The Deals Are Out There With Co-Host Robert Orfino

TRE 177 | Deals Out There

 

Many who are new in the real estate industry complain that they can’t find a decent deal. This episode, Jason Bible and Robert Orfino discuss why they believe that in contrast to everything that’s happening, the deals are still out there. For those in doubt, they give their insight and knowledge on how the federal government is helping the industry through regulations and subsidies. They also discuss the difference in the appraisal industries’ behavior due to the pandemic and give some tips on important factors you should consider when getting an appraisal. Learn how appraisals differ from the West and the Southeast in order to plan your investments better and understand how an appraiser’s mind works.

Listen to the podcast here:

The Deals Are Out There With Co-Host Robert Orfino

I am queued up for a rant anytime you’re ready because I figured out exactly what’s driving me crazy. I posted two controversial and let me show you the controversy right here. I want to pick it up. I’ll put it on my face. That right there is controversial, wearing a mask and I think I figured the whole thing out. Whenever you’re ready to hear a rant, I’m ready to let it rip.

I was in Buc-ee’s and one guy, his wife and two kids have no masks. Everyone else had masks and of everyone, I would say maybe 3% were not wearing it right. A little too loose, one person was below the nose and had I a little more time and wasn’t exhausted, I would have asked a question, “I’m not starting a fight. I want to know why you’re not wearing a mask.”

What’s the big deal?

Help me understand it.

Now, you just cued the rant up.

Is it freedom of your liberties? Is it maybe you already had COVID and you feel you’re not going to get it again? I’m wondering why you’re not wearing a mask.

We’re figuring out that’s not to be true, isn’t it?

Yep. We’ve got a common cold problem here. Don’t we?

Chris Matterson interviewed an interesting guy.

We saw that.

His wife is a picture of health. She’s one of these vegan yoga chicks. She probably doesn’t even use cosmetics that hurt animals. She’s one of those people.

Why would you?

She’s this picture of health and she gets COVID twice and it’s awful both times. She almost died the first time. It’s crazy. I’ll go there. I’m sitting there and I put these two posts. We’ve got a couple of yahoos out there are starting to earn their Darwin Awards. They’re posting on Facebook that, “The virus is fake news. It’s not real.” They’re dying from it, which I have zero sympathy for that.

I have a little bit.

I don’t because it’s not like, “I didn’t know how I caught it. I heard this thing.” These are ranting and raving on Facebook about how it’s fake and all that and then they’re dying from it, which is hilarious.

Surplus population.

It is. That’s how we’ll get our carbon footprint down. We’ll let the rest of these yahoos rant and rave on Facebook. I posted a couple of these articles and I said, “We’ve got a lot of guys running for that Darwin Award here in 2020. They’re trying to see who can win it.” If you are not familiar, the Darwin Award is this Facebook thing where it’s the number one person who dies in the most ridiculous fashion.

The stupidest way.

There was a gal that won the Darwin Award one year she was at some park somewhere.

We’ll look it up over the break.

All of the loans out there are federally insured. If the loans go bad, the federal government will subsidize the losses. Click To Tweet

She was taking a selfie and then fell off the face of this thing. It’s crazy stuff.

It happens. Someone’s taking a selfie at the Grand Canyon and fell in.

The Grand Canyon is big by the way. In any case, I posted like, “These are runner up for Darwin Award.” All of a sudden, all the no mask crowd starts showing up. The no mask, people are hilarious to me, especially the ones in real estate because they start ranting or raving about my freedoms. “I’m not doing this. The government can’t tell me to do X, Y, and Z. I want my freedom.” I’m about to drop an enormous rant on entrepreneurs and in particular real estate investors. You can add Tesla haters into the same group. This is the same group of people who do not understand how much of the real estate industry is subsidized by the federal government. You’re going to run around and tell me about how, “My freedoms in my mask and I’ll wear no mask because I’ll do what the federal government does.” You suck off that teat for real estate, don’t you?

Let me explain to you how deep the federal government and the state and local governments are in real estate to make you rich. First of all, there’s a licensing requirement. Any time there is a license required by a state entity, it is an absolute subsidy for those professionals in that group. For example, Rob and I, despite the ridiculous amount of experience we have, we cannot manage other people’s rental properties. Think about that. We have more experience than most property managers as owners in the country yet, in the state of Texas, because we’ve not been a broker plus a broker with this many years’ experience, at least four years’ experience, we cannot be property managers. What does that artificially do? It keeps us out of the property management market, air goes keeping prices up, competition lower for the brokers that are property managers who have at least four years’ experience as a broker. That’s one.

