The Real Estate Investing Strategy Smackdown and Which Will Outlive 2022?

Dave:
Hey everyone, welcome to On the Market. I’m your host, Dave Meyer and I have a special co-host with me, Mr. David Green. What’s going on?

David:
Hey Dave. It is a good day, man. Every day’s a good day right now. I just was thinking last night, I got home from the office at like 9:30 at night because I was really busy and trying to keep up and I realized this is the most fun I’ve had as a real estate investor in my entire career.
The last time I could remember being able to get deals that you were excited about under terms that you were excited about with the price that you were excited about and that had a big future was 2011 and ’12 when none of us knew how quickly that was going to close. This interest rate hike that everybody is mad about came with the opportunity to actually negotiate and use the skills we’ve been teaching about for 10 years now at BiggerPockets. To be honest, it’s like every day is a good day.

Dave:
I could tell, man. You are glowing right now. You even dressed up for this appearance On the Market right now. You’re looking good.

David:
Thank you for that.

Dave:
Well, can you tell everyone why you’re here?

David:
Yeah. We have a fantastic show for everybody here today. If you want to learn and laugh, you’re in the right place. Dave has actually brought in Avengers assemble of sorts where we have experts from different strategies in the real estate market.
I’m talking about the BRRRR method. We have Avery Carl talking about short term rentals, Jamil Damji, talking about wholesaling and Pace Morby talking about creative finance. We’re all sort of going back and forth and kind of picking at each other and defending our positions as well as revealing which strategies work better for which personality type, which lifestyle, which market that we happen to be in. If you want to get to know us at kind of a deeper level, this is a fun show. And then at the same time, if you want to get to know what strategies are working in today’s market now that strategies are working, this is a great place to be.

Dave:
Well said. I think it was super informative and very grateful everyone was able to make this show. I do have to give all the credit to our producer Kailyn. This was her idea and a great one. As you said, it was very fun. We laugh a lot, but there’s a lot of really good information in that.
With that, we’re going to take a quick break and then bring on the rest of the crew that’s here today. Again, in addition to myself and David, we have Pace Morby, Jamil Damji and Avery Carl joining us today.
Welcome everyone to On the Market. I feel like we’re at the all-star game right now. We have people coming from all over the real estate investing universe and we’ve picked some of the best talent from across the BP sphere. We have David Green, Avery Carl, Jamil Damji and Pace Morby joining us for our 2022 strategy showdown. How are you all doing?

Jamil:
Amazing.

Avery:
Awesome.

David:
I’m loving the market. I’m loving everything that I’m doing in real estate right now, more than what these guys are doing.

Dave:
Yeah. I just want to throw out that you’re doing better than everyone else. Right. Okay, good. Well, if you haven’t picked up on this, the premise of this show is to pit these four experts against each other to battle out what strategy is the best for real estate investors right now at this point in late 2022.
I’m going to have a go around and have each one of you introduce yourself, if people don’t already know who you are. Just quick intro and what strategy you’ll be promoting in this show. David, let’s start with you.

David:
I’m David Green. I’ve written some books for BP about long distance real estate investing, the BRRRR method and some agent books. I’ve got a real estate team, a mortgage team, and I buy real estate all across the country and I will be advocating for and defending the BRRRR method.

Dave:
All right, Avery.

Avery:
My name’s Avery Carl. I wrote the BiggerPockets book on short term rental investing. I just closed on my 220th door and I will be defending short term rentals.

Dave:
All right. Pace, what do you got?

Pace:
Hey guys, I’m Pace Morby. I’m currently writing a book for BiggerPockets, all about creative finance with an emphasis on sub two. This year we will close on close to 1,000 doors. Most of those utilizing creative finance. We are heavily focused in seven different markets, mostly the Sunbelt State.
We do a little bit of fix and flip. We do a little bit of BRRRR strategy, a lot of longterm and short term rentals. But I’m here to stand up for creative finance today.

Dave:
Okay. Jamil, who’s doing better than all of you, he’s winning already, even though he hasn’t said a word. Jamil, what do you got?

Jamil:
Hi guys, I’m Jamil Damji. I am from Phoenix, Arizona. I am here defending the business model of wholesaling. I am the founder of KeyGlee, which is a nationally franchised wholesale operation. We are in 126 markets and counting. I’ve done over 5,000 wholesale transactions and I am here to defend it to the end.

Dave:
All right. Well, let’s just start with you, Jamil. Tell us why wholesaling is the right strategy for 2022.

Jamil:
Well Dave, the reason why wholesale is the strategy for 2022 is the reason why it was the strategy for 2021, why it was the strategy in 2006 and 2008 and all of the years up until now, because you can’t lose when you’re wholesaling. Wholesale is, in my opinion, the strategy that allows you to have your finger on the pulse of the real estate market and every time you transact, you’re literally giving the market what it wants.
If pricing is going down, you underwrite well, you contract well and you can still make a profit. The beautiful thing about wholesale is that we never get caught with our pants down in a transaction. We can always, always, always walk away.
For me, that makes everything extremely open because not only am I not invested in pushing a value that no longer exists, but I’m truly paying attention to what’s happening today, now, in the time. And that allows me to give my buyer a great deal. It allows me to give my homeowner a real solution. Because of that, I think that no matter what, whether or not you’re a beginner or if you’re a seasoned investor, wholesaling should be a strategy that you have in your tool belt.

Dave:
All right. So I understand that you can’t lose wholesaling, but can you win the same way you can with other strategies like BRRRR or traditional buy and holds or short term rentals?

