250: Rookie Reply: 2023 Risks, The True Cost of Owning Rentals, and Live Q&A w/Pace Morby & Jamil Damji

This is Real estate rookie episode 250.

Right now, the lenders are all tricking us into thinking that 5% is going to be a blessing. So when we hit 7, 8% where we're at right now, and they finally start creeping down towards five, five and a half, do you know what kind of pressure cooker is going to exist in this market? So all the real smart investors, they are buying cheap and they're holding. They're buying cheap and they're holding. They're just waiting for this 12 to 18 month cycle to do its and then as soon as the rates go back somewhere around 5%, it is going to be bananas.

My name is Ashley Kerr and I am here in person with my co host, Tony Robinson.

And welcome to the Real Estate Rookie Podcast where every week, twice a week, we give you the inspiration, motivation and stories you need to hear to kickstart your investing journey. And I want to start today's episode by shouting out someone from the rookie audience that goes by the username kissthenoobie, which, I like that, I like that name. But anyway, Kiss newbie gives a five star review on Apple Podcasts. And this person said, I've been researching the wrong way for way too long. YouTube and Google are not always as helpful as it seems. The information is mostly brief and summed up. Listening to other points of view and scenarios helps a lot. The episodes in particular dug into some questions I had been looking for. So Kiss to newbie, we appreciate the five star review and if you haven't yet, please leave us an honest rating review on Apple podcasts, Spotify, whatever it is, you're listening.

All right, cool.

Asha Care, what's going on? We're here in person.

Yeah, we are in Phoenix, Arizona for a meetup tonight.

Yeah, it's actually my first time in Phoenix and so far so good, right? Like, I got some chick fil a last night. Actually, you know, you know what, last night I landed and I tried to get some food and it was like a mission trying to find somewhere that was open at 10:30, which I feel like is kind of crazy for a city as big as Phoenix. So Phoenix helped me out. Stay open just a little bit later for the food spots.

Someone door dashed Tony tonight, some food.

But we did, we did get this place called Insomnia Cookies. We were like walking by and this place was open and have you heard of Insomnia Cookies before? They're like, they're open until like midnight. It's like a cookie spot that's open to Midnight. But they've got like these really cool cookie. Anyway, Insomnia cookies in Phoenix. I appreciate you for being open at 11 o'. Clock.

We were looking for food and it was good.

It was great.

Yeah. And then this morning we were late because you had to get Chick Fil.

A. Chick Fil A on the way in. Yeah. So the food escapades have been probably the biggest thing.

Yeah. Yeah. So besides the food, we're super excited. We are recording a live podcast tonight. So if any of you who are listening to this now are actually there. Thank you so much for coming.

Appreciate you guys.

Yeah. And if you guys want us to come to your city next, send a DM to the Bigger Pockets Instagram account. Or you can send it to Tony or I. Or when you leave a podcast review, let us know where you would like us to come. So today on our Rookie reply, we have four questions. We talk about real estate agents and lenders, as to how to build that relationship or to even break off that relationship. And then we're talking about closing, going to the closing table, but you're wholesaling the property. And Tony gives two different examples of how you can actually handle that.

Yeah. Other things we talk about are building, like long term relationships with your lenders and your agents, how to kind of toe that line the right way. And then some other questions we talk about are the differences in expenses on your primary residence versus your investment properties or some sneaky little things you might not be thinking about. And then the last one is, what is a dual agent and should you be using one? So we're excited to get into today's questions.

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You guys, this is the first time ever that we've really done something like this. So we just want to say, like, we're super excited to be here and welcome to the Real Estate Rookie Podcast.

We got some special guests for you guys, Pace and Jamil. If you guys can come out, bring them out. Yeah. Clap it up for Pace and Jamil. So, guys, first, thanks for inviting us to your. Your home state. This is actually my first time, like, in Phoenix, Scottsdale, anywhere other than, like, layovers at the airport. This is the first time I've ever been here. So I appreciate you guys inviting us out, man.

We're happy that you're here. Like, first and foremost, isn't it cool that biggerpockets came all the way to Phoenix, Arizona?

Yes.

To film a live podcast. Y' all are incredible.

I do have to say one thing. Coming from Buffalo, I'm very disappointed in the weather. I did not pack appropriately.

Did you bring a jacket?

This right here is my chat.

Oh, you. You thought you were coming to, like.

I thought, like 90 degree dry heat.

No, no, no, no, no, no. The desert gets cold in the winter.

