Episode 13 | Investor Friendly Brokerage

Welcome, ladies and gentlemen, back to the New and Experienced Investor Podcast. I'm Alex Barnett, one of your hosts, and my name is Joe Holmes, and co-host, the experienced one.

The experienced one. You didn't say that you were the rookie or whatever.

Yeah, the new guy.

The new guy.

Yes, I know.

Yeah, so Yeah, you confused me a little bit there.

That's okay, because today we're, uh, we're headed out. We're going, um, to an event tonight, so that's kind of what we're going to be talking about. It's an investor-friendly brokerage, and maybe you could kind of enlighten people into what that even means.

So the organization is called PelleGo, P-E-L-L-A-G-O.com. And we're going to talk about the organization and the website and everything that makes it investor-friendly. It is for investors and also real estate agents. We do hire real estate agents at the company. It's an online brokerage and the fees are $85 a month. You keep 100% of your commission. We charge a transaction fee of $850, which is—

Nothing, peanuts. Wow.

Yeah, peanuts.

What's a normal brokerage gonna take?

Depends on your experience level. So, you know, brand new agents can go to a brokerage, I won't name any here, but it could be 50/50 split, it could be more. Once you get experienced, then, you know, you can get 80/20 or even 90/10 at some companies. Still, yeah, but, uh, but what, uh, what the nice thing about our brokerage, obviously other than the commission structure, is that you have a very, very experienced broker that's been licensed for over 40 years, answers his phone, texts, emails, works from 9 in the morning to 9 at night, pretty much 7 days a week. Uh, and that would be me. I'm always here available to help you or any other investor out there.

Wow, you answer your phone. That's unheard of.

Yes, I know.

What about the, uh, what about the agents under you? Do you teach them to answer their phone?

That's a great question. That's a great question. I try to teach them, uh, you know, please answer your phone when somebody calls, whether it's an investor, you know, regular client, buyer, seller, um, or another agent. But You know, you can lead a horse to water, but you can't make them drink. But that's yeah, that's kind of one of my pet peeves is other agents don't answer their phone for whatever reason. Obviously, you know, whatever, whatever reason. Yeah. But I try to answer my phone all the time. Obviously, I'm not going to answer it now if you're calling. We're in the middle of a podcast here, but leave a message and I will. Excellent.

So signing up seems pretty easy, right? What do you— what are the requirements?

The requirements is you have a real estate license. It doesn't matter how long you've had your real estate license. I've had people call me literally the next day telling me that they're ready to go, they want to hang their license and move forward. Or you could be as experienced as me, and, you know, again, I've had my license for over 40 years, so it really doesn't matter. What matters is that you're looking to do something real estate related, and it may not be that traditional helping buyers and sellers. It may be because you want to invest in real estate or help somebody that's investing in real estate. And so our brokerage is geared towards training you how to do all that and more. And so, you know, that's another nice thing about Pelago.

That is nice. Yeah. And maybe we could just touch on some of the differences between maybe a retail agent and an investor-friendly agent, because if you're an investor, you're going to want to work obviously with an investor-friendly agent. Otherwise, a retail agent might just be sending you properties that, you know, would never even pencil out.

Yeah. And that's a great example. There is the difference. So when you're dealing with an investor-friendly agent, you're dealing with somebody who knows what they're doing with investing. Investments in real estate, and like you said, for example, I may go to a meetup or whatever, and you see oh you always have meetups real estate agents raising their hands. You know, I work with investors. I work with investors. Okay, and then you start to dive into who they are, and you know the reason that they're saying that. You know most of the time they've been licensed for less than a year. I always. Tell people to ask some qualifying questions of all types of real estate agents. One, how long you've had your license. It gives you the ability to gauge their experience level. Number 2, do they own a house? I mean, you get a license in California to represent other people on an investment that's probably the largest investment that they'll ever make in their life. And you don't own a house, you know, you've never been through that process. You know, maybe it's time. Yeah, maybe it's time to move on to somebody else. And then the third question I always ask real estate agents, if you're an investor or even a buyer or even a seller going into that transaction, is do you invest yourself? Do you have any buy and holds? Do you flip properties? Do you, do you not even know what subject to is? Do you do any type of owner financing properties? So these 3 questions would literally give you an idea as to what the experience level is of that agent. And we train our agents to be as experienced as possible. At times we partner them up with other experienced agents, and that's a, that's a great way to learn the process.

