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Real Estate Rookie
He Made $65,000/Month on His First Rental Arbitrage “Contract” (Real Numbers!)
00:55:28
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- [00:00]
A
Today's episode is a first for Real Estate Rookie. We're diving into government contracts, what they are, how they work, and how rookie investors can actually use them to create predictable long term income without owning hundreds of units.
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B
Yeah. If you've ever felt nervous about maybe Airbnb rules changing or you don't like the idea of flipping or large multi family and you want something that's maybe a little bit more predictable, today's guest is going to show you a completely different way to think about rental demand for where the government becomes your tenant.
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A
This is the Real Estate Rookie podcast. I'm Ashley Kerr.
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B
And I'm Tony J. Robinson. And with that, let's give a big warm welcome to Noble Crawford. Noble, thanks for joining us today, brother.
- [00:46]
C
Hey, thanks for having me. I appreciate it.
- [00:48]
B
Appreciate it, Noble. First thing I want to ask before we get into, like the actual interview, do you ever feel like this pressure with the name Noble? You've got to like, live up to a certain standard because, like, if my name was like honesty, you know, or like my name was humor, like, I'd have to be funny everywhere that I went, like, with the name, like Noble, do you feel that pressure?
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C
It's funny. Not, not so much anymore. That's a family name, so I'm actually the third. My, my oldest son is the fourth. So we're getting, it's getting out of control. Now. That's funny.
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A
Now tell us who spill the beans, who actually lives up to the name and who doesn't in the family.
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C
Definitely would have been my dad. My dad was. Yeah. Upstanding. Yeah.
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A
Well, Noble, take us back to when short term rentals were working and what was going right and what started to feel unstable underneath the surface.
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C
So, yeah, so let me. So I'll give you the quick little bit of context to how I got into it. So that'll help kind of break. Break some things down. So I, I used to work in the hotel space, and then I got in the technology space and I worked in that space. And when I was in that space, I got into sales. I was doing commission sales for technology. I had to manage a couple of different verticals. So this will be important later. So the verticals that I was over was corporate, was higher education, was healthcare, was military and federal government. Okay. Those are the primary verticals that I worked as a commission sales rep. Okay. And so, so long story short, my wife, she gets sick, right? She gets sick and she's having these seizures and whatnot. So we had to take to the doctor and they Were like, oh, you have a massive tumor right? In your. In your brain. You have a brain tumor. We need to get it out, like asap, right? So we scheduled the surgery, got her in what should have taken six to eight hours. And the surgery took 14 hours, but they were able to get the tumor removed. She's. She's out. She's in the icu. The second day in the icu, she flatlines twice. Okay, long story short, turns out she was allergic to morphine and they had her on a morphine drip post surgery, and it was killing her organs from the inside out, right? And so, you know, fortunately they were able to resuscitate her both times. She's still here with us today. But on the heels of that, that surgery, she had to go through a long recovery period, right? Because the brain surgery is pretty major. And so it took like six weeks almost, you know, for her to learn how to do basic things all over again, including, like, walking straight. Right? And so during that time frame, I had a decision to make, you know, if I was going to stay home and care for my wife or I was going to be at the job grinding because I was on commission sales. So I like to stay home with my wife at that time. And so at the end of that timeframe, I got called into a company wide sales meeting. And the CEO of the company, he just rips me in front of the entire company for having dismal sales numbers for the previous four weeks. And even though everybody in the country in the company knew what, you know, what I was dealing with. And so I had made a decision in that moment, like, I'm not going to be beholden to someone else's time, you know, making money for someone else. I'm going to put my head down and grind and work myself up out of this W2, right? And so eventually I hit a couple of large contract deals and I was out of there. I cashed out, right? So on the hills of that exiting, I got. I started a marketing agency. I always wanted to run a marketing agency. That was the thing. I was one of the first, like, HubSpot related agencies in that space, right? And so, so I fell in love with this concept of mrr, monthly recurring revenue. So as I stacked clients in my marketing agency, my monthly revenue started stacking. And so I was like, oh, I can get used to this, right? But as misfortune would have it, I was working exponentially longer hours than I was in my W2. So it kind of like, you know, defeated the purpose and so my dad came across this YouTube video and he sent it to me and he said, you familiar with this? Short term rentals? I was like, short term rentals? Like, what is that? This is 2016. Late 2016. And so, so I, I checked out the video. The guy was putting it on. He was holding a mastermind out in California at the time of a group of people that were already in the space doing some big things. And so me and my wife flew out there and we, we, we said, hey, we can do this back home in Texas. And we came back and put our heads down and went to work. Right. What we were taught. Initially, the short term rental space was leased arbitrage. That's how we were taught when we went to that mastermind. So that's what we executed on. So we're cruising right along. We're starting to build our portfolio of inventory and stuff. We get up to like a dozen and plus. And we, we started having some, we, Some things about the Airbnb's platform specifically that we didn't enjoy. Right. And then, you know, so we started engaging in B2B type business way back in like, 2018. 2017. 2018. Okay. And so that was our first kind of like, foray into the short term rental space and how we got started.
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B
So.
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C
I don't know. That was a long answer. I don't even know if I answered your question.
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B
No, you did. And nobody. Well, first, let me say I'm incredibly happy to hear that things turned out well for your wife. And I can't imagine what, what a, what an experience that might have been for you, just going through that from a health perspective. But I always think it's so interesting how for a lot of folks in this podcast, myself included, like, there are these moments in life where you feel like, man, could things get any worse? And a lot of times that becomes that, that turning moment where it's like, I'm actually going to decide to make sure that things get better. And I just love that, I love that part about your story. But you jump in full force into arbitrage. You're building up your portfolio and you're, you're early. I mean, 2016, you know, Airbnb is still almost a baby at that point. So you're, you're really one of the earlier folks in the space, but you go the arbitrage route, you start building your portfolio. Why not just keep scaling that up? I mean, you had first movers advantage. There wasn't a lot of folks doing arbitrage at that point, like, you know, why not be one of the guys that's got like thousands of arbitrage units?