So both of you guys are super experienced investors and I just want to. I want to Tap into that knowledge a little bit. Right. I know one of the questions I get asked super often about I invest in short term rentals. That's like what we do. That's like all of our portfolio right now. And a lot of questions come up around Tony, with where the economy is going, with where everything's headed. Do you think short term rentals are still a good investment? And I know what the risks are that short term rentals present. Right. Like the economy softens, maybe people travel less, people spend less on vacations. So we know what we're doing in our business, try and mitigate those risks. But you guys have, like, unique strategies as well, right? Wholesaling, everything with Creative Finance. What are some of the risks that you guys see with those strategies going into next year? And like, how do we kind of mitigate those?

So risks with respect to wholesaling or risk with respect to Airbnb?

I would say to the Phoenix market.

Yeah. With wholesaling and with like, Creative Finance.

Okay. So right now I think that the greatest risk that people have in the wholesaling space I'll let Pace speak to Creative Finance for, would be wholesalers or people embarking on a wholesale journey or doing it right now. If you have not made adjustments to your numbers, you're spinning your tires, you're, you're literally wasting your time. The market has shifted and, and buyers are baking in the depreciation. They're, they're, they're baking in where they're expecting the market to land. Because the fact is, is that we know where it's going here in Phoenix. We, we overshot. And so we saw about a 20% uptick, and we're going to hit that 20. We're going to come down about 20%. So all the buyers that I'm working with right now and their volume has picked up dramatically like the last 30 days. The number of deals that we've been, that we've turned is as much as we had in the peak.

Well, that's so crazy. Like, I would think the opposite would be true.

Almost.

Right. Like as the economy starting to shift that, like, things would slow down.

No, because the buy. Because we're buying deals so cheap right now that, and let's, let's, let's just think about what's happening. Okay. As soon as the market started to shift, interest rates went up. What did builders start doing? Stop building. Okay. We were already short on inventory. You also have all these people that have all this cheap debt at 2 and 3% and they're looking at the market thinking when am I ever going to get a loan like this? So what are they going to do with their property? They're going to hold it, which is going to remove that inventory from the market. You've got builders depressing building, you've got inventory shortages already. We're already walking in with inventory shortages. And right now the lenders are all tricking us into thinking that 5% is going to be a blessing. So when we hit 7, 8% where we're at right now and they finally start creeping down towards five, five and a half, do you know what kind of pressure cooker is going to exist in this market? It's going to be insane. So all the real smart investors, they're, they are buying cheap and they're holding. They're buying cheap and they're holding. They're just waiting for this 12 to 18 month cycle to do its thing. And then as soon as the rates go back somewhere around 5%, it is going to be bananas. That's my thought process.

Pace, what about you from yeah, first stop it up for Jamil. That was a, that was a great answer.

As far as Creative Finance is concerned, Creative Finance is so diverse in the sense that I kind of look at real estate as a pile of logs and a fireplace. Creative Finance is the gasoline you pour on top of it. It doesn't matter what you guys want to do on acquisition or in disposition. Creative Finance amplifies everything you do. So if you're acquiring deals, I can buy sub 2 seller finance, lease options, I can buy on novation agreements, morbi method, all sorts of things. I can dispo 10 different other ways that don't exist in traditional real estate. So right now everything is amplified. So last week I closed my biggest seller finance deal. 264 units.

And yesterday I put in my largest offer. I think we'll go under contract tonight. $52 million, 600 unit seller finance deal. And then today we closed another big deal, 192 units in North Carolina. So in two weeks I bought 500 units and I have literally not a dollar out of my pocket. So.

Follow me on YouTube.

So I'm being overwhelmed right now. Okay, so we did really well the last five, six years with Creative Finance. But right now people are like I've got agents texting me and going my seller is willing to let this house go. I mean what other market do you see? Sellers just saying get rid of this house. I just can't take care of the payments anymore. So in Arizona Phoenix, specifically, we are just going for houses that are 90 days on the market or longer and saying, hey, if I can get your commissions paid, can I just take over the payments? I could buy two houses every single week if I wanted to. Now, what is amazing about that, the amplification process is not only can I hold those. Okay. And we do Airbnb as well, but the way we're mitigating a lot of that is we're diverting to sober living right now. A lot of sober living, because it's government money coming in rather than tourist money. Right. But the other way I'm amplifying what I'm doing is I don't just buy and hold creative finance deals. What happened to buyers? Right. The buyers got priced out of the market because the interest rate. So I can assign my sub 2 and seller finance deals to an end user or I can wrap them and sell them at a higher interest rate or whatever. A little bit more strategic. But it is like rocket fuel right now. Everything for us is rocket fuel. Who's the sub two student in here?

