2 “Slam Dunk” Small Multifamily Deals in 2023

David:
This is the BiggerPockets Podcast, show 817.

Dan:
I started as a poker player. So negotiation is actually my favorite part of being a real estate agent. I love it. When you’re thinking for yourself like, what is this property worth? And you’re evaluating it for yourself, you’re looking at properties completely different than an agent that has never bought an investment property or maybe even hasn’t bought a property themselves at all. They don’t understand how to value the property and where the price should be because they don’t know what it’s like to have skin in the game, and they don’t know what it’s like to have skin in the game over and over and over again.

David:
What’s going on everyone? It’s David Greene, host of the biggest, the baddest, and the best real estate podcast on the planet, aka The BiggerPockets podcast. Welcome all of you. We’ve got a great show for you today. I am joined by my co-host, Rob Abasolo, who’s looking svelte, fit, trim, handsome, dark, well-dressed, well-manicured. Like can you just slow down this glow up that we’re all getting to experience in real life?

Rob:
Yes. I’m now changing my title to co-host with the co-most.

David:
Hmm.

Rob:
Yes. Yeah. So, if you could start referring to me as that, that’d be awesome.

David:
This is a true marketer at heart because that’s incredibly cheesy, yet will still stick in my brain. Sticky cheese, the Sticky Cheese Method with Robert Abasolo, Marketing Co.
In today’s show, you’re going to hear all about two popular markets, Chicago and Houston, as well as agents that work in those markets that can give you the scoop on what to look for, what to avoid, and how to approach buying real estate there. We talk a little bit about cashflow versus equity, identifying up and coming markets and the right approach to take in a challenging market.
Rob, what do you think investors should keep an eye out for on today’s show?

Rob:
Honestly, I think it’s a really great educational episode for anyone that is new at working with real estate agents in general because as you’ll hear in today’s episode, you’re going to hear how they provided value, how they were able to save deals, how they were able to price properties, and it really is just nice to know that there are realtors out there that are really thinking about your deal from every angle. We talk about owner financing and how not all realtors are down to have that conversation with the sellers and the importance of having someone that’s willing to go at bat for you.

David:
That is true. Having the right agent in your quarter can make a huge difference in having a portfolio that scales or having a portfolio that fails. Today’s quick tip is simple, head over to biggerpockets.com/agentfinder to match with an investor-friendly agent now. It’s fast, it’s free, and it’s easy. That’s biggerpockets.com/agentfinder and I am on there too, so hopefully, you all go find me and click on my beautiful bald face so that we can get in touch. All right, let’s get into today’s show.
Dan and Jodi, welcome to the show. So nice to have you two here today. We’re going to get into some interesting markets, Houston and Chicago. We’re going to run through each of these markets and then we’ll get into some recent deals that you two have helped close. Then we’ll talk about what made those deals work, and all of our listeners can use these insider tips and secrets on their next deal too. So we’ve done these before. They were a hit. We’re going to be learning all about what is available in Houston and Chicago.
Dan, we’ll start with you. A little bit about your background here. I understand you’ve been in real estate for 20 years. You’ve been an agent for five. You were full-time in learning development and training agents, started flipping with dozens of houses being flipped over the years. 10 units total. Made up of single family and multi-units. And you are a poker player who used your winnings to start in real estate. Did I miss anything there?

Dan:
No, you got it. That’s right.

David:
Awesome. All right. Jodi, you’ve been in the game for 20 years. You own a boutique brokerage where you have 12 agents that work for you, a property management company with home design and remodeling, a little bit of everything. 22 single family homes, a couple commercial properties. You’ve got historic homes that have been converted into office space. You flipped 30 houses, and one of the agents on your team was an investor that you met through BiggerPockets and you helped them acquire their first few properties. They later became a full-time agent on your team, and now you’ve got a full brokerage. Did I miss anything there in your story?

Jodi:
I think that pretty much sums it up.

David:
Awesome. Well, it’s nice to have you two here. Now that we have a little bit of background on you, let’s get into your markets. Dan, I’ll start with you. What are some of the long-term benefits to Chicago?

Dan:
Well, Chicago really didn’t go through the huge growth spurt that a lot of the other markets did. We increased about 3%, 5% depending on what part of the market we’re in a year. And some of our areas are just now returning to pre-recession prices. So that tells you that while our prices have gone up, there’s still a long way from what you’ve seen in the other markets. So there is incredible opportunity to appreciate price, and as you always say, there’s going to be a lot of appreciation in rent as well.

David:
There you go. What about population shifts? What’s the economic engine that’s driving Chicago?

