← Real Estate Rookie
Real Estate Rookie
They Were Right in 2008, Now They’re Saying to Buy in 2026 w/ Thach Nguyen & James Dainard
00:53:05
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- [00:00]
A
Every investor dreams of getting into real estate during the perfect market, but the truth is, there's actually no perfect time. And if you ask our guests today, they'll tell you some of the biggest fortunes in real estate are built when everyone else is terrified to buy.
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B
These two have been investing for over 20 years, through booms, through busts, and even the chaos of 2008. So if you're wondering how to start in a market that feels uncertain, you're about to hear from people who didn't just survive the downturns.
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A
They.
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B
They use them to build everything they have.
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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 James and Thatch. Fellas, thanks so much for joining us today.
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C
Go. Let's go. They wake. Wake their ass up this morning.
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D
Let's go. Yeah, I just flew out of Seattle. I got in late last night. Missed you.
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C
Well, we're ready, baby. Whatever you got for us, give it to us.
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A
Yeah, I'm ready to talk about pre 2008. So, James, let's start with you. You were investing before the crash. Honestly, one of the very few investors I know that was doing this. What did your business look like when things started to fall apart?
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D
Oh, man. Yeah. 2008 was. You learned a lot in 2008 when the market started crashing. But, you know, I was actually a wholesaler that had just started flipping homes. They had about six rentals at the time. And we. Me and my partner, Will, actually branched out on our own. And literally 60 days after we had opened up our own shop, subprime mortgages blew away. They just blew up. There was none to be had. And I remember reading about it in the. In the news, and I didn't even know what that really meant. I was like, oh. I mean, that's how new I was in real estate. I've been buying and selling for, like, four years. I got really good at wholesaling by then, and once that went away, it was like the lights went off, and it was just. There was nothing going on. It was. You go down to auctions, no one was buying. You could find a house for a dollar, and no one would buy it. Just no one wanted to touch real estate. It just went into a massive spin. And, you know, I saw a lot of people leave the market at that time. A lot of people quit the industry. And I will say the best thing we ever did was not quit during that time.
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A
That. What about you? What was Your business looking like during that time period?
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C
Yeah, for me at that time, I was actually selling a lot of real estate at the time. I was a realtor at the time. But also I was, I was also at the time fixing the flipping and good and bad. I actually did a lot of construction during the time. I did a lot of single family new construction. And I was also just beginning to do apartment building, new construction from ground up. And what's interesting was my residential real estate business. You know, when people are. There's somebody always got to sell real estate. They always got to, they need to buy and steal every day. Okay. At that time I was selling like 150 homes a year. So even my business went down to 100 deals a year. I was still making good money selling real estate. My rental property did well because when people can't afford to buy, they gotta rent. I will tell you where I got hurt the most was in the new construction game. Because it takes so long to buy a piece of property, get plans and permits, build it out and then sell it and catch the market. Well, in the single family world, it might take you six, eight, nine months to get permits. Six, eight, nine months to build it out. You know, it's, it's a little bit of time. But the thing where I got hurt the most out of everything, my single family wasn't as bad, but it was the apartment world. You can buy a piece of land, it takes you two years to get permits and then two years to build it. And so you. It's hard to time it. So I got hurt the most in a couple of brand new apartment I was building. And even though I got done with my building, I had a hard time leasing it and I couldn't get a lease fast enough. And my note, my construction note was due and the bank wanted to repull it and, and we worked out a deal and we end out getting it done, getting leased, but we'll end up losing like on one building, like probably four or five million dollars. And then a lot of personal and then some of my single family, I have to owe wat fed, you know, j member wat fed. I owe wat fed a couple million dollars. So I would say today, you know, doing new construction, you really got to know what you're doing. And sometimes going big isn't always better.
- [04:53]
B
So, Jimmy, you said something that I thought was interesting. You said that a lot of people left the industry during that time. And honestly, I think we're seeing a lot of that now as well. As things have gotten more Difficult to be a real estate investor today. There's a lot of people leaving the industry also. But you said what helped you guys get through is just a simple fact that you didn't quit. And, you know, Thatcher saw you nodding your head as well. So, Jimmy, I guess to you first, why didn't you quit? You know, I mean, because you could have, right? You could have gone out and got a W2 and, you know, just plugged away and lived the normal American life. Like, why. Why didn't you quit?
