But for the first time I’ll keep this house to be a midterm rental, although for the first year it may be a self-managed short-term rental for the bonus depreciation.” And I love that you were taking notes from Rob Abasolo on this one.
“Since I’m new to rentals, what repairs do you make on renting that you would not make on a flip and vice versa? I’m thinking function is more important than cosmetics on a rental, so fix the toilet that needs to be plunged every 100 flush, but not the brass doorknobs. Do you have anything you always or never update?”
Wow, Heidi, this is a very insightful question. Great job. You’re asking the right questions. And you’re exactly right. On a rental, you’re not making improvements for cosmetics as much as you’re making improvements for functionality unless for some reason improved aesthetics would lead to increased rent. So if your property’s in Beverly Hills, California, updating those brass doorknobs might make you more money. But if it’s in a traditional rental market, you’re exactly right, you probably don’t want to do that.
Here’s the advice that I give people when it comes to what money to put into a rental. Rather than just thinking about what it costs, I want you to think about how durable it would be. When you put in tile somewhere, it’s very unlikely your tenant’s going to ruin that. When you put in carpets, you’re constantly going to be replacing it. Yes, if you have a toilet that needs to be plunged constantly, you’re better off to replace it. But can you replace it with the low flow toilet that uses less water so you can advertise that when you’re renting the property out to tenants that their water bill will be lower? Are the cabinets hideous and need an upgrade? Painting them makes plenty of sense on a rental. You don’t need to take them out and put brand new cabinets in that are also going to wear out.
Most of the time when you have someone show up at your house to fix a water heater or an air conditioner or look at a roof, the professionals tend to tell you the whole thing needs to be replaced because the cost to fix it is going to be more than what it would be to buy a new one. My experience when I push back on that is it’s rarely actually the case. Of course, sometimes you do need to replace it, but that’s not the rule. That’s the exception. I’ve had many people that said, “You need an entire new roof,” and when I pushed back, it ended up being an $1,800 repair, not a $28,000 roof like the roofing company wanted.
Remember with the rental that you need to keep it safe, but that doesn’t mean that you need to replace everything with brand new stuff. The name of the game is to keep the costs low and to find tenants that are not going to continue to push you to put in upgraded things into this rental property, especially because they may end up leaving after you spent the money. So I think you’re doing things the right way.
The only other piece of advice I’d give you if you’re trying to maximize the ROI on the properties is you may have to manage them yourself. Now, this is important but not as important with the traditional rental. I have plenty of those. I pay 8% of property management. That doesn’t break the bank. But on a short-term rental, they often want 25, 30, 35% of your rents, which means your cashflow typically disappears to the property management company.
The new trend I’m seeing is that people are buying short-term rentals, but they’re managing it themselves and they’re getting a new job, which is why I’m telling everyone don’t quit your job. Don’t think that real estate’s going to be passive. It’s too competitive now. It rarely works out that way. So I would love to see if you have the bandwidth for it to buy one of these short-term rentals that you talked about for tax savings and manage it yourself so that you can increase the cashflow, pay attention to what type of amenities allow you to charge more for rent versus traditional rentals where it really doesn’t matter what you put into the home, you’re not going to increase the revenue. Thank you very much for your question, Heidi, and let us know how that goes.

Brian:
Hi David. My name is Brian and I’m from Morris County, New Jersey, and my question is this. I’ve recently come across the acronym of BEAF, break-even appreciation-focused, and I’m wondering why we’re not talking about this more in this market.
I’ve recently closed on a single family house in Palm Beach County, Florida, three bedroom, two bath where I put down a significant amount of money and the cashflow, as you can imagine, is very limited, just under $100 per month right now. My focus and my strategy is the appreciation play in Palm Beach County. Florida being the fastest growing state in the country and Palm Beach County being the third-fastest growing county in Florida.
My question is this, why are we not talking more about the BEAF method? One of my investor friends simply asked me why am I going to put down a significant amount of money on a deal, $141,000 to be exact, down payment on a $512,000 purchase for something that’s not going to cashflow. And I think the BEAF method clearly articulates what my strategy is, long-term appreciation, and I’m also betting on the interest rates coming down within the next 24 months where I can refinance into a cashflow position. I would love your comments on BEAF and would encourage you guys to speak about it a little bit more, especially in this market conditions. Thanks.

