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How to Find & Fund MORE Real Estate Deals in 2024 (Tips from a PRO!)


Finding and funding real estate deals are the two biggest obstacles new investors face today. Are these skills preventing you from building your portfolio? You’re in luck. Today’s expert will show you how to find, analyze, and finance deals like the smartest investors do!

Welcome back to the Real Estate Rookie podcast! Henry Washington is not only a big-time investor with well over 100 doors but also a fellow podcast host and new author here at BiggerPockets. In anticipation of his upcoming book, Real Estate Deal Maker, he joins the show to discuss the common challenges of finding and funding deals. Henry is bringing you expert tips for all situations, whether you’re trying to pin down your sourcing strategy or find creative ways to buy rental properties.

In this episode, Henry will not only explain why finding a rental property is FAR more important than funding it but also share his most effective strategy for sourcing GREAT deals. He also walks you through an initial call with a seller, where you’ll learn how to build trust and present seller financing as a win-win for both sides!

Ashley :
This is Real Estate rookie episode 416. My name is Ashley Care and I’m here with Tony j Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, three times a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. So we asked our BiggerPockets audience, what is your number one biggest obstacle? And 42% said that finding properties was their biggest challenge. And another 48% said funding those properties was a challenge. So today we are bringing on Henry Washington who has been using a reliable strategy to overcome those hurdles in this ever-changing real estate market. Now, Henry’s also the co-host of the BiggerPockets on the market podcast and he’s BiggerPockets newest author of the Real Estate Deal maker. So Henry, welcome back to the Real Estate Rookie Podcast, brother.

Henry :
What’s up man? I always love talking to you guys. You guys are two of my favorite people. Don’t tell my other co-host that.

Ashley :
Well, we just had you on not too long ago and we’re excited to have you back in this time to talk about your new book. So Tony mentioned the stat about rookies funding and deal sourcing their way. So why do you see this as an opportunity versus a problem for a Ricky real estate investor?

Henry :
Yeah, absolutely. I think that goes back to my corporate background. So I worked for Walmart for 10 years or so, and at Walmart they had a saying, you weren’t allowed to say problem. You were only allowed to refer to your problems as opportunities. They wanted you to be in this mindset of figuring out every problem is an opportunity to solve that problem. And so when you think about how business works, it’s the same thing. Every good business solves a problem. So every good problem is an opportunity to solve something. And so when I got started investing in real estate, I didn’t know what to do. I just started going to all these meetups and I noticed no matter who I was talking to, whether they’d done tens of deals, hundreds of deals or no deals, everybody said, man, I can’t find any deals or man, I can’t find the money for these deals. And so my corporate brain just started going, okay, if I can figure out a way to solve these problems, well then at least I have a room full of people who will buy deals for me or who will want to work with me because I’ll have the thing they’re struggling with.

Ashley :
So what are some things that a rookie investor can do today to reliably start the process of funding their deals and finding them?

Henry :
That’s a great question. So first and foremost, you have to understand that you’re embarking on something that is going to be challenging. If it wasn’t challenging, then everybody would have it figured out. So you need to have this mindset on the front side that you are making a decision that you are going to get good at finding deals. Now, that is where I would start. I don’t want people to think you need to go out and figure out the funding because the better you are at finding deals, the easier it is to find funding. And so if you put funding on the back burner for the start and focus on finding deals, well then what are the fundamentals of finding deals? The first thing you need to get really good at is understanding what’s the market that I’m going to operate in? And once I know that market, you have to figure out, well, what does a good deal look like in that market?

Henry :
Real estate is super local and a deal where I live is maybe not a deal where Tony lives or vice versa. And so you have to understand what a good deal looks like in your market, and then you have to understand what are the ways that you can go about sourcing those good deals? And there is a ton of them. I cover so many of them in the book. The goal isn’t for you to get good at all of them. Newsflash, I’m not good at all of the ways to find deals that I put in the book. I’ve tried many of them, but I selected the ones that fit me and my business. So you need to find a strategy that fits both your personality and your budget because finding deals cost something. It’s either going to cost you time or it’s going to cost you money. It is not free. So pick a strategy that you know are comfortable doing and that you understand you have the resources to fund appropriately, whether that is going to be your hustle to help you find those deals or your money to help you find those deals. And then once you’ve figured out what that strategy is, you pursue it relentlessly consistently until it produces a result and you have a deal.

