What Most First-Time Home Buyers Get Wrong with Nicole Lapin and Scott Trench

Scott:
Hey everybody. Scott Trench here. Host, guest, I don’t know what I am today, of the BiggerPockets Money Podcast. So excited to share this episode that I actually recorded with our friend Nicole Lapin of Money Rehab on her podcast. You can go check that out on her feed, but if you’re interested in listening here, this is just basically me and Nicole riffing on real estate investing and the housing market for the next half hour. And I think hopefully there’s some valuable nuggets in there. A lot of stuff about first time home buying, a lot of stuff about the practical challenges of getting into real estate investing, and I just had a great time and wanted to share it here on the BiggerPockets Money Podcast feed for those who are interested and maybe didn’t see it.

Nicole:
Scott Trench, welcome to Money Rehab.

Scott:
Thank you, Nicole. It’s great to be here.

Nicole:
It’s great to have you on the show. I came over to your podcast home I suppose, and now I’m inviting you into mine.

Scott:
Yeah, thank you so much. I’m really excited. You guys have a wonderful show here and always learn a lot, so I’m excited to chat with you and learn some more and talk about some real estate potentially.

Nicole:
Let’s do it. So let’s show some love to first time home buyers right now, shall we? Because they’re struggling, Scott. Cards on the table, it’s not an easy time to buy a house, and even in more advantageous economic times or interest rate environments, buying a house is not for everyone. I have a whole checklist that I say people should cross off before even thinking about buying a house. I won’t go through the whole spiel with you, but basically, if you’re going to live in it for a while, if you can afford it, if you have a steady job that you love, things like that. I want to hear from you though. What are the guidelines that you give around whether folks are going to be in a good position to begin with to think about buying a house?

Scott:
Yeah. So I always start the home buying discussion with the concept of should you rent or buy? And right now, in most markets, in most parts of the country, it’s cheaper to rent than buy unless you plan to live in the house for a very, very long time and have very, very long-term horizon expectations. But in terms of if you are ready to buy, I think that my checklist would be very similar to yours. It would include having a great credit score, having a steady stream of income that is something you can borrow against, having a substantial amount of cash savings. I like to have the down payment, plus all closing costs that you’re going to pay in cash, plus all anticipated repairs or maintenance you’re going to make shortly after closing, plus a 10 to $15,000 cash buffer. So yes, that’s a pain in the rear to accumulate, but I think it’s the responsible position going into that purchase. Notice, however, that I didn’t say you need to have a 20% down payment. I’m fine with a 5% or if you’re a military person, a 0% down payment if you can use a VA loan for example.

Nicole:
Let’s double click on that. Why is that?

Scott:
Well, I just think that first of all, it delays your purchase by so long if you have to save up 25%, and second, in my position as a real estate investor, I like to use as little as possible down on a primary home purchase or in my case a house hack or property that I’m turning into a future estate investment, and that gives me more cash available for other investments. I also think it’s more conservative. If you have 100 grand and you’re buying a $400,000 property, if you can put down 20,000 and have $80,000 in the bank, you got $80,000 in cash to withstand any storms. Sure, your payment’s a little higher on that mortgage, but that’s an actually more conservative position than putting the entire $100,000 down or even close to that and having very little leftover in your bank account. That’s how you become house poor, which can make your house a chain or a trap instead of the American dream that I think a lot of us make it out to be.

Nicole:
But then you’re paying a lot more in interest overall. How do you balance that?

Scott:
Yes, you’re paying more in interest, but it’s about what you can earn in other types of investments as well. So for example, as a real estate investor, even at a six or 7% interest rate mortgage, I think I could earn a better return than that in other investments like the stock market and like additional rental properties. That was certainly more true, more obviously true, three or four years ago with three or 4% interest rate mortgages and it’s a little harder now that six or 7% is right in the bubble for a lot of people in terms of the types of returns they can get in other investments versus paying down their existing mortgage. But that’s how generally I’ve approached it in my life to this point.

