Ashley:
This is Real Estate Rookie Episode 326.
Nate:
As soon as I say cold calling, most people just kind of shut down. “I’m never going to do that, I can’t do that.” I promise you, you can. With your skill level, with your own unique personality, you absolutely can do this. But I think it’s a matter of managing your expectations, and I think that’s where a lot of people get gummed up. So I’ll tell you what I say and what I do, and then maybe we could dive a little bit deeper on this.
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 rookies, do we have an episode for you guys today? If you have ever thought to yourself, “Where can I find really good deals? How can I do that with the least amount of money possible?” Nate Robbins, our guest for today, is going to answer that question for you. Now, Nate’s a friend of both Ashley and I, he’s one of the biggest characters I think I know in the world of real estate investing. He’s always got a smile on his face, always making people laugh. But don’t let his kind of boyish charm fool you, Nate is an absolute beast when it comes to finding good off market deals.
Ashley:
You know what? That’s so funny because that exactly describes [inaudible 00:01:14] his boyish charm. And yeah, so we bring Nate on today and we talk about how he actually got started in real estate, gives you a little background of that. And it was a very unique situation, and how he took advantage of this opportunity presented to him.
Then we’re going to go into how to source a deal, how to find a deal. And Nate will walk you through the two different paths as to how he finds addresses or gets the houses that he wants to go after. And we break down exactly what you should say on the phone, exactly what you should do when you’re at a seller appointment, step-by-step instructions. As you’re listening to this, I want you to write down notes of what Nate is going to say. And kind of develop your own plan to follow this along, and just try it out.
Pick up the phone, make a phone call, go door knocking, but Nate does a really great job of describing in detail a step-by-step list for you to go and do exactly what he’s doing.
Nate Robbins, welcome to the Real Estate Rookie Podcast.
Nate:
It’s the honor of my life, I love you guys. And your audience doesn’t know how lucky they are to have you in their lives.
Ashley:
Well, thank you, that was a very nice compliment. But today we are here to shower you with love and admiration on your real estate investing journey. So Nate, why don’t you start off telling everyone a little bit about yourself, and then how you got started in real estate.
Nate:
Yeah, so back in 2016, I was working for a bank. I’d been working at a bank for about five years, I was a private client banker. And I’ll be honest, I really should not be where I am today. There’s just no logical reason way that I am where I am today. And so I was working at the bank back in 2016, and I was actually hitting kind of a midlife crisis. I was very frustrated with my work, frustrated with life. And I got off a very frustrating phone call with a client and I hung up, and I just see this random guy standing in the lobby. And not wanting to make any more phone calls, I just get up out of my desk. I wasn’t necessarily supposed to pull the clients from the lobby. Walked over to this guy and I said, “Hey man, how can I help you?” And he goes, “Well, I need to open a business account.” And I was like, “No problem, I can help with that.”
And so I brought him over to my desk, [inaudible 00:03:47] chatting with this guy and I’m like, “Dude, you’re a really cool guy. What do you do?” And he goes, “Well, I’m in real estate.” I was like, “Oh, that’s cool, I’ve always been interested in real estate.” And I bought Carleton Sheets when I was 18, trying to… Your audience wouldn’t even know who Carleton Sheets is.
Ashley:
I don’t know who that is.
Tony:
You don’t know Carleton Sheets, Ashley?
Ashley:
No, no.
Tony:
So I don’t know, I was a really weird kid, I would stay up late during the summer months. And late at night when you don’t have really good cable packages, all you see is infomercials.
Ashley:
Mm-hmm.
Tony:
And every single night Carleton Sheets had an infomercial running for this at-home kind of package that taught you how to buy real estate with no money down.
Nate:
Yeah.
Tony:
Anyway, he was one of the big real estate info marketers back in the day.
Nate:
He’s the original guru kind of thing, he sold the program and then he’d get you in your loop and he’d sell you more programs and stuff. And so yeah, it’s kind of funny. Hey, actually Tony, if you want, I’ll send you the tapes, you could listen to him again if you want.
Tony:
My dad actually had a copy, I was in his garage a decade ago and found [inaudible 00:04:51] and Sheets’ tapes also.
Nate:
It actually has some pretty good stuff in it. It’s pretty basic, but it’s really good stuff. And I’m like, “Oh, okay, cool.” Yeah, it’s nice, but-
Ashley:
Okay Nate, you don’t need to give us your affiliate link now, back to you.
Nate:
So I’ve actually signed up, but-
Ashley:
Sign up under me.
Nate:
Yeah. I can promote my Amway business also? So anyway, that one conversation with that business account ended up being a conversation with who you guys know, Tarl Yarber. I don’t know if your audience would know who he is, but was one of the most successful real estate flippers up here in the Seattle Pacific Northwest market. And so he’s like, “Well, hey, let’s grab coffee and a lunch.” And so that turned into about a two or three month conversation. And then after about three months, he said, “Hey, I’m willing to offer you a 90-day contract to come work with me.” And so I had to make the choice of, do I stay at a safe job at the bank? Or do I take a chance on a 90-day contract to go and maybe succeed or fail at real estate? And so thankfully, the fear of not knowing what would happen was greater than the fear of being safe or the need for security. And so I took the chance and it’s been an absolute wild, wild ride ever since.
Ashley:
In that moment when you were looking at, okay, 90 days, what happens after 90 days? Are you the type of person that’s like, “Worst case scenario, this is what I can do.” Did you think you could go back to your other job? Maybe if somebody listening is given that same opportunity, what’s your advice on ways that they can take that chance and kind of shift their mindset to leaping into something that may only be 90 days and not continue on?
Nate:
Yeah. Well, I got to the point, and again, I was kind of in a existential crisis a little bit in my life. And so I got to a place… Because it was a big deal, I was on a fairly successful track with my job, I had a plan, a 10-year plan. And I got to the point of saying, or I had this image of saying, “Well, I’m on my deathbed.” It was kind of future casting. I’m on my deathbed, I’m always going to wonder what if? And the fear of… I had to see, I had to know what if? What if it did succeed? What if I did make it? What if this was my chance? And I had to know even if I failed. And so I kind of hedged my bets where I left gracefully, I left kind of on an extended timeline to help my manager out. So I knew that I could always come back if I failed, but I had to know.
And so I think sometimes it’s easy to play it safe, but on your deathbed when you’re dying and you’re about to take your last breath, are you going to be glad you took the chance? Or are you going to be glad you played it safe? And I think most people… And I’m sure you guys see a lot of these same motivational things. Most people on their deathbed when they interview these people on their last moments, it’s not taking the chance, it’s not taking the risk and taking the opportunity. And so for me, I had to see what happened down this path. And yeah, I would encourage other people too, it’s man, take the chance, see what happens.
Tony:
Nate, I just want to ask, you’re talking about taking this chance, but you worked in a bank, but were you in the mortgage department? Did you have any type of real estate experience prior taking this big bet on yourself I guess?
Nate:
No, none.
Ashley:
So why would Tarl want you? What were the things that you thought… What did he see? Besides how handsome you are, what are some other qualities that he looked for?
Nate:
Have you seen this hair?
Tony:
I was just about to say, man, and how perfectly quaffed that [inaudible 00:08:56].
Nate:
It’s almost as good as yours, Tony. It’s almost as good. Yeah, well, I think obviously, I have a real hard time talking to people. I don’t have any kind of personality and I stutter a lot. So those were some of the hindrances I had, but I think I owe a lot to Tarl for where I am at today. And I think what he saw… And he’s very good at this as well, when he sees potential in somebody, he’s really open to taking a chance on that person. And so I think it was probably pretty obvious that I was miserable, and I think from our conversations together he saw somebody that was really miserable, had a lot more potential and was stuck in a place that wasn’t that great for him.
And so Tarl saw that in me, and I think just doing what I do because my strong suit really is building relationships with people, it’s communicating, it’s getting to know somebody, it’s building rapport. And so my job within the bank was as a private client banker, so I was dealing with high net worth clients. I had no real estate background, I really didn’t have anything as far as real estate was concerned to bring to the table. But my personality, my ability to communicate and talk to people, that really I think is what kind of opened the door for me to work with Tarl.
Tony:
Nate, just I want to go back really quickly to something that you mentioned about the whole laying on your deathbed thing. And I think there’s a lot of value and you used a phrase future casting in that way. And there’s a book I’m reading right now, it’s called The Good Life, and it’s by two doctors, Robert Waldinger and Marc Schulz. But basically it was this longitudinal study where they followed hundreds of people over multiple decades. From the time they were 18 until they were in their 80s, and they passed away. And they even followed on with their kids and their grandchildren. So just crazy amount of data and it just goes into hey, what are the key factors of actually living a good life based on this really long comprehensive study? And a lot of it was kind of tied into what you said about taking some of those risks. And kind of surrounding yourself with people that you really get energy from. As opposed to being in an environment where you’ve got a bunch of energy vampires that are kind of pulling life out of you.
So I just wanted to plug that book, I’m 30% through it, I’ve already really enjoyed it. But The Good Life by Robert Waldinger and Marc Schulz, if you guys are looking for a good read on that.
Nate:
Yeah, I think you bring up a very interesting point that I’m still learning. And I think at least in my life, there’s a tipping point where I’ll be in a situation or I’ll be in a job, well, not a job anymore, but I’ll be in a situation where it no longer feels life-giving, it’s an energy drain on me. And I think it’s very challenging to want to pursue safety and security over having the integrity to say, “Hey, this is no longer really helping me, it’s killing me.” And trying to make active changes. Because the reality is we’re not trees, we can move, we can make changes, and we can make those things, right? So when you realize that those things are starting to happen to you, maybe it’s a relationship, maybe it’s a job, maybe it’s something, you have the ability to make changes to improve that situation and find that vein of, “Hey, this is giving me life, this is now exciting, this is good for me, this is getting me to where I need to go.”
So just being aware of that, and I’m still learning that as well, but okay, now I need a change, let’s start working that.
Tony:
One more plug, because I said the word book. And anytime we say the word book on this podcast, Ashley and I now have to plug the Real Estate Partnerships book with Ashley and I co-authored. If you head over to biggerpockets.com/partnerships, you guys can pick up a copy of that book. But now anytime the word book or partnership is mentioned on this podcast, we have to plug the Real Estate Partnerships book.
Nate:
Okay, well, we’re going to plug that a couple more times then.
Ashley:
Pretty soon anytime the word real estate is said, I’m plugging it. So tell me, Nate, what kind of investing do you like to do?
Nate:
Well, actually after that whole thing with Tarl, I don’t actually do real estate anymore.
Ashley:
Oh, real estate, so we have this [inaudible 00:13:14]. Let’s talk about when you made that transition. You’re leaving your bank job and you’re going to work for Tarl, what were some of the things that you were doing for this job? What was the actual position?
Nate:
So this is a little bit funny, and I’ll do the [inaudible 00:13:31]. Tarl, when he hired me he was looking to replicate himself. He wanted to kind of get a step away from the business, run the business and just replicate himself. And we could probably talk about this as well, but I left the bank with a very much of W2 mentality. And Tarl was looking for somebody with more of a independent, I’m going to go figure this out and get it done. So the first two weeks I’m just sitting in the car with him like, “All right man, tell me what to do. I have no idea anything about anything, just tell me what to do.” And after about a month of that, he was starting to get pretty frustrated. And so if you talk to him ever, you’ll find out I was on my way to getting fired actually. And then we went to a Jocko Conference down in San Diego and that reframed some of his thinking, and so anyway, I got a second chance.
But what was apparent is that my strong suit and my skillset wasn’t really around the detailed operations of managing a project. Now, I can do that, but I wasn’t the skill match for Tarl. And so what it became apparent is that I’m much more stronger suited or my skillset is really in building relationships and that type of thing. And so the role that I kind of fell into or I kind of got more focused on was acquisitions. So networking with wholesalers, going direct to seller and that kind of the wholesale aspect of the business. And so just again, kind of Tarl realizing, “Hey, you’re better suited over here, not what I originally planned. So let’s move you over here and get you kind of in a better role.” And so that was kind of how I kind of fell into this whole acquisitions, door knocking, cold calling, deal finding, all that kind of good stuff.
Ashley:
That is such a real thing, the W2 mentality. And it’s also part of who you are too as far as your DiSC profile and things like that as to how you perceive the world. But being you just want to be told how to do something and you can master it instead of having to figure it out. And then there’s other people that want to figure it out and can figure it out. But that was something I struggled with too with one of my business partners, he came from the W2 world. And everything was handed to him as to, “Here’s what you have to do.” And he would just go and do it. And then it was on to the next thing of [inaudible 00:15:57] what you had to do. And there was never really a lot of decision making or even scheduling yourself or any kind of task management because everything was just given right to you.
And I think making that transition is really hard. Honestly, I think it took him a year. Now he oversees all of the maintenance for my property management company. And it is boom, boom, boom, everything is just done, he just takes action on it. But if he was doing that a year and a half ago, I literally would’ve had to sit down with him, “Okay, here’s this work order, this is what you have to do. Now let’s schedule it for this day and this time. Now go ahead and text her, tell her you’re going to be here at this time this day.”
Nate:
Yeah.
