Stop Making Offers! Here’s What to Do Instead with Erik Wright

Ashley:
You guys, it is back, the event you have all been waiting for. Tony, go ahead. Spill the beans.

Tony:
BiggerPockets 2021 is officially happening. We’ll be in New Orleans from October 4th through October 5th, and it is going to be the best real estate conference that happens this year, hands down.

Ashley:
Okay. So here’s just a really short list of some of the keynote speakers, Hal Elrod, Brandon Turner, Ken Corsini, David Greene, Mindy Jensen, Scott Trench, Tony Robinson, and many, many more. This is going to be a great conference. And really, the best part about conferences in my opinion is the networking.

Tony:
Yeah. There’s going to be 1,500 investors at this event, and I guarantee that you guys will be able to build relationships, boost your potential, and close more deals. So if you were interested in attending, which I hope all of you rookies are, head over to BiggerPockets.com/conference to buy our tickets today.

Ashley:
We will see you guys there.

Ashley:
This is Real Estate Rookie, episode 93.

Erik:
That’s a big thing that I have embraced, is that who-not-how mentality, like I said, embracing my own ignorance, not trying to pretend like I know something I don’t, finding somebody who does know that and being okay with maybe making a little less money right now.

Ashley:
My name is Ashley Kehr and I am here with Tony Robinson. Tony, go ahead, tell us how many deals you’ve got under contract.

Tony:
We’re closing on another property actually Tomorrow. But, but, but, but, a bit but here, we actually made the decision yesterday that we’ve got five properties under contract and we’re not going to grafter anymore for a while. We really want to slow down, stabilize the portfolio that we have, and really just refine some of our internal processes. And then, I recently stumbled into the world of container homes, and I’ve become super infatuated with the idea of building a container home on one of our properties, so I think that’ll be the next big project for us. And then we’re also working on some other stuff. We’ve got like this van that we’re working on. So we got a lot of crazy things happening.

Ashley:
I have said those exact same words where I’m not going to buy any property for a little bit. I don’t believe you. Just like when you quit your job, you told me, “Oh yeah, I’ll probably get another job. I’m just going to take some time off, go on our honeymoon, blah, blah, blah.” That was what, six months ago?

Tony:
Six months ago.

Ashley:
I knew you weren’t going back to work.

Tony:
Well, I promised my wife that I’d slowed down on buying the houses. So hopefully, this time I can keep that promise, we’ll see.

Ashley:
She’s just as addicted as you are. Okay. Well, you guys start placing your bets, make your wager on when-

Tony:
What’s the over, under?

Ashley:
… Tony’s going to buy the next house. So today’s guest, we have Erik on. And my favorite, favorite thing about this episode was his negotiating tips and how he doesn’t present an offer. So you guys have to make sure you get through the episode to get to that part because it was very interesting. And the things he tells you to say to potential sellers, it’s gold, it’s our golden nuggets today.

Tony:
Yeah, really, really great explanation on negotiation for new investors. But he also goes into detail about how he’s finding his deals now, he’s leveraging SEO, which I don’t think we’ve had anybody on the podcast really talk about leveraging SEO to be a big source of deals for them. He does a really, really top-to-bottom explanation on how to find deals, how to negotiate and how to get them closed.

Ashley:
Okay, well, let’s bring Erik onto the show.

Tony:
Guys, before we bring Erik on, if you haven’t checked out the Real Estate Rookie YouTube channel, please make sure you do. Ashley and I drop in new videos every week. We’ve also got some really cool special guest contributors on the channel as well. So make sure to listen and subscribe there as well.

Tony:
Erik, welcome to the podcast, brother. Super excited to have you on.

Erik:
Thanks Tony. Hey, Ashley. Good to be here.

Tony:
So Erik, we’ll get into your story here shortly, but I guess just tell us a little bit about yourself, man, when you’re not working in real estate, what are you doing? And how’d you get your start?

Erik:
Yeah. I live here in Chattanooga, Tennessee. I’ve got a wife and two wild and wonderful kids. I’ve got a two-year-old daughter and an eight-year-old son. We love doing anything outdoors here in Chattanooga, some whitewater kayak and mountain biking, trail running, hiking, anything I can do any chance I get outside, that’s my jam.

Tony:
So Erik, before we keep going, where did you live before Chattanooga?

Erik:
Yeah. I lived in Shreveport, Louisiana, which I hear you have some experience with that city.

Tony:
Me and you might be the only people that have invested both in Shreveport and in Tennessee. I don’t know, maybe, there might be some other people, but you’re the only person I know.

Erik:
I don’t know. Maybe so. Maybe so.

Tony:
So for the listeners, I bought my first four properties in Shreveport, Louisiana. And obviously, now I’ve got some investments also in Tennessee in the Smoky Mountains. So Erik and I are blood brothers, we just didn’t know it.

Erik:
Yeah, that’s right. That’s right. I think we share some bankers as well in Shreveport area.

Ashley:
Tony, go ahead and please name drop again that you have a property for sale there if anybody is interested.

Tony:
The last rental I own in Shreveport Louisiana, if anybody’s interested, the flood insurance is really high. It might be a negative cashflow deal for you, but it looks really nice on the outside.

Erik:
Right on. Right on.

Ashley:
Erik, the last four episodes, I think, we recorded, somehow Tony has worked this into the podcast.

Erik:
That’s awesome. I’m actually selling all my properties in Louisiana right now too because the market’s good and I like Chattanooga better.

Tony:
I heard you say we also share some bankers. Who is your banker out there?

Erik:
Yeah. Home Federal.

Tony:
Oh beautiful. Yeah. Same bank I use as well.

Erik:
That’s exactly right. Yeah. So I use Home Federal and Community Bank. Both those two in Shreveport.

Tony:
Awesome brother. Awesome, man. Well, we’re not here to talk about me and my love for Shreveport, we’re here to talk about you, man. So tell us how you got started, Erik. I guess before we dive in, tell us about your current portfolio. Just give us like a brief overview of where your portfolio is at today.