Nicole:
Yeah, I mean, right now we’re in a totally different interest rate environment, so the arbitrage or the area where you can profit from having a super low mortgage and then getting seven or 8% inflation adjusted in the stock market has narrowed a lot. So it’s almost a wash if you have a 7% mortgage and you can get 7% in interest. Has it changed your calculus in this interest rate environment?

Scott:
Yeah, 100% it’s changed the calculus and the way it’s changed the calculus is it’s made renting a more attractive option than buying in many markets for all but the people with the longest term horizons in terms of owning that property. So that is a major issue here. The higher interest rates have changed the housing market in a number of ways. I don’t know if you guys have talked about the lock-in effect for a lot of home buyers.

Nicole:
Let’s talk about it.

Scott:
So this is where if you have a 3.5% interest mortgage on your house from the last couple of years before rates started rising in 2022, you feel locked in. And you could talk to a lot of your listeners here, and I bet you they’d say this, they’re not planning to move. If you have a $500,000 house with a 3.5% interest rate mortgage, you’re not selling that thing and moving down the block into a $600,000 house, even if it is an upgrade, because you’re going to be paying twice as much in interest on that new mortgage. So that’s why existing home sales are down dramatically year over year in the housing market and there’s so low inventory. It’s because of this lock in effect. Otherwise, if this effect weren’t happening, I think you’d be seeing significant declines in property values and prices because people would be obviously transacting at the same rate and you can’t afford the same amount of property at today’s rates if there was enough inventory to go around.

Nicole:
All right. So you say that housing is an expense and not an investment though. So tell me more about why you think people should view housing not necessarily as an investment, I’m assuming out of the gate.

Scott:
Yeah. So if I have a car, my car is not an investment, and the reason why people don’t have a problem with this is because the cars typically depreciate in value. But a house costs you money to live in. You’re going to pay a mortgage, you got to pay property taxes, you got to maintain the property. And yes, while it typically holds its value with inflation over a long period of time, if you were to plot out your net worth based on whether you could live for free in your parents’ basement or in a house that you own and have a mortgage on, you will find that the house is going to decrease your net worth even though yes, you are building equity relative to an alternative, for example, like renting.
What’s fundamentally true, and model it out yourself if you want to, is that the more house you buy, whether that’s renting or as a homeowner, the less wealth you’re going to have, especially when you layer in the opportunity cost you have of investing the cash that’s going towards your housing payment or your rent in things like the stock market or real estate investments. So that’s why I classify housing as an expense. What do you need in determining a liability other than the more you buy, the less wealthy you are and the higher the cash outlays to maintaining that lifestyle you have?
So that’s the first way to think about it. And then that enables us to think, okay, I’m going to change this from an investment decision to a cost benefit exercise. What is the least expensive way to live my preferred lifestyle? Is it renting or is it buying? And a few years ago, I would’ve said it’s about a five to seven year break even point. If you’re going to live in a place for less than five years, in most parts of the country, it’s better to rent than to buy. And by the way, you don’t have to live in the property more than five or seven years, you have to own the property for more than five to seven years to cover the transaction co costs with that. And if you’re going to live or own the property for more than seven years, I think it’s better to buy than to rent. I believe that with the rising interest rates in the last 18 months, that math is pushing things out to the 10, 12 year mark. So you got to be even more thoughtful about that buy or rent decision in most markets in the country.

Nicole:
Yeah, because even when you look at listings, I mean, I love housing porn all day every day, if you look at how much that house is appreciated over time, oftentimes it’s not that much, depending on the area of course. But then when you’re looking at the history of what it traded for, oftentimes you can see that you’ll make much more in the stock market or different investments.

