(upbeat music) - Hello, and welcome to another episode of All The Hacks, a show about upgrading your life, money, and travel. I'm Chris Hutchins, and today we have something a little different in store for you, and I think it's pretty awesome. So it all started when I thought about doing an episode about how to optimize the entire home buying experience.

And I mean all of it, agents, listings, diligence, inspections, financing, offers, and everything in between. So while I've gone through this process twice, I wanted to make sure we had it all covered, including what you might do differently in today's market. So I reached out to David Green and Rob Abasolo, who hosts the number one real estate podcast out there, Bigger Pockets Real Estate, which I've listened to on so many occasions.

They are 10 times more knowledgeable than I am in the space. David is a real estate investor with over a decade of experience. He's bought, rehabbed, and managed more than 50 properties. He runs an award-winning mortgage company and a top-producing real estate agent team. Rob is also a real estate investor and a 12-time Airbnb super host who is often called the king of short-term rentals.

Between the three of us, we should leave no hack unturned, but please reach out to me if we do so I can make sure to share it on an upcoming episode. And one more thing. This episode isn't just coming out on all the hacks, but we broke it down into a three-part series on the Bigger Pockets feed as well, which is helpful context for the way we interact on this episode.

And while you might not need to listen to the conversation twice, you should definitely check out their show. It is so fantastic. And with hundreds of episodes, I think they've covered just about every aspect of real estate possible, from buying, to investing, to house hacking, to short-term rentals, and a lot more.

We'll make sure to mention a few relevant episodes today and link to them in the show notes as well, or you can just search wherever you're listening to this for Bigger Pockets Real Estate. But without further ado, let's jump into today's conversation right after this. I wish I could say I'm eating a fully balanced diet every day, but the reality is that I'm not.

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We've got a cool little crossover event going on here today. For those who are unfamiliar, my name is David Green. I'm a former police officer who became a real estate investor and is now a real estate broker. I have a mortgage company called The One Brokerage. I run a real estate team.

I buy rentals, I write books, and I host The Bigger Pockets Podcast. And I'm Rob Abasolo. I am the co-host of The Bigger Pockets Podcast. I have a goofy YouTube channel called Rob Built where I teach people how to invest in real estate, short-term rentals, tiny homes, and I'm a former ad man, if you will, just like the Mad Men, the TV show is basically me.

I was a copywriter and I quit all that corporate dreams about two years ago to focus full-time on real estate and documenting the journey. So let's jump in. Someone wants to buy a house. I always tend to ask people, before you're even thinking about this, why are you doing this?

So I'm curious if you guys have any frameworks you use for thinking about why you would buy a house, what's important to you. It doesn't even make sense before we jump into optimizing the entire process. Well, I mean, there's a lot of reasons to get into real estate. I don't think that there's any one particular reason.

Some people get into real estate accidentally where they buy a house and they live in that house. And then one day they decide to buy another house and move into that house. And then they have to decide, should they sell or keep the home? And then they become a landlord and then decide, oh, hey, the cashflow from this is great.

And then they buy more houses. Some people buy a house and then house hack and rent out rooms and their home to subsidize their mortgage. And then there are also the other side of it where people work nine to five jobs and maybe they're not making enough money at that nine to five job and they want to create supplemental income.

So they get into real estate to help create monthly cashflow, or maybe they just want to eventually replace their nine to five income with real estate. So for me, that was really why I got into it. I had a pretty stable career in advertising, never really felt like I was making enough money.

And so my side hustle became real estate and I just started buying more properties as a way to make more money to supplement what I didn't feel like I was making at my career. What about you, David? What do you think? - You know, there's a lot of practical reasons why you want to invest in real estate.

Even the casual observer sees home prices getting higher and higher and higher. You watch the HGTV shows that show how people can make money in real estate. It's kind of understood that it works, but not everyone knows the brass tacks of why you can make money with real estate.

A lot of it are tax advantages, the tax code. It's very forgiving for real estate investors and the money that you make from real estate, you usually pay much less taxes on than if you made that same money at a job because there's a little bit of risk that's going to be involved in it.

It's easy to leverage, meaning I can buy a $500,000 house and put maybe 5% down on the loan. So I've only put $25,000 of my money, but when that $500,000 house appreciates by 10%, it goes up to 550. My $25,000 just made me $50,000 of equity. So it's like I've doubled my money relatively quickly where it's harder to invest in other assets where you can borrow money quite as easily.

And then there's lots of ways that real estate makes you money. You can buy it for less than market value. You can't really do that with a stock. You can't go get a deal on Tesla stock or Apple stock and find some way to get it cheaper. You can add value to the property.

You can make it bigger. You can make it nicer. You can fix it out. You can change its use so that it can be rented to people. That creates actual equity, which you can't do with a stock. There's nothing I can do if I buy Tesla stock to make that company worth more.

And then like Rob mentioned, it actually generates revenue. You can rent out spaces in that home. And when you do that correctly, you earn more money every month than what it costs to own the real estate. And that difference is what we refer to as cashflow and that can replace active income.

For anyone listening from all the hacks that hasn't really got into real estate investing, you guys have done a great job. I'm gonna throw out an episode that is about getting started with just $10,000. I think it was episode 730 'cause I tried to take some notes ahead of time, but that was excellent.

I will say the goal of this conversation is to kind of walk through the home buying process, whether you're trying to invest, whether you're just trying to buy your primary residence, whether you're buying even a vacation home or something. So if you're listening and you're thinking, "I don't know if I'm ready for real estate investing," one, maybe you should be.

And two, this is gonna be applicable to anyone, no matter what type of home you're buying, hopefully is what we can get to. So I don't know, that's a little bit of the why. For me, I've never actually dabbled too hard in real estate investing outside of index fund REITs, but I've gone through the home buying process as a primary residence, and I actually own a fractional vacation home.

So I own 1/8 of a home through a program called Picasso, where we bought 1/8 of a home up in Napa. It's kind of interesting 'cause you can kind of invest. It's kind of a lot better, in my opinion, than a timeshare or anything like that. So that's been great.

So that's my experience. And I've kind of optimized little pieces of it along the way, but nothing like what you guys have. So I'm excited. Curious, Chris, how well have you done? I think you said you bought a primary residence that you live in, right? Yep, I've done that twice now.

Has that investment, if you just looked at it from a pure investment perspective, outperformed some of the other things you've invested in? The first time around, yes, but I had the fortunate luck of buying in the Bay Area at the bottom of the worst real estate crash. So I got quite lucky by timing.

Didn't know it was gonna do as well as it did. The most recent one, I don't think it's been long enough to see anything major differences yet. But the first one, if you layer in taxes and leverage, yeah, it was a great investment. But it's hard with an N of one in a market that blew up like crazy to feel like I know too much based on one success story.

That's how it works though, honestly. It really does work like that sometimes for people where for me, I think every real estate investor, they all have this big lofty dream of becoming a millionaire and it's super achievable because you can buy five properties that appreciate over the course of five, 10 years, and you could just have a million dollars in equity and it wasn't necessarily because you were a genius or because you had the most, I don't know, I already said a genius strategy, right?

But it happens because you just did it and you kept doing it and you keep doing it consistently. And that's really the secret sauce. So yeah, maybe it was by luck that you bought that house or in that market. But what a lot of people end up doing is when that happens, they get a taste for it and then they keep just buying and buying and buying and buying.

And I think if you do that consistently, no matter what, you'll always look like a genius 30 years from now. - Yeah, I mean, we could have a much longer debate in a future date about debating that strategy, putting it in a stock market, all these other investments. But I think whether you wanna build a portfolio of 20 homes, whether you wanna buy multifamily homes, commercial properties, or you just wanna buy a primary residence, at the end of the day, you gotta find a home, you gotta buy the home, you gotta decide if it's a good deal, you gotta close on it, you gotta fund the purchase unless you wanna buy it with cash, which I'm guessing most people don't.

So maybe let's jump into that process and kick off with just someone who's like, "I'm not really sure what I'm doing." You've been an agent. Let's talk a little bit about that process of partnering with someone to help you go through this process instead of just trying to wing it on your own and when that makes sense or maybe when it doesn't.

- Yeah, and if you're gonna buy a property, you don't know much about it, you definitely wanna use a real estate agent in the beginning. And when you're buying, here's something people don't realize, you don't have to pay your agent. If you're buying a house off of the MLS, this would be any property you see off Zillow or Redfin, something like that.

The seller has already predetermined a certain amount of money. They are going to pay the buyer's agent for bringing you to the property. So you have a lot of questions, there's paperwork you're not going to understand, you don't know what the process is, it's intimidating. You find a real estate agent and I'll add, they're not all the same.

There's good agents and bad agents, there's good lawyers and bad lawyers, good doctors and bad ones. You really wanna find somebody who's good at what they do. They can take a lot of the fear that you have right out of it. I mean, it's amazing when you take this scary process and there's a person that, like me, that does this so often, it's boring to me.

Like, "Oh, another one of these. "I've walked this path so many times." It's definitely not scary. So that's something that every person who wants to buy a home should know right off the bat. Find a buyer's agent. They're gonna answer a lot of the questions that you're gonna have and they're going to protect you in ways you didn't even know that you needed to be protected.