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D
Honestly, I think it's because I was naive. It was. I had just graduated college in. Been in real estate for about 15 months, full. Full time. And we got really good at getting deals done. And, you know, I think we kind of had that Superman, like, hey, we. We got this lockdown. We're great, right? And I just remember I was. You know what? I was naive. But I also didn't want to bail on my business partner because we had opened up shop. We were four months in. I remember sitting in my office, and I'm sitting there, and we have nine guys working for us, knocking doors. We were getting a lot of. It was real easy to get a deal back then. It was like anybody would sign a contract, but then what do you do with that contract? And I remember we were literally out knocking neighborhoods, trying to sell the house rather than buy the house. Like, just door knock. But, hey, do you want to buy a rental? Do you want to buy a rental? And it was really hard to make a check. And we were just trying to pay the bills, pay the mortgage, and that was it. And it was hard. And I remember sitting there googling. I was looking for medical and pharmaceutical sales jobs. I'm like, I need to get a new job. This is not working. And I just remember looking over at my business partner, and he's just at his computer. I'm like, I can't bail on. I can't bail on him. And we just shut it down. And it was really just about going out and getting a deal done at that point and going, okay, well, if we can get one done, how do we maximize that deal? And that's where I think the light really turned on. It wasn't like, oh, let me just keep doing the same thing. Wholesaling properties, getting a check. It was going, okay, this is not working. Let's try to adjust this and make it work. And if it doesn't, then I need to go find a new job. And really the big difference was we went from wholesaling a lot, and Flipping a little to we were buying most of the properties that we were flying because no one else would buy them. And so that's really what the switch was. It was honestly a 25 naive. Didn't want to bail my partner. And then we had to make some adjustments and test it. And if it wouldn't have worked, I probably would have bailed. But it just got us to squeak by to make it through the hard times.
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B
I mean, you guys pivoted, right? And you know that's like one of the core tenets of any startup, right? Is like you're going to test your hypothesis against the market and if it works, great, and if it doesn't, you try and tweak it just a little bit to see if you can get a better market fit doing something else. That's what about for you? I mean, same same question, right? A lot of people didn't make it through. Why do you think you guys were able to succeed?
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C
I think the first thing is I had a really good mentor that was way older than me him and saw I'm 55. Saul's like 20 years in front of me. And Saul had already walked the grounds of real estate and, and saw remind me and many, many people around us, real estate is a cycle. It comes and go. It comes and go. And for me, when I get to hang around people who've been around multiple cycle, it really for me gave me peace of mind knowing that this is just a cycle I'm going through. I just got to learn how to work through the cycle. So for me, when I knew it's a cycle, it wasn't a question of this is a side hustle. I was a realtor, but I also was a, an investor and a developer.
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D
So.
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C
And Saul was also an owner of John L. Scott companies multiple and he's also a big developer in Seattle. And so for me, it wasn't about I'm going to actually quit because I was already all in and I just need to know how to ride through the ups and the down. And for me, I think looking back today is I think people have to always continue to keep looking for ways how to have more than one leg on their table. And what I mean by that, if you have a table, you only got one leg and that leg is called wholesaling. And when the market is tough, like how it is or how it was back then, if your only income is coming off of wholesale, you're going to have a really weak table. At that time, I was actually host. I was Selling real estate, I did some wholesaling, I did some flip, right? And so I kept it going from that. So when I worked through the tough time and then obviously it got better. And I see the same thing now. What I experienced today is no different than it was the last three decades I've been through because every decade you repeat itself again, again and again. And I see the same thing all over again. So it's just a cycle again.
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B
So Thatcher, I. I love your analogy of having multiple income streams to help weather these different storms as they come. But what is your advice to rookies when they're first starting? Should they try and attack multiple strategies at once? Because a lot of the folks listening, they have zero deals. So should they focus on trying to flip one house and then wholesale a house and then do multifamily? Or should they maybe try and build expertise in one strategy first and then branch out? What would your advice be to the people who have done zero deals?
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C
I know just from speaking to a lot of rookies, a lot of rookie come in here, they still have some kind of a 9 to 5 job right? Now I'm not saying all of them, but a lot of the people I meet who come in and real estate invest, they still have some kind of a 9 to 5 job. I always say if you got a 9 to 5 job, keep it. Milk that machine as much as you can for what I call active income and then start learning about real estate investing. And if you come in right, I think everybody, even someone who's buying real estate, they should learn how to source deal, right? If they source deal and they find the deal, they have options. They can wholesale it to make quick money or they can fix and flip it for bigger money. But I think that someone who comes in and they want to just jump both foot in and just drop their nine to five, I think they put themselves at jeopardy. I think that if they transition slowly into it and work the wholesale market and the fix and flip for quick money, I think that's great.
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A
Now Thatch, do you think that we're actually headed towards any kind of crash or something similar to what happened in 2008 with the housing market?
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C
This is a question I get asked a hundred times literally a month. I talked to Saw my mentor still all the time and this is what saw and matter of fact, even the CEO of John F. Scott, he was at a company meeting here recently and he says again, we are going through what we call a 10 year cycle. And he said the 10 year cycle this is what out of Lennox's mouth? 10 year cycle. What he noticed is that the market goes up, you know, up, you know, 10 years and then it usually correct itself. It takes anywhere between two to three years to correct itself. And then it goes up 10 years and then two, three years correct itself. The one we just came out of, it went longer than normal, right? Was like, like over. It was like more towards the three year versus two years. Lennox feel right now that we are at the bottom of the cycle and we're working out of the cycle, heading into a upswing market because of, you know, inflation is getting more control. But the biggest thing he says is we still have and this sauce says too, he been a big time developer. We still in the biggest holding shortage, shortage in America and it's still not enough houses. So it's a cycle that the economy go through and we gotta raise the rate, deal with inflation. It correct itself and then it goes again. But Lennox feel that we're heading up, heading out of the bottom, working our way up. And what I realized, this is the fourth cycle I've gone through now, the last three decade I've gone through, it repeated itself exactly the same way.