Ashley :
Henry, how many deal sourcing strategies should and a real estate rookie start with? So should they try all of them at once? So should they only rely on one? What’s your opinion on how many strategies you should actually start with to source deals?

Henry :
The coolest part about deal finding strategies is they all work right? And I know you’ll turn on social media and somebody will be like, direct mail sucks. Don’t do it. And then you’ll flip to another channel and they’ll be like, direct mail’s awesome. Everybody should do it. So what you’ll start to see is that people are pitching the thing that they understand or are good at. So we know it all works because it’s been working for decades. It worked before I was here. It’ll be working after I’m gone. So the goal isn’t to try to do them all. The goal is to try to do the one that fits you and your business and the resources you have to allocate. As an example, as I was researching ways to find deals, I came across cold calling as a strategy. I came across door knocking as a strategy and I thought to myself, there is no way, shape, form or fashion that I would ever be successful doing that I’m not built like that.

Henry :
I can make a couple of cold calls and I’ll get cursed out a couple of times and I’m good. I don’t want to do that. I don’t want to reach out cold to people. I’m just not built like that. I’m honest with myself about who I am. But as I started to learn more about the different strategies, I realized, okay, well if I do direct mail, at least the people that I’m talking to want to speak to me, they’re calling me. And that was a much more comfortable strategy and I knew I could afford to fund that strategy appropriately enough for me to do it consistently. That’s the hangup here, guys, is people want to try a little bit of this and a little bit of that, and they don’t want to fund the strategy appropriately with their time or their money and they want it to work quickly. They’re looking for a result in the next two to three weeks, and it often doesn’t work like that. These are strategies that are going to take time and consistency and effort, but the good thing about that is we know it is proven that if you fund them appropriately with your time, the result will come. Real estate investing isn’t brand new. We already have proof of concept, so you just have to be able to stick it out when you’re not getting the return that you want to get in just two to three weeks.

Ashley :
Tony, what are you doing to source deals now and how did that differ from when you first started out?

Tony:
My very first deal was right off the MLS, oddly enough,

Ashley :
Mine too.

Tony:
And the last deal that we bought, I guess technically would be our motel was also just listed right now. In between both of those, we’ve done a little bit of everything. We’ve gone direct to seller, we’ve got one deal going direct to seller. Henry, I was actually cold calling people when I found that deal. We’ve done postcards, I’ve worked with wholesalers. I found off market deals from networking with agents, and so we’ve dabbled in a little bit of everything. But yeah, my first and my most recent deal were both just properties that were listed on the MLS.

Henry :
And as you found that property, let’s take your hotel for example. You found your hotel listed on the MLS. How many deals did you look at before you found this one?

Tony:
Man, don’t open up wounds here at Henry. We looked at a lot of deals, had a couple of false starts, but we were probably looking for about 18 months before we found the right commercial property that we were actually able to close on.

Henry :
And I think that’s the thing that we’re trying to get across with deal finding strategies is yes, you found the deal on the MLS, but it’s not like you just popped your laptop open one day, boop, here’s a deal all by that one, right? You had to fund that strategy with the time it takes to find the deal. That means looking every day, analyzing deals every day, making offers every day and then bang one hits. But if you’re not consistently funding that strategy, then it’s going to be difficult.

Ashley :
We’re going to take a short break here, but when we come back, I want to talk about what actually makes a deal a really great deal and have Henry break that down for us. We’ll be right back after a word from our show sponsors. Okay. Welcome back from our short break. Thank you so much for taking the time to check out our show sponsors. They make the show happen along with you guys, the rookie community. So we’re going to find out what actually makes a great deal. But before that, I need to know, Henry, what is actually your strategy of choice for sourcing deals?