Dan:
So, like every northern city, there’s always people as they get older, they tend to move to warmer climates. But for the most part, our population has done really strong work. Now, getting all the people that thought that they could live forever in Tahiti and work remotely, realizing they’re going to have to go in the office, they’re returning and we’re starting to see all that happen.
So there’s a couple of things. Number one, we have major hubs here like McDonald’s and Motorola and Allstate, Grubhub, and then United Airlines. And United Airlines is important because they have a hub here. And as part of that, there’s a huge consultancy part of Chicago. So, we have all the big companies like Deloitte, McKinsey, and Bain. And those people tend to be nomadic unless they take a full-time job that’s going to last forever. Most of those people expect to be here for a short period of time. And that period of time is one to three years. That’s what they expect. So they’re going to be renters even though they can easily afford properties.
But companies like United, when you have a hub at United, you think of people that the captains of the airlines, but you also have all the people that are just getting the snacks to the cart and there’s just tremendous opportunities. So whether it’s white collar or blue collar, there’s great paying jobs all over the city.

David:
But you’re seeing a tenant base is what you’re getting at. These are people that need to rent?

Dan:
Yes, exactly.

Rob:
And tell us, Dan, why should people consider Chicago?

Dan:
Well, Chicago is an extremely popular city to live in. We recently had the number one ranked restaurant. We have lots of world-class restaurants. It’s the place that improv lives and it’s the number two theater city in the United States. A lot of people move here when they graduate from college in the Midwest because it is the New York of the Midwest. There’s endless opportunities. The public transportation system is incredible. You don’t have to own a car here, but you can also own a car and find parking here. So it’s a great combination of both. So there’s a lot of reasons that people want to live here. So you’ll always have people that want to live here to buy and to rent.

David:
What would you say are the specific strategies that work best in the Chicago market?

Dan:
Anything works in Chicago. When you think about short-term rental, Rob, I loved your @BPCon this year was great.

Rob:
Oh, thanks.

Dan:
When you talked about short-term rentals, just the creative ways in which you can do it, and I think that helps you stand out because there is a lot of competition in short-term rentals, but you should know that the city ordinance to say that you do have to live in the property. So whether it’s a multi-unit property or single family home, you have to live in it. So it’s not something you can easily do out of state. So most people are moving to midterm rentals.
Obviously, I’ve flipped a lot of properties. It’s really easy to flip in Chicago because not only do we have tons of distressed properties, Chicago is unique in that on the same street, you’ll have a property that’s $350,000 sitting next to a property that’s $850,000 around the corner from a property that’s $1.2 million. So those other properties make the appreciation happen very quickly if you make the right changes to the property.
But I think the bread and butter in Chicago, the thing that most people should focus on, two to four unit properties. We have tons of them in Chicago, but they’re getting torn down every day because as people are looking for places to build single family homes and convert into condos, those are the best ways to do it without having to build completely from scratch. So, if you get into a two and four-unit now, it’s going to be become more and more valuable because it doesn’t make any financial sense to build them, they were built a long time ago when labor and materials were cheap. And if you were going to spend that amount of money on a property now, you would build a single family home or you would be able to hide in rentals or high-end condos. You would not build what’s there today. And there’s 1200 for sale right now in the area. So, there’s lots of opportunity.

Rob:
Awesome, man. Well, thank you for the snapshot. And before we move on to Jodi here, just wanted your take on the pizza, yay or nay?

Dan:
I am a huge fan of deep dish pizza, but you should know that true Chicagoans don’t actually think that’s their pizza. They have a different style called pub pizza, which is actually cracker thin. That’s what they think is their pizza. So, the people that think that deep dish is a Chicago local pizza, it’s really people that transplanted here that fell in love.

Rob:
Oh, interesting.

Dan:
But I love it all.

Rob:
Yeah, I did not know that. I’m a New York sliced guy, but occasionally, I do like to eat lasagna, and that’s where the deep dish comes in. But yeah.

Dan:
Yes, exactly.

Rob:
I think it’s all right, I got to try that. Well, thanks, man, I appreciate it. So Jodi, I’m going to ask you the same question. Can you tell us a little bit about some of the long-term benefits of investing in Houston?

Jodi:
Sure, absolutely. So I think some of the long-term benefits, and we’ve got a very favorable tax environment here in Texas, both for investors, property owners, as well as businesses. We’ve got good steady appreciation over the years. It’s a very landlord-friendly state. And we’ve got a very strong rental demand here in Houston. I know we’ve just had a 19% increase in rental properties over the last year, 3% increase in price. I think our average rental price now is about $2,350. So it makes it a very lucrative location for investors to look at long-term buy and holds.

Rob:
And what are some of the population shifts in Houston and some of the economic engines in the area?

Jodi:
So Houston is the fourth-largest city. Personally, I’ve experienced a ton of out-of-state people moving into Houston. I think the statistics are, we’ve had about 85,000 newcomers to Houston over the past year, two-thirds of those being people moving from other states. I think on an average over the past several decades, Houston has seen an increase of about 2% population. Some of the big economic sectors in Houston. Of course, everyone knows us for oil and gas. However, there’s a huge healthcare. We’ve got the number one largest bed center in the area, so that’s a big driving factor there. We’ve also got aerospace and biomedical research, tons of job opportunities in Houston.