And maybe we can go through what the actual escrow process looks like or the process from start to finish of what to expect when buying a home if you'd like. If you're a little bit more experienced, you bought homes before, one thing that people will look at, especially in a competitive market like ours, Chris, we just realized that we're neighbors.

We live pretty close to each other. Probably I can power in some change away, is you can go directly to the listing agent and you can say, "Hey, I will let you represent me "on this deal, but I'm gonna need some kind of an advantage. "I need you to get my offer accepted over the other people, "or I'd like a little bit of a discount on the price "if you're gonna need to represent me here." So there are people who buy a lot of real estate that has said, "Hey, I don't think I need "my own buyer's agent necessarily.

"I still need someone to handle the paperwork." But they go right to the listing agent and they look for an advantage. And that is pretty popular in the Bay Area where most listings are getting several offers on all of them. - Actually, I have bought two homes in the Bay Area and both times I've used the seller's agent.

So we can talk about that a little bit more 'cause I have some thoughts about it, but maybe rewind a little. You said it's important not all agents are the same. You gotta pick the right one. Obviously not everyone lives in the Bay Area, so you're not gonna be the perfect agent for everyone.

How does someone find that perfect agent? - First thing to look for, find a person that sells a lot of houses. Lot of agents don't. In fact, most agents don't. I'd say 90% of agents sell a couple houses a year or less. And it's unpopular to say this. The agents get angry 'cause they're offended right now.

Like, "Just because I only sell two houses a year "doesn't mean I'm not good." Okay, I know. However, tell me anything that you do twice a year that you get really, really good at. In general, that's how life works. If you snowboard twice a year for your whole life, you never really get that good at snowboarding.

Or it takes you 20 years before you're as good as somebody that just snowboarded every weekend for the whole first year that they got into it. Repetition really does develop mastery. I talk about that in the Burr book that I wrote. So the first thing I look for is an agent that sells a lot of homes, period.

The next thing I want is an agent that owns real estate themselves. At minimum, they gotta own their own house. But ideally, I want them to own investment property. It gives a completely different perspective when you've bought a home and you believe in it and you just get a different set of goggles to look at real estate through.

I don't have any kids. I love kids. We were talking about that before the show. But each of you as a dad, I am sure, sees something different when you look at a kid than I do. I don't immediately freak out when they start putting something in their nose.

I haven't had enough experience of seeing how that could go wrong. Rob has seen some of that. So he's gonna have a much different emotional response to that marble or that Play-Doh getting a little bit close to the nostrils. Real estate agents that own real estate have that sixth sense.

They can recognize that's a bad neighborhood, that's not the right tenant, that's not the right floor plan, that's not the right structure. You really wanna go to this house that may not look as pretty in the pictures but will be a better deal. The third thing that you wanna look for is an agent that understands the financial component of real estate.

Many real estate agents are geared to cater to their clients' emotions. They wanna be liked. They're very high as an eye on the disc profile. This is how they make their money, by being likable. Most people reach out to the agent who's the nicest, the friendliest, the warmest. That doesn't mean they're the smartest.

So when you're having conversations, I always wanna hear agents that are approaching real estate from a financial perspective. I wanna hear them telling me, "This is the part of town that's being redeveloped. "This is the next up and coming area. "This is where all the money is going into.

"This is a property that would function as a rental "if you moved out." Even if that's not necessarily what you're looking for, you just wanna buy a home. If your agent sees things that way, it is very good to hedge your bets in the future 'cause you never know when you have more kids, need more bedrooms, get a new job, wanna move for some reason.

You don't wanna be locked into a situation where it's hard to sell that home or it can't be used as a rental property if you wanna leave it. - David, let me ask you something. Does the requirement of having an agent that owns real estate, is that as important if you're just buying a primary residence?

Do you weight that a lot heavier for people that are looking to buy investment properties? - No, it's the same for a primary residence. Let me tell you why. The first house I ever bought, my agent did not own any real estate. And I bought this house in the very end of 2009.

Great time to buy real estate, like you were saying, Chris. My agent did not tell me that the property taxes in that area had special assessments assigned to them and were much higher than the normal property taxes. In fact, they ended up being about $250 a month higher. So I was expecting 300, they were 550.

Now, I was buying this as a rental property, but even if I had bought buying it to live in, and again, I remember at the time, the total mortgage was like $1,300. So bumping it from 1,300 to 1,550 was a pretty significant chunk. It's like a 20% increase almost in my overall payment because they overlooked that property taxes were higher.

Now, agents who own real estate themselves would be familiar with the fact that property tax bills come. There's more expenses than just your principal and interest on your mortgage. They would see angles like insurance can increase in this area because it's in a flood zone. I really think she missed it because she had never paid a mortgage on her own.

She never had her taxes and her insurance escrowed into her mortgage payment. The next time I bought a house, it was with an agent that had been selling houses for a very long time and sold a lot and owned a lot of real estate herself. And as we went through the process, she educated me.

You don't wanna buy on that part of town because you're gonna pay extra money to get the better school districts. You don't wanna buy over there 'cause the taxes are higher. You don't wanna buy a house like that because with that kind of a roof, your insurance is gonna be a lot higher.

I learned so much about investing in real estate just from the person that was getting paid to help me. It was like free advice and free knowledge and it really gave me a different perspective of what to look for and what to avoid. - I love it. When it comes to optimizing the home buying experience, I can't think of a better example of me doing this myself than when we thought about buying a vacation home.

Now, I've long thought that buying a second home was a terrible financial decision because the sheer fact that it's a second home means there's no way you're gonna be spending the whole year there, which means you're either paying for a house to sit empty or you have to manage a rental property, which I just don't wanna do.

So how do you optimize that? Well, instead of buying the whole home, we just bought 1/8 of a home for 1/8 the price and we did it all through Picasso, who I'm excited to partner with for this episode. So how does it work? Picasso buys amazing luxury homes in over 40 world-class destinations, creates an LLC for each home, and you can buy as little as 1/8 of the property.

But it doesn't stop there. Picasso also professionally manages the home, handling design, cleaning, maintenance, bills, repairs, taxes, and more. And the scheduling system makes it fair and equitable for everyone to enjoy their home. And it's true real estate ownership. Owners can sell at any time, set their own price, and tap into Picasso's active marketplace of buyers.

We love our Picasso. I think you will too. So for a modern way to buy and own a second home, go to allthehacks.com/picasso, where our listeners will get a free Picasso access account, which means you can see new listings before they go live on the website and get up to $10,000 in credit towards closing costs.

Again, that's allthehacks.com/picasso, P-A-C-A-S-S-O. I have so many exciting projects happening right now. I launched the All The Hacks membership, I'm working on a book proposal, and that's on top of running the podcast and newsletter. Even just a few years ago, I would have been running all that with some combo of Google Docs, Office Files and Dropbox, a private wiki site, emails back and forth, and probably other things I can't think of because I forgot where they are.

I can't believe how crazy I ran things, but now pretty much every project we have for our family and All The Hacks is organized in Notion. I love the product so much, which makes it so easy to be excited to partner with them on this episode. Notion is so flexible and customizable, and every project you have can be set up exactly how you wanna view it, whether it's a timeline, a table, or even a Kanban board.

There's also powerful filtering and automation features so you can work exactly the way you want. And with their latest launch of Notion Projects, you get project management combined with your docs, knowledge base, and AI, so you can stop jumping between tools and stop paying too much for them too.

Do your most efficient work with Notion Projects. You can try it for free today at notion.com/allthehacks. That's all lowercase letters, notion.com/allthehacks. When you use our link, you're supporting our show. Go right now to notion.com/allthehacks. - I just sent a link to you. There's this guy in Northern California, maybe you know him, Stanley Lowe, number one agent in Northern California for 10 years, looks like and is commonly described in San Mateo County as like the Asian Elvis of real estate agents.

And so when you first said, "Look for someone who sells a lot of houses," I know this guy, I get the flyers in the mail, like he sells all the houses, high volume, high throughput, not just low income property, all kinds of price ranges. Does that mean that if I were looking for a real estate agent like, would he be the right guy?

Should I consider him? Even though it might not feel like someone's personality, maybe that's not the personality I would want as my real estate agent. But like, do the numbers speak more than a personality? How do you think about that? And if anyone's curious, greenbanker.com is this real estate agent's website.

- He's got it down, I will say that. I mean, the marketing, the cowhide blazer and the big circular glasses, I'm in, personally. - That's funny, 'cause I'd be running the other way the minute I saw this. So he does sell a lot of homes, I'm sure. And so he probably does have some experience.

My gut would tell me, as someone who has worked with a lot of clients and knows a lot of realtors, this is probably not someone who's actually going to be representing you. He's going to have staff that are going to be handling a lot of it. You're not gonna be talking to Stanley.

And he's going to likely make up for a lack of negotiation ability and focus on saving you money or making you money, if it's a listing, with his personality. So he's a great marketer. And the top producing agents are always the best marketers. This is a problem in our industry.