Erik:
So currently, I have seven units, five properties. I’ve got two duplexes and then the rest are single family homes. They’re about half and half Louisiana and here in Tennessee. And I’ve got currently six under contract that we’re working on trying to get closed in the next little bit. So the momentum is building.

Tony:
When did you get your first deal?

Erik:
I bought my first house, I think I was about 23, so that was like, gosh, 13 years ago now. That was an accidental house hack actually. Right out of college, I was working and living with some roommates, with a girl, she owned the house and she rented out rooms to the rest of us. And then she got married and kicked us all out, understandably, so we all had to leave. And I was the only one at the time with like a stable job and was like, “Well, I can just go buy a house and we can all just move into my house.” So bought a fixer-upper, took about a month fixing it up on new floors, paint, that kind of stuff. And then lived in that house for about three years with roommates who paid my mortgage plus some. And I was like, “Hey, there’s something to this. This is kind of cool. I need to keep this rolling.” So yeah, that’s how I got my start.

Ashley:
And then after that, you had that for three years. How long until you purchased your next property and was there a period of analysis paralysis as to you weren’t going to be living in the property and it would be an investment? How did that mindset shift happen?

Erik:
Yeah. I actually moved down to Louisiana… So that was an Arkansas where my first house was, that’s where I’m originally from. So I moved down to Shreveport Louisiana. And then when I moved down there, I started looking for a house. I was just crashing our friend’s spare bedroom until I could find my own place. And happened upon a duplex that was a HUD foreclosure that was still in the, I guess, the period of time that owner occupants could buy it first, before it went to investors being able to make offers on it. And so I was able to buy a duplex that I lived in one side and rented out the other and took the money from selling my house in Arkansas to put the down payment on that one.

Erik:
At that point in time, I think I did 20% down on that one because I didn’t realize that I could get loans for small multi-family for lower down payment. My banker at that time told me I needed 20% and I was like, “Okay.” And did that with the money I made from my other house. So yeah.

Ashley:
Erik, can you go into a little detail of the process of what it was like to purchase a HUD foreclosure. And you described exactly what it is there briefly, how it’s put up for sale for owner occupants only to bid on it for a certain amount of period, and then investors can bid on it if no one that’s going to owner occupy it purchases it, Can you explain a little bit more about what a HUD foreclosure is and what the process is like to purchase one?

Erik:
Yeah, absolutely. I think when I actually went to go look at it and then even put my offer in, I didn’t even know it was a HUD foreclosure at the time. I just was looking on MLS at a realtor who was sending me properties, and then he told me, I think when we were about to close that it was actually a HUD foreclosure because it was just a little more paperwork on some things. So typically, that’s just when the house has been foreclosed on and so now it’s being sold to recoup the loan or whatever it was that’s still owed on it. And there’s usually a few week period on the front end that owner occupants are allowed to buy it first before it’s open to investors just to allow that to happen.

Erik:
Honestly, at the time, I knew nothing about HUD or foreclosures or anything, it’s just on the MLS and I went and looked at it and made sense and bought it. I was still super new at the time and didn’t really even know what I was doing.

Tony:
I want to keep going with your portfolio so we can talk about how you’ve scaled this thing up. So, you get the house hack, you move to Shreveport, you get a couple of deals from there. You’re at seven units now, so I guess just give us a quick walk through of how you scale your portfolio.

Erik:
Yeah. So I got the duplex and then about a year after I bought the duplex, I got married. And so my wife and I bought a house that had a garage apartment in the back. And so we house hacked that for a few more years. I bought another single family house that I bought for like $40,000 and put about $10,000 into it in three months of my own sweat equity, fixing it up. I realized that I will never rehab my own property ever again, that’s not my skillset, I’m not good at it. It took me about three months to do what a professional crew probably could have done in like a week working nights and weekends and missing time with the family. It was rough. It was rough. So I did that. That was the only house that I acquired until I moved to Tennessee.

Erik:
When I moved to Tennessee, I kept my contacts in Louisiana. I actually ended up doing my first BRRR deal about a year and a half ago. I actually found a deal on MLS that my realtor had sent me. He’s also a property manager. So he helped me take down the deal. He actually is also a contractor, so he’s triple a threat. He’s my property manager, contractor and my realtor. So he found the deal for me, he rehabbed it for me, and he manages the property for me. So I think that one we bought for $80,000, put about $15,000 into it. It appraised at 140. So we took out all our cash and then now it’s cash flowing and good to go. So did that. And then I bought a few more properties in the past few months here in Chattanooga, Tennessee.

Ashley:
Erik, have you been working full time during this? What has your career looked like? Did you quit your job after your first house hack? What are you doing?

Erik:
When I moved to Louisiana, I actually moved down there to work with the homeless outreach program there in Shreveport, and I ended up becoming the director of the homeless outreach center in Shreveport. That’s actually how me and my wife met. We also have a recovery home for women and children who had been rescued from human trafficking and my wife was a house mom volunteer. She lived at one of the houses with those women in kids. And so that’s how we met and ended up doing the whole falling in love and getting married and doing that whole thing. So we did all that. And then right after we got married about a year later, my wife and I became foster parents. So we had several different foster kids.

Erik:
We ended up having our now son, Landon. We fostered him for about two years and then we had decided that if, and when we were able to adopt him, that we wanted to move somewhere to give him a fresh start. So we moved to Chattanooga. I didn’t have a job when we moved here. We literally moved here, I didn’t have a job. My wife was a nurse. I started selling on eBay and Amazon. I would go to garage sales and thrift stores and like Goodwills and stuff and find stuff to turn around and sell on eBay, which I know is super random. So I did that for a long time. I graduated up into buying pallets of liquidated items and then reselling those. And then about 10 months ago, I started my real estate company that we’re actually focused on making that a full-time gig.

Erik:
And I have a third company that we set up fundraisers for youth sports teams in schools and that kind of stuff selling bedsheets. I know that’s super random, but just anything to hustle to make some money to make ends meet. And then real estate has always been the long game now.