David:
Well, well, well, Brian, what a great question. And you’ve walked right into my trap because I was really hoping that somebody would ask this and you have asked it. All right, let’s talk about, first off, why we don’t talk about it. Short answer is because it’s hard to sell you educational courses on anything that doesn’t evolve cashflow. And most real estate investing educators are trying to sell expensive courses, and so they have to say about cashflow. I’m literally writing a book about this topic right now that focuses on the 10 ways you make money in real estate of which one is what I call natural cashflow, which is the only one that everyone hears about and it’s why they miss out on so many ways they could build wealth in real estate.
Something else that you said that kills me, but I think I have to admit it, you only ask this question because someone made an acronym called BEAF, and this is making Brandon Turner look really smart because he’s constantly telling me that I need to come up with better ways to market my ideas, and I’m always telling him, “No, I don’t think I do. I think that my ideas stand on their merit alone.” However, nobody even asked this question until someone said, “Where’s the BEAF?” And all of a sudden it’s a thing, just like BRRRR became a thing when we called it BRRRR. I think I need to give in and I need to find better ways to market my idea so that more people will digest them. I guess the packaging does matter more than I want to admit. So thank you for asking about BEAF.
The short answer is it is harder to explain ways you make money outside of cashflow. There is less incentive to teach people about other things than cashflow because that’s usually the way you convince someone to sign up for your program, join your community, whatever it is they say, “Hey, do you want to quit your job? I’ve got this shiny cashflow over here that can replace your income.” And then the third is that it shines light on the uncomfortable truth that we don’t have full control over real estate. Everybody likes to feel safe and secure. We like to believe that the world works in a way that we can predict what’s going to happen. This is why we created spreadsheets because the human brain loves to know, “What do I put in my little box?” It’s comforting. But life doesn’t work in a spreadsheet, and this is what’s tricky because when you get into the real world, you realize that things are not stable, they’re not predictable, they are not consistent.
Over a long period of time, yes, that is the case. Imagine you own a casino. Over a long period of time, the house wins. However, individuals that come in can beat the house. You see what I’m getting at here? But I’m committed to telling everyone the truth, which means you got to be okay being uncomfortable because you don’t know what the market’s going to do. You don’t know if the market’s going to go down and you’re going to lose your equity. You don’t know everything, but that applies to cashflow. It just doesn’t get shared with people. You don’t know when your tenant’s going to leave. You don’t know when they’re going to trash the house. You don’t know when the city’s going to come along and say, “You can’t have a short-term rental here after you just bought a property where you had to put $200,000 down on.”
You don’t know a lot and you can’t know a lot, which is why my advice tends to be centered around adding additional streams of income so that when one of those streams gets shut off over something that you don’t know, you don’t panic because you got all these other streams of income. You still run a business. You have several different properties. I call it portfolio architecture, cashflow coming in from different types of assets so that if one of them gets turned off, your income streams are diversified and you’re going to be okay.
But I think that what you’re talking about is for intelligent investors. I don’t think it’s risky to buy in better markets. I think that’s actually the smartest thing you could do, which means you might be breaking even, or God forbid losing a hundred dollars a month. It might be the case when you buy in a really solid market with great fundamentals that other investors want the same investment, which means people are willing to pay more. That’s actually a sign of strength. You’re buying something valuable if other people want it. But that means that it might not cashflow because the price is higher. You see where I’m going with this?