Ashley:
But now he can just go and figure it out, but that is such a big thing. So what are some of the things that you did to kind of get out of that? Because I feel you obviously haven’t stayed stuck in that W2 mentality. I can seriously doubt Tarl is still telling you exactly what to do every day.
Nate:
Well, it’s actually funny because now I’d say about 8, 12 months ago, we’ve kind of stopped doing real estate up here in the Pacific Northwest. So we work together on other aspects of that, and so if I did have any W2 mentality a year ago, it’s definitely gone now because it’s now 100% dependent on me, right? And so I’m looking, I’m trying to think back to my mentality on this kind of stuff, and I think it’s when you really, really want it bad enough, you will figure it out. People want the easy road, they want the easy five steps to make a million dollars. And that information exists except for… What did I see? Hold on, I have to read this quote today. And I posted this, right? It was like, “Building a real estate business is simple, knowing what to do is simple. Executing on what to do is hard, being consistent is hard, delayed gratification is hard, being persistent is hard.”
And so I think it’s just one of these things that it’s not wrong to have a W2 mentality, but it can be hard to succeed. And so you have to have this mentality of, “I am going to succeed, I’m not going to quit. I want this and I’m not going to wait for somebody else to come kind of spoonfeed me. I have to go get it and I’m going to go get it.” And so I don’t know if that was clear, but that’s kind my thought process on that.
Tony:
You kind of said it yourself that no one’s going to spoonfeed you, you have to go get it, Nate. So once you and Tarl had that realization of the detailed operational management isn’t kind of speaking to your natural genius, it’s more so the relationship side. What did that onboarding experience look like? How did you figure out what you should be doing every day? Or what was the effective way to go out? And just even I guess just taking them one step back, if you can first just define kind of what your new goal was after you guys have kind of decided, “Okay, here’s the role for Nate.” What was the end result you were looking for? And then how did you go about teaching yourself how to do that?
Nate:
Yeah, so one of the advantage… Now, I have to be very clear, I had an extreme advantage working with someone like Tarl, because it gave me a lot of things. It gave me access to a lot of high level people that normally a lot of people starting out don’t get, so that was an advantage. He put me in the room with a lot of very successful guys that I could pick their brain and kind of learn from their systems and stuff like that. And so that was a huge advantage. I think with social media and things like that, people today, even if you’re starting out, you can still kind of get the help that you need, but it was really nice having that kind of thing.
Now, the thing that was a challenge was that there was no onboarding process. There was no “Hey, this is how you wholesale.” It was more like, “Hey, go talk to this person and figure it out.” And so even though I had these connections, I made a lot of stupid mistakes. Which we could talk about if you want, because I’m sure your audience would love to hear about dumb things that happened, but I know I do.
Ashley:
I would love to hear about what that process has turned into for you because that was part of a lot of value that you bring. And you’ve helped me a ton with this, is how to actually talk to people to sell their property, and what those kind of processes are. So do you want to start from the very beginning of how you’re even finding a house, how you’re then finding the seller and kind of go from there?
Nate:
Well, first off, Tony, did I answer your question? Did I get to that?
Tony:
Yeah.
Nate:
Okay.
Tony:
I think the only other thing I’d add is just the goal of what it is, right? Tarl brought you in because he had a business of flipping homes. And in order to profitably flip homes, you have to buy properties at a discount in comparison to what you’ll be able to sell them for. So if I’m hearing you correctly, Nate, the role that you were then slotted to fill was to help Tarl find those undervalued properties. Am I hearing that correctly?
Nate:
Correct. And that came through, it could be a number of different ways like networking with other wholesalers myself doing that, agents. It was just I just need to bring in, I think it was about two to three deals a month is what I needed to bring in to the business.
Ashley:
Okay, let’s start with that of how are you even finding the deals you’re bringing them in? I want to create a step-by-step process so everyone listening can go ahead and write this down, make their own little checklist and kind of do exactly what you do, because you are so great at it. So first thing, how to find houses, go ahead.
Nate:
Yeah, well, thank you for that kind word. I will say there’s two tracks, right? There’s the people… And we could go deep on this if you want because this is where I’m probably most passionate about. You have the people that don’t have a lot of disposable income, and they’re going to have to bootstrap it. And they’re just going to have to get after it until they can make some additional income. And so on that vein, so we have the, “I have to just get after it.” Because they don’t have a lot of capital invest. There’s a couple of things that I would say. Number one, is I would download the Driving For Dollars App. And if people aren’t familiar with Driving For Dollars, it’s basically where you drive around neighborhoods and you’re looking for dilapidated houses, tarps on the roof, boarded up windows, overgrown lawns, vacant houses, missing power meters, things like that.
And so if you don’t have a lot of money to invest, and there’s other apps that can do this, I just prefer… because I’m friends with Tucker Merrihew. I don’t get any kickbacks from this, although, Tucker you should sponsor me. But I would download the Driving For Dollars App, and then over a weekend I would drive around median priced houses in a neighborhood that you’re relatively familiar with or a town or a city you’re familiar with. And I would drive up and down every single street and I would create a list of at least a thousand houses over a weekend. And so if you live in a place like Portland, you could do that in a couple of hours.
Ashley:
So what are you looking for when you’re looking at these properties? What was some of your kind of criteria?
Nate:
So I kind of mentioned before, if the house is vacant, if you’ve got boards on the windows, if you’ve got tarps on the roof, if it’s overgrown and with a bunch of vacant nasty cars in the thing, any signs of distress really. With this one, sometimes you can be a little bit liberal on it, you just have no idea who’s willing to have a conversation, but any signs of distress. Pro-tip, actually drive down the alleys. I don’t know in most cities, but ours, we have kind of back alleys that drive between two streets of houses. Sometimes that gives you a different perspective where the house looks good on the front, and you go down the alley and all of a sudden there’s a, “Oh, this is absolutely really bad.” So you can mark the house down, but any signs of distress, just mark it down.
And so what the Driving For Dollars App will allow you to do is you can just drive with the map open or the app open. You can drop a pin on the house and you can just kind of track your progress on what streets you’re going up and down. And I would just continue to build that list. Ideally, you want to build that list of 5, 7, 10,000, depending on your market and depending on how hard you want to go.
Tony:
Just one clarifying question.
Nate:
Mm-hmm.
Tony:
So Nate, I want to give some context to the rookies that are listening because you just said you want to get this list to not 500, but 5 or 10,000. First, how much time do you think it would take for someone to get to a list of that size, Driving For Dollars? And just like cumulatively, how much time do they have to spend driving? And then why does the list need to be so big? Because I think some people have this misconception around the volume that you need to be able to source markets off deals. So how much time? And why that volume?
Nate:
So I would say a couple of things on that. Number one, you don’t have to have 5 to 10,000 to start. If you were a brand new person, if one of your listeners is a brand new person, sat in front of me. And they’re like, “I want to get my very first deal.” I would say, “Download this app, and then go create a list of 200. Start with 200, and tell me your top 20 worst houses that you found, that are vacant. For sure there’s nobody in there and they’re really, really bad.” And so I would start, you don’t have to have that number, but if you’re going to build a business and actually grow this to continually source off market stuff, basically you want a larger list. And the reason you want that is… And I’ve seen this a lot with a lot of newer people, is that they’ll find 100 houses, and they’ll market to that, but they won’t get any calls.
Well, your section of people, it’s too small. And you just need a larger group to actually try and generate consistent leads. And so if you have 5, 6, 10,000 houses that you’re marketing to, well, then the deals will start… you’re going to get more deals that way, essentially.
Tony:
And I think just one thing to call out is that sellers’ timelines don’t always match with when you’re marketing to them. And this is, I kid you guys not, when I first started investing in real estate back in, I think it was summer of 2019. I sent out a bunch of mailers to Shreveport, Louisiana, where I was investing at the time. I got a call last week from someone on one of those mailers and he said, “Hey, I wasn’t ready to sell when I got your mailer, but I’m ready to sell today.” That was almost four and a half, five years ago that I sent those mailers out and someone’s calling me today. So I think it just goes to show that you’ve got to start planting those seeds, and then over time they all start to kind of sprout up.
Ashley:
Tony, are we going to have another story about another house in Louisiana?
Tony:
No, I didn’t even call them back. I didn’t even call them back, I’m not going back there.
Nate:
Give me the lead, I’ll deal with it. I got you.
Ashley:
Yeah, yeah, give it to [inaudible 00:26:53]. So as far as, okay, you have your list, you have the property address, right?
Nate:
Yep.
Ashley:
Are you finding other information? What’s happening once you’ve started to build this list of addresses?
Nate:
Yeah, so what I would say, again, if you have no money and you’re bootstrapping it and you’re just starting out. What I’d say is once you get to 200, I’d start taking action. Now, the Driving For Dollars App, and I know there’s other apps that will… DealMachine I think is one other one, they’ll give you a little bit of the seller’s information. Seller data is probably one of the most challenging aspects of off-market stuff, because you’re not always getting the right stuff. Most skip tracing services are probably 70% accurate. And so I probably spend a little bit too much on this, but I have three other programs that I pay every month to have access to.
And so yeah, these would be the ones I use. And you don’t have to spend all this money on these, but if you’re going to do this longterm it might be worth it. I have Whitepages, and I think that’s 60 bucks a quarter, so 20 bucks a month, I think. REISkip, you pay per skip on that one, so you put in 50 bucks and then it’ll last you until you’re done.
Ashley:
Nate, what’s a skip?
Nate:
Oh.
Tony:
Yeah.
Ashley:
You pay per skip, what’s a skip?
Nate:
Oh, good question. So basically Whitepages… let me give you this and I’ll explain all that. So I’ve used Whitepages, REISkip and People Finder PRO, and then Driving For Dollars. And so what this does is this allows you to look up the homeowner’s information, and get a bunch of emails, phone numbers and potentially mailing addresses. And so between the Driving For Dollars App, Whitepages, REISkip and People Finder PRO, I generally can find a phone number for the seller. And so if you were again, sitting in front of me, I’d say, “Once you have a list of 200, you have your top 20 worst ones. I would not think about it too much, look up, even get a piece of paper out, write it down, your seller leads, write down all their phone numbers, and then just pick up the phone and you call.”
Tony:
So you mentioned a few pieces of software, but you didn’t mention PropStream. Which I feel is a super popular one for a lot of wholesalers that I know. Is there a reason why you’re not using that software?
Nate:
I use PropStream when I’m pulling lists and stuff like that.
Tony:
Mm-hmm.
Nate:
So I do use PropStream, there’s nothing against it, it’s just for the initial find on things… I have nothing against PropStream, I use them. This is just kind of how I kind of started, and I’ve just kind of got stuck in my ways. And so this is not the only way. This is not the only way.
Tony:
Yeah.
Ashley:
Okay, so now you’ve got your list. So you gave us the example of Driving For Dollars, and actually looking at the properties. But then you mentioned sometimes you do use PropStream to actually pull lists without doing the Driving For Dollars. So when you go into PropStream, they have the filters. So what are some of the filters that you are using to kind of find the properties for you?
Nate:
Okay, so I think if I were to break this down in my mind, and maybe for your listeners, I would say that if you have a little bit of money to invest in pulling a list and hiring a professional company, then I might use PropStream. And then there’s two thoughts within this. One, you can do just try and get the cream of the crop off the top of a market. And then you can really dive in deep and then try and stack your lists. And so what that means is if you find multiple pain points on a property, that’s going to give you a better chance of maybe having a conversation, maybe having them want to sell. So what do I mean by that? I mean that if you have a house that’s vacant, that’s out of state owned, they have a code violation and they’re tax delinquent, right? Let’s imagine those are all the problems. And you can filter for that on PropStream.
Basically that seems like a great motivation for somebody that doesn’t live there, it’s vacant, it’s got problems, it’s got taxes backing up. That seems like it’d be a great motivation, so you can spend the money to then pull these lists, stack them together, and then you can call them. But that’s going to cost you a little bit of money. Or if you want to do, I’m doing some general marketing, trying to see if I can pull some easy stuff off the top of a market. So I’m actually just starting this down in Arizona, is I just pulled a tired landlord list, right? So right now just with everything, I just pulled a list and that’s an actual subtitle on PropStream. And so you can just go down from the suggested list.
Yeah, it’s just tired landlords, and so I pulled the area that I wanted to be in. And I just pulled that list, it was about 5,000. And so then I sent it over to my skip tracing company, which I just got a new one. And then I sent it over to my marketing people and we’re now marketing to that, so we’ll see what happens. Did that make sense, kind of the two thoughts there? You can go just general kind of broad spectrum over a market, or you can go real deep on a market and by stacking lists and stacking pain points.
Tony:
And I also just want to shout out, right? So as an alternative to PropStream with some of the data that Nate’s called out here. BiggerPockets also has a partnership with Invelo, that’s I-N-V-E-L-O. And Invelo also allows you to pull a lot of that kind of owner data that you’ll get from some of these other sources.
Ashley:
As a pro member, you get a $50 credit. So if you are already a pro member, go and spend that $50. And if you’re not a pro member, you can sign up at biggerpockets.com/pro
Nate:
Sweet.
