Stop Looking for Perfect Properties, Search for These Instead

David:
This is the BiggerPockets podcast show 772.

Henry:
The people buying now are the people who are buying in 2009, right? Those people were pumped that they bought in 2009. This is what it looks like. This is what it looks like to build wealth. It’s not pretty now, but I think it’ll be beautiful in the long run.

Rob:
We’re always going to be pumped that we bought now 10 years from now.

David:
I say that constantly. Tell me a person you know that bought a house 30 years ago that says, “I wish I never would’ve done it.” What’s going on, everyone? This is David Greene, joined by my fellow avengers, Rob Abasolo and Henry Washington with a special episode for you guys today. We are going to be talking about how to analyze deals in 2023 in the challenging market that we’re in. The reason that we are making the show is we actually received a one-star review on Apple podcast. We wanted to share that with everyone so they can understand where we’re coming from. The review was titled, “It used to be my favorite podcast.”
The reviewer says, “I used to listen to the show religiously, but it feels like it gets more negative with each new episode I listen to, and it makes real estate investing seem unattainable.” Now, that was a bit of a bummer. However, we understand where the person’s coming from, right? The one-star review may not have even been reflective of us. It could have just been frustration with the market, or it might be that we’re shooting straight with everybody. We’re in a position here where we could tell you that everything that glitters is gold, and real estate is easy, and you should quit your job, and spend your whole day listening to us. Replace your active income with passive income.
But for those of you that are living in the real world, you’ve seen how unattainable that can actually feel. The show is a reflection of what we’re seeing in the market, and we value integrity over money. We’re never going to tell you anything that we don’t actually think will work, and it can feel like a bummer. We get it. So in today’s show, we are going to be replying and responding directly to this concept that real estate feels unattainable, and giving you some tips, techniques and tricks that work in today’s market as well as where expectations could be set, and what we are all doing to make deals where other people are missing them.
Before we get to the show, today’s quick tip is brought to you by me, and it is, “Change your expectations when it comes to real estate investing, and stop looking at it only for a cash on cash return.” We are going to talk about the internal rate of return. We’re going to talk about tax savings. We’re going to talk about adding equity, buying equity, converting equity, a lot of more high level stuff when it comes to real estate investing that the savvy investors are using to still get returns on their money outside of just a straight cash on cash return. So, think about real estate a little bit differently, and I think after today’s show, we will have helped you do that. Anything you guys want to add before we get into it?

Rob:
Well, we’ll uncover later that I’m not good at free styling, so listen to the very end to understand this reference, but no.

David:
That is perfect. Let’s get into it. Robuilt, Henry Washington, welcome to the BiggerPockets podcast. First and foremost, how are each of you today?

Rob:
Good. Good. Thanks for having me on, man. It’s always been a dream to be on this show.

David:
I know you actually mean that today because you’re not wearing a black pocket tee. You’re wearing a white shirt.

Rob:
That’s right.

David:
Your camera lighting is brighter than usual. You have a bit of an angelic glow as we’re recording here.

Rob:
New year, new me, baby.

David:
Yes. Wonderful. Henry, back in the purp as always. I see. Still looking cool. How are you today?

Henry:
I am fantastic, bud. Happy to be here talking to my buddy Rob and David.

David:
Yeah, thank you for the also ran mention there. If people don’t understand what I’m talking about, go follow us on YouTube. You will see more than you were just hearing, and all of this will make sense. Now, today’s show is going to be a little different. We are venturing into territory that most podcasts are afraid to, but because I’m hosting this thing, and I fear no evil, we’re going to get right into it, and direct this. We received a review about the show, which I think bears repeating with everybody. So, this came from… It was a review title that was labeled, “Used to be my favorite podcast.”
The reviewer said, “I used to listen to the show religiously, but it feels like it gets more negative each new episode I listened to, and it makes real estate investing seem unattainable.” The three of us put our heads together there, and thought like, “This is probably a common theme a lot of people are feeling,” that they started listening to BiggerPockets podcast. They started listening to real estate investing online, and it was this really shiny, blustery object like, “Hey…” I don’t know. Is blustery good? I’m even thinking luster, and I just added bluster, so opposite of bluster, lustery object, very appealing. You’re hearing all these stories of people that quit their job after six months, or became multi-millionaires on the power of real estate investing.
People charge into this thing super excited about real estate investing, and then they either get their clock cleaned, or they can’t find the deal that people explain that they got, and they get discouraged and think it’s something wrong with them, or they buy bad deals, because they’re trying to figure out, “Well, if you just buy real estate, it’s supposed to work.” Then no one talks about it. No one jumps up and screams, “I lost a lot of money making bad decisions.” They just slink into a hole of shame, and sit there. We want to just have an honest response to this that real estate is harder than I think it’s ever been.
So, let’s start off with you, Rob. What is your overall experience with the market now versus when you first started investing, and when was that?

Rob:
I’m going to answer that, but before I do, I just want everyone at home to know that we read every single review, and we take them all very seriously. When someone leaves us a five-star review, it makes our day. When someone leaves us a one-star review, which is rare, but that’s what happened here, it bums us out. We want to make sure that the show relates to everybody. So, going back to your question, David, what was it?

David:
I was talking about how you never listened to me.

Rob:
Yeah, that’s on me.

David:
What was real estate like when you first started investing, and when was that?

Rob:
I started investing in 2017, so around six years ago. Back then, for me, it was the Wild West. I think true Wild West for short-term rentals in Airbnb was probably like 2010 to 2014, really probably 2010 to 2017. You could have done anything, and made money on Airbnb. But me getting in, that’s when people started to figure it out and figure out that you could actually make big money on it. At the beginning, it was people just renting out a bed in their house, and they were making extra cash on the side. But 2017 is where people were like, oh man, “We could rent an apartment, and then put it on Airbnb, and make $2,000 or $3,000 a month.”
At that time, it was really, really, really hard to fail. I will totally never say that me getting into this, and building what I built was because of any particular genius. It wasn’t because I made the right decisions. It’s just because I happened to get started when I got started, not necessarily from a time standpoint, but I just started and figured it out relative to the market that I was in. So, I could really walk into any deal, and have a large margin of error. The returns from 2017 to 2021 were pretty unreal. 2021 was the most money that anyone really ever made in this industry. Then 2022 and 2023, that’s when we started to see the calibration in things hitting what I think is really back to normal.
So, a lot of people right now are… They’re a little nervous because they’re like, “Oh my gosh, you’re making way less money.” Overall, I would say most hosts are making between 15% to 30% less year over year on their properties, and that’s a big hit. I can totally understand why anybody would be scared at that metric, but I think that that’s a lot closer to what it was before 2020 and 2021. So when you evaluate everything, it does seem scary, but I just think that we’re calibrating to more realistic and normal returns. Does that make sense?