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C
Yeah, yeah, good question. So we ultimately, over time, we scaled up to like 44 doors. And then we had few of those that were owned assets, but the majority of them were leased inventory. And so, so it was going well. You know, I couldn't complain. You know, the revenue was good and all that, that sort of thing. But I just didn't enjoy, you know, some of the issues that came with having to deal with changes in the platform and things like that and just guest issues. You know, even though I started, you know, my, my career in the hotel space in hospitality back in the day, um, it's just not something I enjoy. Right. You know, in my own business. And so for that reason, we decided early on that we wanted to. Cause, remember, my background was already selling into these different verticals, and so my thought process was, why don't I see if I can get direct business for lodging and accommodations in these same verticals? And this was, this was like pre, direct booking this before anyone was talking about it. Right. And so, so we, we, we turned that switch on and it, it started to take off. Right. And then on the heels of that, that's when I had a light bulb moment about engaging with the federal government. And we'll talk about that.
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A
Yeah. So what was that thing that kind of put government contracts on your radar as a real estate strategy?
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C
Yeah, absolutely. So essentially. So a couple of things happened. So number one, like I said, the first thing was I was going about just my regular, you know, regular week of business. And I had this light bulb moment like, why am I not selling to the federal government? I already understand the process because in my W2, I had to sell into the federal government. So that's, so I, that's how I cut my teeth on government contracting was for my W2 job. Right. So I already knew the basic process of it. And so I said, well, why am I not doing that with this business? It's just a different service, really, different product and service. And so, so we started to kind of go down that path of going after our first contract opportunity. And so prior to that, we were already providing inventory in the healthcare space, and it wasn't with traveling nurses. Right. But we were providing inventory in the healthcare space. We were already providing inventory in the corporate space because I had already started engaging with corporate clientele and we had already started providing inventory in the higher education space, and it wasn't student housing. Right. So we had already turned on some of these things very early. Right. And, and then government contract stuff was, you know, just a kind of a natural progression.
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B
No, I'm curious. Just, you know, we're going to get into the how to, of how to actually put these government contracts in place. But just to set the table for our listeners, what is the biggest, in terms of dollar value, what is the biggest government contract that you've ever secured for your real estate business?
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C
So the most recent one, which is a large, large contract out in San Diego, it's a Navy contract, is 400 doors, me and a couple of business partners. That one's valued. 44 million.
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B
44 million, yeah. Oh, my goodness. I was not expecting 44 million this, this episode.
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A
We have to go into the numbers of this real quick. So 400 doors.
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C
Yeah, yeah, yeah.
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A
And so what, what does it, what's the bottom line end up being on this?
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C
So I'll break it down for you so I'll give you a little bit of context. So in the, in the government space, and here's the beautiful thing, and it's probably most the best way for me to describe it. I'll just give you the first case study. So we'll back up a little bit. I'll tell you about my first deal, and that'll set the table for this large one, Right.
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A
Making us wait. Okay.
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C
Okay.
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D
All right.
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C
So the very first one I did after I made the decision, I'm going to pursue this space, right? Because there's something there. So my first deal was I found an opportunity that was already in my backyard. So I'm here in the Dallas Fort Worth area. I found the opportunity with a company that was a defense contractor. And so they were holding at the time a DoD contract, a department of Defense contract, Right. And it was to provide, it was to provide training and recertification for helicopter pilots and mechanics. Okay? And so these pilots and mechanics would fly into the Dallas Fort Worth area and they would go through their training and recertification, right? And so, and they would just rotate them through. Rotate them through. And so the pilots, their, their Training recertification was 30 days. So they were flying in and stayed for 30 days. The mechanics, their training recertification was two weeks. Okay. And so once I found out about the opportunity, I approached the company that was holding the DoD contract, the big umbrella company, and I, I, I said, hey, we would like to provide our inventory of properties for your, your, you know, your trainees to stay at. Right? Because I knew one of the things I Found out, doing my research, was I, I knew that they were right. So at the time I knew I had a superior product. Right. That could compete in price. Now here's the beautiful thing with the government. The government pays for lodging under what is called a GSA rate, Government Services Administration lodging rate, that is a nightly rate. Okay. So they pay for lodging and accommodations by the night. Well, as it would turn out, we were sitting on nine doors, mix of one and two bedrooms that were arbitrage apartment units in the area. And we were leasing those by the month, obviously. Right. And so when the government pays you by the night according to this GSA rate, that nightly rate can differ from market to market. But in Dallas, Fort Worth is 167 at the time, 167 a night. Okay? So if you do the math, 167 a night times 30 nights is $5010 a month. Okay. Now mind you, we're putting the pilots in one bedroom because they're there longer. Okay? So on one bedroom for us was costing us 1485 in rent, couple hundred dollars in expenses, large profit margin. Okay. And so, so we said, well, the mechanics are only there for two weeks, so we're going to put them in a two bed, two bath with a shared living, shared kitchen, right. Common area. And so however, because we had a second bath and we were to split them up like that, we were able to charge that 167 a night, not once but twice. So the two bedroom units were generating $10,020 a month and the rent was only a couple thousand dollars plus expenses, high profit margins. That deal. Five year contract, nine doors, grossing 65k a month.
- [13:19]
A
what point did you say I need to do some tax planning?
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C
So, so, so, so that was the first one that we did. Right. And so after that we were like, oh, we love this. We're about to do it again, we're about to run it up. Right. And so we found another opportunity up in far north Dallas, Raytheon's up there. We found an opportunity with them. Similar situation, not as many doors, but a similar situation. And so after that it was like full on. It was like game on. Right. And so, so fast forward to last year is when we landed the big navy one. And, and that one. So we're still inside of the first year of that one. It's a five year deal.
