Don’t Get a Real Estate “Mentor” Until You Try This (Rookie Reply)

Ashley:How do you worth additional bedrooms when comps simply don’t match? Is discovering a mentor actually important? And do you have to get your actual property license or is that simply one other distraction?

Tony:At present we’re breaking down three key questions from rookie traders identical to you.

Ashley:That is the Actual Property Rookie podcast. I’m Ashley Kehr,

Tony:And I’m Tony j Robinson. And with that, let’s get into in the present day’s first query. So our first query in the present day comes from Richard. Richard says, I’m trying to do a burr in a market that I’m not very accustomed to, really not accustomed to this market in any respect. The particular person I’m doing it with brings a whole lot of worth they usually have assets in that market that may make this cool. Comps are a difficulty although as a result of there are actually no comps of comparable properties. The property is a 5 bed room, two bathtub, but it surely’s solely 2300 sq. toes, whereas a lot of the 5 bedrooms on this space are 3,200 to 4,000 plus sq. toes. That is extra so the scale of a 3 two. So right here’s the query. When evaluating after restore worth, if we’ve got a 3 mattress and a 5 mattress of comparable measurement constructing situation, how a lot worth can we give to the additional bedrooms for the 5 bed room when the sq. footage is about the identical as a 3 mattress, I’ve seen articles with arbitrary numbers like 10 or 20 Ok.

Tony:Does anybody have any concepts? Thanks. So I believe earlier than we dive into this, it’s a very actual query that I believe a whole lot of traders battle with is making an attempt to be sure to nail down your comps to get your A RV. However let’s simply describe first what a RV or after restore worth is. So your after restore worth or a RV is the worth of the property after you’ve accomplished no matter renovations you propose to finish. So sometimes in case you’re flipping a house or in case you’re refinancing plans refinance, you purchase a distressed property, proper? A property that’s in disrepair, you make investments cash to repair it up. And within the technique of fixing that property up, you’re taking its worth from this decrease stage as much as some larger stage. That larger stage is your after restore worth. And the rationale the A RV is so essential is as a result of in case you’re flipping, you must know the way a lot cash it is best to spend as a result of your A RV will dictate what you’ll be able to promote it for. And in case you spend an excessive amount of, you would possibly find yourself shedding cash on that flip. And in case you’re doing a little kind of refinance, you must know what your backend refinance worth is for a similar motive to be sure to don’t overspend in your rehab. In order that’s what the RV is, that’s find out how to undertaking it. However Ash, I suppose, what’s your tackle this query? Small 5 bed room, how would you method making an attempt to determine the RV on this state of affairs?

Ashley:Yeah, the factor that I’d suggest essentially the most, and this is a bit more troublesome to do, however is to get a duplicate of an appraisal from that market. So get the appraisal and have a look at how a lot cash they’re placing in direction of a bed room. So it might depend upon the appraiser, however you’ll not less than get a ballpark concept that as a result of it is a three bed room and this one is a 5 bed room, they’re saying the 5 bedrooms is price $20,000 extra in worth, then it’s 10,000 extra that they’re including in weight to having the extra bed room. After which there will likely be different components although, in the event that they’re the identical sq. footage, however one is a 5 mattress, one is a 3 mattress, that’s going to vary the ARV a bit of bit too as a result of it’s not going to present as a lot weight to different issues. Like if there may be this appraisal I simply had executed.

Ashley:And one of many issues they negated on the property was that there was no toilet on one of many flooring. So there was two bogs, however a basement, a important ground, and a second ground, and there was no toilet on the primary important ground, they usually stated that the format was not perfect or one thing like that in comparison with different properties within the space, which technically is true. And they also negated cash off of that too. So simply just remember to are different issues. So possibly if this property is 5 bedrooms, possibly it has a extremely, actually small kitchen, small front room the place they might additionally negate you for that too.

Tony:That’s fascinating. Ash, I’ve really, I don’t suppose I’ve ever been dinged on an appraisal for format issues. So it’s fascinating that that occurs, however I believe it illustrates the purpose that appraisers appraise properties otherwise. So I might ship two appraisers to the identical precise property they usually might come again with two very completely different opinions of worth. So it’s type of half artwork, half science, however ash, your recommendation to exit and get your fingers on an appraisal, that’s precisely what we did once we hung out in OKC earlier this month as we had been strolling with this agent, I stated, Hey, in case you may give me some copies of some current value determinations, she redacted all the private info from who ordered the appraisal, however I used to be in a position to see, oh, for bed room variances, right here’s what they’re including or subtracting for sq. footage variations. Right here’s what they’re including or subtracting for lot measurement variations, right here’s what they’re including or subtracting.