Ashley:
I love it.

Erik:
So I’ve had a lot of different random jobs.

Tony:
No, you sound like the hustle for sure, Erik. But I want to go back, you’ve purchased seven properties now, and it seems like quite a few in the past couple of years here. How are you financing these if you don’t have traditional W2 income?

Erik:
Yeah. So the first few I bought was with traditional W2 income. And then since then, it’s just been finding lenders who will still allow me to get FHA or Fannie Mae, Freddie Mac or whatever loans who will look at my income from all of my hustles, I guess, that I’ve been doing long enough that they’ll count it as actual income. So I’ve still been getting most of my loans the traditional way. And then I’ve used a few construction style loans where if I’m doing a rehab on a property, that the bank will fund some of the rehab costs and then I’ll refinance out later.

Ashley:
Erik, are you seeing that banks are requiring two years of tax returns with your income that’s not W2?

Erik:
Yeah. So that’s actually been great to have my wife’s W2 because that helps us to qualify for some of those loans. In fact, some of the properties we’ve actually put solely in her name just because it was easier to qualify with her W2 than my mess of the financial statement.

Ashley:
For all of our single listeners out there, Erik just dropped a golden nugget right there, marry someone with a W2 income so that you can get financing on your properties. We need to have a dating segment on here for rookie investors.

Erik:
That’s good. That’s good. BiggerPockets Singles Group.

Tony:
Erik, I got one more follow-up on the financing piece. So how were you able to find these lenders that were able to use all of your side hustles as income? Were these like four leaf clovers that you just happened to stumble across or how did you actually find these people?

Erik:
Man, a lot of it is just asking questions. I would find other investors or other people, anybody who would talk to me about real estate, I would talk to them until they told me to shut up and go away. I would just constantly pick their brain on, “Okay, so what lenders do you use? Whose good connections Shreveport, in Chattanooga?” The other day, I was actually here in Chattanooga, I’m refinancing a duplex that my wife actually just quit her job, and so we don’t have any W2 income. And so now it’s a little bit more of a struggle to find that. So I put something out on our local Facebook group for real estate investors here in Chattanooga, just like, “Hey, does anybody work with a lender who works with people who don’t have typical W2 income?”

Erik:
And I had like 10 people respond with, “Oh yeah, this guy’s great. This guy’s great. This lady at this bank does really good stuff and they’re willing to work with people who are entrepreneurs and self-employed and that kind of stuff. So a lot of it’s just networking and just embracing your own ignorance and not being scared to ask questions.

Tony:
Erik, I love the advice of using a Facebook group. Facebook groups for me in my transition from long-term rentals to short term rentals has been invaluable. There are several big short-term rental Facebook groups on Facebook, and I’ve been able to connect with so many people. I was literally in a Facebook group yesterday, and we’re thinking about purchasing in a city called Lake Arrowhead, California, which is nearby to where I live. And I was in a Facebook group, found some random person who I’d never met before, who was talking about Lake Arrowhead. I sent her a message and we had like an hour’s long back and forth on Facebook messenger about investing in Lake Arrowhead.

Tony:
She’s also thinking about investing in Joshua Tree, so I gave her some information about my market. There are so many people that are willing to share and give their experiences, like you said, you just have to be, I guess, confident enough to share your ignorance and ask for that help.

Erik:
Yeah, absolutely. I feel like the real estate community is way more giving and forthcoming with information and sharing and trying to help other people than almost any other community of people I’ve ever met. Everybody’s so excited to help other people grow and be better and grow their business.

Ashley:
Erik, I have a question on finding your team real quick, because we’ve had a mix of people, some investors would rather have like one key person, the boots on the ground that takes care of everything like you have your one person that’s property manager, helps with the rehab, is your realtor. Then there’s other people that say, “No, I want one of each person because I want those checks and balances. I want my realtor to stop in and make sure that the rehab is being done.” How do you navigate that having that one key person?

Erik:
That’s a good question. Honestly, the one guy that I had in Shreveport, I just trust him. We were friends before we even started working together, and he was referred to me even… I met him through other friends, and I’ve never really had an issue, it’s always been great. So I was like, “If it’s working, then I’m not really looking to change anything or fix it.” Now, that being said, here in Chattanooga, I came in and didn’t know anybody. So I’ve been networking and partnering and I’ve done deals with multiple different people and multiple different agents that I’ve been working with and talking to. And so I definitely think that the more people you can network with and have on your team, the better. In Shreveport, that’s just the way that it worked out, that I just had the one guy who did everything for me.

Tony:
Awesome. Erik, I want to go back to something you said earlier, before we keep moving. You were talking about one of the BRRRs that you did and how you did all the work yourself, but this you’ll never do it again. And I want to highlight that point because I’ve always struggled with this as a real estate investor, the fact that I’m not a general contractor. I don’t know how to lay flooring, I don’t know how to put in cabinets, I don’t know how to do really cool backsplashes. I look at some of these other investors, I follow Investor Girl Britt on Instagram and she’s amazing. And I see her do these really cool time-lapses, and sometimes it makes me feel like, “Man, am I not doing what I’m supposed to do as an investor?”

Tony:
But what you said is super important, is that you could find someone who could do it in half the time with twice the results. It’ll look two times as good, but it would have taken them half as much time to get it done. So it’s a really cool mindset for you to have. I guess just for you now, have you done any more work on any of your other properties or was that the last floor rehab that you did?

Erik:
No, absolutely not. Nothing. I feel like in that experience, I thought I was saving money by doing it myself, but in reality, it took me three months to do what a contractor could have done in a week. So I missed out on three months of rent income and took up all my time. And when it’s all said and done, I probably would have come out about even and not had to do any of the work myself.

Ashley:
I can relate to that because yes, it could have been cheaper and it’s your time, you’re wasting your time doing it when your time is more valuable doing other things like finding deals or analyzing deals, things that you know what to do instead of spending three months rehabbing property because I’ve definitely been there and can relate to that.