The best agents don't make the most money. The ones that are best at getting the phone to ring make the most money, but that doesn't mean that they're the best when it comes to representing you. - So you want someone that sold a lot of houses, but maybe you don't necessarily want the person who markets themselves as the person who sold the most houses.

So it's kind of that sweet spot of maybe like the 60th to 90th percentile, but not the very top. - There's a lot of things people fall for. I sell the most houses in this neighborhood. Realtors will use that as a way of saying, "I'm the best. Don't fall for that." It makes sense to our perspective when we're listing the home, "Oh, you sell all the houses in the neighborhood.

You know how to get me top dollar." You just don't realize until you think about it, the buyers don't care. The buyers don't care who's selling that house. They are never going to look at who the listing agent is when they're writing their offer. They just care about the house.

The buyer's agent needs to know the neighborhood. The buyer's agent needs to know the amenities. When you're looking to buy somewhere, you want an agent that knows the area very well. When you're looking to sell, it will never matter how many homes in the area that agent sold. In fact, the only reason they sell a lot of homes in the same area is they put their sign in all the yards, and then they go, we call it farming, knocking on all the doors and meeting all the people, getting their name out there.

They're just able to utilize a listing to build leverage to get more. But there's no competitive advantage when it comes to representing a seller if you've sold other homes in the area. I wanted to add one thing to that. Well, A, it sounds like if they're putting signs in everyone's yards, sounds like they're good marketers, which goes back to what you were saying.

But I did want to say that one really important piece to agents, just from a consumer side, and as someone that relies on agents pretty heavily, is them having a really thorough Rolodex of vendors that I can use to help me run my properties, whether I'm living in it or not.

If I'm buying a short-term rental, for example, I know I need a contractor, cleaner, landscaper, pool maintenance person, pest control, and probably a plumber, electrician, and all that type of stuff. So when I'm calling a realtor, and this goes into how many houses have they sold, if they've sold a lot of houses over the last five, 10 years, they probably have a pretty thorough Rolodex, I mean, outdated term.

If they use the term Rolodex, maybe they're not with it. But if they have a very big contact list of all these different vendors, that's what I'm personally looking for in a realtor, because a lot of the times, I really need a firsthand referral to know that I can successfully either live in a property or execute a rental.

- Yeah, that Rolodex is interesting. Something I never saw in the contract, but once you close, I was surprised that even though it's not necessarily required, a good agent will spend so much time helping make sure the process from, I closed to, I moved in, I got the yard done, I renovate, even renovated something.

They've been super helpful there. We have a lot to go here, but I do wanna touch quickly on that negotiating piece that you mentioned earlier, David. When someone's trying to get into this, what leverage or room is there for negotiating? I did what you suggested. I went to the seller's agent and said, "Hey, I don't wanna mess around.

"I know I want this house. "I don't need to go find another agent. "I feel good in negotiating. "Will you work with me?" It ended up being a great situation because that agent got more commission and was a little bit more biased towards trying to get my purchase over the finish line.

And in one case, rebated 1% of their fee back to me. Are there other rooms for negotiation? Are there other tactics someone can use to get a better price or likelihood of getting accepted? Well, the first thing you have to do is define a win. So in a situation where the house is getting 10 offers, a win is just getting it at all.

There are times in the Bay Area or other hot markets with restricted supply and lack of inventory that you're just not gonna get a home, period. It's incredibly hard to get in contract you're competing with so many people. So in those situations, you're not gonna get a discount from your listing agent.

You're not gonna get a better price on the home. You just have to get it. Now in other situations, which is what I try to target my clients into, I show them properties that less people are competing with. The listing photos are ugly. It's been in contract, it fell out of contract.

Now the days on market have ticked up and people aren't looking at it anymore. I look for opportunities to help them get into a property with much less interest and then we can get them a discount on the price. We can save them some money there. A mistake a lot of people make is they go to the listing agent of an incredibly hot property.

They ask for a discount from the listing agent and they go, "No, there's like 12 other people "that wanna buy this house. "I can get my client a hundred grand more "going with a different offer. "I'm not gonna discount commission just to help you get it." So that's a big piece is knowing when you have leverage and when you don't.

- I wanna talk about making that offer now, right? Like let's say someone's gone through this process, they pick their agent, they've figured out what they're doing and they find a house and they're trying to decide, is this a good house? So let's start with that before we get to the offer.

It's like you have a place in mind, you're looking at this listing. Maybe you do, maybe you don't have an agent yet, but what are the things that are really important for someone to be paying attention to when they're looking at a listing either online or in person? - I like to find stuff that needs a little bit of work, a little TLC personally on my end, just because I don't really like paying the premium of someone else's fine-tuned work that I probably don't like anyway.

So I don't wanna go in and usually do like a full rehab. That's not really my space, but I'm looking for something that I can really spice up with a nice paint job, maybe doing a lighter cosmetic renovation, like changing out the floors or something like that. So I'm not necessarily looking for top tier, I'm just looking for something that I can come in and kind of add my touch to.

I don't really like paying for turnkey properties personally, but it all comes down to what your buy box is. What about you, David? - In a hot market like where we are today, it's usually a good time to buy real estate because when there are more buyers than there are product to buy, the odds of prices increasing are favorable because you've got a favorable supply demand ratio there.

However, it becomes harder to get into the asset in those environments, which is why most people get discouraged. There's also an element where people aren't educated, so they all chase after the same homes. They want the ones with the best listing photos, the best locations, they're moving ready, that gives you that emotional tingle that you just love.

You're just looking for something that other people are gonna pass up that you see the value in, that you're gonna put a little bit of elbow grease into. Sometimes bad smells can really benefit you when you're trying to buy a home 'cause it's gonna turn off a lot of your competition.

Ugly floor plans. People don't realize it's usually not as expensive as you think to move walls around, but when it's got a closed off kitchen, you can't see what's going on in the family room. The wife's thinking, I can't see what the kids are doing. I just don't like it.

That's as far as they go. They don't realize that you could spend $2,000 and move a wall. You can see everything that's going on there. Then painting and flooring. You can fix homes up for a lot less than what people think today, but you have to see the opportunity, not the move-in ready product.

- And so how does how long the house has been on the market play into this? When you see something that's been on for a while. - When a seller first puts their house on the market, they have all the leverage. They have tons of interest. People are going to look at their home.

Showings are being scheduled. Agents are calling all excited. We really love the house. Do you have any other offers? It's this frenetic, crazy, emotional pace where the sellers are trying to think of how can I leverage this to get as much money as possible, which is really where I'm trying to guide my clients away.

I don't want you in that feeding frenzy. If no one buys that house after 14 to 21 days, interest is starting to slow. By day 30, day 40, they're getting worried, okay? It's not who's the best guy that I can take that gets to take me to prom. It's, am I going to prom at all?

I just want a date. Does anyone want to buy my house? I'm stuck. I might not be able to move. And I write about this in some of the books that I've published for BiggerPockets for agents. There's this spectrum of fear and greed. We usually all start off on the greed side.

And as you slide across, you end up in the fear side. And you're worried, I might not sell the house at all. So in most markets, depending on what your average day is on market, like this wouldn't apply in an area with $7 million homes that tend to sit on the market for six months before they sell.

But for your regular starter homes, they should be selling in less than 30 days in most markets in the country. So the minute you get past that point, you're going to start seeing some worry in sellers and they will be open to more aggressive offers or terms that are more favorable to the buyer.

- What happens if you are in a hot market and let's say you've identified a neighborhood, you've looked, maybe a house comes on every two or three months, and you know like, this is what I want. You say, the moment that house comes on the market, it's hot, it's the worst time.

Is there a way to find homes before they get on the market and buy them? Is that finding the right agent? Or how do you get what might be a hot home before it's hot? - Rob, what have you been doing? You've gotten a couple of deals this way.

- Let's see, there's the creative finance and the sub two deal, right? And that's effectively where you're cold calling a bunch of property owners and also wholesaling where you cold call property owners and basically try to buy the property directly from them versus going the realtor route. That's a very popular niche within real estate.

But honestly, I think having a really big network of realtors that you're friendly with is super important and more than just having like a bunch of realtors in your network. And this is sort of where the marketing thing kind of comes into play too. But finding a realtor that's very good at marketing and having a vast network of realtor friends that can pass each other deals to you or pass deals to each other, that to me is super important.

Because if you find someone that's like a very new and very green in the industry, they probably don't have a lot of other real estate colleagues necessarily. But if it's someone that's been working in the industry for a while, they have the opportunity to find all these deals before they ever hit the market.

So I have realtors that are texting me all the time that they're like, "Hey, my bud just sent me this. "It's gonna hit the market next week. "They're interested in selling it "before even going to market. "Are you interested?" And I'll look at a deal much quicker, much faster and much more intentionally knowing that I've got first dibs on it.

- Do you think that applies for kind of consumer? If I'm looking to buy a home in a neighborhood, should I just talk to all the agents in the neighborhood and say, "Hey, I'm looking to buy a home. "There's nothing on the market I want right now. "But I just want you to know, "if you can find me something, I'm ready to go." And just talk to 10 agents.