Henry :
We do use several methods of finding deals, and so I do think as you get more experienced that bringing in multiple strategies to find deals can absolutely be very beneficial. But if you’re just starting out, selecting one is great for you to get started. What we do is we put a lot of time and effort into direct mail campaigns, and then we supplement the direct mail campaigns with a third party cold calling service. So we do cold call, it’s just not me making the calls and we do some Google ad words, so pay per click because that mix of people looking for us plus a slow strategy because mail is slow, it takes time. And then a fast strategy of phone calls. Phone calls are quick. You can call immediately. That combination of reaching out to people accelerates the amount of time it takes for you to get a deal because the typical rule is it takes about seven touches for your lead to be ready to potentially sell their property. And so if I can speed that process up by mixing mail with some calls, then I’m getting that person in the right mindset to where they may be ready to hear an offer by having multiple strategies.

Tony:
I got to share a funny story about direct mail because Henry, you said it takes time to get people calling you back and to go from conversation to close. We were dabbling in wholesaling a little bit a few years ago now, and we dropped a postcard campaign in the mail and it was a few thousand letters and the very first call we got back, we end up wholesaling that guy’s house, the very first call and we dropped one batch of mail, we send it off and boom, it was like a $30,000 assignment fee and then we don’t get anything else for seven months. I’m like, this is the worst thing ever because you get this high, but the first very first person you talked to, you’re like, oh, this is the easiest. Why isn’t everybody doing this? And then it’s like another seven months before we find the next one. So it definitely does take time to get that machine going,

Henry :
But what’s important there is that you continued, you persisted through that period, and that’s where most investors fail, especially new investors because what’s behind that seven months of marketing is money that you’re spending every month and not seeing that return. So it takes guts to be able to continue and be consistent. And that’s what we’re talking about in the book is we know this works. It’s proven, but you got to have the guts to stick it out. And then there are some things that you can do to help increase that lead flow by mixing up some of the strategies. But when people quit, I always tell it, I like it when people start marketing strategy in my market and then they quit because all they did was warm up my leads because if you sent two pieces of mail and that seller threw both of those pieces of mail away and you said, direct mail sucks, I’m never doing it again, and then I started mailing that person, well then that’s three touches now, but I only had to send them one. So I send them one to three more pieces of mail and I’m going to get a deal from the person you warmed up because you quit. So I appreciate that.

Ashley :
I think one other thing to point out that you mentioned Henry, is that you’re tracking all this that that it takes those seven touches on average, and that is so important, especially when getting started. When you are consistent with it, you will be able to track it and you will have a better idea of like, okay, this is actually how much it costs me to get one lead. This is how much it costs me. This is how many mailers I have to send, or whatever your phone calls you have to make before you’re actually getting a deal.

Henry :
You’re absolutely right. Tracking the spend is important. You do. You want to know what’s your cost per deal, how much money do you have to spend to get a deal? But what’s also really cool is to be able to see your spend versus how much money that made you. And so in the book, I have a page where I show you over a 90 day period how much money I had to spend on my marketing strategies versus how much money that made me. And what most new investors do is they focus on the money they have to spend. That’s your scarcity mindset. That’s your scarcity mindset number. Oh boy, I got to spend $5,000, but if $5,000 makes you 40, you’d spend $5,000 every single month. And so I have a slide to show you, and that slide will show you. I spent about $16,000 over a 90 day period on the different marketing channels, but that netted me over half a million dollars in profits. And I don’t know about y’all, but I’ll spend 16 to make 500 every time.

Ashley :
Well, you just made me more excited to read your book and get my hands on it because I love a good template or spreadsheet to actually calculate all these things on my own too. Yeah,

Henry :
It’s got charts and stuff.

Ashley :
So we are talking about how you’re finding a deal, but what actually makes a great deal. How do you know that a lead coming in is a great deal that you’ll want to purchase?

