Podcast Summary
Measuring potential investment properties' square footage and effective communication with appraisers: Measuring square footage can lead to valuable discoveries, effective communication with appraisers is crucial, especially during uncertain times.
Measuring the square footage of potential investment properties yourself can lead to significant value discovery. Additionally, the current situation has forced creativity and innovation in real estate investing, particularly in long-distance and remote transactions. In this two-part podcast series, Brandon Turner and Josiah Smelzer discuss Josiah's successful BRRRR strategy and the importance of effective communication with appraisers, especially during uncertain times. Part 1, which is available now, covers Josiah's strategies and tips for appraisals. Part 2, coming tomorrow, will delve into the challenges and solutions for refinancing during the current climate. Stay tuned for the full story.
Success in real estate investing and life isn't about perfection, it's about finding the right balance: Understand various techniques, find balance, invest with little money, consider private funds, secure home with home security
Being successful in real estate investing and in life in general doesn't require perfection or adhering to binary thinking. Instead, it's about understanding how different techniques and strategies fit together and finding the right balance for your specific situation. This can be seen in Josiah's story, where he used various methods for real estate investing to make progress in different parts of his journey. Similarly, Brandon plays poker with a false sense of ignorance to lure others into underestimating him. Another important takeaway is that there are opportunities to invest with little or no money down, such as through rent to retirement's no money down turnkey rental properties. Additionally, investing in a private real estate fund like PPR Capital Management can provide passive income without the hassle of property management. Lastly, securing your home while traveling or being away can be achieved through the use of home security systems like SimpliSafe, which offers peace of mind with award-winning security and professional monitoring at an affordable price.
Courage to take risks leads to growth: Despite missing out on potential gains, having the courage to take a break from real estate investing and hike the Appalachian Trail led Josiah Smelzer to valuable experiences and a $4M portfolio
Even in the face of unexpected challenges or difficult decisions, like selling all of one's real estate investments right before a market crash, having the courage to take risks and follow one's passions can lead to unique experiences and opportunities for growth. Josiah Smelzer's story is a testament to this. After starting his real estate investing journey in 2004, he took a break to hike the Appalachian Trail and later returned to the industry, building a portfolio worth $4,000,000 in the last 12 months. Although he missed out on potential gains during the market crash, he gained valuable experiences and insights during his trail hike that enriched his life. Additionally, SimpliSafe offers a 60-day money-back guarantee for those interested in securing their homes with their system.
Overcoming capital bottlenecks in real estate investing: Recognizing and addressing capital bottlenecks can lead to transformative investments, enabling scaling and focusing on distressed properties.
Identifying and addressing the bottlenecks in your real estate investing business can significantly accelerate your growth. During a past market downturn, the speaker faced a bottleneck in the form of limited capital. Attending a mastermind event, they were encouraged to seek out private money investors, leading to a transformative $200,000 investment. This investment allowed the speaker to scale their business, buy properties with hard money, and focus on distressed properties purchased from wholesalers. By recognizing and addressing their capital bottleneck, the speaker was able to supercharge their investing experience.
BRRRR Strategy: Buy, Rehab, Rent, Refinance, Repeat: Using a combination of private and hard money loans, real estate investors can purchase undervalued properties, add value through renovations, and refinance to pay off debt and own the property with significant equity. Repeat for consistent profits.
The speaker uses a combination of private money and hard money loans to purchase real estate properties at a low loan-to-value ratio, then performs value-add work and refinances the property to pay off the lenders and own the property with a significant equity stake. This strategy, known as BRRRR (Buy, Rehab, Rent, Refinance, Repeat), allows them to do large-scale deals and consistently make a profit. The speaker emphasizes that not all deals result in getting all the money back, so they also flip properties to raise capital and have reserves for unexpected expenses during the refinancing process. The key to success in real estate investing, according to the speaker, is being able to back into the numbers and determine what you can afford to pay for a property based on its potential value after repairs and desired profit margin.