David:
Yeah. 2021 was the era of steroids in baseball. There is an asterisk that year. It was the best you’re ever going to see. Now that more people are getting into this, like you were saying, there’s maybe 15% to 30% less returns per property, but that’s because there’s probably 15% to 30% more people that are getting in this, that that money is getting spread around four, which is how equilibrium works. We have the option to tell you the truth, which is what we at BiggerPockets believe is the right approach, and all three of us that are on this show is integrity is more valuable than money. I was just telling someone that earlier today, or try to put some lipstick on that pig, and sell you on a dream, get you all hyped up, get your advertising dollars, and then watch you get destroyed when you realize, “Oh, it’s a lot harder to hit that baseball when you’re not on steroids.”
I mean, I think that’s one of the reasons 2021 was so good, and a lot of people do use that as their baseline, which would be a mistake. Henry, what about you? How long have you been investing, and what was it like when you started?

Henry:
Man, every time I do a show with Rob where we talk about our history in investing, it’s so aligned. I also started in 2017, so I’ve been doing this for just about six years. When I look at what I was buying back then, we were buying single families, small multi-families, we were buying them at about a 30% to 40% discount. We were either renting, mostly renting them, and then I would do the occasional flip. I was getting at about… At that time, I was getting between 5% and 7% interest, and so when you hear Rob talk about he feels like this is getting back to normal, that is exactly how I feel. I mean, now we’ve gotten a little past normal on the interest rate side now, because we’re up above that 6% and 7% for investors anyway getting loans, but it has felt more like a reset than a crash or what some people are saying.
So, yeah, it’s been a reset. I think there’s a caveat to my strategy versus Rob’s short-term rental strategy. It’s that I’ve always been trained to look off market. So, I’ve been building systems and processes to help me find off market deals before I even knew that that’s what I had to do. That’s just how I learned this business, and so if my deal flow hasn’t changed from then to now, I get the same amount of deals for the same amount of effort, because looking off market, you’re more buying situations than you’re buying houses, and there’s always going to be a situation where people are willing or need to sell at a discount.
That hasn’t changed, but what has changed is the disposition strategy, because the market is going to reward you in some way, shape or form. It’s either going to reward you through appreciation cash flow or equity. So when I first got started, I was holding a lot, because it was fairly easy to cash flow. I could get deep discounts. I have… I’m in a market where I can get fairly decent rents, and I’m in a market where the entry price, the purchase prices aren’t through the roof. I’m not in a California or a Florida, Texas New York realm, and so being in Arkansas, I can get good entry prices. So, almost every deal would make sense from a rental perspective, so we kept a lot.
But then 2021 hit, and I started doing the math on, “Well, yeah, I could rent this, and make a few hundred dollars a month net cash flow, or I could sell it, and make $90,000. I just bought it six months ago.” It was really hard to hold those, and so we were capitalizing on what the market… In sports, David, we say you take what the defense gives you, right? The defense was saying, “I’m going to give you a big bag of cash for this property, and it’s going to take you 15 to 20 years of cash flow to even get close to the amount of money you’re going to make if you sell it.” So, we pivoted by selling a lot in 2021, and I used that as a time to trim the fat in my portfolio. I had properties that were cashed on a little bit that I didn’t love. We would sell them.
If I had properties that were more maintenance intensive than I had hoped, we would sell them, because we could get paid for selling them in that market. So, now, I would say that the defense is telling us, “Well, you’re not going to make a ton if you sell it, and your cash flow is going to be a little difficult.” Now, we have to really pay attention to how we’re analyzing the deals, and then make a call. Mostly, that call right now is, “Am I willing to make a little bit of cash flow, or break even in hopes that when interest rates come down that we get a bump in the market, and appreciation goes up, or do I flip it and make 20,000, 30,000?” So, it’s the same game, but the disposition gets a little different.

David:
That’s a great way of looking at today’s episode. We are talking about in today’s market against today’s defense, what is it giving you, and how do you take advantage of it? There are times when, if we’re going to stick with a basketball analogy here, where you’re playing a scene with a terrible defense, and your goal is to score as much points as you can, and get your starters out of the game. This was the Golden State Warriors for years. Stephen Curry didn’t even play the fourth quarter, and it gave them a better opportunity to have a better longer season, because they could rest their stars. They could score a lot of points. Teams didn’t know how to guard him.
Then there’s times where the market’s going to give you a very difficult defense like now where you feel like sometimes, it almost might feel like it’s impossible to score. Can you run the defense ragged for the whole shot clock, and make them tired so that later in the game, you have an opportunity? Can you get fouled and start to just try to get into the bonus? There’s something that can be done, but if your expectation was, “We’re going to make three passes, and get a wide open three pointer by one of the best shooters in the world,” and if that doesn’t work within basketball isn’t working, you’re not adapting well.
Real estate is cyclical. Economic cycles are by definition cyclical. There are times where it’s hard to buy real estate. There are times where it’s easy. There are times where we are printing a lot of money. There’s times that we’re in a recession or a depression. There’s going to be different defenses that we’re going against. I think your example there is really, really good. So, let’s use that as a jumping off point. Rob, what is your preferred method of investing?

Rob:
In terms of which asset class?

David:
Yes. Yes.

Rob:
Short-term rentals, I don’t think… Not much of a secret there, but it is starting to move a little bit into… I’m doing a lot more stuff this year I think, and this will still feed into short-term rentals for sure, but I’m definitely really heavying up in the Sub2 creative finance space, because for me, that’s the solution to all the problems that we’re seeing right now with interest rates and everything.

David:
All right, so let’s talk about expectations. What were they when you started, and what are your expectations right now that you’re investing in a tougher market?

Rob:
Okay, cool. So, here’s… One other thing that I wanted to say about all this is that… I hate to even say this. Maybe we’ll cut it out, but I feel like the last five years, real estate was a get rich quick scheme like, “Everyone was making money.”

David:
I would say in the short-term rental space specifically, your experience, yes.

Rob:
But legitimately, you could make a lot of money, but most veterans, I think, know and understand that all real estate is not get rich quick. It’s get wealthy over time, and then there will be pockets within the timeline that you can make a lot of money. So, for short-term rentals, that’s what it was, and now, you can still make really good money, personally, I think. I’ll walk you through a deal in a second. I just think it’s not like… I don’t think you’re going to retire off of one property. I’ve personally anecdotally have never paid myself really for my short-term rental properties. So whether my portfolio makes 10K or 7K, it doesn’t affect me too much, because it all just goes back into all the properties that I’m buying.
But all to say these days, here’s the cash on cash that I’m looking for. Traditionally, over the last five years, I was looking for a 30% to 50% cash on cash return, which I don’t even like putting that out there. This is not really something I would ever tell anybody listening to this like, “Go get a 50%.” It’s ridiculous. It’s just how it was.

David:
Well, let me jump in there. That’s what you were getting because when you compared all the deals that you were looking at, the top, top, top deals could provide a 30% to 50% return. Because you had a really good deal funnel, you had a really good analysis system, you were good at what you do. You were only buying the best deals, which provided that. That does not mean the person who’s brand new is going to step in, and, to use the basketball analogy, get the same wide open look that you’re getting.