That is. Is there ongoing training, or how, how do you I mean, obviously the market shifts. How do you stay up to date with agents and kind of—

So weekly we have Zoom meetings. They're not mandatory, but if you'd like to jump on a Zoom call, you can discuss whatever you want. And obviously I talk to people, agents, all the time during the week and answer whatever questions that they have coming up. How to list the house? What's the paperwork? Hey, I'm working with an investor who's looking for, you know, A, B, or C? You know, what should I tell them? How should I look for these properties? Things like that. So it's an ongoing educational process.

Sure. And maybe we could touch base on— and we don't have to mention any other brokerages, but somebody recently came over from another one because they weren't getting any help. No one was answering their questions. Do you see that a lot, or is that—

I do. I, I see that a lot. You know, when you have these mega brokerages that have literally thousands of agents, you're really kind of signing up and you're a number in this organization. When you have situations that come up or questions that need to be asked, you know, don't get me wrong, there are responsive brokers out there, but most of the time they're dealing with so many people that it's very difficult for them to give you that personal attention that you need or even get back to you. And recently, like you said, I had an agent who was in that situation. And, uh, he, he asked me lots of questions. He wanted to know how responsive I was. Do I answer texts, phone calls? What do I prefer? I said, whatever you prefer is fine with me. Um, and so yeah, he ended up coming aboard, uh, because he felt that, uh, that was what he was looking for. Yeah.

I mean, and that, that right there seems worth it. Um, you keep your commission, you can kind of learn on the job, earn while you learn. You know, any questions that you might have, you can reach out to Joe. That's— I don't know, that's, that's good value right there, I'd say.

Yeah.

And you throw a party every year.

I do. Okay.

And what is it? What is the party about?

I throw a party every year for agents, and we recognize the top producers. during the, during the year, during the last year. And that happens to be tonight, that our party. I, I, I have agents from Sacramento all the way down to San Diego. And at least twice a year, I meet with the agents in the Bay Area and in San Diego and take them out to lunch and, you know, introduce myself because we are an online brokerage for the most part. I do have a physical office in Laguna Hills. Orange County, California. And but really 99% of what we do is, is online. But I do like to meet people and I do like to meet agents that, you know, I talk to them on the phone. So at least twice a year I'll go up to, you know, the Bay Area or go down to San Diego and have lunch with my agents down there. Tonight is for the Orange County and LA agents. And if they wish to come down and And break bread and have some drinks and, you know, talk about what they're doing or not doing. That's, that's what it's for.

Nice. That sounds fun.

It is.

That's why I'm tagging along.

Yeah. And to take pictures.

That's right. I'll be documenting so we can throw that up maybe on the next pod or something. But, um, like you mentioned, this is an online brokerage. And was it first started as just a website, or was that— it was Was it all in one? Because they have a really cool website. You can find comps, you can do all your calculations as an investor.

Which one came first? The website actually came first and it was from an investor and he lives in Washington. He's actually the owner of the company. His name is Gideon Silvan. And he started, I'm guessing here about 8 to 10 years ago and created a website because he was flipping properties at the time. And he literally wanted to know an easy way That he could calculate after repair value, rehab estimates, closing costs, and then determine how much profit he was going to make at the end of the day. So he, you know, put together this website and hired some programmers, including himself. He was a programmer, including himself, to put together a website. And then I think the brokerage came after that. It's been running in Washington for quite a while. About 3 years ago, he decided to open up all of California and also Florida. So the website works in Washington, California, Florida. He is expanding into other states, but those are the 3 primary states that Pelago is a brokerage with right now.

Excellent. Well, let's, uh, let's jump on in and take a look at the site so people can see. And do you have to sign up for the— is there a subscription?

No, there's, there's, there's no, uh, fees associated with Searching for properties, which is, you know, the whole crust and meat of this website.

Excellent.

You can sign in, you can create an account, and it would be free.

Okay.

So it's not mandatory that you pay for anything.

Sure.