The second one is the loans. All of these loans out here are federally-backed. They’re federally insured. The federal government has said, “If this loan goes bad, we will subsidize the losses.” For all you real estate investors and real estate agents out there that like to run on this conservative, libertarian rant, sorry, you would be nonexistent if the federal government didn’t create FHA and built a 30-year mortgage that is backed by the federal government. You wouldn’t exist. You could go down all the different housing regulations and tax benefits.

We can go into tax benefits alone. Brett’s bragging on Facebook about how he’s not paying anything in taxes this year, because of all the depreciation. Let’s be honest, that’s not true. You will pay taxes on that stuff eventually. It’s not, “I don’t pay taxes.” It’s tax-deferred until sometime in the future. However, keep in mind when you hear people, especially real estate investors, ranting and raving about, “I’m not wearing a mask because of the government.” I’m like, “Your entire livelihood comes from the government.” The tax benefits, the loans. 

You’re working in a government-regulated industry.

An incredibly highly regulated industry. Let’s not get on this, “I’m not wearing a mask because of my freedoms.” A lot of those freedoms years ago. Put on the damn mask, is it that hard? I was at Christian’s Tailgate. It didn’t seem that hard there. You were at Buc-ee’s, “Because of my freedoms.”

He was in my freedoms guy.

What’s funny is because I get into some of these let’s say far, right groups. Everyone’s talking about the Boogaloo and the Civil War and all that. You bought your little girls would make it six minutes. Let’s talk about some real estate. I was down in Surfside and it was packed. The sheriff, I don’t think they were the city guys. These were the county guys because they had the SUV. They were sitting there making sure everybody was social distancing.

Was everyone?

Yeah.

It’s a small beach.

I was surprised. I was 3 miles down.

Did you go all the way up towards the bridge?

Yeah. Not that close, but I still don’t have my resident sticker. We need to get our resident stickers. I was on the free side of the beach. I was down there with all those yahoos.

Those are not quite yahoos. Are there a lot of people in the water with white T-shirts on?

Yeah. There was a big Jeep group out there. All of the Jeep Wranglers that are all lifted. There must have been a dozen of them. Everybody’s got their flags out. No New York Giants flags, Rob.

It’s coming. I’m telling you.

I went by all of our beach houses. You could tell these little families, a little SUV or truck. I went by crane and race and then went by thunder. The other ones that we got under contract. I went by the two land deals we’re looking at and it looked good. It was full down there. It’s going to remain that way for a while. It’s good times in the Surfside. I got down there at 2:00 in the afternoon too on a Sunday. 

TRE 177 | Deals Out There
Deals Out There: Apartment owners go with the cheapest toilet available, which will eventually wind up leaking in about a year and a half right.

 

I am a late beachgoer. My dad was the opposite. We’d be up when it was dark out to get to the beach.

Was that to save the spot?

Nope. My dad’s an early riser.

That’s years of construction stuff.

My dad was up at 4:00, 4:30 every morning.

Why do you guys sleeping late? It’s 4:45. You’re like, “What?”

We would go to a place called Sandy Hook in New Jersey. It was $10 for parking for the day. We would get down there, my father and then I had a fake aunt and uncle, close family and we call them, they were both super early. We would get on the beach at 7:00 in the morning. We are still sleeping in the car and by 9:30 as kids, we’re already exhausted. We’re tired like, “What time is it? When are we going home?” We’re here for another eight hours.

Yeah, we got $10 for it.

My dad would always go. He is a cheap guy. He wants to get his full money and over time, we’ve become, “What time is it 4:00? Let’s give about another half hour then went over to the beach.”

The difference is I noticed with a couple of friends of mine, we’ve taken groups down to Surfside and I have noticed that when you go from beachgoer to beach owner, your habits completely changed because you’re then you’re like, “We don’t have to get there that early.” We can see it from here. Anybody can go out there whenever you want. Go if you want in the morning. I’m an afternoon, 3:00 or 4:00, the sun’s starting to go down a little bit. It’s not as intense out there.