Rob:
Correct. Yes. Thank you for that. That’s why I’m like, “I don’t even want to put it out there,” but we bought a chalet in the Smoky Mountains. I think all in, we paid 50K for furnishings, down payment, everything. We grossed 83,000 the first year, profited like 58. I don’t know. It was something like that, right? So, that one was a perfect deal, but these days, it is just not like that anymore. I think a lot of people want to achieve that, but nowadays, I’ve really… I’ve tampered it more and more over the last year. At the beginning of last year, I was cool with a 20% to 25%. I was settling for a 20. Right now, a 15% cash on cash return is what I’m looking for when I very conservatively underwrite all my short-term rental deals.
That’s a really big change from when I started. That’s nowhere near the same return profile, but I am also really just padding my underwriting to just allow… I’m trying to make it… Even if it is, let’s say, a 25% or a 30%, I’m purposely adding so much stuff in my underwriting to try to get it to a 15% just so I’m like, “All right, doomsday scenario, can I get a 15%?” If the answer is yes, I’ll move forward with it. If it’s less than that, I won’t do it.

David:
All right, so you are still taking a cash flow heavy perspective where you want a cash on cash return at 15%. That’s still the most important metric that you’re looking at when you’re analyzing deals.

Rob:
Well, there’s more to it than that, David. I mean, look, I think when you’re analyzing a property, it’s not just the cash flow. You have to look at the overall ROI of the property, and that ROI is going to be calculated between cash flow, debt pay down, tax deductions and appreciation. So when you factor all those things in, it usually doubles roughly your cash on cash, I believe. I’d have to look at my calculator. Am I okay with… Me personally, do as I say, not as I do. I’m fine with a 10% really at the end of the day.

David:
If it’s the right property, right location, right value add.

Rob:
Yeah, because the ROI is going to be much higher than that if I ever sold it in five to 10 years. But baseline, if I were just looking at it from a cash-on-cash perspective, which I think nowadays, I’m not, but for someone getting into it, I think a 15% is a pretty good metric with the way interest rates are.

David:
There’s a good point in there. When you first start learning about real estate, we use ROI, return on investment as the metric that we teach people to look at, which is in our world, really, what we’re saying is cash-on-cash return. That’s the technical term for what we’re describing. We say ROI, but the I in ROI is investment, and we’re talking about the return on the cash we put in the deal, not the overall investment, because it makes you money in other ways too. The more accurate way of measuring your ROI is actually called the internal rate of return, IRR. That’s something worth Googling. It’s something to go onto BiggerPockets, and take a look at.
This is a metric that syndicators use, because they’re looking at the return on a property if you own it for five years, seven years, 10 years. They’re including the cash on cash return that we just described, the loan pay down, the equity that you may have created by buying an undermarket value as well as the equity that you may have created by value add to the property. Increasing the rent amounts makes it worth more money when you go to exit. There’s lots of ways real estate makes money, tax advantages. IRR really takes all of those into consideration. So when you hear someone like me say it’s not all about cash flow, that doesn’t mean cash flow doesn’t matter. It means it is a piece of…
It’d be like saying, “Well, it’s not all about how well you can score.” That doesn’t mean scoring doesn’t matter in sports. There’s more to it. That’s obviously a part of it. So when it comes, Rob, to the deals you’re looking at, where are you starting financially? How do you tend to fund most of the deals you’re buying?

Rob:
Over the last couple of years, we have been doing OPM, other people’s money, and working with individual investors. We have since switched to that, and now we’re doing fundraising with Robuilt Capital. We haven’t really launched it yet, but we’re going to be doing a fund, and working on more value ads, because I think that that’s where the real equity and appreciation will come into play for 2023. It’s taking a dilapidated RV park, making it… sprucing it up, making it a lot nicer, doubling the income, getting a lot of value, and basically forcing appreciation that way. That’s where I’m moving is out of single family acquisitions into much bigger developments and projects.

David:
All right, Henry, moving on to you here. When it comes to your expectations, what is your approach right now to real estate investing in this tougher market?

Henry:
When we first started out back in 2017, I remember I was a big BiggerPockets Brandon Turner guy.

David:
Nice subtle dig there. Let’s hear more about your ex. How is she compares to me?

Henry:
Brandon was the $100 a door after all expenses, right? That’s how I evaluated and determined if the rental property was going to make sense. I wanted a 7% to 10% cash-on-cash return, and I wanted a $100 a door net cash flow.

David:
You’re talking after expenses, after vacancy, after CapEx.

Henry:
All the expenses, guys, not just the mortgage, taxes, insurance. I’m uber conservative on my expenses numbers. I over budget for my expenses, because then when I know I see $100 net cash flow, I’m probably going to make more than that. That’s how we were analyzing deals back then. Now, things are a little different, but not much because back then, I didn’t have the consistent deal flow that I have now. I was building those processes. No, as the processes are well established, and I have great deal flow, I understand my market better, and have some… There’s some predictability with what I see coming in the door.
I’m a little more… Greedy is not the right word, but I want my numbers to be better. I’m a little more picky. So for me, we are looking at, “If I’m going to buy a single, and hold it as a rental, I want my singles to pay me a multi.” So, I want $200 to $300 net cash flow per door on a single. On a multi, I’ll take 100 to 200 net cash flow per door. I would like a 10% cash-on-cash return, but if it’s a multi, it doesn’t have to give me a 10% cash-on-cash return, because the multis are just so much more beneficial both from a cash flow perspective, also from a tax perspective. Then from a value perspective, the value of those goes up faster.

David:
Well, the fronts are are going up by $100 a year, and you’ve got three doors versus one door that exponentially starts to become more valuable over time. Is that what you’re getting at?

Henry:
Absolutely, yes. The analysis as far as how I do it hasn’t changed, but what I’m looking for or what I’m willing to take on a property has changed. I would say that that’s what everything was up until 2023, and the interest rates going the way they are, because those high interest rates are eating up that cash flow. So, it is a whole lot more difficult to find those properties where I’m going to get $200, $300, $400, $500 net cash flow per door, because I’m paying so much more for the money to buy that property. So, the game’s a little different right now. I am willing to take less cash flow if the property is in a neighborhood that I feel like is going to appreciate, especially if that property is a multi-family, again, for those same reasons, because the golden days…
Rob’s golden days, we had ours too before these interest rates, the golden days where you could buy something. As long as you were getting it at a 30% discount, if you stuck a tenant in it, you were going to cash flow, and it just doesn’t work like that anymore. So, we do find ourselves making decisions on, “Do I keep this property, and essentially break even, or do I sell this and make a smaller profit than I would typically like to?” Those are deals I wouldn’t even have considered.