Do agents like that kind of behavior or? - No, not really. 'Cause you kind of send the message that you're looking for an open relationship and they're wanting a committed relationship. So it doesn't benefit me as an agent. If you come and you're talking to 12 agents in the areas, "If you find me the deal, I'll buy it from you." That sounds great, but I don't need to sell it to you.

If I get a listing, it's so hot right now, everyone's gonna wanna buy it. I don't have to discount my commission. There's people that would probably give me extra commission if they wanted to get that home. Or I wanna be able to go to my seller and tell them I got 10 offers on their home and I wanna look like a rockstar to them.

So I don't think the go wide instead of deep strategy works, unless it's a buyer's market. When you are in those situations where it's very difficult to find someone to buy a home, we're talking 2010 when there was first sales signs everywhere, listings were all over the place, REO inventory was massive, but there weren't a lot of pre-approved buyers that were willing to step in and buy a house.

Then that strategy makes a lot more sense. That's where you're reaching out to all these agents saying, "Hey, if you get a deal, bring it to me and I'll buy it because you're the prize in that situation." They need a buyer. And you're basically saying, "Listen, I'm one of the few buyers that's out there that could do this thing, but if you want my business, you're gonna have to make it worth my while." That works a lot better than in a market like today where you're just one out of a whole bunch of other people that are all struggling to try to get a house.

Yeah, I'm actually really glad you asked that, Chris. And I'm glad you clarified, David, because Chris, for reference, I'm in about 16 different markets around the country. So I actually have a massive network of realtors in different cities. They're all very aware of exactly what I'm looking for. So when they get a pocket listing or an off-market listing, they text me directly.

When I'm working in a city specifically or in a market specifically, I do want just one realtor. And that's why I say, I want to find a realtor that's got a lot of realtor friends that can help find some of those off-market deals. So it's about finding someone that's connected.

Is that as simple as just seeing whose name pops up in a neighborhood most for sale signs? Like who represented most of the sales or any other tactics for finding that super connected agent? I see why it would look that way. But there are so many real estate agents, Chris.

The ones you see are the tip of the iceberg. There's so many of them. There's way too many agents. We don't need this many. It reminds me of a scene in "The Office" where Dwight and Michael are walking through a crowded room and Dwight says, "There's too many people.

We need another plague." There's just so many agents that have flooded into the real estate space. Like people coming to California in 1849, thinking they're going to strike gold. They're all fighting to try to get that seller to think of them. It's just this massive marketing campaign that every agent is throwing themselves in front of people.

And now you've got investors that are also sending letters to those same people saying, "I want to buy your house. I want to buy your house." Most home sellers know in general, they have what everyone wants. Their home is valuable. You're probably not going to put things in your favor by just talking to every real estate agents out there and saying, "Hey, I want to buy a house if you get one." Because if they can get a listing, it's guaranteed to sell.

There's no reason they're going to go to you particularly. And then this is a very short question, but it's important. How much does the brand behind the agent matter? Is it all about the agent or is it all about the agency they work at or the brokerage firm they work at?

The only people that think a broker matters is the broker. Your clients never care who your broker is. It's 100% the agent. So if you're trying to find someone and they're like, "Oh, you can work with my colleague on this." That's like red flag. Big. It used to be really useful, just a little history lesson.

Because there was a time where if you wanted to buy a house that RE/MAX was listing, you had to go to a RE/MAX agent at that office to buy that house. So RE/MAX had their listings. Coldwell Banker had theirs. Century 21 had theirs. And you would jump from broker to broker and look at their inventory.

When we created the multiple listing service, this was an agreement between all brokerages that they would all put their listings into one central location that everybody could see, which eventually morphed into the online listing portals that we all see when we're looking for homes. That eliminated the value of going to an individual broker 'cause now you can see everybody's inventory in the same place.

- And if people that you know had success using those online brokers that are like, "We're just gonna cut your rate "and give you huge discounts." I know Redfin does that. Have you heard success stories there? Is the savings worth it? - In our industry, Chris, I'm just gonna tell you the brutal truth.

I look for a Redfin agent to be on the other side of the transaction because I know I'm gonna destroy them in negotiation. Because they don't make hardly any money on these deals. They usually go there when they're desperate for food. I'm starving, please Redfin give me some deals or whatever the discount brokerage is.

I have had massive success, particularly targeting listings that are Redfin listings because those Redfin agents are not all the time. I'm sure there's gonna be a Redfin agent out there who's gonna say, "Well, I'm a Redfin agent and I'm good." Yes, they do exist. But in general, any of those discount brokerages.

- I sell the most Redfin homes in this neighborhood. - Yeah, in fact, that might even be an advantage to tell people to look for those because your agent is going to have a field day with their agent if you have a good one. - Last tip, I got one more tip here.

If the listing says, "Run, don't walk." It's probably not that great of a listing. - We were just talking about this yesterday. Every listing agent is putting that their house boasts of five bedrooms, boasts of amazing light, boasts of a great view. These houses are just boasting all over the place.

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So please consider supporting those who support us. Let's say we find this house, whether it's a hot home, whether it's the home you're not sure about and you wanna rehab a little bit, what do you do when you've got someone and you're like, "I want this home," or at least I wanna consider it, and you're going through that diligence process of trying to figure out, doing inspections.

How do you optimize that part of the process to make sure you're getting the right home at the right price? First thing for uninitiated to understand, writing an offer is not a commitment to buy a house. A lot of people get stuck dragging their feet. They don't wanna write an offer.

They need time to think about it. They need time to pray about it. They need time to talk to their mom. They need time to analyze it. By the time they get comfortable writing an offer, someone's already bought the house. This happens a lot of the time. When you write an offer, most of the time you will include a contingency, which is an allowance to back out of the deal and recover your earnest money deposit if you find something you don't like.

The main three contingencies are inspection contingencies, appraisals, and loans. So if you can't get your loan, the house doesn't appraise at value, or something is revealed when you're inspecting the home, which can, in most cases, literally be, "I looked at the front lawn "and I didn't like the way the grass looked "when I inspected it.

"I want out." You can use that contingency for just about anything. It's okay to rush to put a house in contract and then slow down when you're in contract and order your pest inspection, order your home inspection, order your pool inspection, order your roof inspection, whatever it is that you're looking to do.

Take your time from that point, and if you decide you don't like the house, you want to back out, you can without penalty. - What about hot markets where there's no contingencies, or people are saying, "We're not accepting offers with contingencies." Are there secret contingencies you can kind of put in?

Are there ways to get out? Or what do you think about those? - Oh man, you're going for the good stuff here. There's a couple, right? Here's a couple hacks that I'll share with you that normally you got to be my client if you want me to know this.

There's a rule in California that once you receive the disclosures on a property, you have seven days to back out after receiving them. It gives you time as a buyer to review these disclosures. That is not a part of the contract that realtors use. That is a state law that cannot be waived in a contract.

Many times, listing agents, because like I said, they're not all good. You get that discount agent, you get the person that hardly sells homes. They're arrogant, like, "Oh, I'm going to sell this thing because everybody wants my listing." But they don't know those little rules. So we've had times with our clients where the listing agent did not provide the disclosures up front.

They just didn't have their clients fill them out. The clients didn't want to fill them out. They didn't know why they were important. If I see there's no disclosures, then they make me waive contingencies. I will put the house in contract, wait for them to give me those disclosures, and then the timeline starts.

Try to remember if it's three days or seven days. I believe it's seven days. Anyway, we then have a period of time to decide if we want to move forward on that house. And we backed out and they said, "Well, you don't have an inspection contingency." We said, "Yeah, here's the disclosure law.

There's nothing you could do about that." That's one loophole that we've looked for. - That's good. You dirty dog. Everybody go back 30 seconds and listen to that again. That is so good. I can see why you didn't want to necessarily say that on the podcast. You don't want people to know.

- That's exactly right. And so when I'm selling homes as a listing agent, we have our people fill these disclosures out. And if you write an offer to buy the house, the first thing I do is say, "Review these before we even accept your offer." I want it to be signed that you've looked at them to start that timeline as fast as possible.

I also, it's why I want people to come to me to be their agent. Because like I said, when you use an agent that doesn't sell a lot of homes, they don't know that. And even more importantly, I know that they don't know. And when I sense that as the agent, that's where I start shifting everything to protect my client.

Another one that people don't think about, usually when you buy a house, you have a period of time to send in your earnest money deposit. So there are certain times where there's two houses and you like them both, and you don't know if you're gonna get one. So you write offers on both houses, and then you get lucky and end up with two of them.

What am I gonna do now, right? Well, if you don't send the earnest money deposit in and you cancel the contract, there's really no recourse that the seller has to come back after you and say, "No, you have to give me money for this." There is no money in the escrow to take out.

So when you're a buyer, either put a longer period of time before you have to put in your earnest money and use that time to do your inspections, do your praying, talk to your mom, go through your due diligence. Or in some cases, I will admit, I bought houses out of state and the listing agent and the escrow company literally did not ever check to see if I sent the earnest money in.