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B
No, but I'm super excited to kind of get into the, the kind of nitty gritty part of putting this together. But what did that first deal prove to you? Again, you said five year contract. What did that first deal prove to you? That most investors misunderstand about government contracts?
- [14:16]
C
I think most investors think that it's just difficult to pursue them. Like, there's just too much red tape. You're talking about Uncle Sam, right? And, you know, so, so they immediately think, you know, I. IRS level red tape, you know, and it's just, it's just too, too difficult to pursue. Right. And it's too, it's too big of a, too big of a goal. Right. Maybe they think it's like doing business at the federal level is just, you know, way over the top and it's really not, it's really just a matter of understanding the federal procurement process. Right. And how to bring your product or service to the market. Right. And make it available to them as a registered vendor. And so that's, that's, it's, it's, it's not easy, but the process is simple, I'll say that.
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A
So really, that first deal really opened the door for you. Because once you understand how that contract worked, the next question becomes how many different types of government contracts are actually out there? And which ones should rookies even be paying attention to? We'll be right back with more from Noble.
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D
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- [17:28]
A
okay, so now that we understand why government contracts made sense for you, let's slow this down and walk through how they actually work, especially for someone who's never even heard of this strategy before, like me. So for someone.
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C
Good question. So, so there are multiple types of government contracts. Okay, now since we're on the real estate Rookie podcast, we're going to focus on just the real estate related ones, which the majority of those involve some type of lodging, accommodations, housing, something like that. Right. The way to think about it is what type of inventory is a specific federal agency looking for? Okay, now There are over 400 federal agencies. Okay. So there's a lot. Right. And they move people all around the country all the time. Right. So there's always a need for someone to lay their head somewhere. Right. And so, but what types of inventory are they looking for? Well, it could be single family, it could be multifamily, it could be hotel, it could be emergency shelters. Okay, so this is an idea. Right? And it could even be, in some instances, manufactured homes and tiny homes. Okay. Now the core areas that I focus on are single family, multifamily hotels. We sell all of that back to the federal government. Right. And so part of it is just understanding what specific type of housing or type of lodging is the agency looking for. And then what we do basically is we find after we found the opportunity and we understand what they're looking for, then we go out and source that inventory. Right? So then we go out and we find the property that matches that inventory. And there could be a number of different variables. Sometimes it could be a scenario whereby it needs to be within a certain radius of this address or of this Zip code. Right. It needs to have certain amenities. It needs to have free parking. It needs to have this, that or the other. Right. And 95% of the time, the inventory needs to be furnished. Okay. And so very similar to like an STR MTR play, right? The it needs to be furnished inventory. Right. And so, but once we determine kind of, you know, what type of inventory is required.
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B
No, but one, one clarifying question on that. I just want to make sure I'm tracking. So you're, you're securing the contracts before you actually get the property. So is your, is your model predominantly then still arbitrage to where you have some flexibility to lock these units up after you've gotten the contract?
- [19:59]
C
Good question. Good question. So in some instances, yes, some instances will, we'll win the contract and we'll leverage the contract to support, to support getting the inventory. Right? Because it's a, it's a totally different conversation when you're coming to the table with a federal contract, right. And you're not asking a multifamily community, you know, can I do a short term rental in your, at your property? Right. It's a totally different conversation. The occupant is totally different. These are vetted personnel of federal agencies or contractors or service members. Some of them have security clearances. So they are the ideal occupant that most of these properties would love to have on site. Right. And so sometimes, yes, we'll put the, we'll get the contract and we'll leverage the contract to then go get the doors. Right. More often. More often we are actually having a preliminary conversation with the property about the opportunity we're working on and we're trying to negotiate what is a win win solution to partner with them on this opportunity.
- [21:04]
B
Got it? No, but let me, let me ask one follow up question on that piece because you mentioned like the government contract in hand and it almost reminds me of section 8 where there are a lot of investors in the section 8 space who tout that section 8 is guaranteed and for the most part it is. Right, because the government is paying all or a portion of those rents. But then there are those situations like the government shutdown. So when those things happen, are your contracts impacted? Like if the government shuts down for, you know, 60, 90 days, are you not getting payments or are they still paying for their like lodging requirements?
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C
Good question. So the short answer is. I'm going to give you two answers. The short answer is your payment, their payment obligation is, is guaranteed. It's a legal, legally binding contract. Okay, so once you go into contract with the agency to provide lodging, it's legally binding. Right. So this most recent government shutdown, because we've gone through government shutdowns before now, this most recent, recent one was the longest, right? They've never gone that long before they were the longest. And that was the first time ever that we got paid late. Okay. However, there's. They also are required to pay interest on late payments. Right. So our. What we would normally got paid on X date. We got paid like 48 hours later. Right. And so. But they. They paid with interest. Right. And that's the. That was the first time it ever happened. And quite frankly, I think it was more of an anomaly because at the time, Trump had made a decision to pause payments. Well, that was actually illegal. And, you know, the big. The big contractors in, you know, went in an uproar and he backed down. And so. But, yeah, it's a legally binding contract, and thus it's a guaranteed payment from the federal government.
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B
My mind is, like, blown right now on this strategy, and I can't believe that we've waited almost 700 episodes to get you onto the podcast. So I guess the next question about the contracts is how long do they typically last? Like you mentioned, five years. That's a long time to have some quote, unquote, guaranteed income. Is that normal or is it typically a shorter time frame?
- [23:14]
C
So it can be anywhere from. They run the gamut, to be honest with you. Like, I've seen some as short as, like, two nights. Right. But maybe they need to put 500 people in a hotel room for two nights and we'll broker that deal. Right. We'll put those rooms under contract and then mark them up and sell it back to the agency, basically. Right.