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A
James, what about you? Do you feel the same or do you have a different take on it?
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D
I kind of think it's too hard to say whether it's a cycle or what's going on right now. I mean, we've only been feeling a slide for six months. It's, I mean, really what started this whole thing. You know, it's the thing about investing is there's always ups and downs. It goes up, it goes down, it goes flat, it makes adjustments and like to the V point. What I think a lot of people forget about is before the pandemic was we were on a slow slide going down. Like housing was slowly creeping down the wrong way and it was harder to sell things. It took longer to sell. That wasn't that long ago. And then that cycle got disturbed because of all the money that got pumped in. I think a lot of people are hitting the panic button right now because their Performa isn't going the way they thought. And then they say, therefore, there's a crash going on. But what we're doing is we're adjusting back to normal, right? Like, what's really beating up investors right now? Days on market, things take longer to sell. Cost of money is more expensive. That stuff is what really erodes a deal and beats up your math. It was unexpected where you get hurt in a market change or Whether it's a, I would not say crash when there's an adjustment to conditions. You only really get stung when you're already in a deal. Right now we change how we're buying because we're expecting longer market conditions. We're, you know, we have to, we have to go with what is going to come out of the market.
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A
So instead of being worried of a, you know, recession or a crash, you are just adjusting your business and pivoting to be more conservative and to adjust with the market instead of just saying, you know what, we're done buying until the market is better.
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D
Well, and that's what investing is like. It's, you know, and that's one thing, you know, people need to kind of realize, like, you don't sit on the sidelines ever. You adjust how you buy and you adjust how you want to buy. And when the market gets a little shaky, you should focus on what you're really good at doing. If you're a brand new investor and you have no construction experience, don't buy a flip, partner with someone doing a flip, or go get a really good general contractor you can bring in first. If you are a really good flipper and you want to expand your business when the market's adjusting, there's a lot more deal flow right now. Like, there's a lot more opportunity. Go work with people and bring, you know, I know a lot of people that are, whoa, that's real loud. Now all of a sudden, you know, one of the biggest things is just like, as the market changes, you should really not stop buying. Right? Like, I know me and Thatch, we made our wealth when the market was at its worst and like, that was almost impossible to make money. It was really hard to figure it out. But you just want to stick to what you're good at, right? Like right now, when I go through a market change, it's, it's not fun because I have a lot of projects going on. So when you're stuck in the middle of a bunch of projects, that's when you get beat up the most. But the one thing I have learned since 2005 is you don't ever stop buying because when you buy on the peak, you take a little bit of loss. But when it correct, you're buying on the big dip, right? And you have to ride the waves. And if you ride through it, that's how it always averages out. If I get through a bad cycle and I lose some money, typically I'm making 2x because I didn't stop Buying fear really does create a lot of opportunities. And when you're a new investor, you just want to stick to, okay, what are you good at? Don't worry about all the noise. What's everyone doing? Think about what you have. What kind of money do you have, what kind of contractors, what kind of access to resources, and focus on that. And that's how you kill a transitioning market.
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C
I want to dovetail on this, James. Hit it on the market. You see, in a good market, even a piece of shit house with bad design, bad remodel in a shitty neighborhood still get multiple offer, right? That's because everybody's buying on frenzy, right? Regular homeowners, you know, they went and they walk into this flip house done by some shitty person with a shitty floor plan in the shitty neighborhood, and they still get towed. It's like, what the hell? And then when the market is doing what it is now, which has been soft for the last, you know, two year, you know what don't sell is this shitty rehab, the shitty neighborhood, the shitty detail. Those are the one that actually take longer. And it, you know, people like they have more choices. But I will tell you, in a good area, with good craftsmanship, it's still sale. It might not get multiple offer in this market, but it's still sale. So I think what James is saying, and I agree with him, is you got to pivot for me now. Now I've done it so long, I have a certain area that I always going to buy in a good market and a bad market. I always label four market. There's a market, B, C and D. A is the high end, you know, like Newport beach, you know what I mean? Mercer island, where I live, right, Those right there always do well. Mercer Islands still do well, but those are high end homes, right? The D, what I call is, you know, the ghetto area, you know what I mean? You can flip in the ghetto, you can wholesale in the ghetto when the market is good. But when there's a tough market, those ones move the slowest. Why? Because the people who live in those area, their income get affected very fast. And, and not everybody's trying to buy in those area. The bees in the sea. In a good market, the sea still relatively move, right? But in a soft market right now, the sea's even taking a hit. I got a product right now in a sea market right now, new construction, and it's not selling how I want it to sell. And the same townhouses that being built right now on Beacon Hill, same square foot as James same bedroom bath. Mine is near Mount Baker which is towards Rainier Avenue and this other project is up on Beacon Hill, North Beacon Hill. Same square footed, same bedroom bath and they selling theirs and I'm not selling mine. Same product, same stuff and I should show you location play a big difference in even a soft market. So what am I saying for everybody? If you're going to invest, know your ABCD neighborhood. In a good market you can buy anywhere you're good but in a market that's actually soft, when a bad market or a tough market things don't take longer, you have to reduce the price. So you might want to think twice about either. Hey if you're going to buy in the C market you better get a good price on it from the get go otherwise you will get hurt when it gets tougher and tougher. So for me today I really trying to stay close to the B market and get good margin and knowing that if I have to take a haircut I'm still going to make good money on it.