Erik:
I would say at the time, I wasn’t doing any off market deals. I didn’t have a lot of lead flow coming in or I wasn’t… It might’ve been an okay decision at that time to try to do the work myself, but now that I’ve decided to focus on becoming really good at finding leads and lead generation, now that that’s my focus and that’s my expertise in what I’m trying to be really good at, because I’m so much better at that, now I’m definitely not going to try to go put a new cabinets or flooring or whatever in a house because I’m not good at that.

Ashley:
Yeah. What I like to think is that I can put myself in a position where if I want to go install flooring one day, I can go do that, but I don’t have to do it. So I think that that’s great. You’ve put yourself in a similar situation where if you really wanted to, you wanted to get away from the world. And that’s what I loved about rehabbing, it’s just you by yourself and you’re not responsible to anyone and it’s a nice break, you have the option to do that. If you really wanted to go paint one day, you could decide to do that, but you’ve put things in place so they don’t have to.

Ashley:
So what about working with contractors? That is a reason that some people do the work themselves too, because they can’t find contractors, they don’t to deal with contractors or they’ve had a bad experience with contractors. So it’s not always about saving money. What would be your advice to some of our rookie listeners when it comes to hiring contractors?

Erik:
Yeah. I think the number one key is referrals. We were talking about before with Facebook groups, local real estate meetups, any of that kind of stuff. If a contractor has a bad reputation, word’s going to get around. Real estate investors like to talk. And if somebody does something to screw somebody over or do something wrong, people are going to know about it. That’s how I found my contractors here in Chattanooga, it has just been through asking other investors and who they work with and who they’ve had a good experience with and who finishes on time and communicates well and stays on budget and all that kind of stuff. And so that’s how I’ve gotten my contractors here in Chattanooga.

Ashley:
For the management of these contractors, are you creating the scope of work, putting together contracts for the contractors? How does that work? Once you initially hire someone, what does that process look like? And are you setting a timeline where they have to finish or are you doing anything special?

Erik:
Luckily, I think I’ve found some unicorn contractors here in Chattanooga, who they do all that themselves, which is amazing. They write out the complete scope of work and the timeline, and they have an app that they use called Basecamp where every bit of the scope of work is put into the app, every step of the process is photographed and documented, and this is what we’re on, and this is the checklist they’re doing now. It’s some contractors who run their business like a Fortune 500 company. I’ve never seen anything like it. It’s absolutely incredible. So I literally can just get on my cell phone, open up the app, be like, “Okay, pictures. This is what they did today. Okay, cool. They’re on task. Good to go.”

Erik:
So I guess maybe I just lucked out on that. But also, I looked around for a long time and vetted a lot of different contractors from referrals before I found the ones I’m working with now.

Ashley:
I actually just learned about Basecamp last week. I was in Idaho and a couple of investors there use it for their property management company. So that’s pretty interesting. They must use it for part of their flip process too, but yeah, I just heard of that software.

Tony:
One more follow-Up from me, Erik, on the contractor. You said that you’re trying to vet these contractors. What are the questions that you’re asking? For our Wiki listeners, what should they be asking when they get this referral, they’ve got a phone number, they pick up the phone, what are they saying? What are they asking to determine if this is a good contractor or not?

Erik:
I think the first thing is, do they answer their phone? Do they actually communicate or call you back if you call them? I always have them actually come out to the property. And so we’ll do a walkthrough, I’ll ask for a bid and then see how quickly they get back to me with the estimate, how organized the estimate seems to be, itemized with all the prices and all that sort of thing. And then honestly, typically, most of my vetting has to do with talking to their previous clients. I do just a little bit of communication with the contractors themselves, just to make sure that they communicate well and then that I can get in touch with them. But most of my vetting has to do with talking to their previous clients and talking about their experiences with them.

Tony:
That’s a really great call out, to see how was it working with that person. It’s a good advice. People are always looking for contractors. I know that’s one of the hardest things to find. Just one quick tidbit from me, say that you’re moving into a new market and you don’t know… You kind of mentioned this already when we talked about the Facebook groups. That’s been super, hugely helpful to find contractors as well. So anytime you’re building a team, the Facebook groups are a big help.

Erik:
How many times do you hear stories about contractors who people had a great experience with them in the very front end and they expect it to go great and then everything falls apart at the end? People can make a great first impression and you can interview them and they can sound great or look great on paper, but did they actually follow through? I feel like that’s really key. And that’s where talking to their past clients is a great way to figure that out.

Tony:
Let’s talk about deal flow next. You mentioned earlier that you’re in a position in your real estate investing career now where you’ve got more important things to focus on than changing out the floors. You mentioned deal flow was one of them. How are you finding deals for your business today?

Erik:
Yeah. So about 10 months ago when I talked with my wife and we really decided that we were going to dive in head first and make the real estate investing a full-time gig eventually, I was researching trying to figure out what the best way to do that was. And what I found out is that every single investor I talked to, their bottleneck seemed to be finding deals. Everybody was just, they’ve got money, they got lenders, they have contractors, they’re just trying to find deals, especially in the hot market that we’re in right now. And so I decided that I’ve got to become the guy who can find the deals and then all the other opportunities will open up for me. So I was trying to figure out how do I do that and researching what’s the best way to find those deals, cold calling, direct mail, bandit signs, whatever.

Erik:
I actually ended up coming across again, in Jerryll Noorden with The Mighty Investor And I ended up signing up for his program. He specializes in search engine optimization or SEO for real estate investors. And so that’s where I started. I was like, “Rather than starting off putting bandit signs or whatever, my goal is to be the number one ranked cash home buyer in Chattanooga when you search cash home buyers in Chattanooga, we buy houses, Chattanooga, whatever, I want to be the number one Google ranking for those web searches.” And so that’s what I did. I spent about six months building my website, working on my SEO, working 15 to 20 hours a week while I’m doing all my other jobs and not making any money in real estate yet from those efforts.