Calculate potential deals' numbers and align with investment goals: Accurately estimate repair costs, structure deals with private money lenders, and communicate effectively with lenders to ensure successful real estate investments
Every real estate investment opportunity has a specific number that makes it worth pursuing. As an investor, it's essential not to rely on finding deals randomly but to calculate potential deals' numbers and determine if they align with your investment goals. When using private money lenders, it's possible to structure deals in a way that minimizes the amount of cash needed upfront. For instance, a hard money lender can cover the majority of the loan to cost, while a private money lender can cover the remaining amount plus closing costs. By accurately estimating repair costs and servicing interest only payments, investors can ensure they have enough cash reserves to complete a refinance when necessary. Additionally, some lenders may allow for delayed payments, which can help reduce stress during the flipping process. Always remember, clear communication with lenders and accurate number crunching are key to making successful real estate investments.
Effective communication and understanding the other person's perspective are crucial in real estate negotiations.: By asking questions, listening, and finding common ground, both parties can increase their success in real estate negotiations. Accurately determining the after repair value (ARV) is also essential for successful real estate investing strategies.
Effective communication and understanding the other person's perspective can lead to mutually beneficial solutions in real estate investing. When negotiating, take the time to ask questions and listen to their reasons for saying no. By finding common ground and coming up with creative solutions, both parties can increase their success. Another crucial aspect of real estate investing is accurately determining the after repair value (ARV) of a property. This number is essential for strategies like BRRRR (Buy, Rehab, Rent, Refinance, Repeat), as it determines the maximum loan amount you can secure. To ensure an accurate ARV, practice pulling comps, understand the local market, and consider the improvements you plan to make. Remember, the more accurate your ARV, the better your chances of a successful investment.
Analyzing Comparable Sales for Property Valuation: Appraisers determine property value by analyzing sales of similar properties and considering specific property and location factors. Homeowners or buyers can prepare their property and provide additional data to potentially influence the appraisal outcome.
Appraisers determine the market value of a property by analyzing comparable sales and considering various factors specific to the property and its location. When selecting comparable sales, appraisers look for properties with similar characteristics, such as size, location, and amenities. In areas with few sales or in rural locations, appraisers may need to expand their search parameters to find the most comparable sales. Once they have identified suitable comparables, appraisers use data from these sales to determine the value of the subject property. This process can involve analyzing price per square foot or cap rates for income-producing properties. Homeowners or buyers who receive a lower appraisal than expected can take steps to potentially influence the outcome, such as preparing the property for the appraiser's visit and providing additional comparable sales data.
Providing accurate information to appraisers: Collaborating with appraisers by providing them with a list of completed repairs, costs, and itemized details, as well as good comps, can lead to more accurate appraisal values.
Effective communication and providing accurate information to real estate appraisers can significantly impact the appraisal value of a property. When meeting with an appraiser, having a list of completed repairs with costs and itemized details can strengthen their case when submitting their appraisal. Providing good comps for them to consider can also prevent them from missing important data. Furthermore, being respectful and cooperative with appraisers can lead to better outcomes, as they are more likely to consider additional information and work harder to ensure accuracy. Remember, appraisers are not your adversaries, but rather professionals doing their job. By approaching them with a collaborative attitude and providing them with the best data available, you can increase the chances of a more accurate appraisal value for your property.
Effective communication in appraisals and negotiations: Approach appraisers with solid evidence, tailor your approach to the individual, and be adaptable and empathetic for better results.
Effective communication and understanding the perspective of the person you're dealing with can significantly impact the outcome of a situation, especially when it comes to appraisals or negotiations. Appraisers value data and facts, so approaching them with solid evidence and avoiding emotional appeals is crucial. Additionally, tailoring your approach to the individual's needs, motivations, and communication style can help build a stronger relationship and lead to better results. This principle applies to various scenarios, from dealing with contractors to communicating with lenders. Ultimately, being adaptable and empathetic can lead to more successful interactions and better outcomes.
Presenting a property for appraisal or sale: Making a good first impression, highlighting unique features, and maintaining property condition are crucial for accurate and favorable appraisals. Market data, competition, and time adjustments also factor into the appraisal process.
When trying to sell or appraise a property, presenting it in the best possible light is crucial. This means making a good first impression, ensuring the property is clean and well-maintained, and highlighting its unique features. Appraisers consider various factors when determining a property's value, including market data and the condition of the property. If a property is presented poorly, it can negatively impact the appraisal value. Additionally, appraisers consider the number of offers and the competition in the market when determining a property's value. By setting the frame for the appraiser and highlighting the desirability of the property, real estate agents can help ensure an accurate and favorable appraisal. The concept of a time adjustment is also important in appreciating a property's value, as it takes into account the current market conditions and the competition among buyers. Overall, understanding the appraisal process and presenting a property in the best possible light can lead to a more accurate and favorable appraisal value.