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A
Well it seems like 2008 tested everything you guys know about real estate, but what about now? After the break I want to find out if 2025 is shaping up to be just as scary or maybe even better for investors. We'll be right back.
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E
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- [21:48]
A
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D
Well, the one thing I think everyone needs to do is don't overthink it. You know, as investors we are buying an asset and we're buying math. So it doesn't really matter what's going on in the market. The math is the math, right? Like if I'm looking at a rental property and they can make me a 10% cash on cash return on rents today, unless I think the rents are going to drop to dramatically, which I don't think, then that's a very stable thing. I can buy that and doesn't really matter what's going on with the market. Right. And so for everybody who's new and even experienced, right. We get confused and we get on pins and needles. Define your buy box. What will you buy? What won't you buy? And stick to it. That's how you get kind of clarity. For people that are brand new, though, like, the thing I don't like to do in a transition market is try to create new business plans and go buy different types of investments that I don't have the experience in. You know, like, I'm not going to go out and try to build a skyscraper because I've never done that before. I don't care what the deal looks like. And, you know, you want to kind of stick to what you're good at and, you know, focus on partnerships. Like, you don't have to sit out that. Like, if you want to make a high return depending on what your goals are, partner with someone that's really experienced because they've gone through different market cycles. And it's going to teach you a valuable lesson and how to navigate a harder market. And if you know that when the market actually gets good, that's how you crush deals. Like, it's because, you know, that was our big competitive advantage. We didn't make a lot of money in 2008, 9 and 10. We barely paid our bills. But when 11 hit and it started going up, we had the competitive edge on everybody and we were flipping. I think at that point we were running a hundred projects at a time. And when you have a hundred projects in the queue and the market starts going up, things change forever because you have a lot of lift. And so, but, you know, stick to what you're good at and you want to, you know, stick to what you're good at, stick to what you know, and then get qualified. The more resources you have. Shop hard money lenders. Have a soft hard money lender. Have a hard money lender. Shop DSCR loans. Get qualified. With traditional loans, access to capital and resources are what really makes or breaks you as a real estate investor. And if you're afraid right now, that's okay. It's okay to be nervous, but then hedge against it, right? Clarity in your buy box. What will you buy? Nervous. Make sure it's a really good deal. Set that bar. Then have access to all the resources just in case that goes sideways. You have different exits and different strategies to save that deal. And the more resources you have, the more safe this business is. And so really just kind of focus on that. And really. But before you dive in, get clarity in what you want to do, because that's where everyone kind of floats, is they don't really know what they want to do. They just heard a podcast and then they go here and they go here and they go here and then they go nowhere.
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C
I think for me is if I was starting out today, really do your research and know your market. What's. Because, you know, every market and every city in that market is different. Like, I was talking to a student yesterday in this one section of Florida, and that one section of Florida has a lot more inventory than Tampa, right? And so, and they, they label it as, you know, the market is really, really, really bad and tough. And I said, where do you live? You live in this one area in Florida. Down. Down in South Florida. But she lived in what I call the boonies, right? Of course, out there, right? There's a lot of inventory out there. But go to Tampa, you can't find a house, you know, you can't find listings. It's tight. Go to Orlando, it's tight. So know your market, okay? Understand it. Know your time on market. Know what's selling, what product is selling. You know, know that. Understand that real estate is a cycle, right? It always go up, always go down. But I think the most important question they got to ask themselves a rookie is what's my extra strategy when I invest in real estate? Am I buying to fix and flip or am I buying to hold for long term rental? This is what Saul said to me a million, million times. If you buying long term rental, it is playing the long game. Even if you pay 10, 20 grand more today, even the market go down 10, 15, 20, $30,000, 10, 20 years from now, it looked like pennies. So you're playing the long game, right? It's not that big of a deal if you play in the flip game. Know your market just like, you know, you playing the long game. But flip game, make sure you buy it in a good market and a good product so that if you're gonna get in and get out, right? Get good margin on it, right? Stay in the area where you know the product is moving. Don't go buying a Timbuktu somewhere. It takes forever, know that. But if you're buying for long term rental, right, 10, 20 years from now, you look like a genius.
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B
That's. I love that point because, I mean, it almost mimics what people say about the stock market. It's like you don't buy a stock and try and sell it tomorrow. You buy it, you hold it for 30 years and then you make a lot of money at the end, end of it. But you talked a little bit about like ethic strategies, knowing your market, how, how are you changing how you're underwriting deals today compared to when the market was super hot a few years ago? Like, are you looking at, you know, maybe different cash on cash returns or shorter hold periods? Like, what's changed about how you're underwriting deals right now?