Erik:
And now I’m actually, I am the number one ranked Chattanooga cash home buyer on Google. And so those leads are coming in and we’re rocking and rolling.

Tony:
Erik, Ashley, if I can steal a few minutes here for me selfishly, so we’re working on some direct to seller marketing as well.

Ashley:
Of course, Tony.

Tony:
We’re working on direct to seller marketing as well in the markets we invest in. To help us with deal flow, we’re wholesaling some stuff as well. Give me the crash course on how you rent number one in your market. What are the five steps I should follow to follow in your footsteps?

Erik:
Okay. Well, like I said, it took me about six months working 20 hours a week. So it’s a lot of steps, more than five, but I’ll try to go quick. I feel like the number one most important is a lot of people try to approach SEO, trying to trick Google into, or try to somehow coerce Google into ranking you number one. When really a lot of times what happens is if, when people get on your website, they stay on your website, and they click around, and they read stuff, and they scroll through, and they click on different pages, and all that stuff that people are interacting with your website, then Google sees you as more credible and they’re going to start ranking you higher and higher.

Erik:
So I think that’s the first thing is actually having a website that’s engaging, that people are going to interact with, and that Google notices that. And so that’s really the first and most important thing. And there’s a lot of technical stuff and backend stuff with backlinks and all different kinds of optimizing your picture size and your load rate on your page, a bunch of different stuff that’s real technical. And I’m not a real techie guy, that was just the program showed me what to do and I just plugged away at it. I’ll beat my head against the wall sometimes because it was just way over my head, but I just followed the steps and the process.

Erik:
And so that’s a big part of it, I feel like it’s just having a website that people actually click around, optimizing your pages for keywords, which is basic, but then also having lots of credible backlinks. And basically what that means is that people who actually linked to my website because it’s good content that they want others to see, if that makes sense. So when you have somebody like BiggerPockets linking to your website or whoever, that Google sees you as even more credible because BiggerPockets is already established as a very credible website, if that makes sense.

Ashley:
Erik, if there’s somebody out there that’s like me and has no idea where to even start researching and learning how to build a website and SEO, do you have any advice to resources or websites they should go to start learning about this?

Erik:
Yeah. Either pay a professional to do it for you or pay a professional to teach you how to do it. Don’t try to figure it out yourself.

Ashley:
I like that answer. So where should they go to find a professional?

Erik:
Jerryll Noorden, The Mighty Investor, he’s the guy who really taught me everything that I know. I’d never built a website before, I’d never done any SEO before. I’d never done anything, like I was saying, before now I’m the top ranked cash home buyer on Google for my area, which just blows my mind that that’s even possible, but just follow the steps and it works.

Tony:
It’s almost like the concept of Who Not How, and Dan Sullivan was on the OG Podcast. Is that the approach that you took? And I guess for listeners that aren’t familiar with that, Erik, let us know what that approach is?

Erik:
100%. And I feel like I’ve done that with most aspects of my investing, even when I was getting in my first leads and I had basically buried myself in this website and SEO for six months, and I’m like, “Oh, I’ve got leads coming in now, what do I do with these?” I’ve never done an off-market deal, I’ve never wholesaled a property, I don’t even have a contract that I’m planning on using. I literally had nothing and I’m the number one ranked cash home buyer on Google, and yet, I literally have not done one deal off market. I have now, I’ve done a bunch now, but at the time I was like, “Oh, leads are coming in, I got to find a local wholesaler, because I want to wholesale this deal and partner with him and do a JV wholesale deal, and he taught me that whole process, like, “Okay, I want to take down this house as a flip.”

Erik:
Well, then I found another investor to partner with me on that so that we could do that together. And so I think that that’s a big thing that I have embraced is that Who Not How mentality or finding those other people. Like I said, embracing my own ignorance, not trying to pretend like I know something I don’t, finding somebody who does know that. And being okay with maybe making a little less money right now to partner with somebody else and split the profit with them in order to really learn and get that education.

Tony:
I love that approach, but just to make sure that everyone understands what, Who Not How is and how it works, Who Not How is that when you have a goal for yourself, it’s not asking yourself, “What do I need to do, or what skills do I need to develop to achieve that goal?” It’s, “Who do I need to work with or who do I need to partner with to achieve that goal?” And I think so many times as a real estate investor, people feel like that they have this superhero syndrome where they have to do everything by themselves, but the really, truly successful real estate investors are the ones that have built the right teams and the right relationships to help support their growth. Ashley, I think you got something to add on that as well, right?

Ashley:
Yeah. Well, Erik had mentioned too, how he didn’t do rehabs and he learned that he did one and learned he had to outsource it. So I think that’s another example of this, but if you guys didn’t listen yet, go to the Bigger Pockets OG Podcast and listen to episode 470. My good friend @investorgirlbritt on Instagram, she was interviewed on there, and this is her second time on the show. The first time there, she would talk about DIY. She did everything for her rehab, she did everything herself. And it’s interesting to see how she’s transitioned to actually outsourcing as much as she can.

Ashley:
We were sitting in Idaho last week and she’s like, “Oh, I need to put together this like template thing.” And I said, “Oh, well here, let me go on Canva and do it.” And I was playing around, but she’s like, “Oh, actually, I already emailed the guy that’s going to get it back to me by today, you don’t have to do that.” And I was like, “Whoa, okay. I need to get these people in my life.” And so I thought that was really awesome. So go and listen to that episode. She also said she wants to make t-shirts too that say, “Hire the who’s not Dr. Sues.”

Erik:
Yeah. I heard that. That’s awesome. I love that.

Tony:
Erik, you gave us like a really good deep dive on deal finding and how you’ve built that out in your business. Now, what are you actually doing with your properties? Are these all traditional buy and hold? You mentioned a little bit of wholesaling and flipping, what’s your actual strategy right now?

Erik:
Yes. I’m trying to build up my rental portfolio and then wholesaling and flipping here and there just to build some capital as I need it. So my goal is to try to keep as much as I can right now. I’m trying to embrace the whole delayed gratification mindset of, I could make more immediate money if I just flipped or wholesaled to everything, but I’m trying to build that long-term wealth to build a good future for my family.

