B (3:22)

You know, I love the house hack strategy. My first property was a house hack condo moved into it, was able to cut my rent down over like 60% on my mortgage at that time. People get so confused about the strategy, though, sometimes because there's so many different opinions. And the purpose of the house hack is to get you into ownership so you own the asset, but also to make sure that you're growing, whether it's you owning or saving money every month. And, you know, I think the first step always is what's your monthly payment on rent? What can you go buy a property with $25,000 down? Where do you want it to be and can you qualify in those areas? And then you have to look at the variance between the rent, what your monthly payment is.

A (4:04)

Yeah, that's just the right way to think about this. I get what you're asking is like, what is my cash flow going to be in the future? What is my pmi? But I think the math that James, who asked this question, was alluding to said there's a lot of math trying to think it out. I think James just nailed it on the head. Like, how much money are you going to save? How much better is your, your run rate, your savings rate in a given month going to be if you keep renting or if you house hack? Because even paying pmi, right, like, you still might have a financial benefit.

B (4:34)

And I think that's important. Don't get trapped on cost, because cost, it's just a cost of the deal, right? If it gets you into a better Financial situation in two years, who cares if you're paying pmi? Who cares if you're paying any expense, like hard money? I pay a lot in interest because it gets me into the deals I need. And I think that's where people get really stalled up. But you have to kind of audit like hey, what is my goal in two to three years? It's always that, that question what jams everyone up. Should I wait and put more money down to get the cash flow up? Should I wait and wait for the market to drop? And then what happens is you wait too long and the savings account just doesn't earn what you need it to do. And the only time I'm an advocate of waiting is if you can take that 25,000 and invest it and make, you know, then like a 8, 9, 10% return higher than you can make on the savings every month. And you know, I think people just get so jammed up and it really just comes down to cost. And if it's not, take that 25,000 and you can still go buy another piece of real estate or invest with someone else and still get into real estate. And maybe you rent. There's nothing wrong with renting. Agreed. You know, I've owned almost every house of mine except for I was in California, I rented for three years.

A (5:46)

I agree with you, I rented for five years. Recently when I moved to Seattle, I thought about renting for a while too. Just whatever makes more sense, you know, like I'm open to it. Let's just use some real numbers because maybe an example here would, would benefit because like let's just say your rent, the seatt, pretty expensive. So let's just assume you have a one bedroom, it's probably two grand here. Seattle's an expensive market. If you could house hack and even with PMI you're only coming out of pocket $1,000 a month. That's $1,000 in post tax saving that you are getting, which $12,000 a year to me, I don't know your personal financial situation, but that seems worth it to me. You're just saving now, $12,000 are starting to pay down your mortgage and you own an asset and you have the opportunity if rents go up to increase your cash flow and pay out of pocket even less. That to me even if you're paying PMI makes sense to me. If for example though you were paying $2,000 a month in rent and you did the FHA loan and PMI and now you're coming out of pocket $1800 a month, then I don't know if it's worth it. Like, at that point it's like, oh, 200 bucks a month to take on an asset. The work, there is risk in it, you know, then it's not worth it. But, like, if you're meaningfully changing your lifestyle and able to all of a sudden save up significantly more money than you were before, I don't care if you're paying pmi. I think most people who get into house hacking in the first place pay pmi. Like, I think that's the more most common example is people do an FHA loan. And so for me, like James said, I wouldn't get caught up on that cost. I would just think, is this benefiting me at the end of the day?

B (7:35)

And, you know, this is why it's so important for people to write down what their goals are in one, three and five years. Because if you have goals and you're pushing yourself and they're a little bit higher, that's where maybe you will be more inconvenienced. And that's important because in Seattle, rent can be expensive, but you can go further outside the city, live a little bit further out and get some bigger homes to where maybe you can house hack and rent out three to four bedrooms and then you will cash flow.

A (8:05)

Yep.