Jamil:
Well, it’s a great question. So the thing about wholesale that I love the most is how much cash you can actually generate fairly quickly. When you’re looking at a BRRRR deal, you need to actually come into that deal typically with some form of down payment and you’re going to need to renovate that house and it’s going to have at least an initial out of pocket expense in the tens of thousands of dollars.
That can be difficult for people that are brand new in the business to actually pull off. Not only that, but if mortgages rates change, which we’ve seen happen, you could get stuck in a deal and not be able to pull your cash out. And so for me, the risk that you have when you’re doing a BRRRR deal is that it may not actually pan out the way you want it to. And you might get left out in the cold saying, “BRRRR.”

David:
Sorry, Dave.

Dave:
That was so good.

David:
You could tell Jamil did his homework.

Dave:
Jamil has A&E guys writing this content for it before he even shows up on this show. That was good though. David, do you want to respond to that?

David:
Being left out in the cold with BRRRR, that was good. That was not bad at all. Where I’m from, Jamil, being cold is a good thing. I don’t know what kind of a upbringing you had or maybe you were raised in a gated community or something where people would see it that way. But in the streets, we used to use that as a compliment. So I’ve been told many times that I’m so cold, that’s why I developed the BRRRR.

Jamil:
Ooh.

Dave:
All right. Well David, since we’re on the topic of BRRRR, can you tell us why it’s a good strategy here in 2022?

David:
Yeah, so there’s a lot of reasons why BRRRR is great. I would probably end up taking up the whole show if I went into it and I don’t want to do that. We have to give everybody else their chance to hype their method. But one of the reasons that it’s great is it forces you to only buy the best deals. If a deal does not work under the BRRRR method, it’s probably not something you should have bought. It’s going to have to cash flow. You have to buy it below market value. You have to add value to it in some way.
Those are the ways that I like to buy real estate. I like to look at a property, come up with a vision for how it could be better used or should be better used and only buy properties if I feel like there’s something I can add to it.
Now, of course, we can get around that creativity by buying something at a better price. Sometimes, you can’t do that. In the market we’ve been in up to this point, man, it was really hard. Unless you were wholesaling or you were doing what Pace does where you find something off market and get creative, you just couldn’t make a deal work.
So BRRRR was sort of like guidelines that kept me in line to make sure I was only buying the right deals. And now that we’re on the downhill side and prices seem to be dropping in most markets across the country, I really like BRRRR because it takes the risk out of the deal for me. If I buy it at a million and I’m worried it might drop to 900, but I can add value to make it worth 1.2, maybe it drops to 1,000,050. Even if the market goes down, I added value to the property so it’s a bit of a hedge.

Jamil:
Can I just say what I think everyone’s thinking right now?

Dave:
Please.

Jamil:
You still have to do so much work. David’s talking about his model failing and if it fails, he can still find a way to get out of this because all in all, there’s a good chance that you could fail in the model. He has to have an escape hatch. I don’t need an escape patch. You can’t fail.

Dave:
I don’t know enough about wholesaling to refute that point but could anyone tell me if you could fail in wholesaling?

Pace:
I can tell you. We do a good amount of wholesaling. In fact, I’ve probably wholesale 200 deals through Jamil and his company at KeyGlee. I doubt. Actually, Jamil bought my first deal ever. I made $25,000 on my first assignment fee. Can you lose money in wholesale? Yes, you can make an argument that you can lose money in wholesale. If you are somebody that’s out in the streets like David where he grew up and you’re knocking doors, you’re not really spending a lot of money.
But let’s say you hire cold callers, you start spending money on texting or mailers, your marketing costs, if you’re not good at communicating and negotiating with sellers, you can hemorrhage a lot of marketing costs and therefore you can lose money in the attempt of wholesaling. But once you get into wholesaling and you get some traction, you almost have to try to lose money in wholesale.

David:
If you’re good at it.

Pace:
There you go.

David:
If you’re not good at it, it’s very easy to lose money spending $30,000 to send out letters and fumbling your way through the call that comes in and not knowing how to read the client and then getting out of real estate altogether and being driven into crypto, which also probably just got people trash. So Jamil’s method is the gateway drug into losing money through stocks and NFTs.

Jamil:
Holy moly!

David:
And destroying lives everywhere. But if you’re good at it’s great, not much different than the BRRRR.

Dave:
I feel like David has got it to school, is school’s a given the gateway drugs conversation when he was a cop and he’s just practiced this so many times and now he is putting all that on you, Jamil.

Pace:
Can I defend whole self for just a second on that please.

David:
I like how Pace has to defend Jamil’s, “Oh my God.”

Jamil:
Okay.

David:
He’s like, “Hey little brother, I got this.”

Jamil:
Stick up for me, buddy.

Pace:
I will stick up for you because here I’m direct to seller, which means I am the person that’s sending out mailers and cold callers and doing all of those types of things. And I can tell you that that method costs a lot of people a lot of money.
Jamil actually has a lot of videos making fun of spending money on wholesale. His strategy is actually coming to people like me who have spent the money and he gets my deals and he goes and sells them for me and gets a portion of them. He’s created a really specific niche that’s amazing, where he can avoid the upfront costs, talking to sellers, negotiating, follow up, follow up, follow up, follow up, follow up and he just is there saying, “Hey, send me your deal.”

Jamil:
True. Another way that we get a lot of our deals is through real estate agents. And I know BiggerPockets has an incredible platform, the Agent Finder, a great way to connect people with real estate agents that are finding great opportunities.
For me, if I’m looking at scaling and building a real estate business, you guys are both right. You can spend a tremendous amount of money on cold callers or on direct mail. Like David said, you could end up trading crypto in people’s stories or whatever. You can be one of the bots in people’s comments on Instagram very quickly trying to spend money wholesaling.
However, if you take this business from the point of view of building relationships, which is what I wholeheartedly believe in and you make those relationships worthwhile, you can create opportunities that are infinite. I have got relationships with real estate agents where I’m making over a million dollars a year with one single agent that’s bringing me opportunities that she wouldn’t normally be able to sell on the MLS anyways, because they’re in such terrible condition, they’re not financeable homes.
The way that I see it is that you guys are right, you can lose a lot of money marketing in wholesale, but if you do this the right way, you can not have to spend that money. You can build relationships and you can create the superior real estate investing strategy.