Ashley:
So Nate, okay, you have your list created, you went and you either were Driving For Dollars and got some addresses, or you were going on your software and looking up properties. So now that you have your list together of addresses and now you’ve used your tools like Whitepages, things like that to find the phone numbers of the people who may own this property. When you make the call, what do you say?
Nate:
Ooh. Now, again, I’m going to preface this with saying, I’m very comfortable doing this. When I was a kid, just to give you a backstory, it’s funny how things kind of come full circle. I mowed lawns to make a living, and to make money my junior high and high school days. And so I would literally door knock people and go do this. I’m like, “Here, I’m door knocking again, it’s like I can’t get away from it.”
So this is something that I’m very comfortable doing. And something that I think everybody can do, but I think it’s a matter of managing your expectations, and I think that’s where a lot of people get gummed up. So I’ll tell you what I say and what I do, and then maybe we could dive a little bit deeper on this because as soon as I say cold calling, most people just shut down, or door knocking, shut down. “Oh, I’m never going to do that, I can’t do that.” I promise you, you can. And with your skillset, with your skill level, with your own unique personality, you absolutely can do this.
Ashley:
Real quick, part of the reason we are doing this episode today is because Nate flew out to Buffalo to visit me. And we’re driving from getting chai tea, and he sees the house with papers in the window like it might be vacant, whatever.
Nate:
Signs.
Ashley:
Pulls it up, finds a relative of the person that died in that house, and they’re five minutes from my house. And he is like, “I’m going to drive over there and knock on their door, see if they want to sell it.” I was like, “Okay, you and Daryl go, I going to just stay here. I don’t want to go do that, that makes me scared and nervous.” So part of this episode that we’re having is for me to become better at cold calling, cold knocking-
Nate:
Yeah, cool.
Ashley:
… door knocking.
Nate:
Next time I come out you’ll come with, you’ll be fine.
Ashley:
I’ll have to do it, yeah. He’ll wait in the car and make me go.
Nate:
And she was the nicest lady. So I think honestly, and we could talk about some resources and books that’ll help people with this, but I keep it very, very simple. So when I’m cold calling and we could role play. Who wants to role play?
Ashley:
Go ahead, Tony.
Tony:
Yeah, I’ll be the landlord here.
Nate:
Okay, cool. So let me just preface this and say that the only objective that I have for this very first call is going to be, “Are you open to an offer?” That’s the only thing I need to figure out. One of the pitfalls that I see with people is that sometimes they’ll see a vacant house and they’ll begin to fantasize about how amazing this house is, all the money that I’m going to make when they… And then they find out that they’re not even wanting to sell, that you can’t find a good working number. And so you begin to get way down the road. All you need to do for this very first conversation is just figure out, “Are you open to an offer?” All right. So this is how the conversation would go, and then we can kind of break it down. So ring, ring.
Tony:
Hello.
Nate:
Hi, is Tony there?
Tony:
Yeah, who is this?
Nate:
Tony, hey, yeah, my name is Nate Robbins, I’m really sorry to call you out of the blue like this. The reason for the call is I’m in the process of trying to buy a house here in Tacoma, and I noticed your house over on Main Street. It is probably a long shot, but-
Tony:
Look, I get calls like this all day. How did you get my phone number?
Nate:
You know what, Tony? I totally get that. I’m sorry, it is kind of a random call like this. So basically I drove by your house over on Main Street, homeowner information is public record. I use a program called Whitepages, it was actually a book when I was a kid. And I just looked up your own information and thought I’d give you a call. [inaudible 00:36:15] old school like that, I’d rather talk to you face-to-face, versus just sending you a letter. And so I don’t know, I’m just curious if there’s any chance you might be open to considering an offer on the house.
Tony:
Well, I get calls like this all day, Nate, so what’s your number?
Nate:
You know what? That’s a great question. Well, Tony, I’ve only ever driven past the house one time and I’m assuming you’re probably like me. I’ve been on the receiving end of low ball offers, and low ball offers are very offensive to me, and I don’t want to do that to you. And so I don’t actually have enough information to really make you a fair offer. So it sounds like you might be open to actually looking at an offer if it was a fair price.
Tony:
Yeah, I think I’d be open to that.
Nate:
Okay. Yeah, great. Well, how I make sure… I’d like to ask you a couple of quick questions right now if I can have 30 seconds. And then what I’d really like to do is then find a time to actually walk the property. I’d love to actually meet you in person, so you know I’m a real person. But would it be possible to walk it maybe this Friday? Are you going to be around?
Tony:
Yeah. All right, that’s pretty good, Nate. I feel like I threw some curveballs at you, man, and you handled those pretty well.
Nate:
Yeah, [inaudible 00:37:24] I’ve done this before.
Tony:
Because I’ve done a very, very few cold calls before trying to source my own deals. And it’s always like, “Who are you? How’d you get my number? I don’t want a low ball offer, the property’s perfect.” But you’ve kind of got a way to handle all of those objections it sounds like.
Nate:
So I don’t know if there’s a best way to do this, I have a couple of things I could give your audience. Number one, I can give you my script, which is I’m happy to do. And then I also have a worksheet that has… really, there’s six objections you are going to encounter if you cold call or door knock. And one of those is, how’d you get my number? What’s your offer? There’s some basic ones you’re going to come in contact quite a bit.
Ashley:
Okay. Yeah, Nate, we can put those into the show notes, it’ll be at biggerpockets.com/blog/rookie-326. Or you can also send Nate a DM on Instagram, and I’m sure you give him your phone number and your address, so he can cold call you, he would definitely give you a script.
Nate:
Yeah. Well, before we go too far on this, I would say you might get a seller that’s like Tony. They’ll just immediately, “What are you doing?” Or you are going to get people that are getting a lot of calls or getting a lot of mail, you will do that. Most people, however, if you are normal on the phone, are very normal. And so there’s a couple key things. Number one, again, managing your expectations like, “I’m only there to see if you’re open to an offer, if not, no big deal.” And this goes back to our original point of saying, why do you have 5,000 houses on your list? Or even if you have 500, right? It doesn’t matter if you tell me, no. It doesn’t matter because I have 499 other people I got to call. So you have that kind of thing, but when you call though, you have seven seconds to get to this line. And Ashley’s heard me talk about this before and she’s posted about it, is the reason for the call, right? You have to get to that, because you’re calling these people out of the blue.
And once you get to that line, it kind of allows you to get past their wall, right? It gets you kind of behind their immediate rejection. “Hi Mr. Seller, my name’s Nate, sorry to call you out of the blue. The reason for the call is I’m trying to buy a house, I’m trying to buy a rental.” Whatever your motivation or your goal is for your investing. And then, “I’m just curious if you’re open to an offer.” Again, yes or no. And then you might have to handle a couple of objections, which is totally fine. And I play off the, “Well, how’d you get my information?” I play it off like it’s no big deal. It’s no big deal, this is not a big deal.
“Oh, I looked it up, homeowner information’s public record.” “Cool, cool.” And then I always make a joke about Whitepages used to be a book. I’m like, “Oh, back when I was a kid, it was a book. Now it’s online, I just looked you up.” And then I just give that reason, then I don’t know if you noticed what I did is I immediately went on to say, “Do you think you might be open to considering an offer?” It’s almost like you just went past it, I didn’t even care. You do care, but you’re just kind of scooting past it, right? If that makes sense.
Tony:
Mm-hmm.
Nate:
And then he might bring up another objection. “Well, let’s just talk about it.” And then, “Okay, so it sounds like you might be open to an offer.” So you’re just kind of pushing the conversation forward. And then basically if they say, “Yes, yeah, I’d be open to an offer.” “Hey Mr. Seller, my process is because I don’t want to offend you with a low ball offer. I don’t want to offend you.” Most people don’t want to be offended. “Let me walk the house so I can make sure I make a fair offer.” And then that allows you to then kind of go to the next step of actually creating a good offer. And then if you’re going to wholesale it, if you’re going to buy it yourself, it allows you to put accurate numbers together to make the deal happen. So if they say yes, then I’m shooting for the appointment, I want to see the house.
Ashley:
So are you trying to set the appointment right then and there on that phone call too?
Nate:
Absolutely, no and yes.
Ashley:
Okay.
Nate:
Yeah, if they said no, I might toy with them a little bit, but if they say yes, I’m going to say, “Hey, cool, great.” I’m going to ask them a couple of questions about the house to sound like I’m intelligent, like I know what I’m doing.
Ashley:
Well, can you give us a couple of those questions?
Nate:
I’ll give [inaudible 00:41:41]. Yeah, no, no, no, no. I’m gatekeeping that one. No, but it’s, “Hey, have you made any repairs on the property in the last five years?” “Great, okay.” “How much do you owe on the property?” “Cool.” If they say free and clear, that allows me to think of some, “Oh, maybe there’s a creative option.” “If the right offer came across the table, what would be your ideal timeline? Do you want to sell it?” Because some people are like, “I need to [inaudible 00:42:08] this in two weeks.” Some people are like, “Oh, I have six months.” “Okay, cool.” That allows you to kind of gauge what’s important to them. And I always throw this one in. Now, some people are not going to be very comfortable doing this, but I always try and do it. I’m going to say, “Hey, do you have an ideal price range? It sounds like you’ve had…”
So if Tony, we got past all the objections, and we’re having a conversation, I would say, “So Tony, it sounds like you’ve been approached quite a bit. Do you have an ideal price in mind for what you’d like to get for the property?” And I kind of throw it out super casual, just to see if I can get a number from them. Or if they’re like, “Oh no, I haven’t really thought about it.” And I was like, “okay, cool, but have you thought of maybe a range of where you need to be?” And I try and get a range, because if they’re like, “Oh, well, I need $500 million.” Well, I’m like, “Is that for real?” Because I can always make a joke about it, like, “Hey, listen, I totally would give that to you, but my money people, they don’t let me make that decision, I have to back up my offer.”
But if they’re adamant, like, “Give me $5 million or I’m never selling.” And the most that these houses are selling for are half a million dollars. Okay, “Hey, Mr. Seller, we’re probably not on the same page. I’d love to put a real offer together if you’re serious, but if you’re really stuck at $5 million, I’m not going to be the guy for you.” And sometimes you can break past that by just saying that, but sometimes it’s that’s their number, they’re so sick of people reaching out. “Okay, thank you for your time, have a good day.” And I move on.
Tony:
Nate, so once you kind of go through the conversation and say you find… I guess first let me just ask one clarifying question. How many conversations do you typically need to have to book one appointment? Do you have a ballpark that people-
Nate:
Yes, great question. And this is again, kind of even setting expectations in your mind. I’m not going to speak for anybody else, I’ll speak for myself. There’s been times where I’ve found a house, and I fall in love with this house. It’s so nasty, it’s so vacant, it’s so… hell, my heart-
Ashley:
Smelly.
Nate:
Smelly, you can smell it from the street. And you start thinking about how amazing this deal’s going to be. And then nothing comes of it, right? You can’t find the seller, or they’re not going to sell, whatever reason. In your mind, this is the statistic, based on your skill level, it could be better or worse. But what you need to have in your mind is for every 100 contacts you make, actual conversations, it could be a [inaudible 00:44:36], it could be via email, whatever. For every 100 contacts, you should get one deal. So it kind of translates a hundred contacts, maybe you get 10 appointments, one deal, something like that. That’s not an exact science, but that will help you kind of break down the daily activity that you should have to do to try and get a deal.
So again, if you were sitting in front of me and we were having a conversation, I would say, “You have a list of 200, okay? You’re going to call these people, you’re going to make 100 contacts, 10 appointments, one deal.” That means to break it down super simple, you have to make five contacts every single day, Monday through Friday. You don’t even have to work the weekends, right? Five contacts, Monday through Friday, that should equate to one deal. Now that’s going to depend some on your skill level and different things like that. But I would expect that you would have one deal in the pipeline, one deal under contract, one deal ready to go. Now, if you want two deals a month, well, maybe you need to make 200 contacts in a month. So on and so forth, right?
Tony:
Nate, how are you keeping track of this communication with these sellers? Are you using a CRM? Or are you just kind of keeping track of it in a Google spreadsheet? Or just are you [inaudible 00:45:51] and just it’s all in your mind? How are you keeping track of it there?
Nate:
No, if you know me at all, it’s not safe in here, I’ll forget. Let’s just say there’s been a number of times where I’ve written down something on a paper, and then I found that paper months later and I was like, “Oh, I forgot to put that in Podio, and then I missed that deal.” So for me to manage my deal flow, I’m using Podio for my CRM, so…
Ashley:
What are some other ones that people can use too?
Nate:
Okay, look, if you’re super cheap, just use Google Sheets, something, write it down. What do they say? A short pencil is better than a long memory. So the idea is to write it down and track it. And then the other thing that I have to do for me is because I am a visual person. And so what I’ll do is as soon as I’m done with a seller call, if I have an appointment or a follow-up, I put it in my calendar in my phone so that it comes up like, hey, make sure to follow up with Mr. Smith. Follow up with Tony, he can meet on Friday at 3 o’clock. And so I immediately put that in my calendar, then I’ll put my notes in Podio. And then also track it through there, but yeah, I know there’s a bunch of different ones out there, but Podio is just the one I kind of fell into early on and I’m stuck with it, so…
Ashley:
Okay, cool. And kind of to wrap all of this up, when you do go to the showing, what are some of the most important pieces of information you want at the showing?
