87. Navigating Close Calls in Real Estate Deals and Unlocking Airbnb Success

The word that I have for the day , or at least the sentence I have for the day , is it's not over until it's over . Right , where had to actually ? There we go , had to actually cancel the deal right around midnight to save earnest money because the other sellers agent was not trying to negotiate .

It was a lot going on , but it always seems to happen between 10 pm at midnight on the day that it's due . And so we negotiated this thing , negotiated , we came to a crossroads , canceled it right around midnight , right .

But then the next day , of course , the seller comes back and there's more apt to to negotiate this piece , and so , long story short , we're putting it back on the contract tonight , which is kind of funny for the same term . So it's not over till it's over . You got to just continue to fight the good fight . Take it one day at a time .

Leave on how you doing , man , I'm doing good .

And he was trying to say something to the effect of well , technically , your loan wasn't denied , so you can't use your financing contingency , not knowing that we got guys right . So I just called up the person to hey , man , send me a letter , right ? So me like a official letterhead , right ? We said that thing , cancel the whole thing .

And came back two days later . And now we're negotiating . Put it back on the nice , nice , nice , awesome okay leave on . I know you are . You are getting over over over an illness , man , how you feeling through .

My guys are headed there tomorrow should be able to knock it out and , yeah , I looking like it's gonna be good . The another piece I kind of wanted to talk to you about is actually a funny story . So there's this kid in my neighborhood who I never knew about . This . My roommate actually told me about him .

He was like dude , there's this kid who just collects trash and I was like , what do you mean ? And so he was telling me this kid knocks on doors and says , hey , I'll take your trash out . Learn behold , one day he knocks on my door hey , I'm taking out trash for a dollar in the condo I live in . We have one disposal for the entire neighborhood .

So a ton of people don't want to do it and everyone who does do it , they drive just for that . So this kid and this kind of shows . There's you . You got to figure out your market . That's a great because from his strategy he's eight , he's like eight years old , so he just goes knocks . I paid him a dollar today .

He picks up my trash , takes it for a dollar I don't have to do it , you know , I don't have to do it , so to me it's a win , to him it's a win and it's it's just a . It was a great little kind of look for the value in no matter the situation .

So if somebody say like , hey , I'll put you on a calendar and I'll come once a week , and that's probably what he's gonna do now that he's made contact , who come back ? Yes , I low key with this kids number for when ? So we can join the cop a home team , that's a great yeah , no , it's like I'm seeing him expand .

He knew I was gonna be home , that's incredible like it's a smart kid and I . I gave him the dog . He could have charged me five dollars . I would have given him five you know , I'm so important the entrepreneurship 100 dude .

So I , you know , it was the end of the year , summertime for one day , like a period . Instead of having , like , science class , they'll have all the eighth graders seventh graders just have a free period where they can go into our hallway and like , buy stuff from our businesses , right ? So mine was . I was snow cones , you know now I had all the different .

But the thing about it was our teacher told us we have $20 to spend , right ? So I found some ice , grounded it up , you know , put in a cooler and then I have , you made it yourself . Flavors , yeah , I made myself so , but I had , but I had different flavors .

So I remember telling my mom hey , mom , it was at 8pm I was like mom , we need to go to the grocery store . She's like why I need food coloring . What do you need food coloring for ? For my flavors . So I mixed grape , like . I mixed like . So I had like a purple food coloring and I called it grape . It was not grape , it was sugar and water .

Da-da-da , this is the room . I had so much money that I had to buy a wallet from a kid in my class . He was making duct tape wallets . I was the only person that bought a duct tape wallet from him and I had so much money at the time . I was like $10 . I don't need to change .

Go to a dollar store buy a bag of blowpops and sell it for a quarter of a piece , and then my friends from high school do this , but we all used to play cards and stuff , so we take extra money that we had and play a game called 13 . I don't know if you know 13 . I'm unfamiliar . 13 is like an Asian version of poker . It's like you have 13 cards .

You're trying to get rid of all your cards . I learned it from somebody at school , but , long story short , I became an expert at 13 . And that's what I played throughout high school .

It's very funny , and this is not the first time this has happened , something like this . But on Monday , finance and contingency was getting ready to run out and we needed an extension and the seller was playing horrible , right . So it got to between like 10 PM at midnight you still don't have the extension sign . I'm messin' you .

I'm blowing this phone up like , hey , man , send this thing back , we need the extension back . So we ended up canceling the deal to preserve the earnest money . And then they start talking right . So , long story short , we're putting it back in our contract today for the same terms .

It's just sometimes you do have to exercise your right and show that , hey , we're not going to just let you keep the money . You know , like we got to keep going from there .