B (8:05)

But it comes with the inconvenience. And that's really what I think a lot of people forget. It's like the owner occupied, flip the house hack. Those are inconvenient processes. You might not have a house for a little while. You might have some roommates and rent them out. You might have some rotating people, some extra dirty dishes. But is the pain worth it to you? And so, you know, I always encourage people, don't listen to what everyone else is doing. Listen to their strategy, write down your goals and then match the strategy with your goals. Not just because Dave's doing or I'm doing it. It needs to match up with your lifestyle.

A (8:37)

So, great question. I think this comes up a lot, but I think you just do the math, right? Figure out how much it will save you or what you would do if you would wait and compare those two things. I wouldn't think so much about the pmi. If doing it now is going to save you more money, go ahead and buy that deal right now.

B (8:53)

Yep.

A (8:53)

All right, great question and thank you both. James is from Seattle. Our second question also comes from Seattle. We picked regional ones for you here, James, but these are applicable to any market and anyone. But just because James and I both live in Seattle. I picked some from local investors here from Biggerpockets. So the question here comes from a guy named Graham on the Biggerpockets forums who said, I finally decided to get serious about investing and wanted to get your perspectives. For a first timer, I'm leaning towards purchasing a single family or duplex for less than 200,000. Should I look into a one move in ready unit to a unit that needs cosmetic rehab or a unit that needs significant work? With my budget, there may be units that fit the bottom two criteria. But is cosmetic or significant rehab too much to bite off for a first timer? Appreciate any advice if you're in my shoes and had to do it over. Let's just like hone in on the core of this question, which is if you are starting out almost regardless of budget, do you try and buy move in ready unit, a unit that needs cosme medic rehab or a unit that needs significant work? This is a first timer. How would you approach it if you were doing it again?

B (10:07)

You know, I'm a big value add person, but you don't have to go heavy. Right. When I first started buying properties, you know, I started with condos that were really beat up. They're kind of hoarder style condos and so they were simple because I could get them trashed out. Do the carpet, do the paint.

A (10:22)

Yeah.

B (10:23)

Do the countertops, do the appliances. I think if you're a new investor and you don't have a construction background, go with the cosmetic because the significant rehab. There's going to be so mistakes that we make on these big projects that are going to slow down the time which is going to be a loss of income on a month. And if you go over you just doing a lot of work and you're not getting cash flow to probably be at the same numbers as a cosmetic renovation. And so, you know, I'm a firm believer that you don't want to go too deep. People make this mistake all the time because they're working on a budget and they just buy the cheapest thing they can find. That's not always a good thing.

A (10:56)

No, you're going to pay more in.

B (10:57)

The long term and you're going to learn a lot. If you want to go to school, then hey, it's education and investment. But you know, starting steps. And you know, one thing on this question that is like jumping out to me is do I purchase a single family or duplex? It depends on the opportunities in the market. I would say three years ago, single Family, that would be what I'd be looking for because multifamily was in a lot higher demand because rates were lower. Now with the current market trends, two to four units, they're not selling as well as single family.

A (11:28)

Yeah.

B (11:29)

And so there's a lot more opportunity. And also when you're trying to buy a rental, when the rental property's in the middle where it's a cosmetic fixer, their rents are typically not as high too because they're like average. You can make that property a prime property or premium property in your market for low amount of cost and get a high kick on your rents. And so like if I'm looking for anything right now, and I was a first time investor, house hacker, you know, get going on my investing, I'd be looking two to four units because there's the lowest amount of demand. And when you're buying in the area with the lowest amount of demand, you get the best possible deal.