I’m not sure if I’m using the right words but when you own the house at the beach, it’s an amenity. It’s part of the deal. I also have a good range and a good grill and when you don’t own a house to the beach, it’s an event. Jason’s taking us to the beach. Pack up. We went to the beach and I’m like, “Do we even have a towel?” I’m looking at her and she’s like, “I brought a towel.” I’m like, “We don’t have any.” I’m going, “Let’s just go.”

Yeah, because you can walk back to the house. It’s the difference between taking a hike and doing the nature trails in your neighborhood. It’s like, “We got to go.”

It’s hiking and walking your dog but on the same trail.

It’s like going to the neighborhood next door that you don’t live and hiking their trails, “We got to take a water bottle. We got to make sure we don’t forget the leash, we got the right shoes on and all that.” We walk out.

Back in college, I went to college up in New Jersey and the Appalachian Trail crosses New Jersey.

The 80.

We’re hearing about it and friends are talking about it and we’re all like, “We’re going.” We’re going to get up Saturday morning at 5:00 AM. We’re going to get up there around 8:00 and we’re going to walk the trail. There’s a pretty waterfall in the New Jersey. It’s part of the trail is one of the highlights of it. We’re up in Morris Plains. We get up there and there’s a big parking lot. There are a lot of people in the parking lot. I’m like, “That’s interesting.” We get on the trail and there are grandmas with walkers, people walking their dog. I’m like, “This is not what I was sold on. This is a day in the park here.”

That’s certain parts of the 80.

That’s the Jersey part of it for sure, the 80.

The Appalachian Trail is 2,700 or 3,500 miles or something like that and it goes from North to South. There are three trails that are that big there’s Appalachian Trail, Continental Divide, and the Pacific Crest Trail. There are people that are called thru-hikers that will take the summer and hike the whole thing. Smelly people because they don’t shower.

Loans are not easy to get right now. Some of the overlays have gone up, so it's a little bit harder to get a loan. Click To Tweet

There’s not a lot of hygiene on the trail.

Once you get out of the parts of   Jersey and all that other stuff, it’s wilderness. You’ll hear some people called the Triple Crowners that have done all three, which is crazy. There are a couple of them that I follow them on YouTube and they do daily video updates. It’s neat. That’s exactly what it’s like. It’s the city’s fortress.

I’m headed into the van life.

You’re going to be a van life guy?

I’m going to be a van life guy.

Explain to everybody what the van life is.

The van life is, you live out of a van. It’s not the college van.

There are van life guys living out of Honda Elements and then there’s Rob’s van life, which is $1 million van.

It’s a Mercedes Benz Sprinter. The base, the box itself, the diesel, there are 144-inch wheelbase or 170-inch wheelbase 4×4, it’s $80,000 for the box.

That’s seats and nothing else.

Before they add the bathroom and the infusion stove range, cook top, the bed, the garage, the solar panels, the roof rack, and the security system, any of that, we’re already at $80,000.

An Airstream gets ahold of it and it’s $250,000.

Roughly the stuff I’m looking at is $170,000. My thing is, “Is this going to be another gym membership? Am I going to buy it and be excited and then never use it?”

I   the RVs, but I’ll tell you what, when somebody Airstream or Mercedes goes to Elon and says, “Give me that self-driving technology.” What I have a self-driving RV, I don’t think you will see me drive unless it’s for fun ever.

I’ll tell you what I’m going to do this year. I’m going to winter camp with no bugs, no bears. Everything is hibernating. I’ll feel a little bit better about that.

It’s the perfect time of the year.

Beach houses are good. We’re liking those. We made a little miscalculation months ago. We have seen the two markets that we’re in, the appreciation have skyrocketed in six months. The report was out. You did a little bit on that and we’re up 11% from January 2020.

Let’s explain that real quick. Meaning if you bought a house in January 2020 for $200,000 it’s now worth $222,000 in seven months. That’s at the median home price. Houses below that are appreciating faster. That’s 22% a year.

You do the case study for the mastermind for a house that we bought all-in for $110,000 plus $45,000 in construction. We spend $155,000 and we couldn’t appraise it. We thought maybe it was going to be $165,000, $180,000. It came back at $215,000 with the COVID caveat on there.

You’re about to get me on another rant because I was thinking about that too. There was a COVID markdown by all these appraisers. The appraisers that mark properties down because of COVID need to have their license revoked and thrown in jail.

