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Real Estate Rookie
We’re in a “Buyer’s Market”…But Where Are the Real Estate Deals? (Rookie Reply)
00:23:10
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- [00:00]
A
If you're having trouble finding deals, this is the episode for you. We're going to break down what strategies work in today's market.
- [00:07]
B
We're also going to talk about when, if ever, it makes sense to buy a deal at negatively cash flows, which is a hot topic for Ricky investors.
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A
Today we're going to cover what makes a good investment versus a bad investment. And Tony and I will actually give our own personal opinion on this. Welcome to the Real Estate Rookie podcast. I'm Ashley Kerr.
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B
And I'm Tony J. Robinson. With that, let's get into today's first question.
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A
So this question comes from the Bigger Pockets forums. We just recently sold our house and finished our first deal. Congratulations. We've been looking for deals and haven't had much luck. Cold calling or driving for dollars. Any other strategies that have worked for you guys? So I thought this was a perfect question for right now. We're getting to the end of 2025, going into 2026, and the market has definitely changed since, you know, a year ago even, and we're definitely seeing it more as a buyer's market. So Tony, what are the ways that you have found deals this year or I guess even leads even if they didn't turn into deals?
- [01:18]
B
Yeah, I mean, I think the first thing I'd say before I even answer that question is they didn't give a whole heck of a lot of context that you said we've been looking for deals and haven't had much luck. Cold calling or driving for dollars. I think the first thing I would ask is how much activity has gone into, like how much effort and time have gone into cold calling and driving for dollars? Did you call 100 people or did you call 10,000 people? Did you drive for two hours or did you drive for 200 hours? I think oftentimes rookie investors underestimate how much time it takes to really build that pipeline of going off market for deals. We've interviewed multiple folks who, you know, wholesalers or just people that do a lot of direct to seller marketing. And typically if you can get your first off market deal within your first 10 to 12 months, you're. You're actually doing pretty darn good, you know. So if you, if it's been any shorter period than I'd say even six months, I think maybe you just need to continue to work at it to make sure that you're doing it long enough to have that momentum start to build. So I think that's the first piece. The second piece is the actual strategy that you're following within cold calling and driving for Dollars. Like if we look at cold calling, you and I could both have the same exact list. But how we approach those phone conversations can make all, all of the difference. Have you trained yourself up on best practices when it comes to sales? Or are you just kind of winging it every time you hop on the phone with someone? Do you have a script that you're working from that's been validated and tested and, and iterated? Or are you flying by the seat of your pants because someone picks up the phone, you're calling them out of the blue. One question. Hey, this is Tony. I'm looking to buy your house on one two three Main street is very different than, you know, hey, is this Ashley? Hey, it's super weird question, but this is Tony. You know, I hate to call out of the blue, but I think you own one to three Main Street. Like which one of those is going to entice that person to continue that conversation? Right? So working on your script for the cold calling could have a big impact as well. And same for driving for dollars. Like, where are you driving? What kind of properties are you taking down as you're driving? Are you looking at the properties that are big and beautiful and like, man, that's just a really nice house. Let me see if I can get that one. Or are you only taking down the ones that have the overgrown weeds in the front yard? You know, the, you know, the garage door is broken, the, you know, windows are boarded up. Like, what type of property are you adding? So I think before we just say what else should I be doing? Let's make sure that we've actually done everything that we can within the strategies that are in front of us to validate that we're doing it the right way.