When we chase cashflow, that is not wrong. It’s, “I like cashflow like everybody else does.” But when you get singular focus on just that, you end up chasing assets other people don’t want. You end up making decisions based off what a spreadsheet tells you and not what the reality is going to be. You end up tricking yourself into thinking that your results are predictable when they’re not, because you have the most unpredictable tenant base in the worst locations in the D class areas, in the stuff that people tend to have a lot of their own financial instability so they can’t pay the rent or they choose not to pay their rent. You see where I’m going with this whole thing?
The break-even appreciation focus community, if you want to say so, has figured out that more wealth is created by buying in better areas, but that often comes at the price of immediate cashflow. Now, I’m okay with that, assuming the person is in a position of financial stress. If you make 10 grand a month, but you spend three grand a month and you’re putting seven grand a month away in the bank because you live beneath your means and you’ve made smart financial decisions, if a property is losing a couple hundred dollars a month when you first buy it, but you’re saving seven grand a month and you have 50 grand in the bank, that isn’t actually scary. You see where I’m going here? If you have no money, no job, no savings, no experience with real estate, I wouldn’t tell somebody that they should buy a property where they lose money. They’re not in a position to do that. But the big boys tend to think about the big picture. They tend to look further into the future when making their decisions.
So I think you’re wise to be thinking about this. I also think that if you’re going to sacrifice cashflow in the beginning, you got to make up for it somewhere, which is your job, a business that you’re running increased savings, not spending money on dumb things, even keeping your own mortgage low by house hacking and sacrificing comfort so that you can put more of your chips on the long-term strategies.
And the reason people don’t talk about it as often is because it doesn’t pay to talk about it, but you’re wise. Thank you for bringing this up, for mentioning it. I think it should be talked about more. You just never know how the community is going to receive it. Even me saying this, there are people out there that are screaming around saying, “David Greene is a heretic who is saying cashflow doesn’t matter.” This is always a problem that we have to deal with. Please everyone understand I’m not saying it doesn’t matter. It just doesn’t matter in the way that it’s been explained to you in the past. Thanks for the question, Brian.
All right, that is a wrap, everyone. Thanks again for taking time out of your day to both send me questions and listen to the show. We would not have a Seeing Greene if it wasn’t for you lovely people, and I appreciate you. We’ve had a great response from our audience, and I encourage all of you to ask your questions, which you can do by submitting them at biggerpockets.com/david. I would’ve come up with that URL sooner. I just couldn’t think of a name for it. Just kidding. I look forward to hearing from all of you. Please do submit your questions. I would love to hear from you on a future of Seeing Greene episode. And if you’d like to follow me, you could do so @davidgreene24 on Instagram or any social media or davidgreene24.com to see what I got going on. Would love to hear from all of you. If you’ve got a minute, please do me a favor. Leave us a review on wherever you listen to your podcast, whether that’s Apple Podcasts, Spotify, Stitcher. Those reviews help a lot and I appreciate if you do it.
A couple of our listeners that have left us reviews online have said some pretty cool things. The first one comes from BooJedi and says, “Keep it up. Love listening to the podcast. David and Rob do a great job with the new material, and it’s helped me to get into the game. Currently, I have two long-term rentals and I’m looking to get my first short-term rental.” What an awesome review. Thank you for that, BooJedi.
And then from Lauren1124, she says, “Amazing resource. After semi-casually investing in real estate for almost 10 years, I’m finally taking the time to educate myself. I found this podcast after buying one of the BiggerPockets books, and I’m hooked and I can’t stop listening. Wish I discovered this years ago. Endlessly grateful for this resource.” Well, we are endlessly grateful for you, Lauren, because people like you are literally why we do this and why we provide it for free. So if I could get all of you to just go leave a review like Lauren did and like BooJedi did, I would be eternally grateful. And if you’ve got a little bit more time, please listen to another one of our shows. Remember, if you want to see what I look like, you want to see all the hand movements that I’m making and you want to see the cool green light behind me, check us out on YouTube where you can both listen and look. Thanks everyone. We’ll see you on the next episode.