Okay. So we have like, people are being overwhelmed with creative finance. It's kind of the perfect storm for us.

So that's how you're kind of mitigating and taking advantage of the market right now. But for a new investor, what are some of those risks that you're seeing that that's the reason they should be using creative financing and doing seller financing and subject to. So what risk in the market.

Okay, so I'll give you like on our cash stuff. Okay. So this year we had a couple of houses. We thought the ARV is about 500,000. And we've got people offering now those houses are fixed up, ready on the market. I can't sell them for 390. That's happening. That's been happening this whole year. So the risk is I got to refinance some of these deals, right. I got to burr into some. Some deals that I didn't want to burr into. Instead of me stroking a check for those, I'm going to hold on to them and I'm going to wait until the market comes back.

But the smartest thing that he's doing is he's. Because he's got the capacity. See a lot of fix and flippers, they have to sell. Pace has money, right. So he can refinance these and hold them, but you know, continue holding. Right now is the key. If you are in a bad fix and flip that, you can't disposition hold that sucker.

Yeah. So If I'm new, right. One of my risks is being in that situation. I would not want to be in that situation without a good partner. So if I'm brand new and I'm looking to do my first deal, I would look for somebody that's done 10, 15, 20 deals and partner up with them. So when the market does its little thing, you can go, what are we doing? Partner? And the partner goes, oh, this is no big deal. We're going to refinance and hold it.

Okay, what's the best way to find a real estate investing partner?

So for me, I found my partners in places I would never be, like, never hang out at. I needed people in my life that weren't like me, that didn't listen to the same music as I did, that don't like the same things that I do, that don't have the same skills and qualities that I have. I wanted people that were very much opposite. In fact, one of my previous business partners and still very good friend is in the audience here. Patrick. And Patrick and I couldn't be more different from each other.

Because of your strengths and weaknesses?

Because we have different strengths and different weaknesses. Right. And I'm always looking for people that can complement my shortcomings, which we all have them. Every one of us have strengths, things that we're phenomenally good at, and there's things that we just couldn't care to do. And so what a lot of us do is we make business partnerships with our friends and we have these incredible campfire conversations with people, and we share our dreams and our aspirations. And then all of a sudden, we find that there's an alignment between what they want in life and what we want in life. And we say, should we do it together? But we're both the same person, and then what ends up happening is disastrous. So find places where you don't necessarily hang out, business.

Situations where you wouldn't normally go and go and find your counterparts that have the strengths that you'd like.

What's an example of where places you have found your partners?

COO Alliance, Chief Operating Officer, Alliance. Because visionary, visionary, visionary, visionary. We should not be operating, managing, onboarding, doing any of the SOPs.

Zero.

Do you know that Jamil and I are not partners in any business?

Actually, I did know that.

Yeah.

Is that we 100% compete on everything we compete on. In fact, get the hell out of here.

So we. We collaborate. But he's right. I mean, the best man at my wedding, I don't talk to anymore. My very best friend I brought into my business because that's who was in my circumference.

And I was like, it was easy.

Oh yeah. It's like, oh. And the funny thing is you see eye to eye on all your ideas, but when it comes down to rubber hitting the pavement, a visionary is not going to do any of the actual nitty gritty.

Can you. So just for folks that aren't familiar with that phrase, like define what visionary Best book.

In my opinion, the best book you can ever read in business is called Rocket Fuel. And it talks about all the greatest business partners in the world all had a visionary and an integrator. And so Jamil and I combined have about 1,000 employees. And the reason being is because we have integrator partners that actually manage the office. The only time I go to my office is when there's a Christmas party. And so because of that, because we have integrators doing all the things, hiring, onboarding, managing the books, paying the payroll, looking out for the problems, it allows us to go out and raise capital, find the deals, recruit opportunities and recruit people.

How did you guys find your COOs, your integrators?

COO alliance.

So that's a real thing?

That's a real thing. The funny thing is like all of us visionaries all go to these really fun and charismatic beautiful like meetups and masterminds. The integrators don't go to anywhere where we go, so they go to something called the COO Alliance. It's where all the cool people that are actually going to run the business, they go to those masterminds.

That's a phenomenal resource for me was a little different. We were looking for.