- [04:06]
A
And I just think right now with the market, there's a huge opportunity just to buy off the MLS as to, you know, there are, you know, off market deals and there's huge opportunity there. But what about what's actually on the MLS too? Like I look to pull up Zillow list, sort everything by, you know, most recent and then I go to the very end of the list and see what's been sitting. I'll try to find out why it's been sitting. I go and I look at, you know, see if they have any debt on the property. How much, you know, should I, you know, could I offer? Do they have a ton of debt on there that there's really not any wiggle room they need to pay? That off. So I think using right now the market as an opportunity to make those low ball offers where there are more and more properties that are sitting longer on market than they were say a year, two years ago, three years ago. So that would be the first thing I'd look at. But also like what type of properties are you cold calling and are you door knocking? So is it just you're driving by and you see a house that looks distressed? Is that you're driving by and you see a house that looks vacant, so then you're, you know, finding their information and calling them. So one thing that has worked very well for me in the last couple of years is older people's homes that either passed away or they've gone to assisted living or gone to live with a family member. And until we I just read that question, I didn't even think about this. But in the last two years, four or five of the houses that I have bought have been from somebody that passed away or moved out to like assisted living or a nursing home. And if you include my sister, that that's six houses actually. So I think really defining what your list is too as to what types of properties is it properties in pre first foreclosure, is that properties that the. There's an owner out of state. So for me, what has been working and I haven't even realized it is actually going after homeowners who maybe are moving out, going to assisted living. And a lot of these came from just word of mouth. Like people know that I buy houses, people reach out to me. You know, my dad is, you know, going to assisted living. We have this property, do you want to come and see it? And actually the property I'm sitting in right now was word of mouth. The, the mom had moved in with one of her kids and I was able to purchase the property off market from that too. So really define what you know, what you're going after, like what type of person, what type of seller you're looking for. Because if you just do all across the board, it's going to be a broader net and it's going to take more of your time and more of your money to contact all of these people. But if you can kind of narrow down the actual seller you're looking for, that will help.
- [06:58]
B
Yeah, I, you made an important point actually about like where we're at in the market cycle. And I think right now the MLS still does have a lot of good opportunities. Last year that we bought was right off the mls. You know, we got it at a pretty, pretty steep discount. So the MLS is definitely still an option. But I think the last piece here is maybe you're just not good at cold calling. You know, maybe you're just not good at going direct to seller. Right? And not everyone is. And if that's the case, then maybe just focus on networking with the people who are good at that. We recently interviewed Dominique Gunderson on an episode and the majority of her deals come from wholesalers that she's networked with. And she just super hard hit the local meetups in the area that she was investing in looking for wholesalers. Now she gets a lot of her deal flow from those relationships. So you could do the same thing. You know, you could continue to invest time, effort and energy in trying to specialize or improve your skill set when it comes to going direct to seller. Or you could just say my time is better spent networking with wholesalers who are doing that work for me. Or I know I have a friend, Brian Davilo, who's based out of Vegas and he wholesales both in California and in Vegas. And the majority of his deals comes from networking with agents. So he just cold calls agents all day and he says, hey, do you guys have any off market deals that look like this? Things maybe don't make sense to go on the mls. And that's how he gets a lot of his deal flow. So you can just bypass the work of trying to find it yourself and go network with people who are already doing that and they can probably do it better than you can.
- [08:31]
A
We're going to take a quick break, but when we come back we're going to talk about what happens if you have negative cash flow. We'll be right back. Need fast, reliable funding for your next investment Property? Join over 17,000 real estate investors nationwide who trust KABI for quick, flexible financing. Whether you're flipping houses or growing your rental portfolio, Kihave offers high leverage loans and closings in as few as seven days, including Fix and Flip, New Construction and DSCR Rental, all through an easy online platform that you can access 24. 7. Get pre qualified in minutes@kiavi.com biggerpockets and turn your next deal into reality. Terms and Conditions apply. Visit kiavi.com for details. NMSID Number 11252:07 if you own a.