I've closed on several houses in Tennessee that I never sent the earnest money for the entire escrow. And nobody even asked about it. I just sent the whole money in to close. And I was fascinated that that happened, but it probably happens in more markets than people think. Or with agents that aren't experienced selling houses like this hypothetical Redfin agent we talked about that doesn't even know they're supposed to check.

You might make it 10, 12, 14 days before an escrow officer realizes, "Oh, we don't have earnest money." And they contact your client about looking into it, which is plenty of time to get some of those inspections done without a contingency. - I love that. And it's funny because I took that strategy we mentioned earlier where I used the seller's agent.

And in fact, we made an offer and they set disclosures like two hours before we made the offer. It's like quick cursory glance. Fortunately, everything worked out, but I did not get reminded by the seller's agent that I might have some time to back out. And I think that's one of the risks when you use the seller's agent is that they might give you a little bit of the edge to try to get the deal done 'cause they might make a little bit more.

Not at the risk of completely tanking the purchase price for their seller, but they're certainly not gonna try to come up with creative ways to save the deal and get you out. - Yeah, of course not. Those bros ain't loyal, not to you. - That's awesome. Any other things when you're going through inspections, things that people often miss, things that you learn?

I feel like every time, and it's only happened two times, but every time I bought a home, like 30 days later, I'm like, "How did I miss that?" Any tips for finding all the that's? - (laughs) Yeah, sure. So I think one thing to keep in mind, and David kind of hit the nail on the head with this one, is if it's your goal to get into a property, get into escrow as fast as possible.

I typically run two sets of analytics, especially with rental portfolios. I have my back of the napkin analytics, where I just wanna know, does this property feasibly work? If it kind of does, okay, great. I go into escrow, and then I run my deep dive analytics for that. The reason I say this is because a lot of people, like David said, will spend so much time just getting analysis paralysis, and then they'll lose out on the deal.

One of those things that typically give me a lot of analysis paralysis back when I started was this little phrase in the listing that says, "As is, seller not willing to make any repairs to the property." And so that held me back from ever buying properties or ever making offers until I figured out that that really doesn't mean anything.

Really, you can buy a property as is, but David, correct me if I'm wrong, there's no actual legal paperwork that is signed that says that you can't actually ask for concessions. 'Cause what's happened for me 100% of the time is I'll make the offer on an "as is" house, and then I get the inspection report, and guess what?

I asked the seller for $10,000 worth of repairs or a $2,000 credit or whatever, right? So just because something says "as is" doesn't necessarily mean that you have to take that at face value. And that's something that I think a lot of people miss when they're buying their first or second or third property.

100% correct. I laugh in the face of "as is." It means nothing. Nothing! "As is" is a completely toothless claim. When someone says, "I'm selling my property as is," what they're saying is, "I don't want to make any further concessions." But no seller wants to make concessions. It just doesn't matter anything.

The only time someone could say, "I'm selling a house as is," is if you have no contingencies and your earnest money deposit is so high that you would not want to back out of that deal. Because you could always back out of a deal, you'll just forfeit the earnest money and the seller will get to keep it.

So let's say, Chris, you asked earlier, what if you just can't get contingencies? And all the things we've mentioned, you don't have any wiggle room. Well, what if you just make your earnest money deposit really low? Like, all right, no contingency, short escrow, I'll give you everything you want, $3,000 earnest money deposit.

You find something you don't like in the house, worst case scenario, you lose three grand. No one loves it, but it's better than closing on a house that has a bunch of problems. So don't ever believe "as is." Rob and I bought a house together, actually. And he got to see behind the scenes of I was working the negotiation through our realtor.

So it was like me telling Rob to tell our realtor, "Hey, say this." And he saw some of the angles and the experience that when you've been through these escrows, you develop. Sellers always start off with a hard stance. "I'm not taking less than three and a half million." And then three weeks, four weeks later, all of a sudden, three million is starting to look like a possibility.

"I'm not giving them anything." Well, we get these inspection reports, and hey, your pool's got some issues, your landscaping has some issues, your roof has some issues. It's going to be $75,000 worth of work that needs to be done. You give them a week or two of sweating that out, they start to think a little bit differently.

And so oftentimes when you're the buyer, you want to gather as much as you can about what's wrong with this property, present it to the sellers, and then wait. Let them marinate in their worry that you're going to back out of the deal or you're going to find something else, and they're going to have to give you concessions.

The knee-jerk response is almost always, "No, I will not do it." But if you wait long enough, those nos frequently turn into yeses. So when I'm listing a house, I will have my client pay for a home inspection, which they never like doing because they're 500 bucks, but it saves you so much money, Chris.

You would ask for other hacks when you're in escrow. Anytime there's a inspection that's done, the perspective is as crazy as this is, is the buyer's buying a house in perfect condition. And if anything's wrong with it, they deserve a credit or they deserve repairs. They deserve something to put this house back into perfect condition.

Frequently, the house is in much better shape than other houses in the neighborhood, but they still use that inspection to get a discount. Short answer is if you are buying a house and it's not a situation where they have another buyer willing to pay more than you in backup position who's gonna jump right in there, anything absent that, you can ask for credits.

You can get a significant chunk of your closing costs paid for by the seller. If you wait long enough into the escrow before you ask, almost regardless of the condition of the home. So when I'm selling houses, that's how I get people to waive the inspection contingency. You're gonna get a home inspection paid for.

We're gonna give that to the buyer up front. We're gonna say, "Here's what it looks like. Here's all the reports. If you don't like it, find another house. But if you want this house, this is what you're buying and you're gonna waive those contingencies." So when you're selling, that's what you wanna do.

When you're buying, you wanna avoid it. And then one practical thing to look for that everybody misses is what we call the sewer lateral connection. So there is a sewer line that runs from your home out to usually the sidewalk where it connects to the city sewer line. Those plumbing lines, if it's an older home, usually running through the front yard, can become infiltrated by tree roots.

This is a crazy thing. But when the roots are just pushing against that PVC pipe for years, they will eventually push through there and then the roots will grow and these sewer lines can become clogged and they're very expensive to fix. So one thing I tell every home buyer who's trying, like, "What could I miss?

What's that thing that I might've missed?" Get that sewer line scoped by a plumber before you buy the house, during your due diligence, and make sure that there aren't any clogs 'cause those things can be 10, 15 grand a fix when they get messed up. - Yeah, that did happen to me.

We did a sewer scope. There was a problem with the sewer. They sent out the plumber to "fix the sewer." And we asked for the sewer scope like an hour before closing. And they're like, "Oh, we didn't do one." But everyone's hands were sort of tied. It was December 31st.

We were all trying to close that year. It was gonna mess everybody up. So we were just like, "All right. Well, I mean, if they fixed it, then in theory we should be good." My wife moved in with our two kids. And then that week, ramen noodles and poop show up in our bathtub.

And it was a whole thing. And so lawyers got involved and it was a whole thing. And basically what happened was the seller's agent lied to us about the repair and basically never even told the plumber kind of thing. And so because we didn't get it re-scoped and while we didn't do it while they owned it, it became a whole problem for us.

So I would say from a sewer scope standpoint, if you do have to make repairs, make sure you pay for two sewer scopes. - What do you guys think about inspections when the seller's already done the inspections and they're in the disclosures? I remember when we bought this house, the disclosures were like, "Here's the building report.

Here's the roof inspection. Here's the termite inspection." They were all there. Do you still recommend people go do them themselves also? - Usually not. The fear is, well, that's the seller's inspector. But the inspectors themselves are licensed professionals that don't really care who the seller is, who the buyer is.

They just wanna make sure they don't miss anything so they don't get sued. So what I tell my clients when you're getting inspections someone else has done is call the home inspector and ask them, you can actually do that, especially if you're the one who pays for the inspection.

But even if you're not, "Hey, I see in your inspection line 9C2 shows this. Is that something I should be worried about?" You get great information from home inspectors. They give you the context that's often missing, especially 'cause when you're first buying a house or even if you've owned a lot of houses, Rob, you could probably admit, we don't know what a lot of that stuff means.

You see a report and it lists something, you're like, "Well, is that a bad thing or not a bad thing?" Just ask them, "Do you see this very frequently? Oh yeah, every house has that issue with the trusses in the attic or whatever the cases are." No, that's very concerning.

That electrical system should not be wired that way. I rarely ever see that. That's a big problem. So having those conversations with the person that inspected the house and then specifically asking, is this a common problem or is this concerning to you? Or maybe when you looked at the house, what stuff from this report stood out to you in your experience?

Now you're getting 20 years of experience so that home inspector's perspective benefiting you as a person buying the house. I'm gonna rapid fire through a few things quick that I've done in this part of the process. One, we did get an inspection that said that there were termites. I got another inspection and found someone that was willing to crawl through a smaller hole than the original inspector was to figure out what was wrong and find local treatment that was gonna be less expensive.

So I think anytime an inspection reveals something that could be expensive, it could be worth doing a second one. Another one is, I'm trying to figure out when we're trying to buy a home, what the person cares about. Because sometimes there's sellers that really just wanna close fast. Some want the most money.

Sometimes someone might just wanna make sure that the house is gonna be taken care of by a good family. I find that if I could figure that out, either through the agent or some other way, maybe from some neighbors. Sometimes we ask the neighbors about the sellers. You could try to optimize what you're doing.