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A
So that's even you going to the hotel.
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C
Oh, yeah.
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A
Oh, so like getting a room block.
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C
Yeah, we'll do hotel brokering. Yeah, that's the strategy that we use. And so. So it could be as few as just a couple of nights, and as long as it's five years. Right. And everything in between. Right. So. So they vary.
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A
So now let's talk about, like, the operational piece, the hospitality piece. You know, you think of Airbnb arbitrage, you're renting the unit from somebody, then you're doing these contracts. Who's the actual property manager? If they're the toilet starts leaking, who is the person are they contacting? The apartment agency or apartment complex and you're out of it. Who is taking care of them? And what role do you actually have once the people are in the apartments.
- [24:20]
C
Yeah, good question. So essentially we are the point of contact for the agency. So there's actually two contracts exist. The contract between your company and the agency and the other contract between your company and the property, the property owner. Okay. And so, so we're the main point of contact for the agency. If an issue comes up with the occupant, our team is alerted first. Right now on the front end, we've already come to an agreement of how maintenance and things like that and emergencies will be handled with the communities. Right. Or with a single family property owner, whatever the case is. Right. And so if anything happens then, well, that whole process kind of kicks, kicks into place.
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A
Do you have like an example or a story of like, you know, there was a problem where you actually had to step in and take up some of your time? Like what's the worst case scenario of something that could happen?
- [25:10]
C
Okay, so we're at the end of the day, we're all in kind of a real estate quote unquote space, right? So yes, I'll give you one. The worst one probably happened to one of my students. So one of my students, he had, he had, is a contract out in Alabama. It's for the Alcohol, tobacco and firearms ATF. Okay. It's a five year deal. It's 150 doors, something like that. Okay. So it's a combination of multifamily and hotel space. Now the multifamily that he got under contract was new development. Okay. So it's super clutch new development, brand new facility, class A, beautiful everything, right? So he's in into the second year of the contract and just a random event happens. Now all of the occupants are there gone during their job, during the day, right. So they're not in the units during the day 9 to 5 type deal. During the day, one of the units gets shot up by a drive by. Okay, now here's the thing. This is in a nice area of town, okay? It's in a nice area of town. It's brand new class A development and it's this freak thing. So this whomever shot up the unit drove by first, first floor type of scenario. Luckily nobody was there, but multiple rounds going through the, the, you know, the windows and everything. So after that happens, of course he's freaking out because he's getting all of these messages and stuff from the agency, his agency contacts. Long story short, it was a very freak thing. Like even the, the police got involved. Obviously they said nothing has ever happened like that. In this side of town and certainly with these level of properties. And, you know, and the agency didn't like, hold him responsible or anything. Like, we moved him, they had a move to another unit, the higher floor. It was, it was good. It worked out. So anything can happen, right? Anything's possible. We're dealing with real estate at the end of the day, and you just, you just had to kind of have to go with the flow and adjust accordingly. Right? And so that's what happened now, before
- [27:05]
B
we talk about pitching Noble and kind of putting yourself in position to start securing some of these contracts. And again, I'm sure everyone's like, mouth is probably watering at a $44 million real estate contract. I couldn't even, didn't even think that that was, like, possible in this space. Before we talk about that, though, what. What's the minimum foundation that a rookie investor needs to even be taken seriously by a government agency?
- [27:30]
C
The very first thing that you have to do, right, is you need to register your entity to be a vendor with the federal government. Okay? So you have to register your entity. You can do that by going through a website, samsam.gov, like Uncle Sam, sam.gov and you have to go through the registration process. Okay. So for someone that hasn't gone through that process before, it can be a little cumbersome, right? And so, but that is a necessary first step, right? You just have to do it. Once you're registered with the federal government, you receive two different identifier numbers. One of them is called a UEI Unique Entity Identifier. It's a 13 character alphanumeric number. Right. The other one is called a CAGE code. Cage. The CAGE code is an identifier for your entity that is issued by the Department of Defense. Right. Every. Every company gets one. And so once you have your UEI and your CAGE code assigned, you're officially in the system, in their database as a federal vendor, and it's off to the races. Then at that point, you can start the process of going after some of these opportunities.
- [28:38]
B
And how long does that process take? Noble, like, ballpark, is that like a two year process or is it like a two week process?
- [28:44]
C
It's definitely not that long. It, it can vary, though, depending on, you know, the person's aptitude going through the process. So I've seen it, quite honestly, I've seen it where it's taken some people, you know, a couple of months to get through it because they just didn't know how to navigate it. And the questions are a little Bit confusing. It's something, it's like filling out IRS paperwork. Right. It's just not fun and confusing. When I work with my students and mentees, my goal is to get them in and out in two weeks. Right. And that's historically what I've been able to do. And so it just depends on, you know, that person's aptitude for getting through the questions. Because a lot of questions and documentation you have to deal with, but it
- [29:27]
B
can be quick, which is, which is super cool. I have family members who run homes for disabled adults and you have to go through like a government, you know, vetting process as well. But that's like a two year time frame for like you have to get all these certifications, do all these different things. So I was just curious if it was similar here. One last question though, Noble, just going back to the contracts really quickly. I know we mentioned like the, the, the length can, can vary, but do you see renewals happen often? Like that first one that you signed that was, you know, five years. Do they renew for another five or is it kind of like a one and done thing? In most scenarios, yes.
- [30:02]
C
So a lot of the contracts, to be honest with you, are old contracts that just get re repeated every five years. And so that is pretty common because the agencies want to give other companies the opportunity to win the business. Right. And so a lot of times when opportunities come out, they're not first time opportunities. On occasion there are. But a lot of times they could be decades old opportunities that just get resolicited every five years. Right. And give you an opportunity to compete for that business with that agency.