- [29:03]
C
For me, number one, I, I really focus on buying in the bead market. That's rule number one for me, right? I get deal come across myself every day. And when it's in anything less than a B minus, C plus, I just said I'm not interested. And this is what I learned from Saul, right? You don't have to do a lot of deal. All you got to do a few good deal and you'd be set. The problem, everybody try to do so many deal and they buy everything and everything. You know what I mean? Okay, I'll take some of that. I'll take some of that. I'll take some of that. Just find some good deal. It's okay, right? In order for you to do 100 deal like James, you have to live through it to be able to do that. But don't go jumping in tomorrow. I want to do 50 deals, so buy everything and everything, you know what I mean? So for me, know where the good area is. And for me, every deal that I do, I got to get at least 20% gross margin. If I flipping a deal after all spent, I got to get at least 20%. If I'm buying a house to fix and hold after all costs, right? The equity I built, I got to be at least 20 plus percent in equity in those deal right? Now for me, what I'm doing today now is I'm buying ugly houses. So I get a good deal in that and I add value to the house, right, by rehabbing it. Add more bedroom, bath if I need to. And then today, right, I'm adding more units to it because I'm doing the ADU play and I keep those as long term. And so 10, 20 years from now, when the market get even more tighter on housing, right, I'm going to look like a genius. So again, this is why it's important. If you're buying for a hold, there's a different strategy and you buy for a flip, there's a different strategy. But bottom line is if you buy anything today's market, don't try to buy everything. You don't need to do Everything. Just do a few good deals, stick to the good area and try to get good margins. Possible upfront, right? No, rates will come down soon. It will come down soon. It's coming. So you buy for long term. It's okay to buy with a little bit high interest rate, but it will come down. You refi it later. But right now, if everybody's scared, it's okay. You get a better opportunity to buy more. Deal with everybody in the frenzy. Because when the frenzy, me and Jane hate it because we got a lot of inexperienced investor buying at stupid prices and waving feasibility like we can't compete with those people. So we let them have it. And those are the people who always get hurt when the market turn. And then they know who caused a lot of the craziness around, around, around town.
- [31:41]
D
Hey, question thatch. Like so you're at 20% now like two, three years ago when rates were low. What was your number then, right? Like because that's the thing, we got to adjust our numbers with market conditions. We're building in risk into how we look at a deal, right? So like with flipping, I targeted a 35% return. Right now I'm at 45% because there's more risk in the deal. So if it's got more juice and more meat on the bone, I'll buy it today. Four years ago market was great. I get a little thin on it. Yeah.
- [32:11]
C
And when I mean 20% profit, meaning if I bought something I'm all in for 800,000 is worth a million bucks, that's 20%, right? That's 20% profit. I got to make at least 20% profit in a good area. But I don't go out to the high end market. I do that for James. I, I go out to the everyday market. I get in and out in 90 days, right? 20% good money. But it has to be in a good area. Otherwise I'm not even messing with it. If somebody give me a C area and I think it's a good floor plan, I'm going to need probably 25, 30% margin. Otherwise I don't touch it. Now, new construction is different because it takes longer. So I need bigger margin right now I got so many people shopping. Deal for me. Jam. Hey dad, you want to buy this property? You can put two packer three packers in new construction, eight of you here and there. What? Now look at the margins like 15 margin, bro. No wonder why they wholesale. Like last night I got somebody sent me over a micro apartment, right? Asking some stupid prices, right? I'M like. And do you miss the. You missed the time of micro apartment. It's gone now. Right. So again, that's why they wholesaling, because they just. They didn't get the price low enough.
- [33:10]
D
There's not a lot of money in development right now. I thought much.
- [33:14]
A
Now, James, we're hearing the word buyer's market, seller's market. We're transitioning to a buyer's market. What is your take on this and what are you seeing in general across the country? Are we in a buyer's market or are we headed towards one, you know.
- [33:29]
D
Buyer'S market that, you know, for me, I like a buyer's market. I get to pick the deals that I want to do. Like, when the market was frenzy mode, you kind of buy what you could get and, you know, like. So for right now, how do I mitigate risk? Buyer's market gives me a lot more inventory to look at. The only types of deals that I'm buying right now has nothing to do with price point, has nothing to do with location. I just want to make sure it's a good house that doesn't have any negative factors on it. It's easy to resale, but also that my contractors are good at. I buy based on what my teams are good at, not based on what I want to buy. And so when you do that, you can chop it out. And I will say I've been able to purchase a lot more properties the last 60 days. I. I would say over the last 90 days, since the market got bad, I have bought more deals than I did all of the year before.
- [34:21]
A
Wow. And are those two flip or to buy and hold?
- [34:25]
C
Both.