So if you— this is the website here and this is how it's presented. It's, you know, super easy, clean. And then you go and literally put an address like you're doing now, and then it finds the address. And it'll go pull all the information that you need. And so as you can see on here, this property was listed a few years ago. It shows you the price that it sold for a few years ago. And then it goes out and determines, you know, what the after-repair value is on this property.

That's big.

Which is what, you know, most investors are looking for. It shows you some graphs over there on the right-hand side. Obviously, when we pull information, this— all this information is pulled off the MLS. And so following the MLS rules, you have to put down the broker that was involved in this transaction, the agent and their information. That's what you see on the left. The graph on the right is really the pricing of this property, you know, ups and downs. Obviously 2008, it was worth a lot less than it is now. And as you can see, we're getting up to the peak and actually it looks like we've gone over the other side and the property values are starting to come back down again.

Wow.

So again, all useful, really good information.

Yeah.

If you go down a little bit more, it just gives you more information about the property and then a Google photo of the property out front. On the top, we had the photos from the last listing that were there, so you can see more. And then the details about the property itself, how big it is, square footage, all that stuff, which is What it uses to do the comparables on, which is the next area that we're headed to. And so you can see that there's a comparables map and you can change a lot of this stuff on, on the left-hand side. If you, if you press edit, you can add information, delete information. Maybe you don't want properties that are currently on the market for whatever reason.

Mm-hmm.

So there's a lot of checkmarks in here. You can check and customize this particular search. So only flips right here. Yeah, only flips if you want to just only— because you're going to do flips, you want to see who's flipping in, in the area and what they are. And then it goes into the actual comps. So on the left-hand side, it's got your subject property, and then it goes into the 3, 4, 5, 6, 7 comps in the area. And as you can see on one of them, it actually says this is a flip. So it's identified that one, and they identify it by the time it was purchased and then at time it goes back on the market, which is a short period of time, less than a year. It's identified as a flip. So that's how they get that information. So as you— if you're looking at this, you may say, yeah, this is probably going to be the closest one to what I'm looking for, is this flip. But it gives you an average of what's going on in the market. Which is, you know, again, as a flipper, which is what I do, that's really important.

Yeah, it's nice when I, when I've used it and you'll see 1, 2, 3, 4, you can kind of see the spread where you need to be, similar style house. It makes it really easy to determine if it's a deal or not.

Yeah, and then you can click on the photos and, you know, if it's not a flip, maybe it's only going to— looks like only one photo on this one. The, the other ones you can see, and then you can start to compare what yours is going to look like at the end of the day to what has sold, which is what comparables are all about. So remember, we're determining the after-repair value at this point.

So last month for $725,000.

There you go, there you go. And you look at the photos and, you know, I can instantly tell whether it's a flip or not. This is probably not a flip. Just a regular home that somebody was living in and, you know, maybe they did some upgrades along the way. If you go and click on the flip property, yeah, so then you start looking at these photos. If the flipper knows what they're doing, which they obviously do, they do professional photographs, they do staging, and you can pretty much tell it's all neutral colors. And then the staging furniture, for some reason, all staging companies use about the same furniture out there. You can see the kitchen. Literally brand new. White shaker is what's in style. The appliances are stainless steel appliances.

The tile there?

Yeah, I would— I wouldn't have left the tile there, but, you know, it just depends on whether you think you can save some money by leaving it there. That would be the only— so far from looking at the pictures, the only comment that I would make. And obviously you saw that right away, but This, this property sold, you know, it's closed. So obviously somebody liked it enough to, you know, put some money down and, and purchase the property. So, uh, you can see all the pictures are professionally done, light and bright, and, uh, and then that's what you're looking for. Looks like the windows were, were done, right? Yeah.

Yeah, nice.

So now if we go down a little bit farther, we're starting to get into the calculations now, the calculator. And so that this is going to give you the after repair value of what it's determined and what the comps were that pulled. And then the rehab, it's going to give you on the rehab at least 10% of what the after repair value is, and that's a guesstimate. And I like to use this website as a guesstimate because If the numbers work out at the end of the day, and we'll get down to that point, then yes, I have to do my due diligence and I have to go physically go out to the property and inspect it and find out, do I have to put this amount of money in? Do I have to put more? Is the air conditioning not working? Does it need a new roof? These are just really estimates.

Mm-hmm.