Nate:
Yeah, so whether you’re going to wholesale the property or whether you’re going to do it for yourself. And this is something that Tarl… one of the major lessons that I learned. And so even if you’re flipping houses and you’re listening to this, when I show up to the property, my several objectives, one of them being is that I will take 80 to 120 photos of the property. So I will do wide angle photos, I’ll start from the street, and I’ll walk all the way around the property. Then I’ll start at the front door, walk left to right throughout the house. And I’m getting detailed photos of the entire thing. And then I’m taking pictures of the quality of the roof, the water heater, the electrical panel. If I can sneak in the foundation, I’ll take pictures under there. I’m not crawling under there, but I’ll at least take pictures underneath.
I’m paying attention to noting if there’s slants on certain parts of the house. I’ll get under the sinks and take pictures of the plumbing, any of these big ticket items. And so this allows you to do two things. One of the biggest frustrations, because I worked with a lot of wholesalers. One of the biggest frustrations I had as someone trying to buy properties from wholesalers is they would send me three pictures of the house and an address. I’m like, “Hey, do you want this house?” “I don’t know, maybe.” But if you were to, I’ll tell you this right now, you’ll be the rockstar wholesaler in your market if you send a hundred photos.
Ashley:
Not even for wholesaling though, Nate, even just for your own information to put together an accurate offer, to put together your scope of work. And estimate what your rehab is going to be.
Nate:
Yes.
Ashley:
[inaudible 00:49:11] you can go back and you look at the pictures, you can look at the video instead of having to remember like, “Wait, how many windows were on the house now? I think there was two in the front, two in the back.” I’m like, “Okay, well, I’m going to need 10 windows. Here’s what my cost will be.”
Nate:
Exactly, exactly. So two points, so I’ll say, so a typical wholesale package for me is a hundred photos. I’ll sketch a very basic floor plan, I’ll put in some comps and I’ll put in the stats of the property and I’ll send it out. I’m like, “Hey, here’s what I’m thinking. Here’s the major list of things you’re going to have to do.” I don’t necessarily price that out, I have an idea of how much that’ll cost, but everybody’s prices are different. And so I send a package together. And so if you do that for wholesaling a property, man, you’re going to be light years ahead, you’ll get you faster answers as well.
And then to your point, Ashley, is a lot of times I’d be walking these properties for us to buy them. And so it allowed us to do a better scope of work. Or if you’re new and you’re like, “Hey, I don’t even know what this is going to cost.” If you have 150 or 80 to 120 really good photos, you could go to a contractor and say, “Hey, I’ll give you a hundred bucks. Can you sit down with me and tell me how much this is going to cost to do all this stuff?” And it’s going to allow you then to kind of put your scope of work together. It’s very easy, especially if you’re doing a lot of appointments and you’re getting houses mixed up. “Was the electrical panel good on that one?” Or, “Where is…” Oh, man, it’s really easy to get mixed up. So taking that and that allows you then to be more effective if you’re going to buy it as well.
Because the last thing you want to do is, “Oh, hey Mr. Seller, can I meet you at the property again?” And sometimes they’re cool with it, sometimes not, but that allows you to do that a little bit more effectively.
Tony:
Well, Nate, such a wealth of information brother, and I always love when we can deep dive a topic like this because not only is it instructional for the rookie audience, but I feel like Ashley and I always learn a lot when we kind of go through these deep dives as well, man. So I appreciate you pouring into the rookie audience. Before we let you go, got to pick your brain just a tad bit more, and I want to take us to the rookie request line. So for all of our rookies that are listening, if you want to get your question featured on the podcast, head over to biggerpockets.com/reply and we just might use your question for the episode. So Nate, are you ready for today’s rookie reply?
Nate:
I’m so ready.
Tony:
All right, so today’s question comes from Steven Cobb. Steven says, “Hey, I’m in the Dallas, Texas area. I’ve been out Driving For Dollars, and I have a list of about 30 or 40 houses. I’ve already looked up owners and numbers on the county website. Question, when I call the owners, how will I know how much I should offer them? I don’t even know the bedroom square footage of the property or what needs to be repaired. How can I run comps to come up with an ARV so that I know what number to offer even though I don’t have all of this info?” So Nate, what would your advice be to Steven?
Nate:
Steven, great question. Two things. One, Drive For Dollars more, get a bigger list. Two, to answer your question, this is why I always set the appointment. So there’s some things you can do, you can look up the basic square footage, bed, bath count, garage, lot size of a property. And then you can run comps generally on that, you can get a general idea of a range of maybe what that property’s worth. But you’re not going to be effective, I would say, as effective without going and walking the property. So it sounds like you have the hesitation of like, “Well, what do I offer?” Well, do you have enough information? And so that’s why when I call, if they’re open to an offer, I want to then set the appointment. So then I can go and walk the property, take my a 100 photos or so, and then go back and run a proper analysis.
You can do a rough range based on the stats, but I would say set the appointment, walk the property, dial back your expectations. Be like, “Hey, Mr. Seller, I don’t have enough information to make you a fair offer, right? So how I avoid making a low ball offer and offending you is I want to walk the property. Let me walk it, let’s do that, meet you, say hi, and then give me 24 to 48 hours and I’ll get you an offer then.”
Ashley:
Nate, thank you so much for all of your information today and taking the time to come on the episode. I know you’re sick of me and Tony all the time, so I greatly appreciate you taking the time to do this.
Nate:
No, I’m coming to the BiggerPockets Conference just to hang out with you guys.
Ashley:
Well, Tony won’t be there, but-
Nate:
Tony.
Ashley:
He’s having his baby.
Tony:
I’m MIA this year.
Ashley:
Yeah, he’s having his baby.
Tony:
Yeah, the baby’s due I think the week before BP Con, so we will be phoning it in this year, and then we’ll have Baby Robinson at a BP Con 2024.
Nate:
Yes, let’s go. Let’s go.
Ashley:
So Nate, you’ll just have to fill in as Tony for the conference.
Nate:
Done, I will wear my-
Ashley:
Practice his signature, so you can sign some books.
Tony:
Yeah.
Nate:
I’m going to wear my-
Ashley:
Black shirts.
Nate:
… my black shirts and my black shorts, we’ll be good.
Ashley:
Well, Nate, where can everyone find out some more information about you and reach out to you?
Nate:
Yeah, probably Instagram is probably the thing that I’m trying to do the most. So it’s N, the number 8, Robbins, R-O-B-B-I-N-S. And then, like I said, I’ll send you the scripting and stuff. But if people want the script or if they want the objections, I need to see if I can scan that and upload that. If they want to send me a DM, I’m be happy to send that over to them as well.
Ashley:
Okay, awesome. Well, thank you so much Nate, and we will put those documents in the show notes, go on to biggerpockets.com/blog/rookie-326. Or you could just DM Nate on Instagram @n8robbins.
Nate:
Could you say that one more time please?
Tony:
Where do we need to go Ashley? [inaudible 00:55:04].
Ashley:
Everyone knows the dash is I meant horizontal [inaudible 00:55:06] dash, hyphen. Well, Nate, thank you so much for joining us today, I’m Ashley @wealthfromrentals, and he’s Tony at @tonyjrobinson. And we’ll be back on Wednesday with another guest.
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The Step-by-Step Guide to Finding the BEST Off-Market Real Estate Deals
Finding off-market real estate deals can be a great way to kick off your investing career, as it requires very little money to get started. The catch? You must be willing to get your hands dirty.
Welcome back to the Real Estate Rookie podcast! Today, we’re chatting with real estate wholesaler Nate Robbins. After a long and successful career in banking, Nate was beginning to feel burnt out and frustrated with life. As fate would have it, he ran into Tarl Yarber—one of the most successful real estate investors in the Pacific Northwest. Under Tarl’s mentorship, Nate learned the ropes of real estate investing. With his strong people skills, natural ability to communicate, and infectious personality, he was able to carve out a niche in acquisitions—where he has been able to close off-market deals at a massive profit.
If you need real estate to be your escape rope from the monotony of your nine-to-five, this episode is for you! Nate talks about shedding the W2 mentality and how to find the best investing strategy for you. He also shares his step-by-step process for finding highly profitable off-market deals. Whether you’re a bubbly extrovert or a cautious introvert, Nate will equip you with practical tips on how to engage a seller and get your foot in the door!
Ashley:
This is Real Estate Rookie Episode 326.
Nate:
As soon as I say cold calling, most people just kind of shut down. “I’m never going to do that, I can’t do that.” I promise you, you can. With your skill level, with your own unique personality, you absolutely can do this. But I think it’s a matter of managing your expectations, and I think that’s where a lot of people get gummed up. So I’ll tell you what I say and what I do, and then maybe we could dive a little bit deeper on this.
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 rookies, do we have an episode for you guys today? If you have ever thought to yourself, “Where can I find really good deals? How can I do that with the least amount of money possible?” Nate Robbins, our guest for today, is going to answer that question for you. Now, Nate’s a friend of both Ashley and I, he’s one of the biggest characters I think I know in the world of real estate investing. He’s always got a smile on his face, always making people laugh. But don’t let his kind of boyish charm fool you, Nate is an absolute beast when it comes to finding good off market deals.
Ashley:
You know what? That’s so funny because that exactly describes [inaudible 00:01:14] his boyish charm. And yeah, so we bring Nate on today and we talk about how he actually got started in real estate, gives you a little background of that. And it was a very unique situation, and how he took advantage of this opportunity presented to him.
Then we’re going to go into how to source a deal, how to find a deal. And Nate will walk you through the two different paths as to how he finds addresses or gets the houses that he wants to go after. And we break down exactly what you should say on the phone, exactly what you should do when you’re at a seller appointment, step-by-step instructions. As you’re listening to this, I want you to write down notes of what Nate is going to say. And kind of develop your own plan to follow this along, and just try it out.
Pick up the phone, make a phone call, go door knocking, but Nate does a really great job of describing in detail a step-by-step list for you to go and do exactly what he’s doing.
Nate Robbins, welcome to the Real Estate Rookie Podcast.
Nate:
It’s the honor of my life, I love you guys. And your audience doesn’t know how lucky they are to have you in their lives.
Ashley:
Well, thank you, that was a very nice compliment. But today we are here to shower you with love and admiration on your real estate investing journey. So Nate, why don’t you start off telling everyone a little bit about yourself, and then how you got started in real estate.
Nate:
Yeah, so back in 2016, I was working for a bank. I’d been working at a bank for about five years, I was a private client banker. And I’ll be honest, I really should not be where I am today. There’s just no logical reason way that I am where I am today. And so I was working at the bank back in 2016, and I was actually hitting kind of a midlife crisis. I was very frustrated with my work, frustrated with life. And I got off a very frustrating phone call with a client and I hung up, and I just see this random guy standing in the lobby. And not wanting to make any more phone calls, I just get up out of my desk. I wasn’t necessarily supposed to pull the clients from the lobby. Walked over to this guy and I said, “Hey man, how can I help you?” And he goes, “Well, I need to open a business account.” And I was like, “No problem, I can help with that.”
And so I brought him over to my desk, [inaudible 00:03:47] chatting with this guy and I’m like, “Dude, you’re a really cool guy. What do you do?” And he goes, “Well, I’m in real estate.” I was like, “Oh, that’s cool, I’ve always been interested in real estate.” And I bought Carleton Sheets when I was 18, trying to… Your audience wouldn’t even know who Carleton Sheets is.
Ashley:
I don’t know who that is.
Tony:
You don’t know Carleton Sheets, Ashley?
Ashley:
No, no.
Tony:
So I don’t know, I was a really weird kid, I would stay up late during the summer months. And late at night when you don’t have really good cable packages, all you see is infomercials.
Ashley:
Mm-hmm.
Tony:
And every single night Carleton Sheets had an infomercial running for this at-home kind of package that taught you how to buy real estate with no money down.
Nate:
Yeah.
Tony:
Anyway, he was one of the big real estate info marketers back in the day.
Nate:
He’s the original guru kind of thing, he sold the program and then he’d get you in your loop and he’d sell you more programs and stuff. And so yeah, it’s kind of funny. Hey, actually Tony, if you want, I’ll send you the tapes, you could listen to him again if you want.
Tony:
My dad actually had a copy, I was in his garage a decade ago and found [inaudible 00:04:51] and Sheets’ tapes also.
Nate:
It actually has some pretty good stuff in it. It’s pretty basic, but it’s really good stuff. And I’m like, “Oh, okay, cool.” Yeah, it’s nice, but-
Ashley:
Okay Nate, you don’t need to give us your affiliate link now, back to you.
Nate:
So I’ve actually signed up, but-
Ashley:
Sign up under me.
Nate:
Yeah. I can promote my Amway business also? So anyway, that one conversation with that business account ended up being a conversation with who you guys know, Tarl Yarber. I don’t know if your audience would know who he is, but was one of the most successful real estate flippers up here in the Seattle Pacific Northwest market. And so he’s like, “Well, hey, let’s grab coffee and a lunch.” And so that turned into about a two or three month conversation. And then after about three months, he said, “Hey, I’m willing to offer you a 90-day contract to come work with me.” And so I had to make the choice of, do I stay at a safe job at the bank? Or do I take a chance on a 90-day contract to go and maybe succeed or fail at real estate? And so thankfully, the fear of not knowing what would happen was greater than the fear of being safe or the need for security. And so I took the chance and it’s been an absolute wild, wild ride ever since.