Henry :
Yeah, this is a really good question. Absolutely. So one of the things that we do break down in the book is how to know if you have a good deal and what are the numbers that you need to pay attention to or the words you need to pay attention to in the conversations that you’re having with the seller, right? So first and foremost is you have to understand what is the value of that property typically called the after repair value. So when you get a lead for a property, your first goal is to figure out, well, what is the value of this thing? After it’s all fixed up, you won’t know if you’re getting a good deal unless you know what your final price or value for that property is. And so understanding your A RV is huge, and we talk about multiple ways for you to do that.

Henry :
Once you understand the value of that property, the next thing you’re trying to figure out is, am I going to be able to get this thing at a price point that would truly make this thing a deal? Typically for me, if I can get something at a 30 to 50% discount, then I know that I’m getting a good deal. And obviously that varies on the neighborhood, and some of the ways that I determine those things when a seller calls me is I am typically going to say something like, hi Mr. And Mrs. Seller, I just want you to understand that I am a real estate investor, which means typically I’m going to purchase a property and then I’m going to spend some money to fix it up if it needs work, and then I’m either going to rent this thing out for a profit or I’m going to turn around and sell it at retail value.

Henry :
And unfortunately, that means I cannot pay retail value for this property. And when I say that, that typically helps me weed out people. And so if they’re like, oh, okay, well, thank you for being upfront with me. Yeah, we’re looking to get as much as we can. We want to sell this for retail value, well then great, then I understand that that probably isn’t a deal, but if that seller then says, well, I’d still be interested in hearing what you have to say, even though I don’t know if that’s a deal yet, I’m getting indications from the seller that they might be willing to sell it at a price point that would make it a deal, and that allows me the time to be able to go and do further analysis.

Ashley :
Henry, in your business, do you have a checklist that whoever’s doing these cold calls for you or the leads are coming into that they have to go through and this is the information I Henry need to actually decide if this is something I want to move forward on?

Henry :
Absolutely. 100%, absolutely. So in that initial phone call, there’s a couple of goals. Again, you need to know the value, but that’s something you can do outside of the phone call, but on the phone call, what you’re wanting to be able to do is determine if there’s any level of motivation. So the script I just kind of gave you in terms of what to say, that’s one way of uncovering motivation. You’re also trying to build trust because you want them to trust and understand that you’re there to help because you truly are there to help, and then you want to make sure that you’re setting an appointment. So those are the goals on the call during the conversation, what I want to get an understanding for is what is the size of the house, how many beds, baths, and square footage, what kind of disrepair there is?

Henry :
I want to know what’s the seller’s idea of what kind of disrepair there is. If the house is perfect and in great condition, then they don’t need me. They need a real estate agent. They need to go help somebody get them value. So what’s the size of the price in terms of what the renovation cost is going to be? So what’s the disrepair? And then I’m asking about a couple of big ticket items, so I’m not trying to go down this long list of, well, how is this and is the refrigerator running? It’s more about, Hey, how old is the roof and how old is the hvac? Those are the two main things that I’m concerned about on the front side because those are indicators of large ticket disrepair items, so size of the house beds, bath square footage, and then the HVAC and the roof are typically the questions that I’m asking, and that’ll help me with the other information, understand if I’m potentially dealing with a good deal here.

Tony:
You mentioned something about condition of the home, and I feel like most sellers always think their home is in the best condition possible, and I can’t remember who taught me this question, but it was something I picked up in my education process, but someone said, instead of asking them like, Hey, is your home in good condition? If you can be more specific with your line of questioning, you tend to get more accurate responses. So instead of saying like, Hey, what’s the condition of your home? Say, Hey, when was the last time you fully renovated the kitchen? When was the last time you fully renovated the bathroom? When was the last time you fully replaced the roof? And you start to ask some of these more detailed questions. Now you start to peel back the layers of that onion and like, oh, I haven’t touched the kitchen since 95.

