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Real Estate Rookie
How to Find Great Real Estate Deals in 2026 (Before Anyone Else) (Rookie Reply)
00:25:23
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- [00:00]
A
What if the only thing keeping you from your first deal is not knowing what a good deal actually looks like?
- [00:06]
B
Or maybe you've got your first slip lined up, but you can't decide if you really need a general contractor or if you can manage it yourself.
- [00:13]
A
And finally, the million dollar question every rookie is asking is now the right time to buy? We're answering all three of those questions and helping you make smarter moves in any market. This is the Real Estate Rookie podcast.
- [00:31]
B
I'm Ashley Ker and Tony J. Robinson. And with that, let's get into today's first question. Now this question comes from Eric in the Bigger Pockets forums and his question is I'm new to real estate investing and just finished reading Brandon Turner's book on investing with no money down. I found myself particularly interested in multifamily properties. But I'm struggling to grasp what exactly defines a quote unquote good deal. When evaluating listing, should I primarily focus on properties that seem undervalued, or are there specific market indicators or property traits that I should be paying attention to? I feel like I'm missing the bigger picture of what makes a property a great investment. If anyone could share some pointers or insights on how to identify a good deal, I would appreciate it. This is a really good question, right? Like just how do we know if a deal is a good deal? And you know, he asked like a few different data points that he should be considering, right? You know, property trades or you know, the value of the property. And I think the first thing that I'll say is that a good deal to me could be a bad deal to you and vice versa. And what Ashley looks at as a good deal could be a bad deal to me. And part of that is because we all invest for different reasons. We all invest with different inherent skills and we all invest with different amounts of time, effort and energy that we're willing to put into real estate. So for someone who is a busy corporate executive that works 80 hours a week and makes half a million dollars a year, a turnkey property at 20% down at a 6% cash on cash return could potentially be a good deal for them because they don't have the time, energy or desire to do anything more than that. And that could be a great deal to the like the person who asked this question, 20 down on a turnkey short term rental that's cash flowing at 6% could be a terrible deal because you just talked about, hey, you're looking for no and low money down strategy so that that doesn't work. So I think the first thing to ask yourself is, what, what am I looking for when it comes to real estate investing? What are, what are the things that I need to understand before you even get into good deal versus bad deal? Ash, I guess I'm just curious, is there anything else just like, strategically or from like a theory perspective that we should be focusing on? Forget the details of the answer.
- [02:51]
A
I think maybe just like, what is like you said your why for getting started, but like, define like what actually gets you to that point. So like, if your goal is to build legacy and build wealth, well, do you want to put a time, a ton of time and effort into doing that or do you want to like, maximize passive income to be able to generate that wealth? So I think like, the time and money commitment are like two big pieces to the puzzle that like, you need to be really heavy on either one of them or kind of like have a mix and balance of the bolts so that like, one doesn't outweigh the other. Like six, seven. If you're watching this on YouTube.
- [03:38]
B
If you don't, if you don't have a kid that's maybe my, my son's 17, so 17 or younger, you probably don't get that reference. But six, seven has been. Been everywhere. But I couldn't help myself. I just saw you doing this.
- [03:48]
A
I was like, I'm proud of you.
- [03:51]
B
My son's going to be proud of me too, when I tell him the story. So I think let's, let's talk a little bit about what actually makes a good deal. So when we talk about real estate, we talk about a specific property as an investment. There's the cash flow that it produces, right? Like the actual cold, hard money that comes off of the deal on an annual basis. There's the cash on cash return, right? Which is a measure of how good of an investment it is. Because Maybe I'm getting $100 a month in cash flow, but if I invested nothing into that deal, technically I'm getting an infinite return If I get $1,000 per month in cash flow. But I've got a million dollars of cash sitting in the deal, more cash flow, but it's actually a really bad return on my investment. So we look at the actual cash flow, we look at the cash on cash return. The other piece that we can take into account is the appreciation. If I hold this property over the life of the loan 30 years, is it reasonable to believe that this property is going to appreciate a significant amount over that time frame? Some Markets appreciate faster, some markets appreciate slower. Nationally. You know, post Covid, I think we've seen a lot of appreciation across most of the United States. But some markets do it faster than others. So I think those are really the two big things that most investors today. There's also the tax benefits and you know, maybe that's an entirely different story. But I think based on how this person asked the question, they're probably not too concerned with tax sheltering at this point. So cash flow, cash on cash return and equity growth or appreciation I think are the big things to focus on. Am I missing anything there?