Ashley:
In that moment when you were looking at, okay, 90 days, what happens after 90 days? Are you the type of person that’s like, “Worst case scenario, this is what I can do.” Did you think you could go back to your other job? Maybe if somebody listening is given that same opportunity, what’s your advice on ways that they can take that chance and kind of shift their mindset to leaping into something that may only be 90 days and not continue on?
Nate:
Yeah. Well, I got to the point, and again, I was kind of in a existential crisis a little bit in my life. And so I got to a place… Because it was a big deal, I was on a fairly successful track with my job, I had a plan, a 10-year plan. And I got to the point of saying, or I had this image of saying, “Well, I’m on my deathbed.” It was kind of future casting. I’m on my deathbed, I’m always going to wonder what if? And the fear of… I had to see, I had to know what if? What if it did succeed? What if I did make it? What if this was my chance? And I had to know even if I failed. And so I kind of hedged my bets where I left gracefully, I left kind of on an extended timeline to help my manager out. So I knew that I could always come back if I failed, but I had to know.
And so I think sometimes it’s easy to play it safe, but on your deathbed when you’re dying and you’re about to take your last breath, are you going to be glad you took the chance? Or are you going to be glad you played it safe? And I think most people… And I’m sure you guys see a lot of these same motivational things. Most people on their deathbed when they interview these people on their last moments, it’s not taking the chance, it’s not taking the risk and taking the opportunity. And so for me, I had to see what happened down this path. And yeah, I would encourage other people too, it’s man, take the chance, see what happens.
Tony:
Nate, I just want to ask, you’re talking about taking this chance, but you worked in a bank, but were you in the mortgage department? Did you have any type of real estate experience prior taking this big bet on yourself I guess?
Nate:
No, none.
Ashley:
So why would Tarl want you? What were the things that you thought… What did he see? Besides how handsome you are, what are some other qualities that he looked for?
Nate:
Have you seen this hair?
Tony:
I was just about to say, man, and how perfectly quaffed that [inaudible 00:08:56].
Nate:
It’s almost as good as yours, Tony. It’s almost as good. Yeah, well, I think obviously, I have a real hard time talking to people. I don’t have any kind of personality and I stutter a lot. So those were some of the hindrances I had, but I think I owe a lot to Tarl for where I am at today. And I think what he saw… And he’s very good at this as well, when he sees potential in somebody, he’s really open to taking a chance on that person. And so I think it was probably pretty obvious that I was miserable, and I think from our conversations together he saw somebody that was really miserable, had a lot more potential and was stuck in a place that wasn’t that great for him.
And so Tarl saw that in me, and I think just doing what I do because my strong suit really is building relationships with people, it’s communicating, it’s getting to know somebody, it’s building rapport. And so my job within the bank was as a private client banker, so I was dealing with high net worth clients. I had no real estate background, I really didn’t have anything as far as real estate was concerned to bring to the table. But my personality, my ability to communicate and talk to people, that really I think is what kind of opened the door for me to work with Tarl.
Tony:
Nate, just I want to go back really quickly to something that you mentioned about the whole laying on your deathbed thing. And I think there’s a lot of value and you used a phrase future casting in that way. And there’s a book I’m reading right now, it’s called The Good Life, and it’s by two doctors, Robert Waldinger and Marc Schulz. But basically it was this longitudinal study where they followed hundreds of people over multiple decades. From the time they were 18 until they were in their 80s, and they passed away. And they even followed on with their kids and their grandchildren. So just crazy amount of data and it just goes into hey, what are the key factors of actually living a good life based on this really long comprehensive study? And a lot of it was kind of tied into what you said about taking some of those risks. And kind of surrounding yourself with people that you really get energy from. As opposed to being in an environment where you’ve got a bunch of energy vampires that are kind of pulling life out of you.
So I just wanted to plug that book, I’m 30% through it, I’ve already really enjoyed it. But The Good Life by Robert Waldinger and Marc Schulz, if you guys are looking for a good read on that.
Nate:
Yeah, I think you bring up a very interesting point that I’m still learning. And I think at least in my life, there’s a tipping point where I’ll be in a situation or I’ll be in a job, well, not a job anymore, but I’ll be in a situation where it no longer feels life-giving, it’s an energy drain on me. And I think it’s very challenging to want to pursue safety and security over having the integrity to say, “Hey, this is no longer really helping me, it’s killing me.” And trying to make active changes. Because the reality is we’re not trees, we can move, we can make changes, and we can make those things, right? So when you realize that those things are starting to happen to you, maybe it’s a relationship, maybe it’s a job, maybe it’s something, you have the ability to make changes to improve that situation and find that vein of, “Hey, this is giving me life, this is now exciting, this is good for me, this is getting me to where I need to go.”
So just being aware of that, and I’m still learning that as well, but okay, now I need a change, let’s start working that.
Tony:
One more plug, because I said the word book. And anytime we say the word book on this podcast, Ashley and I now have to plug the Real Estate Partnerships book with Ashley and I co-authored. If you head over to biggerpockets.com/partnerships, you guys can pick up a copy of that book. But now anytime the word book or partnership is mentioned on this podcast, we have to plug the Real Estate Partnerships book.
Nate:
Okay, well, we’re going to plug that a couple more times then.
Ashley:
Pretty soon anytime the word real estate is said, I’m plugging it. So tell me, Nate, what kind of investing do you like to do?
Nate:
Well, actually after that whole thing with Tarl, I don’t actually do real estate anymore.
Ashley:
Oh, real estate, so we have this [inaudible 00:13:14]. Let’s talk about when you made that transition. You’re leaving your bank job and you’re going to work for Tarl, what were some of the things that you were doing for this job? What was the actual position?
Nate:
So this is a little bit funny, and I’ll do the [inaudible 00:13:31]. Tarl, when he hired me he was looking to replicate himself. He wanted to kind of get a step away from the business, run the business and just replicate himself. And we could probably talk about this as well, but I left the bank with a very much of W2 mentality. And Tarl was looking for somebody with more of a independent, I’m going to go figure this out and get it done. So the first two weeks I’m just sitting in the car with him like, “All right man, tell me what to do. I have no idea anything about anything, just tell me what to do.” And after about a month of that, he was starting to get pretty frustrated. And so if you talk to him ever, you’ll find out I was on my way to getting fired actually. And then we went to a Jocko Conference down in San Diego and that reframed some of his thinking, and so anyway, I got a second chance.
But what was apparent is that my strong suit and my skillset wasn’t really around the detailed operations of managing a project. Now, I can do that, but I wasn’t the skill match for Tarl. And so what it became apparent is that I’m much more stronger suited or my skillset is really in building relationships and that type of thing. And so the role that I kind of fell into or I kind of got more focused on was acquisitions. So networking with wholesalers, going direct to seller and that kind of the wholesale aspect of the business. And so just again, kind of Tarl realizing, “Hey, you’re better suited over here, not what I originally planned. So let’s move you over here and get you kind of in a better role.” And so that was kind of how I kind of fell into this whole acquisitions, door knocking, cold calling, deal finding, all that kind of good stuff.
Ashley:
That is such a real thing, the W2 mentality. And it’s also part of who you are too as far as your DiSC profile and things like that as to how you perceive the world. But being you just want to be told how to do something and you can master it instead of having to figure it out. And then there’s other people that want to figure it out and can figure it out. But that was something I struggled with too with one of my business partners, he came from the W2 world. And everything was handed to him as to, “Here’s what you have to do.” And he would just go and do it. And then it was on to the next thing of [inaudible 00:15:57] what you had to do. And there was never really a lot of decision making or even scheduling yourself or any kind of task management because everything was just given right to you.
And I think making that transition is really hard. Honestly, I think it took him a year. Now he oversees all of the maintenance for my property management company. And it is boom, boom, boom, everything is just done, he just takes action on it. But if he was doing that a year and a half ago, I literally would’ve had to sit down with him, “Okay, here’s this work order, this is what you have to do. Now let’s schedule it for this day and this time. Now go ahead and text her, tell her you’re going to be here at this time this day.”
Nate:
Yeah.
Ashley:
But now he can just go and figure it out, but that is such a big thing. So what are some of the things that you did to kind of get out of that? Because I feel you obviously haven’t stayed stuck in that W2 mentality. I can seriously doubt Tarl is still telling you exactly what to do every day.
Nate:
Well, it’s actually funny because now I’d say about 8, 12 months ago, we’ve kind of stopped doing real estate up here in the Pacific Northwest. So we work together on other aspects of that, and so if I did have any W2 mentality a year ago, it’s definitely gone now because it’s now 100% dependent on me, right? And so I’m looking, I’m trying to think back to my mentality on this kind of stuff, and I think it’s when you really, really want it bad enough, you will figure it out. People want the easy road, they want the easy five steps to make a million dollars. And that information exists except for… What did I see? Hold on, I have to read this quote today. And I posted this, right? It was like, “Building a real estate business is simple, knowing what to do is simple. Executing on what to do is hard, being consistent is hard, delayed gratification is hard, being persistent is hard.”
And so I think it’s just one of these things that it’s not wrong to have a W2 mentality, but it can be hard to succeed. And so you have to have this mentality of, “I am going to succeed, I’m not going to quit. I want this and I’m not going to wait for somebody else to come kind of spoonfeed me. I have to go get it and I’m going to go get it.” And so I don’t know if that was clear, but that’s kind my thought process on that.
Tony:
You kind of said it yourself that no one’s going to spoonfeed you, you have to go get it, Nate. So once you and Tarl had that realization of the detailed operational management isn’t kind of speaking to your natural genius, it’s more so the relationship side. What did that onboarding experience look like? How did you figure out what you should be doing every day? Or what was the effective way to go out? And just even I guess just taking them one step back, if you can first just define kind of what your new goal was after you guys have kind of decided, “Okay, here’s the role for Nate.” What was the end result you were looking for? And then how did you go about teaching yourself how to do that?
Nate:
Yeah, so one of the advantage… Now, I have to be very clear, I had an extreme advantage working with someone like Tarl, because it gave me a lot of things. It gave me access to a lot of high level people that normally a lot of people starting out don’t get, so that was an advantage. He put me in the room with a lot of very successful guys that I could pick their brain and kind of learn from their systems and stuff like that. And so that was a huge advantage. I think with social media and things like that, people today, even if you’re starting out, you can still kind of get the help that you need, but it was really nice having that kind of thing.
Now, the thing that was a challenge was that there was no onboarding process. There was no “Hey, this is how you wholesale.” It was more like, “Hey, go talk to this person and figure it out.” And so even though I had these connections, I made a lot of stupid mistakes. Which we could talk about if you want, because I’m sure your audience would love to hear about dumb things that happened, but I know I do.
Ashley:
I would love to hear about what that process has turned into for you because that was part of a lot of value that you bring. And you’ve helped me a ton with this, is how to actually talk to people to sell their property, and what those kind of processes are. So do you want to start from the very beginning of how you’re even finding a house, how you’re then finding the seller and kind of go from there?
Nate:
Well, first off, Tony, did I answer your question? Did I get to that?
Tony:
Yeah.
Nate:
Okay.
Tony:
I think the only other thing I’d add is just the goal of what it is, right? Tarl brought you in because he had a business of flipping homes. And in order to profitably flip homes, you have to buy properties at a discount in comparison to what you’ll be able to sell them for. So if I’m hearing you correctly, Nate, the role that you were then slotted to fill was to help Tarl find those undervalued properties. Am I hearing that correctly?
Nate:
Correct. And that came through, it could be a number of different ways like networking with other wholesalers myself doing that, agents. It was just I just need to bring in, I think it was about two to three deals a month is what I needed to bring in to the business.
Ashley:
Okay, let’s start with that of how are you even finding the deals you’re bringing them in? I want to create a step-by-step process so everyone listening can go ahead and write this down, make their own little checklist and kind of do exactly what you do, because you are so great at it. So first thing, how to find houses, go ahead.
Nate:
Yeah, well, thank you for that kind word. I will say there’s two tracks, right? There’s the people… And we could go deep on this if you want because this is where I’m probably most passionate about. You have the people that don’t have a lot of disposable income, and they’re going to have to bootstrap it. And they’re just going to have to get after it until they can make some additional income. And so on that vein, so we have the, “I have to just get after it.” Because they don’t have a lot of capital invest. There’s a couple of things that I would say. Number one, is I would download the Driving For Dollars App. And if people aren’t familiar with Driving For Dollars, it’s basically where you drive around neighborhoods and you’re looking for dilapidated houses, tarps on the roof, boarded up windows, overgrown lawns, vacant houses, missing power meters, things like that.
And so if you don’t have a lot of money to invest, and there’s other apps that can do this, I just prefer… because I’m friends with Tucker Merrihew. I don’t get any kickbacks from this, although, Tucker you should sponsor me. But I would download the Driving For Dollars App, and then over a weekend I would drive around median priced houses in a neighborhood that you’re relatively familiar with or a town or a city you’re familiar with. And I would drive up and down every single street and I would create a list of at least a thousand houses over a weekend. And so if you live in a place like Portland, you could do that in a couple of hours.
