Buying properties at a discount is number one. But if you put all your eggs in one basket, you could suffer a total loss in the blink of an eye. The best way in real estate investing that nobody tells you about is finding discounted properties by using a direct-to-seller market. You have the tools to find these motivated sellers; the only problem is that you must know how to use them.
Because time is money—and speed is one of the most valuable assets an investor can have—David Dodge is here to give you the keys to keeping your business door open. Guaranteed, you’ll be closing deals in no time!
Are The Doors To Your Business Open Or Closed
We know that finding discounted properties is the most proven path to financial freedom. Let’s face it. We all want financial freedom and security but so few of us have been taught how to build long-term wealth while still earning an income. The truth is owning rental property is the best and most effective way to increase your income and build legacy wealth fast. In this show, you will discover how to take control of your finances and make your money start working for you.
I am here to show you how to build long-term wealth and cashflow while paying less taxes through owning rental properties. Stop trading your time for money and get off of the transaction treadmill. In this episode, we are going to talk about the doors in our business being open or closed. It may sound so crazy like, “Dave, what in the world are you talking about?” What I am talking about is buying properties at a discount. That’s what it all comes down to.
I have been investing in real estate for many years. I have been full-time at it for years. I have done over 700 transactions and every one of those transactions over the years was discounted properties that I was able to buy. In the first ten years of my real estate investing career, I did it wrong. Don’t do what I did for ten years. What did I do? You are probably wondering. Here’s what I did. When I was in college, I first started buying rental properties.
I used a simple method called house hacking. I bought a house and rented out the other rooms. That right there was great. I only had about $100 a month in expenses while I was in college because my friends rented out the other rooms in a house that I bought. What I did wrong was I went and found a real estate agent to help me find a rental property. We went to the MLS and found a full retail deal. It’s not even a deal. It’s a full retail property.
When you’re buying properties at full retail, you need to have skin in the game.
I went and said, “This one looks good. It’s a four-bedroom house. I will live in 1 of the bedrooms and rent the other 3 out.” It seems like a great play. It wasn’t bad. I was collecting rent and reducing my cost of living but I didn’t get a good deal on it. I paid full retail for that property. I had to go out and get a conventional loan where I put down 20% and borrowed 80% from a bank. I didn’t even have the 20% to put down. I borrowed that from my grandparents.
It was a 100% loan but I had to put down the 20% that I borrowed and even had to have my sister and grandparents co-sign on this deal. Moving forward over the next nine years, I did this a couple of more times with house hacking. I moved on to work at various jobs and started small businesses. I essentially was buying one house a year. The houses that I was buying were roughly about $150,000 purchase prices.
They were all bought with a real estate agent of the MLS at a full retail price. When you are buying properties at full retail, you are going to have to have skin in the game. In my case, I had to put down 20% every single time I bought a piece of real estate, and I did that for ten years. After ten years, I owned twelve rental properties. Some of you might say, “That’s pretty good.” It wasn’t bad. Let’s be honest. 12 properties over 10 years are not too terrible, but now, I can buy ten properties in a month or two. On a good month, I might buy ten properties.
The difference is I’m not paying retail for these properties. What I’m doing is I’m buying them at massive discounts. What happens is it allows me to open the doors in my business. Coming full circle, are the doors to your business open or closed? If you are buying properties at retail or slightly under, you are going to have a very difficult time wholesaling that property, fixing it up, and selling it as a fix and flip. There’s not that much value to add by rehabbing it if you don’t get a deal on it.
If you want to add it to your portfolio of rentals, you can do what I did for the first ten years and put down 20%, which is going to limit your speed and maybe even the amount of properties you can buy, if any. Doing the landlord play or specifically using the BRRRR method is going to be very difficult if you are not buying these properties at a discount. Check this out. If you are able to locate a motivated seller and buy a great deal, you have the ability to wholesale it.
That door is open. You can run through it if you have a great price. If you want to fix and flip that property, the door is open. You can run through that one, go fix it up, sell it for retail, and hopefully, make a killing. If you want to use the BRRRR method, buy a rental property, and have little to no of your money invested in it, in the end, that door is open to you as well. These doors are merely exit strategies. That’s all they are.
If you want to do some other things with creative finance, maybe you want to lease option it or hold the note, these are also other exit strategies. Buying a property at a discount will allow you to open the door to that exit strategy. One of the things that I see very often with my students is they will find a property, and it’s not a deal. I help coach them into getting these properties at better discounts or moving on from that particular property because it’s not a deal.
If you aren’t buying properties at a discount and getting deals, all of the doors to your exit strategies are going to be closed. You are going to be hitting your head up against the wall or, in this case, up against the door trying to get through it. It’s going to be closed and locked. It’s the best thing for all of us real estate investors. I don’t care if you are wholesaling, fixing, and flipping or if you are a landlord. The main thing that we all need to be focusing on all the time is finding discounted properties. We do so by using direct-to-seller marketing.
Buying a property at a discount will allow you to open the door to that exit strategy.
