This is the BiggerPockets Podcast Show 715. It doesn’t take that many properties to achieve financial freedom. I was financially free when I was still working as a cop from the first six or seven properties that I bought. So it doesn’t take that many. It just takes the right goals, the right plan, and the right actions. That’s it.
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast, the biggest, the best, the baddest real estate investing podcast in the freaking world here with you today to help all of us go a little bit deeper on our journey to financial freedom through real estate. And I’m psyched. Lately at the beginning of every year, I’ve been getting more and more and more into setting better goals for the year. You may have noticed that Brandon Turner does the same thing. The older we get, the more we start to realize how important it is to set goals because if you don’t set goals, you will achieve all the goals that you didn’t set. You’re also very likely to achieve the goals you did set.
So in today’s podcast, we’re actually going to be bringing you a webinar idea for the BiggerPockets community specifically about how to make 2023 the best year you’ve ever had. Now, keep listening because you’re going to hear more about how to do that in today’s episode as we cover goal setting, time tracking, creating a lead funnel and the LAP system, deal analysis, and so much more. I actually analyze a deal live on the show, so if you guys want to hear what the initial steps of analysis can look like, how simple they can be, and how to find properties that you should avoid in 2023, a time where it is more important than ever to avoid buying the wrong deals because of this crazy marker we’re in, then please follow along.
Today’s quick dip is consider setting some goals for yourself. I’m going to be having another goal setting retreat coming up in Arizona because I think these are so important. And in today’s show, we’re talking all about goal setting. We just started a new year. There is no better time to set goals than right now. If you would like to get a BiggerPockets Pro membership so that you can analyze as many deals as you could possibly want, as well as get software to help you manage those properties, find off market deals, exclusive content nobody else gets, all that and more, you can get 20% off because you listened to today’s show by using the code BestYear23. So that’s your quick tip for today, use the code BestYear23 at BiggerPockets.com/proupgrade.
All right, so without any more ado, let’s get into today’s show about making 2023 the best year you’ve ever had.
Do you want 2023 to be different than 2022? I sure hope so, and by different, I mean better. Do you want more real estate? Do you want more passive income? Do you want more flip opportunities? And do you want more time with your family and friends? Do you want to travel more? Could this be your pivot year? That’s a pretty cool thought, right? Like could 2023 be a year you look back at and say, “My life changed in 2023.” Could it be the start of your stack? The stack is a cool strategy where you buy a property, then next year you buy two, and then next time you buy four and then eight, and it doesn’t have to be every year, but it could be, and eventually you end up with 100s and 100s of properties or at least units, but it all started with the first one.
Well, here’s something to remember, life doesn’t get better by chance, it gets better by change. This is a quote by Jim Rohn, and today is all about how to make that change just like I did, how to make 2023 your best real estate investing year ever. Here’s the problem with resolutions that everyone seems to make every year. They’re not specific enough, there’s no plan to reach it, and there’s no way to force action. I want you to think about the typical New Year’s resolution. Okay? It doesn’t have to be what you make, but what do a lot of people say? “I want to lose weight.”
A couple things come to mind about that. I think all of us want to lose weight or gain muscle or something like that. There’s never a point we don’t want that, so what the heck is different about January 1st or December 31st than any other time? Okay, the goal isn’t really meaning anything. How are you going to lose weight? Why do you want to lose weight? What is your plan to go about losing weight? You see what I’m saying? It’s too general of an idea and it’s not going to work. Studies have shown that approximately 80% of New Year’s resolutions fail, and many of the people over the years, including myself, have written about new approaches needed to achieve our big goals and resolutions, including naming them differently, approaching them differently, and viewing them differently.
Forbes article about the top three reasons why New Year’s Resolutions fail. I also have been featured in Forbes, so if you Google David Greene of Forbes, you’ll find a bunch of the stuff I wrote for them. What’s the shift change formula? Having the right goals, the right plan, and the right actions because as someone who has become a multimillionaire through real estate and found financial freedom, I can tell you guys it is not complicated. It’s easy, it’s very simple. I kind of started off the first 12 or 13 minutes of this webinar talking about the stuff that’s going to be in the book, and if any of you have any degree of intelligence, I’m sure you were like, “Yeah, that sounds like common sense. Why does someone need to put it in a book?” Because nobody does it. That’s the thing. It is easy, but no one does it. Got to have the right goal, the right plan, and the right actions to get the right result.
By the end of this webinar, you’ll have a day-to-day plan for actually achieving your goal, which is very empowering for you if you stick around all the way to the end. Here’s our agenda for today. We’re going to have free door prizes if you stay to the end, no one’s going to be mad about that. I’m going to talk to you about BiggerPockets. We’re going to talk about the 11 tips for making 2023 incredible, which I truly hope is the case for every single person here. We’re going to get into Harold’s example and include a real life deal search and analysis. We’re going to get into tools and tips to help you blast off. And then we’re going to have the giveaway, which you must stay all the way to the end because we’re going to give away for you guys a sign up for the giveaway. And then we’re going to have a question and answer period before we call it, so now you know what to expect.
Some of the door prizes, right? Well first off, you’re going to get the slideshow that we have right now, so if you stick around, we’re going to give you the URL where you can find that. You’re also going to get this workbook, which is designed to help you set powerful goals that actually become a reality, so stick around for that too. You’re also going to get a media network here. You’re going to get to hear actionable stories from other real estate investors from our four YouTube channels if you just follow BiggerPockets. So if you’re here for a webinar, you don’t know what BiggerPockets is, there’s a ton of information. There is not a better place in the world to teach people how to invest in real estate, and that’s why I’m here. There’s not even a close second, there’s nothing you can compare to how valuable BiggerPockets is to compared to anything else.