Ashley:
So what are you looking for when you’re looking at these properties? What was some of your kind of criteria?
Nate:
So I kind of mentioned before, if the house is vacant, if you’ve got boards on the windows, if you’ve got tarps on the roof, if it’s overgrown and with a bunch of vacant nasty cars in the thing, any signs of distress really. With this one, sometimes you can be a little bit liberal on it, you just have no idea who’s willing to have a conversation, but any signs of distress. Pro-tip, actually drive down the alleys. I don’t know in most cities, but ours, we have kind of back alleys that drive between two streets of houses. Sometimes that gives you a different perspective where the house looks good on the front, and you go down the alley and all of a sudden there’s a, “Oh, this is absolutely really bad.” So you can mark the house down, but any signs of distress, just mark it down.
And so what the Driving For Dollars App will allow you to do is you can just drive with the map open or the app open. You can drop a pin on the house and you can just kind of track your progress on what streets you’re going up and down. And I would just continue to build that list. Ideally, you want to build that list of 5, 7, 10,000, depending on your market and depending on how hard you want to go.
Tony:
Just one clarifying question.
Nate:
Mm-hmm.
Tony:
So Nate, I want to give some context to the rookies that are listening because you just said you want to get this list to not 500, but 5 or 10,000. First, how much time do you think it would take for someone to get to a list of that size, Driving For Dollars? And just like cumulatively, how much time do they have to spend driving? And then why does the list need to be so big? Because I think some people have this misconception around the volume that you need to be able to source markets off deals. So how much time? And why that volume?
Nate:
So I would say a couple of things on that. Number one, you don’t have to have 5 to 10,000 to start. If you were a brand new person, if one of your listeners is a brand new person, sat in front of me. And they’re like, “I want to get my very first deal.” I would say, “Download this app, and then go create a list of 200. Start with 200, and tell me your top 20 worst houses that you found, that are vacant. For sure there’s nobody in there and they’re really, really bad.” And so I would start, you don’t have to have that number, but if you’re going to build a business and actually grow this to continually source off market stuff, basically you want a larger list. And the reason you want that is… And I’ve seen this a lot with a lot of newer people, is that they’ll find 100 houses, and they’ll market to that, but they won’t get any calls.
Well, your section of people, it’s too small. And you just need a larger group to actually try and generate consistent leads. And so if you have 5, 6, 10,000 houses that you’re marketing to, well, then the deals will start… you’re going to get more deals that way, essentially.
Tony:
And I think just one thing to call out is that sellers’ timelines don’t always match with when you’re marketing to them. And this is, I kid you guys not, when I first started investing in real estate back in, I think it was summer of 2019. I sent out a bunch of mailers to Shreveport, Louisiana, where I was investing at the time. I got a call last week from someone on one of those mailers and he said, “Hey, I wasn’t ready to sell when I got your mailer, but I’m ready to sell today.” That was almost four and a half, five years ago that I sent those mailers out and someone’s calling me today. So I think it just goes to show that you’ve got to start planting those seeds, and then over time they all start to kind of sprout up.
Ashley:
Tony, are we going to have another story about another house in Louisiana?
Tony:
No, I didn’t even call them back. I didn’t even call them back, I’m not going back there.
Nate:
Give me the lead, I’ll deal with it. I got you.
Ashley:
Yeah, yeah, give it to [inaudible 00:26:53]. So as far as, okay, you have your list, you have the property address, right?
Nate:
Yep.
Ashley:
Are you finding other information? What’s happening once you’ve started to build this list of addresses?
Nate:
Yeah, so what I would say, again, if you have no money and you’re bootstrapping it and you’re just starting out. What I’d say is once you get to 200, I’d start taking action. Now, the Driving For Dollars App, and I know there’s other apps that will… DealMachine I think is one other one, they’ll give you a little bit of the seller’s information. Seller data is probably one of the most challenging aspects of off-market stuff, because you’re not always getting the right stuff. Most skip tracing services are probably 70% accurate. And so I probably spend a little bit too much on this, but I have three other programs that I pay every month to have access to.
And so yeah, these would be the ones I use. And you don’t have to spend all this money on these, but if you’re going to do this longterm it might be worth it. I have Whitepages, and I think that’s 60 bucks a quarter, so 20 bucks a month, I think. REISkip, you pay per skip on that one, so you put in 50 bucks and then it’ll last you until you’re done.
Ashley:
Nate, what’s a skip?
Nate:
Oh.
Tony:
Yeah.
Ashley:
You pay per skip, what’s a skip?
Nate:
Oh, good question. So basically Whitepages… let me give you this and I’ll explain all that. So I’ve used Whitepages, REISkip and People Finder PRO, and then Driving For Dollars. And so what this does is this allows you to look up the homeowner’s information, and get a bunch of emails, phone numbers and potentially mailing addresses. And so between the Driving For Dollars App, Whitepages, REISkip and People Finder PRO, I generally can find a phone number for the seller. And so if you were again, sitting in front of me, I’d say, “Once you have a list of 200, you have your top 20 worst ones. I would not think about it too much, look up, even get a piece of paper out, write it down, your seller leads, write down all their phone numbers, and then just pick up the phone and you call.”
Tony:
So you mentioned a few pieces of software, but you didn’t mention PropStream. Which I feel is a super popular one for a lot of wholesalers that I know. Is there a reason why you’re not using that software?
Nate:
I use PropStream when I’m pulling lists and stuff like that.
Tony:
Mm-hmm.
Nate:
So I do use PropStream, there’s nothing against it, it’s just for the initial find on things… I have nothing against PropStream, I use them. This is just kind of how I kind of started, and I’ve just kind of got stuck in my ways. And so this is not the only way. This is not the only way.
Tony:
Yeah.
Ashley:
Okay, so now you’ve got your list. So you gave us the example of Driving For Dollars, and actually looking at the properties. But then you mentioned sometimes you do use PropStream to actually pull lists without doing the Driving For Dollars. So when you go into PropStream, they have the filters. So what are some of the filters that you are using to kind of find the properties for you?
Nate:
Okay, so I think if I were to break this down in my mind, and maybe for your listeners, I would say that if you have a little bit of money to invest in pulling a list and hiring a professional company, then I might use PropStream. And then there’s two thoughts within this. One, you can do just try and get the cream of the crop off the top of a market. And then you can really dive in deep and then try and stack your lists. And so what that means is if you find multiple pain points on a property, that’s going to give you a better chance of maybe having a conversation, maybe having them want to sell. So what do I mean by that? I mean that if you have a house that’s vacant, that’s out of state owned, they have a code violation and they’re tax delinquent, right? Let’s imagine those are all the problems. And you can filter for that on PropStream.
Basically that seems like a great motivation for somebody that doesn’t live there, it’s vacant, it’s got problems, it’s got taxes backing up. That seems like it’d be a great motivation, so you can spend the money to then pull these lists, stack them together, and then you can call them. But that’s going to cost you a little bit of money. Or if you want to do, I’m doing some general marketing, trying to see if I can pull some easy stuff off the top of a market. So I’m actually just starting this down in Arizona, is I just pulled a tired landlord list, right? So right now just with everything, I just pulled a list and that’s an actual subtitle on PropStream. And so you can just go down from the suggested list.
Yeah, it’s just tired landlords, and so I pulled the area that I wanted to be in. And I just pulled that list, it was about 5,000. And so then I sent it over to my skip tracing company, which I just got a new one. And then I sent it over to my marketing people and we’re now marketing to that, so we’ll see what happens. Did that make sense, kind of the two thoughts there? You can go just general kind of broad spectrum over a market, or you can go real deep on a market and by stacking lists and stacking pain points.
Tony:
And I also just want to shout out, right? So as an alternative to PropStream with some of the data that Nate’s called out here. BiggerPockets also has a partnership with Invelo, that’s I-N-V-E-L-O. And Invelo also allows you to pull a lot of that kind of owner data that you’ll get from some of these other sources.
Ashley:
As a pro member, you get a $50 credit. So if you are already a pro member, go and spend that $50. And if you’re not a pro member, you can sign up at biggerpockets.com/pro
Nate:
Sweet.
Ashley:
So Nate, okay, you have your list created, you went and you either were Driving For Dollars and got some addresses, or you were going on your software and looking up properties. So now that you have your list together of addresses and now you’ve used your tools like Whitepages, things like that to find the phone numbers of the people who may own this property. When you make the call, what do you say?
Nate:
Ooh. Now, again, I’m going to preface this with saying, I’m very comfortable doing this. When I was a kid, just to give you a backstory, it’s funny how things kind of come full circle. I mowed lawns to make a living, and to make money my junior high and high school days. And so I would literally door knock people and go do this. I’m like, “Here, I’m door knocking again, it’s like I can’t get away from it.”
So this is something that I’m very comfortable doing. And something that I think everybody can do, but I think it’s a matter of managing your expectations, and I think that’s where a lot of people get gummed up. So I’ll tell you what I say and what I do, and then maybe we could dive a little bit deeper on this because as soon as I say cold calling, most people just shut down, or door knocking, shut down. “Oh, I’m never going to do that, I can’t do that.” I promise you, you can. And with your skillset, with your skill level, with your own unique personality, you absolutely can do this.
Ashley:
Real quick, part of the reason we are doing this episode today is because Nate flew out to Buffalo to visit me. And we’re driving from getting chai tea, and he sees the house with papers in the window like it might be vacant, whatever.
Nate:
Signs.
Ashley:
Pulls it up, finds a relative of the person that died in that house, and they’re five minutes from my house. And he is like, “I’m going to drive over there and knock on their door, see if they want to sell it.” I was like, “Okay, you and Daryl go, I going to just stay here. I don’t want to go do that, that makes me scared and nervous.” So part of this episode that we’re having is for me to become better at cold calling, cold knocking-
Nate:
Yeah, cool.
Ashley:
… door knocking.
Nate:
Next time I come out you’ll come with, you’ll be fine.
Ashley:
I’ll have to do it, yeah. He’ll wait in the car and make me go.
Nate:
And she was the nicest lady. So I think honestly, and we could talk about some resources and books that’ll help people with this, but I keep it very, very simple. So when I’m cold calling and we could role play. Who wants to role play?
Ashley:
Go ahead, Tony.
Tony:
Yeah, I’ll be the landlord here.
Nate:
Okay, cool. So let me just preface this and say that the only objective that I have for this very first call is going to be, “Are you open to an offer?” That’s the only thing I need to figure out. One of the pitfalls that I see with people is that sometimes they’ll see a vacant house and they’ll begin to fantasize about how amazing this house is, all the money that I’m going to make when they… And then they find out that they’re not even wanting to sell, that you can’t find a good working number. And so you begin to get way down the road. All you need to do for this very first conversation is just figure out, “Are you open to an offer?” All right. So this is how the conversation would go, and then we can kind of break it down. So ring, ring.
Tony:
Hello.
Nate:
Hi, is Tony there?
Tony:
Yeah, who is this?
Nate:
Tony, hey, yeah, my name is Nate Robbins, I’m really sorry to call you out of the blue like this. The reason for the call is I’m in the process of trying to buy a house here in Tacoma, and I noticed your house over on Main Street. It is probably a long shot, but-
Tony:
Look, I get calls like this all day. How did you get my phone number?
Nate:
You know what, Tony? I totally get that. I’m sorry, it is kind of a random call like this. So basically I drove by your house over on Main Street, homeowner information is public record. I use a program called Whitepages, it was actually a book when I was a kid. And I just looked up your own information and thought I’d give you a call. [inaudible 00:36:15] old school like that, I’d rather talk to you face-to-face, versus just sending you a letter. And so I don’t know, I’m just curious if there’s any chance you might be open to considering an offer on the house.
Tony:
Well, I get calls like this all day, Nate, so what’s your number?
Nate:
You know what? That’s a great question. Well, Tony, I’ve only ever driven past the house one time and I’m assuming you’re probably like me. I’ve been on the receiving end of low ball offers, and low ball offers are very offensive to me, and I don’t want to do that to you. And so I don’t actually have enough information to really make you a fair offer. So it sounds like you might be open to actually looking at an offer if it was a fair price.
Tony:
Yeah, I think I’d be open to that.
Nate:
Okay. Yeah, great. Well, how I make sure… I’d like to ask you a couple of quick questions right now if I can have 30 seconds. And then what I’d really like to do is then find a time to actually walk the property. I’d love to actually meet you in person, so you know I’m a real person. But would it be possible to walk it maybe this Friday? Are you going to be around?
Tony:
Yeah. All right, that’s pretty good, Nate. I feel like I threw some curveballs at you, man, and you handled those pretty well.
Nate:
Yeah, [inaudible 00:37:24] I’ve done this before.
Tony:
Because I’ve done a very, very few cold calls before trying to source my own deals. And it’s always like, “Who are you? How’d you get my number? I don’t want a low ball offer, the property’s perfect.” But you’ve kind of got a way to handle all of those objections it sounds like.