Tony:
Can we talk a little bit about the negotiation side of things, Erik, because if you’re getting all these off-market deals, there’s no real estate agent in between the two of you to help facilitate that, so it’s you talking one-on-one with the seller. I actually just got the audio book for Never Split the Difference yesterday, which is like a big negotiation book. So I’m curious what tactics you’re using to help you get some of these deals closed?

Erik:
Yeah, absolutely. I love that book by the way. I just read it two months ago. It was definitely life-changing for me. I have a great mentor here who has taught me all the negotiation skills that I use now. And I actually, it may seem a little backwards, but I actually don’t make offers ever on any property, I’ve never once made an offer on a property that I’ve gotten off market. And what by that is my goal going into the negotiation with the seller is to make everything their idea. And so I constantly go into it by making it 100% about them, their situation, what it is that they need, what are their pain points, or their problems, or their struggles, what do they want to do next in life, what do they need to be able to do that?

Erik:
And so the negotiation stems then from them telling me those things. And then a lot of times I’ll ask, I’m like, “Okay, so if I can come in and take care of all these issues that you told me about, I’ll the house completely as is, I’ll pay all the closing costs and you don’t have to make any repairs or fix anything, do anything. You can leave all the junk in the house, I’ll take care of it,” all that kind of stuff cash home buyers say, “I’ll say, “What’s the best you see yourself doing on this property?” And you’ll be amazed just by that one question, how often they’ll give you a number lower than what you would have offered had you made the first offer.

Erik:
And then the second part is I go, “Hmm, okay. Now, is that the best you see yourself doing?” Which again, I’m not low-balling them, I’m not making them an offer that they’re going to be mad at and cuss me out on the phone or whatever. And they’ll only say, “Yeah, that’s the best I can do,” or they’ll say, “Well, I can probably… ” I literally had this happen, “Well, I could probably come down about 20 grand.” And in person, I’m trying to keep a straight face like, “Don’t smile, don’t smile, don’t smile.” And I’m like, “Okay. I can make that work. Let me go look at this side of the house again,” whatever. Or if we’re going into them, if they’re like, “Man, I’ve really just don’t know.”

Erik:
Like, “Okay, well how much do you owe on your mortgage?” “I owe $90,000 in my mortgage.” “Okay. And then what are you planning on doing next?” Well, this one guy told me, “I want to buy an RV and travel the country and work remotely because I can work remotely from my job now.” “Okay. Great. How much would an RV costs that you’re looking at?” “Well, like 25, 30 grand.” “Okay. So if I could pay off your mortgage and give you 30 grand for an RV, would you sell me the house? Would that seem fair to you?” And they’re like, “Yeah, that’d be great. That’s all I want, is an RV.” And the house is worth $200,000. You know what I’m saying?

Erik:
So it’s like those negotiations where I actually don’t ever throw out the number, it’s all about trying to find what want, what their pain points are, solving their problem. And then at the end of the negotiation, everything seems like it was their idea.

Ashley:
Another investor just told me the same thing you said is what do you plan on doing with the money? To ask them that. And I think that is so important, and that was such like a light bulb moment for me, because you can structure your deal so that it does benefit what they want. And maybe they don’t need any money right now, so maybe seller financing would be a great option.

Erik:
Then you can get creative.

Ashley:
Yeah. Or like in your example maybe they need the down payment for a motor home or whatever they want to buy. So I think that’s a great question to ask. And someone also referred to me the book Freakonomics, and I ordered it. It hasn’t arrived yet, but I don’t know if either of you have read that. And she said that in this book, they just give you really good… It makes you think of questions to ask investors when you’re negotiating deals because of how their brain is working. I don’t know, I haven’t read it yet, but she said to read this book and it will help you learn what kind of questions to ask when you’re negotiating a deal?

Erik:
Yeah, absolutely. And then if they really feel like it is all about them and you’re trying to work with them, and help them, and solve their problems rather than how many times do you hear about investors they’re like, “Well, just make as many low ball offers as you can and eventually you’ll get one accepted”? And I’m like, “Well, that’s true, you can be successful that way, but I’ve seen more success when you actually work with people and let it be their idea.”

Ashley:
Yeah. Two of the questions that I always ask is first of all, they do seller financing. And I don’t ask that right away, I wait till I talk with them and they get to know me and hopefully like me. And then the second question I always ask is, do you have other properties for sale? Because if they have other properties for sale, okay, that might be another potential deal, but the fact is if you could buy all their properties and take that headache away from them at once, that’s like a great selling point for them to go with you because you’re going to take all of their properties. I had bought this six unit from this investor and he would only sell it to me if I took this falling over duplex that he had.

Ashley:
But that was for me, when I learned like, “Okay, I am the better offer because I’m going to take this thing that he has no idea what he’s going to do with it, I’m going to take it off his plate, and I’ll figure it out or whatever.” But those are the two questions that I like to ask, but I’m trying to learn more and more about negotiating, what other things to ask, but I like the advice you gave a lot.

Tony:
Erik, I have got one more follow-up question. You mentioned that you don’t typically make the offer, you ask them to give you the offer, but I’ve been on the phone with sellers before as well and they want to press you for a number. So if a seller is asking you, “Well, tell me what’s the most that you want to buy it for?” What is your response to that typically?

Erik:
The phrase that I use, and it sounds weird to say, but I’ll tell them like, “I don’t make offers. I’m sorry that’s just not how I run my business. There’s plenty investors out there who would love to make you a low-ball offer and try to squeeze every last penny of you. That’s not what I do, I want to try to work with my sellers to give them a number that works for them.” And then if they’re still pressing me and pressing me, then I’ll be like, “Hey, you know what, that’s totally fine.” I was like, “Honestly, I’m so busy with appointments and buying houses right now, I don’t need to buy your house. I’m happy to talk about buying your house. But if you can come up with a number that you feel like works for you, then I’ll be happy to talk with you.”