Rob:
Yeah. Yeah, for sure. Oil and gas is a big one. NASA, like you said, and then overall, not specific to Houston, but we also have Whataburger and Bucky’s here, and that’s just an overall economic driver for Texas in general. Other than those two amazing things, why should people consider Houston?

Jodi:
Well, I think they should consider Houston based on a couple of what we’ve discussed in regards to our population, our good long-term appreciation rates. We’ve got a vibrant art and food scene, which is very important, low cost of living. Houston’s a very diverse community.

Rob:
And did you mention that the average rent in Houston is about $2,300?

Jodi:
Yes.

Rob:
Okay. Yup.

Jodi:
About $2,300 in Houston, yes. That is about a 3% increase from last year. Single family homes have jumped 19% year over year with the average lease price climbing 3%, which is now at $2,363, which is a record high. There’s also been a total of $4,396 leases were signed compared to $3,690 in July, which is the highest volume of single family leases that have ever been recorded in Houston history.

Rob:
Wow.

Jodi:
So we have a very strong rental market. The demand is there.

Rob:
It is. I mean, I grew up in Houston from zero to 18. I feel like it’s just such a different city 10 years later, which I guess you could say about really any city, but being from here and actually returning, it is just crazy how much development. And honestly, yeah, the real estate seems to be growing at all times. The rent prices definitely seem to be so much higher every single year. What strategies are currently working here?

Jodi:
I see I’ve got a lot of clients that are interested in the long-term buy and holds. Of course, with interest rates increasing the way that they are, it is a little more difficult to cash flow, but I’ve got a lot of investors focused on more long-term appreciation. And so, some of the metro areas in Houston, areas that have very good school districts, I have noticed I’ve got a lot of clients that are interested in that for the long-term appreciation aspect.
I think Houston is such a diverse area. It’s so large that you can really focus on multiple different strategies just based on what the investor’s goals are. So, I’m seeing a lot of newer investors that are purchasing properties, house hacking, or inside the loop, possibly looking at properties with garage apartments, doing short-term rentals there in order to offset those mortgage payments and be able to get in oftentimes with a little less than the typical 20%, 25% down payment for investment properties of owner occupying them. So I think there’s multiple strategies.
Of course, we also have older homes. So, doing the BRRRR strategy. Over the past few months, I’d say the majority of my clients are looking for the long-term buy and holds and small multifamily anywhere from two to four units, and we’re having great success there.

Rob:
And then when you said the loop, what do you mean by the loop?

Jodi:
I’m sorry. Inside the 610 loop, so that’s more inner city. And then you’re going to have, there’s three loops in Houston. And you’re going to have the 610 loop and then the Beltway, which is a little more suburban and far out, which used to be considered far out, is the Grand Parkway loop where you’ve got all the more suburban areas. And those are some of the areas that are really good for long-term buy and hold. Good appreciation, great school districts.

Rob:
Very cool.

David:
So I want to ask each of you a question that doesn’t get brought up a lot in real estate, but I think it’s a question that needs to be asked. The last decade, we’ve primarily invested for cashflow. Podcasts have described cashflow as the reason to invest. This has been the right motivation is you should invest your money to get cashflow. And if appreciation happens or if rents go up, so much the better, but you need to really rely on cashflow. And Jodi, as you mentioned, rates have gone up, but prices really haven’t gone down. Supply and demand is out of whack right now. There’s still much more demand than supply. So cashflow has been largely eaten up in a lot of markets, but prices haven’t come down to fix that.
What are your thoughts? We’ll start with you Jodi, on if a buyer is not going to get cashflow, are there certain markets they could focus on within Houston where you think rents will go up, So eventually they will? Do you think that there’s a strategy where they should be okay with breaking even if they believe the property values are going to increase? Or do you think that investors should just stop buying properties unless they cashflow really strong?

Jodi:
I think if a property makes sense, and especially buying in some of the areas that I had mentioned, some of the suburban areas where you’ve got steady appreciation and I think it’s always a good idea to buy if you can have someone else cover your mortgage and help build equity. And so, I would suggest some of the areas, some of the suburban areas, I’d say like Katy, Cypress. The school districts are the driving factor. You’ve got a lot of people moving from out of state specifically looking for those areas, wanting their kids in good schools. And so, you’re going to have long-term renters, good steady appreciation on average about 7% per year. So I am seeing a lot of investors now that are diversifying their portfolios and they are perfectly fine with breaking even and focusing on areas that have good long-term appreciation. That is something that we assist in guiding our clients and showing them the statistics in specific areas and giving them their feedback of which areas are ideal for that.