It’s a free member community, doesn’t cost anything to join the community. There’s a pro membership that all the benefits of a free membership plus access to tool services and exclusive additional content to help you reach financial freedom faster. So think about the pro membership. There’s nothing that stops a handyman from building a deck or a fence, but the pro membership is like equipping you with a nail gun and knowledge of how to build a deck and access to people that build decks all the time and ways that you can find new clients. It’s like actually helping you build a business instead of just having a hobby. There’s an agent finder tool where you can quickly find local investor friendly real estate agents who can help you find, analyze, and close next deal. We’ve got books, tons of books. If you go to BiggerPockets.com/store, you can see all the books the BiggerPockets has to offer.
And events. Join a local meetup or attend the annual BPCon to network with the community and learn from experts. BPCon is a blast. We just had one in San Diego. Next year is going to be in Orlando. I highly recommend you go there. It’s one of the most fun times you will ever have.
At BP, we believe that real estate investing is the greatest tool on the planet for the average person to build wealth and passive income. It’s not get rich quick. The goal of real estate is not to simply get rich, but to live an amazing life of freedom to do what you were meant to do. Anyone can invest in real estate no matter how much money, experience, time, or connections they have. It’s one reason I love it.
Let’s talk about my slow start and what went wrong. I started young, but there’s people that start a lot younger. I almost gave up. My first rental property went terribly, and I almost didn’t get into real estate because I was watching home prices climbing really fast and thinking I’ll never be able to buy real estate. I just happened to not get involved in the frenzy and I waited until the market dropped before I bought. But to be honest with you, that wasn’t a plan. I didn’t know that was going to happen. It just ended up happening and I had the money saved up to take advantage of it when it did, which is why a lot of my advice goes towards learn how to save your money and be prepared for opportunity rather than trying to force it if it’s not there.
I bought stuff in the meantime. I spent, God, it was like $25,000 on a really nice Roush Cougar. So everyone, if they’re into Mustangs, they’ve heard of Roush Mustangs. I had one of only 100 Cougars that were modified by Roush. Super cool metallic red, low profile tires. The car was lowered, souped up really, really nice. Everyone loved it. Really cool body kit. And it was a bad decision man. Not only did it get keyed all the time and those low profile tires were constantly having problems happen, I ended up not able to flip a house because I was short by about $11,000 and if I wouldn’t have bought that $25,000 car, if I would’ve bought a 10 or $15,000 car and just bought like a used Civic or something, I would’ve had the money to flip a house and make about $50,000 with my partner. So the total deal would’ve been $100,000, my split would’ve been 50.
And I learned a powerful lesson about how buying stuff is not smart to do when you have a bigger plan. I didn’t know what to look for at the time though because we didn’t have webinars when I was getting started, so I just bought more stuff. I tried to manage it myself and continue and then I lost the desire to continue. I struggled and decided to start living proactively setting goals to find my processes and started taking massive action. Around that time, I basically realized like okay, I want to get out of the restaurant industry. I was in college, I didn’t know what I wanted to do. I graduated with a psychology degree. I got into law enforcement and I was like, “Ooh, in this place I can work as much overtime as I can handle and I can take responsibility for the direction of my financial future.” And when I had that combined with my knowledge of how to invest in real estate is where I started to make really big progress and eventually become a millionaire.
It doesn’t take that many properties to achieve financial freedom, okay? You may hear me talk about a really expensive property I bought in Scottsdale with [inaudible 00:10:33] who I do the podcast with or Brandon Turner buying $50 million apartments. I do share some of the cool stuff that I’ve done. I wanted to inspire people, but you don’t need that to become financially free. I was financially free when I was still working as a cop from the first six or seven properties that I bought. So it doesn’t take that many. It just takes the right goals, the right plan, and the right actions. That’s it.
So if you don’t know who I am and you’ve been listening to me talk a lot, here’s why I’m speaking from this position of authority. This is my bio. It is not everything because you don’t need to hear everything that I do, but I own rental properties, I flip houses, I own commercial properties. I’m the co-host of the BiggerPockets Podcast. I’ve written, buy, rehab, rent, refinance, repeat, long distance real estate investing, the top producer agent series for bigger pockets. I run the David Greene Team, which is one of the top real estate agent teams in California where you can come to us, we will help represent you buying property or selling your house for top dollar. I run The One Brokerage, which is one of the top producing mortgage companies in the country where we help investors in all 50 states finance their real estate. I run masterminds, I write books. Basically, I’ve given my life to the service of helping other people escape the trap. The trap of being in debt, the trap of working a job you don’t like, the trap of not knowing how to invest your money or not knowing how to save your money or not having the information needed to make progress in life.
And so that’s what I’m here today to help you guys with. If you want, you could follow me at DavidGreene24, we talked about that a little bit earlier. Please do though. I’d love it if you guys would send me a DM, especially if you live near me or you’re interested in getting contacted with one of my loan officers, you want to hear about loan products that I’m using. You want to know what market we’re buying in, all of that stuff. Please reach out to me.
So what’s the key to success? Because if you’ve heard what I’m saying and you’re like, “Well, that sounds good. I don’t think I’d want his bald head. I don’t know that I’d want those bags under his eyes, but there’s some other things about David that I kind of like. I wouldn’t mind having these parts of his life. What’s the key to that?”
It’s goals, plans and actions. GPA, that’s what we call it, not grade point average. That’s what they teach you in the educational system. In the entrepreneurial world, GPA is goals, plans, and actions. It’s not about wanting a better life, it’s about having a plan to get a better life. Now let’s walk through exactly how to do that. First off, you got to define your why and I’m going to tell you shortly why this is important, but it is really important. I often talk about wanting something versus liking something. The first blog post I ever wrote for BiggerPockets was actually about the same topic. If I said to any of you here, “Do you want a six pack?,” you’d all be like, “Yeah, I do.” And then I’d say, “Well, why don’t you have one? What did you do yesterday to get one?” And you’d give me a little head scratch and, “I’m not quite sure. That doesn’t make sense. Yeah, if I want a six pack, why did I eat that cookie?” The fact is you don’t want a six pack. You would like a six pack.