- [34:25]
D
We bought in apartments we've gotten. You know, there's very good deals on apartments. Like we bought in some burnout apartments where, you know, not finance. Well, heavy construction freaks people out. I mean, that. We just paid 110 grand a door in Belltown. Now, that's an A market. Those units are worth 450 grand a pop in the hot market with low rates. So there's opportunity there, and it's that heavy rehab. And so we're buying apartments, we're buying development still, and we're buying a lot of flips. And, you know, it's just whatever the margins are at, we're going with. There's opportunities everywhere. And. And so buyer's market. Yes, I do, because we're getting a lot of deals. My phone is burning up with wholesalers going, hey, James, I haven't talked, like, I might have talked to this guy in two years and he's like, hey, I got all these deals because they can't move them, right, which allows us to get a better deal. Now when we go to sell, I don't care if it's a buyer's or seller's market. I just have to plan accordingly. When I'm buying up front, I can say since June, my, I've increased my whole time projections by 25%. That's. Am I adding two to three months onto every hold that I have? I'm also increasing my construction costs by 10% because we got a floating tariff going on. We don't know when it's going to hit, when it's not going to hit. And so we just have to build these things into the risk. And then I've increased my return going, I want to make more per deal. And if it hits that stress test, why wouldn't I want to buy that? And so, you know, it is definitely a buyer. I wouldn't say it's a buyer's market. I think it's a balanced market. And you know, I think when people throw that out, it's because they bought something bad and they can't sell their house. It's. You have to look at the data. The data says what, there's like three to four months of inventory right now in most markets that's fairly balanced. Six months is when it really starts to go to a buyer's market. And so we're approaching. We're just not in an aggressive seller market right now where the sellers had all the power and so, you know, buy good assets, build it into your Performa. And if it's a buyer's market, that means that there's better deals for us anyways.
- [36:29]
C
Yeah, I agree with you. I think it's a balanced market. I don't think it's a whole all, all selling market. You know, right now, some type of product are like in Seattle house, ugly house with big yard that you can do adus on, right? They can't. They can't. The moment hit the market, they get multiple offer. That's a seller's market, right? You get an everyday house that needs some work. It's more of a neutral market. But if you take a look at the overall real estate market, just everyday people buying and selling, it's. It's more of a neutral market, right? The seller don't have all the upper edge. Buyer don't have all the upper edge either.
- [37:02]
B
And I think you guys are making a very important point for Ricky's right now because a lot of people who are listening, maybe they were trying to get started when the market was going crazy and that that potentially discouraged them because they couldn't get a deal. But now we're at this point where sellers are willing to entertain reasonable offers on their properties. And I think one of the messages that Ash and I keep trying to drive is if you find a deal, don't even really worry about what the listing price is right now. Just underwrite it, whatever number makes the most sense to you and then offer even below that number. Because the worst they're going to say is no. At best they say yes. But the most likely scenario is that they start negotiating with you and then you're able to start taking that conversation and letting it actually lead somewhere. So it sounds like both of you are kind of echoing the same thoughts there.
- [37:47]
C
Yeah, I think seller, I think seller, the media is actually trained seller, the market is soft. So I think that's why it's actually easier to negotiate when the media is saying things are friends, everything's selling off, you know, within one day, you know, 100,000, 200,000 over asking price. Then the seller trying to stick tight to their property. You know what I mean? So that's why it's funny. Investor, they want to buy when the media say it's a great time to buy and they don't realize they fighting against all the other dumbass.
- [38:11]
D
And I think it's important, you know, especially in the world we live in now where people are online, they're looking up to people that have bought all sorts of different things. What you have to remember is people built wealth when the market wasn't red hot. They they be they built wealth because they bought on a dip. And then when the market accelerated, that's when they, you know, I didn't do well when I bought a bunch of properties in 20, 19, 20. I did well because I bought a bunch of properties in 2010, 11 and 12 that hit the accelerator and the gas during those times. And so this is the time to really pick up better buys right now. And the numbers aren't going to be sexy. They're not. But if like right now, if I can buy below replacement cost, I've been able to do that a long time. I'm like, I can buy this for $150 a square foot. It take cost me 300 to build this. Why wouldn't I buy that and take a hard look at that. And so, you know, that's the thing to remember. Don't buy on the now, buy on the location. Buy. Is this good value, does it pen like, you know, that's where you do well in 10 years. It's not instant gratification in real estate like we've seen, we got that for two years because of the pandemic. It is a long term, it is a long term road and if you get in now and you buy consistently, that's how you come out the other end.
- [39:33]
C
Yeah, you got, you got to have both foot in. If you play in this game, you can't be, you can't be buying long term rental as a side hustle because the moment you hit a speed bump or turtle on the street you're like, that's all the reason why I shouldn't be investing in real estate. You know what I mean? But yeah, I mean I agree with James. You can buy something for cheaper than replacement, but again, you have to have the long term mindset game. The problem with social media is I can go out there and then all of a sudden on my next slide on social media I'm driving a Ferrari, right? And now everybody's coming through. They all want instant gratification. When they don't realize the most successful real estate investor, they ain't a bunch of young bucks at 20 years old, right? With you know, millions and millions and hundreds of million dollars of real estate portfolio. It didn't happen overnight, you know what I mean? They all bought during the downtime and they ride it out. So just know everybody. This is a mindset game more than anything.
- [40:29]
B
That's, I love that advice because I think social media has definitely skewed the perception of what it actually means to be successful. But what you guys are saying is that now really is a good time to invest. So now I think the next question is how do you build something that can last through the next storm? Right? Because we know it's the cycle. How do we get to the next storm? That's what we'll cover right after a word from today's show sponsors.