A C suite that could handle our franchise growth. And so we actually ended up getting a very high level individual that was in the franchise department at IHOP that ended up coming and helping us with structuring our franchise and creating the growth that we've had over there. And it's been an incredible, incredible run with him.

Awesome, you guys, thank you so much for sharing. I think Pace actually had somebody write this question specifically for him. What is a good way to invest in multifamily for the first time safely?

Okay, two easy ways. Either a become an LP on somebody else's deal. Like the 264 unit deal I closed last week, I had zero partners so I didn't raise money seller finance. But the one I closed today, we brought on LPS or limited partners. Right. So that's the easiest way, the second easiest way to get into multifamily is through something called the fund of funds. Very few people actually know what that is. And if you knew what it was, you'd write it down, fund of funds. And you'd go research it and you go, that was worth a million dollars right there. Fund of funds is the easiest way to get into multifamily investing.

Can you elaborate more?

Do you want me to?

Yes, go ahead. We'll give you more than that.

Okay, so let's say Kara has a multi family deal and she has to raise $20 million for a hundred million dollar purchase, hypothetically. And Kara goes, I can only raise $10 million on my own. I need somebody else to help me raise some money. So she goes and finds 10 other people to do what we call a fund of funds.

So basically other syndicators who are used to raising money, they build their own fund that's going to invest in her fund.

Right. It's a fund underneath your fund. So it's a fund of funds. And so instead of having to find the deal, operate the deal, manage the deal, raise all the capital, I could go leverage Kara's credibility and just literally the first fund to fund I ever did was five years ago. I raised 100 grand for somebody's deal that needed 20 million. And I got all the credibility and experience of actually going through the deal as if it was mine.

Super interesting. I was at a multifamily meetup in Philadelphia a couple weeks ago, and that's what they were kind of pitching at the meetup is that's how they were pivoting their strategy. They were building a fund to invest into.

Would you rather raise $20 million all by yourself or find 20 people to raise a million dollars each?

Oh, yeah. And you have less people to, you know, have responsibility to. Okay, so we have our last question here that we have time for. Where do you like to find data? So where are you going to find information on properties?

The data deli.

Yeah, Data deli is obviously the number one choice. But if I'm looking for market information to try to understand where our buyers buying at right now. Where are deals selling at right now? There's a software called Privy that has been a game changer for Pace, myself, our entire community. I mean, this algorithm runs comps. It'll identify what deals are on the market right now that are actual value. And it'll also shows you what percentage of ARV fix and flippers are buying at in this specific pocket. It'll tell you what percentage of ARV buy and hold buyers are buying at and so. And they'll leave. It'll even tell you if this buyer is buying on market deals or off market deals only. And so it really just gives you all of the information that you could possibly want to understand whether or not. If you guys want to know more about it, go to runprivy.com run privy.com, run preview.com for me.

My fit. I go to these two websites every morning. Same two websites, landwatch.com I do love that one.

It's so good.

Hey, do you know how many owner finance listings are on there right now?

Yeah. If you you there's even a button to push.

It's gangster.

There are currently 12,644 listings on Landwatch.com all on Owner Finance. Just 12. Just Owner Finance. And then for multifamily or commercial is. I love crexy.com. i used to love LoopNet, but I feel like they just haven't innovated and cry just has kicked their butt. And then also Dave Meyer.

Well, thank you guys so much for coming on to the Q and A.

Thank you guys.

And thank you so much for having.

Love you.

Tony And I give it up for these guys.

Let's go.

These guys are the best.

Guys.

Clap it up one more time for Bas and Jamil.

Yes.

Okay, so our first question today is from Dimitri Andre. And his question is, I'm curious how the wholesaling process works. Does the seller know that the initial person they go under contract with is not the end buyer? Do they show up at closing and find someone else and feel like something shady happened in the process?

Yeah. So this is a great question, Demetri, and I think it depends on the wholesaler.

Right.

Depending on who you talk to, every person kind of handles it in a different route. So I'll kind of give you the two options that I'm familiar with and let you make the determination of what makes the most sense for you. So option one is you be very clear with the seller up front to say, hey, my job is to help you find an end buyer for this property. And when we get to the closing table, there will be another party that's actually going to be purchasing this property for you. I'm just here to help play the middleman and connect you with that person. In exchange for me doing the service for you, I will collect a small assignment fee.

And.