Ashley :
My husband built the kitchen handmade in 1950 when he built this off.

Henry :
Absolutely. What’s good is I would tell you that line of questioning is great for if you truly do want to get to the root of what the condition of the home is. I prefer not to ask specific questions. I prefer to ask very open-ended questions. I want the seller talking more than me. If the seller is talking, I’m learning. I’m learning about what work has been done, maybe what work hasn’t been done, I’m learning about what the situation is that’s causing them to want to work with me. Again. If I can’t help you out of a situation, then this, I’m not the buyer for you. I want you to get what’s best for you. And if what’s best for you is retail value, I need to be able to know that and understand that. So I don’t ask, well, how many bedrooms is the house?

Henry :
I typically say, Hey, I just need a little bit of information about the property in order for me to move forward. Can you tell me a little bit about the property, maybe how many beds, baths, square foot, that kind of thing, right? And then they’ll tell me about, well, it’s got a living room and a sunroom and it’s got a laundry room, but then they send, then my cousin did this thing in the sunroom, and that thing’s almost fallen in. And then you get so much information that way, and I really, really, it’s more about getting them talking because the more they’re talking, the more I’m learning and understanding how I can actually help be of service. And sometimes that helper of service that I can provide actually has nothing to do with buying the house. And if that’s the case, that’s fine too.

Ashley :
Henry, you mentioned one of the first things you want to know during that initial conversation is how motivated they are. What are some of the signs or red flags that, or maybe green flags as to why they would be motivated to sell and especially at a discount to you as an investor?

Henry :
Yeah, absolutely. I’ve bought houses from people in all kinds of situations, and again, that’s what we’re looking for, right? It’s the situation we’re looking for. The house typically comes with a situation, and so some of the situations may be I’ve bought houses from people who had to relocate for work in the next 30 days, and if your house is in some level of disrepair and you’ve got to sell your house in 30 days, obviously we’ll give you some motivation to try to, Hey, get this thing payment out from my name so that I can move on and do something else. I’ve bought houses from people who unfortunately had some legal bills that they had to take care of, and the only thing they could do was to get access to the only money that they could get access to. There’s tons of different situations that you can look for.

Henry :
The goal is to understand why someone would need to sell from you. As you uncover that situation, you are going to learn, is there a way that I can help? I want to make sure that people understand that buying properties at a discount is buying a situation. It is buying potentially a problem. Our goal is to solve that problem, but you’re probably going to come across situations where people think they need to sell you their house and they might not need to for you to be able to help them. We as the investors are going to have some level of understanding of this real estate market that maybe they don’t have. We’re going to have some level of understanding maybe of legal matters that they don’t have. And as you’re talking to people, if you’re uncovering that their situation is something that maybe you can help them solve that doesn’t require you to buy their house, I want us as investors to be able to understand that we do have a level of responsibility to try to be of service, even if it means we’re not getting that house.

Henry :
This isn’t about taking advantage of people in difficult situations. This is truly about helping people out of difficult situations. Sometimes that help will mean you can buy their house and help them, but sometimes you’ll be able to help them without buying their house. And I encourage all of you, if you find yourself in that situation, please try to be of service to those sellers. We’ve walked in houses and instead of buying the house, we paid their mortgage for another couple of months. They didn’t need to sell their house, they just needed some more time, right? We’ve walked in houses and instead of buying their house, we fixed their vehicle because they were selling their house to fix their vehicle so they could go to work. And I’m not going to buy your house so you can fix your vehicle. I’m just going to fix your so you can go to work.

Henry :
Did that cost me money? Absolutely. But was it the right thing to do also? Yes. So don’t hear I’m buying situations and think I’m being a predator. What you should be hearing is there are people, regardless of what you’re doing in your daily life, there are people who need to sell their home and can’t. And if you can be of service to be able to help them out of that situation and buy it, you should. And if you find yourself in front of somebody who does not need to sell their house, you should also be able to explain to them what options they have, even if those options don’t mean you get to profit.