Just to let me know whether I'm going to get up from my chair and go out and take a look at it and do some more investigating on this property. On the left-hand side, you have a purchase money loan, which is a hard money loan, and the amounts. And you can change that, you know, from— it's currently 20% by default. If you're an experienced investor, you can get 10% only. The interest rates, you know, if you're an experienced investor, you can get down to 8%. So you can change all those numbers and, you know, make things look a lot better. And then the rehab loan, So when a hard money lender gives you a loan for a property, he will give you a loan for everything. So buying the property and rehabbing the property. And so that, that's why there's 2 things there. If you don't need a rehab loan, which means you're not going to draw on those funds, you just uncheck it. Okay. And then if you go down to the right, why don't you check it again? Okay, and so we go down to right and we're talking, um, buying costs, we're talking sales costs, closing costs and commissions, and then we're talking the bottom line, which is how much am I going to make on this property? If all these numbers are correct, then you can see that there's a profit on this property, and that is a profit with a loan.

Okay.

And so how much of a profit— because I can't see this far— how much of a profit does it show?

$30,000 at the current purchase price.

Okay. And $30,000 is a pretty thin margin, honestly. But let's say you wanted to purchase this property with all cash. So uncheck the purchase loan and, and the rent and the rehab loan. Now, how much is your profit?

$51,000.

$51,000. So you can see that when you partner up, and I call them partners, when you partner up with a hard money lender, they are really taking $20,000 in this case out of your profit. But obviously, if you don't have the money, then you need to partner up with this person. Because would you rather have $30,000 in your pocket or zero?

Right.

You know, so that's kind of the way you have to look at it. So, you know, if, if you want to pay cash and you're at the end of the day obviously going to make more money because you're not Borrowing that money from someplace else. Another way I look at it is, let's say you wanted to partner up with somebody and they're the money partner. You're the brains of the outfit. You're going to run the construction crew. You're looking for the deals and you share the cost half and half. And this money partner brings in all the money so you don't need any hard money lender. And then you're both going to split the $50,000 or $25,000 each.

Yeah.

So again, at the end of the day, do you want to split that or zero?

Yeah. I like to use that before I make an offer. So I'll come in here, it's like, all right, we need a bigger spread. So I need to get this at $475,000.

Right.

Maybe, and start there.

Right.

And then maybe put a little bit more into the rehab just in case, $80,000. So then maybe I need to go $450,000.

Yeah. Yeah, and that's, that's what you do to work out the numbers so that you know where you need to be at.

Yeah.

You know, and if you're a wholesaler, this is a great place to be because you're going to change those numbers. And at the end of the day, you're going to put your wholesale fee in there as well. So if you acquire it for, you know, $450,000, you may be asking, you know, $470,000 for it, right? And see if a flipper like myself is willing to to pay you $470,000 for this property. And as a wholesaler, you make $20,000 in between without ever putting any money into this transaction or deal. You know, your, your thing was that you contacted the seller, locked it up in a contract, and then were able to assign that to a flipper at the end of the day.

Yeah.

So, you know, all the wholesalers I talk to, just I tell them, you know, hey, go to this website. It's free. There's no charge. Work your numbers there. Obviously, you know, try to go as low as you can with the seller so that you have some room to add that assignment fee at the end of the day to make some money.

Absolutely. And I think it gets you used to seeing these buying costs, carrying costs, selling costs, which a lot of people overlook. They're just going to go, okay, $660,000 takes $80,000, you know, you're not, you're not anywhere near. And then the profit, you know, you still got to take a little bit more for the selling costs.

Yeah, no, absolutely, because I have to account for all that at the end of the day. If I purchase it at some price, I still have to pay commissions and closing costs and everything else. So I have to account for that. So you're better off accounting for that in the beginning, uh, than at the end.

Yeah, exactly. And I mean, most people, they see the $661,000 and they see the $450,000 and they think that's a big gap, but that's where it is. The numbers are what the numbers are.

