Real Estate Investing School Podcast

Episode 85: REAL DEAL: The Power Of Clarity In Real Estate Investing
Guest: Lance Brown
Date: August 31, 2023

Episode Overview

This episode of the Real Estate Investing School Podcast delivers a hands-on case study of a recent real estate acquisition, featuring first-time investor Lance Brown. The central theme is the immense value of clarity in establishing investment criteria (the “buy box”), tangible action steps, and the learning process of closing on your first deal—even when it’s far from perfect. The episode provides concrete insights into property sourcing, networking, financing, managing fear and hesitation, and building confidence through action.

Key Discussion Points and Insights

1. How Lance Found His First Deal (00:39–03:01)

• Outreach and Agent Selection:
  • Lance contacted 5–10 agents via BiggerPockets, using "Find Your Agent," and conducted informal interviews to find a good fit.
  • He emphasized the importance of being upfront and crystal clear with agents about his specific needs:
    • “You got to be crystal clear with what you're wanting to do.” (Lance, 01:39)
  • He filtered down to 2–3 agents, communicated his exact buy box, and told them directly:
    • “If you can find me a deal, I'll buy it. Basically, that simple.” (Lance, 01:06)

2. Defining and Communicating the ‘Buy Box’ (01:19–02:19)

• Lance’s buy box included:

  • Multifamily (duplex)
  • C or C+ neighborhood
  • Specific cash flow minimum
  • Value-add potential (e.g., room to build or under-market rent)
  • Min/max square footage and room count

• Host underscores to listeners the practicality of precise, filterable criteria when working with agents.

3. The Process & Emotional Hurdles: From Search to Offer (03:01–03:53)

• Timeline:
  • Approximately 5 months from start to closing on the right property.
• Obstacles:
  • Missed prior deals due to hesitation and fear, being “gun shy” as a first-time investor.
  • “There's probably five to 10 deals that, that I could have picked up prior to this, but I was just dragging my feet, honestly. So it probably took five months, I'd say from start to finish.” (Lance, 03:02)

4. Deal Structure, Pricing, and Financing (04:22–08:05)

• How the deal surfaced:
  • Pocket listing from the agent, coming straight from another investor before hitting the open market.
    • “We picked it up for 98,000, and based on the comps...I think we could get it for 110 normally. So we came in with about 12,000 equity.” (Lance, 04:33)
    • With renovations, potential value estimated at $130k+.
• Pocket Listing Explained:
  • Internal sharing of unlisted properties, often yielding investment opportunities before broader exposure.
• Financing:
  • Lance used a HELOC to purchase the property in cash, planning to refinance after the seasoning period to recoup his capital.
    • “I had room on my HELOC, enough money to buy it cash and then after the seasoning period, I plan on doing a cash out refinance.” (Lance, 08:06)
    • Objective: Be "no money in" by extracting his equity after appreciation.

5. The Business Plan and Cash Flow (07:21–09:05)

• The property is fully occupied, though tenants are “under rented”:
  • Market rent: $1,600
  • Current rent: $1,350
  • Plan: Gradually raise rents (stair-step pattern) as leases renew.
• The property cashflows even with current below-market rents.
• Once refinanced, after value-add, Lance expects to have all capital returned while retaining cash flow.

6. Unique Deal Features and Learning Opportunities (09:21–11:22)

• Age and Condition:
  • Built in the 1920s with possible weatherproofing challenges; inspection revealed no serious issues.
  • Sight-unseen purchase; relied on videos from his agent and inspection reports.
• Expansion Potential:
  • Unfinished basement (with Midwest moisture concerns—may weatherproof and finish for extra space).
  • Expandable attic—for possible future value-add.
  • Flexible plan: "Test it out and see how much money I want to put into it before then. But there's room to grow there." (Lance, 09:52)
• Host’s Commentary:
  • Emphasizes importance of buying properties that work “as is,” with additional options being a bonus for future creativity and growth.