TRE 177 | Deals Out There
Deals Out There: In the West, and other locations, appraisal values are based more so on location, but in the south, southeast appraisal, values are more square footage driven.

 

Somewhere some Grand Poo boss said, “We should start thinking about this.”

I’m okay with the start thinking about it but when you’re making stuff up.

Let’s talk about the appraisal industry quick

We get fired up.

Years ago, you had 60, 70, 80 appraisers in Houston and they are all independent and you called one of these guys up and they came out and did your deal. What happened with the whole 2009, 2010 mortgage collapse is we realized that some of the appraisers were given a rosy picture on some of the properties to make the mortgages work easily?

Some appraisers were getting kickbacks for that from mortgage companies.

Some of them were breaking the law and what happened? We came back and it went completely out of the pendulum and the opposite way. Now, everyone who is an appraiser and having their livelihood from being an appraiser is freaked out because they’re going to lean towards the lesser side, the safe side so that the bank can never call question to their appraisal. In the middle of all this, these guys are going under is not a lot of real estate happening, and here come two major consolidators. These guys go back to the banks and the underwriters and say, “We promise that our standards are above grade. We’ve got the best standards in the world.” Meanwhile, they’re a broker of service.

They’re brokering out appraisers.

They turn around and all these other appraisers have stepped in line with these guys. There are few independent appraisers left. These guys are all fallen in line and you either work for 1 of 2 of these companies. I believe it’s probably those companies that said, “We need a 5% cushion for COVID.” I don’t think it was the industry. I think it was these large consolidators that said, “We’re only successful because we promised everyone, we wouldn’t give big high numbers. Here we are in this middle of this crisis, let’s take another 5% off the top.”

There is no economic data out there at least for Texas that says that even makes sense. I wanted to go back and study this at least with a couple of guys that do a lot of real estate deals and share some notes. How many properties have you bought or sold more importantly, that didn’t appraise because they came back and said, “COVID?” What do you mean COVID? We’re up 11% on the year. Should we be up 15% or 20% because appraisals are low?

I don’t know. There are more people on that roof.

I look at some of these numbers and I’m like, “How can you, even in your right mind say that this thing is not worth $150,000?” “We’re going to take 5% off of COVID.” “What do you mean 5%?” You see this line out the door, that’s all the people want to buy this house? Loans are not easy to get right now. Some of the overlays have gone up. It’s a little bit harder to get a loan. I’m like, “What are you talking about?” That infuriates me to no end because it’s such a lazy way to look at the marketplace.

We got hit on two big deals for us $2 million loans. We got hit with the 5% to 6% COVID and I’m like, “That’s nonsense.”

We had to bring another between those two deals almost $250,000 in cash in the deals. This is ridiculous. Which tells me I’m like, “When I refinance these things, I’m getting all that money out than some?” That’s the nonsense that goes on the industry. Despite the fact that here we are and what happened? Real estate prices have gone up dramatically.

A lot of agents out there will tell us how they’re getting multiple bids and multiple offers.

If you’re at or below that median home price, which in Houston is $270,000, you’re doing well.

There’s a lot of agents who are doing the best and final.

This is the strategy I like to use in those marketplaces. Your house gets listed Thursday night and then the family that lives in that house goes away for the weekend. Let me put it this way, when I sold my house, this is what I did. It went on the market Thursday night. I left Thursday afternoon. They had two dozen showings between Thursday and Sunday. I got home Sunday night, highest and best Monday, the house is sold way above market. It appraised. That’s how I like to do it for my personal residence. I imagine with the sharp agents out there that exact same scenario happened. It was listed on Thursday night, they go through all the showings. You don’t even need to have an open house and it’s old by Monday.

That’s the market. My fingers are crossed. I got my house going on the market in New Jersey.

That’s a perfect time. It’s not snowing. It’s not cold.

When you go from beach-goer to beach owner, your habits completely change. Click To Tweet

We’re a month behind with the COVID. We’re good. $700,000 is what we’re asking for it.

I was watching the tropical storm that went rolling through that side of the state. Did it flood in the areas that flooded?

There are always some places that get back up.

It’s like Houston.

It’s usually streets. They always go to the same house. Growing up in Wayne, New Jersey, there’s a little bend in the river.

A little oxbow there.