A (12:01)

Yep, I'm 100 with you on this one. I think, you know, for probably 80, 90% of new investors, the cosmetic rehab is the best first deal. You could buy an existing unit if you want, but you're probably not going to get the same level of cash flow and you're not going to learn as much. And I buy some stabilized units. But my first deal, I did cosmetic rehabs. And you know what? I learned plenty. I didn't need. I would still mess it up on a cosmetic rehab, you know, like I didn't need to do a heavy value add to go to school. At least for me. I was had no construction background and even just doing simple stuff like a bathroom Renault or painting or resurfacing a driveway, like I had never done any of those things. And it was stuff that still I learned. But it was a manageable amount of learning that like I could take on at an appropriate pace. I didn't have to do it all really quickly. I was already getting rents. I could do these things, you know, stagger them one at a time so I could build out my network of contractors, I could do research on what I should be paying for these things and the best ways to go about them. And to me that was like the right blend of getting the right return and learning at an appropriate pace. So it wasn't so overwhelming that I was getting discouraged and panicking and having to spend tons of money. But I was, you know, eating some humble pie about what I knew and was getting an education in real estate at an appropriate pace to set me up for a Career in real estate. So for me I think those are always the best what that means some people call paint cosmetic. I think people can go a little bit further than that. I think you know, paints floors, I think even kitchen bathroom renos like those things I think are manageable for a first time investor. It's really like the structural stuff that honestly I've avoided pretty much all of my career because I just, I don't want to mess with that. James, you quickly got into that but I think you know, just the surface level stuff is manageable for any first time investor.

B (14:09)

Yeah, stay away from moving walls. Yeah, that's where cost compound and if you don't, you don't know what you don't know. It's easier to negotiate a flooring installer than an electrician and a framer because you're moving walls around. That's a lot more complex and and definitely take your steps. I mistake of, hey, I did a couple flips, bought a couple rentals that were condos. I had massive success. I was like I'm Superman. Then I went and bought a huge fixer and I got my clock cleaned in 2008. Best education I ever got.

A (14:40)

Great question. I love this question and I love it so much because I think it has a concrete answer. There are so many questions in real estate. It's like, oh, it depends on this and your goal in this. But I think for most people like cosmetic fixer is the right answer for their first deal. So I'm glad we can give such a clean response to this one. We have more questions coming up right after this quick break, so stick with us. Real estate, it's been a cornerstone of wealth building for generations. But it's also often a major headache for investors. You get these 3:00am maintenance calls, tenant disputes, property taxes. Enter the fundrise flagship real estate fund, a $1.1 billion real estate portfolio built for you. We're talking more than 4,000 single family homes in the thriving Sunbelt. 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the flagship fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential hedge against inflation, diversification for the stock market, all those things. Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. So visit fundrise.compockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's perspectives@fundrise.com flagship this is a paid advertisement. All right, I'm going to share with you guys a little known way to fund your next real estate investment. It's actually your retirement account. With a self directed IRA from Equity Trust, you can invest your retirement savings into nearly any opportunity, including real estate. And here's the best part. You can reduce or even eliminate taxes on your real estate investment. If you don't have much in your IRA, that's not a problem. You can partner with other IRAs or funding sources to make deals happen. Equity Trust has over 50 years of experience and $58 billion in assets under custody and administration as the exclusive self directed IRA company for BiggerPockets, they're here to help you take the next step. You can get started online and learn more@trustetc.com BP that's trustetc.com BP you ever.

C (16:50)

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A (17:35)