Nate:
So I don’t know if there’s a best way to do this, I have a couple of things I could give your audience. Number one, I can give you my script, which is I’m happy to do. And then I also have a worksheet that has… really, there’s six objections you are going to encounter if you cold call or door knock. And one of those is, how’d you get my number? What’s your offer? There’s some basic ones you’re going to come in contact quite a bit.
Ashley:
Okay. Yeah, Nate, we can put those into the show notes, it’ll be at biggerpockets.com/blog/rookie-326. Or you can also send Nate a DM on Instagram, and I’m sure you give him your phone number and your address, so he can cold call you, he would definitely give you a script.
Nate:
Yeah. Well, before we go too far on this, I would say you might get a seller that’s like Tony. They’ll just immediately, “What are you doing?” Or you are going to get people that are getting a lot of calls or getting a lot of mail, you will do that. Most people, however, if you are normal on the phone, are very normal. And so there’s a couple key things. Number one, again, managing your expectations like, “I’m only there to see if you’re open to an offer, if not, no big deal.” And this goes back to our original point of saying, why do you have 5,000 houses on your list? Or even if you have 500, right? It doesn’t matter if you tell me, no. It doesn’t matter because I have 499 other people I got to call. So you have that kind of thing, but when you call though, you have seven seconds to get to this line. And Ashley’s heard me talk about this before and she’s posted about it, is the reason for the call, right? You have to get to that, because you’re calling these people out of the blue.
And once you get to that line, it kind of allows you to get past their wall, right? It gets you kind of behind their immediate rejection. “Hi Mr. Seller, my name’s Nate, sorry to call you out of the blue. The reason for the call is I’m trying to buy a house, I’m trying to buy a rental.” Whatever your motivation or your goal is for your investing. And then, “I’m just curious if you’re open to an offer.” Again, yes or no. And then you might have to handle a couple of objections, which is totally fine. And I play off the, “Well, how’d you get my information?” I play it off like it’s no big deal. It’s no big deal, this is not a big deal.
“Oh, I looked it up, homeowner information’s public record.” “Cool, cool.” And then I always make a joke about Whitepages used to be a book. I’m like, “Oh, back when I was a kid, it was a book. Now it’s online, I just looked you up.” And then I just give that reason, then I don’t know if you noticed what I did is I immediately went on to say, “Do you think you might be open to considering an offer?” It’s almost like you just went past it, I didn’t even care. You do care, but you’re just kind of scooting past it, right? If that makes sense.
Tony:
Mm-hmm.
Nate:
And then he might bring up another objection. “Well, let’s just talk about it.” And then, “Okay, so it sounds like you might be open to an offer.” So you’re just kind of pushing the conversation forward. And then basically if they say, “Yes, yeah, I’d be open to an offer.” “Hey Mr. Seller, my process is because I don’t want to offend you with a low ball offer. I don’t want to offend you.” Most people don’t want to be offended. “Let me walk the house so I can make sure I make a fair offer.” And then that allows you to then kind of go to the next step of actually creating a good offer. And then if you’re going to wholesale it, if you’re going to buy it yourself, it allows you to put accurate numbers together to make the deal happen. So if they say yes, then I’m shooting for the appointment, I want to see the house.
Ashley:
So are you trying to set the appointment right then and there on that phone call too?
Nate:
Absolutely, no and yes.
Ashley:
Okay.
Nate:
Yeah, if they said no, I might toy with them a little bit, but if they say yes, I’m going to say, “Hey, cool, great.” I’m going to ask them a couple of questions about the house to sound like I’m intelligent, like I know what I’m doing.
Ashley:
Well, can you give us a couple of those questions?
Nate:
I’ll give [inaudible 00:41:41]. Yeah, no, no, no, no. I’m gatekeeping that one. No, but it’s, “Hey, have you made any repairs on the property in the last five years?” “Great, okay.” “How much do you owe on the property?” “Cool.” If they say free and clear, that allows me to think of some, “Oh, maybe there’s a creative option.” “If the right offer came across the table, what would be your ideal timeline? Do you want to sell it?” Because some people are like, “I need to [inaudible 00:42:08] this in two weeks.” Some people are like, “Oh, I have six months.” “Okay, cool.” That allows you to kind of gauge what’s important to them. And I always throw this one in. Now, some people are not going to be very comfortable doing this, but I always try and do it. I’m going to say, “Hey, do you have an ideal price range? It sounds like you’ve had…”
So if Tony, we got past all the objections, and we’re having a conversation, I would say, “So Tony, it sounds like you’ve been approached quite a bit. Do you have an ideal price in mind for what you’d like to get for the property?” And I kind of throw it out super casual, just to see if I can get a number from them. Or if they’re like, “Oh no, I haven’t really thought about it.” And I was like, “okay, cool, but have you thought of maybe a range of where you need to be?” And I try and get a range, because if they’re like, “Oh, well, I need $500 million.” Well, I’m like, “Is that for real?” Because I can always make a joke about it, like, “Hey, listen, I totally would give that to you, but my money people, they don’t let me make that decision, I have to back up my offer.”
But if they’re adamant, like, “Give me $5 million or I’m never selling.” And the most that these houses are selling for are half a million dollars. Okay, “Hey, Mr. Seller, we’re probably not on the same page. I’d love to put a real offer together if you’re serious, but if you’re really stuck at $5 million, I’m not going to be the guy for you.” And sometimes you can break past that by just saying that, but sometimes it’s that’s their number, they’re so sick of people reaching out. “Okay, thank you for your time, have a good day.” And I move on.
Tony:
Nate, so once you kind of go through the conversation and say you find… I guess first let me just ask one clarifying question. How many conversations do you typically need to have to book one appointment? Do you have a ballpark that people-
Nate:
Yes, great question. And this is again, kind of even setting expectations in your mind. I’m not going to speak for anybody else, I’ll speak for myself. There’s been times where I’ve found a house, and I fall in love with this house. It’s so nasty, it’s so vacant, it’s so… hell, my heart-
Ashley:
Smelly.
Nate:
Smelly, you can smell it from the street. And you start thinking about how amazing this deal’s going to be. And then nothing comes of it, right? You can’t find the seller, or they’re not going to sell, whatever reason. In your mind, this is the statistic, based on your skill level, it could be better or worse. But what you need to have in your mind is for every 100 contacts you make, actual conversations, it could be a [inaudible 00:44:36], it could be via email, whatever. For every 100 contacts, you should get one deal. So it kind of translates a hundred contacts, maybe you get 10 appointments, one deal, something like that. That’s not an exact science, but that will help you kind of break down the daily activity that you should have to do to try and get a deal.
So again, if you were sitting in front of me and we were having a conversation, I would say, “You have a list of 200, okay? You’re going to call these people, you’re going to make 100 contacts, 10 appointments, one deal.” That means to break it down super simple, you have to make five contacts every single day, Monday through Friday. You don’t even have to work the weekends, right? Five contacts, Monday through Friday, that should equate to one deal. Now that’s going to depend some on your skill level and different things like that. But I would expect that you would have one deal in the pipeline, one deal under contract, one deal ready to go. Now, if you want two deals a month, well, maybe you need to make 200 contacts in a month. So on and so forth, right?
Tony:
Nate, how are you keeping track of this communication with these sellers? Are you using a CRM? Or are you just kind of keeping track of it in a Google spreadsheet? Or just are you [inaudible 00:45:51] and just it’s all in your mind? How are you keeping track of it there?
Nate:
No, if you know me at all, it’s not safe in here, I’ll forget. Let’s just say there’s been a number of times where I’ve written down something on a paper, and then I found that paper months later and I was like, “Oh, I forgot to put that in Podio, and then I missed that deal.” So for me to manage my deal flow, I’m using Podio for my CRM, so…
Ashley:
What are some other ones that people can use too?
Nate:
Okay, look, if you’re super cheap, just use Google Sheets, something, write it down. What do they say? A short pencil is better than a long memory. So the idea is to write it down and track it. And then the other thing that I have to do for me is because I am a visual person. And so what I’ll do is as soon as I’m done with a seller call, if I have an appointment or a follow-up, I put it in my calendar in my phone so that it comes up like, hey, make sure to follow up with Mr. Smith. Follow up with Tony, he can meet on Friday at 3 o’clock. And so I immediately put that in my calendar, then I’ll put my notes in Podio. And then also track it through there, but yeah, I know there’s a bunch of different ones out there, but Podio is just the one I kind of fell into early on and I’m stuck with it, so…
Ashley:
Okay, cool. And kind of to wrap all of this up, when you do go to the showing, what are some of the most important pieces of information you want at the showing?
Nate:
Yeah, so whether you’re going to wholesale the property or whether you’re going to do it for yourself. And this is something that Tarl… one of the major lessons that I learned. And so even if you’re flipping houses and you’re listening to this, when I show up to the property, my several objectives, one of them being is that I will take 80 to 120 photos of the property. So I will do wide angle photos, I’ll start from the street, and I’ll walk all the way around the property. Then I’ll start at the front door, walk left to right throughout the house. And I’m getting detailed photos of the entire thing. And then I’m taking pictures of the quality of the roof, the water heater, the electrical panel. If I can sneak in the foundation, I’ll take pictures under there. I’m not crawling under there, but I’ll at least take pictures underneath.
I’m paying attention to noting if there’s slants on certain parts of the house. I’ll get under the sinks and take pictures of the plumbing, any of these big ticket items. And so this allows you to do two things. One of the biggest frustrations, because I worked with a lot of wholesalers. One of the biggest frustrations I had as someone trying to buy properties from wholesalers is they would send me three pictures of the house and an address. I’m like, “Hey, do you want this house?” “I don’t know, maybe.” But if you were to, I’ll tell you this right now, you’ll be the rockstar wholesaler in your market if you send a hundred photos.
Ashley:
Not even for wholesaling though, Nate, even just for your own information to put together an accurate offer, to put together your scope of work. And estimate what your rehab is going to be.
Nate:
Yes.
Ashley:
[inaudible 00:49:11] you can go back and you look at the pictures, you can look at the video instead of having to remember like, “Wait, how many windows were on the house now? I think there was two in the front, two in the back.” I’m like, “Okay, well, I’m going to need 10 windows. Here’s what my cost will be.”
Nate:
Exactly, exactly. So two points, so I’ll say, so a typical wholesale package for me is a hundred photos. I’ll sketch a very basic floor plan, I’ll put in some comps and I’ll put in the stats of the property and I’ll send it out. I’m like, “Hey, here’s what I’m thinking. Here’s the major list of things you’re going to have to do.” I don’t necessarily price that out, I have an idea of how much that’ll cost, but everybody’s prices are different. And so I send a package together. And so if you do that for wholesaling a property, man, you’re going to be light years ahead, you’ll get you faster answers as well.
And then to your point, Ashley, is a lot of times I’d be walking these properties for us to buy them. And so it allowed us to do a better scope of work. Or if you’re new and you’re like, “Hey, I don’t even know what this is going to cost.” If you have 150 or 80 to 120 really good photos, you could go to a contractor and say, “Hey, I’ll give you a hundred bucks. Can you sit down with me and tell me how much this is going to cost to do all this stuff?” And it’s going to allow you then to kind of put your scope of work together. It’s very easy, especially if you’re doing a lot of appointments and you’re getting houses mixed up. “Was the electrical panel good on that one?” Or, “Where is…” Oh, man, it’s really easy to get mixed up. So taking that and that allows you then to be more effective if you’re going to buy it as well.
Because the last thing you want to do is, “Oh, hey Mr. Seller, can I meet you at the property again?” And sometimes they’re cool with it, sometimes not, but that allows you to do that a little bit more effectively.
Tony:
Well, Nate, such a wealth of information brother, and I always love when we can deep dive a topic like this because not only is it instructional for the rookie audience, but I feel like Ashley and I always learn a lot when we kind of go through these deep dives as well, man. So I appreciate you pouring into the rookie audience. Before we let you go, got to pick your brain just a tad bit more, and I want to take us to the rookie request line. So for all of our rookies that are listening, if you want to get your question featured on the podcast, head over to biggerpockets.com/reply and we just might use your question for the episode. So Nate, are you ready for today’s rookie reply?
Nate:
I’m so ready.
Tony:
All right, so today’s question comes from Steven Cobb. Steven says, “Hey, I’m in the Dallas, Texas area. I’ve been out Driving For Dollars, and I have a list of about 30 or 40 houses. I’ve already looked up owners and numbers on the county website. Question, when I call the owners, how will I know how much I should offer them? I don’t even know the bedroom square footage of the property or what needs to be repaired. How can I run comps to come up with an ARV so that I know what number to offer even though I don’t have all of this info?” So Nate, what would your advice be to Steven?
Nate:
Steven, great question. Two things. One, Drive For Dollars more, get a bigger list. Two, to answer your question, this is why I always set the appointment. So there’s some things you can do, you can look up the basic square footage, bed, bath count, garage, lot size of a property. And then you can run comps generally on that, you can get a general idea of a range of maybe what that property’s worth. But you’re not going to be effective, I would say, as effective without going and walking the property. So it sounds like you have the hesitation of like, “Well, what do I offer?” Well, do you have enough information? And so that’s why when I call, if they’re open to an offer, I want to then set the appointment. So then I can go and walk the property, take my a 100 photos or so, and then go back and run a proper analysis.