Erik:
And then end the conversation, which I know sounds crazy because you’re like, “Oh, but you just lost that lead.” But at the same really what you’re doing is you’re making them chase you. Because if you’re the one who seems desperate, then they feel like they’ve got the advantage. But if you’re like, “Hey listen, I’d love to buy your house, but honestly, I’ve got five appointments this week. I’ve got six houses under contract in the past two weeks. I’m so busy that if you’re wanting to shop my offer around a bunch of different people and try to get in a bidding war with other investors, I honestly just don’t have time for that.”

Erik:
I’m not being rude, I’m being nice and kind over the phone, but make them chase you rather than chasing them.

Ashley:
I think that cuts out the people too that are just jerking you around, that really just want to see what you’d throw out there even though they have really no interest at all in selling

Erik:
Absolutely. And I’ll still put them in my follow-up drip campaigns or whatever, to follow up with them every few weeks, “Hey, are you still interested in selling your house for cash or whatever?” And sometimes I’ll hear back from them and sometimes I won’t, sometimes when you start pulling away and they feel like you’re backing out, they’ll start chasing you though. They’ll be like, “Oh no, no, well, let’s talk about that.”

Tony:
Erik, what kind of CRM or customer relationship manager are you using to follow these leads you’ve got?

Erik:
Great question. Actually recently about a month ago, actually started doing Facebook ads for the first time because my SEO leads were coming in and they were good quality, but honestly with the market being so hot, I think leads dropped off because you could sell a cardboard box on the MLS for over asking price. And so I started doing Facebook ads just to increase my lead flow with a company called Hesel Media. And they actually have a CRM that they have built in with their program. I think it’s based on the REI reply CRM, where you can as leads come in, you can drag and drop people into different buckets

Erik:
And then there’s different automations that they have set up for me, that way, if I haven’t gotten in contact with them yet, then it’s this automation and it lasts for six months, or if I’ve talked to them and made them an offer, but they were like, “Oh, I need to think about it,” then I’ll put them in a different automation and that sort of thing.

Tony:
That’s so cool. We’re actually using REI reply as well right now. So I was hoping you would have said something different, that way I could have like something else to compare it to, but it’s cool. We’re using that software also and it’s reasonably priced and it’s got a lot, lot of powers and automation behind it. So I really, really love that.

Erik:
It does. Again, with the Who Not How, I didn’t want to put in all those automations myself. So that’s why I hired Hesel Media, and they actually put in all the automations for me. So I didn’t have to learn how to do that.

Ashley:
Okay. Well, Erik, I want to get to the nitty-gritty, I want to jump into one of your deals. And so I’m going to fire off some questions at you. If you could just give us the answers, and then we’ll go into the story. So do you have a deal in mind that you want to share with us?

Erik:
I do.

Ashley:
Okay. Where was this property?

Erik:
It’s here in Chattanooga.

Ashley:
And what was the purchase price?

Erik:
$90,000.

Ashley:
Okay. And what did you do with it, a flip, a BRRRR?

Erik:
Currently in the process of refinancing it as a BRRRR.

Ashley:
And how did you first purchase it? What was your financing on it when you purchased it?

Erik:
I actually bought it all cash. This is the first property that ever bought all cash. This was at the end of 2020. Right in the middle of COVID in 2020, I just decided that I was going to try to… I didn’t have any deals yet, but I wanted to prepare to be ready, so called the bank that had the loan on a couple of my rental properties in Louisiana and talked to them about getting a line of credit based on the equity that I had in those properties. So I was able to get a line of credit on those properties that I used that, and then a little bit of my own cash to purchase this duplex in cash. And then I put about a little bit of money into fixing it up and then now we’re in the refinance process.

Ashley:
Awesome. What do those numbers look like? So did you rent it out? And what do you expect to pull back out of it? Did you happen to praise yet?

Erik:
Yeah. The appraisal I think is actually happening this week. So I expect it to appraise around 140 to 150 in that range. So I’m about with closing costs and rehab costs and that sort of thing, I think I’m in it for about $103,000. So I think it’s 75% loan to value. We should be at 140,000, it’d be 105, we’ll be able to take out if it appraises for more, and we’ll be able to take out a little more. So we should be able to get all of our money back out, hopefully a little extra.

Ashley:
Awesome. Congratulations.

Erik:
Thank you. Thank you.

Tony:
I guess one last question. What do you think your cashflow in that property when it’s all said and done?

Erik:
It’s actually already rented. So the rehabs complete, both sides are rented out. It’s rented out for a total of, let’s see, 650 on one side, and 925 on the others. What’s that? 1,575. So 1,575. I have a property manager who actually oversaw the whole rehab and he’s managing it. So again, kind of that Who Not How, I didn’t want to do that rehab myself. So it’ll cashflow $600 or so after paying the mortgage and taxes, insurance, property manager, all that kind of stuff.

Tony:
That’s an awesome deal, man.

Erik:
Thank you. I’m excited for it.

Tony:
Erik, I want to take us to our next segment, which is our Mindset Segment. This is one of my favorite parts of the show because I know that what holds a lot of real estate investors back it isn’t that they don’t have the technical knowledge or they don’t have the know-how, it’s that there’s something mentally that’s stopping them from moving forward, they’re in second analysis paralysis phase. So I’m curious, for you, Erik, before you actually became an investor, what were some of the assumptions you made about being a real estate investor or what you needed to be, who you needed to become that turned out to not be true?

Erik:
I always thought real estate investors were just like the typical rich greedy guy who was like a slumlord and basically just a terrible unethical rich person, which I know sounds terrible, but that was just my concept of a real estate investor. And so as I got into it, I found out that a lot of it is actually the opposite. Some of the people I’ve met who are real estate investors are some of the most kind, giving, they love giving back and helping other people, teaching other people. It’s really been a much different community than what I first expected when I started getting into the real estate game.