And typically when you do that process like you're at the closing table, it's a single closing and you just get cut a check for Being that person in the middle. So that's one way to do it. You just open and honest with that person at the outset. The other way to do it is to say like, yeah, I'm going to buy this property from you. And then when you go to the closing table, instead of it being one closing, it's a double closing. So say at 10:05am you buy the property from the seller, that closing closes, and then at 10:10am you turn around and have a second closing where you're selling that property to another buyer. Now, there are benefits and cons to each one of those approaches. Right. If you do a single close, you don't have to come out with any cash out of your pocket because you're not actually purchasing the property. You're just getting a fee for connecting the seller with the end buyer. If you do the double closing, typically you will have to come up with the funds to actually purchase a property, even if it's just for that, you know, our timeframe in between those two closings, you have to actually pay that person up front and you immediately get repaid, you know, shortly thereafter to you that second closing. So those are the two options I'm familiar with on the wholesaling side.

And Tony, have you ever shown up to a closing table with the seller? Because I don't think that I've ever actually been in a room with the seller.

The very first real estate investment that I purchased, this is one of those properties in Shreveport, Louisiana, that one I actually, just because I was so excited, I literally flew to Louisiana, sat down at the closing table and like the sellers were there, I shook their hands. Outside of that, I haven't seen any person. Usually, Dimitri, when you close in a property, you haven't, you're either going to a notary's office or they're send a mobile notary to you.

Yeah. And even if you're going to, so when you use a mortgage on the properties, it's more likely you have to be in person. So when you're doing a cash deal, which a lot of times a wholesale deal is, you can sign ahead of time, like Tony said, with a notary at mayor, maybe at your attorney's office, something like that, so you don't even see the seller. But if you're doing. I did a closing with at city, the city hall, so that we could file it and the sellers were there, but they were like at a completely different table buying the property that they were closing on. Once I signed that, I was buying their other property, but we didn't even see each other really at that point. So I don't think that's something really to worry about. I think the big as long as that property does close the close, the people aren't going to care who is actually the end buyer on it. Yeah.

And again, it's up to you. You've seen wholesalers do it both ways, so you think about what makes you more comfortable and what you feel might help you get the deal closed and oh with it.

This next question is from Elisa Serrano. I'd love some advice about business relationship etiquette. I've been reaching out and starting to create relationships with real estate agents and lenders. I'm 100% the type of person to compare several different options to get the best choice for me. Although I know it is part of their job, I'm struggling with taking up their time knowing I'll have to go with one agent lender and I might not use them. What's a professional, respectful way to say thank you so much for your time? However, I'm going to go with someone else, but I'd still like to keep this connection with you in hopes we can work together in the future. And at what point do you say this? Do you wait until the very end to see what they can do and tell them or try to save their time? I just don't want to burn bridges and make anyone feel like they have wasted their time. And having worked in sales commission before, I know that there is a tasteful and not tasteful way of, of going about this. And this is my first deal, beginning of my real estate journey. So I don't want to make any bad impressions. Any advice is very welcome. So the first thing I think of after reading this is it is great to get to know who you're going to be working with and maintaining those relationships. It is going to be somebody that's helping you build your team, build your rental portfolio. So you do want to know more about them and what they're willing to offer you. I definitely think on the real estate agent side there is some etiquette as to if that person is bringing you the deal. If they bring you the deal, they take you to the showing, then I think it's proper etiquette to go with that person to purchase the deal. As far as mortgage lenders, whenever I have a deal I am reaching out to any of the mortgage lenders I've worked with, any that I have wanted to work with and I ask them what options they have. And I don't waste a lot of their time because I ask them right away, if I close today, what would the terms be? What can you offer me? And then I also look at who actually responded to me in a timely manner because I want a mortgage officer who's going to be able to close on the property quickly and timely. So what are your thoughts on that, Tony, as far as, like, getting to know agents and lenders as to how to not waste their time, but get to know them and make sure the right person for your team?

I mean, I think Lisa here said the exact correct way. She said, what's a professional slash respectful way to say thank you so much for your time? However, I'm going to go with someone else, but I still like to keep this connection open like that. That is a perfect way to say it. Right. I think, as you said, like, most people in this industry understand that, yeah, a lot of their customers are going to be shopping around looking for the best person for them. So I think they do understand that. I think your point though, about the agent is super important to kind of point out because it's like if this agent brought you the deal, it would be kind of shady for you to then go out and bring in another agent to close on that same property. However, I do think it's fine to work with multiple agents at once. And one agent brings you this deal on other businesses. Agent brings you this deal. I think that's fine. And you know, like, I have different agents in the markets we work in and yeah, different ones are sending me different deals and I think that's fine. But to Ashley's point, it's like if one agent brings you that deal, I see you closing a deal with that person.