We'Ve all been there. You need to buy something for your business. But first you're stuck dealing with procurement bottlenecks, then going back and forth with approvals and boom, surprise costs that mess up your whole budget. There's gotta be a better way. And there is. It's called bill procurement. Bill's already helping almost half a million businesses streamline their finances. Now they've rolled out Bill Procurement, which works with their accounts payable to handle your entire buying process from start to finish. And here's what's really cool. Everything happens in one spot. You submit a purchase request, you get approval, make the purchase, pay the Invoice. All in bill procurement. No more guessing if you're over budget because you'll know if your spending's approved before you buy anything. Their AI even helps you catch mistakes too. The bottom line, ditch that messy procurement system. With bill procurement, you can purchase, pay and get back to growing your business. Right now you can score 200 bucks just for checking out a demo. Head to bill.com biggerpockets that's b I l l.com biggerpockets welcome back to the Bigger Pockets podcast here with James Dard answering listener community member questions. Before we talked about saving up or buying. Now we also talked about the right level of rehab or condition of a property to buy for a first time investor. Next up, we have a question. It's kind of just more of a comment. I wanted your take on Gibbs from Charlene in Virginia Beach. She said, sorry, but let me rant for a minute. I've been talking to a lot of people lately who want to break into real estate with zero experience. Most of them just took a class from some random guru and now expect 100% financing on the purchase and 100% on the rehab. Then when I give them a realistic number, they call me a scammer. Honestly, it's frustrating and it feels like a waste of time. For context, I manage an assisted living facility, broker money, and also do fix and flips. I've been in real estate for quite a while and know firsthand it's not easy. The business takes skin in the game, experience and realistic expectation. What's going on with this mindset? What do you all think is driving this trend? There's a lot in here, James. I think you and I share some of the same thoughts about this. But take it away. Let me know what you think.

B (19:55)

You know, gurus, they're selling a dream, right? And, and the thing is it is a dream that you have to put together when, when you don't come from a lot of money. And I mean I got started in real estate and I didn't have a lot of money. I was working at Red Robin and I was saving tips and I was saving everything I could but they didn't mean I had enough money to buy a house. And you know, and so I kind of took the service approach of going and wholesaling, working with some investors, building the relationship and they it funded me the deal. But you know, everyone wants the dream and, and they think it's easy because someone's talking about it and it's not. And you know, for people out there, you can work with someone to borrow money. You can get a hard money loan for 85%. 80%, you can borrow a second. You can partner with somebody. Those are realistic investment platforms. Those are not unrealistic. What is unrealistic is if you're new and you don't have any experience and you don't want to put in the work to start building the experience, to just expect to go get all this money, you have to put in the work no matter what. And that's what people are doing is they're skipping the work. You know, like if. If I have a contractor that doesn't have any money and he's never invested before, but he came to me with a good deal and a plan to fix the house. Yep, that's a good opportunity to get 100 financing with somebody or a partner. But if you're new, don't focus on getting the deal and the money. Get the experience that will attract better things.

A (21:18)

I couldn't agree more. I think there's a lot here. First and foremost, it is social media. Like, a lot of people sell unrealistic dreams. I think that is just like, at part of the core of this is there are a lot of folks out there who are saying, you can do this low money down, no experience. All you got to do is go out there and call a million lenders or call a million banks. Like, I'm sorry, it's just. It doesn't work that way. Actually, James, at one of the walkthroughs you and I did together here in James, there's a young guy who came up to me because I do some private lending. Seemed like a really smart, interesting, hardworking guy. And he was like, I don't have a lot of experience. Like, what would I have to do to get you to lend to me on a flip? I was like, there's literally nothing you could do. I wouldn't do it. Like, there. It's true. Like, you have no money and no experience. Like, I'm not going to do it. So I was like, what you have to do is like, go find a way to be a partner on a deal. Go get 5% of a deal. Go get 10% of a deal. Go work for James or someone else who has experience as a pm, like, or save up money. But, like, if you're coming to me and saying I have no skill and no money, like what? I. I could lend to anyone. I could lend to an experienced flipper. I could lend to someone who has money, who just needs help. With cash flow management, like, why would I choose you over everyone else? The answer is I'm not going to. And so like, I just think that expectation needs to be set. You can start with no money and no experience, but you have to take off a bite sized chunk. You can't have it all when you have nothing to contribute. And I'm sorry that I know a lot of people say out there it's just hustle and effort. That is true. But that hustle and effort needs to be extended for a realistic timeline. It needs to be over a year or two years or three years before you're going to get someone to actually commit to you. If you think that you're going to walk in with nothing but your own attitude and get someone to part with hundreds of thousands of dollars, I'm sorry, but you're insane. That's just not going to happen.