Yeah, and this, you know, it also depends on the condition of the home. I mean, we're talking the after-repair value is after it's been repaired, you know. So if you have, you know, a house that's, you know, what I describe like, like a hoarder house or something that's totally messed up, that, you know, the, the owners are embarrassed to have anybody come over and take a look at it, um, they're looking for somebody that's, you know, willing to offer them cash. For this property. And if that's the case, then the price has to be lower. Yeah, you know, that's just, that's just the way we, you know, the system works. Yeah, the price has to be lower. You want quick cash, and the quicker the cash you want, um, you know, the lower the prices at the end of the day.

Seems fair, you know. Yeah, I agree. And so, um, I guess if they're seeing a property they like, what they— yep.

They hit me up. Yeah, if you look at a property and you like it and you want some more information about it, or, you know, are thinking about, you know, purchasing yourself or rehabbing it or whatever it is, just, you know, you've got all my information there. Just put your name and number, email, and I'll get back to you. I'm happy to offer free advice if you have something that you're looking at and you want to get a second opinion on it, then By all means, please just reach out to me and, and let me know. If you're looking for a partner on a deal, we can talk about that as well. Just depends what you're looking for at the end of the day, but I do partner up with people. Um, so anyways, uh, the, the only other thing that we missed in there— sorry.

That's okay.

The only other thing we missed in there, if you go back up Um, oh, or go back down. It's got the market insights. So how— what's this property doing in that specific area, in the county, and in all of California? If you go down a little bit more, I think, or you go— no, you go up. So let's say you wanted— right there. Let's say you wanted to buy this to rent it. So you click on the rental tab and it'll tell you, you know, it'll go out and pull how much this place is going to rent for. And so you can actually do an analysis of whether it's going to be a good buy and hold. I can tell you in California, I mean, tell me what the bottom line is here, but pretty much in California, you're not going to find anything that cash flows right now. Negative cash flow. Yeah, negative cash flow. So yeah, so that's the cap rate. That's why I flip. And, you know, I want to get my money As quick as possible. So I'm in and out of these properties as quick as possible.

At that purchase price of $450.

Yeah. So it, you know, change the purchase price to something low and see at what point are you cash flowing.

Yeah. Oh yeah. Let me see. $350 maybe. No, still negative. $300. Come on. $4.

Oh yeah.

And $300.

You don't want to buy something that you're only making $4 a month, you know, because one repair and you're— you've started to lose money that year.

Yes.

So yes, this is California. It's very rare that you find something that cash flows. Um, and I would say honestly, if you're not making at least $500 a month cash flow, I wouldn't purchase it. It's just, you know, you're one garbage disposal away or an AC problem away from not making any money whatsoever. Yeah. So again, that's why I, I flip properties. I want to go in and out, make $60,000 to $100,000 per deal and, um, and just move on to the next one.

That sounds nice. That sounds very nice.

Yeah.

Okay, excellent. Yeah, it's such a cool site. Um, absolutely love that.

Cool.

And then you're still hiring under the brokerage?

Always hiring. Yeah, always hiring, always hiring agents. And, um, uh, I, I mean, I get lots of questions from agents when they call, but I think at the end of the day, the, the best thing that I can tell you, um, whether you're an agent or an investor, you need to, you know, get off your you-know-what And go out and do something.

Yeah.

Because a lot of people think, okay, yeah, I got my license, that's going to make me a millionaire, or I'm going to put this website together and that's going to make me a millionaire. But honestly, none of that will make you a millionaire. You need to get out there, you need to network, you need to talk to people who have done this before, you need to put your team together. Um, I, I do have a training website where I offer a free wholesaling course and a free flipping course. And, uh, if you're interested in that, please put your information down below, make a comment, ask for that, and we will text you back that free website.

Yeah.

Um, great value on that website. Remember, it's, it's free. You'll learn a lot. But even with that, you need to take action. That's the biggest thing for anybody to do is to literally just to take action.

Yeah, that's, that's it. Yeah, that's, um, words to live by. Well, I think we got to head out.

You're getting close. Oh yeah, it is close.

And we got that traffic that we got to account for, so we're gonna go party with some agents.

Okay, sounds great.

All right, we'll see you guys on the next one.

Take care.

Yeah, make sure to subscribe to the podcast and the channel and check out both of our YouTube channels, @JoeHoms on YouTube and @LaurenAndAlexRealEstate on YouTube, and find us there. And you know, let's connect. See ya.

If you want some more advice on real estate investing, reach out to us one-on-one.