- [30:35]
B
Once you understand the contracts themselves, a real advantage shows up in how you approach them. Because after the break, Noble is going to break down how to actually find these opportunities and how to pitch the government. So like you said, they choose you. So we'll be right back afterward. From today's show sponsors.
- [30:50]
D
People love to call real estate passive income, which is interesting because most of the investors I know are very busy busy finding deals, busy managing teams, busy worrying they picked the wrong market. Rent to Retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build the property management and the details so you don't have to. In some cases, Investors even receive 50 to 75% of their down payment back at closing. And there are interest rates as low as 3.75%. They've been trusted partners with biggerpockets for over a decade. And if you want to learn more, visit biggerpockets.com retirement if you want a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short term rentals, covering property damage, liability, lost rental income and even unexpected issues like bed bugs. Steadily works exclusively with real estate investors so they understand the details that make short term rentals unique, and they build coverage to match it. A quick review of your rates and coverage every year can help you protect your property and your cash flow. Get a quote in minutes@biggerpockets.com landlordinsurance steadily rental property Insurance for the modern investor Wouldn't it be great if your houseplants
- [32:15]
C
paid rent while you were out of town? I mean, they've got the whole place to themselves. Lots of sunlight, zero responsibilities. But no, they just sit there waiting for someone to spray them with some cool mist like a bunch of leafy loafers. But guess what? Your home actually could be earning you money while you're not there.
- [32:29]
D
Airbnb has a great feature called the
- [32:31]
C
Co Host Network, which makes hosting your home so easy.
- [32:34]
D
If you live far from your property
- [32:35]
C
or are away for extended periods, you can hire a local co host to take care of the hosting for you. These co hosts are vetted locals who already have experience hosting on Airbnb. A co host can handle all the details, like messaging guests, creating your host space, and managing reservations so everything runs smoothly. It's a practical way to earn a little extra money, maybe even some cash toward your next trip. Plus, you get to share your place with someone traveling to your area. While you're off making memories somewhere else,
- [33:00]
D
your home might be worth more than you think.
- [33:02]
C
Find out how much@airbnb.com host all right,
- [33:06]
D
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- [34:15]
B
All right, so we've covered what government contracts are, how they work. Now let's talk about the part that everyone's really excited about. Where do you find these opportunities and how do you actually get the government to say yes? So noble, a lot of rookies probably assume, and you kind of hit on this earlier, that you need some, you know, super secret access to be able to do this. But obviously that's not really the case. So where can I go to find these government contracts once I've been approved? Is there like a Zillow for government contracts or where am I going to search for these?
- [34:43]
C
So essentially the same place that you go to register sam.gov that's, that's the best starting, starting spot, right? Because those same opportunities, once you're registered, you can log in and you can see a list of a lot of those opportunities right there in that portal. I would say that sam.gov is probably, would be considered like the parking lot, if you will, of government contracts. They park a lot of, of opportunities there. Now there's some other portals as well, but that is the primary portal. Sam, that good and, and noble.
- [35:10]
B
Do you ever find yourself like, you know, we both know Jesse Vasquez and when we interviewed him on the podcast, he was almost doing like guerilla type marketing for his midterm rentals where like if he saw like a, like a, a business truck at the Extended Stay America, he would like search for their phone number and call them up directly to try and get them to come, say, his mentor rental. Are there any kind of guerrilla strategies like that or do you. Or is it really just like, hey, once you get approved, you can really get all the business opportunities you need through that1sam.gov website.
- [35:39]
C
So there's not really guerrilla strategies per se. That being said though, there are a couple of marketing assets or tools that we use, if you will, in this space. So one of them is called a capability statement. Okay. A capability statement is simply like a one page business resume.
- [36:00]
B
Right?
- [36:00]
C
So we use that document all the time. We use it, we send it in emails to different contracting teams. We, you'll put it on your website, you can put in your LinkedIn profile, whatever the case is. So the capability statement is probably the number one marketing tool that we use. And again, it's like a one page business resume. The next thing that I would say is probably the best way to kind of get out there and get in front of people. Because the part of the problem is a lot of these agencies, they don't know you exist, you're in the database, but that doesn't mean they're going specifically and looking for you. Right. And so getting in front of these agencies is, is a huge advantageous thing to do. And so you can request what is called a capabilities briefing. Okay. And that's simply kind of like a get to know you meeting over, over zoom typically or a conference call or something like that, where they're actually looking at your capability statement and you're going over it with them, kind of explaining to them like, what is your background in this space? And your background does not need to be on the federal side. It can be on the private sector side. Right. It can be that you've ran short term rentals or midterm rentals or what have you, but it's effectively a get to know you meeting. So between capability statement as a marketing tool and also having capabilities briefings, you know, that's, that's, that's as good as it gets in terms of like any type of guerrilla marketing effort.
- [37:19]
A
So is that kind of like your pitch almost before the numbers even happen? Is that meeting or is there something else that happens before you're actually working through the numbers on the deal?