But we stayed firm , per you know , knee suggestion and good wisdom , and luckily we were able , like out of nowhere , kind of Like you know , at one minute he was very firm and like , hey , like no , I can't do that , like I won't contribute any closing costs from the seller .

And then , after we kind of explained it a little , even a little bit right , he was just like , yeah , all right , like that sounds good . And I was like , oh shit , like cool , like yeah , that works .

So it definitely taught me a bit about the point of like exercising your right , realizing that especially , you know , in certain markets , in certain situations , like you have leverage . So , yeah , that was a good thing to see yesterday .

I don't want to disclose the number . We're under contract right now . Way below that .

Typically they're asking prices crazy and it does not make sense . That's because the barrier to entry for wholesaling has become so much easier . Now . If you have $100 , you can do it with pretty good success because most of the data is public and so a lot of people they see oh , a wholesaler , he made $10,000 , he didn't do anything .

But you don't see the 300 calls he made and the 700 mailers he sent out five times and the $2,000 he spent in marketing to get that deal . So a lot of wholesalers like to act as though it's a lot easier to find than it really is .

like I wish I had found out about that .

But , even more generally , like the good graces of real estate earlier , right , as we all , I feel like everyone wants to have figured out five years before they did but if I had figured it out right when I was like back in college , I probably would have been like on the weekends you know what I'm saying Like it said , like some of the parties I hit up ,

I might have been sending out some of the mailers , man , I'm telling you .

That he's what's called Daisy chaining , which is just wholesalers have connections with each other , because the most important part of the wholesale transaction is the buyer . If you can get the deal deep enough , it doesn't matter If someone's gonna buy it . You just have to find the buyer . So , and to your point about kind of hold the whole process learnings .

I continuously failed at it when I was doing it , but whenever an investor would pass on a deal , I would consistently ask them why did you pass ? And they would give me feedback . So that gave me a lot of information and it was kind of my boot camp in real estate , because I was dealing with extremely advanced investors .

So they were telling me this deal is bad because it would work in another market , but this market , the permitting process , is a lot harder . They don't allow this , they don't allow that . They have a specific law that doesn't allow you to do so . I was just learning a ton about the market .

So in that sense I didn't necessarily sell a ton , but the skills piece that you're mentioning it's really good at leveling you up because in a wholesale transaction , you have to be able to negotiate that price , and that is a skill that you can take to any sort of real estate deal , because that skill is extremely transferable , not even interest real estate , I

think it's translated very well into kind of what you're doing now , especially with the focus on flips and how many flippers that you're working with right now .

Get some capital and use that for a couple other deals that I'm looking at and to take advantage of this 5% down thing . I definitely want to do that .

I've been seeing more properties pop up my eyes or popping out of my head , but I don't have to wait till the next tax return to kind of get through that piece , see what the bill is going to be and then go buy the next one .

I can tell you that I've been having conversations with my nephew since he was like 16 , 17 . I think it's finally pushing through , because now he's 20 in college and he's got pre-approved . He's getting ready to go try to buy a duplex . I'm like man , if you could get one at 20 , he's going to be set for life .

I'm not going to lie for the past couple of weeks there's a couple other events taking place that I need to focus on , but we're going to be bringing on more guests as we head into the new year , more specialists , and we have a whole slew of folks that I just need to reach back out to to set it up .

So we'll get that going as we head into the new year . But , karim , how are you doing , man and Karim , can you hear us ? You ?

It's almost like subletting an apartment . If you were to move out an apartment to sublet it , the apartment may be OK with it , but they're going to take that person through credit checks , background checks , to make sure , hey , would this person get approved anyway ? And so you've got to go through that piece to assume it .

And then the second piece is they're more than likely selling it for more than the mortgage . So if you're assuming , say , 200k and they're selling it for 300k , now you got to find a bank , and hopefully the same bank will do it . But now you got to find a bank , that's OK .

Taking second position on a home loan , which not many banks are , or have the seller be willing to seller finance the rest of that piece and make that work from there . Those are the two pieces you got to check out for right One qualifying .

and then two , making sure that you can cover the rest of that gap , either with another loan where they're like , hey , the second home loan or a second mortgage , or the sellers covering the percent .

That's one of the main differences from that piece , aside from , like , the down payment that you have to put down .

But I'm actually ideally , if I was going to do something like that and I'm working on a deal right now I actually had an appraiser going check out a property that we manage where the owner's looking to sell it because they're investing elsewhere , they're building up a huge portfolio and so we're getting it appraised .