There’s somebody out there that’s saying, “I found a deal on the MLS.” Here’s the thing. You can find deals on the MLS. It’s possible. It’s just very unlikely to find a lot of them all the time. In 2021, I had my best year to date. I bought 162 houses in 1 year. I’m not telling you this to brag. I’m telling you this because three of them were on the MLS. They were listed properties. The only reason that we even bought those is that the agent that had that listing knew that it was a house that needed a lot of work and that they weren’t getting any interest or showings.
They reached out to my team and me and said, “We’ve got this deal. It’s listed. We think that you are going to be able to get a good deal on it. Here’s what the seller is looking to get or make us an offer.” At the end of the day, with 162 purchases in 2021, 3 of them came from on-market MLS deals in my local market. Do not put all of your eggs in the MLS basket. The MLS, by design, is designed to get full retail for your property. Here’s a great exercise that I love sharing with my students.
You are a real estate agent. You go present to somebody that owns a property, and they are looking to sell this property. You walk in as an agent and say, “John or Jane, I would love to help you sell this property. I’m an agent. Work with me. We will get it listed on the MLS. I’m pretty confident that I’m going to get you somewhere between $0.50 and $0.70 on the dollar.” Do you think that anybody in their right mind would want to hire that agent? No way.
Agents come in and say, “Mr. or Mrs. Seller, John or Jane, I’m an agent. I’m great at being an agent. You should work with me because I’m going to get you as much as possible.” The more money the agent gets for the seller, the more commission they also make. By design, real estate agents are selling their services to sellers as full retail. Nobody is going to want to work with an agent that says, “I’m pretty confident that I’m going to get you a $0.50 to $0.60 on the dollar.”
That’s why I like to avoid the MLS because the agent has already convinced the seller that they are going to get more for the property than all of us investors are typically going to want to pay for it. The direct-to-seller marketing matters. We were to even take a step back from that and say, “Why do real estate investors get deals? How are they able to get deals?” It’s very simple if you think about it. Everybody wants to constantly overcomplicate all things real estate.
At the end of the day, all we do as real estate investors, wholesalers, landlords or fix and flippers is we offer to solve problems for people. Another way to word that would be, “We offer convenience to our sellers in exchange for a discount.” That’s all we do. We make their life easy, provide them convenience, and solve problems for them while simultaneously demanding, notice I didn’t say asking, a deal on this property. From what I have experienced, convenience can look like anything.
It can be a cash offer or the ability to buy the property as-is and not require the seller to do any painting, cleaning or repairs. Also another big convenience is typically speed. From my experience, cash, as-is, and quick, those three things typically make up about 70% to 80% of the conveniences that we, as real estate investors, offer to our motivated sellers. The more convenience that I offer to somebody, the bigger discount I’m looking to get for the property. If they are not willing to give me a big discount, then I’m not willing to give them massive amounts of convenience. It’s a seesaw.
The more I get of one, then the more I’m going to want of the other. If somebody is willing to give me a great deal on a piece of property, I’m going to bend over backward and make it super easy for them to sell me that property and ultimately solve problems that they are facing in their life. The problem isn’t always the house. Sometimes it is but sometimes the problem is external. It might be death, divorce, disease or job relocation.
You have to market directly to motivated sellers to find good deals.
I have even dealt with sellers that were going to prison, and they only had three weeks to sell the property before they got locked up. They were willing to give me a massive discount on that deal because I was going to be able to help them solve this problem before they went away. That’s one example. At the end of the day, that’s what we are doing. We are trading convenience to our sellers in exchange for a discount. If we are able to buy properties at a discount, all of a sudden, all of the exit strategies show themselves to us, and those doors are wide open.
If I want to wholesale, buy it as a rental, keep it, use the BRRRR method, and have none of my money invested in it or even go and fix and flip that property, then I do all of those things. I love it. Real estate is amazing. Those doors are wide open to me, and I can run through them. It’s easy. If I’m not buying properties at discounts and offering tons of convenience in exchange for those discounts, it’s going to be very difficult to disposition or find an exit strategy for those deals that makes sense and makes dollars. That’s another way to word that.
Are the doors to your exit strategies or your business open? Are you buying discounted deals? It’s not even buying. It’s contracting. That’s the wholesaling game. Are you contracting deals, putting properties under contract or buying properties like I did for ten years and paying full retail for these properties? Don’t do that. Take my advice and don’t waste ten years doing what Dave did, putting down 20% to buy a property at full retail, going out, and getting a loan because you have the tools to find these motivated sellers with direct-to-seller marketing.
You have the tools to offer them convenience in exchange for a discount. I demand a discount. If I’m going to go out of my way, buy a house that needs a ton of work, close fast, offer to buy it as-is, and pay cash for it, you better believe that I am not going to pay retail for that. The convenience that I’m offering warrants a discount. The bigger discount you have, the bigger your door is. Hopefully, that door is wide open.
These doors are our exit strategies. Thanks for reading. Remember, as real estate investors, we are in the marketing business before we are in the real estate business. We have to market direct to motivated sellers to find these good deals. Once we have these good deals, the doors to our exit strategies are wide open, and we now have plenty of options. I love it. The conversation continues over at WholesalingInc.com. Check it out.