Rob:
Yeah. Houston is a really interesting city in that it is 80 cities all clustered around one big city. It feels like every suburb of Houston is just its own little metropolitan area. Like Cypress for example, I think that’s a really great booming area in Houston. But five years ago, it didn’t look like that. It was just fields. And you drive by Cypress now and it really is its own living, breathing city. I agree though I think a lot of those cashflow opportunities I think do tend to come from some of the suburban areas. It’s interesting how it is seemingly tougher to break even.
I’m actually working on a seller finance deal in Houston right now at the moment, and it loses money. And the seller proposed the terms to me. I said, “Hey, this loses money.” And he was like, “Well, the thing is with real estate investing, sometimes you got to lose money, but you understand that you’re building equity over time.” And I was like, “Well, yes, but I don’t like to walk into deals where I’m losing money automatically.” So we’re trying to work out terms to break even, but it definitely gets tougher in Houston specifically because the property taxes in Texas seem to be pretty high.

David:
Dan, what about you? What are your thoughts on investors that are having a hard time finding cashflow in the Chicago market? Do you think that there is an argument to be made for taking maybe a delayed gratification approach if the fundamentals are strong and you believe you’re going to have rent and price growth, that it’s okay to invest in those markets? Or are you like, “Hey man, cashflow till I die. That’s the only reason to invest. If you can’t find it, just don’t buy.”

Dan:
I’m really glad that you brought this question up and you guys had a great interview recently with Barbara Cochrane where she talked about she expects to overpay for properties and she’s thinking long-term. When you think about year one of a rental property, I just don’t think it makes any sense. Real estate to me is a long-term process and I just don’t think it’s that hard. You buy a property, your tenant pays down your mortgage and eventually, you are going to make a lot of money. If you’re not making a lot in the beginning or even breaking even or a little below it, eventually you will. The rents will go up. The price you’re paying for the mortgage will stay the same.
As somebody that invested in properties not knowing what he was doing in the beginning, I started before I even knew about BiggerPockets. We didn’t know what we were doing it, and here we are years later, our properties are worth two or three times what we paid for them. And we’re cash flowing and everything. I just think if you focus on short-term today, that was a strategy for 20 years ago. That’s not the strategy for today.

David:
That’s a great point. What worked before doesn’t always work now. And let’s give a disclaimer. Rob made a good point. This does not mean buy a property that bleeds two grand a month hoping that it goes up. That is not what we’re saying. We are talking about if fundamentals are strong, businesses are moving into the area, there is not enough supply for the demand that you see. Let’s assume Cypress, I know nothing about it, but hypothetically speaking, this is an area everybody wants to move into. The school scores are high, wages are higher in Cypress than they are outside of it. You have every reason to believe that this area is going to grow at a faster pace than the others around it, but wages haven’t gone up to the point where the tenants can afford to pay enough for the rent to make it cashflow. Right?
There is an argument to be made, I think, that buying in better areas will make you more money over time, but they may not crush it right away. That is not to say buying in a war zone and hoping that rents go up is a good strategy. I want to clarify that because it seems like there’s always someone, no matter how much I try to make this clear, that finds a way to be confused and accuses me of saying, “David Greene said cashflow doesn’t matter and we shouldn’t even analyze properties, and you shouldn’t even look at it.” That’s definitely not what we’re getting into. But I do think that some of the better markets like what we’re talking about today, have more competition for the homes which drives the prices up, which does eat up a lot of the cashflow, unless you find that unicorn that we’re always looking for.
So ,let’s move on a little bit here. Each of you has a deal that you’ve done. Jodi, I’m going to start with you. Tell us about the last resort.

Jodi:
So this was a property that one of my buyers located. It had been in contract previously. Typically, when I see that, I like to reach out to the listing agent, get some background information, see if they have any current inspections on the property, just try and figure out any insight that I can get that would be beneficial for my borrower going in. Got under contract, I think we negotiated after reviewing the inspection report. So she had a good idea of knowing what issues were going on with the property, which it was pretty much renovated, not many issues at all. We were able to negotiate about a 20K price reduction and got into contract. Everything was going smoothly. She opted to have another inspection report done. We negotiated a few repairs there during the option period.
Moving towards closing about three days prior to her financing contingency, found out that the lender had miscalculated her monthly incomes. Let me backtrack a little bit. She’s self-employed so this was a stated income loan. So, found out she wasn’t able to get approved. At this point, she had already sold her home in Austin, packed up and moved to an Airbnb waiting for closing in Houston.
So, we went to every other lender. I’ve got a good resource of lenders that I’ve worked with over the years and basically, everyone said no, they didn’t even know why the first lender approved her. The funds just aren’t there, she’s not going to be able to get it approved.
That initial lender had suggested going in with basically private moneylender or hard moneylender. Her rate was just jumped up to 12%, wasn’t going to make sense. I sat down with her, said, “Look, I know you really want this property, but you’ve got to take emotions out of it. Put your investor cap on. It doesn’t make sense.” Her intention was to occupy one side of the property and short-term rental the other. It was still, with that interest rate, going to make it very difficult for her to cashflow anything.
So, as a last resort, I reached out to the listing agent, was able to negotiate with her, and the seller agreed to seller financing with some pretty favorable terms. The terms were actually about 2% lower than the initial rate that she was going to go with, with the stated income loan.
So, we were able to negotiate that. Another hurdle came up that found out there were open permits on the property and the contractor that had done the renovations walked off. Seller couldn’t get ahold of them. And if anyone knows, working with permitting in the city can be difficult at times.
So at that point, we stepped in. I also have a construction design remodeling company. Got my project manager involved. They were able to go to the city, pull some strings with some people they know, and we were able to get those permits passed. And we actually closed on that deal about two weeks ago, and she has had it leased out on short-term rental for the past two weeks. She’s had full vacancy.
So it was a deal gone south that had many hurdles, but we were able to shift gears when needed and use our resources to actually get a more profitable deal for the investor as opposed to what she was initially going in at.