 

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TerrenceMurphy
Terrence Murphy

From the end zone to luxury open houses, Terrence Murphy is proof that an entrepreneurial spirit is the key to success in nearly everything. 

Murphy is not only a legendary football player, he is also a top-producing real estate agent, investor and broker-owner. He leads TM5 Properties, powered by eXp Realty, which has won the Inc. 5000 several times. He even hosts a podcast, despite describing himself as an introvert. 

Despite the tight market, Murphy has amassed more than 75 listings above $1 million. Below, he spoke with HousingWire about his career in real estate and as a professional football player. Throughout it all, Murphy said, “Books, God and my wife are my triangle of success.” 

HousingWire: Before we discuss your current career in real estate, tell us a bit more about your past experience as an athlete. 

Terrence Murphy: I was a quarterback out of East Texas, and I had 20 Division One offers to play quarterback. I had a lot of really good offers because of my GPA scores and my background, so I actually got full-ride academic offers before I ever got a full athletic scholarship. 

I chose to go to Texas A&M and played football as a two-time team captain; a two-time, first-team all-conference; and two All-American records. I also broke several school records. I’m most proud of my three-time, academic all-conference record. It was really important to me, and my mom, to not just go to school to score touchdowns but to do really well in the classroom as well. 

Back then, a lot of freshmen got red-shirted. I actually came in on the first game of the year, and as a true freshman, caught the game-winning touchdown in the fourth quarter with two minutes left. To come from humble beginnings — I wasn’t a big-time recruit — and catch that game-winning touchdown, really set my career on the right path. 

My next step was getting drafted. I was projected to go in the top 15 as a receiver. Aaron Rodgers was the first pick for Green Bay that year and I was the second pick. In that same season, I got injured. Today, everyone knows Damar Hamlin’s name because of his cardiac arrest. A very similar thing happened to me on Monday Night Football. It forced me to retire because I had neck injuries. 

HW: How did you make the transition to real estate? What inspired that move? 

TM: I had to rebuild myself mentally, spiritually and physically. I was in a transition, thinking, “What am I going to do with my life?” 

I ended up doubling down on my financial literacy. When the stock market hit in 2008, I went to my financial advisor and told him to take out all my money. He challenged me and said, “What are you going to do?” So, I went to Barnes and Noble, and I started buying real estate books, investment books and financial books. I read Robert Kiyosaki’s book, “Who Took My Money?” That is what set me on my real estate path. That book changed my life. 

As I fully transitioned into real estate, I started investing with a group called Stillwater Capital in Dallas. They gave me my first taste of real estate investing. After three years of investing with them, I told my wife I wanted to move back to College Station and start doing real estate there. I was still reading books and teaching myself how to become a real estate investor and entrepreneur. So, I started buying houses around campus.

I tried to get mentors, and I would knock on people’s doors, but no one ever had time for me, which was the total opposite of what I expected. I thought, “Man, I was the face of Texas A&M football and an NFL draft pick,” but the world thinks we just had stuff laid out for us and it wasn’t. So, I had to build everything on my own. 

HW: What was the greatest learning curve getting into a new industry? 

TM: I taught myself through trial and error. That is where I cut my teeth. After doing that for a couple of years, people started to ask me to help them learn the business. I ended up getting my license with Keller Williams. In that first year, I did seven transactions for $1 million, and I was frustrated because I knew I could do better than that. I left after only doing seven transactions, and I started my own brokerage. Everyone told me not to do that, but that’s part of being an athlete; you just blaze out there.

I started TM5 with no broker help, no training or anything. Since then, I’ve scaled the business with my team to $1.4 billion in sales in eight years. Now, I have 52 companies under the Terrence Murphy company portfolio. They are either companies that I founded and created or ones that I acquired. But back then, I started winning awards like Inc. 5000, and realized that I knew something about being an entrepreneur. That was when we started scaling and doing everything that we are doing. 

HW: Having more than 50 businesses under your portfolio is impressive. Obviously, partnerships and strong business relationships have played a big role in your ability to scale that way.  How do you think you’ve best-used partnerships to grow your business? 

TM: I didn’t have a specific mentor, so God has truly been my mentor. I just figured most of this out on my own. My wife has played such an interesting role. She’s been my business partner and she is very sharp. She helps me execute my visions and integrate them. She’s my right hand in building these companies. We funded everything on our own and we sacrificed. I remember that I ate sack lunches for a year straight. All the money I could have spent going out for lunch, I spent on books. 

Other than that, it is all about hiring the right people. You need people that can get behind a vision. I can cast a vision and create a picture for people; that is a gift of mine. But having a team that can help me execute is key. 

God, those books and my wife have been the triangle to success. 

HW: What does the market look like in your area? 

TM: Texas is a very unique place with the interest rates being at an all-time high. It is stable but unique. There are four major housing markets: Houston, Austin, Dallas and San Antonio. College Station is right in the center of them all. 