Now if you said, “Oh, I went to the gym yesterday. This is the only foods that I’m eating. I’m measuring all the time. I have this plan to do this many workouts and eat this many calories and only eat this kind of food and I’m measuring my blood sugar to make sure I’m doing it right,” I would say that person wants a six pack. Okay? The rest of us, I don’t get to say that. David Greene does not get to say he wants a six pack. I have to say, if I’m being honest with myself, I would like a six pack. What that means is if the six pack fairy came and touched me on the stomach with their wand, I would accept it. Yeah, I’ll let you give me a six pack. That’s very different than wanting one. And I want you guys to understand this because I don’t lie to myself, it stops you from being successful.
If you tell yourself, “I want financial freedom,” but you’re not doing anything to get it, you’re lying. You would like financial freedom. If you say, “I want that car, I want to be married, I want to be a millionaire,” but you can’t show me your plan, your GPA to get there, you don’t want it. You’d like it, and there’s nothing wrong with that, okay? You don’t need to have a six pack. You don’t need to be a millionaire. You don’t even need financial freedom. If you like your job, keep working the life you have, but you’re probably not here because that’s the case. And that’s why I’m starting off making you eat your vegetables, okay? This is the hard truth. If you don’t define your why, you’re never going to get out of liking into wanting, and it’s not until you get into wanting, real wanting that you’ll actually put the plan together to get out of where you are and get into a better place.
Let’s look at Harold. Harold is tired of working his 9:00 to 5:00 job. He wants to spend more time with his kids. He wants to see them grow up, and he also wants to spend more time traveling the world. Talk about commitment, okay? This is something that a lot of people think they understand and they really don’t understand. Harold doesn’t just desire freedom, he’s committed to it 100%, there’s no other option. Commitment is how you move from like to want.
So I always tell this story. This is where I first understood this concept between like and want. So I’m in high school, it’s my junior year. My team is very good. The seniors that were playing, they were a year ahead of me. Only three of us on the whole team were juniors, all the rest was seniors. That group had won the championship at every level up to the point except for the year before when they were juniors, so they were very talented. It was very hard to be on that team. We were ranked number two in the state for our division. And we have a new coach who, his dad was a Division I college basketball coach, and he had just got done playing Division I college basketball and they had gone to the NCAA Tournament. They had won games against teams they shouldn’t have won. I think they made it to the Sweet 16, incredibly, incredibly smart mind.
And he asked us all at practice one day, “Who here wants to be a better shooter?”, because this was the thing. When you play basketball, your coaches don’t really care if you miss, they just want to know your form is good and you took a good shot. They don’t really look at the results. But he’d been playing at a high level with a lot of accountability where they actually do look at are you actually making it? He got tired of seeing us miss and he said, “Who wants to be a better shooter?” And everyone on the team raised their hand. He said, “Okay, keep your hand up if you stayed after practice yesterday to practice your shooting.” And me and Scotty Thompson were the only two guys that kept our hands up.
He said, “That’s what I thought. I’m tired of you guys lying to yourselves because now you’re lying to me. Get on the line and everyone has to run.” And we ran and we ran and we ran until we were exhausted. I don’t even know if we touched the ball for the rest of the practice. It was horrible. And his point was pretty clear. If you wanted to be a better shooter, you would’ve been here yesterday working on your shot. You don’t. So that’s what I understood. Yeah, we just would like to be a better shooter. Scotty and I are the only two that actually want to be better. We were committed to getting better at shooting, so we stayed after practice to get some attention from the coaches and to work on our shooting. And it’s not a surprise Scotty and I would always end up on the same team at shooting competitions and we probably won like 90% of those competitions that we would have as a team because we were committed.
I want you guys to have the same success that I had at shooting at high school basketball with your finances, which is much more important. Define your five-year vision. “If you don’t know where you’re going, you’ll end up someplace else.” That is a great quote from Yogi Berra. You guys ever want an entertaining time? Google Yogi Berra quotes. But it’s a really good point. I saw a post on social media today that said, “If you don’t have a destination, you’ll never know if the trade winds are favorable.” If you don’t know where you’re going, you don’t know if the head direction you’re headed in is the right direction or the wrong direction. Where do you want to be in the next five years? What job do you want? What kind of income do you want? Do you want any passive income or not? How much free time do you want? And what kind of relationships do you want?
In five years, Harold wants to be generating $5,000 a month in passive income from rental properties, as well as doing two flips per year for a total income of $100,000. Harold is pretty clear on what he wants his life to look like, and he’s committed to getting there. He just doesn’t know exactly what he has to do to do it. To be on track to hit your five-year goals, what do you need to accomplish in 2023? This is what I want you guys to go ahead and take a picture of the screen.
And most of you don’t know, which is fine, but it’s not fine if you continue to not know after today. You need to make a list, write it in a notepad, put it in the note section of your phone. Whatever you’re going to do, take your kids’ crayons and draw it out. What do you need to accomplish in 2023 if you want to hit your five-year goal? At minimum, you need to understand what your plan is.
Now, set a one-year goal because you have to know where you want to be in five years and then you can say, “Well, what’s the first step I need to take that I want to do in one year?” This year, Harold has committed to purchase his first two single family homes. Not a huge, huge, huge goal. He’s not trying to buy 200 properties. He wants to buy two single family homes. That’s doable. He could probably get the first one as a primary residence with an FHA loan is three and a half percent down depending how much homes cost in your neighborhood. I don’t want to make it sound like that’s nothing, but if you live in an area where homes are $300,000, you can get in on a house with an FHA loan and closing costs for $15,000. Okay? I think most of you here have the capability of saving $15,000.