David:
You had me at pulled some strings with the city to get the permits approved. You just became my go-to Houston real estate agent. Congratulations, Jodi. You’ve skipped to the front of the line.

Jodi:
Well, it is hard to do. But at the end of the day, I mean what we’ve learned and we’ve learned in many municipalities in working with permitting, ultimately, they just want the job done right. And if you do it right and you do it the first time and you follow the guidelines, it’s not that difficult. So, we’ve got a good reputation working with many of the cities, and they know if we’re on the job that it’s going to be done right the first time. And so, not necessarily… no money under the table, anything like that, but just representing our clients to the best of our ability and getting the job done.

Rob:
And when you said that she was booked full occupancy, what do you mean by that? Do you mean that she listed on Airbnb and every night was just getting booked by guests?

Jodi:
Yes. Yes. For two weeks. She can’t believe it. She is a newer short-term rental or Airbnb host. She had her last property in Austin and she said she had about 50% vacancy there. So she’s new and she’s been booked for the past two weeks, so she’s super excited about that.

Rob:
Cool. Very fun. Well, how did you find the deal?

Jodi:
It was on MLS. And as I mentioned, in this market, just well, given the past year market, you had to be a little more creative to find deals. So I always like to look at properties that have fallen out of contract. Oftentimes, you’ve got sellers that are motivated, they may be in contract for something else. And so, when I see that something’s fallen out of contract, I like to jump on those and try and get it locked up as quick as possible for my clients.

Rob:
Awesome. And how did you help with the due diligence, the team building and some of those other aspects within the deal?

Jodi:
At first, I assisted in recommending our inspectors, lining that up. As I mentioned, our contracting company came in and they were able to get the permits cleared, which the seller was unable to do. I also got her in touch with an attorney that was able to structure the owner financing terms and draw up the paperwork. Also connected her with a property management company that she hasn’t employed yet because she’s been doing the management herself for the short-term rental, but that she would possibly, in acquiring her next one or other properties, she would help utilize.

Rob:
And you talked about it with some of the connections that you were helping to make, but were there any other ways that you demonstrated value to your client?

Jodi:
I believe just not giving up and being persevering over the hurdles that we encountered. Many people would just walk away, but ultimately, I mean I make a connection with all of my clients. And at this point of the transaction, I wasn’t giving up and I was making sure that she was going to be able to get this closed no matter what. So I think thinking outside of the box such as owner financing, that that’s something that I would say retail agent may not consider, but as an investor myself, I know that where there’s a will, there’s a way, and you don’t know unless you ask. So first, suggesting it and then putting her in touch with the correct people that were able to structure the deal and get it closed. I think that’s a way that we were able to turn tables on, what could have been an ugly situation and made it profitable for both her and the seller.

Rob:
In general, because I agree, I think any realtor that is willing to go to bat on the owner financing side, an amazing, amazing trait and characteristic. Do you feel like in general, most realtors are pretty, not anti, but won’t really ever take that to the seller?

Jodi:
Absolutely. I think most realtors, just because they don’t necessarily understand it. And I think a lot don’t want to come to their seller and propose something that they don’t understand or can’t educate them on. So, I have encountered many that do not want to. And then, as I educate them on how it can be most beneficial to their seller, as well as the buyer, I’ve been pleasantly surprised that others will. I believe that they need to be educated at first and know how it can help all parties involved.

Rob:
Awesome. Well, keep fighting the good… Now, I know who to come to for all my owner finance deals.

David:
All right, Dan, let’s talk some Chicago real estate. By the way, how come you don’t have an accent? Why is it that I go to cities? I just got back from Boston, I was there for the UFC fights. 20% of the people had an absolute iconic Boston accent like you hear in movies, then 80% of them just sounded normal. How does that happen?

Dan:
I was not born in Chicago. I actually was born in Indiana, so I have an Indiana accent.