David:
Because the defense didn’t make you back when you started, it was the 15% to 30% cash-on-cash return that Rob’s talking about, the $200 or $300 per door that Henry’s talking about. Those were… If you probably took a super nerdy approach, and you looked at the statistical… What’s the word? The standard deviation, and you looked at every deal, and you compared, these were in the upper echelon of deals, and so that’s what you’d go for. You’re comparing the deal. You can get to the deal you’ve seen before, and you’re looking for the one you’ve seen before. In today’s market, there aren’t those amazing cash flow numbers that we’re seeing, because there’s so much competition for these assets.
Now, it almost becomes, “Is it better to get my 7% return that Henry said or nothing?” Before, it was, “Is it better to get 7%, or wait for a 10% to 12%?” Going back to the basketball analogy here, when you first get the ball, the first thing you look at is, “Can I get all the way to the rim?” There’s nobody in there. I can beat my guy at the dribble. It’s a layup. Of course, that’s a 30% ROI. You’re going to take that every time, but as defenses get better, that’s not an option. They have a seven-foot Rudy Gobert in there who’s waiting for you, and that’s not going to happen anymore. You can’t beat your guy off the dribble.
Now, it starts to, “Okay, can I come off of a screen, and hit a jump shot?” It’s going to be tougher, but it’s better than a shot clock violation and not getting anything off. That’s what we’re describing in these situations. If you take the expectation from five years ago, and you apply it to the market you’re in now, you’re never going to shoot the ball. You’re going to have shot clock violations over and over and over, and you’re going to lose the game by virtue of not taking a shot.

Henry:
Or Rudy Gobert is going to throw it back in your face.

David:
That’s the other thing. That’s the loss, right? You tried to go after that great deal, and you got sucked into buying a $40,000 property in a terrible neighborhood that you never should have bought, because the cash-on-cash return looked great. When it comes to financing, Henry, what’s your financing strategy right now?

Henry:
Absolutely. So back in… I would say from 2017 on until about six months ago, my financing strategy was using commercial loans from small local banks. I built relationships with small local banks, and I could take down deals. If I had to put money in from a down payment perspective, the benefit to the small local banks is I could bring that money from somewhere else. So, I was either taking equity from another property, and using a line of credit to pay those, or sometimes I would borrow the down payments from other investors, and pay them a high interest for doing that. So yeah, I would… Sometimes, I would get the owner to carry back the down payments, and so we’d owner finance at least the down payment portion.
That’s how we were taking deals down, but as interest rates have gone up, and there’s been tightening amongst banks, and lending and the criteria has been a little more strict for them, and it’s harder to make deals cash flow. Part of the reason small local banks want to invest in our loan to real estate investors is because they can buy great deals that have great cash flow. As we stated, that’s not always the case, and so it’s been tougher to get the local banks to loan on deals if the numbers aren’t fantastic. So now, we’ve shifted, and we’re typically taking down deals with private or hard money at a higher interest rate, and then we’ll refinance them with either a small local bank or a non QM product.
Still, that allows me to take down deals without having to put a ton of my capital in them, but it’s a more expensive route to take because the interest is higher. Plus, you’re basically closing the loan twice, but it’s a way we found to be successful because we’re still very, very strict on our underwriting.

David:
Now, with, I don’t know the right word to use here, the decreased expectations on mostly the cash-on-cash return from real estate, are each of you buying less real estate now, or are you buying the same amount or more? I’ll start with you, Henry.

Henry:
I am buying, I would say, the same to more. Actually, I would say more. We’re doing more flips this year than we’ve done in any year. Last year, I bought more doors in one year than I’d ever purchased, so we’re doing more.

David:
Rob.

Rob:
I am doing more. I want to do more. I’m really addicted to creative finance Sub2 right now. People have been sending me deals, and I’m just like, “Yeah, why not?” So, it’s my goal. I mean, I want to take down a lot this year. I want this to be the biggest year that I operate in. The reason that it’s actually been working out relatively well so far is that, I guess, there’s that… I don’t know. Was it Buffet, Buffet? Is that his name, Warren Buffet? No, I’m just kidding. Warren Buffet, he was talking. He said, “When there’s blood in the streets…” Oh gosh, I don’t want to mess this up.

David:
When the tide goes down, you see who’s been swimming naked? Is that it?

Rob:
No. No. I know for sure he said this. He was like, “When people are scared by when people are-

David:
Oh, what you’re describing is when others are fearful, be greedy. When others are greedy, be fearful.

Rob:
Oh, you see. That’s why we pay you the big bucks, David. So, with that one specifically, everyone is so scared to get into real estate right now, so I can actually make offers and get them accepted, and it’s a beautiful thing. The property that I’m buying in Denver right now, it’s a triple-dome home. It was on Zillow Gone Wild. That got 25,000 likes on it. Traditionally, I would’ve had to have offered 200K over that a year ago. Today, I mean, I offered a little bit over just because I knew that there was another offer, and I wanted it. I think I offered 25K over, and I got it. I was like, “Wow, this feels good. It feels good to actually only be competing with one other person versus 20 other people.”
So, for me, I’m like… I’m coming in like, “Oh yeah, everyone’s scared. Give this one to me, baby.” But on top of that with creative finance and Sub2, yeah, man, I’m just going to be picking up as much as I possibly can, because if you can assume someone else’s mortgage and get a 3% interest rate, I mean, literally, almost any deal works. It’s really quite a magical thing.

David:
So, useless fact here, you mentioned blood in the streets. Did you know the high heel shoes were originally created for men to wear that were butchers for walking around in the butcher shop so that they would not get blood all over the bottom of their shoes?

Rob:
Wow. I had no idea. I did not know that. I was wondering why you kept a pair of high heels in your car.

David:
It’s a secret to these calf muscles actually. It’s like I’m always walking down a hill at all times. It’s also why we never let the camera go below my waist when we’re recording. I’m not sure if the audience is ready for that.

Henry:
I just got an image of strong hairy calves in high heels right now.

David:
It’s a great way to describe it. On my Instagram story the other day, I put a little meme that had 25-year-old guy that works his calves out seven days a week in the gym, and they’re skinny, and it’s like 42-year-old dad of three kids, and this guy is like, “Yes-

Henry:
Oh man.

David:
… massive thighs for… It’s so true. I don’t understand. Yes. All right, moving on here. Now Rob, I understand you have a deal in mind that we are going to break down for all the people joining us on this podcast to hear how deals are being analyzed. First off, tell me where is this deal? What is it? Is it your triple dome deal that you just mentioned?

Rob:
It is. It is. It’s in Castle Rock, which is about 15, 20 minutes away south of Denver. It’s in between Denver and Colorado Springs, and it’s beside the Iraqi Mountains and Breckenridge. So, it’s in this little spot that’s really cool.

David:
You should call this the Casterly Rock, right?

Henry:
Yes.

David:
As your Airbnb name, because we always give stupid names to Airbnb properties. Do you know what that is from, Rob?

Rob:
Yes. But for everyone at home-

David:
You don’t know what that is. Henry, would you like to share?

Henry:
That is the goat reference, the Game of Thrones.

David:
Yes. It’s a location in Game of Thrones called Casterly Rock. You would get a lot of… People would recognize that, and book it. I think you should go with that.

Rob:
That’s cool.

David:
Triple Dome has a good ring to it also, but what do you like about that location?