Ashley:
Erik, I’m going to take us to our next segment here, and this is the Rookie Request Line. Anybody can call in at any time, the phone number is 18885-ROOKIE, and leave us a voicemail, and we will play your question on the show. So today’s question is from Jake in Orange County, California.

Jake:
Hi, I’m Jake, I’m 17 in Orange County, California. You guys mentioned on an episode around a month ago the idea of just in time learning. And really I’ve been thinking of reading all these real estate books and listening to BP and BP Rookie episodes aren’t really of use since not applicable to me. So I was wondering if there’s anything else aside doing that. For example, I was thinking running the numbers on a property, but that might not be of use as well, that you would recommend I can do now that years from now I’ll wish I did at my age. Thanks.

Ashley:
Yeah. So what are some things he should be doing now while he’s young and not just researching deals?

Erik:
Yeah, absolutely. I think one of the keys is connecting with other people who are doing what you want to do, and then finding some way to partner with them, provide value to them, whatever it takes to learn from them. I think that I’ve read a lot of books on real estate investing, I’ve listened to like every single BiggerPockets OG Podcast, Rookie Podcast, everything, and I’ve learned a ton, but I feel like I’ve learned the most when I’ve been working side-by-side with somebody who’s boots on the ground, doing it, investing here, and I get to partner with them and do it with them.

Ashley:
Yeah, I agree. I think the best experience you can get, and it was what I did was hands-on experience. So Jake, you’re 17, first of all, this is awesome and so exciting for me that you already want to invest in real estate. So I think that what you could do is that with real estate, there’s so many different jobs or things you could do to provide value to an investor. You could even do showings of apartments for a local investor, you could help with turnovers, painting a unit, you could do the cleaning in the common areas. And just having that connection with an investor in your market, you’ll be able to meet different people, you’ll be able to see what units look like in your area to get an idea of that.

Ashley:
You can even do the landscaping at duplexes and apartment buildings. So I think there’s definitely a lot of opportunity for you to meet with investors and also going to meetings. I bet that you will be favorite of everyone’s that you are 17 and you are there trying to learn about real estate investing. I don’t think you will have a problem getting people to talk to you and want to help you learn and grow and become a great investor. So after you’ve got your first deal, make sure you reach back out to us, Jake, so that we can have you on the show and see how your journey went.

Tony:
We can take us to our next segment here, which is the Random Question Segment. And I guess I’ll go first, Ashley, I’ll give you a break this time. What is maybe the most awkward conversation you’ve had when talking with the seller about trying to buy their property?

Erik:
The times where you have to be the most tactful and the most careful in the conversation is when someone’s selling a property because someone in their family has died. And it’s kind of this depressing conversation to have because they have this house. I had a lady who called me, she said her and her husband were in the middle of a remodel on their house and her husband passed away, and so she just doesn’t feel comfortable living in the house anymore and so she wants to move, but the house is still like halfway remodeled or whatever. Those kinds of conversations, it’s more important, yes, I want the deal, but at the same time, their life situation is way more important than whatever it is that I’m trying to do with the property or the deal.

Erik:
And so having those conversations can be awkward and they can be difficult, but doing that in a way where they feel like you actually care about their situation, because hopefully, you’re not faking it, you actually do care about their situation, I think really helps you connect with the sellers as well. And then they develop that trust and respect. And then sometimes that turns into a deal and you get the property and sometimes it doesn’t, but either way, treating people with respect in those kinds of tough situations I feel like is really important.

Ashley:
Erik, for my question, this is something that I’m so interested in, but I want to know how are you teaching your kids about investing and about managing their finances?

Erik:
My son, one of his favorite things to do during the summers when he’s not in school, is to go to the thrift stores and to try to find stuff to sell on eBay, because he’s seen me do that in the past. So we’ll actually go to the thrift stores together. And so he’s learning this idea of deal finding. I’ve honed my skills now where I can walk into a Goodwill, scan the shelves and go, “These are the four items that are worth good money.” And so he’s learning those skills and go, “Oh, I can buy this for $2 and sell it for 60 on eBay? That’s awesome.” So we’re starting small with those kinds of things.

Erik:
And we talk about real estate and he knows what I do. So we’re starting him, flipping those small items before we get him flipping houses.

Ashley:
Yeah. And not even anything with real estate, but just the fact that he’s learning how to be an entrepreneur and creating his own little business. That’s awesome. I love that. Tony, who is our Rookie Rockstar this week.

Tony:
Yes. Today’s Rookie Rockstar, and for the rookies that are listening, if you’d like to be featured as a Rookie Rockstar, make sure you guys join our Real Estate Rookie Facebook group. We’re shouting out all the rookies from there usually, but today’s Rookie Rockstar is Anisa N. And they just closed on property number two. So they’re calling this property, the Yellow Papaya. So last year their goal was to save $30,000 and closing two properties in one year. And they’re super happy to say that they actually achieved that goal. So big congratulations to you guys. They’re going to start the renovations on this triplex in June, and it’ll involve renovating the upper unit, and luckily the lower two units don’t need any work. So big shout out to those guys for making that goal a reality.

Ashley:
That’s really awesome. Okay, Erik, thank you so much for being on the show today, but before we sign off, can you please tell everyone where they can possibly reach out to you and learn some more about you and what you’re doing?

Erik:
Yeah. So my company is New Horizon Home Buyers. And so that’s our website, newhorizonhomebuyers.com, and on Instagram and Facebook. And then my wife and I have a blog called the Real Life Investor Couple. So that’s reallifeinvestorcouple.com, and also the same on Instagram and Facebook, where we document our investment journey and journey to financial independence.

Ashley:
Is that where your t-shirt is? I only read the couple part of it.

Erik:
Yeah.

Ashley:
Cool. I love it. Well, thank you so much for being on the show today. We took away so much weight. I especially loved the negotiating tips you gave us. So thank you very much.

Erik:
Thanks for having me guys.

Ashley:
I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. And don’t forget to check back with us on Saturday for another Rookie Reply. You guys, keep chasing those deals.