Yeah. And also too, if you, you know, happen to be scanning Zillow and you find a deal and it now it's your turn to pick which agent you're going to ask to take you to the showing. Start thinking about what are those agents strong suits? Like, maybe you want to do creative financing. Does your agent have, you know, experience helping you structure that? If you need help with things like that. So look at the deal and think about what will I need help with through this deal? Is it maybe just getting to see a showing? That's it? You don't need any help with anything else? No. You know, market research, analysis, then it's probably the first agent that can get you into the property and then, then that's the agent to go with because you can do everything else on Your own. So think about that, too, as you're deciding which agent to use for a deal, as to what value they're bringing and what you kind of need from them.

And on the lender side, I think it's very reasonable when you start that conversation to say, hey, you are lender one that I'm talking to. But I just want to be super clear that I'm also working on getting pre approval from this other lender. And when you get those initial term sheets back, I think that's when you can make a more educated decision around which lender you actually want to move the process with. Because a lot of lenders, just by giving you that initial pre qualification, they can give you a ballpark on what your final terms might look like. And I think that should probably be enough information for you. I probably wouldn't get to the point where you have like two closing disclosures out with the same lender, because at that point, they've done a lot of work to get you to that point. But I think that, like, initial pre qualification is totally fine to be shopping around.

Yeah, I actually had one of my business partners on a deal. Him and his wife did actually burn a bridge with a lender where they waited until the morning of closing on their line of credit on a property to call the bank and say they could no longer go through with it because they found out this business they were purchasing wanted to use that house as collateral for their SBA loan to purchase the business. So they could no longer get this line of credit. And they completely burned that bridge with that bank. Like that bank, that loan officer, he actually retired this year. But I'm pretty sure the. It's a very small bank that they would not. Not be able to, you know, go there and get along.

Okay, let's move on to our next one. This question is from Bill Ackridge. Hello, fellow rookies. I don't own any properties yet besides my primary residence. I'm wanting to know if there are any additional costs of ownership for rental properties that I wouldn't necessarily experience at a primary residence. How do things like insurance on the property difference between a primary residence and an investment property? Thanks. Insurance. I love it. Hate it.

So I actually got my insurance license and I dreaded every single part of it. I did it just to help somebody open an insurance company.

But so if you need insurance claims. Ashley cares. Your girl. Hit her up.

I. This is, I think maybe three years ago, four. Maybe four years ago now that I went to that. And I can't even tell you one thing anymore, I don't know. So now I just send referrals. But so with the insurance we'll address that first, then we can kind of go over some of the other differences. But the insurance is very different because you're not covering the contents like the personal items of the tenant that is renting the property. So if you're doing a short term rental, then that would be different because you do own the furnishings in the property. But as far as a long term rental property, you are just going to be covering the structure, the building of the property and then you want to have some kind of liability on the property and then if there's any outbuildings like a shed on the property, you want that covered too. So in my experience, it is usually cheaper to get insurance on an investment property than your primary residence because you're not covering all of the contents and other things inside of the property too.

From a short term rental perspective, the opposite is actually true. You know, insurance companies I think see more risk with a short term rental because the number of people coming through that property on a regular basis is higher. You have people that are on vacation sometimes they're maybe, you know, having a good time, they're you know, drinking other things. So I think the risk for short term rentals are probably a little bit higher. So we do see our insurance rates on our SDR is higher than our, our long term rentals typically. But to go back to bills, like the initial part of his question is like, what are some of those other expenses? I think this is a great question for rookies and one that a lot of people are probably thinking. And my first piece of advice, Bill, is that when you go to analyze a property, use one of the bigger pockets calculators because I think the calculators force you to think through all of those expenses that come along with your rental properties you don't really think about. So a lot of times you analyze a property yourself, you're just going to think about the expenses that come to your mind. But the BB calculators actually force you to say, okay, put a line item in for this, put an amount in for this, put them out in for this. So some of the other things that might come up when you own a rental property, I've seen and depends on the property, right? But I've seen some owners where they bake in the cost of utilities, right. If you have multifamily, where things aren't separately metered, sometimes it's hard to account for the utilities costs. If you're doing like a house hack where you're renting out the rooms, most people just kind of bake in the utilities cost of the flat or they'll charge like a flat rate for utility. So utilities is one thing to me that you might want to consider depending on what kind of rental property you're going with.

