AIPIS 39 - Selling to Real Estate Investors with Paul Da Costa

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It's my pleasure to welcome Paul DaCosta to the show. He is the owner and leader of the Port Charlotte Real Estate Investment association and he is an active real estate investor and works extensively with investors. So I wanted to talk to him today a little bit about the market in general and also how we can be more effective in serving investors as clients. Paul, welcome. How are you?

I'm doing great, Jason. Thank you very much for having me on. I appreciate it.

Well, it's good to have you. So tell us a little bit about your thoughts on the current marketplace and then let's talk about working with clients in a better fashion.

My personal opinion on the marketplace is that in some areas it's picking up considerably. I live in Florida. We're seeing a big uptick in Florida market sales, especially new home construction. If you move around the state, especially on the coastlines, there are hundreds of homes going out of the ground every single month. So that's a very good thing. The other part of the market that I like is the newer homes that were foreclosed on from the crash. A lot of them now are slowly starting to get on the market and they're picked up quickly, not just by investors, but by people who are looking to purchase them for their own personal residence, which is a great sign.

What do you think is contributing to it? Low rates, obviously, etc.

Yeah, low rates. But I look at our local newspaper puts all the sales in from week to week. 90% of the sales are being paid cash What I think people are seeing, especially the ones that are buying the homes in the $200,000 to $600,000 range. I think they're finally saying, you know what? I'm going to get this house now before it gets too far out of control, before the prices go up too much and they're picking the houses up. I know the last three deals I've personally worked for with some people who bought homes in the $600,000 range, they were all homes up north. And they finally just said, you know what? Now we're going to do it. They came to Florida and they bought their. They bought their home.

Yeah. And we were talking a little bit about the industry in general. And one of the things that I always like to say, Paul, is that real estate has the best product. I mean, it's just not even really debatable anymore. I've had the debates for a couple of decades now with people about they want to do the stock market and buy gold and all of this stuff. And none of this stuff ever works on any real consistent basis. It's just, I mean, the argument is, is really, in my eyes, completely over. The best investment in America, bar none, is income property owning rental real estate in many of its different forms. As long as you do it right, you got to know what you're doing, you got to do it in the right place at the right time, etc. Structure the deal properly. But, but all of that aside, I always like to say the real estate industry has the best investment but the worst sales force, whereas Wall street has the best sales force but the worst, or maybe mediocre investments. What are your thoughts on that?

I agree with you. One of the problems you have with the Wall street thing is like they say they have a great sales force and a mediocre product is that. We talked about this before. It's kind of very rigid. But their sales training is considered one of the best. And, and they have a structured track to work on. And the people come to work, they go to an office, they actually sit down and they're responsible and held liable to get something done. Where in the real estate business, you know, just as much as I do, if you don't get up till 11, no one cares. There is no structure and most facilities have basic minimum training at the best. Few agencies, large corporations have some very good training. I personally am involved with a Keller Williams agent and we have real good training, but 90% of our people that are signed up in our office still only work part time.

Right, right.

It's not like it's a full time job.

It's a very fragmented industry. For sure. Correct. But it's such a good product. That's just what's so sad about it is that I think a lot more people, I mean, the stock market has trillions of dollars in retirement funds and non retirement investments, but the people that invest, unless you're an insider, nobody's doing well. I mean, they might do well for a short time. You know, you always hear a story here and there. But hey, look, I'd rather be lucky than good any day of the week. Okay? Absolutely. It's not the investment, it's just luck occasionally, you know.

Sure. And the other thing too with that, Jason, is that people for decades now have been ingrained. You sock away a little bit at a mutual fund, you put a little bit here. If you work for a big company, you buy a little stock, it's good for you, you're investing in your company, blah, blah, blah. But everybody has been, oh, well, yeah. If you're lucky enough to buy a house, you have one, maybe two. Our generation or the generation that's here now, that's in the 60s and 70s, they're really the first generation to own a home up north or wherever they lived and then maybe buy another one in Florida. That's it. My grandparents owned one home for 52 years and it was sold. And my parents, my father's on his third home, he's 86 and that's only because he's been downsizing. So there's a mentality difference where people don't think of buying a home and saying, hey, let's buy a house and let's just put it up for rent and let's just keep it and let's just work on another one and you have to buy it.