David:
Honestly, Jamil. You’re doing it in a way I’ve never heard anyone else do it. Everyone listening to this should make a note right now in your phone to go listen to BiggerPockets podcasts Episode 593, where we interviewed Jamil and he went into detail about how he uses relationship building.
My personal opinion, the way you do it is the way business should be done. People often try to spend money to make up for a lack of skills. “I don’t know how to talk to people. I don’t know how to build trust, so I’m just going to go throw money at the problem,” which is where most people do lose. But again, I’m going to say you’re good at it. You’re handsome, you’re charming, you pay attention, you’re good at building relationships. You are meant to be a wholesaler.
I think wholesaling often gets put out to the masses like, “Oh, you’re sucking at life. You have no money, you have no credit, you have no job. You can’t save anything. You spend all your money on boats.” They had a Napoleon Dynamite where Kip was selling that little ship that the lady really wanted. That’s where all their money’s going. And we tell them, “Oh, well you should just go wholesale because you don’t need money,” as if it’s an easy thing to get into. But you’re out there, you’re hustling and you’re building your skills. Right.

Dave:
All right, well that was a very good debate about wholesale. I love that. Avery, let’s go to you. What is going on with short term rentals in 2022? I’m very curious to get your read on this.

Avery:
Yeah, yeah. I’m not sure I want to go. You guys are brutal with the dad jokes. I don’t want to get hit. But yeah, I am here to defend short term rentals and stand up for short term rentals. With short term rentals, the art of doing it right is really in choosing the right market. They really are, if you choose the right market, for example, a market where most of the properties come furnished, like regional drivable vacation rental markets that I always talk about, most of the properties in those markets are going to come furnished.
They’re very easy to finance and they come with furniture for free. Especially for someone who’s new getting started in the market today, you can get a conventional loan, it’s already furnished. And then they do provide, in my opinion, the highest cash flow out of the gate for the lowest amount of work to actually acquire the property. Now, you do have to get… There are a few stipulations to that, like you are probably going to need to self-manage that remotely.
So you are going to have some systems to manage after the fact, but in terms of being able to create the most amount of cash flow the fastest so that you can go scale your portfolio maybe in other ways, I think is short term rentals still.

Dave:
Are you able right now to find deals on the MLS that are offering that good cash flow?

Avery:
It’s certainly not. Nothing is what it was five years ago where there’s 100 great deals sitting on the market for six months waiting for you to just get this great discount. But it’s certainly a lot better than it has been in the last two years. It is the best time in the past two or three years to be able to get into a deal as far as short-term rentals are concerned.
This time last year, everybody was having to offer a 100,000 over asking to get anything. Now, you can actually go back to the fundamentals of real estate investing and do these crazy things like negotiate and ask for closing costs and ask for discounts and you can get them now. There’s opportunity in the market because the weaker hands have kind of been shaken out in terms of buyers.
There’s less competition. And then we see a lot of what I call FOMO sellers. I forgot to mention this when I introduced myself, I run a big real estate team also that focuses on these. And what we’re seeing with the FOMO sellers is they saw their neighbors selling for these crazy, just made up astronomical numbers and getting them six months ago and now they’re seeing that the market’s changing and they’re going, “Oh crap, I missed the boat. I better hurry up and sell mine to try and capitalize on those costs.” They’re flooding the market a little bit. So there’s a lot more opportunity in terms of competition and being able to negotiate and get those deals than there have been in the past few years.

Jamil:
That was a great term, FOMO seller. I like it.

David:
I wrote it down.

Dave:
I hope you trademarked that because if not, it’s getting stolen immediately.

Avery:
They taught me that in business school.

Dave:
I’m curious about where you see the market going for short term rentals. Because to me, maybe I’m just being optimistic, but I think there’s going to be good buying opportunities because demand from second home buyers seems to be falling off a little bit and that leaves a little bit more room in some of these more desirable rental property areas for investors. Do you think that’s a reasonable hypothesis?

Avery:
Yeah, it absolutely is. Last year, the interest rates were so low, anybody could afford a lot of things and could afford secondary spending second homes that they’re not necessarily renting out. A lot of those people are tightening up because their payment, if you have a second home and you’re not renting it, then your payment is just out of your pocket every month. So with higher interest rates, you get the same house.
A lot of those people are like, “Nevermind. Not going to do that this year.” There’s definitely a lot more opportunity for investor buyers now.

Jamil:
Here’s the problem that I have.

Avery:
Okay.

Jamil:
Where I think short term rentals will do well is where people want to live and visit. Would you agree?

Avery:
Yes, depending on a number of things. But yes, go ahead.

Jamil:
Popular places are where I think short term rentals will do the best. Why? Because they’ve got to draw there. But what I’m seeing is this, there’s a huge lobby against short term rentals by the hospitality industry as well as just the fact that rents are continuing to escalate in these primary high demand-driven markets.
I have this tremendous amount of fear of scaling a business where I think the writing is on the wall, that lobbying groups are going to try and eliminate short term rentals or that other groups that have interest in maintaining rental inventory will get in and try and outlaw short term rentals where I’m making a huge investment. How do I hedge against that or quell my fears if you would.