7. The Value of Taking Action and Learning (11:22–13:12)

• Guided by his coach, Emily, Lance overcame indecision—even if the first deal wasn’t a “home run.”
  • “[Emily] was kind of the one that was like, what are you doing? Like, just pull the trigger. Make it happen. It’s a good deal. You'll get your money back.” (Lance, 11:36)
• The host stresses that learning through doing—even with “base hit” deals—compounds skills and confidence much faster than just chasing perfect deals.
  • “Put the money wherever you’re going to learn the most.” (Host, 12:17)

8. Building Momentum and Accountability (13:10–15:29)

• Clarity, accountability (from the school/community), and daily action were game changers compared to years spent only thinking about investing.
  • “I've been trying to get deals for the last six years…But unless you're doing the daily tasks…you're not making any progress.” (Lance, 13:51)
• Key advice:
  • Build your network in the market piece by piece.
  • Constantly run numbers on deals, make offers, and refine your buy box through activity, not theory.
• Host shares a guiding principle:
  • “Perfect adherence to an imperfect goal is more effective than imperfect adherence to a perfect goal.” (Host, 15:28)

9. Closing Advice (16:01–16:11)

• Lance’s parting wisdom:
  • “Just do something every day to get a little bit closer to each goal.” (Lance, 16:02)

Notable Quotes

• “You got to be crystal clear with what you're wanting to do.” – Lance (01:39)
• “If you can find me a deal, I'll buy it. Basically, that simple.” – Lance (01:06)
• “I don't want to see your junk. Like, let's filter it down. Like, I want to get crystal clear on this.” – Lance (03:01)
• “There's probably five to 10 deals that, that I could have picked up prior to this, but I was just dragging my feet, honestly.” – Lance (03:07)
• “We picked it up for 98,000…we came in with about 12,000 equity.” – Lance (04:33)
• “I had room on my HELOC…enough money to buy it cash and then after the seasoning period…plan on doing a cash out refinance.” – Lance (08:06)
• “You sign up for the school for a reason. You want to learn how to do it…put the money wherever you’re going to learn the most.” – Host (12:17)
• “Perfect adherence to an imperfect goal is more effective than imperfect adherence to a perfect goal.” – Host (15:28)
• “Just do something every day to get a little bit closer to each goal.” – Lance (16:02)

Timestamps for Key Segments

• 00:39: How Lance sourced his first deal using BiggerPockets and agent selection tips
• 01:19: Building a crystal-clear buy box
• 03:01: Hesitation and overcoming analysis paralysis as a first-time investor
• 04:22: How Lance found the right deal (pocket listing, numbers, and instant equity)
• 05:39: Explanation of pocket listings and their advantages
• 07:21: The business plan: tenant situation, cash flow, and incremental rent increases
• 08:05: Using a HELOC for cash purchase, then refinancing to recoup capital
• 09:21: Property quirks: buying sight-unseen, unfinished spaces, Midwest considerations
• 11:22: Coaching support, committing to "base hit" deals, and prioritizing learning
• 13:51: The reality of building momentum: daily actions and staying accountable
• 15:28: The value of clarity and consistent adherence to clear, actionable goals
• 16:02: Parting advice on daily actionable steps

Takeaways & Action Steps

1. Get Crystal Clear: Define your buy box with absolute specifics—agents (and yourself) need clarity.
2. Take Daily Action: Even small steps—networking, running numbers, reviewing deals—build skill and momentum.
3. Value Learning Over Perfection: Be willing to do “base hit” deals to accelerate learning and confidence.
4. Leverage Community & Accountability: Surround yourself with mentors/coaches who’ll encourage real action.
5. Be Flexible, But Buy Right: Ensure a deal works in its current state; consider expansion options only if they’re a bonus.
6. Explore Creative Financing: Tools like HELOCs combined with rental income can help you move quickly and recycle capital.

In summary:
This episode is essential for anyone hesitating to take the plunge in real estate investing. Lance’s journey demonstrates that clarity, persistent action, creative deal structuring, and surrounding yourself with the right support can help you move from wishful thinking to becoming an active investor—one purposeful step at a time.