Right.

Which is important.

Yeah, yeah. Fantastic. Well, talk to us a little bit about practitioners in the industry and some tips on how people that may be coming from the traditional side of real estate can do a better job at working with investors.

Okay, I'm going to give you my personal how I do it. Even though I have the RIA Group and I'm involved with investors all the time, there are some investors I will not work with flat, straight, period. I will not work with them because all they want from you is information and free stuff. No one deserves to work for free. So I will not work with them. I only work with investors who are one, who are going to buy multiple properties, number two, who respect you and respect your time. And who understand the value of a real estate agent. And that's where as an agent, you have got to interview the prospective investors and how you're going to work with them. Basically what I do is because I have a little bit of an advantage, but before I got to that advantage, I would say to them, how many homes you're going to buy a year, what's expected out of me and what I expect out of you. I expect to find your house, that you buy it, and then if you're going to rehab it and fix it up, I expect to list it as well. If I'm not going to get it that way, I'm not going to work with you because I'm not just going to give you all the great properties that come up and then you turn around and give them to somebody else to sell because you're buying them for 60 cents on a dollar and then selling them at 100 cents on a dollar. And I want to be able to be fair share all the guys I work with. And ladies, that's the agreement we have. And it works real well because they understand that I am not going to work for free.

Yeah. So any other tips on that investment counseling session and what you do when you sit down with an investor and you determine their needs, how do you fulfill their needs? What kind of questions do you ask?

Okay, one of the biggest questions I ask them is what is their real goal? Is their goal just to buy them, sell them and flip them, or is their goal to buy them and hold them long term? Depending on what that answer is, that's going to make a difference in what type of properties I'm going to bring to them. And then the other thing is, I say to them, what kind of funds are you dealing with? Are you financing everyone? Are you paying cash? Are we buying them? In your self directed ira, how long is it going to take you to do this? And how many of these can you go under contract at any given time? I'll give you an example. I have a client who has got unlimited funds, just unlimited millions. So every time I get a property that meets his thing, I call him up, he says, buy it. He's bought 25 properties this year.

You have got to know where these people are coming from. No different than what you would do with a regular person who's purchasing a home to move into. Do they have cash? Are they financing it? When can they close? How can they get all these things done? And the other questions I ask is, what type of inspections are you going to want done on the homes and what kind of contracts do you want? Because in Florida we have as is and then we have the full far bar contract. So you need to know these things. And every state runs their contracts a little different. So that's just a local thing and the realtors know that. So they just need to figure out what's going to work best for their customers.

Okay, so other questions in counseling. That's good.

Yeah. The other big question in counseling that I ask them is if they're going to hold the property long term, are they going to property management themselves or are they going to need a property manager? And if so, I work with two or three people. I'm more than happy to set it up for you to. You can interview those people to get them done. I also get involved with the insurance on the homes. How much it's more or less what it's going to cost, how old the home is. Is that a good investment for them to. Because insurance on the other end for the homeowner, it could be very, very expensive. So those are all the things that you've got to have. And I work with a number of insurance people as well. So basically I'm the conduit for them. I have contractors that I do business with that I know and trust that if I have a guy that's kind of new coming in or has a long term project and is doing a number of houses but he needs to change. I have the insurance people, I have three home inspectors. I have all that right there handy. So for my investor, he only makes one phone call. So I make myself the conduit for him and now I become more of a partner and then the commissions are no longer an issue for them.

What do you see as the better strategy? Is it the buy and hold or the buy and flip strategy for investors?

I personally like to buy and hold, providing you can find the property at the right location and you can rent them out. I like that because in the long run, it's a monthly income. When you buy the buy and flip, you get it. Sometimes you make 15,000, sometimes you make 10,000. Once in a while you hit a home run, you make 30.