B (23:21)

Yeah. And I mean my own little rant right now.

A (23:24)

Yeah, please.

B (23:25)

One thing is their social media and other platforms and conferences, they're really good. Right. You can learn a lot. But also they can be a little bit bad. You know, I have seen a lot of newer investors get access to capital because they start raising it right, because they're promoting their deals. And I think that's great. Capital is the engine for growth. But don't abuse it either. Holy smokes. Like, the one thing I've learned in my life is don't abuse debt. Because no matter what, debt will roll you if you don't use it correctly. And you don't need to be greedy.

A (23:54)

Yep.

B (23:54)

You know, for those who are new though, because that's a frustrating thing to hear. There always is a way, you know, go find someone in the market. Like Dave said, go work for them. You know, you can make money that way. I do believe finding a deal creates a lot of value and you don't need a lot of experience to do that. Sometimes, sometimes when you're new, you just stumble into a home run deal. And you know, like what I do with a lot of wholesalers too that bring me deals and they want to get involved in flipping, they don't have a lot of money. Forfeit your assignment fee. Like if a wholesaler brings me a deal and let's say they're going to make 20 grand on this house and I got to come up with a hundred to buy it, I will let the wholesaler defer their assignment fee and take that cash and invest into the deal with me. And so I do that to kind of help people grow. But you Know if you're new, find someone local in your market that you can work and offer services to and help and learn how you can start building a career. It doesn't really matter if you're talking that some guru online is in Florida and you're in Seattle. Yeah, they're going to give you concepts, but they're not going to give you resources. So go find the person in your market with resources that can really help develop you as you help them with their business.

A (25:01)

Yeah, it takes a little bit of humility. Like, imagine in any other industry, if you just like, walked up to an experienced CEO and was like, I want your job. Or, you know, it's like, I want to have the same job as you. You would get laughed out of the room. Right. Like, you have to sort of, you have to earn your way in. You got to, like, do pay your dues in this industry. Unless you come from money or have experience from another job. Like, you're a contractor and want to get into this. Like, you have to learn. And so I, I totally agree. I think there's, like, essential to being successful in real estate investing is having appropriate expectations. And I just disagree with this idea that you're like, oh, if you set your goal super high, then you're going to achieve it. I actually think it's kind of the opposite. I think you need to, like, have realistic goals that you can just make incremental progress towards. Because if you say, like, oh, I'm going to make 100 grand next year as a wholesaler and you have no experience, like, it's just not going to happen, you're going to get discouraged and then you're going to quit. Whereas instead if you said, like, my goal is just to get piece of one deal, that's all I want is to get a piece of one deal that's achievable. Go do that and then the next one, get a bigger piece of your next deal, that's achievable. And then maybe your goal is, by two years from now, I want to own my own property outright. That's achievable. Like, set achievable goals and you can build off that, you can build momentum. Whereas if you set these unrealistic expectations, you're just going to fail. And, like, that sucks. And I know people on social media like to promote these ideas and get people hyped up on it, but it's just, it's doing you a disservice. So, you know, that's my rant.

B (26:42)

I mean, the reality is you guys. This is not an overnight success. I knocked doors for 10 months and didn't make it a dollar. And the people's problem quit too early. Then I started finding the deals. Then I would sell deals to investors. I started building the relationship. That's how I got my 100 financing on my first flip. It was by not quitting, providing value, selling people deals and then asking for help after I built the relationship with them. That's how I got money on my first deal. We're talking about 18 months into my career, 15 months of my career. It's not tomorrow. And I had to provide value. I mean, people just, just expect too much now. Like, go earn it.