You can do a rough range based on the stats, but I would say set the appointment, walk the property, dial back your expectations. Be like, “Hey, Mr. Seller, I don’t have enough information to make you a fair offer, right? So how I avoid making a low ball offer and offending you is I want to walk the property. Let me walk it, let’s do that, meet you, say hi, and then give me 24 to 48 hours and I’ll get you an offer then.”
Ashley:
Nate, thank you so much for all of your information today and taking the time to come on the episode. I know you’re sick of me and Tony all the time, so I greatly appreciate you taking the time to do this.
Nate:
No, I’m coming to the BiggerPockets Conference just to hang out with you guys.
Ashley:
Well, Tony won’t be there, but-
Nate:
Tony.
Ashley:
He’s having his baby.
Tony:
I’m MIA this year.
Ashley:
Yeah, he’s having his baby.
Tony:
Yeah, the baby’s due I think the week before BP Con, so we will be phoning it in this year, and then we’ll have Baby Robinson at a BP Con 2024.
Nate:
Yes, let’s go. Let’s go.
Ashley:
So Nate, you’ll just have to fill in as Tony for the conference.
Nate:
Done, I will wear my-
Ashley:
Practice his signature, so you can sign some books.
Tony:
Yeah.
Nate:
I’m going to wear my-
Ashley:
Black shirts.
Nate:
… my black shirts and my black shorts, we’ll be good.
Ashley:
Well, Nate, where can everyone find out some more information about you and reach out to you?
Nate:
Yeah, probably Instagram is probably the thing that I’m trying to do the most. So it’s N, the number 8, Robbins, R-O-B-B-I-N-S. And then, like I said, I’ll send you the scripting and stuff. But if people want the script or if they want the objections, I need to see if I can scan that and upload that. If they want to send me a DM, I’m be happy to send that over to them as well.
Ashley:
Okay, awesome. Well, thank you so much Nate, and we will put those documents in the show notes, go on to biggerpockets.com/blog/rookie-326. Or you could just DM Nate on Instagram @n8robbins.
Nate:
Could you say that one more time please?
Tony:
Where do we need to go Ashley? [inaudible 00:55:04].
Ashley:
Everyone knows the dash is I meant horizontal [inaudible 00:55:06] dash, hyphen. Well, Nate, thank you so much for joining us today, I’m Ashley @wealthfromrentals, and he’s Tony at @tonyjrobinson. And we’ll be back on Wednesday with another guest.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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As rising mortgage rates push buyers to the brink, sellers are starting to cut prices
Even with demand buoyed by a sparse housing inventory, growing financial challenges for buyers are forcing home sellers to cut prices to close deals, a new Redfin research report found.
According to the brokerage, 6.5% of U.S. homes for sale posted a price cut during the four weeks ending September 24, up from 5.8% the month prior.
In some markets, more than 50% of active listings have experienced a price cut, according to Altos Research. The five metro areas with the highest percentage of listings with price cuts for the week ending Sept. 22 were Wenatchee-East Wenatchee, Washington (53%); Idaho Falls, Idaho (52%); Carson City, Nevada (52%); Austin-Round Rock-San Marcos, Texas (52%); and Waco, Texas (51%).
Due to a lack of supply, prices overall have been on the upswing. The median U.S. home sale price rose 3% year over year, reaching $420,846 in August, the largest annual increase since October 2022. And because mortgage rates have been above 7% for about two months consecutively, the cost of financing is extreme. The average principal and interest payment among borrowers purchasing a home using a 30-year fixed-rate loan hit its highest point ever in July at $2,306, according to Black Knight’s mortgage monitor report. With taxes and insurance, most buyers today are approaching $3,000 or more
Pricing accurately is paramount
“Pricing is the absolute number one, most important factor when somebody sells their home,” Robert Andert, a real estate agent on The Minnesota Real Estate Team, told HousingWire in an interview in July. ”So even in the market that we’re in now, with a high demand, if a home is overpriced, it’s not necessarily going to move right away.”
On the one hand, there are very few homes on the market, with total inventory down 15% year over year, according to Redfin. But on the other hand, homebuyers are also growing more price-sensitive as monthly payments eclipse an all time high.
“Buyers are picky and they don’t want to pay a dollar more than they need to,” the report said.
Available inventory of home for sale is ticking up
Hence, homebuyers are encouraged to negotiate with sellers, who seem willing to make concessions. However, available inventory of homes for sale is on the rise in late September, a very unusual trend for the season, Altos Research’s Mike Simonsen noted in a HousingWire article this week. It is giving buyers a little more leeway and allow them to chose from a larger selection of homes.
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Opinion: When it comes to default and REO, what you don’t know will hurt you
Even though mortgage origination volumes are down, we’re experiencing a highly competitive purchase market. That means a number of businesses, seeking to grow their revenue, will likely look to expand their reach to the default and REO space.
But for those who haven’t done their homework, this is not an easy step, nor is it easy money. More than a few firms learned this the hard way during the housing meltdown and Great Recession, when foreclosure volume soared and public scrutiny intensified.
Those who cannot remember the past are condemned to repeat it. It can also be said that those who have not stayed current with this changing environment will be in for some serious challenges as well.
A moment of reckoning may be imminent for the default and REO industry. Many in the industry are already rising to meet it. Yet, we’re going to soon find out who’s heeding the lessons taught by the last foreclosure wave.
A look at default activity past and present
The default industry was thrust into the public view during the Great Recession. From 2007 through mid-2013, approximately 5.5 million households lost their homes to foreclosure.
While there are many reasons this came to be, the public focus quickly turned to the consumer and how poorly, in their perception, lenders and servicers treated them during the process.
Within the industry, many providers struggled with the sheer volume of transactions. While the historic amount of foreclosure activity was unprecedented, the industry, as a whole, was not as prepared as it should have been.
At least, that was the general perception.
Now, reports from Black Knight and ATTOM are showing signs that, while we may not be looking at another foreclosure spike anything like what we experienced in the late 2000s, we are likely in for a definite increase in default activity.
Understandably, foreclosure has never been a popular topic. Nor should it be. It’s the antithesis of the American Dream.
The mortgage lending industry exists to make home loans, not to repossess them. But the default surge accompanying the Great Recession; the struggle to manage it effectively and the subsequent public backlash inspired a number of consequences that changed the way lenders, default-focused firms and REO businesses had to operate.
What had already been a lengthy and complex process, as a result, became even more complicated. A 2012 Gallup Poll asserted that 58% of Americans preferred that the federal government take additional action to prevent foreclosures.
There’s little to suggest that sentiment has changed, which means that, today, mortgage lenders need to focus not only on an additionally scrutinous enforcement but the impact of public sentiment as well.
The housing meltdown and Great Recession inspired a flurry of activity in the hopes of dampening any future such surges in foreclosure. Some unintended consequences, such as the rise of “zombie foreclosures” or increase in abandoned properties, were the result.
It would appear, now, that we’ll find out how effective the changes made will be.
What’s really changed since 2013?
The obvious result of the surge of foreclosures in the early 2010s was a wave of legislative and regulatory action. Especially where service providers were unprepared for the sudden pivot in market conditions after the refinance boom of the early 2000s.
The result of that reaction has been a no-nonsense approach to default and foreclosure. While well intended, that reaction has only created an extended foreclosure process.
Another lesson learned, the hard way, from the foreclosure spike of the late 2000s was that scalability is the key to a market that can change quickly.
More than a few of the consumer-focused stories featured in the mainstream media during the height of the foreclosure spike were likely the result of the quick pivot from refinancing boom to default that caught many businesses flat-footed.
Most of them are no longer in the industry. But the result remains the same.
The default industry has digitalized a lot more. Many of the largest servicers have made major investments in automating their production platforms and workflow management systems. But they have yet to be tested by heavy volume.
The next major change in the default landscape is the way those who hold the loans, the lenders, are reacting to default. Likely because of more aggressive regulatory scrutiny, loss mitigation has become more of a priority.
Loan modifications, deeds in lieu and short sales have now become the preferred path to addressing defaults, although none of them are 100% effective. In fact, one could argue that they can often delay the process or even exacerbate the challenge.
The bottom line? It’s harder, more expensive and more time-consuming to foreclose on a defaulted mortgage today than ever before.
How should the mortgage, servicing and default industries be preparing for the inevitable next spike?
The 2008 housing crisis happened 15 years ago. The world, and the default industry, are different now.
Lenders, servicers, asset managers and all of the other firms working in the REO industry should be well aware that default volume will soon be increasing and that it’s well past time to prepare.
It starts with compliance (and a little bit of PR). Public perception, right or wrong, has led to fairly intense scrutiny of the default servicing industry.
As volume increases, servicers and lenders should be sure to have compliance resources in place. They should also be on top of other compliance considerations such as oversight, training, staffing recommendations and, above all, documenting everything.
Lenders and servicers should also be mindful of the push toward “first look” programs as well. This is a direct reaction to the surge of single family home purchases by investors seeking to subsequently rent those properties.
Freddie Mac, for example, has put forth an initiative which, for the first 30 days of a new MLS listing, essentially blocks out investors in favor of owner-occupants or public entities that would drive owner-occupancy instead of rental.
As is so true in any industry, compliance begins on the front lines. If a lender or servicer has a solid set of policies and procedures, but its contractors or employees don’t adhere to them, the lender or servicer faces the same exposure they would if they had no plan in place at all.
Having the right boots on the ground is critical and that starts with thorough training (and continuous updating) and effective monitoring. This won’t just protect against legal or regulatory risk. It’s also a sound way to help improve or at least maintain the entire industry’s reputation in the eyes of the media (as well as the public and regulators).
Consumer experience needs to be a part of the overall strategy of every firm serving the default and REO space.
Technology is often mentioned as a panacea for just about anything, but the investment must come after careful consideration about what systems are needed and what will provide the best fit.
Now is the time for any business involved in the REO industry to strategically review its workflow and efficiencies, especially on the customer service and field management side of operations.
More importantly, technology is the ultimate fulcrum for “right-sizing” staffing levels. There are numerous options available for scalable solutions. And the businesses that leverage them will likely see the positive results in the coming year.
Final thoughts
This is an industry of partnerships. A successful home closing simply cannot happen without a multitude of firms — mortgage brokers, appraisers, title companies, real estate brokers and professionals — investing their efforts and collaborating. If your partner/service provider isn’t of a like mind, you’re not ready for the next REO spike.
There are a number of other considerations for which we’ll all need to be prepared when default volume increases.
Vendor management should begin with holding third party service providers to the same standards as the company they’re serving and they should be held accountable if they fall short of those standards.
In many cases, the existing standard even needs to be raised. Be certain your vendors are staying updated and have effective policies that align with your own regarding legal eviction, rehabilitation, liens, code enforcement, vacant property registrations
A mortgage lender with the right approach will still be faulted for a botched or inhumane eviction process if the law firm or third party with which it partners doesn’t share the same principles and practices.
The good news is that any number of firms (real estate professionals, servicers and asset managers) have long since evolved from where the industry was in 2010.) The ability to oversee and monitor has also been dramatically improved with the arrival of better technology.
Stricter compliance standards demand better vetting. It’s built upon seamlessness. For instance, does their tech align with yours?
However, the service levels of the vendors you depend upon to manage your risk mitigation and default processes (servicers, real estate professionals, asset managers) can make all the difference. This is a nation that revolves around perception. Public relations can mean everything, although this is not a call for “spin.”
There are community-focused default professionals and businesses out there. One of the easiest ways to mitigate the heightened risk that comes with conducting default-related transactions in high volume is to find programs and entities that are working to do things the right way.
The best default professionals aren’t looking to take people out of their homes. They’re looking to help them to find their path back to the American Dream. In so doing, they’re also supporting the entire REO and default industry.
Michael Krein serves as President of the National REO Brokers Association (NRBA) and Managing Partner for House Karma, a digital ecosystem created to facilitate affordable, sustainable homeownership and neighborhood stabilization.
To contact the author of this article:
Michael Krein at mkrein@nrba.com
To contact the editor responsible for this article:
Deborah Kearns at deborah@hwmedia.com
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Pending home sales fell 7.1% in August
Mirroring the trend for new home sales, pending home sales fell 7.1% in August, according to data released Thursday by the National Association of Realtors (NAR). All four regions of the U.S. posted month-over-month and year-over-year declines in transactions.
Year over year, pending home sales were down 18.7%, an even greater decrease than the 14% annual drop recorded in July. Despite falling in August, new home sales remained 5.8% higher than the previous year, while pending home sales continued to lag last year’s levels.
The NAR’s Pending Home Sales Index fell to a reading of 71.8 in August. An index of 100 is equal to the level of contract activity in 2001. Existing home sales also fell in August, down 15.3% below the August 2022 level.
Pending home sales are based on contract signings.
“Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers,” Lawrence Yun, NAR chief economist said. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.”
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Fannie Mae announces new resources and assistance programs to address Latino homeownership access
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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How to Retire with “Turnkey” Rental Properties (as a COMPLETE Beginner)
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:
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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Plunk partners with two real estate industry marketing platforms
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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Home inventory is climbing even faster than this time a year ago
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.
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.
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.
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
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.
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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MV Realty files for bankruptcy
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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Better conducts layoffs just weeks after going public
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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