Avery:
I would love to quell your fears. Like I said, the real art of being successful at short-term rentals is choosing your market wisely. So choosing a market that maybe is… We’ll use Dustin, Florida next door to me for example. So Dustin is 1000% dependent on tourism. There’s not a lot of hotels and even the people who don’t own short-term rentals, the locals, their businesses also depend on the tourism coming in.
The city would really not be able to thrive without short term rentals. I totally understand what you’re saying with the affordable housing for the people who actually live and work in these markets. But if you choose a market that’s kind of dependent on it like that, then you’re going to have a bit more insulation than if you’re buying in a metro market that’s really cool that everybody wants to go to.
But there’s a lot of people that live there whose income is not dependent on tourism, who work in other industries and then also a lot of hotel presents. So a really good example of that was during COVID when all of the Florida short term rentals shut, they allowed hotels to open back up first in South Florida, where there’s a lot of people who live there, lots of other types of industry were up in the panhandle. There are no hotels. I mean there’s some here and there, but the vast majority of the housing or the accommodations rather for tourists coming in is short-term rentals.
We got to open back up first before the rest of this state of Florida as far as short term rentals are concerned because the economies couldn’t live without them. So you kind of have to choose the right market.

Dave:
One question for your Avery and David, I know you have some short term rentals. Pace and Jamil. Do you guys have any short-term? How’s demand? Because I’m a little curious if fear of recession or inflation, discretionary spending is going down. Are you seeing any slow down in your bookings or revenue?

Avery:
For us personally, because we have a lot of reviews already, we have actually done, I think we’re at about $15,000 more year to date than we were last year, which was technically an anomaly year. So we’ve got a lot of that kind of backup and we’re really a sturdy business because we have a lot of reviews. So guests coming in might book us before somebody with no reviews. It just kind of depends On the Market.
Again, so if you just bought something in Jackson Hole, you might be a little bit more worried because that’s a really expensive vacation, you bought a really expensive property. It’s expensive for people to take a vacation there. But if you’re buying something like in the Smokeys or Western North Carolina where people can just shoot over there on a quick drive trip, pretty affordable, then again you’re going to have a little more insulation there too.

Dave:
Are any of the other, you guys seen any changes in demand on your short terms?

David:
They’re new. I just closed on them a couple weeks ago or I’ve got several that are still in escrow. Some are being renovated and getting all the pieces together. So I haven’t really had a long enough of a data sample to know.
What I did do when I was planning for this was I planned on the next 18 to 24 months having lower than normal demand. As long as there’s talks of a recession, you’re going to have people that don’t want to spend money. The same things that create opportunity for us to buy, which is the money that was chasing assets has pulled out, it’s not like it disappears. The money doesn’t evaporate into the sky, it comes out of the pool when it goes into a reserve or reservoir. That’s the same money that people would’ve been spending buying fancy cars, taking nice vacations, staying in better places.
I’m just expecting it’s been pulled out. But so often, people just look at the real estate market in general like there’s this huge crash that’s coming like the 1920s depression and it’s going to take 10 years to come out of it and it just not what usually happens. We saw the same thing during the [inaudible 00:23:50] with COVID. Everything froze. Nobody was traveling, houses weren’t selling. And then everyone realized, “I guess the sky isn’t falling.”
They unleashed what I call the kink in the hose and the water pressure came flying out and all the money went back and the market and next thing you know, you’re on this wild ride of prices going up. So when you’re playing the game of real estate, you have to plan for short periods of time or medium periods of time where you’re not going to be getting the revenue that you wanted or it’s going to be very difficult to get into the properties that you want to get into and hold reserves.
And then you change that when things switch around. I don’t think it’s going to be something where I’m losing a ton of money, I’m definitely not going to lose a property. You just don’t underwrite them based on 2021 numbers because those were the hose just came on kinked and nobody was able to go anywhere and life was miserable and everything was shut down. So of course everybody wanted to travel and you had a record number. Everything was perfect for short term rentals.
If you bought a property based on 2021 numbers, you’re probably part of those people that are throwing it back in the pool and putting it on the market. And those are the houses that I’m now going after. What I’m doing to hedge against that potential risk is I don’t want to buy anything cookie cutter.
I don’t want to buy a track house, I don’t want to buy a condo, I don’t want to buy anything where there’s 700 million of them that people could pick from. I want a very unique property, incredible views, really big house that can sleep a lot of people, great area, unique amenities. It has a pool when other houses don’t have one. Something that makes this house stand apart from everything else. So if it does get harder to… We’re all chasing after the same guests. They’re looking for this property because it’s different and better than all the others. So if the buyer pool goes down, I’m still going to be their priority.

Dave:
This is just wild speculation, but I think there’s going to be great buying opportunities in 2022 or maybe even into next year too. I just sort of think we have had so much Airbnb and short term rental supply come online right at the time when demand might fall off. I don’t think it’s going to be a lot. Actually, Tony Robinson did some research and it shows that it might be a three or 7% drop in revenue.
If you underwrote it well, you’ll be fine. But if there’s excess of supply coming on when demand comes down, there might be a couple of operators who don’t really know what they’re doing, who bought in at a high point are going to have to sell at a low point and maybe some great properties. I think there could be some big inventory upticks and some really good markets over the next couple of months and personally I’m very interested in jumping in on that.

David:
Dave, I’ll tell you, I have never in my career as a real estate investor ever had as much fun as I’ve had in the last 60 days buying property. I’m working 14 hour days and every day I go home, “God, I cannot believe that you’re this good to me, that I’m getting this great of an opportunity.”
There’s literally too many deals for me to even analyze or take down. I can’t remember the last time that I felt like there’s too much to pick from. All of these are great deals. What’s the best of the good deals? It used to just be can I find anything that I can justify trying to make it pencil other than counting on appreciation.
In the last 12 properties I’ve bought, just between what I paid and what they appraise for, I’ve added over seven figures to my net worth. Just over those 12 deals that I bought. There’s quite a bit more coming that have between 200 and $300,000 in equity that we’ll be closing on. When’s the last time you could say that as an investor? It’s all because of this amazing gift of high interest rates that we’ve been given that everyone’s mad about.

Jamil:
The amazing gift of high interest rates, says the guy that’s defending BRRRR.