- [09:17]
C
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- [10:37]
B
All right guys, welcome back. All right, so let's go to our next question, which also comes from the Bigger Pockets forums. And this question is from Vin. Vin says after hearing a lot of episodes about negative cash flow, I've got a question. I'm currently living in my primary residence and I'm planning to purchase an investment property and it's going to be negative cash flow. It's in the Bay Area of Northern California, very expensive market. But I am of the opinion that as long as the rent on the investment is at least going to be greater than my current primary residence mortgage, it can still be considered as a positive cash flow investment. The investment property is going to be in a much better location than my primary residence. I might be totally wrong in my thinking. What am I missing? So let me just make sure that all of us here are understanding what the question being asked here is. So VIN is saying that they have a primary residence already and for round number sake, let's say that their primary mortgage is $1,000. They're going to buy this investment property and say the mortgage is $2,000. Right? So double their primary residence and the rent is call it $1500. Okay, so we have their primary residence at 1000. The rent's being collected at 1500. The mortgage on this investment property at 2000. Right. Their question is does it make sense to buy this investment property that is technically losing $500 per month, but it still maybe makes sense because 1500 is more than what they're paying on their primary residence, which means that money can be used to offset the $1,000 that they're paying and still have some money left over. It's a good question and I get the train of thought they're trying to follow, but I think they're looking at it from the wrong perspective because even if they're making money on this investment property, they're still losing money at the end of the day, right? They're, they're still in a worse, and I'm using air quotes here, financial position than if they just didn't buy the investment property from, from a purely cash flow perspective, I do think that there's nuance to this. And Ash, I'm curious what your thoughts are as well. I do think there's nuance because it does depend on what your personal financial situation is and what your motivations are for investing in real estate. If you're buying this because you believe strongly in this area that you're buying and that it's going to appreciate incredibly well and your goal is just to have this paid off in the next 30 years. So you've got a, you know, maybe a multi million dollar property in the Bay Area of California that you can then use to fund your retirement and you've got maybe a lot of active income. Maybe you're, you know, you work in tech, you get a lot of, you know, active income from your day job. So the, the whatever 500 bucks a month that you're losing is negligible, then sure, do the deal because it makes sense for you. But if your focus is I'm doing this because I, I want income or I want to maybe subsidize my living cost, this is a bad deal, right, because you're, you're losing money, it will make more sense maybe for you to go out and buy a duplex or, or fourplex and house hack or a house with an adu. So that way you really are subsidizing your living cost and not trying to wrap it into an investment that's losing money. So that's, that's my initial take. Ash, what are your, what are your thoughts?
- [13:51]
A
Yeah, I think the point that I would add is that, you know, they did say this investment property is in a better location. So maybe there is more opportunity for appreciation that, okay, you want to invest $500, you know, extra every month into this property, knowing that in five years you'll be able to make that money back when you sell the property. Plus, you know, Make a ton more money off of the appreciation. And you know, David Green talks about this as to like breaking even and how appreciation is to play. And there's a bunch of other investors that actually followed this where they're okay paying into these negative cash flow properties because even though they're paying a couple hundred dollars each month, they are banking on appreciation that in several years, five years, 10 years, they'll be able to sell the property, recoup all of that money they invested it into it, plus make a bigger return and in cash out then. So that could be the thing. But you really have to define what your why is why you're investing if you can afford to cover that additional amount and you want to for the long term. I mean, right now we're not seeing like if you were to buy a property right now, we're not probably not going to see huge appreciation in that property from today to next year today just because we're seeing it become a buyer's market. And even properties that I saw, you know, up for sale a year ago, some of those are still sitting, including one of my properties. So I think if you're able to afford to hold the property long term and continue to pay into it and think about it, you also have to cover any capital improvements that come up, any repairs and maintenance that come up, you have to cover any vacancies. Now you're going to be paying your mortgage and the mortgage on the investment property. So just remember there is more that goes into it than just that $500 in negative cash flow a month to ash Incredible point.
- [15:54]
B
And I would encourage Vin who asked this question to run this deal through the Bigger Pockets calculator so that way you can make sure that you're really accounting for all of those other ancillary expenses that maybe you hadn't considered because maybe that Delta is a lot bigger than what you initially anticipated.
- [16:10]
A
Okay, we're going to take our last break here, but when we come back, we're going to get into what you should actually know before getting into real estate. We'll be right back. Need fast, reliable funding for your next investment property. Join over 17,000 real estate investors nationwide who trust Kabi for quick, flexible financing. Whether you're flipping houses or growing your rental portfolio, Kihavi offers high leverage loans and closings in as few as seven days, including Fix and Flip, New construction and DSCR Rental, all through an easy online platform that you can access 24, 7 get pre qualified in minutes@kiavi.com biggerpockets and turn your next deal into reality. Terms and Conditions apply. Visit kavi.com for details. NMLS ID Number 1125207 Most investors spend.
- [16:59]
C
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- [18:28]
A
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B
My motivations for investing in real estate are in priority right now. Cash flow, tax benefits, appreciation.