Scott:
Yeah. I think that’s absolutely right. And what a lot of people don’t do is they say, “That house looks beautiful, it has all these things.” They don’t understand what that means for them a few years down the road, which is why I think you got to think through what’s called exit options whenever you buy any piece of real estate, and especially your house. And there are three basic exit options for your typical homeowner in this country. One is you move into the property and you live there happily ever after. And too many people overweight that as the only option and just have that as their standard assumption here. The second exit option is that you hold the property and keep it as a rental. Preferably, that’s going to be a positively cash flowing rental where money is going into your pocket and you’re not subsidizing your future tenants’ housing costs by paying a mortgage or having expenses that are greater than their rent, which is how many homeowners that turn their primary houses into rentals actually turn things out. And the third option is to sell the property, and again, hopefully add a gain.
And so the better you can maximize a happy combination of those three options, and the sooner you can do that in your home buying experience, the better off you are, the more free you are. If you buy a house and you do your numbers correctly and you finish the basement or add value to it in some way, it’s worth more. Maybe it cash flows if you were to move out six months, a year later as a profitable rental, and maybe you’re happy to live there for as long as you want. That’s the framework I think you should have going into your first home purchases. How do I maximize happy choices in those three categories? Because a lot of people go in there and they only have one exit option, live happily ever after and close my eyes and pray for continued appreciation so I can sell it at a gain. And that’s where you find yourself stuck in the same job. That’s where you find yourself in this trap that tens of millions of Americans are in right now where they’re locked in to their current housing situation and cannot move in a reasonable context, can’t take that job in the next city if it’s a better opportunity, but doesn’t pay enough to cover the new housing costs that they’re going to have.

Nicole:
But you assume that exit option of renting it out and being able to cover your basis and all of that. It’s a pain in the ass to do that. It’s hard to have renters. I think that somehow this has been glorified, this idea of I’m just going to get my duplex and I’m going to rent half of it out, or I’m going to live in the ADU backyard and I’m going to rent out the house and it’s going to be rainbows and butterflies and the person’s not going to suck and they’re not going to have parties and they’re not going to mess up the toilet. It changes your lifestyle completely. It’s beyond a cool TikTok of, hey, I got this rental property and it’s paying for my sweet yacht when I go to Dubai with my wife that somehow I’m getting all of these TikTok fed to me. It’s hard in practice.

Scott:
Absolutely. Where do you live right now?

Nicole:
I live in LA.

Scott:
LA. And do you live in an apartment complex, a house?

Nicole:
A house.

Scott:
A house? Okay. And how close are your neighbors?

Nicole:
Soops close.

Scott:
Soops close. Okay, great. Do you like all your neighbors?

Nicole:
I don’t know all my neighbors, but the ones I know I do like.

Scott:
Okay, fair enough. Well, I haven’t always liked all my neighbors, but I have generally been able to not have them continue being neighbors after a year if they behave poorly or cause problems in my life. And so that’s how I’d reframe the discussion around landlording. Yeah, it’s obviously work. It’s about the ROI of that work and the other tangible benefits that come with it. When I started out my investing journey, I was making $50,000 a year and I bought a duplex for $240,000 in Denver. Can’t do that anymore. That place rented for 1150 on the other side and I had a roommate for 550. So as you’re doing that math, that’s 1700 bucks a month. 1700 times 12 is, what is that? That’s about 20 grand in annual income. So that’s two fifths of my salary are going into this exercise.
Obviously, it would’ve been better not to have tenants in my place and to have the whole place to myself and not have to worry about those problems, but I got paid 20 grand in order to do that and that was worthwhile to me. So fast-forward to today, I run this real estate company, I’ve got a very good income, life is good. My wife decides that she wants to move into one of our duplexes, and I’m a little bit resistant at first because I don’t want to go back to house hacking. I go back here and we have this big five bed, three bath duplex on each side, so it’s a nice house.

Nicole:
You guys have your own separate side? What’s happening?