- [40:54]
E
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- [42:24]
A
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- [43:32]
B
All right guys, we've covered how to find opportunity and uncertainty. And for Ricky's who are listening, this next part is about how to build a foundation that doesn't crumble when the next downturn hits. So you mentor a lot of new real estate investors who are doing this for the first time. What's the biggest mistake you see them make and that's. We'll start with you.
- [43:50]
C
I think the biggest mistake is that they all want to happen like now, right? They all, they all want to go out there and like have $10,000, 20,000, 30,000 passive income now, right? And they don't realize, right. You got to accumulate some and then as you accumulate them, you can, right? You can see the cash flow get bigger and bigger, right? The other thing I see that a lot of investors like, oh, I don't want to buy rentals because, you know, $300, $500 on one house, you know, before it's paid off ain't moving the needle. So I'm just going to just do fix and flip, fix and flip. And then next thing they know, they become a full time, just active income job. It just become a higher level job. And then 10, 10, 20 years later down the road, right? They're in the same spot. A lot of people don't see James, James used fix and flip, right, As a vehicle to actually two things. One to source deal and two, to actually use that money to buy long term rentals. Right? And that's the problem with a lot of the young folks coming here. They think that the game is fix and flip. No, fix and flip is a vehicle to long term wealth.
- [44:59]
B
Jimmy, what about for you?
- [45:00]
D
You know, I think like what that said, it's just that you have to buy in the long and find out kind of where the opportunities are in what vehicles you want to pick, right. And no matter what you're doing new, you know, because I always try to think back, okay, when I was new, what do I need to really get moving forward? And it was access to capital. That was the first thing I needed money because I was 22, no one wanted to give me money, you know, and the Red Robin tips weren't, they weren't covering. And so, you know, I think that's the biggest thing. Go get set up, get your financing in order. Why are people really struggling right now? They didn't lock their debt. They're on floating loans and their deals are getting destroyed. So how do you hedge against that? Lock your debt, get set up with the right amount of capital and don't force a deal.
- [45:56]
A
Jimmy, can you just like break that down for a rookie, what that means real quick?
- [46:00]
D
Yeah, yeah, we want to take away the variables from a deal. And so if I'm looking at a rental property and I get this special loan and I can buy this, this house and my loan and it works really well. When I got a five and a half percent loan. And I can get a DSCR loan that's fixed for two, two years. And then it's going to change into a variable rate. It could go up, it could go down. That's where the risk is. We don't know what's going to happen. And if you want. And so how we, you know, it kind of blew my mind that so many people are in variable debt going through these deals. Because as investors, we're buying math, we're buying a Performa. And if the debt goes up and down, we really can't project. You know, we're speculating at that point, we can't go, this is what I'm going to make. And you know, like, if Thatch has a bunch of rental properties, he wants to know what his monthly payment is and what his income is going to be. That tells him his cash flow. When rates go up and you're not locked in, your cash flow goes away. And that's why there's a lot of people in trouble right now. And so the things to mitigate that is lock your debt. Like when you're buying today, my number shouldn't change, you know, and then don't build in a bunch of appreciation and projections like, you don't need to speculate, just buy on today. What will it rent for? What's my payment? What's my taxes, what's my insurance? Do I like that cash flow? Yes or no? You overthink the deal and try to force it. That's where you can get in trouble. So just secure it, lock it and buy in today. And if you like it, it's a good buy.
- [47:34]
A
Yeah. And not buying based on future projections based on like, you should run your numbers and not be like, okay, I'm only losing $200 now, but when interest rates drop, then I'll refinance, then I'll make money. Like, you need to make your purchase price based on today's numbers and how it will work for you. So we just had Lake of Dave on recently and she talked about how she had bought in one year, $11 million homes for flip them. But in total she only made a hundred thousand dollars. And one of the things she talked to us about is like scaling too fast and knowing what is actually sustainable. So how do you both measure sustainable growth where that system isn't going to break? Thatch, let's start with you.
- [48:20]
C
Oh, man. I think you got to have an A team, right? I think, I think you got to have a good general contractor. You got to have some good subs. You got to have people that you know that had been, you know, obviously if you knew, you got to find a good general contractor. A good general contractor. And let me tell you something, do not be cheap paying a general contractor, okay? That's rule number one. The problem with new, new new investor. They try to go find the cheapest contractor and what happened is they get their ass kicked every single time they.
- [48:51]
B
Get what they're paid for, right?
- [48:53]
C
All the time, man. You know, they get delays. They have, you know, just the delay cost money, let alone, oh, you were under budget or this and that, right? Over budget, whatever. But get a good general contractor, right? A good general contractor will have good subs. They're reliable. Bad general contractor, have their mom and their brother and sister a gen subs. You know what I mean? It just, it just right, get, get a good designer, good property manager, get a good agent, you know, to understand the market. So for me, you got to build a real good a team and, and then know your market, right. I think how fast you go is how good your team is going to be because they're the one who's going to slow you down. Okay?
- [49:37]
D
Yeah. And I think, you know, growing big, this, I tell people a lot because people go, oh, wow, you got all these businesses going on. I want to be you. I'm like, I don't know if you really want to be me.