A (27:17)

Yes, exactly. Go earn it. It's a job, it's a business. Go run a business. Do your job. You can succeed. That's the awesome thing about real estate investing. It's like if you stick with it, it's not rocket science. You can succeed. You just need to put in the effort. We do have one more great question, James. This one is right up your alley. I'm excited to hear your answer to it, but we have to take one more quick break. We'll be right back. Real estate. It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. You 3am maintenance calls, tenant disputes, property taxes. Enter the Fundrise Flagship Real estate fund, a $1.1 billion real estate portfolio built for you. We're talking more than 4,000 single family homes in the thriving Sunbelt. 3.3 million square feet of in demand industrial facilities, all professionally managed by a very experienced team. With the Flagship Fund, you're tapping into real estate's most attractive qualities like long term appreciation, potential, hedge against inflation, diversification for the stock market, all those things. Check, check, check. All this comes without complex paperwork. Massive down payments are the soul sucking landlord duties we all know about. So visit fundrise.compockets to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the Fund's prospectus@fundrise.com flagship. This is a paid advertisement. All right, I want to talk to you guys for a second about investing strategy. Smart investors know that reinvesting profits is key to building wealth. And with a 1031 exchange, you can defer capital gains taxes while keeping your money working for you. Here's how it works. Sell your property, defer your taxes and reinvest into higher value properties or new markets for long term growth. It's the ultimate cheat code for investors with Equity 1031 exchange as your trusted qualified intermediary, you'll get expert guidance and a smooth transaction every single time. With over 50 years of combined experience, Equity 1031 Exchange could help you discover how a 1031 exchange can elevate your real estate strategy. Start building your path to tax deferred growth today at getequity1031.com/bp that's get equity1031.com.

C (29:31)

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A (30:18)

You need to buy something for your business. But first you're stuck dealing with procurement bottlenecks, then going back and forth with approvals and boom, surprise costs that mess up your whole budget. There's gotta be a better way. And there is. It's called Bill procurement. Bill's already helping almost half a million businesses streamline their finances. Now they've rolled out Bill Procurement, which works with their accounts payable to handle your entire buying process from start to finish. And here's what's really cool. Everything happens in one spot. You submit a purchase request, you get approval, make the purchase, pay the invoice. All in Bill Procurement. No more guessing if you're over budget because you'll know if your spending's approved before you buy anything. Their AI even helps you catch mistakes too. The bottom line? Ditch that messy procurement system. With Bill procurement, you can purchase, pay and get back to growing your business. Right now you can score 200 bucks just for checking out a demo. Head to bill.com biggerpocket that's B I L L.com biggerpockets welcome back to the Bigger Pockets podcast here with James Dard answering your questions questions from the Bigger Pockets community. One more question for you, James. It comes from Liam in Denver who says, hey everyone, I wanted to get some insight on what you look at when running the numbers on a flip flip opportunity. James, this is your wheelhouse, but Liam said, past your standard ARV rehab cost, desired profit and max purchase price, what questions do you like to answer? Do you look by neighborhood, speed of sale, average home costs and layouts? Is there anything out of the ordinary that you have found useful? And James, I'm going to let you untake this away because I am going to be writing down notes. I'm doing my first flip right now and I'm going to be just, just going to the school of James Dannard right now.

B (32:10)

You know what, this is actually probably my favorite question I could have got because, like, I only got this clarity, like four years ago, five years ago, when I was flipping homes, I always looked like, hey, if I buy it, you look at the Performa and we all get distracted by this shiny estimated net profit number. We were like, look how big that number is. And I think one of the biggest mistakes is people just look at profit. And one of the best pivots I ever made was about five years ago I switched to annualized return because it told me whether it was a good deal or not, right?

A (32:42)

So I love that.

B (32:43)

It is all about velocity, money in cash, especially in flipping. It's a high risk business. But so the concept behind that is if I go buy a home run deal, you know, I got to put $100,000 up and I'm going to make $100,000. That's 100% return home run. But it's going to take me a year to complete. That means I'm making 100% return in 12 months. Great return. No problems with that, but that's going to come with some hair too. A lot of hard work, usually a lot more management. I got to visit the site a lot. It's a heavier fixer. If I can go buy a cosmetic fixer and be in and out of a deal in 90 days and I got to put up a hundred grand and I'm going to make 25,000. I can do that four times in a year, which gets me to the exact same return as this big fixer, but probably substantially less work. And so that's why we always look at annualized return. You know, the annualized return is how much cash am I putting in how much cash am I getting back and then how quickly am I doing that? And then look at it on an annualized basis. And that's our metric for buying. We don't buy on profit. We want to buy at a 35% cash on cash return in six months.