- [37:30]
C
So there's a couple of things that happen which I'll break down for you. So there's really kind of like two sides of the coin if you kind of look at it. Right? So on the one side of the coin, you have active bid opportunities that are posted on sam.gov okay. The other side of the coin is there are opportunities that are not that, that you don't have to compete for. You're not like if you, it's who you know and it's, you know, it's driven by the need that the agency has. And so it's, it can be advantageous to build a rapport. Get to know some of these contracting teams, the decision makers, what their needs are, what they're looking for, what their forecast is for inventory and lodging. Inventory. So one side is active bidding, the other side is networking, quite frankly. Right. And so, so, so those are the two sides now as far as the active bidding side, I'll give you, I'll break down like the anatomy of like providing a proposal to an agency that's put out a solicitation. I'll break it down, okay? So the first step is to find the opportunity. Again, you can do that on SAM.gov you know, that's one location where you can look the next. The next step is once you find the opportunity, there's going to be a due date, which that due date represents. When does, when do you need to submit your proposed solution for this opportunity to the agency? There's a cutoff date. There's a date and a time. You can never be late, not even like 30 seconds, right? Because that could automatically disqualify you. And so you need to pay attention to the due date. Once you find the opportunity and you notice what the due date is, then you want to read all of the information that the agency has provided about what they need. That is called a scope of work or a performance work statement. It can be a five page document, it can be an 85 page document, right? But at the end of the day, it states everything in great detail about specifically what the agency is looking for, the type of housing, the quantity, the dates. Right. The move in or check in the length of the contract term. Like all of the things, all the amenities that they're looking for. Like everything is in that performance work statement or scope of work. So you need to read that document. Okay. Then after you determine, okay, this is something I want to go after, I want to pursue, you can do some quick math to run the numbers to see how much potential profit is on the deal. Right? So you would start by finding the GSA rate for that region or market or zip code, right? And you can Google that. You can put GSA lodging per diem into Google and then put in the city and state or the zip code, it'll bring up a chart and it'll tell you what the government pays per night in that market. Okay? And so once you've determined that, let's just say the. Let's just say the opportunity is for a one year deal, okay? So 365 days, you can multiply it times that GSA rate. That gives you your gross revenue ceiling, okay. Of what you could potentially from a gross revenue perspective make. Now the next question is you want to know how much potential profits in the deal, okay. And so if you, if you know, let's just say it's a hotel deal, okay. You could quickly go just to get A quick idea, right? You could quickly go to like hotels.com, okay, drop in the city, put in the number of doors that you're looking for or whatever, put in some rough dates and get an idea, kind of a foundational baseline of what hotel inventory is going for in that market. Okay? Now keep in mind, what you find on a Hotels.com is not what you're going to end up paying. Okay? Reason being is because when the government has a need, they have a need in bulk, they need a lot of something. That's typically the case for lodging as well. So when you contract a hotel deal, you're not going to pay market rate, you're not going to pay rack rate, any of that. You're going to be paying a group discount rate where you're blocking a group block of rooms, right? And so you're going to get a discount for that. But it at least gives you a foundational baseline of what you could expect in the market, right? And so you can quickly assess and say, okay, this is my gross revenue. This is what I anticipate, you know, from a market perspective, what is the spread there? Because that's where you make your money. Okay? And so you can do run, you can run some quick math to make a, a quick decision of am I going to pursue this opportunity or not. If you say, okay, I'm going to pursue this, then you need to start doing your market research. That's finding the actual property that's going to fit all, all of the criteria that they spelled out in the scope of work, right? So they want free parking included. Maybe they want continental breakfast, Maybe they different things, right? So you're going to find properties that fit that criteria. Once you find the property, then you're going to start your outbound communication where you reach out to the property to get rate quotes from them for all of the things that were detailed, right? Because you need to then start to determine what are my expenses going to look like so I can figure out what my true spread is. Okay? So you're going to get some, you're going to get some rate quotes back from the hotel, okay. After they've determined it's available, that's first and foremost you want to find out is it available, if it is noble.
- [42:28]
A
Real quick on that, that point of availability, how far in advance are you getting these contracts? Like is it, you know, you have a year to kind of book out these, is it weeks or what is that kind of time frame that you're getting before they actually need the check in?
- [42:44]
C
So it could vary. It could vary. Sometimes the true window is when does my proposed solution, my proposal need to be submitted? I see it's on Sam. I see it's readily. They're readily ready to award it. When do I need to have that turned in? That window could be, it could be a week, it could be three weeks. Right. For you to go out and put a solution together, to present, to propose. Right. Now, once you've secured the contract, it. Maybe you, maybe you secure it in April and it doesn't start until mid May, you know, well, maybe you secure it April 1st and it starts 10 days later. Right. There's a lot of variables that determine is based on the agency's need. Does that make sense?
- [43:29]
A
But it could be like two months from when you find the bid online and from when they actually need it to start. Like it could be that quick. Okay. Because I feel like that makes it even more difficult to like, find, find availability when it's that short of a window.
- [43:46]
C
One might think. Right. But there's, there's certain strategies that you could use to, you know, to get that information quickly and to lock up that inventory. Okay. But at the end of the day, you still want to get your numbers back from the property, the hotel in this case. Right. Because you've got to put your mark up on it and determine what you're going to propose to the agency. Okay. And so then once you, once you've done that, usually you'll want to ask for what is called a letter of intent or a letter of authorization from your partner hotel. In this case, that is not a legally binding document. Right. It's just a letter on their letterhead from their decision maker simply saying that should XYZ company end up closing this opportunity with this agency for X number of doors over this timeframe will support it based on availability. Right. And so it doesn't lock them into anything hard. So, so then there's that. Then after that, it's very much, it can be in some situations, very much a hurry up and wait game. Hurry up and get, get us your information, your proposed solution in. And then we. You gotta wait on the government to respond. Right. And so sometimes you might wait, you know, a few weeks, sometimes you might wait a couple of months. I think the longest my, one of my students has had to wait was like five months. But he landed a $7.5 million contract. Right. And so, so, but that's the process kind of from beginning to end, if you will. Right.
- [45:07]
B
I'm just curious. Right. Because like, it seems like it's a little bit of a black box. Once you submit everything, what, what can someone do to make their proposal stand out amongst, you know, you can't even see what everyone else is submitting, right? It's like, like how do you make sure that you give yourself the best shot and actually getting chosen?