- [20:17]
A
I'm going to add one more to your list. And as in like time, like how much time I have to actually put into the property, into the deal, like the operations, things like that too.
- [20:29]
B
Absolutely. So for me, as I'm analyzing different potential opportunities, it's against that lens of will it generate a good amount of cash flow? Will I be able to perform a decent cost segregation study on this property and will it give me some meaningful appreciation so that you know, in 30 years when the loan is paid off that it's appreciated at least to some extent? And since I have very strong clarity on what my motivations are, for me, good deals are easier to spot than maybe someone else who doesn't have that clarity. So like a killer deal for me right now, north of 20% cash on cash return is probably really good. Right. If it's in the single digits, it's probably not worth my time. Bigger deals typically give better cost segregation tax benefits versus smaller deals. Right. Super, super rural cities aren't going to give me any appreciation. Whereas maybe ones that are in, you know, two or three hours outside of major cities or in kind of maybe more popular tourist destinations will give me that. So that, that's a good deal for me. What, what about you, Ash?
- [21:32]
A
Yeah, I mean the three that you said, plus the, the fourth thing I think are the great metrics of understanding. I'm definitely will take a little bit less cash flow if I can be more hands off on the property too. So like there's that give and take of like, okay, how, how far do I want to take the scale to increase my income? But also that means I'm going to be putting way more time, energy and effort into the property too. So I try to find that like happy medium, but also another metric or measurement that I use that isn't just like cash on cash return or anything like that. It is when I'm looking at the property. What else could I do with that capital? So if I'm putting $50,000 into this deal. What are my other options that I could do with this? Could I invest that in any other way? Could I, you know, and not even like could I buy another property or invest in a syndication or things like that, but are there other ways to grow my business? Like, could I take that 50,000 and say, you know what, this year I'm actually going to hire a project manager and I'm going to have him work for me and you know, give it a year and see if he's able to take my rehab projects from here to, to here to the ceiling, you know, like 10 exit. And so I think that is like a big thing I think about too are what other, what are the other opportunities I have? And then also just like along with the time commitment, the stress, as in, like, is this going to be like, cause me a lot of stress? Am I confident in what I'm going to be doing in this deal? Am I confident I can take it on? And like a big piece of that is I don't like to take risk financially and stress myself, stretch myself, because it stresses me out. But I, I, and I think that's like a big piece of it too. Like I could have a good deal, but in order for me and my situation to take that deal down, I would have to stretch myself financially. I'm probably going to say no and not take that risk. Even though the reward could be amazing and great. I don't like that feeling of being stressed financially. And I, that would be something that I would avoid in a good deal.
- [23:54]
B
Yeah. And I think part of the question too is just like, what else should I know? So we just talked about like, hey, what's important to you? How do you, how do you determine what's a good deal? But I think you should also just have like a good foundational knowledge of the different things that go into being a real estate investor. And at a high level, if we were to kind of split it up in two different chunks, there's the acquisition, which is choosing a market, getting approved for financing, finding deals. Right. All of that is part of the acquisition buckets. You got to have some foundational knowledge there. It's the kind of intermediate what happens when you find the deal. So negotiating your, your purchase agreement, your due diligence phase, you know, what does that look like from the, you know, going under contract, actually closing on the deal and then it's what happens afterwards. It could be just the management. If it's something that's more turnkey, it could be the rehab. So just having some sort of working knowledge in all of those big buckets I think are important to give you the confidence to be able to step out and take that first step of actually getting that first deal done.
- [25:01]
A
Well, thank you guys so much for joining us today for our rookie reply. I'm Ashley, he's Tony, and we'll see you guys on the next episode.
- [25:10]
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 let's talk about a real estate backed investment with major tax advantages. Car washes PBR's Opportunity Fund offers accredited investors access to a high margin, recession resistant industry with passive income tax efficiency and significant upside potential. With operations in prime locations using best in class technology. Managed via a vertically integrated team, this fund is designed to deliver strong, stable returns. Backed by over $1 billion in assets under management. PPR has provided passive returns to thousands of investors since 2007. Don't miss out. Learn more today at biggerpockets. Com pprcar. That's biggerpockets. Com pprCar.