Now, if he does that and then he wants to buy a second house, he’s either got to say, “Do I have enough to put 20% down? Can I put 10% down and get a vacation home? Can I partner with somebody else to come up with some of the money? Can I borrow the money from someone else? How much more work would I have to work or how much overtime would I have to do to get there?” Then you contact someone like me and we go through your loan options and you see where you need to be and you get connected with an agent through the BiggerPockets agent finder, and they start showing you what the homes look like. That’s already a lot of steps of action that Harold can take from just this one year commitment, and we’re not even on step 13 yet of this whole slideshow here, right? We’re just getting started and already if you stopped right now, you have way more direction than what you had when you showed up for what this can look like.
“A goal is a dream with a deadline,” that’s Napoleon Hill. If you don’t put a deadline on your dreams, they don’t become goals. Otherwise, you’re just wishing. And when you’re wishing what happens is you’re hoping that someone shows up and says, “Hey, I have this cash flowing rental property that’s growing inequity, it makes my life better, that I don’t want anymore. Will you take it off my hands?” And since we know life doesn’t work that way, it doesn’t make sense to keep waiting for life to hand you what you want.
To be on track to hit your one-year goal, what do you need to accomplish in quarter one? Think about that. Harold wants to buy two homes. What does he have to accomplish in the first quarter to make sure that happens? Number five is set a Q1 goal. We’re getting into the nitty gritty here. This is good stuff. The great thing about having a 12-week year is that the deadline is always near enough that you never lose sight of it. It provides a time horizon that is long enough to get things done, yet short enough to create a sense of urgency and a bias for action. It’s human nature that we behave differently when a deadline approaches. We procrastinate less, we reduce or eliminate avoidance activity, and we focus more on the things that matter. You see, when you think you have 20 years to accomplish what you want, you’ll move at a 20-year pace. When you think you got one quarter, you move a lot faster. And people that move faster consistently over a long period of time really win the race and beat the competition of those who think that they have all the time in the world.
By the end of Q1, Harold plans to have one property under contract. So define your weekly process is going to be number six. Every result that you desire is preceded by a process that is required to produce the result. When you define your process and commit to it for an extended period of time, the results take care of themselves. Brandon Turner and I were listening to [inaudible 00:22:41] speak at a Goldman’s event when we heard him say this and we’re like it’s that simple. Every result you desire is preceded by a process that is required to produce it. When you define the process and then commit to it for an extended period of time, the results take care of themselves. So if I said, “I want to be able to bench press 250 pounds,” that is a result I want that is preceded by the desire to do it. I want to be able to do that.
Well, what’s the process to get there? Start working on my bench press and slowly adding weight every single time I get to the point where it’s not that hard anymore. If I commit to that process, it’s impossible for me to not bench 250 pounds. Now, some of you may say, “Why would you say two 50 David? Your chest looks pretty good. Why didn’t you say 300?” Well, what stops me from going to 300 once I do 250? You don’t usually just stop setting goals for yourself when you achieve it. There’s nothing wrong with Harold’s goal of getting two properties. There’s nothing that says that’s the last goal he’s going to make, right? It’s just this understanding that every result is preceded by a process required to produce it, and if you’re on track with your process, you will just end up getting the result.
This is what the real estate funnel looks like, all right? We call it the LAPS funnel. It stands for Leads, Analysis, Pursue, Success. That’s the acronym LAPS. I want you to go ahead and take a picture of this screen. This is how simple finding and acquiring real estate can be. Each week, Harold will analyze five real estate deals that he gets from the MLS and will make offers on at least one of those. He will also listen to two real estate podcasts a week and will read Real Estate by the Numbers, which you can find at the BiggerPockets store.
Now if you want to understand what you’re doing with the LAPS funnel, it starts with leads. So I can use this example for anything. My real estate business, my mortgage company, the properties I’m buying for myself, even the process of hiring people, they all follow the same pattern. A lead is a thing that could work for what you want. This could be an employee that I’m interviewing. This could be one of you who says, “I want to get a loan that’s a lead.” Or a person that says, “Hey David, I want you to help sell my house,” that’s a lead. You might have something that I am interested in, okay? And I’m a lead to you by the way in those situations. But when it comes to rental properties, leads are people who own homes or homes that are on the market that might work for what you want.
After you find a lead, you analyze it. I would interview the person, would you be a good fit for my company? I would talk to you. “Are you a good client for my real estate team or my loan company?” I would analyze a property. Is it going to make money or is it going to lose money? For the ones that pass the analysis stage, I pursue it. If it’s a rental property, that means writing an offer. If it’s a real estate client, it would be let’s sign a listing agreement and I will sell your home. If it’s a mortgage company client, I would say, “Hey, let’s get a loan application filled out and get you pre-approved.” You see what I’m saying? It’s very simple, and then if after the pursuit, you just find success. Some of these offers will be accepted. Some of those people will come work for my company. Some of those people will sign the listing agreement. This is all it takes to run a big company. You’re just doing these four things. It gets so confusing when you let people talk you into it, but it’s not.
Now, every one of these four things involves what? Skills. Where do you find leads? You got to be good at that. Can you find off market leads? Do you find on market leads? Do you know how to analyze? If I don’t know what I’m looking for in someone to hire, it’s simple to work this process, but I won’t be good at it. If I don’t have a listing presentation I can give someone or understand how to get them to sign a listing agreement, it doesn’t matter if I’m analyzing them, I can’t pursue anything. If I don’t know how to analyze a rental property, looking at leads all day long doesn’t do me any good. Once I’ve analyzed it and I like it, I have to pursue it. If I’m too scared to do it or if I don’t know what the due diligence process looks like in buying a rental property, I’m not going to pursue it. I’m just going to sit back, or when I pursue, I make a bad decision. And if I don’t pursue anything, I’ll have no success.