David:
Okay, you are off the hook. What about everybody else that lives in a big city but doesn’t have the accent?

Dan:
Well, it really depends on the community you’re from. You mentioned this about Houston, but Chicago, it is really a collection of neighborhoods, and there are neighborhoods, and you live and work in that neighborhood, and everybody sounds the same. And then, in a different neighborhood, they sound completely differently. We have Polish neighborhoods where people only speaks Polish, and we have lots of neighborhoods where people only speak Spanish, and then we have lots of neighborhoods where people sound like Saturday Night Live Skid.

David:
That is a sound answer. I threw it at you out of nowhere and you gave a very good explanation. You also highlighted what I should have thought about, which is not everybody that lives there was born there and grew up in grade school, so there could be some transplants that I should have thought about. But the Saturday Night Live Skid is exactly right. It was actually my first time visiting the East Coast. And I kept thinking, every time I would talk to someone with a really thick accent, they’re pretending to be a character out of a movie in Boston. There’s no way that they actually talk like this all the time. And then I eventually realized, “Oh no, it really is that accurate.” They don’t like Rs. The letter R gets dropped out of everything they say. They’re just not fans of the R. All right, so tell me about Logan Square.

Dan:
So I had a client that had called me up from the Agent Finder on BiggerPockets. And I talked to him, got a sense of what he wanted to do, and got him qualified with a lender that works with multiunit properties, and felt really good about him. And very rarely, but every now and then, I find something on the private listing, which is just absolute slam dunk. So I called him up, and I said, “We should do this.” People don’t know private listing or listings that you can’t see on Zillow or Redfin that only brokers that know how to access them and make them available to their client, can show them. So I called him up.
And so many people that are listening to this podcast are listening for years and are afraid to buy something. And I found that when I offered him that, that he was suddenly dragging his feet nervous because it was the first thing I was showing to him. And I said, “Trust me, this is an absolute great deal.” And he looked at it and he loved it. They had redone the whole thing.
But David, as you know, a lot of the people that sell multiunit properties have no business doing it. They don’t know how to price them, they don’t know what they’re doing. And he just listed it way below market. But because it hadn’t hit the public market yet, there wasn’t much competition. So I’m begging this guy to get the offer in and he’s thinking and thinking. And finally, we get it in, and they said, “Oh, we just got another offer that’s much higher than that, and so we’re going to go that way.” So we lost out in it.
And then, he spent the next day going through, looking at his numbers and going, “Oh my God, I really screwed up, didn’t I?” I said, “Yeah, you really missed out on something.” And I don’t tell people this, but when there’s a multiple offer situation, I don’t tell them because I don’t get their hopes up. I’m always calling that agent saying, “Listen, if anything’s going wrong with this deal, give me a call. We’re going to get this done. It’ll be a sure thing.” Because a lot of people when they bid over asking price, once they do that, then they start to regret it and they have second thoughts about it, and then they start renegotiating the price. And so, that was happening. He called me up and he said, “Is your buyer ready to go? And I was like, “I hope so.” And I said, “Yes, absolutely.” I called him up. And by then, he was really excited for the deal. We got it under contract and everything looked great.
So this is a unique property. It was a two-unit property in Logan Square. And Logan Square is a neighborhood that is appreciating like crazy. There’s great restaurants and bars and breweries. People want to live there. So there’s lots of opportunity if you get a property there to find renters. But what was unique about this property was there was a top floor and then the bottom unit had two floors. And the people that lived in it were brother and sister. And in order to give themselves privacy, where the stairs were, they put a piece of drywall to separate them so they had privacy. And so, when the appraiser came by, he said, “This is not a two-unit property, it’s a property that has two pieces that aren’t connected.” And he couldn’t understand. All we do is take down a piece of drywall and it’d be fine. So he did not appraise at value.
So I had just promised this agent that we could get this done and now suddenly, it’s not appraising. But fortunately, the lender I worked with is really creative and we came up with an idea and we went back and I said, “Look, can you get the seller to take the drywall down? We’ll redo our loan so we get another appraiser out.” Because usually if you send the same appraiser out, no matter what you do, it’s not going to appraise above value.
So they had to, at cost, take down the drywall, clean it all up, make it look great. We sent out another appraiser. And a nice twist of fate, it appraised at $60,000 above what he was paying for it. And he got it. He got $60,000 of equity from moving in, and it’s cash flowing from day one. He’s really excited.