Scott:
We have our own separate side. Yes. And the other side pays $2,700 per month. And the mortgage on this property, I bought it two or three years ago, is $3,200. So every once in a while I got to interact with the tenants. They let the lawn grow pretty high before mowing it recently. Send a friendly reminder over there, please mow that thing. But on the other hand, I’m living in this really nice place that’s pretty big here in Denver for essentially $500 a month plus the maintenance and utility fees for my side. So it’s all in that perspective.
Obviously it would be better to just pay $2,700 a month in rent and not have to deal with that. It’s about how much benefit I’m getting in order to do that. So that, I think, the glorification, if you will, of this is when you do it right, if you go through the hard work of educating yourself on how to find quality tenants that have good credit scores, have good income, do your reference checks, you can still have problems, but you’re a lot less likely to have those problems and you’re much more likely to have a quiet, peaceful existence with your neighbors that they share a wall with our property, but there’s another house on the other side that is 40 feet away, so I actually see that person more, because of the way our structure is set up, than I do the tenants that I have living next door to me.

Nicole:
Yeah. But you don’t have to tell them to mow their lawn. You don’t have to interact with them. They could be (beep), they not pay, they could squat, they could TP your house. There’s all sorts of things that people don’t talk about. It could have been the case when you were younger and had your duplex and had your roommate that you couldn’t find a roommate or that you couldn’t find a tenant or all of these things. And so I think sometimes we get colored by the perfect case scenario and oftentimes we don’t talk about the variables that can really suck. And by the way, you’re running a big company. Scott, how many employees do you have?

Scott:
We have about 80 folks here.

Nicole:
And a bunch of people report to you. You guys make a bunch of money, it’s a big company, and you’re dealing with this dude’s like lawn. That is opportunity cost for you making even more money.

Scott:
I agree, but I also like where I live. And here’s where I put it back to you. I’ve had neighbors I haven’t liked in the past. So for the three years prior to this move, it happened a couple months ago, I lived in a quadplex as a tenant. Nice place downtown in Denver near one of our fancy parks Wash Park. I can say that I didn’t always get along with some of the neighbors there. Unfortunately, not owning the rest of that quadplex, I couldn’t tell them, go mow your lawn and please stop going through my stuff over here, please don’t do this stuff. Guess what? I own this duplex and so my tenants, who have not caused any problems whatsoever, literally, the lawn grew a little high, it’s not even a big deal, I just texted them to please mow it at some point. If that was to repeat, I’d have a little bit more control over that situation. So I actually almost prefer that in my situation.
Now, I want to also stop rose coloring the whole real estate investment process because you’re absolutely right. There’s a pain and a price to getting into real estate investing that has to be paid, and it’s not really in the form of dollars, and I would even say, at this point, it’s not really even an ongoing time spent managing the property. The price that you’re talking about is paid upfront and it’s in the form of hundreds of hours of self-education. And so I paid that price. I spent hundreds of hours listening to podcasts and reading books and meeting people in the real estate investing world to get this framework, and I paid that price when my time was worth $25 an hour. So that’s a great investment for me.
For Nicole, this is not a good investment. I would encourage you not to invest in real estate. You are this finance superstar. Why would you spend 250 hours learning about real estate investing to get into this to buy a bunch of duplexes unless you really wanted that extra bit of return, that spread, that maybe you can get with leveraged real estate between the stock market over the next 20 years. Then I’d encourage you to do it. There is some benefits to it. But I think a lot of high income earners don’t like real estate investing for exactly the reasons you just described. The difference is, once you’ve paid that price, especially if you can pay it early in life, you can reap the benefits for the next 50 years of your career, more or less. By the way, if you get into real estate without paying that price, you will pay the price later, you’ll just do it in the context of major losses and huge problems with tenants and lots of surprises. You’ll call them disasters. I call them capital expenditures in my business.