'Cause if you know what's important to them, if they care about fast close, then maybe that's the thing you optimize for. My brother-in-law's tip was always, it's a lot easier to extend a fast close than you think. So if you say we're gonna close in 30 days, you need to push it back by day 30.

It's a lot easier. I'm gonna throw a couple little things that I've thrown in contracts or learned and regretted not doing. I'm curious if there are any last things that you try to negotiate for. For me, I always had this rule when I bought a car that's like try to get them to throw in the floor mats.

And for the home, I always love getting a little extra at the end of the deal because you're looking at a house that the cost to throw in a few things is so small that even if someone's not willing to negotiate, you could sometimes get it. So we got all the lime trees that were technically staging included in our house.

There was a nice stage TV in the living room. We got that thrown in. So I always like to throw in a little bit of few small things that at the end of the day, no one's gonna kind of blow a deal up over something small, but it feels really good.

Every time we walk through our living room, I'm like, I didn't pay for that TV. Like that TV was free. Yeah, I paid for the TV. I bought the house, but I feel like I didn't pay for the TV. And one that I've recently come across. So depending on how much you care about privacy and whatnot, I'm now in a situation where I'd prefer the whole world doesn't know where I live.

So one thing that you can do in advance, because it's a lot of work if you don't, is put into the contract that the agent needs to remove all of the home data, photos, descriptions from the MLS. Sometimes it can be a hassle to get them to go do it after the fact.

But if you don't want all the pictures of the interior house online, you can write that into a contract, which is something that took me time, but I didn't do it in advance. And if you really wanna be private and you wanna buy a home in an LLC so that you kind of protect your identity where you are, you can't do that later.

Like the records will always be there if you didn't do that in advance. So if you're in a situation where you think one day in the near future, you might not want people to find your address, buy the home in the LLC in advance. Don't try to change that after the fact.

'Cause I have at least one friend who ended up just having to move because someone knew where his address was and there wasn't really anything he could do at that point. So those are a couple of mine. Any other small, quick wins that you can get when you're negotiating?

We talked about seller credits. I think it's important to note that you can have a little bit of flexibility with seller credits. Like let's say you can't see eye to eye with the seller and they don't wanna give you a $5,000 seller credit to repair this one kind of thing that you think is a big deal.

You could, in theory, raise the price by $5,000 and then have them give you a credit for $5,000. And while they're not paying it for you, throwing that onto your mortgage is really gonna have a pretty minimal effect on your overall payment. I mean, probably less than a dollar is my guess.

I don't really know. But that's always something you can do too if you need to make a deal work and you're really like, "Hey, this $5,000 is gonna kill the deal." You can always add it to the price of the house if you feel like you're getting a good enough deal.

That's a good strategy, especially if you don't have a ton of capital. In general, having 5, 10, 15 grand in the bank is more value to you than having 5, 10, or 15 grand added onto a $600,000 mortgage balance. When it comes to extras that you mentioned, Chris, one of the best things to do is to have your agent ask the listing agent, "Is there anything that the sellers don't wanna have to move?" You wouldn't think that would be a common thing, but many times, sellers, their biggest concern is, "I don't wanna move all my crap." And if they don't wanna take the bunk beds with them, or they have some patio furniture in the backyard that they were planning on replacing when they got something new, or they don't really love their couch, it's not worth moving because they're gonna have to spend a bunch of money to get it from one place to another, they may be happy to leave it for you.

So just getting a list from them, or what are all the things you don't wanna take regarding furniture or stuff like that, is something that you can get added. Like what you mentioned, Chris, sometimes there's TVs that they were just gonna get a new TV when they got to the new house, and you can have that added, and just end up with some extra things to throw throughout the house.

Doesn't hurt to ask. - Love that. Rob, you talked about mortgages. Let's talk quickly about financing. I know it's a big thing. Anything people need to be thinking about as they go through this process, getting a loan, getting pre-qualified, figuring out what they can afford? - There's a couple ways to look at it, right?

So if you're buying conventionally, they're typically gonna look at what's called your debt to income ratio. So this is how much money you're paying every single month to debt servicers versus how much income you make. Now, I believe this is gross income. So let's say you make $10,000 a month, but all of your credit cards and your student loan payments and your car payments and the couch that you finance adds up to 4,500 bucks a month.

That means that your debt to income ratio is 45%. And David, you probably know the exact number here, but typically, lenders don't want you to have higher than a 45% DTI to make a deal work. Is that the correct figure, David? - It's sometimes lower than that. That's like the ceiling as high as most of them will go.

- Yeah. So you wanna make sure that when you're analyzing a deal and seeing what you can qualify for, I mean, all lenders are basically gonna run this calculation for you. But just to put it into perspective, you don't want the payment of the house that you're buying to throw your DTI out of whack, right?

If you're barely qualifying now, the debt that you're gonna have from the house that you're buying contributes to that DTI and what you're qualifying for. So make sure that that's something that you can hone in ahead of time. And certainly don't go take out new credit cards and fill them up to buy new furniture before you close.

That's a big mistake that I think a lot of people make on their first property. - Yeah. Opening any line of credit is gonna screw up your debt to income ratio. And it often happens once the house is an escrow. Now let's buy a new car to drive into our new garage.

Let's go open a line of credits to buy a bunch of furniture. You're so excited. And then the entire escrow gets blown up because you were just at the peak of what you could afford if that new line of credit put you over. - I'm a big fan of the points game and opening up cards and sign up bonuses.

But when we're buying a home, it's like, let's put a hold on all of that six months out just so I kind of have a nice clean slate there. And I'm not trying to take on any extra inquiries or anything like that. - When you're helping people find homes or looking for mortgages yourself, do you think a broker is an important part of that equation or not?

It's something I've never actually worked with. I've always gone direct to a handful of financial institutions. - Yeah, and disclaimer, I am a mortgage broker, so I am partial towards them. But here's why I went that route instead of becoming what we call direct lender. So what a lot of people do is they'll go to Wells Fargo, they'll go to Chase, they'll go to Bank of America, and they'll say, "What can you do?

What's your rate? What are your closing costs?" And it gives you this feeling of productivity that you're out there shopping around. But as a broker, we're doing the same thing. We're going to Bank of America, we're going to Chase, we're going to all the same lenders you have, but they're probably giving us better pricing than you.

And this is one of the shady things about how the loan industry works. When you walk into Bank of America, 'cause that's where you bank and you know them and you're comfortable with them, they know that you're gonna bank with them because you're comfortable. They don't have to give you the best deal.

But when they're working with a broker, they know that we are comparing them to all the other lending options, so they're gonna have to give us a good deal to get the business. So going to a broker, it will allow you to have them shop for all your different loan products and options that are available, save you time, and they're usually gonna get better pricing.

- Can a broker still get deals where they're required to put a certain amount of assets at that institution? I know, at least with Wells Fargo, as your example, if you move some money into a brokerage account with Wells Fargo, you get a better rate. Do brokers still negotiate those kinds of deals as well?

- Those are uncommon now. We were seeing those with jumbo loans. There was a time where you could get a better rate on a jumbo loan if you put a significant amount of money in with the bank. And we would just tell our clients like, "Hey, if you're looking for a jumbo loan in this market," it's not the case right now, but at the time, especially during COVID, you're better off just to go to that bank.

You're gonna get a better rate on jumbo products than you would be right here. But you're gonna have to put 100 grand in a bank. They're gonna schedule a meeting for you with one of their financial advisors 'cause they want you to take that 100 grand and go buy mutual funds through them and they're gonna make money that way.

So if you get an honest broker, we don't wanna waste our time working on somebody who we can't get them a good loan product. We're pretty good at just telling people upfront, "For what you wanna do, we don't have a product like that." For years, we didn't do commercial lending.

So we would refer people to the best commercial lender we knew until we got set up with a commercial lender and now we can do it. So if you do have one of those special opportunities, sometimes physicians can get special loans through a credit union that is geared towards physicians.

Yes, there's an angle, but for your average person, there's not a ton of those opportunities. - And David, just for reference, what makes something a jumbo loan? - Yeah, that's a good point. Every area has a difference, what they call it like a conforming limit. This is how much you can borrow before it's considered to be risky.

A mortgage broker or a loan officer can tell you what the Fannie Mae, Freddie Mac guidelines are for that area. You might even be able to look that up online. But a loan balance above a certain amount, it's obviously higher in the Bay Area, California, than it's gonna be in Topeka, Kansas.

But it's a proportional amount. And then once you have to get a loan balance higher than that, you're not gonna get a Fannie Mae, Freddie Mac loan, you're gonna get a loan that comes from private investors that have pooled their money in capital markets. They're going to give you the loan, then they're going to sell that as a mortgage-backed security somewhere else.

So that's why the rates are usually a little bit higher on jumbo loans. They're riskier for the person lending you the money. - I think in the Bay Area, it's like high six figures is the threshold, I think. - Yeah, it goes up every year, usually, too. - Okay, yeah, it's been a few years for me.