David:
You said something earlier, I don’t want to skip over. There is a psychological condition where if you are paying less than the asking price, you think you’re getting a good deal, and if you’re paying more than the asking price, you think you’re getting a bad deal. And it drives me nuts because it’s like tell me you’re an amateur without telling me you’re an amateur. It’s you use the list price to make your decision on the value of the property. It does happen where a house is listed low and writing an aggressive or over asking price offer is the smartest thing you could do to lock it up before they get a lot of other offers and realize they listed it low.
So what probably happened is you were speaking to that listing agent, they knew your guy was sniffing at the bait, but he hadn’t actually bit on the worm yet. You were trying to get him comfortable with going in strong and playing the listing agent like, “Hang in there, hang in there, hang in there. Come on, buddy, we got to do this.” And then someone else called and the listing agent told them, “Oh, I got another buyer.” And his guy was like, “Oh hell no, I’m buying that thing now.” Came in 20 grand higher, he gets the great deal. Your client wishes that he had.
I just want to co-sign on what you’re saying here that it is not inherently bad. Your agent is not ripping you off if they ask you to pay over asking price or I should say they recommend that you do that because sometimes properties are priced low, sometimes they’re going to get seven offers and the new baseline for what the seller expects, it goes from the $600,000 asking price to $650,000 because that’s where the offers have come in at. And had you paid $610,000 in the beginning, it would’ve looked like a good deal. Have you experienced that as well, especially with some of the small multifamily?

Dan:
David, yeah, that’s absolutely the bane of my life is I always tell people it’s not the price of the property, it’s the starting price. So sometimes the starting price is too high and sometimes it’s too low. And you can use the data to figure that out. It’s not hard to figure that out. I can tell usually if a property’s going to go the first weekend. So do you want the property at the valuation you put it or do you want it at the valuation that some agent, who may not even know what they’re doing, listed the property at? Yeah, I totally agree.

David:
There’s another point there where when you’re selling your house, because I know a lot of our listeners, at some point, we’ll need to sell a house with an agent. There is a temptation to choose the agent that says, “I want to list it at whatever the highest price is.” It feels safer. Like, “Well, this person said $700, but this person said $800, I’m going to go with the $800.” And then it sits there for four months not selling and it becomes stale product and nobody’s seeing it in the searches, and the showings dry up, and you have to drop it to $700 and then you get offers at $650 because it’s been there for four months and nobody wants it at that price.
It’s your own fault because you went with the agent that told you what you wanted to hear versus the agent that said, “Let’s list it at $700, try to get several offers and now my skill as a negotiator will play and I will push those offers up to $750,” versus, “Let’s price it at $800 and maybe someone will write an offer at $750.” It just doesn’t work that way. That’s another thing I want to highlight. The skill of the agent you choose plays a huge role in how much money you make. But most clients, and I think you probably can both agree, have no idea if they got ripped off or if they won. All they know is what their agent tells them.
You both negotiated against other agents that did a terrible job, and you knew it, and you knew they cost your clients money because you knew you made your clients money. In order for one side to make money, somebody had to lose it. That’s the way that it works. And I’m sure those agents never go and tell their clients, “I screwed up. I listed your house too high. I got too greedy. I went on vacation for three days and didn’t want to answer my phone. And so, the buyer that we had moved on somewhere else,” whatever the case was. They say, “Oh, those buyers are just jerking you around.” It’s just be very careful who you choose as your agent and make sure they have a lot of integrity because they can color how that went down however they choose to and you won’t be privy to that information.
As investors yourself, I’m assuming that each of you have a different perspective when it comes to this. So I know, Dan, we’re still wrapping up on your deal here, but do you have experience with selling real estate where you feel like your experience as an investor is helping your clients because you can shoot straight with them where other agents that don’t own their own rentals, that need that deal to pay their mortgage, feel pressure to tell them what they want to hear?

Dan:
Yeah. You mentioned at the beginning I started as a poker player, so negotiation is actually my favorite part of being a real estate agent. I love it. And some agents don’t. They can’t sleep at night going through the negotiation process. But yeah, when you’re thinking for yourself, what is this property worth? And you’re evaluating it for yourself, you’re looking at properties completely different than an agent that has never bought an investment property or maybe even hasn’t bought a property themselves at all. They don’t understand how to evaluate the property and where the price should be because they don’t know what it’s like to have skin in the game and they don’t know what it’s like to have skin in the game over and over and over again.

David:
Jodi, how about you? Have you seen experiences like this?

Jodi:
Yes, absolutely. For example, I had a property. I had someone that called us that an investor wanting to do a full rehab on a property. And they called in our design remodeling company, and one of my salespeople went out to do the bid. They realized, “Hey, this person probably doesn’t need to put in $80,000 to sell the property.” They consulted with me, and they had multiple other agents that told them, yes, they need to put granite countertops in, they need to change the floors, they need to put in a roof.
And when my salesperson came in and said, “Hey, I want you to look at this property, they want to do a full remodel, I don’t think it’s necessary.” I evaluated it, looked at the comps and said, “Absolutely not. It’s not necessary. Put some paint on the walls and the property’s going to sell.” There’s no inventory in the neighborhood right now. So I put my investor cap on thinking, no reason to go in and spend all of this money to maybe make a $20,000 difference because the home’s not going to appraise if not. So, absolutely. I think many times as an investor, we put that cap on and think how we’re going to save our client’s money as opposed to making it the most beautiful home in the neighborhood and making our marketing collateral look good.