Selling a house in spring/summer vs winter: Better offers, faster sales, and accurate appraisals during spring/summer. Fewer offers, longer market times, and potential difficulty with accurate appraisals in winter. Access MLS through an agent or communicate clearly with them for accurate comps.
Selling a house during the spring and summer seasons can lead to better offers, faster sales, and more accurate appraisals due to increased buyer demand and competition. However, during the winter months, it may be more challenging to secure higher appraisals due to fewer offers and longer market times. To obtain accurate data for appraisals, one can access the Multiple Listing Service (MLS) through a real estate agent or work with an agent who can help pull comparable sales. Zillow's Zestimates should not be relied upon solely for determining property values. For new investors seeking assistance from agents for comps, it's essential to build a relationship and communicate clearly about their needs, understanding that agents have limited capacity and cannot drop everything for immediate requests.
Building Professional Relationships with Real Estate Agents: Be transparent, respect agents' time, ask about their expertise, acknowledge risks, and build mutual respect for successful partnerships
Building a professional relationship with real estate agents is crucial for successful investing. Instead of trying to use their expertise for free, investors should be transparent about their intentions and value their time. Treating agents as professionals and asking about their experience, strategies, and past deals can help determine their expertise and suitability for a partnership. Honesty and acknowledgement of the risks involved in investing time and resources into a new investor can also strengthen the relationship. Remember, the key to a successful partnership is mutual respect and understanding of each other's roles and expectations.
Honesty and transparency are key to building a successful relationship with a real estate agent: Be honest about your intentions and respect agents' efforts, explore off-market deals with tools like PropStream, and secure funding with private credit strategies like Fundrise.
Building a successful relationship with a real estate agent requires honesty and transparency. Agents invest their time and energy into helping clients find the perfect property, and it's essential to respect their efforts. If you're not serious about using their services, it's important to communicate that upfront to avoid wasting their time. Additionally, the real estate market is becoming increasingly competitive, and finding quality deals is becoming more challenging. To expand your options, consider looking for motivated sellers off-market using tools like PropStream. Lastly, high-interest rates are making it difficult for real estate investors to secure funding. Fundrise offers a private credit strategy to help investors get the financing they need while earning a healthy return on their investment. Overall, honesty, transparency, and utilizing the right tools and resources are crucial for success in real estate.
Seller's priority for security led to successful deal: Effective communication and adaptability are essential in real estate investing to understand sellers' priorities and secure deals.
Understanding what truly matters to the seller can be a crucial factor in securing real estate deals. In the discussed scenario, the seller prioritized security over a higher purchase price, as indicated by their preference for a large earnest money deposit. This preference, which might not have been apparent without asking, ultimately led to another buyer's success in securing the deal. This example highlights the importance of effective communication and adaptability in real estate investing. Listeners are encouraged to pay close attention to the specific needs and concerns of potential sellers, as these insights can inform strategic decision-making and ultimately lead to successful transactions.
Understanding sellers' motivations matters in negotiations: Consider sellers' unique situations and reasons for selling to tailor negotiations and increase chances of success. Efficiently analyze leads and write letters of intent to scale up operations.
Having a deep understanding of the seller's situation and motivations can significantly impact negotiations and help buyers tailor their approach. Josiah's experience of losing out on a $6 million property due to a small difference in earnest money deposit highlights the importance of this. The sellers in this case may have had specific reasons, like a 1031 exchange with a tight deadline, that influenced their decision to accept a lower offer. By considering such factors, buyers can increase their chances of success. Furthermore, consistent effort and scaling up operations through building a team can lead to more deals. However, the process of analyzing leads and writing letters of intent can be time-consuming, and it might not be feasible to generate 3 offers a week right away. Instead, focusing on improving efficiency and finding ways to streamline the process can help reach this goal.
Embracing challenges for innovative solutions: Stay open to new ideas and allow problem-solving process to unfold naturally for progress in real estate and beyond.