Rob:
Like I said, it’s in between a lot of different areas. So, my buying criteria in general is buying near national parks, state parks, eclectic towns, and vacation destinations. Those are my four buckets. This one is in between all of them, right? So, it’s in between Denver, which is a really big metropolitan area, and the regulations in Denver are pretty strict. So, I already feel like the overall competition is on the lower end, because it’s so hard to get a functional Airbnb in Denver, but it’s also near Breckenridge, and it’s also near the Rocky Mountains, so that’s a state park, sorry, national park, but then there’s also a state park.
It’s called Roxborough State Park. That’s right next to Castle Rock, and then an eclectic town. I mean, I wouldn’t really classify this one as that. The boulders north of Denver, that’s eclectic. That’s near Castle Rock as well. So, it’s in this booming little spot where I have so many target markets of people that are going to be going through Castle Rock just to get to some of these areas that I told you. So from a location standpoint, it checks the boxes. It’s also a very unique stay. If you’re on YouTube, we’re B rolling all of this for you to see. It’s a beautiful home. What’s really special about it is that it’s got 360-degree views of mountains everywhere.
Everyone has gone crazy about this house on the internet. The Zillow Gone Wild comments were really, really crazy, so I just feel like it’s going to be a really, really amazing portfolio piece for my direct booking website, Nick Sleeps. I think it’s going to be a very Instagramable experience, and so this is one of those, “If I build it, they’ll come type of things.” It’s already been built, but I’m going to be building the brand and everything like that. I think this one to me has a lot of potential, but I was a little bit… There are some ways that I underwrote this to make sure that it fit my criteria.

David:
All right. So, how much are you buying this for, and how is the deal structured?

Rob:
It is a conventional loan. It is a 5.99% interest rate actually, which is not bad. I had to pay about $8,000 worth of points to get it down to that rate, so I’m really happy with it. It was a million dollars, and I bid 1,000,025. I would’ve probably gotten it for a million, but someone else made an offer, and we got the intel that it was over asking. So, I just went, I was like, “Man, I don’t know how much over asking was. I’m going to go 1,000,025,” and I beat them. So, I guess I went over 10,000 or something like that. I’m not really sure. I am putting unfortunately 30% down, because I had to do that to get it to not be a jumbo loan so that I could…
Basically, it’s what I could qualify for conventionally. To the banks, I’m a poor man even though I have successful businesses, but I haven’t had successful businesses for two tax years. So, I still have to cobble together finances to get it all approved, but I’ll be putting down 30%. I’m hoping to squeak out a 15% cash-on-cash return on this particular property.

David:
All right, and then was there a subject to element to it?

Rob:
No, not on this one. This was just a straight per… I saw it. I was like, “I want this house. I’m going to buy it,” and I made the offer, and somehow got it.

David:
Now, if you had professional property management, 20%, 25%, would this deal still pencil?

Rob:
Technically yes. This would be much closer to… Oh, actually, no. It would still be an 11%. The way that I’ve underwritten it, I think I’m going to make a 20% cash-on-cash return. With a 20% management fee, it would be an 11.7% cash-on-cash return. Now, if this ends up being middle of the road… So if I get this to a 15% cash-on-cash return like I was thinking in a management company, let’s assume that Blue Gems isn’t doing this free for me. Then it would still be a 7.5% cash-on-cash return. So, it would still work. It would cash flow. I think this deal would still cash flow $2,500 a month.

David:
What were you adjusting on your calculator there to determine if it would work?

Rob:
My management fee. You asked if I had a professional manager in it at 20%, that’s what I’m putting in to see how it changes cash flow, and it would bring me down to a 7%. But if I remove that, then I go up to a 16.2%.

David:
So from 7% to 16% by eliminating the management, so there’s a point there for everyone listening who is running their deals saying, “I don’t want to be… I want passive income. I don’t want to be a short=term rental operator.” That could be why you are seeing your competition moving on deals and buying them, and you’re not because that one number made it from a pretty solid deal to most people are passing on a 7% return. It is a little bit more elbow grease. You’re going to have to put into these deals in many cases, and Rob’s one of the best in the business when it comes to these.
So, the odds of somebody else getting a deal this good, and having the vision to feel confident that it’s going to work are going to be lower than it would be with Rob. So, part of what we’re describing here is that with real estate becoming tougher, the passive element of it is passing away. Maybe there’s a play in words. We could get into that like passive has passed.

Rob:
Ooh, is that our thumbnail title?

David:
Yeah.

Rob:
Passive is dead

David:
Because real estate is cyclical, there probably will come a time where it will go back to what it was like before. We don’t know when that’s going to be, but it was much easier to get these returns, and just hand a property manager to manage it than what it is right now.

Rob:
I want to say that you’re absolutely right on this. Everyone at home, relisten to that part, because a lot of us are getting into real estate. Let’s say short-term rentals because that’s what we’re talking about for me specifically. You’re going to buy 10 properties and then 20 and then 30. Eventually, like me, I have 35 right now. You will no longer be able to self-manage those properties. You’re going to have to give them up. I started my property management company. I went in to Blue Gems, because I was like, “I need a solution for this,” but the everyday operator, you will have to give that over to a management company, and the moment you do that, it will shrink your returns dramatically.
That’s a really good point, David. I mean, that’s something that people don’t think about. If you’re good at this, you’re going to be very successful. You’re going to scale up like that, and then you’re going to have a management problem, meaning you’re going to have to pay someone to manage everything.

David:
My advice, not that anyone asks for it, is if you’re going to get into this asset class, expect to manage it yourself for three to five years. Do a very good job. Rents increase over time. Revenue increases over time. Your reviews increase over time. Your systems get better. Then you can… You’ve earned the right to hand it over to a property manager. Now, they can take over, and it becomes passive. You just can’t have the expectation of starting it for day one. That’s a theme that we’re seeing throughout today’s show, I’m noticing, is you’re just extending your horizon from when you expect that jackpot.
Henry had mentioned several deals like, “Right off the bat, we’re buying them at 70% of what they’re worth. We’re getting this kind of cash flow. I could either get rid of it, make a bunch of money, or keep it and make some money, but I had options.” It’s slowly moving into, “I can still make the same money, but I’m not making it right off the bat. I’m having to extend.” I think that’s a good advice for people to extend their expectations. Now Henry, same question to you. Do you have a deal picked out here?