David:
Yeah, a lot of people don’t realize agents don’t get training in what they’re supposed to do. A lot of it is just whatever occurs to them is the right way to think about it. It’s sort of the Wild West, and that’s why choosing your agent wisely is so important.
One of the things that I’ll do, just like you said, Jodi, someone will say, “Hey, I want to sell my house.” And I’ll look at it. It’s not updated. It’s got the green shag carpet, the white tile, brown grout linoleum, the oak cabinets, wallpaper with sunflowers, just your typical, this is not going to show well. I don’t assume that they need to go spend a $100,000 to upgrade their house because they may only get A $100,000 back if they do that, but they spend three months going through this really annoying rehab that ruins their life.
I just look and see, well, how many actives versus pendings do we have? When there’s nine active properties for sale and one or two pending, there are too many homes for the buyers that are out there looking. And so, we are going to have to do something to improve the condition of this property if we even want a chance versus there’s one property active and nine pending, there’s so many buyers out there looking for these properties that you don’t have to do anything. They’re going to pay almost the same price because they have no other option.
And that little thing, I swear, agents don’t even think about it. They just go and look up comps and they get a price and they say, “Here you go.” They don’t call the other agents and ask them, “How many showings are you getting on your listing?” They don’t call the agents of pending properties and say, “What did you go under contract for? How many offers did you get?” That’s really the only way I’ve found to get a snapshot of what’s going on in the market, is to talk to the agents that have pending homes for sale and ask them, “How many offers came in? How aggressive were they? Would you price it at the same price? Would you go higher? Would you go lower?” But that one little thing will make such a big difference when you’re giving information to your clients.
So all of our listeners, as you’re going to choose your agent, hopefully you’re using the BiggerPockets Agent Finder to do so, ask questions like that. See if the agent… When you say, “What do you do to sell a home? How do you make sure I know I’m pricing it correctly?” If you just get a, “Um, uh, well, we look at comps,” probably not the agent you want selling your home.
And the same goes for buying a house. You want to be asking them similar questions to what you hear Rob and I asking on today’s show of Dan and Jodi, because you could tell from their answers they know their market, they know what’s going on, they know where the opportunities are, they know what to help you avoid, and that’s what you’re really looking for, especially if you’re investing in a market you’re not familiar with.
And if you like more information than how to do that, check out Long-Distance Real Estate Investing where I explain the process for doing so and having the right agent is a crucial piece in that puzzle.
Dan, Jodi, thank you so much for being here. I really appreciate you guys. Jodi, if people want to find out more about you, if they want to reach out, where can they find you?

Jodi:
So I can be found on thisislivin.com. There’s no G at the end. And on Instagram and Facebook, Thisislivin_Properties.

David:
All right, and how about you Dan?

Dan:
Dan Loves Houses everywhere, including my website.

Rob:
Nice.

David:
Is it like Dan heart for loves like the poker suit?

Dan:
No. That would’ve been great. No.

David:
Rob, how about you? Where can people find you?

Rob:
You can find me over on YouTube and Instagram at ROBUILT, R-O-B-U-I-L-T.

David:
Did you give up on TikTok because someone stole ROBUILT over there?

Rob:
No, I’m still on TikTok, but you get the good-good over on Instagram.

David:
There you go. You’re only giving us the best version of Rob, not the mediocre.

Rob:
That’s right, that’s right. The weird stuff is on TikTok, but the good stuff, Instagram.

David:
Yeah, if you want to get the best of Rob, it’s like the very end of the buffet. Don’t eat early, avoid the TikTok. Wait till you get to the end. That’s where you’re going to find the most expensive items. Don’t fill up on all the mac and cheese that they put out early.
You find me at davidgreene24.com or @davidgreene24 on Instagram or your favorite social media.
Thanks again, both of you. Really enjoyed having you here. Rob, anything you want to say before we get out of here?

Rob:
No. No. Thank you for your time and maybe I’ll be investing in Chicago and more in Houston with you all, so thanks. We appreciate it.

Dan:
Thank you. I really enjoyed it.

Jodi:
Thank you all so much. I really appreciate it. Thanks for the opportunity.

David:
This is David Greene for Rob “End of the Buffet” Abasolo signing off.
Is there any cheese you don’t think is great, if we’re being honest here?

Rob:
Blue cheese, like crumbles, not a fan, but I like blue cheese dressing for my wings.

David:
So you like rotten cheese in its liquid form, not in its solid?

Rob:
Well, when you put it that way, it doesn’t really change anything, but it does make me feel worse.

David:
Well, if you like blue cheese, you should check out some green cheese, and you’re going to hear more of that coming up now.

Rob:
Green Cheese, that was your nickname back in prison, right?