- [45:29]
C
The key is, at the end of the day, you want to be in a position where you're providing the best value for the agency. Now, value can mean different things to the agency, but they'll typically spell that out. So there's three common things that they look for. Okay, Obviously price is one, right? Sometimes that's the most important factor, sometimes it's not. And they'll rank the factor of what's order of importance. So price is one determination factor. Another one is what they call technical capability. Technical capability just simply means are you able to check all the boxes of all the things that we're asking for in the scope of work? If you can, you get graded 100% on the technical part, right. Because you met all of the requirements. The third part is past performance. That's where people get hung up the most because the first inclination is, oh my gosh, I don't have any government contract past performance. How can I win? You don't need government contract past performance. Right. For those that play in the space that we do, that's all the past performance you need. You need, right? So all of my students that have won contracts, it was all the first for them, right? But they've had past performance by doing short term, even long term and midterm stuff. Right. Or maybe they came from a flipping or wholesaling space, but they have some level past performance under the larger kind of real estate umbrella, we can leverage that. Okay, and so, so did I answer your question?
- [46:50]
B
No, absolutely. And that's what I'm trying to understand is just like how, how as we kind of go through this process of submitting ourselves, can we, can we potentially stand out? But I think the next question that comes to mind for me, Noble, is that let's say that we do get chosen. And you know, you talked about reaching out to the hotels, you know, if it's a big order or something to that effect. But how can rookies maybe negotiate on the property owner side or the landlord side to get the best possible rates to make sure that that margin is actually there.
- [47:18]
C
Got it, got it. So let me back up a little bit and I'll say I'll make one point and then I answer that. Question. So what you asked previously, most people think, hey, this is going to be a highly competitive deal. I'm going to be going up against multiple other vendors. Right? Here's what happens in reality. And I was just walking a student through this the other day. You may be in a scenario that you feel is highly competitive because you call a hotel and your, your sales contact at the hotel is like, you know, you're the fourth call I've had today or you know, whatever. Right. And so that, that, that plants this seed in your head of oh my gosh, like there's a lot of people calling, right? This is going to be a competitive opportunity. More often than people realize, there are a number of the people that are initially looking at an opportunity fall off, they don't go to the finish line and they end up no bidding. Okay. And so I've seen set multi seven figure opportunities where there was one vendor that bid and won by default or there was two or three and it was one that somebody won 20 million and it was only three bidders. Right. And so it's not as competitive going to the finish line as people think it is. Right. Part of that is just up here. Right. And so, so hopefully that makes sense now and then. What was the previous question you asked me?
- [48:36]
B
Just like on, on the other side of like going toward the landlord, how do you leverage these, these government contracts to negotiate better rates?
- [48:43]
C
There's. So it depends on the type of asset. Okay. So let's just say it's a single family asset. Okay. Obviously you're dealing with a property owner at that point or maybe even property management company. So if it's a single family asset, and let's just say it's a contract with the Veterans Administration because they're very common. Right? So the Veterans Administration, they'll look for single family assets where they can place a veteran in a room in a house, right. Or sometimes two in a room in a house. And maybe that veteran is house is located near a VA medical center and they need to stay nearby because they just had a post, you know, surgeon, they go back to post post op appointments. So they need to stay nearby. So the VA will pay for veterans to stay in your unit, sometimes by the bed, but definitely by the room on a monthly basis. Okay. Now here's the thing. If you're speaking with a single family property owner, one of the advantages for them making their inventory available for you for this specific use case is, is one, that individual is already vetted by the federal government. Right. Secondly, the payments are guaranteed by the federal government. Right. Third, it's a long term deal. These are normally five year deals when you find these, these VA type opportunities. Right. So you can actually, you know, lock up a property for five years with a homeowner. Right. With guaranteed payments backed by the federal agency. Those are all positives for the homeowner. Right. And you're simply, you're, you, you become the manager, you know, for the occupants that the federal government provides. Right. And so, so because of that, you're able to negotiate usually a discounted rate because you're taking it for such a long term. Right. And, and you're just helping them pay down the, the, the mortgage on the house. If it's, if it is a, a multifamily scenario, then there's a lot of leverage that you can pull. It's very much similar to arbitrage play. Right. Because you're taking so much inventory, you're helping them increase their occupancy rate. Right. Sometimes we have helped property management companies go from 93% to full on 100% occupancy just off of one contract. Right. Our San Diego contract, we're spread out across 27 different communities. Okay. To get to that 400 doors, because inventory is so tight. Right. But in some of those areas, we're able to get those private management companies to 100% occupancy. Right. That's excellent for them. Right. That, that's, that's a, that's a win all day long. Because the threshold, the standard is you need to be at 96%. That's kind of the standard for where they, property owners want to see property management occupancy rate. And so we're able to like push that up. Typically we're able to negotiate because we're getting so much inventory, so we're able to negotiate a very, you know, favorable rate for us. Okay. And then also again, because of the type of occupant that we're putting into the property, they're vetted at the highest level of the federal government. Right. So the background checks are and the clearance checks is at the highest level, much stronger than property management vets, I guess, and background screens, I guess. Right. So the type of occupant that we're putting in the property are the type of people that they very much want to have staying on site. Right. And so, so we leverage all of that stuff to, at the end of the day, come up with a win, win, win solution. A win for you as the vendor, a win for the property owner or property management company and a win for the agency. And when you can construct that deal, that's the recipe for a winning contract.
- [52:12]
A
Now Noble, what are some of the negotiation tactics you can kind of put into your contract or you know, negotiate with agency where maybe you don't have as many upfront costs? You know, if you're getting even 100 units, furnishing those units can be quite extensive of a cost. So what are some of the things you should negotiate to really minimize those upfront costs?