Henry:
Yes, I have a deal. We’re moving from the amazing place of Casterly Rock to Sleepy Hollow, my little town of Bentonville. I’m buying a single family home, and it is… I’m buying it for I know that what is a discount, but I am in the position of trying to figure out which exit strategy is going to make the most sense given the current market conditions. So, I think it’s a good deal to talk about. I’m paying $170,000 for it. It’s going to need some work in order for it to either be flipped or be long-term rented or be short-term rented. So, I am literally in the decision process right now trying to figure out which one of those exit strategies we’re going to do.
Now, I’m buying it regardless of… This is a purchase, regardless of exit strategy, but this is that analysis that we’re talking about trying to figure out what’s the best strategy given the market and your current financial situation? I’m in a position where I can put about 40,000 in it, and I can flip it. I can put maybe 50,000, 55,000 in it, and short term rent it, or I can put about 30,000 in it, and make it a rental. If we rent it out, I could probably get 1,800 a month. So, I would be in the neighborhood of breaking even if I did that. Now, the reason I would consider breaking even for this is because Bentonville is just such a strong market with Walmart headquartered there.
Though even it wouldn’t cash flow right now, I’m going to get a big bump in appreciation because Walmart’s building their brand new home office facility. They’ve got to bring people here. It’s still a tourist destination for mountain bikers right now. There’s not a ton of hotels, and so people need places to stay if I wanted to do a short-term rental. I think once interest rates go down, it’s going to force more people into the market, and it’s going to force the values up, right? So, there are situations where I’m ready to… where I’m willing to break even because of what my analysis tells me about what could be coming in the future.
That is not something every new investor is going to be able to do. It’s going to involve you being an expert in your market, and understanding what’s coming, and doing the research to make those kinds of decisions. So, right now, I am leaning towards going ahead and selling it. The reason I’m leaning towards going ahead and selling it is because I have a pipeline of deals. There are more deals coming. I’m not… I don’t have a shortage of deals to buy, and so this one… I don’t love the long-term rental cash flow numbers, and I’m not confident. I’m not super confident in the short-term rental numbers, because of the specific neighborhood that this home is in.
I don’t know that it would produce the returns that my other short-term rentals in Bentonville will, and so I’m not super comfortable with it. I’m doing some research talking to my Airbnb property manager, seeing what’s his confidence level on what he thinks we could rent it for. I think if we did a short-term rental, we’d push that monthly income up to about anywhere between $2,000 and $3,000 a month. So, it could be great. It could not work out well. So, what I am confident in with 100% certainty is that I can put $40,000 into it, and sell it for $210,000, no sweat, and so that is… Sorry, not 210. I said 210. It’s not 210. Sell it for $275,000, no sweat, right?
That is the strategy I am absolutely the most confident in, and in this market, you’re getting punished for making mistakes. So, I’m probably going to lean toward the thing I’m the most confident in.

David:
There’s a couple points I think worth highlighting there as well. Some of this comes from James Dainard. Well, Jimmy made a point on the State of the Market podcast that I thought was really good and worth repeating here. Jimmy had mentioned that the ROI, if you’re looking at cash-on-cash return, is nominal or non-existent in a lot of deals. However, he flips a lot of houses, and the return on his investment when he looks at flipping can be incredible. He could get 20%, 30%, 40%, 50% return on the money that he put in a deal, especially if he’s leveraging other people’s money on a flip. Now, that’s not passive income. That’s active income.
We usually don’t compare these two options, because when you keep real estate, and you get $100 a month, but you bought it with 200,000 inequity, you still made $200,000 at that time. You just didn’t make it in the form of cashflow, which can be misleading. What that had me thinking about is so many people are listening to us. They want our lives, because they don’t like the job they have. Henry, you, at one point, were doing corporate real estate for Walmart. Rob, you were doing professional voice acting and marketing and overall debauchery, but the thing… I was a cop. I was sleeping three hours a night on a good night just looking for…
Every day, I woke up like, “When’s the next time I could sleep?” I was just obsessed with when can I get sleep? We didn’t like the lives we had. Real estate gave us a better life. If you’re in that position, it has been previously spoken to you that the evangelist for real estate would say if you get enough cash flow, you can replace your active income with passive income. You can quit your job. You can move on to something better. That is what is becoming very hard. However, if you quit your job, and got into flipping houses, and you made $75,000 a year flipping two different homes, that could be a job you like more than the one you don’t like, doesn’t involve you sitting in commute traffic.
You can work from home. Your schedule becomes more flexible. Now, there are some downsides to that. You’re taking a little bit more risk. There might be a learning curve in the beginning, but if you’re somebody who’s really good with real estate, you’re a Henry, you’re looking at deals all the time, and you’re like, “This thing just doesn’t add up right now for cash flow, but I could make 45 grand flipping the contract to somebody else, or fixing and flipping and moving into something different.” You do have an opportunity to get the ROI you would need to replace your job doing this. It’s a different way of looking at these opportunities, and it’s forcing yourself to stop looking at only cash-on-cash return.
It’s looking at many ways that real estate can benefit you that will open up these opportunities. Let’s say each of you to this… Well, I’m now just deeming the new approach to looking at real estate investing.

Rob:
I agree. I think we got to get back into the habit of saying, “Hey, real estate is a long game, and sometimes there will be good years. Sometimes there will be more normal years like now.” But at the end of the day, it’s like you’re just pushing the ball forward. I was thinking about this as Henry was saying it earlier, the golden years. “Hey, these were the golden years,” but I genuinely think, not to be too Andy from the office, but I do think that 20, 30 years from now, we’re going to look at now, and be like, “These are the golden years.” This is it, because we’re all good at what we do, and we’re all going to continue to crush it every single year because we love doing this.

Henry:
Absolutely. I couldn’t agree more. I tell my students this all the time. I’m like, “Look, investing is about buying something for less than it’s worth, adding value to it, and then capitalizing on its new value.” Even in the stock market, you want to buy when a stock is down, hold it until it goes up, and then you’ve made a return on your investment. This is when the wealth is built, guys. This is what it looks like. You have opportunity to buy, and though you’re not going to make money immediately, I think for the people who are actively buying right now, five years from now even, the people buying now are the people who are buying in 2009, right?
Those people were pumped that they bought in 2009. So, this is what it looks like. This is what it looks like to build wealth. It’s not pretty now, but I think it’ll be beautiful in the long run.

Rob:
We’re always going to be pumped that we bought now 10 years from now.

David:
I say that constantly. Tell me a person you know that bought a house 30 years ago that says, “I wish I never would’ve done it.”

Rob:
Well, do you remember we had Janice on a month ago, and she was like, “Yeah, I bought my first house in LA for 180,000 or something like that.” We were like, “What? In 2004?” We were so perplexed by this.

David:
Tell me a person who bought a house 30 years ago that remembers what was in the inspection report, and how stressful it was.

Rob:
Right? Right. That’s true.

David:
But also, tell me a person that bought that house 30 years ago that thought that they were getting a great deal, and they were buying it for less than what it’s worth. Most people believe they’re overpaying for real estate at the time they buy it. We always think we could have got the deal better. It’s time that really creates the wealth in real estate, and we sabotage this when we’re like, “I need to get a dunk four seconds into the shot clock before I put some work into breaking down the defense or move the ball around.” Now, Henry, you made a great point. Real estate is about buying something for less than it’s worth, making it worth more, and then capitalizing on that.
So from my framework, I would call that buying equity, forcing equity, and then having an extra strategy. Now, the extra strategy could be holding it as a rental. It could be selling it and turning the equity that you created in that deal into cash, putting that cash back into the next deal. There’s lots of ways we can do it, but on the… From the perspective of how do we make something a good deal if it doesn’t start as a good deal, I’m going to ask each of you, what advice do you have for taking a deal like Rob’s Castle Rock property that other people passed on, and making it a good deal? Then Henry, I’ll ask you the same thing.
You mentioned creative financing. That’s one way, I think right off the bat, that you said, “If you get something at a 3% interest rate, everything works, right?”

Rob:
Yeah. I mean, I think… Hold on, let me think about that for a second. Go to Henry first. No, I’m just kidding.

David:
No, we could do that. I don’t mind. Rob is not a freestyle rapper. I will tell you guys that right now.

Rob:
No. No, I am.