Nicole:
I also call them CapEx in my business too. However you want to spend it, you’re going to have a price to pay some time, and I think you and I can agree it’s better to pay that price early when the value of your time on the open market, you can always get more money, you can’t get more time, but when that value of your billable hours, because we all have them, is lower. So I think we can agree on that because I hear all the time from people who want to do this thing and think it’s rose colored glasses, glorified investment properties, buy the house, get the rental income, and they think that renting out their house and you can rent a cheaper spot and do all of this stuff is going to be net positive and that it’s going to be a slam dunk. So I’m really glad that we are finding this common ground because there is a place where it can really be a slam dunk, but having that education out of the gate is super important. I think that you might have a suggestion of where they can get that education.

Scott:
I’m happy to, of course, plug BiggerPockets. We try to have a bunch of free content and stories that can talk about that stuff. But yeah, if you’re going to dabble in real estate or BiggerPockets or any of those things, be prepared. It doesn’t have to be an active every day I’m spending four hours, but I listen to a podcast every single day on the way to and from work and while working out. I probably consumed 400 hours of this stuff before buying my first property in addition to that, plus the meeting of people attending mastermind groups looking at properties and those types of things. And that’s just not a reasonable investment for someone that’s maybe making millions of dollars or several hundreds of thousands of dollars unless they plan to invest for a decade or two at least, and really attempt to drive that net worth and that spread because again, if you’re going to do all that work, you have to believe that real estate’s going to produce at least a little bit better of a return than an alternative like a stock market index fund or something that’s totally passive and easy in there. And that’s what I fundamentally believe and that’s worked out so far, but that’s the trade off there.

Nicole:
But it’s not a cheat code. You’re going to spend time somewhere. For me, I just don’t want to spend my time that way. I just don’t. I’d rather be a passive investor. But you’re going to spend your time dealing with tenants or you’re going to spend your time, likely, or hopefully, on the education front. But don’t do this just off of a TikTok that you watch.

Scott:
Yeah. We see a lot of overnight successes in 10 years through hustle, grind, sweat, saving, extreme frugality, moving into properties, fixing them up and painting them and stuff on the weekends. And then we do see those folks emerge again as overnight, I’m saying that facetiously, successes in seven to 10 years of this very consistent approach, and that’s the power. Real estate is not your get rich quick mode. If you want to really make tens of millions or hundreds of millions of dollars, start a business and go all out in that field. If you are already a high income earner and you want something totally passive, stick with stock market index funds.
In fact, most of my personal dollars invested have been in index funds. I own more real estate because I’ve used leverage to purchase those real estate properties in there. But I actually have put more of my personal dollars into index funds, and I mention this all the time in BiggerPockets, than I have into my real estate. That’s given me a diversified portfolio that’s pretty balanced because the real estate has done better with the leverage than the index funds that I put money into. But that’s completely consistent with my philosophy. Real estate’s this great sweet spot for somebody who wants to build a significant pile of wealth over a seven to 10 to 15 year period and have the tax advantages and have the cash flow from that. You can retire or come pretty darn close in 10 to 15 years if you make some reasonable bets, take some reasonable risks and work pretty hard in this business, and that may not be quite as accessible from an index fund investment.

Nicole:
I think you have a really measured outlook and a really realistic outlook on where the opportunities are and what some of the cautionary tales are. I mean, I’ve somehow gotten into the TikTok algorithm or the Instagram algorithm, where I keep getting fed a bunch of this content around investment property hacks, creating an LLC for each of the properties you buy, putting the LLC in Delaware or getting the trust in the offshore account and then all these charts and flow charts and things like that. You’re shaking your head.