- [52:32]
C
I like that, I like this. I get that question a lot. So one of the things that I recommend, especially out of the gate, because these contracts can be a year, three years, five years, they're longer term. And if it's 50 doors, a hundred doors, that can get costly furnishing that. Right. We don't pay for the furniture. We typically will lease it. We will lease the furniture. We'll go through like a court, we'll go through like a afr, we'll go through like a regional furniture coming. We'll lease that inventory for a number of different reasons. One, we're padding that lease cost back into our proposal. Right. So we're taking that expense, we're marking it up a little bit and we're putting it right back into the proposal. Okay. So it's being offset by the revenue that we're generating. That's number one.
- [53:15]
A
So is this Noble, is that like a high end rent a center or something? Kind of like where you're leasing?
- [53:20]
C
It's, it's, it's a. Yes, it's corporate, it's corporate furniture leasing. And so like court CRT is probably one of the largest in the nation. AFR is very large, but they rent full on fully furnished apartments and you can do it by the month. I mean all the way down to like the silverware stuff. Right. And so, so, so, so, yeah, so it's a fully furnished, but we're not paying for it, we're leasing it. Right. And then because we're going to accord our AFR with volume, we're expecting a discount again because it's over a longer period of time and it's multiple doors, so we're not going to pay even market rate. But it also helps on the back end because when it comes a contract ends, it comes time for disposition, you know, not sitting on, you know, 100 units worth of furniture you don't know what to do with. Right.
- [54:08]
A
Having a garage sale at the apartment complex.
- [54:10]
C
Right, right. So, so that's how that's how it works. And that helps keep our. Our upfront expenses low. Right? Very manageable because now we're just dealing with things like utilities, turning those on this, that and the other, and we don't have huge upfront expenses. And to that point you made earlier, we do negotiate off of security deposits and first month's rent a lot of times where we're not paying first and sometimes not even second month's rent of upfront. Right. And so, so, so there are some different levers you can pull to make the, you know, make your upfront cost very minimal.
- [54:43]
A
So, noble, you left me in suspense here. So with that $44 million contract, I don't know if you want to give us yearly or monthly, but what are you going to end up netting on that contract each month or every year?
- [54:57]
C
I can tell you what we deposit in the bank, and then we end up paying out every month. So here's how it works, and it's a little tricky because when you get a contract like that, the agency will issue what are called task orders. Okay. And so a task order is where they say, okay, we've got our next wave of people coming in is going to be 120 of them, and they're going to be there for eight months. Okay. And that's a task order. Well, while that task order is going on, another task order could be issued on top of that that overlaps. Okay. We're sending in our next 200. They're going to be there for four and a half months, and that's a task order. And then there's another layer task order. So task orders are issued throughout the course of the five years. Right. But the value of what we sold to the agency and what we wanted on was 44 million. Now, our profit margins. Profit margins in this space can vary. Right. They can get. I've seen as small as, like, 20%, and I've seen as large as, like, 55, even 60%. Okay. And so we're probably hovering around for this particular deal, the 40 to 45% profit margin range. So it's nice, right? Yeah. And. And so, but it's. It's difficult for me to say monthly because of the task orders and the way they stack on top of each other, Right?
- [56:20]
A
Yeah. No, that makes total sense. And that's also interesting to learn. Yeah. But wow. Okay, so 40 to 50%.
- [56:26]
C
Yeah.
- [56:27]
B
I mean, over the life of this deal, I'm 44 million. You know, 40% is what, like just over $16 million or the life of that that deal, I mean, that's like an NBA player salary, you know, like, that's, that, that's like an NBA contract right there.
- [56:38]
C
So that's. It's not just me because I have business partners in on it.
- [56:43]
A
Are you calling in from your yacht right now?
- [56:46]
C
No, I'm at the house. That's funny.
- [56:51]
A
Well, no. Well, thank you so much for enlightening us on government contracts and really the upside potential. And I sure, you know, is as great as. As it sounds like there is a lot of work that goes on behind the scenes, the negotiation that I can't even imagine finding the properties that fit exactly what the government wants. So thank you so much for taking the time to share with us, you know, the first basic steps of how to actually start this real estate strategy. Noble, where can people reach out to you and find out more information?
- [57:23]
C
Absolutely. Well, first of all, my pleasure. Thanks so much for having me. I appreciate you having me on. If anybody wants to connect with me, the easiest place, quite frankly, is Instagram. I'm always on the gram. My handle is noble.crawford. the number three. So noble.crawford3. And I'm. I still answer my own DMs. You know, I'm not like a. Any type of influence or anything, but Instagram's a way to reach me until
- [57:47]
A
this $44 million contract
- [57:51]
C
will be able
- [57:51]
B
to find them anywhere.
- [57:55]
A
Well, thank you guys so much for listening to this episode of Real Estate Rookie. I'm Ashley, he's Tony, and we'll see you guys on the next one. At some point, your little real estate side hustle stops feeling little rent's coming in, maybe you've got a couple properties now and suddenly the money part gets real. Your tax bill's going up, you're Googling LLC versus S Corp at midnight, and you're just hoping you didn't miss something that'll cost you later. That's where Collective comes in. Collective is the first all in one financial solution. Built exclusively for solopreneurs. Saving you time and money, they help you structure your business for success, whether that's forming a single member LLC or adding an S Corp election. Collective's AI engine, backed by expert oversight, automatically categorizes every expense so you never miss a deduction. Beyond bookkeeping, they handle quarterly tax estimates and prepare both your business and personal tax returns so you never miss a deadline. You also get integrated invoicing plus seamless payroll for S Corp owners, which can unlock thousands in self employment tax savings. And with Kollective's community and support. You can finally take the solo out of Solopreneur. Right now, Kollective is giving you 50% off your first two months when you go to to collective.com rookie. That's 50% off your first two months at collective.com rookie hey rookies, if you're
- [59:06]
B
watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener
- [59:23]
A
as a rookie investor. Especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.
- [59:36]
B
So head over to biggerpockets.com guest if you want to be a part of our show. Again. That's biggerpockets.com guest and we'd love to have you on.