The funny thing is there’s four steps to a LAPS funnel, but I can take out the last one because success is not a step or a thing you do. It’s just what happens. You only do three things. I cut it by 25%. You look for leads, you analyze them, you pursue them. That’s all you’re doing over and over and over. That’s what every single business is doing. 99% of the properties out there are not good deals. You have to analyze for the best deals.
Let’s analyze one together. I’m going to show you guys just how simple it can be to analyze the deal when you have the right tools and you know what you’re doing, okay? So this is the property that we are going to analyze. It as a four bedroom, two bathroom home that’s 1,411 square feet on Sanford Road in Memphis, Tennessee, currently receiving $1,425 a month in rent. So I’m going to memorize this 508 Stanford Road, Memphis, Tennessee. I’m going to have to stop sharing my screen. All I had to do was I just went to Tools, and then Rent Estimator brought me right to the screen I’m at right now. So this is 508 Sanford Road, and I’m looking for Memphis. Here we go.
So BiggerPockets recognizes this address and it says, “Oh, let’s look up all the other houses that are for rent in the area.” All right? Right now it’s analyzing for a one bedroom, I have to let them know it’s a four bedroom and two bath because that’s what the description said. Adjust details, shows me the medium rent is $1,150. Now, do I know it’s going to be $1,150? I’m not sure. It is a stark difference from the $1,425 that was advertised, wouldn’t you agree? Now, that doesn’t mean the person was advertising it incorrectly. They could be telling the truth. There also could be some fishiness going on there, okay?
What we do is we look at these other comps and we try to figure out are other units rented for different prices? So this one’s only $1,125, this one’s $1,425. This one’s $1,500. This one’s $1,500. This one’s $1,400. A lot of these properties are starting to get up into the higher numbers, which makes me think that maybe the person advertising it wasn’t wrong. It’s probably worth continuing to look into, right?
I can also look and I can see where are the properties located. So this one right here is on the eastern side of the map. This one here, eastern side of the map. This one here, eastern side. Is there patterns? It looks to me like the more expensive ones are … Okay, that one is pretty cheap, so I wonder if that one’s actually smaller. Yeah, three bed, one and a half, 1,200 square feet. You’re also going to find that sometimes the people who are renting these out have been renting … This person might have rented it out years ago. The rents might be really low because they’ve never actually increased the rent because of either rent control or they’ve just chosen not to. So don’t get freaked out when you see a difference between $1,100 and $1,400. I always verify these with property managers before.
But from what I’ve I’ve seen so far, there’s reason to believe that this house could be rented for $1,400 even if we don’t know that we can right away. So we’re going to keep in mind that we’re going to assume that the rent on this property is around $1,400, and we’re going to analyze it at $1,400 and see if this looks like it’s actually a good investment or not. We’re going to click on Tools. Sorry, the Zoom is getting in the way of me navigating the screen here. Tools and then Calculators and Rental Property, that simple. Start a new report. Street address, we’re going to put in 508 Sanford Road. I put Sand. See how nothing’s popping up? That’s cool because the software knows that doesn’t exist. I take that out and we can find Memphis, Tennessee somewhere. There we go.
So now it’s going to import the data that we just looked at, which is awesome. It’s doing this for me, okay? The import has been successful. Now remember that the rent was like $1,100 or something. We’ll get to that actually a little bit here. We’ll start up at the top. Well, the purchase price for the property, I believe they were asking … Get back to where we were in the slideshow. It’s always hard when I jump around between screens, I can never remember it. All right, they were asking $165,000, so that’s the price that we’re going to put under purchase price, 165. The closing costs, let’s just assume they’re going to be around $5,000. Now, let’s say you’re saying, “David, how would I know closing costs? I’m not like you. I don’t sell houses every single day sitting in your office with the blue light behind you.”
Well, that’s okay. If you click on Calculating Closing Costs, the software will actually tell you here’s how you can determine what they might be. It’s usually 1 to 2% of the purchase price, so they shouldn’t be somewhere between like $1,650 and $3,200. I went really high with $5,000 just to be extra conservative. But whenever you’re using in the BiggerPockets software, you’ll find there’s all of these little descriptions that help you know what should I put, how do I work the calculator here?
We’re going to assume that we’re putting 20% down on this property, that we’re buying it as an investment property. Let’s put an interest rate of 7% because it’s an investment property, that’s right around where they are. No points, and you always want to put 30 years because most loans are going to be a 30-year fixed rate loan. Monthly rental income, it imported the data at $1,035, and you can run it at that number if you want, but it’s telling you something even more important.
Its confidence is low in that number, meaning the comps are all over the place. It could be $1,700, it could be $1,000, right? It’s not super confident in that number. So for the purposes of analysis, now I want to make sure there’s always a person that jumps in and goes, “You put a higher number because you think it’s always going to be great,” no, I don’t. I don’t think the rent’s going to be $1,400. I’m analyzing it as if it was $1,400. I would never buy this house unless I contacted a property manager who rents in the area or a real estate investor who rents in the area and said, “What rent are you getting on your property that’s like mine?” So we’re going to put the $1,450 a month, which is what I believe the person said in the advertisement that they’re currently getting, and there are comps that support that, so there’s nothing wrong with starting with this number.
Now we’re going to look at property taxes. Well, how do you determine what those are? It’s usually around 1% of the properties value for the year. So in this case, if we buy it for 165, we’re going to be paying $1,650 a year.