- [49:46]
A
Nobody wants to work as much as you.
- [49:48]
D
Yeah, I'm. I'm wired a weird way and it's not for everybody and that's okay, right? Like, but there's a sweet spot and we don't have to take over the world playing your sweet spot, right? Like if I do know, like my team can manage a certain amount of flips. Once I go past that, all my flips become inefficient. Or we can do a certain amount of apartment rehabs at one time or we become inefficient and then we have to make a choice. Do we want to take on more expense and more employees and then we have to load up even more and force it because you have to cover your cost or there's always that magical sweet spot. And the thing I've learned is when I get get deal goggles and I go past that sweet spot, things become inefficient. The wheels come off because you physically don't have the time to manage things like you need to fix and flip is a very high management business. I don't care what people say. That's how you control your cost. I still shop for faucets on Amazon late at night for my team, like just to keep those costs down. Right? Like if you're not in that business and you don't go and you get to a certain amount of projects and you're not there to manage it, that's where you're doing more and you're making less. Right? And that's what I've really learned, you know, like right now we have about 20. No, because we got the zombie flip show going right now. And so it's like we have about 35 projects going. That's past our sweet spot. We are typically 20. 25 at a time is right where my team can hum or I gotta hire another project manager and then we're running 40 to 50. But it's, you know, just don't, don't force it and it will be okay.
- [51:30]
C
I agree. One of the things I noticed, James, people, they tend to, you know, like, let's say you go past 30, you gotta start getting the property manager. I mean, there's another superintendent or another project manager come in, right? They go and they try to hurry up and go get more deal. And they haven't really stabilized a good project manager or a superintendent yet. Even work them through the system at least once or twice. Because just because you get a new project manager or superintendent does not mean that person is good or working well with the team, right? So they just hire a superintendent. They go, oh yeah, I got a superintendent. They don't know how good it is. And they go, they tend to lower, more deal, more deal. Kind of find out that superintendent wasn't that great and it's caused a lot of issue. But they got all this deal and they can't afford to let somebody else. Either they keep this guy work with it, the whole team hate him, or you get rid of them, then you're going to suffer. So be careful how fast you scale. Also, you know, how fast you bring in your team, how well they get trained, how good they work with everybody else. It plays a big role. This is why I always say, right, you don't need to do a lot of deal, you just need to do a few good deal. And a few can be 10, 20 a year. But don't try to be someone that you see on stage or social media and try to do that overnight.
- [52:45]
D
You know, don't get drunk on the performance because that's what happens, right? We all go, hey, how do we scale? How do we take over? How do we get to that next level, you take a performer that you're really good at doing, like, oh, hey, hey, look, I'm doing three houses at a time. I'm crushing it. What happens when I do 20 and you look at that perform and you build that out, you model it out, but you forget all the things that come along with that. And, and so that's what happens. We get, we look at performance and performance lie. Guys, they will, they'll, they'll tell you different things, right? Like, it's like, because you see it and you're not factoring for all the outside stuff off the performer and in. Take your time. You don't need to be the biggest. I mean, if I could unwound my journey in real estate, I would have took my businesses all to 50% of where I'm at right now. Now I'm so far deep into it. We have a lot of good employees, a lot of good staff. I'll never change that. But it's, you know, there is a sweet spot. And I honestly probably could have done half as many deals and made twice as much money as I made the last 15 years. And, you know, so don't always listen to what's going on online. Like, oh, go bigger, go bigger. They're blowing smoke half the time because.
- [53:54]
C
A lot of times they count. Just like you said. They count how much? You know, I did $12 million, but I made $100,000.
- [54:02]
D
Right?
- [54:03]
C
So on, you know, on social media, right, they always talk about, you know, the gross number or how many transaction I do, but nobody really talk about the real net at the end of the day.
- [54:15]
A
Well, Thatch and James, thank you so much for joining us today. We really appreciate it. Thatch, where can people reach out to you and find out more information?
- [54:23]
C
They can just go on social media, just my name. That's when they can find me in Instagram, YouTube, it's all the same thing. That's when.
- [54:30]
A
And James, what about you?
- [54:32]
D
Instagram, I think no Jdane flips on Instagram. And also the on the Market podcast, the best real estate podcast on the planet.
- [54:44]
A
And also, also on their tv, right?
- [54:48]
D
Oh, yes. Yeah. And there's, yeah, the Million Dollar Zombie or filming season 2 million. I will say this is next level what we're doing right now. Million Dollar Zombie flips A and E. These houses, I've been going through these houses. They're so messed up. I have a rash that hasn't gone away in eight weeks. I think I, yeah, I, I, I probably need to check that out.
- [55:10]
A
If if you're not on YouTube right now and you're listening to this car in your car, James just stripped down and is showing us where his rash is. Well, thank you guys so much for joining us. We always appreciate having you both on the podcast. Thank you so much. I' Ashley, he's Tony. And we'll catch you guys on the next episode of Real Estate Rookie.
- [55:27]
B
Hey, rookies, if you're 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.
- [55:46]
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.
- [55:58]
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.