Ashley :
That’s really incredible, Henry, those little stories that you shared with us, and I hope that motivates some other listeners here and other investors to do something like that if they are in the position to do so or have the opportunity to because what goes around comes around, and I’m sure you have made that car payment money back in deals for sure, but there’s one thing I want to ask on this is how are you getting them to give you that information? What is the question that you are asking or what is your approach?

Henry :
Yeah. Again, one of the goals on your call with a seller is to build trust, and I’ll do that through a number of ways. First, I am always, again, you want to be listening more than you’re talking. As I’m listening, I’m actively listening. I’m listening for things that I can relate to on a human level, and that could have nothing to do with the actual property or the house, but if I hear somebody say as an example, I was speaking with a seller and I heard them say something about they had a additional bedroom, but they just do art in there. Well, my father was a high school art teacher. I know that I now have a point that I can reach out to them. I can now connect with them on some level and say, oh, that’s cool. What kind of art do you do?

Henry :
My father was an art teacher. He did this kind of art. Those little conversations are humanizing you. They’re taking you out of right now. They see you as some stranger who wants to buy their house. But the more you can humanize yourself, the more that helps you build trust, and the more trust you have, the more open they’re going to be willing to be with you about what situation they’re in. If you get on the phone call with the seller and the first thing you say is, oh goodness, why are you selling your house? To me? They’re not going to want to explain to you what tough situation they’re in, but if you approach that conversation with empathy, and the other thing that I do is I’m always extremely open and honest about who I am and what my intentions are. And so one of the first things I say is that script I gave to you earlier in the thing, I let them know, yes, I am an investor.

Henry :
I am doing this because I’m looking. I have to do this for a profit. And I often tell them, look, I’m going to be as transparent with you as humanly possible, whether that is in my best interest or not, I just want you to everything about this process, and if I can help you, I will absolutely reach out to help you. And I often will provide resources. So if I hear them say something about a situation, even if I have looked at the house or not looked at the house, if I can provide them some sort of resource or something, I will do that. Sometimes I’ll hear people say they’re having some issues with credit or something. I have some resources that I could potentially provide them, give some information or some people I can connect them with. I’m always looking for ways to be of service to those people because then if I’m of service and going out of my way, the trust is built and the walls come down and they’ll be able to talk to you more.

Henry :
What we are selling is speed and convenience. What agents are selling is the most money possible. The reason people go work with an agent is so that they can sell their house on the open market for the most money possible. The reason people sell at a discount is because they need some level of speed and convenience. So don’t look at this as you are going out here and trying to take advantage of anybody. Your product that you are selling is speed, convenience, and problem solving. Agents are selling, how do I get you the most money possible? Sometimes the people who you can help do not want the most money possible. They don’t care about that. What they care about is getting this problem property out of my life as quickly and as conveniently as possible, and sometimes a traditional way of selling property doesn’t afford them to solve that problem. That is the space that we play in.

Ashley :
So we have learned how to find a deal, what to do when you get a lead, and what makes a great deal. But what is the next step? We’ll find out right after the short break. Okay, welcome back. So Henry, you’ve found a great deal. Now what do you do with

Henry :
It? Absolutely. There’s a reason that the Finding Deals portion was the first part of this book because it is the most important factor. If you have a good deal, getting the money becomes substantially easier. Matter of fact, if you think you have a good deal and you’ve been out there looking for money and can’t find any, I’d probably tell you that your deal is not nearly as good as you think. It’s so this step should be substantially easier. That is why it is the second half of the book. So now that you have the deal, you have to go out and find money. But when you think about funding, I don’t want people to think about funding from the perspective of I want to know one or two ways to finance a deal and then go out and hammer every deal that I find with this type of funding.