- [05:21]
A
No. And like I just thought of this and we don't ever really talk about this as one of the pieces of a good deal. But also like I would say like regulation security as in like there's been towns near me where people have short term rentals and all of a sudden the town say you know what we're, unless this is like your primary residence your can't do short term rentals anymore. And like all of a sudden people are like what am I going to do with this house? Like I can't rent it out, doesn't make enough money as a long term rental. So I think like it would be a good deal if you can actually do that strategy long term. So just another little aspect and there's I think a lot of those little nuances we could probably do a whole episode on. But you know, thinking a little outside the box too.
- [06:07]
B
Yeah, real estate nuances as our, as our next episode. So if you guys want to see that, let us know, let us know in the comments. And then I think that the next piece here too is just defining your buy box and I think that'll also help you identify whether or not what you're looking at is a good deal for you specifically. And I'll give you like a recent example. When we, when we were shopping for our first hotel we had a very specific buy box. We had a buy box of we wanted a purchase price between 1 and $3 million. We wanted a value add opportunity. We wanted to be in either a, in an urban or a vacation market. And we wanted, I think there are 10, 10 to 30 rooms, right? So those are all the things we were looking for. And once we had that buy box built out it became significantly easier for us to say yes or no to certain deals because now it's just like does it match our buy box or does it not? So I would encour to and this is for everyone that's listening to Think about building your own buy box and how, how that can make it easier to identify the right deal. And then just there's some basic rules of thumb as well when it comes to buying rental properties that don't necessarily give you the cold, hard to the penny return, but directionally I think they can, they can kind of point you in the right direction. But there's the 1% rule that says your revenue or your rent in this case should be 1% of the purchase price. So if I have a house that is $100,000, if I can rent that property out for $1,000 per month, that would be meeting the, the 1% rule. The other is the 50% rule, right, where 50% of your revenue shouldn't. Or, sorry, let me say that again. Then there's a 50% rule that says your expenses shouldn't exceed 50% of what that revenue is. So using that same example, I got a $1,000 a month in rent. My expenses hopefully shouldn't exceed 500 bucks on that, right? So there's different rules of thumb that you can use to help guide you in the right direction to quickly either say yes or say no to these deals, aside from fully underwriting them.
- [08:09]
A
And just to remember that a good deal doesn't mean it has to be the greatest deal of all or you have to get the best benefit. You have this money because we see a lot of times like, I have $50,000. What's the best way that I can use this money? Like, even if it doesn't turn out to be the best way, there ended up you could have got, you know, a 2% more return or something, doing something a little different or buying a different property. Like, as long as it ends up being a good deal, it is going to make you so much more money because that first deal propels you, it gives you, you took action and it's going to start your investing journey. So don't get too caught up in analysis. Paralysis, thinking you need to find the perfect deal.
- [08:53]
B
Ash, that is a great point. The last thing I'll add to that is we need to give ourselves more permission to learn when it comes to real estate investing. And I've given the analogy of, you know, if you have a child or if there's a child that you ever met in your life, uh, chances are that child did not come out of the womb walking. And there is at some point in their early Life, somewhere between 8 to 12 or maybe some sometime shortly after months where they started to learn how to walk. And I haven't met anyone yet, though I could be wrong, but I haven't met anyone yet who at 12 months old, when they fell down for the first time after walking, their parents just kind of scooped them up and said, you know what, Walking is just not for you. Usually the kid falls down, parent picks them back up, and then they keep that process going until they finally find the strength to stand on their own. And I think real estate investing, and really this is for learning anything new is the same process. The goal is that we can lay a foundation with that first deal is not to be perfect. And sometimes that means stumbling. Sometimes that means everything doesn't go according to plan. Both in my portfolio and Ashley's we've experienced that, and many of the guests that we've interviewed on this podcast have experienced that as well. So if we give ourselves more permission to learn on that first deal, we can take off some of that pressure of it being perfect and position it as an opportunity to get better for the second deal and the fifth deal and the tenth deal coming up.
- [10:21]
A
When you're tackling your first flip, should you really pay for a general contractor or is that just wasted money? We'll break it down right after this quick word from our sponsors.