Pace:
Yes.

David:
Yes.

Jamil:
I just had to repeat that.

David:
Tell me how high interest rates would hurt BRRRR.

Pace:
I can answer that. I had to cancel 20 of my BRRRR strategy deals in the beginning of the year, deals that we had under contract. But this is to be said about other types of deals we had under contract as well, my BRRRR stuff. Last year we did 40 BRRRRs, this year we’ll probably end up doing less than 10.
The reason being is because interest rates… The problem is seller’s expectation of their purchase price has not come down to equal where the interest rates have raised. I think that just takes a little while for the sellers to sink in. We went back and we renegotiated some of them because sellers really needed to get out. But that is not a fun feeling going back to the seller with your tail between your legs, no matter whose fault it is, the Fed or whoever. The seller’s always going to blame you for having to renegotiate the terms of the deal. Our BRRRR deals, I got annihilated in the first quarter of the year in terms of canceling contracts because of interest rates.

David:
But if they had been a standard buy and hold, not a BRRRR, would anything have been different?

Pace:
A standard buy and hold?

Dave:
Well yeah, because it’s on the refinance. If you buy at a low interest rate and then during the hold period, if you underwrite it with a similar interest rate and interest rate skyrocket like they did in the first two quarters, then you weren’t prepared for that increased debt cost.

Pace:
Yeah.

David:
Well, what Pace was saying is that he wouldn’t have bought them even if they were traditional rentals. Just because rates went up, it made the purchase price of the home regardless of if it’s after the refinance or before, the deal doesn’t pencil anymore. I don’t know that that’s a BRRRR problem. That is a cash flow problem because rates went up and it kind of affected interest rates or sorry, it affected the market at every strategy that you’re trying to do. When I’m thinking about how interest rates-

Pace:
The only thing it didn’t affect is one thing, the greatest strategy, which is creative finance.

David:
That’s true. Because if you write your own interest rate, you’re not dependent on the bank, then it doesn’t matter what rates do.

Dave:
What a segue, Pace. Take it away.

Pace:
The good thing about creative finance is that it in my opinion, not even opinion, a lot of everybody on this panel right now has done creative finance deals. I know David Green does creative finance deals. We all know the power of it.
The reality is creative finance is the best strategy because I can do everything with it. I can do short term. Right now, I’ve got 75 Airbnbs or short term rentals right now on my page that we are acquiring all through creative finance. Short-term rentals is amazing and it is a great strategy. But I can do that with creative finance. I don’t have to go out and get loans. I can acquire long term rentals. I can do multifamily. Most of the doors we purchased this year were through multifamily. A lot of zero down, 50 year mortgages that we’re getting from sellers and wholesale.
We wholesale a lot of creative finance deals. When we can’t take them down or we can’t raise enough capital or whatever it is, like David said, this is the greatest time ever because everything’s on sale and the seller’s mindsets are, “Oh my gosh, what I thought I was going to get On the Market I’m not getting.” They’re way more open to negotiating, especially with creative finance. Creative finance, we flip with creative finance. We do sub tails is what we call them. We buy them subject to or seller finance and then we take them retail.
We do wholesale, we do long term rentals, we do short term, we do multi-family, mobile home parks, land, literally anything you want to do, creative finance does and improves whatever the strategy is when you layer creative finance on it.

Dave:
Why, we just did a show about this Pace, so I’m giving you a softball, well this is always a softball for you, but why is this particularly beneficial in this type of economy?

Pace:
It depends on the seller you’re talking to, but here’s the answer. If you’re a sub two seller, meaning you have a mortgage or an underlying debt on your house, there’s people that bought in January, February, we’ve got a deal in Florida that we just I talked about on another BiggerPockets episode where somebody bought it with a VA loan. How much money did they put down?

Jamil:
3%.

David:
Probably zero.

Dave:
Zero.

Pace:
They put 0% down in this situation. Now, they bought that property back in January of this year. Interest rates were great for them at the time. Then they get deployed as somebody in the military to a different part of the country. They go to sell their house now and they’re getting $60,000-70,000 less than what they bought it for. So what is the option for that seller? The option is either they turn it into a rental and most sellers are not really equipped to be landlords.
They want to sell their properties. And so we come in and say, “Hey, if I can short term rental that myself,” this is in Lake Worth, Florida, “turn this into a short term rental, I’ll take your payments off.” So we bought the house for $2,500, no credit check. Nobody looked at my tax returns, nobody checked if I was a US citizen, nobody cares about anything.
I just gave $2,500 and closing costs and took that over. It’s fully furnished, fully renovated, turning into a short term rental. It’ll net $1,500 a month. My cash on cash is like 400% per year. That’s somebody that’s in a pickle because of the market and seller finance on the other side of it, sellers are…
In the multifamily world where Jamil and I were in a multifamily deal, 53 unit deal, the interest rate annihilated our deal. It took it from a 15 million deal to what Jamil? An 8 million deal?

Jamil:
Yep.

Pace:
An 8 million deal in a matter of 90 days. It destroyed that.

Jamil:
You lose $7 million in value because your interest rates doubled.

Pace:
It destroyed it. And so what’s happening is, I’m getting a lot of multifamily right now where the sellers are saying, “Look, I really care about one thing. I care about winning on my top line price.” And it also helps them out with tax benefits. They can mitigate their taxes on creative finance whereas they can’t with a cash transaction. We’re helping them on taxes, we’re giving them a higher number. So if they give me the number I want or I’m sorry if I give them the number they want, they give me the terms I need to get into that deal with little to nothing out of my pocket and cash flowing from day one.
The sellers care about a top line number, I care about on that San Angelo deal that we broke down 43 units, $0 down, 4% interest on a seller finance and the seller gave me 50 year terms with no balloon.
The reason why he did that is because he was in contract on a cash transaction at 3.5 million. They cancel because their lender comes in and says, “Sorry, we can’t give you what we said we could now. We’re going to cancel.” They go to the seller and say they cancel. I come along, pick up the broken pieces and go, “I’ll buy it at whatever price you are asking as long as I can get the terms that I need.” You’re seeing that more and more and more.
This is why David said this is the fun… All of us are kids in a candy shop right now because everything’s on sale. Not just house prices but also sellers and their desires have changed dramatically to a point where the great negotiators of the world are dominating.