Identifying and solving problems can lead to innovative solutions. The speakers shared their experiences of feeling overwhelmed and not knowing how to move forward in their real estate ventures. However, instead of giving up, they embraced the situation and allowed their brains to come up with answers. By putting themselves out there and sharing their needs with others, they discovered new possibilities. Josiah's challenge was finding ways to buy more houses despite limited funds, and he was introduced to the concept of private money. Brandon's issue was managing the influx of leads, and he found a solution by hosting a seminar and turning it into a group learning experience. These stories illustrate the importance of staying open to new ideas and not trying to have all the answers before starting a project. By letting go of the need for control and allowing the problem-solving process to unfold naturally, progress can be made in the real estate world and beyond.
Finding deals through MLS errors: Errors in MLS listings can lead to significant savings and higher returns. Utilize keyword alerts and look for unseen potential to succeed in a hot market.
Finding deals in the MLS by looking for inaccuracies or overlooked details can lead to significant savings and higher returns. The speaker shared an example of a duplex he bought for half the market value due to an error in the listing square footage. He also mentioned his success in this hot market by using keyword alerts and looking for unseen potential in listings. The deal was funded with a combination of hard money and private money, and the rents were more than doubled after renovations. When asked if he would have paid more than the list price, he confirmed that he would have, as the value was still a good deal despite the error.
The true value of a property goes beyond its purchase price: Consider potential value and opportunity cost when evaluating a property. Don't overlook hidden opportunities in the MLS, even with limited information.
The value of a property is not solely determined by its purchase price or the list price. Instead, it's essential to consider the potential value and the opportunity cost. For instance, if you bought a property below its market value, you still "won" even if you paid more than your initial target price. Conversely, if you let go of a deal due to minor issues like a deck needing repairs, you might be missing out on significant equity growth. The MLS, despite being perceived as picked over, can still offer excellent investment opportunities if you're willing to look beyond the presented data and think creatively. Don't be afraid to explore properties with limited information or poor listing photos, as they might hold hidden value. Having a knowledgeable guide, such as a real estate agent, can help navigate these opportunities more effectively. In summary, the true value of a property lies in its potential for growth and the lessons learned from the experience.
Measuring actual vs listed square footage for better deals: Successful real estate investors measure actual property size for discrepancies and better deals, and possess a strong work ethic to overcome challenges.
Successful real estate investors like Josiah go beyond the standard search parameters to uncover hidden value. By measuring the actual square footage of properties and comparing it to the listed size, investors can potentially discover significant discrepancies and negotiate better deals. This simple yet effective tactic sets successful investors apart from those who miss out on potential opportunities. Additionally, having a strong work ethic, or "grit," is crucial for overcoming challenges and staying committed to the real estate investing journey. Josiah emphasized the importance of this quality and recommended the book "Meditations" by Marcus Aurelius for inspiration on cultivating resilience and staying focused on long-term goals.
The Importance of Perseverance and Grit in Real Estate Investing: Josiah McPeak, a real estate investor and podcast host, emphasizes the importance of not giving up and having a strong mindset to overcome obstacles in real estate investing. He also shares insights from his book 'Dream It and Build It' and discusses his experiences during the COVID-19 pandemic on Bigger Pockets Radio.
Perseverance and grit are crucial for success in real estate investing. Josiah McPeak, a guest on the show, emphasized the importance of not giving up in the face of adversity. He also shared that having a strong mindset is essential to overcoming obstacles. Josiah hosts The Daily Real Estate Investor podcast and has recently published a book called "Dream It and Build It," which shares insights from his own investing journey and provides guidance on avoiding common mistakes. To learn more about Josiah and his experiences since the COVID-19 pandemic, tune in to episode 382 part 2 of Bigger Pockets Radio. If you're interested in finding an investor-friendly real estate agent to help you on your own investing journey, check out BiggerPockets Agent Finder.
Connect with investor-friendly local agents for real estate investment guidance: Use BiggerPockets.com/deals to connect with local experts for neighborhood insights, number analysis, and confident investment action.
BiggerPockets.com/deals offers a free resource for connecting with investor-friendly local agents to help navigate real estate investments. By entering a few details about what and where you want to buy, you can instantly match with an expert who can guide you through neighborhoods, number analysis, and taking confident action. This service, available only at biggerpockets.com/deals, is crucial for those seeking to invest in real estate and get closer to financial freedom. Remember, past performance is not indicative of future results, and all opinions expressed are those of the hosts and participants. Investing in real estate, like any asset, involves risk, so use your best judgment and consult with qualified advisors before making any decisions. BiggerPockets LLC disclaims all liability for any damages arising from reliance on information presented in this podcast.