Henry :
You see that a lot right now, especially in the creative finance space where people, they have this creative finance hammer in their hand and they go find a deal and they’re like, give me that. I’m going to create a finance this deal. That is not how I want you to look at financing. I want you to be a fundamentally sound real estate, and that means I want you to understand what are all of the ways I could potentially fund a deal. And then you should select the funding that fits that deal and your current financial situation where those two things intersect. That is the financing that you should use for your deal. And what you’ll see is a lot of people, since they only know one or two ways and they’re trying to finance that deal, maybe that deal doesn’t make sense for that type of financing.

Henry :
And you’re putting yourself in a tough situation by using that type of financing. As an example, if you want to buy a deal because you want to owner finance something and you find a deal and the owner agrees to owner financing and you’re like, sweet, I’m going to get a deal. I’m going to get a 5% interest rate, it’s going to be awesome. And then you need $80,000 to renovate that property. Well, the owner ain’t going to finance that $80,000. Now you’ve bought a property that you got to go find $80,000 to renovate, and that $80,000 now is not secured by the real estate you’re buying, right? It’s difficult, and it’s not impossible, but it’s difficult. So that may not have been the best financing for that deal. Or you see people they want to buy, a lot of rookies do this, right? They want to buy a rental property, they go find one, and then they’re trying to figure out a way to finance it, and they’re talking to all these conventional lenders, but they don’t have a 20% down payment.

Henry :
Well, if you don’t have a 20% down payment, conventional lending is not the best tool for that job. So every different type of financing is a tool in the tool belt. We want to use the right tool for the right job. And so we try to educate you on what are the multiple ways you could finance a deal, and then we educate you on what are some ways that you can piece together multiple types of financing to take a deal down so that it does fit your current financial situation. I’m not saying every deal needs to get done with little to none of your own money. I am saying that if that is a goal of yours, there are multiple ways to do that, but you have to be, well-versed in how to underwrite deals in order to be able to piece those things together.

Ashley :
When you were talking about this, all I could think about was how I literally use what you said to pick my partners instead of my funding for the deal. It’s like, okay, here’s my partners. It’s what partner works for this deal. And I love how you framed the financing on that because that is so true. Everyone, yeah, you got seller financing, that’s amazing, but maybe it doesn’t work good on that deal, and there’s actually better financing out there. Whenever I’m doing a showing with either the seller or the agent, I’m always asking, would you be open to seller financing every single time? And sometimes the thing is, well, yeah, if the down payment’s big enough and it’s like, okay, well that’s not going to work for me. Seller financing does not work great in that scenario. So when you have your deal, what are some of the things a rookie investor should be looking at when deciding what type of funding this will work for?

Henry :
That is a fantastic question, obviously is first and foremost is money on hand. Even if you can get into a deal with little to no money, that doesn’t mean that real estate takes little to no money. If you’re getting into a deal, you don’t have any money, and so you piece together some financing that requires you to use no money, and then your HVAC goes out on day two of owning that property, well, you got to come up with six to $8,000 to fix that hvac. So real estate does cost money. So you need to think about what’s the cash that I have on hand? And the next thing you need to think about is how quickly do I need to get this deal done? As an example, I recently bought a duplex, and actually I bought two duplexes very close together, and they were very similarly priced, but I bought one with completely different financing than I bought the other one with.

Henry :
And the reason I bought the one that bought them with completely different financing is because in order for me to secure the deal on one of them, I was going to have to beat out the competition. And I knew the best way to beat out the competition was to tell the seller I could have him his money in less than seven days. And so if I knew that I needed to get that deal closed quickly, well then that limits the type of financing, the kind of financing that I need to use to get that done. So I immediately knew if I want this deal, I got to get it in seven days. That means I need to go to this particular private money lender or this particular hard money lender who I know will get that deal funded in seven days or less. Whereas the other deal, I had a much longer runway to close, and so I just used a more traditional financing product to get that one done so that I could just put it straight on a 30 year fixed from day one. Whereas the one I closed quick, I used a short-term loan to secure the deal, and then I’ll have to refinance that one later into a 30 year fixed. But even though that costs me a little more money, I’d rather have to pay that money to keep my great deal than to have not gotten that deal at all because I didn’t use the right financing that was going to win me that deal.