The insurance, let’s assume that’s going to be about $50 a month. Repairs and maintenance, we’re going to budget 5% of the rents to go towards that. We’re going to budget 5% to go towards vacancy. We’re going to budget 5% towards capital expenditures. Capital expenditures are money you set aside to fix big things like the roof or the air conditioner going out. We’re going to assume we’re going to pay 8% in management fees to manage this thing. And the tenants are going to pay for the electricity, the gas, the water, the sewer. There’s no HOA fees in this area, so we’re going to go ahead and take that out. Actually, you know what? Did they mention that there was HHOA fees? I don’t see anything there, but see BiggerPockets imported it so they might have H HOA fees. They’re definitely not $500 a month, not for a house of that price. So what you can do if you find out that there is H HOA fees is you go back in and it saves this information for you, you just pop that in and see what your numbers look like once it’s been included.
I’ve explained this whole thing to you guys. I’ve bounced around a couple times. I took time to show you all the different pieces, and it still only took us a couple minutes. Very, very quick, all right? Now here’s what the calculators do for you. It shows this property would make about $53 a month if the income of $1,450 ends up being the case with the expenses that we’ve put in. Now, this could be even better if you get the house for less or if the rent ends up being more, or it could be worse if you got to pay over asking price or if the rent ends up being less. It’s only as good as the numbers you put in, but for now, we get a pretty good picture what this property would look like, right?
That $53 a month is a little less, it’s about one and a half percent of cash on cash ROI. So you can see that the total cash needed is about $38,000, and that $53 a month would be about a 1.68% return on your money. The mortgage would be $878, and then with the additional expenses we talked about, they would come out to about $1,396. This right here shows the breakdown. As you can see, the majority of our expenses are in the mortgage, which is $878. The taxes show that they’re $137. You can see where the money is being spent on the expenses. Your net operating income, the money you can expect to make in a year is about $11,178, and the cash on cash return is not super solid.
So right off the bat this is like, “Yeah, this probably isn’t a great property to pursue.” The cash on cash return just isn’t really high enough to get me super excited about it. I would either write it at a lower price or I would skip it and move on to another house. But do you see how valuable it is to not pursue the wrong property because you can tell the cash on cash return just isn’t there? You’re not writing offers and hoping that the properties turn out to be good. You know before you go into it what to expect.
Now, let’s say that you’re like, “Well, I really like the house, but I don’t like the return,” let me click the Edit button and let me go back and let’s adjust. What if I offered $135,000 because this house has been sitting on the market for a while, and what if I asked this seller to buy down my rate? That’s something at The One Brokerage that we advise our clients to do, and we actually help them with that sometimes. We’re going to buy the rate down to 6.25, okay? If I change that, I pay less for the house and I buy down the rate, let’s see what happens to the numbers here.
Our cash on cash return bumps up to just about 10%, 9.99. Now, that’s not terrible. Is that going to make me jump and say, “I’m buying that house?” No, but if I like the neighborhood, it probably would, at least I’m going to write the offer. It’s $266 a month if I just offer less for the home and I have the seller buy down my interest rate. This calculator empowers you to make smart decisions.
So now you go to your agent and you say, “Write the offer for $135,000. My mortgage broker said I need a credit of $6,000 to buy my rate down to 6.25 from 7, so I want the sellers to give me a closing cost credit of $6,000. No, make it $8,000 because they might counter me and I want them to come down to the $6,000.” Okay? This is how we play the game. So now you write the offer on this lead that we just analyzed. We had a lead. We analyze it with the software. We tell our agent, “This is the offer that I want to write.” We have them write that up. We go find another lead. We analyze another house. “Oh, it’s not going to work. Well, what if the rent was a little bit higher? Let me call the property … Ooh, this property could go for $1,700, well, not $1,450. Let’s run the numbers there, okay? I will write an offer for this house with an inspection contingency, and if I find out that the rent is not $1,700, I’ll just back out, get my money back.”
This is how simple the LAPS funnel actually is, and you guys are getting to see how easy BiggerPockets can make this for you. All right, I’m going to look at some of your guys’ questions here. “Anything over 10% I like,” that’s from Carl. Amen, that’s pretty cool. “Is this calculator part of the free BP membership?” Marlene, that’s a really good question. You get a couple uses of it as a free BP member, but if you want unlimited uses, we’re going to talk about how you can get those. It’s very cheap. It’s probably like the cheapest thing in all of real estate.
“What’s a good cash on cash return?” Okay Gabrielle, that is a difficult question because it really depends. If the property isn’t going to appreciate at all, I would want to see a minimum of 10%. If it’s one of those properties that just there’s no value add and it’s not going to appreciate or it’s going to need a lot of work, 10% is my minimum. If it’s in an area that appreciates a lot and there’s high demand and low supply, I’m okay going down to a 1, 2, 3% cash on cash return for year one. It better not be that way for the next five years, okay, but there is a balancing act here. If I’m going to buy a house on the beach in a great area that’s super hard to get into and I can go fix it up and I can make it worth more, and I’m going to add $200,000 of equity, I’m okay if it’s a 1% return. I’m okay if it breaks even in that case because I know that the rent’s going to go up every year and it’s going to become a great return later, but if this house is just one out of a million in a huge subdivision with tons of properties, it needs to be at least 10%. That’s the basic rules of thumb that I use.
Here’s what I want you guys to understand. This calculator not only helps you find the right properties, it helps you avoid the wrong ones. It is even more important to not buy the wrong properties than it is to buy the right properties, and you saw just how easy BiggerPockets can make it for you to do that.
Number seven, plan your week. The Intention Journal by Brandon Turner, this is one of the things that he lives by. People that are planners love this thing. You get to come in and write down all of the goals that you have for the week, and Brandon starts his morning off every single morning with coffee and his journal. I’ve seen him do it time and time again. And we recommend that you do the same thing if you’re a planner. On Sunday night, Harold spends 30 minutes looking at his counter and time blocking his weekly process. He will analyze deals between noon and noon 30 each weekday.