Yeah. For some reason, people thought it was okay to build right on the river’s edge there and those houses always flood. There’s always a news crew out there showing the flooded houses. I’m like, “Got it.” I watched YouTube and I was like, “Let me catch up with the storm up there.” It’s the same thing. It’s like, “We were sitting at home and there was a log bang and the tree fell.” I’m like, “Tree falls all the time in Jersey. We get it.” There were five news crews around one fallen tree. That was the extent of the damage. They couldn’t find anything else. Some lady out there with glasses was like, “I was scared.”

We’ve got an area of town and every city has this like you had said up in Jersey. They get hit by storm after storm or flood or whatever it is. You start putting the numbers together and you’re like, “I don’t know, will this work? Will, it not?” You start looking around and go, “There are easier ways to make money.” It’s like, “Let’s go buy another beach house or let’s go buy another six-unit on this side of town.” Sometimes you get caught up in that new investor mentality where it’s like, “How can I make this deal fit?” I’m like, “Why am I doing that? This doesn’t make any sense.” I’m like, “Don’t make it fit.”

You are stuck on that one deal and you letting everything else go by.

That’s what happened. It’s like, “Jason, there are no good deals out there because I bought this one and X, Y, and Z happened.” I’m like, “What are you talking about?”

There are no good deals out there because I’m stuck with his bad one for months.

I’ll never forget there was an investor at one time that told me, “I want to say it wasn’t 77084 because it’s South of I-10 but it’s over there in Katy.” An older section Katy, South of I-10 where the houses were built in the mid to late ’70s. This guy was adamant after six free beers at one of these networking events that there’s no way you get a deal in that neighborhood. I’ve got the guy really churned up. I was like, “Do you think so?” “There’s no way. Even with your marketing, there’s no way. There’s nothing out there.” It goes on for ten minutes and then he stops. He goes, “You got a deal out there. Don’t you?” I was like, “I got three and there are two right across the street from each other.” I’m like, “Trust me. They’re out there. You got to know what you’re doing.” “There’s nothing out there. You don’t understand.” There’s nothing out there now. I can tell you that. It’s slim pickings. I wonder with all the apartment gurus out there, that we can see Sharpstown from here. If you are familiar with this side of town, we are at 59 South.

I’m looking across the landscape and I see a lot of class C and class B apartment complexes in arguably the largest apartment market in the country. One of the things I’ve always asked these apartment gurus is, “What happens when all the properties get rehabbed.” There’s plenty of money and investors out there. They’re like, “That’ll never happen.” I’m like, “Statistically, sure. You have 1,000 people in your weekend event here in Dallas, at what point do you run out of apartments to buy?” That’s when I realized, “They trade them back and forth to each other.” They retrade them back and forth to each other. It’s like, “We got another $50 a month per unit because rents went up and we fired the groundskeeper or we put it in a washateria.” If that’s what you want to build your career a washateria vending machines.

If you have made money on a washateria in a C apartment complex, let me know.

Send me the P&L because I want to see it. We got $50.

I want to see the ROI, the cost, the payback on low flow toilets. If someone could send that to me, I’d like to see that.

It was funny I was chatting with a guy one time and he said, “The ROI between low-flow toilets and replacing all the seals in the existing toilets in the entire complex. The quarter stops valves and all that stuff.” He was like, “You sat down and figure it out and it made a lot more sense to go in and replace the seals and stuff than it did to go in and replace.”

It’s a $25 kit versus $70 product. The problem is that these apartment owners are going to go with the cheapest toilet available, which is eventually going to wind up leaking in about a year and a half.

That’s what I was going to say. You’re going to end up replacing the seals anyway.

At my rentals, we put standard American Standard in it. We put nice toileting. You got to do it.

TRE 177 | Deals Out There
Deals Out There: Remember how appraisers do it. Completely the opposite of how you do it. You take the three best in the neighborhood and then subtract. They take the three worst in the neighborhoods and then add.

 

They don’t leak and the seat doesn’t fall apart.

It doesn’t matter. They’re going to retrade it in 3 to 5 years anyway. That’s the game and you pay that guy $25,000, $35,000, $40,000, $50,000. We learned this guy was asking for $50,000. It’s crazy.