A (33:49)

35%, okay.

B (33:50)

That is my goal.

A (33:51)

I love this because I actually, I think it sort of equalizes flipping to other investments as well. Because a lot of times you hear these huge numbers in flipping. You're like, oh, I made 60 grand. It's like, that's a lot of money. But did you invest 300 grand and was it a super high risk project? Because that's very different than investing 100 grand into a cosmetic flip. You know, like, it's. It's very different. So I like that idea of annualizing because it allows you to sort of compare apples to apples. But the part of it I still struggle with is the risk part. So, like, you're good at this, right? So you can look at a deal and sort of back to Liam's question. Like, you can look at arv, you can look at comps, you can look at your rental budget and feel pretty good about hitting that 35%. But like, it's different for someone like me to go out and say, I want to target a 30% annualized return, but I'm not as good as the inputs. Like, my assumptions about what it's going to cost, how long it's going to take, how quickly it's going to sell, what it's going to sell for, are not as good. And so, like, how do you sort of work on and improve your assumptions about the deal to make sure that the deal does have a very high chance of hitting that 35% cash on cash return?

B (35:07)

Well, you know, I think the first thing is you don't need to buy your first deal on your own. Like investing with an operator so you can watch the numbers go down, the construction, the delays, the issues, how they underwrite the property. That's the first thing is invest in someone that knows what they're doing. Because you get to cheat and watch the process. The next thing is you have to build the right team around you. One of the biggest mistakes flippers make is they go chase the deal first and they're going, I need to find the deal. But you don't even know what a deal is if you don't have the right team around you. I'm sorry. Like everything you're looking at from the wholesalers, you're going off Numbers that aren't yours and you're looking at it wrong. And so it's all about building that team, you know, like the bigger pockets. Agent finder. Right. You can find. You want to find the specialist, narrow your arv. That's the first risk you need to do. Yep. What is this thing worth? How long is this going to take to sell and what is the current market conditions to judge risk? Right. If I know what it's worth, I want at least three to five data points that are going to tell me that that's worth all within a local market. If I don't have those data points, I have to assume the worst. The next is what's the days on market and how long does it take to sell. That is going to tell you your annualized return. Like if I look at comps and it goes, it takes 30 days to sell here, then it takes 30 days to close. That's 60 days. Then I have to lean on my next partner, which is the contractor, and go, how long is this going to take to renovate this scope of work? And the longer you're in a deal, the more risk there is. And so you know you. But you can narrow those risks by having a good contractor that you can depend on, on pricing and how long. And then a broker, they can not only just explain the value, but they have to be explaining the full picture. This is going to take some time to sell, and if it's going to take longer, the market's slowing down, then you have to buy deeper and you have to get a better return. And so it's really about building that team around. But I, I really do believe there's nothing wrong with part. Like, I'm doing a couple deals with some operators right now because I don't know much about, like, I like the investment.

A (37:10)

Yeah.

B (37:10)

I've never done it myself or I have. I just kinked the system too much. And so I'm letting this operator do it so I get to watch his process all the way through, too. That is some of the best learning you can do is watch someone run into hiccups and then have to pivot off.