Just last week, I closed another $3 million listing. I’ve done about 75 listings in the range of $1 million to $7 million. High-end homes and luxury ranches are my specialty. Those stats are just me personally, not my brokerage or team. 

It goes to show that no matter what the interest rates are, high-net-worth individuals are buying luxury real estate. And they mostly pay cash for these properties.

I didn’t start there but, obviously, that’s what I’ve worked my way up to as a broker.

HW: What lessons from your football career helped you in the real estate business? 

TM: One of the biggest similarities is the importance of team culture. If you get one bad apple in the bunch who is negative, makes excuses and doesn’t work hard, then they can corrupt the whole team. Now, I get why coaches used to make guys run. I get why coaches used to bench people or cut players because they can really hurt the whole team environment. I recognized that similarity quickly. 

One of the hardest things I’ve realized is that to scale a business, you need people. I can sell a lot of high-end ranches by myself, but I can’t get to everybody. So who on my team can create a similar experience as me? I studied the Starbucks business model and learned a lot about how they run their business. 

Back when I was in high school, I had an underdog story. In my sophomore year, my high school record was 0-10. Junior year it was 1-9.

Going into my senior year, our school hadn’t signed a Division One recruit in 10 years, but I was walking around telling everybody that I was going to be one of them, that I was going to play in the NFL. People thought I was delusional. That is the reason I worked so hard to take the opportunities that were put in front of me. 



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Ginnie Mae President Alanna McCargo delivered a keynote address at the Barclays U.S. Rates and Residential Mortgage-Backed Securities (RMBS) Conference in Tokyo, Japan, addressing Ginnie Mae mortgage-backed securities (MBS) potential value for investors and the company’s recently expanded social impact and sustainability work.

“As I travel around the world, one thing is clear: global investors want more impact investment opportunities,” McCargo said during her speech.

Speaking to an audience comprised primarily of global asset managers and investors on Thursday, McCargo addressed the macroeconomic trends currently playing out in the mortgage market as well as performance information related to the Ginnie Mae MBS program.

She also used the speech to serve as a wider introduction to investors for its recently-announced expansion of its Environmental, Social, and Governance (ESG) labeling to single-family MBS, comprised of a social bond update to its single-family forward MBS program and its social impact and sustainability framework.

“These enhancements highlight the structural aspects of Ginnie Mae’s mission and program, which drive broader access to mortgage financing and affordable homeownership and rental opportunities for historically underserved communities,” the company said in a statement. “President McCargo also discussed Ginnie Mae’s social and green bond disclosures, which provide reliable data for investors looking for impact investing opportunities.”

McCargo explained that the appetite for such investments extends beyond the borders of the U.S. and that the new program updates provide investors with an opportunity they have long sought.

“Since its founding 55 years ago, Ginnie Mae has been a social impact company. Along with our MBS pool-level disclosure data, our new social bond update and impact framework represent powerful tools for investors who want to direct capital in support of broader access to affordable credit and housing for American households in underserved communities,” McCargo said.

The value proposition of the Ginnie Mae MBS program remains a unique differentiator for investors, she said, and now that proposition can be coupled with the desires of some investors to make an additional impact.

“Ginnie Mae’s unique value proposition remains a significant draw for investors, and paired with the power of our explicit guaranty, our impact work can drive additional global investment into the communities and households we serve,” she told the audience at the event.

In an interview last week with HousingWire, McCargo stressed that determinations of social impact will be left to the investors and will not be made by Ginnie Mae itself.

“Something that we’ve always been doing all along in terms of the borrowers that we support through the Ginnie Mae program is now much more clear and transparent so investors understand and know the social impact elements in their bonds,” she said last week. “And I think it’s important to say that we don’t determine if it’s social impact, investors do. But we’re making all the tools and all the data available to them to be able to do that.”



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The Federal Reserve‘s effort to temper inflation has cooled the housing market that remains subdued with mortgage rates north of 7%.

While the central bank left the benchmark rate unchanged in the target range of 5.25%-5.5% this week, Fannie Mae Chief Economist Doug Duncan believes that mortgage rates will stay elevated before the Fed makes further rate cuts.

“We’ve always been in the camp that we believe Fed Chair Jerome Powell when he says higher for longer,” Duncan said in an interview with HousingWire this week. 