It’s not that hard. I always get a kick out of you get around the bar/happy hour after the seminar lets out. They’re usually at these big hotels and a couple of guys and I’ll get a text or get something on Facebook, “I heard you here. Let’s all get together.” There’ll be 100, 200 people at the deal. You hear the new investors and they’re getting worked up over, “You can replace a toilet, and then you can replace this. You put vending machines in.” I’m sitting there and I’m like, “You don’t understand. The high watermark of your apartment investing career is going to be how many toilets you replaced in your 200-unit apartment complex.” I’m like, “I can’t think of anything more boring in my entire life.” When you and I go and want to buy something, it’s destroyed. Like that nine-year on the Southside. That’s much cooler than, “We’re buying this thing. We’re kicking out some people who can’t pay an extra $50 a month. We are bringing in these other people and we’re painting the sign.” If that’s what your career wants to be, that’s fine.

I love when they put paint jobs on these. They just did the retrade and they repaint it, but they didn’t deal with any of the structural issues. On the balconies you still can’t walk and they’re sagging. I’m like, “Why would they paint that? They got to get in there and fix that.”

My favorite is let’s say it’s a red, brick building and it was a reddish-brown and then on the trim, and then they replace it with white and then you go, “Wow.” You could see the older was a bow in the middle. You could see it from the street and you’re like, “When they changed that pink color, they didn’t do any of the structural on it.”

There is no structure. Just lipstick on the pig.

It’s probably because the seminar that they paid $50,000 for, they don’t know how to do construction. They’re like, “No, you don’t need to replace that.” They’re not going to do it, “Just paint it.”

You’re retrading in three years, don’t worry.

You’re going to retraded it to somebody else.

I can see the paint and then you see there are a pitched roof and the roof is there are six months left on that roof. Why didn’t you do the roof?

It’s lost much of its pitch. It’s got ponds up there for fishing.

All the valleys up there and it’s stained. It’s horrible.

I’m looking at this class C. It’s a little, two-story garden style. They did not paint the stairwells. They’ve got a brown and white. It’s not even Killing Beige. It’s lighter than that. You can see how they did that light yellow in the center. I swear you could almost see the stairs from here are crooked and we’re four blocks away looking down from the twelfth floor. It’s funny to me. That’s the industry. I don’t get it. It’s mom-and-pop investing. They’ll wave the flag of, “We provide affordable housing.”

We’re rebuilding these communities.

It sounds like you kicked out some people couldn’t afford it. You slapped some paint on this big piece of junk and then you charge a $50 a month. That doesn’t sound all that awesome. Let me show you what our place looked like when we start with them. The City of Houston is like, “You are the new over owners? There were six shootings there. Can you do something about that?” We’ll empty the building out. We’re going to rehab it and it’s going to be nicer than the class A that’s across the street. That’s crazy when you think about it. You mentioned that in our mastermind. You turned the camera around and you’re showing the beach house you were staying in. You’d shown everybody the beach house and then said, “This is what we put in our stuff in Kashmere Gardens.”

We have a Monday, Wednesday, Friday, noon market/COVID update.

Monday, Wednesday, Friday, noon on Central time, we are doing market updates. We’re going to do Houston a day. You’ll probably grab some Jersey or California stuff.

We’re going to do Jersey and California too.

We’ve got that on noon Monday, what we used to call in college M Days. The M days, the Monday, Wednesday, Friday, and Tuesday, Thursdays, the T Days.

What we started doing is following Monday, we’ll be an hour about eXp. We’re going to let Brant explain about eXp. He loves doing that. He’s good at it. Amazon and the residual income it’s all good. That goes right after that, our updated go right into the eXp. Every Wednesday, we’re doing a little investor session right after our Wednesday at noon. 1:00 on Wednesdays, we’re talking to investors. These are the people with the money, not the people with the trucks some who have both, but not with the car hard jacket.

The appraisers that mark properties down need to have their license revoked and thrown in jail. Click To Tweet

If you are interested in placing capital to work.

I changed it to passive investing.

We’ll do a market update on Wednesday at noon and right afterwards at 1:00, we’re going to share the deals that we’re doing.

We’re going to show the stuff we’re doing with passive investors and I’ll be in Corpus most Fridays this summer.

On Friday at noon, I’ll do a market update.

I have to act like I don’t own the beach house too when other people are there. I complain along with their complaints.

They are like, “They really need to paint this.”

“This place is horrible.” That’s the afternoon stuff. I’m doing a webinar and it’s free. It’s called The 10 Things That The Wealthy Do That You Don’t Have Time For. The ten things that everyone the one-percenters are doing and you don’t have time to do. It’s differentiating why you are in your situation. We go through some real basic, short-term, and long-term stuff.