And you know what's really funny is do you ever hear the saying, like the shoemakers, kids never have shoes because he's so busy making other people's shoes?

Never heard that.

Okay, well, my dad, he owns a mechanic shop. And that was the big joke when we were growing up is like, we all had, you know, these cars he gave us, but our cars never got fixed. It'd be like, oh, it's leaking oil, just dump more and I'll get to it sometime. And even my sister just recently, she said she made an appointment with my dad on November 7th and it just got in, you know, four weeks later. But so I think, I think about that a lot for my rental properties. My dishwasher, my primary residence has not worked in over a year. And I just will not spend the money. It's just not that big of a deal to me yet. Or the hassle of having somebody come in and replace it and the, you know, to find the matching piece to the rest of my set. I can't go through the company that we usually use for appliance maintenance, things like that. But a rental property, it's like, oh, it's done that day, like get a new dishwasher in there.

So like, even for us, like our, our short term rentals, like from a design standpoint are so much nicer than our own house. I mean, Sarah keeps saying, like, why do we have these nightstands from college still? You know, it's like we're too, we're in our 30s now. Like, why do we still have these? But same, it's just like something about like spending money on your own. How? I don't know.

Yeah, so I, when I read that question, that's what I thought about, is that there will be expenses that could be in both sets of houses, but you will choose to put them into your investment properties to keep them a good investment.

So.

And then other things, you know, to think of is just seasonal maintenance that may happen. So if you own your own residence and you live where there's snow, you could snow blow it yourself, have your kids shovel it, whatever it is. But if it's a rental property, you may have to have Somebody pay for somebody to come and do that or even cut the grass or maintain the pool, things like that too that maybe you could do yourself since you're the primary owner.

Yeah, other things are like big capital expenses. So you know, like we're looking at a property right now, we have to replace the roof. The septic system we had to replace on a few of our properties, we had to install new H vac systems on some other properties. So some of those bigger like capital expenses that aren't going to happen every single year, but you know, they have some type of shelf life. Those are things you want to set aside money for as well to replace as you, as you own that property.

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Okay. Our fourth and final question is from Christina Hawes. I am considering buying a six plaques. I never bought multifamily before. Just single family. What are your thoughts on using the same realtor who is representing the seller? So the realtor would represent both buyer and seller. So this is called being a dual agent where the agent represents both of you. And in New York state, at least you as the buyer and seller have to sign stating that you know, it's full disclosure that this is a dual agent working for both. So I don't think that I've ever used a dual agent before. Have you?

I love doing that.

Yeah.

So like for me, I think it depends on where you're at in your investing career. Right. When I first started investing, one of the things that were super important to me was to have an agent that could educate me on the market that could really advocate for my best interest because I wasn't super familiar with what I was looking for. For I wasn't familiar with what, what some of the pitfalls were. Now typically, if I'm looking in a new market, I will go directly to the listing agent and say, hey, I'm, it's just me. I'm the investor. Here's my offer. Let's work together. I think the benefits of that are a. The agent is I think maybe a little more incentivized to work with you because now they're not splitting that commission with a buyer's agent. And B, it's, it's going to be an easier transaction because they don't have to worry about this telephone game between, between the buyer themselves, the buy or the seller's agent, you know, and like all these different people. So I typically do do that and I think in California you have to sign that document as well. Some agents though won't do that. Like I've reached out to some agents, like, hey, I don't, I don't, I don't do the dual agent thing, like, but I have someone in my office that I can recommend to you. But I honestly have done that and my agent in Joshua Tree I found that way and multiple agents I found have been just by going to break to that listing.