With the majority of Fed officials expecting another rate hike by year-end, Duncan predicts a 50/50 chance of that happening, depending on how resilient the economy is against the Fed’s monetary policy.

Elevated mortgage rates will lead to more lenders spilling red ink in the latter half of the year, in contrast to the improved financial performance of independent mortgage banks in Q2. 

However, a silver lining in the subdued housing market is the strength in new-home sales. Builders are providing rate buy-downs for first-time homebuyers, which aligns with their interests, Duncan explained.

Read on to learn more about Duncan’s views on the housing market, loan performance and affordability challenges homebuyers face. 

This interview was condensed and lightly edited for clarity.

Connie Kim: The Federal Reserve decided to keep the benchmark rate unchanged in the target range of 5.25%-5.5%. With the majority of Fed officials expecting another rate hike before the end of 2023, how do you think this decision will affect housing and your forecast for the economy?

Doug Duncan: It’s our forecast that they won’t make another change until they drop rates. I think the forwards suggest that in either November or December, there’s a 50/50 chance to make an increase. I would say the risks are tilted that way, but we don’t have it in our forecast model. 

We don’t have (the Fed) dropping rates until the end of Q2 next year, and we have a mild recession that starts in that quarter.

The reason that forwards are suggesting a 50/50 chance of another increase is that growth has been stronger than anticipated. We actually think that’s going to slow; I think that this is kind of like a final burst of activity.

We don’t know what third-quarter growth was. Our expectation, at an annual rate, is it’s north of 3%. If there’s another quarter like that, and oil prices have pushed to $100, then I think you get another quarter-point move by the Fed, especially if you don’t see a substantive change in employment. 

Kim: Spreads in the mortgage space are wide. What are the reasons for that? 

Duncan: There are several reasons for that. If that business flow for a time period helps them cover the variable costs, then it can be effective.

For one thing, no fixed-income investor thinks that mortgage-backed securities with 7% mortgage rates will be there when the Fed finishes the inflation fight. They’re going to cut rates and that will prepay. So you’re having to encourage investors with wider spreads to accept that. 

It’s also the case that the Fed is running its portfolio off because they don’t talk about it much. But somebody has to replace the Fed, and the Fed is not an economic buyer. That is they weren’t buying for risk-return metrics; they were buying to affect the structure of markets. So they are a policy buyer.

They were withdrawing volatility from the market, and they were lowering rates to benefit consumers. When [the Fed] is replaced, it’s likely to be by a private investor who’s going to have yield expectations. They may require wider spreads than the Fed because the Fed is not an economic buyer.

Kim: A bit of good news for lenders in Q2 was that their production volume went up and origination costs went down. Are you optimistic this trend will continue?

Duncan: If rates stay at the 7.25% level, it’s going to be worse, not better. On the production side, the mortgage business is in recession because the levels of existing-home sales are back where they were at the end of the great financial crisis at around 4 million units. That’s very low historically. 

I don’t see how it can go much lower than that. Even if we have a recession, we don’t see it going just a hair under 4 million. The reason why some of the headlines look good about housing is because house prices were expected to fall when rates ran up. They did for a quarter as households sort of adjusted to the idea that they were going to be running at a new higher level.

But prices are rising again. For existing homeowners, that’s good news because it means equity accumulation. But if you’re a first-time buyer, that’s not good news because it means it’s harder to qualify — especially with interest rates where they are. 

Production is in a recession. The servicing side of the business is doing very well because those loans are simply not going to prepay for a long time. So, the servicing valuation on those loans is strong, because pre-payments are low. It’s a bifurcated market in that sense. We expect production volumes to remain low through 2024 and start to pick up maybe toward the end of 2024.

Kim: The silver lining in the current housing market is an uptick in new construction sales due to a lack of existing-home inventory. To what extent builders will offer rate buy-downs to drive sales remains to be seen. How likely are builders to support rate buy-downs, especially when it’s becoming expensive to do so?

Duncan: The traditional way in which builders gave borrowers choices regarding affordability was to offer them granite countertops. So if sales volume slows, they will throw in granite countertops, finish the basement or finish out the garage.