You can find all this stuff when you go to the Mr. Texas Real Estate page at MrTXRE.com. You can go to our Facebook group, all this stuff goes into our Facebook group. That’s the Mr. Texas Real Estate Group with Jason Bible and Robert Orfino. It’s not hard to find. We’ve got 2,000 people in there.

This will be the last time I’ll do it live this year. It is a combination. The people in the mastermind are realizing how important those classes were and all of a sudden, they’re like, “Where’s that recording?” I was like, “I didn’t record them.” They’re like, “When are you going to do it again?” I’m like, “I didn’t plan on doing until 2021.” “Can you do it please?” I’m like, “Okay, I’ll do it.” One is finding private money. I’m working with private lenders finding private money and going through all that. The second one, right on the heels of that is social media for real estate investors. Those two things are a key for I’d say 25% of our mastermind. People that has got dozens of properties. The contractors that are doing joint ventures. If they are able to tell the tale and have a system to take in JV partners and private money, they can set them up for success over the next few years.

They’re not looking to do their first deal. These are people that have already done a handful of deals. They’re looking for more capital. They’re trying to attract more attention to their personal brand. Part of that is, how do you raise money legally? Most people don’t do it legally. My favorite Rob quote is he gets on stage and says, “If you want to learn how to lend illegally, come see me.” He walks off stage and they go, “What are you talking about?” That’s how to do it legally and how do we build our social media presence?

I would say a big clue is not to lend money to guys with fedoras.

We have this theory about fedoras and where did that come from?

Remember that lobbyists who got pinched during the Bush administration? He looked like an evil dude in a fedora with a black suit and a black overcoat. He looks like a mobster. You’re like, “That guy is cheating on his taxes. Look at him. How could he not be?”

The IRS could have a Facebook image search and everybody who has got a fedora, you’re all getting audited this year.

That fedora guy doesn’t mesh well with the Rockport Members only crowd. You got to understand who you’re talking to. One’s $97 the other one is $47. It’s $150 for a powerful education. We’ve never had anyone knock our stuff it’s we give everything. We usually wait around to the end to answer every question. I’m here. I’m waiting. Are there no more questions? Sometimes we go to 5:30 and sometimes we’re done right on time.

The only suggestion I’ve gotten over the years is they were like, “You got to come up with better titles for your classes.” “I don’t know. We need to get some brand specialists in here where they tell us to call it something instead of something else.” That’s all the stuff that we’ve got.

We should change the update to protecting your freedoms.

Don’t wear a mask and go to this class. All of our classes are mask free.

You can watch them at home.

You don’t even have to wear a mask, all of you my freedom guys. Scott says I was listening to an audiobook on BRRR, that’s Buy Rehab Rent Refinance.

TRE 177 | Deals Out There
Deals Out There: The appraisers that mark properties down need to have their license revoked and thrown in jail.

 

We love that model. It’s big game hunting.

One thing that caught my attention is he said, “In the West and other locations, appraisal values are based more so on location, but in the South Southeast appraisal values are more square footage-driven. Do you think there’s validity to that as a general rule?” When you get into Southern California and, Rob, you’re certainly an expert here. If you’re on the side of the mountain and you have the view of the valley versus if you’re across the street and you’ve got a view of the hill.

Are you on the inside of the five or the outside of the five? We’re going to be talking about those coastal communities.

There’s going to be a huge difference there. If you’re in Houston, Texas, and you have two of the same houses, they’re across the street from each other, they’re going to be valued the same for the most part unless they have some different amenities for them.

In the West for most big cities like Vegas, the Phoenix Valley Basin, the Vegas Basin, Southern California, Orange County much different than let’s say LA County, Imperial County, Riverside County much different than Orange County and San Diego County. What the difference are planned communities. At this point, most of Vegas is a planned community. There are HOA neighborhoods everywhere. They’re easy to appraise. What else does it come down to?