David:
No, you’re not.

Rob:
Well, I was trying to think of… I’m trying to… Yes, listen.

Henry:
You have to open your computer, and pull up an analysis. That is the opposite of freestyle.

David:
He needs 25 takes.

Rob:
Well, you were asking me to take you through the numbers. I would.

David:
Go home. Get to the lab. Grab a pencil. Make it suspenseful, come back and hit us with an earful.

Henry:
Did you just hit us with an eight-mile battle wrap scene?

David:
Yes, because that’s something Rob doesn’t do. Henry on the other hand, he belongs in a cipher, Rob.

Rob:
I feel that that deal was already good, so you’re like, “How do you make it work?” I’m like, “I did.”

David:
But you bought a deal other people didn’t see, so you saw something in it that made that deal work for you. What do you think that was? You mentioned the experience. You mentioned creating a unique way of marketing the property. There are things you’re doing that other people that just said, “Run the numbers on AirDNA, doesn’t work, past it.” Yes,

Rob:
It doesn’t work on AirDNA at all. I think AirDNA has this one at $60,000. I think it’s going to gross between $175,000 and $200,000. So, the way that I made this work for myself is I just did a little bit of prospecting. When you look at the market analysis, there are no unique dome homes. There are no unique homes at all in this area, and so so many people would look at this deal, and pass on it, because it’s scary. There are no numbers to support this. Where I’m coming in, I’m saying, “I’m going to be the pioneer in this space specifically. I will be the comp that people look to copy basically for the rest of time.”

David:
So, AirDNA is comparing this to a track house that looks like all the other houses around it.

Rob:
Exactly, but what I know is that a unique property can basically demand a 300% premium on a typical property. So as a typical property might only get $100 a night, this would get $300 a night on the opposite end of it. Now really, this property will get 700 to $1,000 a night, I think, whereas most people running the numbers think that it would get 250. So, it works for no one else, but it works for me because I know what I have here, but experience is the reason that I know that.

David:
Now, see, Henry, my job is to bring the greatness out of Rob that’s there that he doesn’t know he has, right? Rob, I’m going to lead you back to some more greatness. What about the hotel that you bought that was being used as a traditional hotel that you are turning into a series of short-term rentals? Did you make something there?

Rob:
Same thing. That one was… Basically, that one was approached to me. Someone approached me that, and they’re like, “Hey, do you want to buy my hotel?” He gave us a really good interest rate. I think we got it for 2.75%, 3%, but the entire hotel needed a remodel. I want to say that the owner had already started to remodel, but it just was so much work that he was like, “I’m just going to sell it to someone that can actually finish out the job.” He sold it to us, and so we’re getting to basically capture the opportunity of remodeling an entire hotel. Granted, it’s a lot of work. It’s active just like you said, but the opposite side of it is that this hotel will be worth double or triple what we paid for it.

David:
So, you’re adding value through a rehab. You’re adding value through putting each of those hotels on Airbnb, VRBO, not just a traditional hotel that someone’s going to have to look up in the yellow pages, and you’re adding value in this case through seller financing.

Rob:
Correct.

David:
That is a great example of you made a deal by those things that other people would’ve just looked at it, saw the cash-on-cash return, and said nope, or saw that it needs too much work and passed on it.

Rob:
Yep. Yep. Yep. Wow. Wow. I’m so smart. Thanks.

David:
I told you, there’s greatness in you, Rob. I just got to pull it out of you.

Rob:
I just got to be willing to freestyle a little bit.

David:
Yeah, and you got to go through mom’s spaghetti to get there, but that’s okay. We’re all going to do that together. Henry, to you, what are some ways that you’ve been able to make deals instead of just looking for deals?

Henry:
Yeah, I can totally freestyle. That’s why I wear black, so you can’t see the mom spaghetti on my shirt. Part of the ways that I make deals are through not looking through one exit strategy lens. I have learned the exit strategies of a flicks and flipper. I’ve learned the exit strategies of a buy and hold renter. I’ve learned the exit strategies of a short-term rental, and that allows me to look at a deal from multiple perspectives. So, I’m not just looking like, “Hey, this doesn’t meet my cash-on-cash return or my cash flow numbers as a rental,” and pass on it. It allows me to look at a deal from multiple angles, and see how I can monetize that. So, like with the deal we talked about, I know that I can make money on it at least three ways. There could be a fourth.
I could probably assign that contract to somebody as well if I wanted to. I can make deals just by being educated and versed in multiple exit strategies. The other way that I think somebody who’s new who may not feel that that’s something that they can do is you can make deals by being creative with what you’re looking for. You can do this even on the market, and I still do this. I will look at deals, and I am looking specifically for how can I add value? Well, where can I add the most value with spending the least amount of money? So, when I’m looking for a deal, if I’m looking, and I can’t find a duplex anywhere or a multifamily anywhere, then I’m going to start looking at single families that I can easily turn into a duplex or a multifamily either by converting a garage, or by converting an exterior building that already has.
Some of these houses that you’ll find, they’ve got a shed with plumbing and electrical in it. Well, it’s not that hard to convert that into a living space, because you’ve got the foundation, and you got some of the structure. Garages are an easy way. Sometimes you can split up a house, especially if it’s a split wing house, meaning that the master bedroom’s on one side of the house, and the other bedrooms and the bathroom are on another. It’s fairly easy to turn one side of that into a unit, and another side into a unit. Now, it takes some creativity. It’s going to take some money, some of those things, but you can make a deal, and add max value with doing a little bit of work.
What I’ve typically done in the flip space is find houses that have… We talked about this on a previous episode. It’s find houses that have sunrooms or big rooms that aren’t technically heated and cooled square footage. This works for garages as well. You can take an HVAC return, and pop it into that room, and now that space is heated and cooled. All you’ve got to do is add the flooring, insulate the walls, and now you’ve got an additional room. Rooms are going to add value, and so just because you can look at a deal, and it’s at its current state, and say, “This deal doesn’t pencil, but will it pencil if you add a bedroom?” Will it pencil if you add a bedroom and a bathroom under the same roof, and how inexpensively can you do that?
I just converted a laundry room for a house into a bathroom, which included the laundry in the bathroom. The house was on a crawlspace. It costs me about $5,000 to do that. But now instead of a three bed, one bath house, I have a three bed, two bath house, which allowed me to take the bathroom that was a hall bath, and close off the doorway to that hall bathroom, and then open a doorway from one of the bedrooms into that hall bathroom. Now, I created a primary suite, because I added a bathroom in the laundry room, because the laundry room was oversized.
I was able to sell that property for about $30,000, $35,000 more than I would have without that extra bathroom, because there was more demand for it, and because there were two bathrooms and a primary suite. It’s a much more desirable property, and it costs me $5,000 to do that.