And how do you think about how much people should be putting down? - I think it's gonna probably depend on the use case, right? So if it's a primary, you can get into a primary for as low as 3.5% down. Unless it's a jumbo loan, I don't think you can do that.

There are limits on those as well, the FHA Fannie Mae guidelines. So make sure to look those up. Those are pretty easy to look up. I think it's totally fine to get into your starter home for 3.5%. I did. I got into my first $159,000 house for like six or seven grand.

That house ended up being the catalyst for my entire portfolio. I think if you're looking at investment properties, you could go as low as 10% with a second home loan. That's still gonna be under your name and your income and everything like that. And then once you go that traditional route, if you're going more traditional real estate, 20% down seems to be the gold standard.

Sometimes it's gonna be asked that you do 25%. Not really a fan of putting 25% down personally. If I can get in for 10% on a second home loan, pretty happy. I'll do 20% though on an investment loan. That seems to be more common these days. So I like to put that into an apples to apples comparison.

In general, if you're an investor or a real estate investor, having more capital is better, but it depends where interest rates are. So for example, when rates are at 6%, to save an extra $40,000 and put that towards your down payment is gonna save you $240 a month. When rates were at 3%, it would only save you $169 a month.

So we saw this phenomenon where people were trying to save more money to get their payment lower, get their payment lower, but prices were rising faster than they could save money. It actually ended up being a poor financial decision to try to save more money to put money down.

So if rates jump up to say 12%, now you're talking about $411 a month. That might make sense to put more money down, but interest rates, though, they're higher than they were. They are still traditionally very low compared to where they've been for a long time. So putting more money down doesn't help you as much as you'd think.

Up to $750,000 of mortgage interest deductible as a primary residence. So that mortgage interest comes off a little bit in your tax return. Obviously, I'm not an accountant. Feel free to talk to a CPA. And then a hack for anyone who's making large purchases and has lots of money that isn't talked about too often, but I'll share on the personal side is that if you borrow money and you use that money to invest in anything, whether it's stock market, bonds, whatever, that interest is deductible as investment interest expense.

Again, not a CPA, talk to your lawyer. I'll put a link in the show notes. So I know people that have been able to buy a house in cash and then do the mortgage a day later, and then take that mortgage and invest it. One thing we did to kind of do this strategy a little bit was we liquidated a lot of our personal investment savings, bought more of the house than we could, and then immediately financed more of it and put that money back in our investment account.

And by doing that, we could go over the deductible mortgage interest limit because that extra mortgage interest was actually being classified as investment interest because it was being used for the purpose of investing. So I'm not gonna go down that rabbit hole, but I know people who have multi-million dollar mortgages that are 100% deductible.

And you could deduct that interest against investment returns and investment gains, whether it's capital gains or interest income or anything like that. There's also a ton of awesome tax hacks when it comes to commercial property. I know you guys did an episode all about the way to do real estate and not pay taxes when you're doing it for investment properties.

I don't remember the episode number, but we'll link to it in the show notes for sure, because I know you guys have gone deep on that on the commercial side. But there is a hack here if you have cash on hand, or even if your house is appreciated and you have equity, you can refinance, take cash out of your house.

And as long as you invest that cash out refinance money, that extra mortgage interest will also be, usually, talked to your CPA, classified as investment interest expense and be deductible. Yeah, you can write off the interest and you don't get taxed on the money that you took out. I will say, I actually remember the episode off the top of my head.

I have every single episode memorized. It was 689, our BiggerPockets episode with Matt Bontrager, who is an awesome CPA. So there's probably a lot more we could do. I could, in fact, probably do an entire episode on each one of these topics we went to. Maybe that's the follow-up is we have a series of extra deeper, deeper dives on each one.

Any last things that you need to be thinking about? We made an offer. We secured our loan. As we're wrapping up the process of buying a home, is there anything else there? Or is it really just closes and that's all that happens? David, you gave a very good tip the other day about keeping your documents into one place.

You think you could run us through that? 'Cause when you said it, I was like, "Oh my God." It's so easy. Why doesn't everyone do this before they apply for a mortgage? So when you're getting ready to buy a house in the first place, a lot of people hate the pre-approval process.

It's like pulling teeth. You have to go get your pay stubs. You have to get bank statements. You have to find your tax returns. Well, who knows where their tax returns are most of the time? And if you're not used to navigating your company's HR website to get pay stubs, it can take three hours to figure that thing out.

It's very frustrating. So the advice that I give to all of our clients and what I do myself is I create a Google folder in Google Drive with that information. When I download those documents, I stick it in that folder. And that way, if you decide that you wanna get pre-approved with several different lenders, if you're gonna use the method like Chris was saying, where you're talking to different people, you're sending the same stuff to everybody.

It's really easy. Then when I close on a house, I open another Google Drive folder for every address and I keep all the information for every house in that folder. It is incredibly simple when you do it. So we get our loan documents. I stick it in there. All the inspection reports, I stick it in there.

The disclosures for the house, they're gonna go in there. The mortgage note, every piece of information, the property management agreement, if I'm gonna manage the property, the work from the contractor, the scope of work and how much I paid them. Whatever it is, it all goes in that same folder.

And then if I ever need it, I know exactly where to go to get it. - I love that. I did not do that with the first house. And you had to go back and track down the mortgage docs. And I was surprised that just because you sign a lot of these mortgage docs in person, I didn't get a copy without requesting them as an attachment in my email.

It was in some secure thing that wasn't easy to access. That's one. And then the last other thing I put in that folder. So now I have that folder. I would say, put a Google sheet in that folder, Excel file, whatever. And every time you make any expenditures to improve the house, make sure you write it down.

Because we just did a renovation and that kind of sparked this idea. But at the end of the tenure at a house, when you sell it, you take the amount that you made from the house selling it, you subtract the amount that you spent to buy it, and that's your kind of gain on the house.

But you can deduct all the improvements you made to that house. And so it might seem small at the beginning, maybe you just redid some floors, but those things add up over the life of the house. And I think it's really helpful if just right as soon as you close, you have one place you can start to track every improvement and every expense you put to improve that house, so that you can save on the taxes at the end.

- And if you ever wanna sell that house, that's something you can show the next buyers of the property. Here's all the improvements that we made over the time we had the home and here's the receipts. - Speaking of tracking all this stuff and storing documents, there's one thing after you buy this house that's very important, is to make sure you get that house insured.

I just did a really deep dive on insurance. I went through every policy, talked to multiple brokers, multiple companies. I tracked a lot. I probably spent 50 hours on insurance. And I wanted to share a few things. Any thoughts from you guys quick on insurance or should I jump in?

- No, let's do it. But I do wanna say I listened to it, dude. I mean, it is clear you put 50 hours of research into it. And as the keeper of all the episodes, you can find that episode of All The Hacks. That's number 104. So make sure to go listen to that after you listen to this.

Make that be the first thing you listen to 'cause I promise you it will answer all of your questions as it pertains to homeowners insurance. - And more. Anytime someone sends me an email on how much they saved after listening to that episode, I write it down. And the stack rank is currently at $14,000.

So if you listened to that episode and you save more than $14,000, absolutely reach out. I wanna put you at the top of the leaderboard. The goal is to save people as much as possible. That's part of the theme of the show. But one of the things that I think is really important is when we bought this home, the amount that we could insure the home for was not what I thought was an appropriate amount.

So there are multiple people that have a requirement. The lender's gonna have some requirement that you insure the home enough. The insurance company will. But at the end of the day, that insurance is there to make sure that you can rebuild that home if something happens. And I asked around from some real estate agents I knew how much it would cost to buy a teardown and build a house.

And I asked a builder and the numbers they gave me were about 20% more than the cost estimator that the insurance company gave me. And they were more than what our lender wanted us to have the home insured for. So for me, I didn't wanna deal with that risk.

So I actually just increased the coverage on the home. So my home is insured for more than the minimum that they required. And one way to increase that total number that's cheaper than just insuring it for more is looking for extended reconstruction as an add-on to your policy. So that will cover you for anywhere from 25 to 100% of the cost of your home.

So if you have a home that's worth 500 grand and you insure it for 500 grand, but you add 50% extended reconstruction, up to 750 to repair it. If building materials go up or something changes in the time, you'll get a little bit of an extra coverage there. So I think that's something really important to think about as you go through that.

- Yeah, that's really cool. I never thought about that. Insurance, it's becoming increasingly difficult to get and significantly more expensive. I'm literally starting an insurance company right now because it has been so hard to find this. And I didn't realize until I just bought a lot of real estate how bad it's getting in certain states.

There are certain areas where you're looking at homes that you will literally not be able to get insurance if you plan on making it a short-term rental. Florida is notorious for this. I had a quote on a property I bought in Florida that was $26,000 a year for an insurance policy.

I mean, that is a mortgage payment on a normal home and some California problems as well. So in your due diligence process, we used to treat insurance like just an afterthought, like, oh yeah, yeah, my loan officer will connect me with someone. I'll look at policies, I'll pick one.

No, you gotta make sure before you close on that house that you can get insurance and that it will be insured for as much as you will need if something goes wrong. Great point there, Chris. - Absolutely, Tahoe is another area like that where I know people who have very, very high costs.