Scott:
Yeah. I mean, this is a really tactical item here. But the LLC thing always ticks me off. And I’m not going to give legal advice, this is not a legal advice thing, this is just an illustrative example in a personal situation here. But when I bought a house hack in 2014, this duplex, am I going to put the thing in the LLC? I have nothing to protect. I’d saved up 20 grand in my whole life. There’s no assets in my life. I have eight grand grand in the bank account, I have 12 grand in equity in this property, and that’s even wiped out because of the transaction cost someone would have to foreclose on me. So am I going to put this thing in an LLC? Even if I did put it in an LLC, I wouldn’t have any protection because I live in the property and manage it myself, and so someone could pierce the corporate veil on this.
After I moved out of the property, I lived in the property for the year prior, pierced the corporate veil, I still self-manage the property, which I believe, by the way, many investors who earn below a certain amount should do for the early years, and then you shift it to property management and make it more passive but not totally passive, to your point, in future years after that. And so when does that take place? Nowadays, I’ve put my properties into an LLC. I put them into one LLC in there. I think that if you are not careful in this space and you let a lawyer scare you, a lawyer is going to make a great return on your real estate investing portfolio potentially if you allow them to help you create a series LLC, which is what you’re talking about, where you put each property in an LLC and then you strip the equity out into a parent LLC.
And by the way, I’m kidding here, I’m getting facetious, you can never touch or even look at your properties in that case because you’re going to be putting yourself at risk of piercing the corporate veil. Not the way I want to live my life. I like an insurance policy and a very simple LLC structure. Sure, I might be assuming a little bit more risk than other approaches, but that’s also the great thing about BiggerPockets is if you were to type this question into a forum, you’d get 20 different investors giving different opinions on this, and of course, the lawyer scaring you and telling you exactly why I’m so wrong and why that equity protection is so important because of this case, this case and this case.

Nicole:
I think I hit on some chord, Scott.

Scott:
What you hit on is, this is what I was talking about earlier. This is the 400 hours of self-education or whatever it is, that you need in order to get comfortable with this is I can now debate this topic with you reasonably intelligently, and if you can’t, you’re going to get sucked one way or the other by someone who may not have your best interests at heart, and so you have to come to your own conclusion in this. That’s the chord you’re hitting is there’s 30 things like that that you need to have an opinion on. Should you allow pets in your rentals? That’s another one. This is just one of 100 different concepts I can get going on. Well, in Denver, yeah, you should because you’re going to have a way better quality tenant in my opinion and way more applicants applying for your property, even though there are going to be some damages or some risks that you’re going to assume from having those pets in the property. So there you go. This is just proving your point that this is not a passive thing that is for everybody. It’s for somebody who is ready and willing to divert a little bit of nerd out to it like you can see probably I have.

Nicole:
We definitely get the nerd out vibes from you, Scott, for sure. So yes, we’re not giving any sort of legal advice. Disclaimer. Understood. But at what point should somebody think about buying their properties in LLCs?

Scott:
Look, and this is a lawyer question, but for me it was, I’m going to put my properties into LLCs and work through this concept of assets protection once I have assets to protect. So for me, that was several hundred thousand dollars in personal net worth and a career that was blossoming and looking promising where insurance alone doesn’t necessarily cut it for some of those things.

Nicole:
Okay. Because I think what’s happening right now is the TikTokification of this, and I think we’re both agreeing that it can look really glorious and simple and just get these different LLCs and then go hide your taxes in the Cayman Islands or Dubai or something like that. This (beep) is scary.

Scott:
Then if you do that, then you’re getting a whole bunch of complexities that your lawyer and CPA may not be telling you about. If you have five LLCs in California, for example, you got to pay an annual fee-

Nicole:
800 bucks.

Scott:
… for each one of those. And then you got to file a tax return for each one of those LLCs, and if you miss your tax return filing, you got to do that. So let’s say that I’m a lawyer and CPA combo and I want to take advantage of a five property investor who’s worth $700,000, $100,000 in five properties, 200,000 in their 401k. I might tell them, “Go form a series LLC here. We’re going to put five properties and we’re going to have a sixth on top of that. I’m going to charge you a thousand bucks, really good deal, to set this thing up, and then every year for the next 20 years of your life, I’m then going to charge you $2,500 to file your taxes for each one of these things, or 5,000 or whatever it is, to file your taxes for each one of these things, and you have to pay that because I’m the one who knows all this stuff. I can still do it more efficiently, legitimately than the next person, and cheaply. And you’re going to be paying $800 times six now for your six new entities that you’ve got here.”
“By the way, never manage them, never do any of the work on those properties and stay the heck away from them so that you can get all the benefits of not being able to pierce the corporate veil here. So you’re going to need to use a property manager and pay 10%.”
I’m not saying that that is actually what would happen to many investors, but that is one way I’ll scare you when you’re talking to these lawyers and CPAs. Think through it and have a thoughtful approach and nobody’s going to look out for your assets like you are. And I think you need the opinions of a CPA, an insurance broker, a lawyer and investor peers or mentors that can all give you the help in pre constructing a practical framework, because a perfect series LLC set up and protection like that has its own costs and risks.