David:
That’s a great, great advice. People should go back and listen to that again. If you’re trying to figure out how to make these things work, you’re hearing it here. The defense is tough, but that doesn’t mean you can’t win. You just got to take a different approach. Last question to each of you, we are what I would call professional investors, professional real estate people. This is what we do full time. We look for deals. Henry, you mentioned that you have a very big funnel that you’ve created that you’re looking at stuff. Rob has an entire network. He’s talking about having Rob Capital that he’s going to be creating.
You each have audiences of people that follow you that can bring you deals. We have this platform that not everyone has. For the person who is not a professional investor that wants to make money through real estate, but they’re not leaving their day job anytime soon, or their skillset would not work in the environment that we operate in, what advice do you have for that person to build wealth through real estate, and what expectations are reasonable for them in this market?

Henry:
Here’s two things. I think you need to be the… Education is vastly important more now than ever so before, and so I talked about educating myself on multiple exit strategies. I think everyone needs to be doing that. You can’t be so laser focused on one strategy, because you’re probably leaving opportunities on the table. Then you have to, for every investor, focus on what’s the lowest common denominator in real estate. It’s always going to be a deal. You’ve got to have a good deal, right? Now, we talked about ways that you can make something that isn’t a good deal at face value, look like a good deal, or become a good deal based on how you can creatively add value to that property, but you’ve got to be able to know what does a good deal look like in your market? Then you’ve got to pick a way to find those good deals.
All three of us, we have a way that we like to find our good deals, and we go all in on whatever that strategy is. So ,I can’t tell every random investor which strategy they should use or what’s the best strategy. It’s really, they all work, but you’ve got to, a, know what a good deal is for you, and then you have to pick a strategy to know how to go find it. I think the better you get at analyzing and underwriting and looking for those deals, the easier it’s going to become to monetize those deals in the future. So, I’m not going to give you the traditional answer of go house hack. That’s a great way to go make money in this market. I think that educate yourself on as many strategies as you can, find a way to find good deals.
I just happen to find my way is looking off market. Rob has his way. David has his way, but you’ve got… The more you do it, the more deals you analyze, the more deals you underwrite, you’re going to be able to start finding those diamonds in the rough, finding those gems, or creating or making the value. So, I just want people to be able to focus on one to two strategies of finding deals, and then you just go all in. I call it relentless consistency in pursuing that strategy until it yields results.

David:
Rob, what about you? Average person not quitting their day job wants to make money through real estate, what approach should they take, and what expectations should they have?

Rob:
I think that for me, I always say this, you got to throw darts at the wall. I think you got to try a few things. I like the idea of going all in. I did pretty early on. I think you got to try a few things before you go all in though. You know what I mean? I think if you… Let’s say that you want to try flipping houses, and you try that, and you’re not very good at it. Maybe you don’t go all in, because that may not be the thing that you should be going all in on. But if you try flipping a house, if you try wholesaling, if you try house hacking, maybe a little bit of short-term rentals, I think it’s at that point you can say, “Man, I didn’t realize this, but I’m really good at wholesaling.”
That’s when you go all in, right? I think you have to be willing to try a few things, and not be so locked into the thing that you think you want, because very rarely is that the thing that actually works out. So, that’s my general approach for getting into this is try a little bit of everything. Some of these things are free. You can… Henry, how much would it cost? If I wanted to get started wholesaling today, how much money would I need to get started?

Henry:
To get started wholesaling, you can get started wholesaling for free. You’re just going to spend a lot of time.

Rob:
Perfect. Low stakes.

David:
So, is that what we’re saying, someone who’s working their day job, they don’t want to be in real estate professionally, should start at wholesaling?

Rob:
Not necessarily. I’m just giving an example here like, try a few things because everyone thinks that real estate is high stakes, not every aspect of real estate. There are ways that you can try your hand at real estate. That’s not like the riskiest investment of your life. That’s what I’m saying. Then in terms of what expectations should they have, I think the expectations that they should have is that they’re probably going to be working 80 hours a week for a while. The network that you’re talking about that I have the network that Henry has, that is a network that we have built because we were working 80, 90-hour weeks for so many years.
I didn’t quit my job, dude, until two years ago, man. You know what I mean? I’ve only had this magical network for two years, and it’s just because I put in the work. But before that, I was working. I was going taking calls in between meetings. I was leaving work to go do a contractor call, whatever. I was doing so much stuff at work, taking calls at nights, missing dinners, doing all that type of stuff. So, I think the expectation is there’s still a lot of work that you have to do. It will never be an easy route to get started, but dang it, is it worth it.

Henry:
I think to add a little bit more color to that, I still believe it. A good deal is the best way to go, and so finding that good deal. But I think part of the reason that people are struggling with figuring out how to be a lucrative investor in this market is more about how much of that work are you willing to put in? Because anybody can do this right now. You can go, and you can get on the MLS in your local market, and you can pull a list of properties that have been listed 30 days longer than the average days in your market, right? You can get a list, and you can go down that list, and say you’ve just only pulled single families. You can go down that list. You can analyze every single one of those properties, and figure out what’s the number that this deal would work for me.
So, if you know you want to buy rentals, you can go analyze each deal, and say, “All right, for me to get my 7% cash-on-cash return, and $100 a door, then I have to be able to buy this property that’s listed for 350,000 for 125,000.” That’s the number that works, and then you know what you do? You submit that offer, right? If you did that for every single property listed for 30 days longer than the average days on market, and every expired listing in your market, and you did that relentlessly consistently for the next 90 days, you’d probably land a deal, but nobody wants to put in that kind of work. People don’t want to go do that work.
That’s a time-consuming endeavor. You got to analyze a ton of deals. You got to make a ton of uncomfortable offers. You got to convince an agent to make those uncomfortable offers for you, and then convince them why it’s a good idea for them to do it. So, you really have to ask yourself, “Am I willing to put in the kind of work it’s going to take for me to be successful in this kind of a market?” Because you can go find a deal. You just got to be willing to get uncomfortable, and that’s what people don’t like doing.

Rob:
Boom, baby, but I will say… I do want to plug that in one of the previous episodes, Henry talked about buying deeper, and so we’re going to do an episode on how to get off market properties. Henry will take us through his strategy, so respond to the poll if you want to hear how we find off-market deals. Leave a comment on YouTube, and we’re going to work on it for you, guys.

David:
All right, Rob, where can people find out more about you?

Rob:
Robuilt on YouTube and Instagram.

David:
Henry.

Henry:
Instagram, I’m @thehenrywashington on Instagram.

David:
I am DavidGreene24 with an E at the end of Greene. Do you guys have your blue checks yet?

Rob:
Oh yeah, baby. You know I do.

David:
Make sure it’s got a blue check, because we have a lot of fake people that are mimicking us trying to take your money through scams of a crypto nature, and we don’t want you to fall for that. I’m DavidGreene24 on YouTube and on pretty much all social media. Send us a DM if you have any questions. If you like this show, if you like the straight shooting, if you like the no BS, no fluff, we’re giving it to you like it is, and we’re giving you examples of what we’re doing to make deals work, would you please go leave us a review on Apple Podcast, and let us know what you think about the show.
All right, I’m going to get you guys out of here. Thanks so much for joining me. We went into overtime today, sticking with the basketball analogy, but we hope we gave you guys a great game. This is David Greene for Henry, Relentless Pursuit, Washington, and Rob, the Papa Doc of Freestyles, Abasolo signing off.