- [10:31]
C
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- [11:22]
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- [11:52]
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- [12:39]
A
Okay, welcome back. Today's second question is my partner and I have started a house flipping business and plan to use local workers whom we trust and who we have done remodels on investment properties for us before. However, these workers are not licensed, but they work hard and efficiently. Most of the rehabbing we are planning for these flips is cosmetic. The most recent house we offered needs a complete remodel inside, but the structure is sound. For example, we need new kitchen cabinets, sink, paint, flooring and drywall in certain areas of the house that have been damaged, as well as new light fixtures and interior and exterior paint. The work is mainly cosmetic except for the drywall repairs. We are concerned about hard money lenders requiring licensed professionals to do the work or requiring licensing later on, having us scramble to find a general contractor. Fortunately, one of our hard money lenders said they will not ask to see any licensing as long as we are not doing anything structural to the house. Another one of our hard money lenders has stated that they want to see licensing anytime we were going to have any work done to pull permits. We are brand new to this as you can tell. So the first thing that kind of stands out to me is like the hard money lender that's saying they'll want to see any licensing when they pull permits. In my experience, I mean I live in very rural areas where a lot of my projects are like no permit or like very like get a permit this morning, start the roof that evening. Like, but like the flip I did last year was in like more of a village within the city and there was a lot more stricter permit requirements but I had to show like for example, the plumber was a licensed contractor just to get the permit on the property too. So I think that if you, no matter what, you know, depending on your city's regulations, you might have to show that it's somebody licensed doing the work, like electrician and plumber, like two big things that usually you would have to show.
- [14:48]
B
And I also, like, if your lender is requiring that you have a GC to do it, then, I mean, that, that kind of answers the question for you, right? Like, I, I wouldn't tell my lender that, hey, I'm going to use a licensed contractor, and then I don't, because that could create its own world of issues. But I think the, maybe the, the bigger question here is why are you opposed to using the general contractor? Is it the idea of cost savings? Because if so, unless you've got a lot of experience managing these types of projects for. Because, I mean, you didn't say nothing, right? Like, it wasn't like you were just doing paint or you were like, adding some turf, right? Or like replacing some hardware. We need new kitchen cabinets, sinks, paint, flooring, basically an entire new kitchen drywall where there's been damage. It does seem like a decent amount of work for someone who's doing this for the first time. And even though you're not changing the layout, as a rookie investor, sometimes there is value in having a, an experienced general contractor guide you through on this first project. And the amount of insights you can pick up and gain from that person, they'll stick with you for the rest of your life. One of the, one of the first rehab projects that we did, we had a juicy walk through it. He ended up not taking the job because he was too busy. But I remember he gave us a layout suggestion we had never even thought about before. He was like, hey, you should actually close this wall off. That way we can make your master bedroom bigger and we can do this and do that. And we're like, man, I walked right through this a thousand times. I never even thought of that. And he was in there for 20 minutes and was like, yeah, you need to do this, you need to do this, you need to do this. So there's value, I think, in just learning from a good general contractor, especially if this is your first time out, obviously you want to make sure they, that they earn their keep, you know, and hopefully a good GC will do that. But I don't know. I think there's value Ash and rookie investors when they're first getting started having a good GC. To lean on.
- [16:50]
A
Yeah. Two of my easiest projects, I had really great GCs that actually did a lot of the work themselves too. Like, when I built my personal residence, like, my gc, like, pretty much built the house himself. He was a licensed electrician, a licensed plumber. Like, he was a jack of all trades. And if I could have him do every house that I ever touch, like, I would 100% consistently use him no matter how much he paid. I'd work it into the numbers because that was just like the easiest, most passive thing I ever did was build that house. And he did one rehab for me for a house I was flipping. He came in after it became too much for just me and my partner to try to handle ourselves, and he came in and finished the whole thing with, like, very little oversight. And that, I think is just, like, tremendously valuable having somebody you don't have to micromanage that can, like, make basic decisions without ever having to bother you or tell you decisions you should be making. Like, in your point, Tony, as to like, you know, put a door here or something like, that's going to max your spice, your space. Or, you know, like, I had a GC that did, like, put a slider door here. Don't put like you're limiting the bathroom by like, putting the same door back in. Like, do this and it will be cheaper. And had all these great ideas. So I think a GC is worth it for the project, especially if you don't have experience yourself. But also another thing they could do is they could go and one of them could get licensed to be a gc. I have no idea what the process is, but I'm assuming it's a achievable doable to go and get your GC license.