Yeah, I feel like I've had more trouble and this is more on the commercial side. So recently we looked at a, it was an old welding warehouse and we're going to kind of use it for self storage for boats and RVs. And just trying to contact the listing agent was, look, we showed up twice and she was a no show. And I'm sure that can happen with all kinds of agents. But then we ended up just contacting an agent we had worked with before and he was like, I'll get you a showing. And then he ended up taking us and to go see it. But I think especially on the commercial side, if you've built that kind of relationship with that broker, you're. It's going to go a lot easier and there you're going to be more of a priority instead of just, you know, this person just reached out to me for the first time ever. I don't really know if they're a serious investor, things like that. But as far as in this circumstance, if you can, you know, if you think it will be easier for you and Tony has obviously had a good experience, there's not a lot of reasons not to. The only thing that I can think of would be if, you know, negotiations start to come up during the due diligence period where the agent becomes the middleman. And now it's like who is the agent really representing and fighting for? Especially if you are a new investor, which is Christina. It seems like you're pretty experienced, you're single family, so. But if you're a new investor, I think it's beneficial to have an agent that's on your side and going to be fighting for you. If it does get to that circumstance where, you know, during the Inspection period, things come up and, you know, they're, they're on your side where maybe if you're, there's a dual agent, they might lean towards more of, oh, the higher price, the higher commission. You know, I'm on the seller side.

That's a great point. And I think the way that you can combat that, Christina, is by really sticking to your numbers, right? Like when you, when you analyze that deal, there was some number where that deal made sense. And if you get to that negotiation phase during your due diligence and the seller's agent is really playing hardball and doesn't want to give you what you want, ask your cue to walk away and say, all right, hey, Mr. Seller's agent or Mrs. Seller's agent, great working with you, but I know what my numbers are, are. Unfortunately, the seal doesn't make sense. So I'm going to walk away. And at that point, either the, the agent is going to work with you and compromise, or they're going to say, hey, wish you the best of luck, and that's the end of the deal. So I think for us, that's kind of what we've leaned on is to say, hey, we know what our drop dead number is and kind of use that as our, our backstop.

And I think you have to look at what type of person you are too, because I would say early on in my investing career, an agent probably could have persuaded me that, oh, this is the way to do it. You should do this. You're getting a great deal where now I know better. So think about what if you're easily persuaded or, you know, if you. I know I struggled with lowball offers when I first started out. I felt like I was offending someone. If you know that you get into the circumstance where the agent's almost making you feel guilty for asking for those things. So think about how tough you are and how much you can stand your ground if you're going to, you know, hold yourself up and not give in to just being influenced by an agent.

I guess you talked about lowball offers, so I just want to mention this really quickly. So I submit multiple lowball offers on a regular basis just because, like, you know, you, you have to, to try and find deals, especially for our rehab properties. I'm just trying to pull up because we just got a. I was just telling yesterday we have a property under contract with a pool. So this, it's a probate property. Hasn't been been taken care of in the best condition. There's a swamp Cooler on the roof that pretty much calls a mat.

Like the roof what, a swamp cooler.

You haven't heard of a swamp.

No.

I feel like this is what I tell you about. Oh, well.

So a swamp cooler. It's like a, it's like an old school H vac system and it's super popular in the desert. I don't really know the inner workings of it, but it's, it's significantly cheaper than like a traditional.

Yeah.

H vac system. However, if they're not maintained properly because like something about like water running through the system, it can, they can leak.

Okay.

So you see a lot of properties in the desert where these swamp coolers are placed on the roof when ideally they should have been placed like off to the side swamp. Anyway, they're placed on the roof and if they weren't maintained, they start to drip and drip and drip. So like we walked into one of the restrooms here and you could literally see skylight coming through the restroom because of all the damage that had happened. So anyway, I just want to pull it up because like I can't find the property. Anyway. The property was listed for something like, I don't know, like 3:70 or something like that. I offered 3125 and they accepted that offer. And now it's under contract. We walked the property, got the inspection report. I'm probably going to ask for another like 12 to 15 thousand dollars in price reduction. So anyway, my point is sometimes just because a property is listed as a certain price, that doesn't even necessarily mean that the, that the sellers believe the property's worth that price. I just want to see what they can get. Yeah, right. And we were one of the only people that offer on that property because it didn't need so much work. But for us, we're not afraid of the work because we know we have the crew as long as we can get it for the right price. So that's a big thing.

And they didn't even counter at all. They just accepted.

They, they accepted our very first offer. They accepted. Right. So it gives me the indication there's probably some, some wiggle room there as well. Which is why we're going to go back with.

Right. We found from the inspection report and it's. And you put in that inspection contingency too. So that's, you know, that safety. Not having that too. Okay, well, thank you guys so much for joining us for this rookie reply. I'm Ashley at Wealth from Rentals and he's Tony at Tony J. Robinson and we will be back next week with a guest. Still you try.

So hard.

Games.

Hey rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener.

As a rookie investor. Especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.

So head over to biggerpockets.com/guest if you want to be a part of our show again. That's biggerpockets.com/guest and we'd love to have you on.