In Vegas, do I have a view of the mountains? Do I have a view of the strip? Am I at the corner, right at the entrance or am I deep next to the pool? There’s some validity. Remember how appraisers do it. They do it completely the opposite of how you do it. You take the three best in the neighborhood and then subtract. They take the three worst in the neighborhoods and then add. You’ve got to start doing your comps the way appraisers do the comps. Meaning they take the bottom and say, “Here are the three base houses in the neighborhood and you’ve got one extra bedroom. I’m going to give you another $5,000. You’ve got one extra bathroom. I’m going to give you another $5,000. You don’t have a two-car garage, you have a one car garage, I’m taking $10,000 off.” That’s how they work. The way that every guru out there tells people to figure out the ARV is to take the three bests and subtract and that’s completely opposite of how appraisers do it.

If you look at the appraisal report and it’s on page 2 or 3 where they start. You’ll see on the far left, there are four columns, or is it five? It’s a bunch of columns. On the far left is your property and all the columns on the right are four other properties they’re comparing it to. They will give you pluses and minuses depending on amenities, square footage, and wood floors versus travertine versus tile versus granite countertops versus court. You will see all the pluses and minuses, but Rob’s right. They go in and they find 3 or 4 properties that are as similar to yours as possible at the bottom of that price point.

It’s not like your subject property, your house versus the one that’s being foreclosed on that looks like a bunch of animals live there and it’s all torn up. That’s not comparable. They’re going to look for, “There are seven houses yours and we’re taking the bottom four.” Every guru across the country teaches it is there are seven-year houses. They’re taking the top three. Which always made Rob and me wonder, “Have these guys ever bought a house?” “Did they ever talk to an appraiser?”

“Have they not ever read your appraisal reports?” It’s crazy when you think about it. There are different types of appraisals, but we won’t get into all that. We’ll make this distinction here. There is a subject to appraisal and then there’s an as-is. An as-is appraisal is what’s it worth now not fixed up? There’s a subject to appraisal, which is what’s it worth when it’s fixed up based on the construction scope that the appraiser was given? This is not a regular homeowner, mom-and-pop going to buy a single-family house. This is investor stuff. When an investor goes out and buys something, you’ll get an as-is and a subject to.

You can not overtly persuade an appraiser.

No, they’re horrible.

You’ll lose if you try and be the bull in the China shop, the A personality.

If you’re trying to be the A alpha dog, “No. This is what it is.” The appraiser’s going to shut down and blow you right out of the room. They don’t care.

There are some ways to be subliminal about it. One of the things we do is when we hand over our scope, we also have a picture of all our finished products, “Here’s what the kitchens, bathroom, floors, crown molding looks like. Here’s our last house.” With the last flip, the same scope. We put that on pages 2 and 3.

We may attach comps in the neighborhood.

Other comps that we’ve used.

We may do that. We may go as far as to take the property off centralized showing service to make sure that they call us, so we get their email and then send them an email with all this stuff on there.

Going back to Scott’s point is, “The default is always square footage.” When in doubt, it’s square footage.

Let’s explain what square footage means. We are going to compare square footage to square footage. I’ll tell you, this is a big difference. Down there at the beach, Rob and I are buying properties under 900 square feet. The smallest one we have in our contract is 468 square feet. That property is comping at $300 a square foot. Conversely, I can’t go across the street to the 2,000 square foot house and simply take my $300 a square foot and multiply it by 2,000 and that’s the comp. That 2,000 square foot house, you’ve got to look for other houses within a couple 100 square feet and they’re trading at $265 a foot.

Anything under 900 in that area, I saw it at $290. It’s pretty close to $300.

Let’s explain why that phenomenon exists. When you go from one neighborhood to a better neighborhood and the houses are the same square footage, what you will find is the smaller houses will have a higher price per square foot. Why is that? Those houses that are smaller, have an entry point into that neighborhood that’s lower than all the other houses. For example, you may have to that 2,000 square foot houses they are selling at $300,000, but the 1,000 square foot houses are selling it $235. On a square foot basis, they’re much more expensive. However, they’re the entry port from a total price standpoint to get into that neighborhood.

This is where flippers start lying to themselves, especially in Southern California where the add value is add-on. You’re going to be with 1,200 square foot house in the valley. You’re in Sherman Oaks and it’s going to be for $1.2 million, $1,000 a square foot. You’re like, “If I add on 1,000 square feet, I’ll make$1 million.” It’s like, “No.” When you get to 2,200 square feet and you’re at $750. You’re still going to make a lot of money. You are still going to be doing well but now all of a sudden, you’re at $750. Now, you’re going to be at $1.7 million, $1.8 million versus the $2.2 million that you think you’re going to make.

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