- [18:36]
B
I think just one, one thing to call out. We've all heard the horror stories of general contractors, or even just tradespeople in general disappearing into the middle of the night. So my. My strong recommendation, whether you hire a GC or a sub yourself, is to make sure that the payment structure protects you in the event that the work isn't done correctly. So do not give them a super large deposit upfront. Right. So, you know, say. Say that the labor for this job, you know, maybe the total bid for this house is like 60 grand. Don't give them $30,000 up front to go start the work. It does not cost that much to go buy whatever materials they need to go buy to get this job started, break it out into very clear milestones, and then only issue those payments once you've validated that those milestones are done, like you know, demo, once they finish demo, then you, then you can release another payment. Once they've done, you know, like the, the rough plumbing and electrical, you can issue another payment. Once the flooring is in, you can do another one. Right. So identify what those milestones are based on the scope of the job and that'll save you in the event that these contractors don't work out. We actually had a rehab once where we withheld the final payment because the general contractor just kind of wasn't great. And you know, we had a lot of issues throughout the life of the project. And I ended up managing the subs myself, right, because the GC wasn't doing a good job. So when it came time for the final payment and Sarah, my wife, still recalls this is one of like her cringiest moments with me. But we're like in the house like arguing with each other and I'm like, dude, I'm not paying you. Like I have done more work on this project than you have. Right. So anyway, you can save yourself, I think from some of those bad experience if you make sure the payment structure is set up in a way that protects you. All right, we're going to answer our final question right after we're from today's show sponsors. While we're gone, if you haven't yet, be sure to subscribe to our channel on YouTube. You, you can find us ealestaterikki if.
- [20:34]
C
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- [24:06]
B
All right, guys, we're back with our final question. So let's see what we've got today. The third question comes from Grant in the Bigger Pockets forums. And Grant says, is there ever a right time to buy a house? A lot of people around me keep saying wait until the market crashes because right now it's high, but it always seems like it's going to keep going up. So I know that there are times or moments when it goes down a little bit, but it's always going to go up, isn't it? This is a great question, and we just recently interviewed Thatch Win and James Danard about a topic very similar to this. Because they Both invested through 2008, Thatcher was even investing in the 90s during the dot com crash. Now that impacted the markets and I think they both echoed the same message. Ups and downs will always happen in real estate, but it's the people who continue to invest through those downturns that make the most money when the market starts to swing back up. So is there a right time to invest in real estate? Yes. And that time is today, right? Very simple answer. There is a right time and it's right. Actually, it's yesterday. Yesterday was the best time to invest in real estate and today's the second best day. I think where people get into trouble is trying to time the market. But no one has a crystal ball. No one has a crystal ball. And I, I would venture to say, Grant, that the majority of the people who are telling you to wait for the market to come down or wait for the market to crash probably haven't invested in a lot of real estate themselves because I only hear that advice from people who haven't done it. And I almost never hear that advice from people who are doing this actively every single day as their, as their main way of making a living. So we've got to be able to filter out the advice that we get from very well intentioned friends and family and be able to say, hey, look, I appreciate that you're looking out for me, but I've got to take advice on wealth building from the people who have actually done it and not necessarily from my friends and family who have only seen the headlines or maybe heard stories from a friend of a friend of a friend about why real estate investing is the wrong thing to do. So it's all about time in the market. Not timing the market.
- [26:18]
A
And one thing that Thatch and James said too was like making sure you have exit strategies as an especially if you're doing a long term play on a property like you can ride out the cycles, you know, get that 30 year fixed rate loan, you know your mortgage payment is going to stay steady and you can hold that property long term and let it appreciate and your your mortgage pay down happen. But like if you're on a shorter term project such as you're doing a flip, what is your exit strategy to get out of that deal if the market does take a big downturn right when you list it, is it can you turn it into a rental? Can you furnish it turn into a short term rental? If you unload it like how much of a loss can you actually take? And they both told how they've had bad years, they've taken losses, but they keep going because the wins during the great years outweigh those bad years. So like you have to be prepared to ride the roller coaster and be in this for the long term, for the long play. This really isn't a get rich quick scheme. Like yeah, maybe a couple years ago you could get rich real quick off of a couple deals, but that was not sustainable. You can't consistently do that every single year and make those great returns that everyone talks about a couple years ago with your 2% interest rate. So having those exit strategies and also like having a long term game plan and growing consistently but not growing and scaling too far, fast too well. Thank you guys so much for listening to this episode of Rookie Reply. I'm Ashley, he's Tony and we'll see you guys on the next episode.
- [28:05]
C
Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords. Whether it's a single family rental, a Brrr Builders risk policy or midterm holiday guests, you get fast quotes, flexible coverage and protection for property damage, liability and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes@biggerpockets.com landlordinsurance steadily landlord insurance designed for the modern investor.
- [28:56]
D
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D
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