I want to see what the value is and whatever that delta is . I'm basically going to take over the property quote , unquote subject to the mortgage , but then have another note where I'll pay the rest of it off , but there's not going to be anything that's paid or due until three years from now . So I'm doing like a 36 months note . It's a balloon .

I can pay it off early with no risk or no penalty . But what I'm looking to do is , I mean , three years from now , we've got the Olympics or not , the Olympics , the World Cup coming into town , right , and things that nature .

And this is in a part of the town where there's a lot of gentrification happening , and so what I'm betting on is that this house is going to be worth more and I'll be able to refinance it or sell it and kind of make up that delta at that point . But until then , I'm just going to short term rent .

It's one that we manage , so it's pretty simple to take it down , put it under my name and put it back up .

They qualify you and then they just transfer the same document over and you just keep making the payments .

He's making money from the STRs , but he needs to get this burden off of his taxes so he can , like , kind of keep moving and building what he's doing with the town homes , and so he wants to lock in a price . It's just the markets not giving it to him right now , because he waited too late , with the interest rates going up , right .

And so if this was like early last year , yes , this house would be gone , but at this point it's not , because that mortgage is pretty steep , right . And so for me I'm like , hey , this is fine , it's already , I could take a lot of the cost out of this . Right , he's got to pay management fees and all this other stuff .

For me it's kind of a mute point . So when I look at that , I'm like , okay , there goes the profit right there . So I'm good , hanging on to it , making some profit . It's almost like doing a rental arbitrage with the quote unquote option to purchase , right , we'll call it there .

But except that I'm actually on the hook for it because I believe it is going to go up and I'll be able to refinance or sell it and kind of make that piece happen .

It was a it's like a novation kind of , and a novation is essentially it's an agreement between two parties without the consent of the third is what it means . But what it means in real estate is basically me and you can do a deal and the bank doesn't have to be aware of it because the bank's going to get paid .

So on that piece , the way I found it was , it was next to a property that I was showing for . Another client called the seller . I said , hey , you know , what are you looking to get for the house ? He was looking for 270 . I was like , okay , that 270 is possible . What does the inside look like ? He sent me some pictures .

I'm like , okay , we can still do this 270 . I went inside . It had changed from the pictures . So I was like this 270 point isn't going to work . And also I had agreed to give him 50% of whatever I had made on my exit , as long as I get my money back Right , so that I will , you know everything looks smooth .

I'm like , okay , you know , this looks great , et cetera . And then you know , my rehab numbers came back . I looked at material costs . I'm like , listen , I can't give you 50% of everything . I make because I leave you no money but I will give you 25% of everything I make over . I'm still going to give you that 270 .

And this is 270 for a home that has nothing inside of it . The inside's fully gutted . And so he was like no . So I was like I'm giving you 270 . And then on top of that , I'm going to give you probably another 60 K off the 25 cents on every dollar I make on sale and the greed you're not allowing . And so I just was not .

I would have made money , but I'm like no , no , I can't , I can't do this .

And got in touch with the owner , actually got to visit his other house , like . We had many , many conversations and it was all around hey , how can I take this over with seller financing ? But we just weren't able to come to an agreement . He won way too much for it , so we had to let that one go . But , karim , can you hear us ? Oh , ha ha ha .

But Karim , how were you doing ? Man ? I know you were working through kind of a new opportunity , right with a renter . Awesome , okay , awesome . And what so with the arbitrage right , is there a top two or three markets that you've been targeting ? Like , hey , I'd love to come into this market for the arbitrage for this reason .

Yeah , yeah , and for the first one , I'm with you on the nationwide piece . Like , you figured out how to do a B&B that you own nationwide right , arbitrage is slightly different . It's still the same systems in place right , but now you're dealing with somebody else who owns the place .

Is this something that you would want to test out locally or you're pretty set on ? Hey , let me go try another state with that piece and kind of go from there .

For sure , I feel you , like I'm like man , like at any time . It just seems like it could like how , when they did in New York , where you think that wouldn't be possible , right , like , oh , like you know someone could sue , but I think we were talking about last week like that could take like years , right , who knows ?

So it seems , I don't know , it kind of not keeps me up at night , but it's definitely something I've been thinking about , I think , a little more and more .

So I think a lot of guests come in that way and I think that's kind of probably going to drive my strategy going forward , just because right now that's what I know right and I think your location can be dependent on , like , what type of property you have right .

So I don't know if the same property that I have , which is a one one , it's pretty small , it's not like fancy , I'm not putting like I don't have , like like me , you know , the pinball machines , stuff on the wall you got like hot tubs .

So I think that's something to keep in mind too .