David:
Yeah, you didn’t have room to negotiate when there’s 12 other offers and they’re like, “Okay, I’ll waive contingencies. Okay, I’ll give you 50,000 more. Okay, whatever you want.” Winning was just getting the house, period. I’ve told people, this is something I had to work with the buyers of the David Green team. Most people walk in thinking the buyer is negotiating against the seller. That is only true when you are the only buyer.

Pace:
Great point.

David:
So they get mad at their agents like, “Why didn’t you go negotiate harder? Why aren’t you working for me?” Because I’m not competing with the seller. I’m competing with the other 12 people that want it more than you do. I would just have to tell our clients, “Don’t get in the cage of an MMA fight if you are not willing to fight. This is not a market to step into if you are not willing because the guy next to you or the gal next to you, they will. They will go harder. They will weigh their contingencies, they will do what they have to do. If you don’t want to compete with them, you shouldn’t be in this asset class. You shouldn’t be in this market right now.”
It’s finally shifted. One of the ways that I know if we have leverage in a deal is if I write an offer on a house and I get a counter offer that is meant for just me, or if I get a multiple seller counter offer. That alone tells me whether I have leverage.
If it’s a multiple buyer, there’s a bunch of other people I’m competing with, I’m probably not winning. If you’re the only person that gets that counter, all the strategies we’re talking about right now, what Pace was just saying, what Jamil needs to do to get that deal to work, it all works because it’s just you versus them. I don’t know how long this window’s going to be open.
I am much more worried about the window closing on us because the current administration says, “Hey, we conquered inflation. Look, the CPI is down to 1%. We can open it up and have a party again.” And they push rates right back down and then this is over. And we look back at this moment like the great window and we talk about it all the time, then I am about a huge depression that’s going to just crush real estate prices and it’s all going to be useless.
I think the people that are waiting for that, I would just strongly ask you to ask yourself, where do you think all the money went that was driving this market? Do you think it disappeared? If money is water, do you think it evaporates into the sky or do you think it moves from one place to another and it waits for the right opportunity? Pace, when you were talking, I was thinking, yeah, creative financing is kind of like the sriracha sauce of real estate. It can make any food taste good. It almost doesn’t matter what the deal is like. If you can figure out a way to get creative financing, you can make it.

Pace:
Anything. We’ve got a short term rental right now where… It’s in Atlanta. What we did is we were in contract, it’s a seller finance deal. While we were in contract, Atlanta cracked down big time on Airbnb, came out with laws, legislation, done, stamped, you’re done, very strict. So I have a couple of houses in Atlanta that got grandfathered in. I have licenses for them.
But that property in particular, I really wanted that property. The problem is I needed to change my strategy away from short term rentals. So what did I do is I went back to the seller and I said, “Hey, I still want to buy your property. Let’s close escrow, but I don’t want to make a payment until I figure out the next strategy.”
We sat there for six months, no payments while we looked for a sober living company to come in and utilize the property and we just leased the property to them through a sober living strategy. For six months I can have that conversation directly with the seller. You can’t do that in any other strategy.

Dave:
Jamil or Avery, have you ever used creative financing?

Jamil:
Yeah. I’ve actually sold Pace’s properties using creative financing. But for myself, I’ve got PTSD from 2008 and I’m Pace’s best friend. I travel around the country with him and I watch him collect all of this incredible cash flow. I watch him collect incredible depreciation from all the money he’s making.
I see how powerful the strategy is. I personally can’t get over the value leverage equation. That to me is where I’m always stuck because when the market crashed in 2008, I was left holding the bag of debt that I could no longer service. When I was holding that bag, it was the hottest bag of turd that you could possibly have.
There was nothing I could do. There was nothing I could do except sit in it and my life became the bag. When I remember what that was like, I am still feeling allergic to collecting leverage as much as it makes sense and as sensible as what Pace is saying sounds, it feels wrong to me to take on a property that has a debt of let’s just use fake numbers here, $300,000 that might be worth $250,000 just because it cash flows. For me, I just feel like, “What happens if?” And then I run for the hills. That’s where my biggest personal, I guess heartburn comes from with the creative strategy.

Pace:
Well can I answer that? Because I think what happens is the sensationalized versions of creative finance are the ones that are like zero down, 0% interest, which we do a lot of those, right? About 15% of our acquisitions are zero down, 0% seller finance. The other ones we’re putting money down, we’re raising capital, we’re bringing in partners, we’re self-funding those down payments or what have you, catching up arrears for sellers that are in foreclosure.
I would say less than 5% of my deals in my portfolio are ever purchased over the ARV of the property. But they get sensationalized because when somebody says, “That’s an impossible deal.” I go, “Actually, let me correct you. We structured it differently and we were able to pay on paper over value because we got into the deal for basically nothing out of our pocket, blah, blah, blah, blah, blah.”
Those stories shoot up in the sensationalized social media as, “Oh my gosh, creative finance buyers are buying over value!” It’s so rare for us to buy something over value. But going back to David’s point earlier, he said, “You’re not competing against the homeowner.” I agree. We do a lot of cash deals, we do a lot of wholesale fix and flip.
I agree. When you’re talking to a homeowner, you’re not competing with a homeowner, you’re competing with the other 15 buyers. In creative finance, nobody using creative finances competing with anybody else. Everybody’s competing with me. I’m the only person. It’s 15 people versus me. When people find out I’m going into a homeowner’s house the day after they were in there in an appointment, they send me a text and go, “I heard you’re the guy going in. Good luck with the house.”
I go, “Thank you, thank you, thank you. I’ll pick up all the pieces. Thank you so much.” I walk in, sweep up shop because I use creative finance to give the seller. I personally believe creative finance is the only thing that the seller truly wins in and the buyer truly wins. It’s the only win-win scenario. Whereas in wholesale, which I do, I have to get the deal so low to make it work that I do have to bring… I have to get that seller to give me some of their equity to make that deal work.