Number eight, execute daily. You cannot change what you get in life unless you change what you do, and even more so who you are. So rather than just identifying goals, identify habits and traits that will turn you into the kind of person in which those goals would just be a normal part of life. If I wanted to bench press 250 pounds, I just have to change my habits and my identity to the person that goes to the gym and bench presses whenever his chest isn’t sore, right? Harold isn’t analyzing two deals per day greater than his goal requires. He’s also submitting several offers per week, sometimes just verbally, because like I said, when you work the LAPS funnel, you want to get as many reps in as you can.
Number nine, track your progress. Harold tracks his progress daily, noting the number of deals he’s analyzed and the number of offers he’s made. Be persistent. Harold joins a small mastermind group of four peers working on the real estate investing business. Each week they meet for 60 minutes to outline goals, set commitments, and encourage one another to be persistent. He also journals every single morning. Because he is persistent with his actions, he finally gets his first offer accepted, a single family home that he estimates will produce $300 in positive cash flow.
Use BiggerPockets to help fill the gaps because no one can do it all on their own. Although Harold didn’t know exactly what he was doing, he asked questions of the forums, met local investors, and asked for vendor recommendations, analyzed potential deals, and even found a partner willing to fund it, all through networking on BiggerPockets.
Let’s wrap things up with two simple questions for you. Number one, do you want to make 2023 the year that changes everything for you? I sure hope so, but that needs to be your desire. And number two, do you believe that if you have the right why, a full commitment, and the right goals, the right plan, you take the right actions, and you stay persistent long enough, then you’ll find the success that you want. Do you believe that? If you don’t believe it, nothing here really matters. I don’t need to give you guys a system that you can work to make 2023 better if you don’t believe it’s going to happen. Do you believe it, that you could find the success that you want?
If you really want to do something, you’ll find a way, and if you don’t, you’ll find an excuse, and this is so true. If I really want to bench press 250 pounds, I’ll find a way to get in the gym. I’ll wake up earlier. I’ll do it at the end of the night. I’ll move things around on my schedule. I’ll take calls when I’m at the gym because really, you’re only bench pressing for 12 seconds at a time, and then you’re taking big breaks between sets. There’s so many ways you can set your life up if you really want to do something. If I don’t really want to get there, I’ll find an excuse. My schedule’s too full. I can’t get there at time. I’m too tired at the end of the day. I have a phone call to make. What do you want me to do? I can’t help it. This is how life works. If you want to do it, you’ll find a way, and if you don’t, you’ll find an excuse.
If you answered yes to these questions, let’s look at some tools that can help you minimize risk, increase your confidence, and blast off in 2023. The best one that I know of is BiggerPockets Pro. BiggerPockets Pro helps you get started analyzing properties and get your next deal faster. It analyzes the best investment properties in minutes and determines which are the ones worth pursuing with unlimited access to analysis calculators and the rent and rehab estimators.
So I showed you guys one thing BiggerPockets Pro has. It has a ton. I just went through the one that was the fastest to show you on this webinar. This is an example of what it looks like when you analyze a property, it does all the hard work for you, okay? This is like the contractor that has a nail gun. Just drop the nail gun on the wood, and the nail goes right in. You don’t have to hammer it. You don’t have to make mistakes and hit your thumb and get tired and get blisters and spend all day bending over and hurting your back trying to analyze properties by hand, okay? These are examples of properties with the Rent Estimator that you can find out what you can expect for the rent.
Become a better investor with curated video content and webinar replays covering everything that you need to make smart investments and avoid bad markets. This is more information that BiggerPockets compiles only available to Pro members. These are Pro exclusive videos, okay? Some tax benefits, multi-family investing, private lending, all the experts that BiggerPockets can find coming together to help give you extra content that no one else gets. You get access to this Investing With No or Low Money Down Workshop that Brandon and I made in Hawaii, a $200 value that probably should be more. I think this is the best content Brandon and I ever made. It’s a nine part video series. It was magic. I knew when we were making it we had something special. This is really, really, really good. You’ll be fired up after hearing ways that you can invest with no or low money down in the video.
You also get the Finding Great Deals Masterclass, a $990 value, with your membership. So these are perks that you’re going to get included here. There’s Brandon interviewing people on door knocking, direct mail marketing relationships to turn into deals and driving for dollars, all in his sea shed in Maui that you get included here. You get to show the community that you mean business with your Pro badge, okay? This is what separates the people from talk about it, from the people that be about it. If you have a Pro member, everybody on BiggerPockets can see you are committed. You can save time and money and minimize your risk with lawyer approved lease documents for all 50 states. So BiggerPockets, we’ve gone through, we’ve had lawyers come up with lease documents for every single state, and you get those all free with your membership.
Save thousands of dollars on tools and services that you’ll use in your real estate business with BiggerPockets partners like Rent Ready and Envelo. So Rent Ready is free property management software for pros. Well, it’s not free to other people, it’s free to you if you’re a BiggerPockets member. You can use this to manage your own rental properties. It discounts for CPA experts like Amanda Hahn to help come up with a real estate tax mini course for you, and more. Plus, you gain access to our discounted 10 week educational boot camps that are 225 bucks a pop that are only available to Pro members. You cannot take a bootcamp if you’re not a Pro member.
Enrollment is open now so choose the course that fits your real estate investing needs. There’s a House Hacking Bootcamp taught by Craig. There’s the Rookie Landlord Bootcamp taught by Ashley, a short-term rental taught by Avery, all of the experts in their respective fields teaching boot camps to you to help you make progress.
But what’s the number one reason to consider going Pro? Is because it works. The BiggerPockets calcs are my go-to for analyzing potential properties. There’s no way that I can analyze the volume of properties I do without being a Pro member. I locked up my first three unit almost a year ago that I’m now selling for almost a $70,000 profit that will go towards something larger. “The BiggerPockets calculators were a huge factor in making sure my numbers were right,” that’s from Aaron C., a BP Pro member.