Tony:
It’s almost like the saying when all you have is a hammer, everything looks like a nail. And I think so many rookies, they hear this one concept and they try and apply that to everything. But the more tools you have in your tool belt that maybe you don’t need a hammer, maybe it’s a screwdriver or a wrench or name the tool, but you’ve got to have those different tools in your tool belt depending on the situation. So one of the things as we didn’t touch on was what actually is seller financing? So Henry, break it down for our rookie audience. What does seller financing actually mean?

Henry :
Yes, seller financing is where instead of going to the bank to get a loan, you get your loan essentially from the seller. So typically this is done when the seller owns the property free and clear. If there’s no loan against the property, instead going to a bank, you can make your payments for that property directly to the seller. And so the seller acts like the bank and finances the property to you. This can be a very beneficial strategy for a new investor because you don’t have to go to the bank, but B, you and the seller get to determine what are the rates in terms of this loan. And you can structure seller financing or said differently. You should structure seller financing in a way that creates a win for both parties. So when you’re looking at seller financing, it’s less about what you want and need and more about what the seller wants and needs, and then you fit your wants and needs within that.

Tony:
We just closed on our first commercial property. It was a boutique hotel outside of Zion, and we seller finance that deal. And like you said, it was a win-win situation for everyone involved. We got a really decent interest rate on a pretty decent term, and they got to walk away from this property. There was a bit of a headache for them because they just didn’t have the skillset or the desire to manage it anymore, and we both walked away very happy. So I think there is a time in place for seller financing, but as you said, Henry, you can’t apply it to every single situation. Henry, there’s so much good stuff coming out of this conversation, and we really just kind of tip of the iceberg in terms of how to fund your deals, how to find your deals. So you’ve got your book coming out. Tell our Ricky audience give us the title again, give us a quick synopsis, watch people go check this book out.

Henry :
Yep, thank you. The book is called Real Estate Deal Maker and it will teach you how to get really good at finding real estate deals and then how to structure the financing that fits the deal and your financial situation the best. The goal of the book is if we can help you solve those two problems, which are the two problems, as you stated in the beginning of the show that most investors are facing, but if you solved your problem of deal flow and you solved your problem of money flow, well, then you’d grow and scale your business at whatever pace you felt comfortable growing it. Right? If I called you tomorrow and said, Hey, I’ve got a seller in Buffalo who’s going to sell five single family rental properties because she’s looking to get out of the landlording space, she doesn’t want to deal with it, she just wants to get out of them.

Henry :
She doesn’t want to put her tenants out. So she’s willing to sell these properties at a 40% discount. And I have a private money lender who you and I both know who already said that he would fund 95% of the purchase and a hundred percent of the renovation. So all you need is a 5% down payment to take down those properties. How many of those houses would you like to buy? All of them You’d buy every last one of them, right? Because the problem of deal flow, finding the deal and the problem of money flow, having money for the deal has been solved. So if you can solve those problems in your business, then you will grow your portfolio at the pace you’re comfortable. And don’t get me wrong, I’m not saying anybody needs to do what I’ve done and build a portfolio of over a hundred rental properties. Whatever that pace is for you, that’s what you should focus on. But solving those two problems will help you get there.

Tony:
And Ricky’s look. If you want to check out Henry’s book, which I recommend all of you do, head over to biggerpockets.com/deals book to get your copy today.

Ashley :
Well, Henry, thank you so much for joining us on Real Estate Rookie. We really enjoyed this mini master class. If you want to learn more about Henry, we will link his information in the show notes. If you’re watching on YouTube, you can find it in the description. If you haven’t already, makes sure you join us in the Real estate rookie Facebook group and make sure to like and subscribe to the Real Estate Rookie YouTube. My name’s Ashley, and he’s Tony. Thank you guys so much for joining us, and we’ll see you next time.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico Content.

Ashley :
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.

 

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