Nicole:
I totally agree. I’d love to know why the insurer is part of the personal board of directors in this, why the insurance broker is part of the personal board of directors.

Scott:
Typically, if you’re setting up an LLC, a huge part of the reason for that is the liability protection. It’s a limited liability company. It’s literally why people set it up. So if asset protection is the game, then when we think about asset protection, we think about all of the things that we’re doing from a business perspective, abiding by all the laws, making sure that we don’t run afoul of discrimination laws, making sure the property’s habitable, meets code in our city, and the LLC then protects your personal assets from lawsuits that might go against the business. Well, if you can protect those assets with an insurance policy just as well as part of that overall strategy, I think your insurance program is a big part of that. That’s why I think there’s more to this than just the LLC and lawyer’s input. There’s also the tax angle and there’s also the insurance angle on this, and then there’s how you conduct yourself in a general sense.

Nicole:
Smart. So we end all episodes, Scott, with a tip we can give listeners to take straight to the bank. What’s your one piece of advice for wannabe home buyers right now in this crazy market?

Scott:
Can I give you a two-minute answer on this one?

Nicole:
Sure can.

Scott:
Okay. So in addition to thinking through the exit options that we just articulated earlier, you need to set up a process for buying the home that puts the advantage in your court and not the seller’s court. So bad process first. A bad process is my lease is expiring August 31st, therefore I need to go under contract and buy my home before August 1st. Now, I’ve created an artificial timeline and what’s going to happen is you’re going to look at the market, you’re going to look at the properties, and at the last minute, a property’s going to come on the market, your agent’s going to be a hero, you’re going to go under contract and you’re probably going to overpay.
Better process here. Say, my lease is expiring August 31st, I’m going to pay my landlord two or $300 a month more so I can go month to month. I’m going to extend my timeline indefinitely. I’m going to look at the past properties sold in my market and I’m going to narrow down my search with my criteria until I found five or 10 properties in the last 90 or 180 days that meet my criteria and I believe are good deals. Now I’ve defined a good deal. And if there’s five properties that have sold in the last 90 days that were good deals, that means a new property is going to come on the market on average every two and a half weeks going forward. All the ones that are on the market currently are probably something’s wrong with them. They’re overpriced, they got something wrong with them, they’re in the wrong part of town, they’re at the wrong intersection. So know that when you look at the active listings, you’re looking at the worst deals than what is actually sold recently, most of the time.

Nicole:
I always wonder that, by the way. I’m like, what’s wrong with this place? It’s been here too long.

Scott:
That’s right. And if you look at sold, maybe there is one that’s on the market that makes sense. So anyways, now that I’ve got my properties that I know what a good deal looks like and I know that every two and a half weeks I go fishing, I wait until one of them hits the market, and when it does, I cancel my evening plans and I go look at that property with my agent and I’m prepared to make an offer that night or the next day. I’m not making an instantaneous decision. I’m making a cool, calm and collective decision, one that’s in advance, and I’m just reacting instantly so I can get my good deal. That’s how you get a good deal in real estate investing and in buying your first home.
Thanks so much for listening everybody, and as always, would love feedback, ratings or reviews on our podcast. So thank you so much. Bye-bye.
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Speaker 3:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.