A (37:25)

Yeah. And I guess the thing I'm trying to do, at least as I'm exploring flipping and just trying to help Liam is like just trying to get reps. Like, I, you know, I am, I have closed on and I'm starting to work on my first flip. I'm probably not realistically going to buy another flip while I'm doing this first one. Just trying to Take it slow. But like I'm still looking at deals and starting to run numbers and just getting practice at that. Like just, just even considering, you know, scoping out, writing up scopes of work at looking into comps and just getting reps. Because I've done this for years on rental properties and I can run the numbers on a rental property in like 10 minutes. You know, like, it doesn't take a lot of time flipping for me. I'm still struggling to like feel confident in my numbers. But like, that just takes practice and experience. And I think like the more you can do it even if it's not on a real deal, the better that you're going to get at it so that when you do find a deal that you are going to execute on, you'll, you could do it with confidence because you've like done the, the process. You've like built the muscle of running these deals long enough that you will feel confident in it.

B (38:32)

Well, and one thing I think is great education for anybody. It's like even when you buy your first deal, it's like a lot of times people just look for that one contractor, they put them on it, go get three estimates. Even if you have the guy and he hits the number the first time, get three estimates because you get to look at these proposals, the pricing, how it's broken. And then sometimes I'll get two different types of estimates just to see, well, if I wanted to do this much work on it, how much will it cost? And the more you can educate yourself on the middle side, that's really where you can feel a lot more confident. Right. The reason I'm confident is I bought a lot of houses and I've made a ton. I probably made more mistakes flipping a house than anyone in the nation.

A (39:10)

You know what, I honestly believe that. But you've also probably successfully flipped more houses than anyone one of the nation.

B (39:15)

Yeah. Because just you have to fail to succeed. Right. And you're going to run into problems for sure. And, and so when you do that first deal, don't just prep it and go take numerous swings on that deal. So you educate yourself. You can really maximize your experience on that first one.

A (39:30)

All right, well, James, thank you so much. I knew this one would be right in your wheelhouse. Thanks for answering this one and for joining us for answering all of the bigger pockets community questions here today.

B (39:39)

I will come back anytime.

A (39:40)

Time.

B (39:41)

BPCON's coming up, guys. If anyone sees me in the halls, Dave will test. I'll just sit there and answer questions for hours.

A (39:47)

You should not be advertising that cuz he will.

B (39:49)

But you don't be greedy with your time. You guys go out to the conference if you have questions, ask those questions and talk to people that care. You're right and it's your opportunity to get some clarity and move on. I honestly I even though I'll talk for like eight hours, I'm so fired up by the time I'm done.

A (40:04)

Oh, it's the most I look forward. It's like my favorite weekend of the year. I love going. It's so much fun. And it's less than a month away, like three weeks away. I'm so stoked.

B (40:13)

Yeah, it's gonna be a good time.

A (40:14)

There are still tickets by the way, if you Want to go biggerpockets.com conference. You can also hit me up. I have a discount code if anyone is interested. You can find me on Instagram at the data deli and I'll pass that along. Or I'm sure James has one too if you want to connect with him. Thanks again man. And thank you all so much for listening to this episode of the Bigger Pockets Podcast. We'll see you next time. Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose and remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast. Hey everyone, my favorite event of the year is almost here, the Bigger Pockets Conference. And I'm here with some exciting news that we just added. Two new sessions that you do not want to miss. First, we have Doug Bryan, super bowl champion turned real estate strategist, who's going to share his playbook that he used after 2008 to scale to 17,000 single family units. And we have Andy Gill, full time investor and tech pro who's going to share the exact AI prompts he uses to save hours on contracts, deal analysis and operations. Said it before, but it's worth repeating. The next wave of opportunity in real estate is already forming. And I believe that the investors who get ahead won't be the luckiest. They're going to be the ones who are the most, most prepared. That's why I want to see you at bpcon with over 40 sessions packed with real tactics for today's market. You'll leave ready to act. But the real magic, it happens in the hallways. Connecting with other investors, swapping ideas and building relationships that last long after. Vegas. October 5th is right around the corner. So if you've been on the fence, now is the time to get your ticket. You can grab it@biggerpockets.com Vegas that's biggerpockets.com Vegas.