This is from Patrick M. “Back in June I attended one of your webinars. Right afterwards, I signed up for Pro. In the next couple weeks I analyzed a bunch of deals. Eventually I found a fourplex. I got it under contract three weeks after signing up for Pro and a week later I closed on another property that was six units. Big thank you to you and the entire team. Final quick tip, signing up for Pro Annual. I made my money back at the closing table.”
Bigger Pockets Pro, if you sign up today using the code on the screen, so go ahead and get your phone and take a picture here, you’ll get a 20% discount off of your first year of a Pro annual membership, but you’re going to need that code that’s on the screen. That’s why I’m having you take a picture. How much is it? All right. Normally it’s only $390. It’s the best deal in real estate. You’re just not going to get a better deal. This is less than what it costs to get a home inspection on a property you have in contract, they’re more than $390. You’re going to spend that money in the real estate space that will actually help you get 100s and 100s of deals analyzed to figure out which ones you want to pursue.
It’s like if you compare this to the other money you have to spend in real estate, it’s a no-brainer. Every single person in the real estate space should be a Pro member at BP. But if you sign up today with your 20% off, it’s only $312. You got to use this code on the screen though. Otherwise, it’s going to be the $390, which isn’t the end of the world. But hey, if I could save you guys 20% because you sat through a webinar with me and you dedicated your time and you showed commitment and you supported us, I want to be able to support you. So get your free money and all the perks that we talked about earlier on the screen.
And as a bonus, you are going to get a copy of the Intention Journal, which is a $40 value. That’s how much it costs to just buy the journal. The things are really cool. I got one sitting actually in my office right here. You guys can see that. Leather bound, smells of rich mahogany. You’ll really like it. And it’s one reason that I would recommend you guys sign up for Pro because you’re going to get that for free.
So let’s recap. You’re going to get 20% off your first year of Pro annual membership, a $78 value, the free Intention Journal, the Pro exclusive Video workshops we talked about, the lease agreement templates, the free Rent Ready property management subscription, plus unlimited rehab and rental estimates using the analysis calculator reports and a Pro profile badge. You also get access to other calculators like the rehab calculator that will estimate what your rehabs are going to be, multi-family calculators, a BRRRR calculator, lots of different tools that you can use for the purpose of analysis.
Now, what if you’re already Pro? Well, good news for you. You can still get access to this stuff. You can find the bonus video content if you go to BiggerPockets.com/pro/videos, and you can get the bootcamp information at Biggerpockets.com/bootcamp. Now, if you’re not Pro, I want you to tell me in the chat that you signed up. This is important, okay? This is a form of the commitment. You are making a public declaration that you are committing to making 2023 a better year than 2022 was, and you’re not just here to like real estate and hope that you get real estate. You’re here to want it and pursue it. Now, BP also has a guarantee. Just give this a try. Sign up and use it for up to 30 days. If you don’t love it, email [email protected] and get a 100% refund just because you tried.
Remember, these bonuses are worth over $2,000 and you can use the code on the screen right there at BiggerPockets.com/Pro. So here’s the point where if you guys have said you want to do this, I want you to go to BiggerPockets.com/Pro and sign up for a Pro member using that discount code. Get 20% off, get all the bonuses that are on the screen, and tell us in the chat if you did.
So this segment here, I’m going to go ahead and we’re going to see, there’s a couple other slides here. Remember, if you really want to do something, you’ll find a way. If you don’t, you’ll find an excuse. If you want to become a millionaire in real estate, you’ll figure out a way to do it. If you don’t, you’ll find an excuse. So here’s the hard thing. Whatever your brain is telling you right now is what’s in your heart. If your brain is saying, “I don’t need you to do this. It’s not for me. It doesn’t matter. I can do it without it. I’ll just willpower my way to millions. I’m going to be a crypto investor anyway. I bought an NFT and it’s going to rebound,” if that’s what your brain is saying, your heart is looking for the excuse. If your brain is saying, “I need to do something different, I cannot have another year like the one last year. It’s not changing on its own,” this is pretty big. Okay? That’s yourself looking for a way. So if you really want it, that’s the step your subconscious will tell you. And if your subconscious is giving you excuses, you have to go have a tough look in the mirror and ask yourself do you really want it?
I hope I see you on the next webinar, and please make sure you sign up … Oh, Daniel Rios. Of course, you got one person. “How do I go Pro?” All right, one last time. BiggerPockets.com/Pro. There’s going to a little screen. You’re going to sign up for Pro annual, and you’re going to use the code that we be put on the screen to get 20% off.
All right guys, thank you very much. I appreciate you all for being here. Hope your 2023 is better than your 2022. Thank you for your prayers and support of me. It’s coming right back at ya. I will see you on the next one.
And that was our show. Hope that you guys liked it. I know I had a blast talking about this stuff. I know that my life was sort of just lived on the waves of the ocean going whichever way the current went for a long time. The only thing I consistently did was save money, and lo and behold, that’s because I had goals regarding saving money, but I didn’t have goals regarding anything else, so I didn’t do anything else. It was only when I got out of law enforcement and I got into being a real estate agent and then running a real estate team and then having a mortgage company and then writing books, and all the stuff that I talk about now that I realize man, I needed a goal for every single one of those companies, and at the beginning of the year is where I set a goal for every business, every company, everything that I’m doing, everything I want to accomplish, both physically and in business and in relationships, and it makes a huge difference keeping me on the course throughout the year. I sincerely hope all of you do the same.
If you like to follow along and see how well I’m accomplishing my goals throughout the year, you can do it on social media. I’m David Greene24 just about everywhere. I made a commitment to start sharing how the progress has been going with my goals this year, so you guys can follow along and randomly see. And as an Easter egg to all who listened all the way through the podcast, you get 20% off. Make sure you use that code BestYear23 at BiggerPockets.com/proupgrade, and you can cash it in there. All right, we’ll see you on the next one.
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