And even in the Bay Area, because of the fires, there are a bunch of insurance carriers that just won't insure. Travelers told me, "We can't insure your home." We're like, "We're not even in a real wildfire area, "but we're off their list." - Yeah, there's a BRRRR project that we're working on that we're gonna do a show on in the future.

We did one previously. I could not get insurance for fire. I had to go through the state. The state had to create its own insurance program because providers were not providing it to people. And you can't get a loan in most cases if you don't have fire insurance on a property.

So people don't talk about it very often, but it's a pretty significant problem that's going around. I'm glad you brought it up. - I'll give a couple quick ones, and then obviously check out this episode if you wanna go deep and save money on insurance. Bundling, not always the best deal.

So a lot of people think, "Oh, I'm just gonna get my home insurance "with the same company that does my auto insurance." We found that many carriers, that was not the case. And we probably looked at 15, 20 carriers. So don't just assume that that's the right thing. Also, don't just assume that your carrier that you've had for five years, because they have their, you've been a customer forever discount, is actually cheaper.

I found that to definitely not be the case in our situation. Also, don't forget that now you own a home, there's a chance that that home has, either now or in the future, increased your net worth enough that it might be worth looking at a umbrella policy that goes beyond the value of the home or your homeowner's insurance.

And that will also extend to your auto insurance. There are a lot of people out there that buy a home, it appreciates over time, their net worth grows and grows and grows, and they're driving around and they haven't updated their auto policy, and they have $100,000 of liability insurance.

So get in a car accident, something happens terrible, and someone sues you for more than that. Well, it turns out that you have more assets. And if you don't have an umbrella policy to sit on top of your auto policy or your home policy, you could find yourself in a not great situation.

And there are some states where you're even able to sue someone for their future earnings. We're talking about real estate, we're talking about building wealth. As you cross that threshold to, now I'm starting to build my wealth, I think it's equally as important to protect that wealth. So that's something that it's very inexpensive.

We're talking $100, depending on how much you need to protect yourself up to like a million dollars a year. I think it's something people should be considering. And then last, you buy this home, after you've moved in, go around the house with a camera or your phone and just take a video of everything in the room and just document all the stuff you own, because it's gonna save you a ridiculous amount of time if anything were to happen, burn down, burglary.

You probably didn't save the receipts for everything you own. So take five minutes, make your own MTV crib style video running around, sharing everything in your house just in case, so you have that on hand. I think that's pretty important as well. - I've had to go through that process before and I did not do that.

Gosh, it was horrible. It was horrible. And you gotta show receipts and you gotta show photos and you gotta look through thousands of photos on your camera roll for some random angle of your house. - Yeah, try to find that family picture you took with the flat screen in the background.

Yeah, just walk through, make that video. I got a bunch of other tips, but we've been doing a lot in this episode. And I think anyone who's looking to buy a home is absolutely going to be able to get a better deal, find a better home, find the right home and get through that process easier.

This has been so helpful. I'm so glad we got to do this episode. I feel like there's more things we could break down, but at this point, I feel like this is a good stopping point. Is there any last bits of wisdom that you guys wanna share to anyone thinking about going through this process?

- Yeah, there's a thing that I mentioned to a lot of people who say, "I don't wanna be a real estate investor," or, "Renting is cheaper than owning." It often is. In most cases, if you buy a home, the mortgage is gonna be more than the rent in year one.

But go back to what rents were five years ago, 10 years ago. Are you telling me that the mortgages from 10 years ago are more expensive than rents today? It's hardly ever the case. So when you take the longer term approach, even if you're not a real estate investor, looking to rent out a property, buying a home and locking in a mortgage, especially with all the inflation we have, will always be cheaper for you in the long run.

If you look at what your parents are paying on the house that they bought 25 years ago, those payments are laughable, but at the time they bought it, they thought it was expensive. So I often tell people, even if they don't wanna be a "real estate investor," you should still buy a house and make sure that you've taken control of your financial future.

You're not in the hands of landlords that can raise rent every year. My only caveat there would be, given the fees that you pay to an agent when you're selling the house and to the buyer's agent as well, if you're gonna buy a home and you're gonna be there for a year or two, you might not make money if you plan on selling it in a year or two, given the fees that are associated with that process.

However, my advice, and this will lead us to an episode on both of our shows about house hacking, is there are ways, if you think, "Gosh, I can only really afford "a two-bedroom house, but we're about to start a family "and we're gonna need a bigger house in a few years.

"What do I do?" There are ways to buy the four-bedroom house or the duplex that you might one day need for your whole family or something like that now. Use tactics that you guys have talked about, we've talked about in multiple episodes that we'll link in the show notes on house hacking, to be able to get that house that two, three, four, five years from now is the house you want and get it earlier.

Increase some cashflow from it so you can afford it for those next three or four years while it's more space than you need. And I think that ends up allowing you to buy your 10, 15, 20, 30-year home before you're ready for all that space. And not be in a situation where you either can't buy the home or you've got to buy a home and sell it in a few years.

So we've both done episodes on it. There's a number of tactics there. I think you can even use that income from your house hack to end up qualifying for income on your DTI for your mortgage. So I think there's some really great stuff there. Obviously, we've both done episodes on it, but there's a lot of stuff there.

We did that in San Francisco and that helped us buy a three-bedroom place when we really only needed a one-bedroom. I will always thank house hacking for giving me my start. It is the catalyst for all wealth and real estate, my deep, deep belief. So yes, go listen to both those episodes.

If you were closed off to the idea, I promise after you listen to them, you're gonna be all in. - Awesome, this has been fantastic. I guess thank you for being here. Thank you for having me here. Thanks for doing this kind of fun episode. And I hope we get to have a conversation like this again soon.

- Chris, for people in our audience that wanna learn more about you, where can they find you? - I'm at all the hacks in whatever podcast app you're listening to on the internet. Unfortunately, not too common of a term. So if you like optimizing real estate, but you're interested in optimizing your life, your health, your money, your travel, I'm one of those crazy people with 10 million points and play the game hard, travel the world for free.

If any of that is something you wanna do, come on over, have a listen, all the hacks. I'd love to have you there. I'd love to hear from you, reach out to me anywhere. Just love having new people in the community. What about you guys, for our listeners? - Rob, for anyone who's been charmed and bedazzled by your amazing personality, where can they find more?

- You can find me over at Rob Built on YouTube, Rob Built on Instagram, and on the Apple Podcasts review platform where you'll be leaving us a five-star review if you like what we do and if you want our content to be served up to millions of other people who get the benefit of learning about financial freedom.

What about you, David? - Find me at davidgreen24.com, see everything I got going on, or your favorite social media or YouTube platform, davidgreen24, E at the end of green. - And you guys forgot the most important thing, which is if you're listening to this on all the hacks, go check out the BiggerPockets Real Estate Podcast.

- Well, that goes without saying. I mean, yeah, if you like this stuff. - Of course, I just, you know, gotta remind everybody. - Yeah, we've got almost 800 episodes of content just like this if you wanna learn how to make money through real estate. And Chris, I will say, I have a book coming out through BiggerPockets Publishing in October that's gonna be called "Pillars of Wealth," and it's all about saving money, making money, and investing the difference.

And so much of what you've talked about, I echo the sentiments in that book. It is incredibly important to be a wise steward of your resources if there's ways you can save money through credit card hacking, travel hacking, food hacking, everything. Like, take advantage of that. The people who manage their money well tend to be rewarded by the money gods who bring more.

So I love what you're doing. Thank you for doing it. I'm glad our audience got to hear about it. - I'm glad I'm here. And I like what you're talking about because building wealth is not always about sacrificing everything. My goal is to help people live a life they really wanna live, just live it for less.

And on that note, there's an episode, I think everyone listening on the BiggerPocket side should check out. I did this episode with Bill Perkins, who wrote a book called "Die With Zero." And it's radically reframed my perspective on basically all things wealth, spending money and everything. I really wanted to focus on what's important, maximizing my net fulfillment, not necessarily my net worth.

And so if I leave people with, obviously, if you wanna optimize your insurance and save money, go there. If you wanna travel for free, where's episodes there. But if you wanna just kind of like really kick your entire perspective on money around and think about whether there's maybe a new way you might wanna be thinking about how you spend and save, episode 91 with Bill Perkins literally changed my life.

It's the only episode I've done where I think I've listened to it five or six times. - Nice, okay. Yeah, I'm gonna go listen to that since I need something to listen to after episode 104, insurance, baby. - Yeah, that's awesome, exactly. - Wow, we covered so much in that episode.

So I really hope it was helpful and that you keep it bookmarked for the next time you might need it or if anyone you know is going through the process of buying a home, there is no higher compliment or way you could support me in the show than by sharing it with them.

And as I said before, if you have any other hacks, tips, or tactics for buying a home, please share them with me, podcast@allthehacks.com so I can share them with everyone else in a future episode. And if you wanna learn more about real estate, definitely don't forget to go check out the BiggerPockets Real Estate Podcast.

All right, thank you so much for listening. See you next week. (upbeat music) (upbeat music fades) (upbeat music fades)