All Forum Posts by: Dan Gandee

BEGIN RANT (Because It's Very Common With New Investors) 

Just wanted to share how many investors want to "feel" like they are getting a bargain or a deal, and then let a deal go over $5K-$10K in difference in price. Now let me preface this forum post by saying I'm not talking about markets where $5K to $10K is a high percentage of the purchase price (lower priced markets with limited returns). 

Typically what I see when this happens, it's because they (the investor) don't know the true components of long term wealth building, forcing appreciation, value add plays, or repositioning of property management/expenses. True cap rate stabilization.

They are too concerned about saying to their buddies that they got the seller to come down one last time, that they completely missed the opportunity to acquire and HOLD the asset to perform the necessary valuation changes. 

Literally see it each and every week. They will let countless deals go over their emotions and not their investing criteria. 

Stop bickering on price, and start looking at the bigger picture. If the deal doesn't feel "right" or you feel that $10K will never be made back in value add, then move on, but don't just let deals go on "principal" of your negotiation preferences. Nearly 9 times out of 10, you'll never be successful in this business. 

How to avoid this?

1. Start by understanding the true underwriting valuation at ACTUALS vs. PRO FORMA 

2. Start looking at your MAO as the ideal price, but look where potential savings can occur elsewhere.

3. Don't just buy at list price, but buy where it makes sense. 

4. Make sure your financing is in order and your cash on hand to close is accurate. 

5. Stop looking at deals as a battle with the seller, and start looking at them as an opportunity of change of ownership. 

6. Know your market appreciation velocity and how fast you'll make up a overpayment in price in equity position. 

7. Ask for other terms in the deal to be reconfigured, and don't fixate on just the price. 

8. Remember, some of the best deals you'll do are the ones you decided to pass on. Not just because you got pissed off at the seller. 

9. Don't blame your broker or wholesaler for the deal going south. They just are a connector to motivated sellers or potential deals. 

10. Always be nice to the seller and ask them to reach out if things change. I've acquired tons of deals by putting gratitude before emotion. 

And remember, sometimes the DEBT you take on is MORE IMPORTANT than the PRICE YOU PAID for the property (i.e. owner financing). 

END RANT (Mic Drop). 

Just thought I'd reach out to those who have portfolios (over 25 doors or 15 individual properties) and ask how often you go through a ranking type spreadsheet of the properties you want to keep, the properties you want to 1031, the properties you want to sell or owner finance, and the properties you need to create action plans on, or keep on your radar for better property management? 

I've created a pretty good system to look at these numbers quarterly from importing Stessa, P&L's, and tenant requests/repairs. 

Just thought I'd get some feedback from the crowd? Thanks in advance. 

I only write offers that make sense to ME. I don't care if it makes sense to the seller. Never split the difference, only buy deals that make sense to your investment criteria or you will suffer in the long term. 

I have a BRRR property that I need to rehab and looking for any special sauce anyone has been successful with on removing smoke odors?

Sorry if this the wrong forum for this but I want to get this property turned around quickly. Thanks in advance. 

Dealt with this exact problem in your market (where I grew up and started investing) and found a few solutions. Local credit unions we started with and asked them if we would deposit say $50K into their bank account (and let it sit) would they fund a $50K deal on portfolio. That worked some of the times. Next, we reached out to smaller hard money lenders and asked them if any of their clients would be open to first position on our projects or BRRR's. That route seemed more effective. All in all we ended up finding a PML who stayed with us until we moved all of our assets out of Ohio and back to the west coast where we could catch faster appreciation and bigger flip mark ups. DSCR we could only get down to $75K no matter how we sliced it at the time. Good luck!

Let me be break down some very simple advice..."Don't hire an agent just because they can sell your flip fast or look polished. Hire the agent who owns investment property themselves and/or is or has done what you are trying to accomplish!" 

(ENTER tons of naysayers and argumentative responses) - All feedback welcome. 

Why?

Because they understand how important your cash position, financing, and long term investment journey is to your survival in this industry. 

They have made the same mistakes you have not made yet or are going to make in most cases.

They can show you how to pivot quickly and exit with minimal damage if necessary. 

They have a long list of investors from all different asset classes that can be potential buyers to your finished product or exit. 

They aren't going to "steal your deal" in most cases and they want to have you become a "repeat customer" by having integrity. 

They understand how to underwrite quickly and tell you when a deal is a deal. 

They speak your lingo and know your buying habits. 

They aren't hungry for a commission check because they have their own passive income. 

This is 100% why I try to tell everyone not to hire the first agent that shows them a home or responds to their FB post on a private group.

What happens if you don't?

You are at risk of making the wrong decision at the wrong time, forcing you to hold longer than you need to or sell for a loss.