David:
Pace, do you ever run into any FOMO of the stuff that Avery’s buying? Because she’s getting some luxury, really nice stuff that’s going to appreciate hardcore over time and is easier to manage rather than the stuff that you’re able to find through off market means.

Pace:
Most of my Airbnbs are all luxury and they’re all creative finance.

David:
So you’re just reaching out to the owners basically through the Airbnb listing and seeing if they’re looking to sell rather than finding it on the MLS?

Pace:
Oh, from her strategy of going to the ones that are already renovated, et cetera. We don’t find deals on the MLS. That’s Jamil’s strategy. I go direct to seller. We go and pull a list of high equity. We go after seller finance. Like my favorite house I own, Jamil’s been to, it’s a house in downtown Atlanta.

Jamil:
Great house.

Pace:
Eight bed, five bath house. It’s two doors down from the mayor. Seller finance, it’s ultra luxury. Most of my Airbnbs are high end luxury homes, but they are not, to your point David, they’re not pre-renovated and they’re not pre-furnished. I have to go raise capital or bring in cash to do that.

Avery:
I just wanted to make a point that the reason that I don’t use creative financing is and it’s not because it’s not a good strategy in terms of business, it’s not a good strategy for me personally and my personality type. Here’s why I say that.
I have been on the other side of the table from people for a lot of deals, whether it’s my own deals or representing clients and I have never ever left the closing table going, “Oh man, yeah I really want to be wrapped up with that person for the next X amount of years while we have this thing seller financed.”
For me, I don’t want to deal with a lot of people. I’m kind of an introvert. I would rather just like… I don’t want to go out and hang out, I want to say home with my kids and my husband and listen to kiss. I just don’t want to be wrapped up with that many people for that long. I like my bank, I like my local bank, I like my mortgage broker that does my more traditional type deals. I’m happy with dealing with X amount of people and nobody else. That’s kind of why I don’t deal with that.

Pace:
That is a really great point. It is a really great point. One of the common things I run into with sellers that are going to seller finance is I… Like that house on Madox for example, in Atlanta. I had to take Jamil to the lady’s house to get her to feel comfortable seller financing at $1.5 million home to me. And

Jamil:
We have to go to dinner with her almost every time we go to Atlanta as well because he has to maintain a relationship with her.

Pace:
Right, because she’s my bank.

Jamil:
But he loves her. She’s a wonderful woman.

David:
Sriracha can make anything taste good, but you’ve got to like spicy food. Pace can probably talk to a potted plant. He’s good at it. The dude’s got a mouthpiece on him. That’s a great point. There’s lots of people that like bury themselves in a spreadsheet, don’t want to come up for air that would have a very difficult time with the people skills that Jamil and Pace can show.

Pace:
Really good point, Avery. It’s not for everybody and you have to have… We have over eight or 900 relationships with different sellers that we either carry their mortgage with or they created a note and deed of trust for us and seller finance to us. It is definitely something that needs to be managed.
We haven’t, not only property managers, but we have asset managers to insulate myself. But again, back to your point, if you’re lifestyle oriented and you’re not trying to build this big massive machine, that’s such a great point that personalities do find the… Look, listen to Jamil. His strategy is personality specific. Am I right, Jamil?

Jamil:
100%. Because look, Pace has a check in his truck that he doesn’t cash. It’s from the United States Treasury. It’s his tax refund and he keeps it there so every time I get into his truck, I see it because last year, he got a refund and I know how much money he makes and he knows how much money I make.
I paid a ridiculous amount of money to the IRS last year and he got a refund and he was able to get a refund because of all of the depreciation he gets from his subject two and seller finance homes that he’s buying. And that’s incredible. My personality though is so averse to just having the obligation of… I don’t have a mortgage on my own personal house. That’s how against leverage I am. I’ve just gotten scared away from it.

Dave:
All right, well as much fun as this has been, we do have to wrap this up. So I’d like for each of you to give me about 30 seconds last word about your individual strategy. David, let’s start with you.

David:
I like BRRRR as it forces you to become good as a real estate investor. You have to understand cash flow, analysis, value add, buying in the right area. You’ve got to be good at everything if you want to BRRRR. So it forces you, I call it like… To be a black belt investor, you’ve got to have a lot of repetition. The BRRRR method allows you to scale quickly.
The last point I’ll make is that the reality is all of these methods work depending on Pace just said and Jamil said, the personality that you have and the other opportunities you have. What we haven’t mentioned is Avery’s team sells a buttload of homes and she does very well earning income, selling houses. If she was on the phone all day like Pace’s with the individual seller, not only would that not be fun and drain her, but she’d probably lose money because she could have been making money in other areas. The method you pick should also fit within the lifestyle you have, the personnel you have and the other opportunities that are in your life.

Dave:
All right. David, if anyone wants to connect with you after this episode, where should they do that?

David:
Go follow me online, at social media, Facebook, Instagram, whatever. Your pleasure @DavidGreen24. I’ve got a YouTube channel that is David Green Real Estate. The most boring name on YouTube, but easy to remember.

Dave:
All right, Avery. What’s the last word on short term rentals?