In doing interest rate buy-downs, they’re focused more on the problem of the first-time buyer. That’s because [the cosmetic] attributes of a house are more for move-up buyers. Builders recognize they’ve got to do something for affordability for the first-time buyer.

The share of new-home sales that are going to first-time buyers is the highest it’s ever been. The share of total sales that are new-home sales is also the highest it’s ever been. This is a highly unusual structure for the market. 

The builders know that those loans are likely to get refinanced, even if they buy down two points. So they go from 7.5% to 5.5%. When the Fed is done with the inflation fight and if economic growth is back to the 2% to 2.5% level, mortgage rates will probably run to 4.5% to 6% over the cycle. These loans are going to refinance, and the consumer will be in good shape, building equity to become a move-up buyer. So there is an alignment of interests for the builders in doing this.

Kim: The housing market was relatively active during the spring and summer homebuying seasons despite lower historical sales than previous years. Looking ahead, do you see another rough Q4 like last year when rates surged? What are some factors that Fannie Mae is monitoring?

Duncan:  If growth surprises to the upside, that will get the Fed to increase interest rates, which will push [mortgage] rates again. That would be the biggest challenge and just seasonality; the fourth and first quarters are the low points for seasonality. 

Kim: Bankruptcies and layoffs are still happening. How far are we into the industry’s consolidation?

Duncan: I was looking at the bankruptcy data. It’s just gotten back to the pace of bankruptcy we saw in 2019. It is true [consumer] bankruptcies have been rising but from extremely low levels. I actually expect that to continue. In part, that’s because some businesses (probably smaller and midsized businesses) were kept going by very low interest rates for a very long time. 

In the mortgage space? Certainly, you’ll continue to see exits from the business. Typically, mortgage companies are not publicly owned. So it happens quietly. It’s people in the industry that know who the players are that are in trouble. The employment data comes out on a lag basis for brokers and loan officers. So that has picked up. I would expect more.

Kim: Executives at Dark Matter Technologies noted that lenders are most interested in bringing down their origination costs and retaining their clients in this rising-rate environment. What other demands do you see from lenders?

Duncan: They have been investing in technology — primarily consumer-facing technologies to get business in the door. Now, that’s not a possibility. Because of the changes in interest rates and a drop-off in demand, they are now focused on tech investments that go into cost savings.

They are turning their attention to what they can do to lower origination costs. Can they convert fixed costs to variable costs? That’s really the question that the industry has to focus on. If they can convert fixed costs to variable costs, then when the cycle changes, they don’t get hit as hard by the drop-off in this business. That’s because the operating structure also drops off.

Kim: I notice a lot of independent mortgage banks roll out down payment assistance (DPA) programs for conventional loans. DPA programs were predominantly for FHA loans. What are the pros and cons of IMBs rolling out DPA programs for conventional loans?

Duncan: For the independent mortgage companies, down payment assistance gets the business through the door, right? If they’re covering their variable costs, they can keep going for a while and, eventually, they have to cover the fixed costs.

The question is, what are the other credit characteristics of the borrower? If they are an IMB, they have to place it with an investor. So the investor will be monitoring. For example, if it’s Fannie Mae or Freddie Mac, we monitor that. We look at making sure there are not layered risks in any consumer’s profile. For example, if they have a spotty employment record, but they’ve always paid their bills on time, and they have savings, they’ve got money to pay 20% down, then it would probably be acceptable to have that spotty employment record. But if there’s a spotty employment record and a spotty repayment record on their credit, that’s not going to make it through the screen.

Kim: DPA programs offered with FHA loans come with higher rates. If the FHA loans layered with a DPA are more costly, how do first-time buyers benefit from these programs? 

Duncan: The question you ask is a really interesting social question. The foreclosure rate for FHA loans is higher than the foreclosure rate for VA loans or Fannie Mae or Freddie Mac loans. Fannie and Freddie are the lowest; VA is a little bit higher. FHA is the highest. There’s not a clear answer on what’s the optimal rate of foreclosure. 

If [that rate] is zero, we can get to zero. But we aren’t going to be making very many loans. So there is some optimal level of risk-taking to help people realize their hope of owning a home. But it’s not a hard and fast number. Different people have different points of view on that.



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