And don't forget, sometimes you lose 10,000.

Or even more. And the thing with that is doing that is you have to continually do that to make your income. If you don't do it, you don't make any money. But if you got $10,000 or $15,000 net rent coming in every month, it's an altogether different story. Now you can go away on vacation for six weeks and not care. If you got five properties under rehab. You can't go away anywhere.

I've always noticed over the years that I've been in the business that the people who buy and flip have spending money and the people who buy and hold have real wealth.

Yes. I've also noticed that, too. I noticed most of the guys who have numerous properties, they have money. If something happens, you tell them, oh yeah, it's going to cost 160,000 bucks. They're like, okay, no big deal. Absolutely. That's very keen on your part. That's a very good notice.

What are some of the other rules either for practitioners who are selling to investors and wanting to work with investor clients or investors themselves?

I think one of the biggest things for investors, and I've written about this in my newsletters and on my blogs, the investors have got to understand that your biggest ally in this business is your Realtor that you work with. Now, I'm not saying you have to work with one exclusively, maybe a couple, two, maybe three, depending how many homes you're buying on. But from the investor's point, you need to make them your partner because there is always a good chance that the Realtors are going to find homes that you're never going to find. I don't care if you're driving around the neighborhoods or you've got people going on. And if you work with the same Realtors, you're top of mind with them and now you become a special client for them. And then they're always looking for houses for you, always looking for deals for you, always looking for buyers for you. But if you're one investor and you've got 50 realtors looking for stuff for you, it just isn't going to work because eventually no one wants to work with you because again, no one deserves to work for free. Now, if they choose to do that, that's their choice. But from an investor standpoint, you want to be able to have two or three good Realtors that know exactly what you can do and that can become the key ally for you and you will make a lot more money with a lot less aggravation.

Yeah, absolutely. Well, any other thoughts or insights that you want to leave the listeners with?

Yeah, I think one of the biggest things too, let's say from a Realtor's point of view, and if you're a Realtor and you're not having a newsletter or an email campaign strictly for your investors, strictly for them, always keeping you top of mind right there in the presence, talking about important things that is right there for them, that affects their business. That's how you lose these people. I mean, I have my newsletter, I've done it for years and it only goes to investors. And then I have a separate newsletter that goes to end users. What I call so my investor newsletter. There's always insurance topics. There's always special things that are happening that's important to their business. Right now, from a Realtor's point of view, that is key to keeping you above and not only that, you're doing something that 99% of all the other Realtors in the marketplace don't do.

Yeah, no question about it. It's amazing. I mean, where can clients go to find Realtors that specialize in working with investors?

I would say first of all go to your local real estate investor groups or your real estate. Some communities have real estate get togethers or Zander boards where a lot of investors go. Go there and see if there's any Realtors there and then interview those realtors. Ask not necessarily how many homes you sell a year, but how long does it take you to get back to be. How often can we get, how fast can we get a contract in? How long is it going to take to get things? What backup do you have? Do you already have three or four home inspectors? Do you have a roofer that you could call and he's going to come out and look at this house today? If we're that concerned, do you have an electrician and a plumber available? Because I'm new, I only have one plumber and he's so busy, a lot of times it takes him five days to get to my house. If you've got all that stuff in a row now, you become a valuable asset and then this is what the investors are looking at. On the other hand, if you do a lot of work for an investor and he's not buying houses from you and he's not letting you sell your houses, you just need to move him down the road and keep looking.

Well, give out your website if you would and tell people where they can find you.

Sure. My website is pauljdacosta.com and my last name is spelled-A C O S T A. You've got seven or eight years worth of newsletters on there. You can just go to the archives, newsletter archives. You can read them all right there. You can download them all as well. And there's a blog on there as well. And then there's just my real estate information as well.

Fantastic. Well, Paul, thank you so much for joining us today and happy investing to you.

Okay. And thank you very much for your time and I truly appreciate it and I hope everybody has a great day.

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