The first full house Airbnb that I purchased got for 460 in East Atlanta Village , and the long-term rents at the time were 2,700 . Doesn't make any sense , right ? Whereas with the STR it pulls in between 3,500 in the low months and 6,300 , right per month In the summers . It doesn't do less than six grand for those four months , which is amazing .

But more important than that , the time since ownership it's gone from 460 to being worth a little over 550 . It's closer to like 575 , depending on interest rates , right , but it's between like 550 , 575, .

If I listed for 550 , it would sell quickly , and so the equity piece is what I'm looking at first , and then I look at the air DNA numbers and I'm looking for that 15% rule at a high level right Now .

There's one caveat to that the property that was just purchased , the Forplex up in a snailville the numbers of air DNA actually don't make sense for that right Like I would not recommend a client to do that . The reason I did it is because we've done enough of these and been able to put some unique quirks in there .

To Desmond's point , I'm like , okay , there's just not enough B&Bs out here . We could potentially set the market . I'm looking across the street . I'm like there's a La Quinta literally within walking distance . There's an extended stay holiday in . I'm like , okay , let's see what we can do here . And so we put down .

We have the second unit that's going up live toward the end of this month . Actually have people delivering stuff there right now . I hope they don't mess that up . I'll give them codes on stuff . Hope they don't mess that up . But long , hey , I put it on on , do not mess that up . So we'll figure it out in about 10 minutes . But long story short .

That's one where we're taking a risk and kind of setting the market there and I believe that we can beat the numbers that were on our DNA and right now we're off to a good start . First month we did about 3,500 , which is awesome . So long story short . I'm looking at location and I like that spot because it's a Gwinnett .

I like that spot because it's a fourplex and each of the units is huge and it can work as a long-term rental once we update all the units . So I plan to use two as a long term , two as a short term . So I'll start with location , then I go to AirDNA , then kind of go from there .

She owned a short term rental in Athens and it was one that she managed , but essentially it was just a regular house and it was under market , but she kind of customized it and called it the doghouse , put a bunch of Georgia Bulldogs stuff all over the place there and I think that kind of caused to go up , because now people are going and staying there for

games .

Literally we have , I want to say , like six units that we manage out there and three of them no , four of them right now have midterm renters that are paying an absorbent amounts , I don't know why . A couple of those are insurance folks , a couple of those are like instruction folks . I don't know what's going on Decatur , but that's been going on there .

And then I like the Marietta's of the world as well , because you have the proximity to the Atlanta battery or the Braves play . You're like 15 minutes from there in Bining's , but you don't have those prices yet , right , marietta is going to get more of the appreciation than Mableton , right , but it's closer . And there's some nice things in Marietta .

You got Marietta Square . I was actually just up there earlier this morning working on the SDR license because Cobb County officially released theirs . It's simple , by the way . It's like $55 . You just fill out a couple of documents , get some things notarized , send out those letters and , boom , you got a license . I actually got my .

I put it in the car , but I got my license for the art house so I need to go hang that at some point when there's nobody there . So we'll figure that piece out . But we got a question from AJ Random question for the section and Karim , I'll take it to you .

How do you handle guests who inquire about monthly stays on Airbnb and you want to take it off platform right , especially with the policies prohibiting that ? How do you work around that ?

Two things One if somebody books , you should already have some type of messaging inside your units , whether it's a QR code , whether it's something to say hey , book direct next time and save on fees right , so they can reach out to you . So after they've already booked , you get their phone number , I would just text them .

We've had plenty of guests say hey , what could you do if we extend for six months or something like that on the platform and we'll just not even respond and just text them , right ? So , hey , let's figure this thing out and we'll work it out . And then , but before the booking , you typically don't have all that info , so you got to be really careful .

We've started to implement some BAs into our team and messaging and we've had one or two instances where we've gotten threatened from VRBOs and the Airbnb's of the world because it wasn't handled correctly . So we had to like hey , guys , if somebody asked this , just pause for a second , let's talk about this and make sure that we word it right .

So we had to create some canned messages .

I haven't started my direct platform yet for as hospitable , so I think once I start that I might start having those issues I did hear of where I don't know if it was you near , maybe on a podcast , but where the email's taken down when they sign up for the wifi .

So when they get on the wifi they take the email down , like you can send out discounts that way . But other than that I haven't . I try now to keep everything on the platform because I've just gotten nervous . I've done the cash app like hey , just Apple pay me and we can do the night , but that just makes me nervous .

Now , just having gone through like nothing , no major issues , but like having stuff come up , it just makes you think like you know what when things do go awry . I don't want that to be the case .

We're already less than 60 days to the end of the year . So , man , if you've got some goals that you're close to , this is the time to put the pedal to the metal , get after it , and I look forward to catching you guys next week .