Avery:
For me, short term rentals, I’m lots of short-term rental people out there. I’m not going to be the person to tell you short-term rentals are the right and only way and that’s all you should ever buy. What I’m going to tell you is that they act as a cash flow turbo charger for any portfolio.
They can provide you, especially as a new investor. If you buy a few to start out, which is what I did. Five of my first six investments were short term rentals. Five and a half years later, I’ve got 220 doors. They can provide you a launchpad to scale your portfolio in whichever direction you want to go. It’s not a pick one thing and that’s all you can do. It gives you the cash flow upfront for you to be able to go whichever direction you want to go.

Dave:
All right. Where can people connect with you?

Avery:
You can find me on our website, the shorttermshop.com, Instagram @theshorttermshop. All of our other links to YouTube channels and stuff is right there on the website.

Dave:
All right. Pace, we heard a lot about creative finance, but any last words here?

Pace:
Oh my gosh! I wrote down so many things from Avery. Turbo Charge your cash flow, I love that. FOMO sellers, I’m going to go copyright that immediately. Just kidding. And then what I really liked about David, forces you to buy the best deals.
BRRRR works all the time. It’s amazing. Short term rentals work all the time, they’re amazing. Jamil and I have done hundreds of deals together. In fact, it’s how we got our TV show together was competing on a deal. I love all of these strategies.
My personal belief is that creative finance is the only no excuse strategy, meaning you have no excuse to be able to wholesale, fix and flip or buy and hold utilizing creative finance even if you have no cash, no credit or zero credentials. Like good job history.

Dave:
All right, great. I love it. Where should people connect with you?

Pace:
At BPCON.

Dave:
I like that. Yeah, I guess we’ll all be there in just like three weeks.

Pace:
Yeah, we’ll be eating sandwiches together, apparently.

Dave:
I can’t believe you didn’t know I was a sandwich aficionado.

Pace:
It makes so much sense. Data Deli, how did I not know that?

Dave:
Honestly, yeah. I have only two interests in life, and so it was pretty easy to come up with. All right, Jamil, what’s the last word on wholesale?

Jamil:
Well, for me guys, wholesale is the crown jewel of real estate investing strategies because it lets you sleep at night. You can generate hundreds of thousands, if not millions of dollars in cash and you can sleep on pillows full of cash because you are a successful wholesaler. And I can help you do that. I can help you do that. In fact, not only can I help you do that, I want to help I want to help you do that. But the only way that I can help you do that is if you make a vow never to BRRRR, use creative finance or buy any short term rentals because wholesale is king.

Dave:
Wow. It’s all or nothing for you. You’re not willing to share.

David:
Kiss the ring. You can only be loyal to one.

Jamil:
You have to take the Black.

David:
Game of Thrones episode of the BiggerPockets podcast.

Dave:
That sort of was the premise for the show. It’s just everyone’s sort of going to be battling each other, but this was a lot friendlier than that show.

David:
Yeah.

Dave:
Jamil, where should people find

Jamil:
You? You can find me on my IG. It’s @ J-D-A-M-J-I, @Jdamji or my YouTube channel, just Jamil Damji on YouTube.

David:
Let’s see if you can take all of us and assign us to what house we would be if this was a Game of Thrones episode.

Dave:
Oh my God.

Jamil:
What a great-

Dave:
Well, Avery’s clearly-

Avery:
I’m clearly the Khaleesi.

Dave:
Clearly a Targaryen. Yeah. She’s got the hair. She owned all you guys. Clearly, she’s… All right. I’m trying to remember. It’s been a couple years.

Avery:
We have Lannister.

Dave:
I’m going to go with Pace being the Stark.

Pace:
Yes.

Avery:
Wow, what a compliment.

Pace:
Bro, are you… Thank you.

Dave:
I just see you being… You’re charming everyone, you’re winning people over left and right. Jamil, you’re also-

Jamil:
King of the North. Yeah.

Dave:
All right. King of the North.

David:
That’s awesome.

Dave:
I don’t remember all the other ones. Those are the two I got.

Jamil:
I think I’m a Lannister because I believe you should always pay off your debts.

Pace:
Wow. You are a Lannister. That’s so good.

Dave:
I missed that. How did I miss that? How did I miss the Lannister? Also Jamil, not that you’re evil, but you seem perfect for that. David, you’re going to have to name yourself because I can’t remember one. Who’s the last one?

David:
I can’t name myself. That’s the worst thing a person can do, is give themselves a nickname.

Dave:
Can anyone else give me another Game of Thrones?

Pace:
Yeah. I would say that he’s a great warrior and so he would have to be not one of the same seven houses. You’d have to be-

David:
A Wildling?

Dave:
Like Khal Drogo. Khal Drogo.

Pace:
Khal Drogo. Yeah, there you go.

Dave:
Oh yes, I could definitely see that.

David:
Oh yes.

Pace:
He’s a Dothraki.

Dave:
Dothraki, there we go. Yeah, that’s it. All right, David, we’re going to have to get you riding a horse.

Jamil:
Tattoos and booze.

Dave:
Yeah.

David:
Get like the black eyeliner.

Dave:
Man. Sorry. I did a bad job of that. I haven’t seen that show in a long time.

David:
No, that’ll work. Have me dressed up like that at BPCON and I’ll walk around and people are like, “Jason Momoa’s a BiggerPockets fan?” We can see how many people we get. We have the same hair.

Jamil:
Well, you got the body.

David:
Yeah.

Dave:
Spitting image of each other. Well, now that we’ve lost our entire listener base probably forever for having this conversation, it’s probably time to get out of here. But this was a lot of fun. Thank you all so much for joining. David Green, Avery Carl, Jamil Damji and Pace Morby. We’ll see you again next time On The Market.
On the Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett, editing by Joel Ascarza and Onyx Media. Copywriting by Nate Weintraub and a very special thanks to the entire BiggerPockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions and investment strategies.