You are at risk taking advice from someone who hasn't seen the unforeseen circumstances that can occur, creating stress and anxiety. 

You are at risk of partnering with the wrong broker who's going to lead you down a path of minimal profit/cash flow deal flow. 

You are at risk of listing your flips with someone that doesn't have a marketing machine built to create multiple offer bidding wars. 

You are at risk of making bad 1031 decisions and putting yourself in a upside down LTR. 

Ask questions like:

1. How many deals have you done with investors?

2. What is your investment strategy?

3. Do you have any references you could share of investors you work with?

4. What's your experience with commercial and investing lenders? (i.e. Hard Money, DSCR, Bridge)

5. What's your next move in investing? 

6. How do you underwrite your deals?

7. Do you have good contacts to contractors and other referral partners?

8. How can you help me achieve my investment goals?

9. What's the biggest investment mistake you've ever made?

10. What's the largest investment you've done yourself AND worked with a client on?

I was investor for a decade before running a high performance real estate team specializing on investments. This is exactly what I would ask!

If you are an agent just starting off and want to work with investors then my best advice is to find a mentor and find the DEALS. 

Learn every metric possible and know how to underwrite deals like a champ. 

End Rant.

Slow downs are typical especially before June/July/Aug in this area. BUT...

Make sure to watch the economy closely as this isn't a covid/post covid travel economy. 

When paying cash the GRM (gross rent multiplier) or BEP (break even point) is key here in the short term game. Weather the storm and wait until you can start profiting on your investment, i.e. be patient 7-10 years as this will pay dividends. If you panic in year 2-4, you'll make a little equity and then be forced to 1031.

If you financed the purchase, then cash flow after debt service is going to be key for monitoring in this specific area. I have a few STR's in areas where if the CFADS isn't going up with rental rates, then I'll move those to long term holds with steady tenants.

Just some food for thought as no need to panic, but watch your money people.

@TimDelaney Totally can see your frustration there and it's definitely something you've got to battle with. For years I've called the mortgage industry "The mafia of real estate" because they see every deal yet own a piece of it all because it's their money. I've moved to having private investors come in with 2nd, 3rd position loans so we can redeploy capital on new projects, giving those same PML opportunities on the new deals so that their front end and back end investments were secure for profit. 

Much appreciated @Andy Sabisch

Let me preface by saying that I was an investor for years (and still am) that hated real estate brokers - I thought they were a necessary evil to the game of relisting and provided no value to find off market deals...

Fast forward. I run a team of 19 agents and have a very successful investment business. Let me tell you that LOYALTY changed the game for us. 

Loyalty between our investors and agents created a mutual beneficial relationship that was NOT BASED just on "who was bring them the next deal" but who could help them build their business fast. We lead with value and tons of it - showing them our systems, spreadsheets, contacts, subcontractors, competitive commissions, access to private money, and overall strategy. 

Loyalty between our contractors and investors skyrocketed our profits, margins, and volume (commissions). No more babysitting and chasing subs down. They know they were the only one we are calling every time unless they are unavailable, then we go to our #2 on the list who was always inspiring to be our #1. Bids are competitive and straight forward. Change orders were reduced by nearly 50%. Repair addendums were handled in days and not weeks. Bids were fast and thorough. 

Loyalty between our HML/PML and investors has created referral relationships that built faster funding and quicker underwriting. Rates have become more competitive and fees have been capped at respectable rates. Access is always there if the deal makes sense without having to bounce around.

Loyalty with our wholesalers and investors has given us more off market opportunities before it gets "sent out" to the rest of the list. We treat them fairly and compensate them greatly. If we pass on the deal, they have can take it elsewhere without any issues. But our business is #1 - We provide the dialer, the data, the scripts, the CRM...

We established this loyalty by FORMING RELATIONSHIPS and not just valuing PROFITS > LOYALTY.  

This came from sitting down and drawing out our expectations up front. If they didn't want to follow our model, then we moved on. If they did, then we would test them out. 

Once they passed the test, then we would keep meeting with them again and again to get deeper with them on their why and their goals. Working together to get them where they want to be in life was and still is our #1 priority. We stopped looking at business as who can I use as a "means to the end or tool to get the job done" vs. who can I put in the seat on the bus with us to accomplish our end game. 

That's when things took off! Yes, people screwed us over. Yes, people would turnover. Yes, damage control would need to happen. But the BS slowed down significantly. We built a retail side and investment side business that everyone tries to work together for the common goal = wealth to change our lives. 

Have loyalty and build relationships when forming your dream team. Take care of people. Don't be inconsistent. Your word is everything. 

People will forget what you said and did, but they won't forget about how you made them feel...