Tony:And I believe she despatched me 5 value determinations and looking out throughout these 5, I used to be in a position to get not less than ballparks for, okay, if I’m plus or minus this on sq. footage, right here’s the adjustment that I ought to make as a result of I believe it’s going to fluctuate fairly dramatically from market to market when it comes to how a lot you’re going so as to add or subtract. So I undoubtedly wouldn’t use an arbitrary quantity like 10 Ok or 20 okay as a result of in a market like Iowa the place possibly I should purchase a property for $150,000, 10 Ok is an enormous proportion of the acquisition worth. If I’m shopping for the place I dwell in Southern California and say I’m shopping for a home for 600 Ok, 10 Ok is a really small proportion of that appraised worth. So I believe getting your fingers on precise value determinations from that market might be the best possible method as nicely.

Ashley:What an awesome concept to ask an agent or a lender as a result of actually how a lot info is admittedly redacted on it? You may search for on-line, it’s public file who owns the property. So it’s like, it’s not just like the social safety quantity actually any private info on there. However yeah, I’ve by no means even considered that. I’ve all the time simply requested different traders and even simply household associates or folks that did a refinance or buy a property for a duplicate of their appraisal to take a look at it for a market. However yeah, that’s a extremely good concept. I suppose one different factor too is to widen your internet. So widen your radius of how far you’re comps, as a result of the appraiser might additionally try this too, the place in the event that they’re not discovering an analogous property in that space, they might widen the online. So particularly in a rural space, that radius will get fairly large as to how they might search for a property. I had one property that was on 30 acres and had two single household properties on it, and I believe one of many comps was 10 miles away and was not even in the identical city, but it surely was an analogous property, in order that they needed to go farther to seek out one thing that was extra frequent to it.

Tony:Ash, one other nice level as a result of I believe most appraisers will go additional out versus going additional again in time.

Ashley:Sure,

Tony:I believe that’s a mistake that a whole lot of Ricks are likely to make is that like, oh man, it is a nice similar construct proper subsequent door, but it surely bought 18 months in the past and that isn’t a great comp anymore as a result of markets shift a lot. So I believe a great rule of thumb is possibly going again 90 days and in case you can’t discover any good comps inside, name it like a mile radius, then simply begin to mile and a half, two miles, two and a half miles, three miles till yow will discover one thing. However I’d actually warning all rookies from going too far again within the time machine to attempt to discover good comps as a result of most appraisers is not going to go that far again in time both.

Ashley:Up subsequent, our mentors actually sport changers in actual property investing and if that’s the case, how do you really discover one? We’ll dive into that after a fast phrase from in the present day’s sponsors. Welcome again. Okay, we’re right here with our second query, and this query comes from Patrick within the BP boards, discovering a mentor is talked about in virtually each single actual property guide, and we do quite a bit on this podcast too, whether or not it’s from a person or a bunch receiving steerage from somebody who has executed what you are attempting to do looks as if a serious step in getting began. I’m curious if folks can attest to this and if that’s the case, find out how to go about discovering this kind of mentor slash steerage. I dwell in New York Metropolis, however would love to listen to about anybody’s experiences. So yeah, Tony, like I stated, we’re very responsible of this, so saying how essential a will be, however that doesn’t imply you want a mentor to get began. Sure, I 100% agree it would quick monitor you, however not less than in your story whenever you acquired began, you didn’t have a mentor, proper?

Tony:Yeah, and I believe that’s the purpose that I used to be going to make is {that a} mentor doesn’t should be a single one that takes you underneath their wings and it’s like an old-fashioned apprenticeship. I believe that’s what folks all the time take into consideration after they hear the phrase mentor. A mentor can imply a number of issues in the present day. It might be the books that you simply’re studying and the authors are serving as kind of a mentor. It might be going into the BiggerPockets boards the place there may be an unbelievable quantity of actual property investing schooling and going into the boards and speaking with folks and studying outdated threads might be your mentor. For me, there have been sure Fb teams that I used to be actually lively in early on, and it was these Fb teams type of served as my mentor. So there’s so many alternative locations, alternatives to seek out folks, and also you don’t should put all the strain on one particular person to be your mentor, however you need to use a neighborhood of individuals to information you alongside in your journey as nicely.

Ashley:Yeah, once I first began, I labored for an investor, however he was very passive within the investing aspect and actually didn’t know quite a bit about actual property, however I nonetheless felt like a way of comfortability simply realizing any individual else that was doing it, although I didn’t actually search steerage or ask questions, I’d say I did a whole lot of figuring that out alone after which discovered BiggerPockets and the boards was gold to me. Having the ability to ask questions and to learn different folks’s questions and actually uncover questions I didn’t even know to ask. I believe that was a extremely large pivotal second for me. It was like, wow, that’s such a good suggestion. I wouldn’t even suppose to even provide you with asking how to try this. So I’d say greater than getting a mentor is surrounding your self with a neighborhood or an accountability group.

Ashley:I truthfully suppose that’s extra priceless than really getting a mentor. And I agree. I consider mentor, it’s just like the man that’s been investing for 50 years and also you hop in his truck and also you drive to his properties and also you’re serving to to do stuff. I dunno, don’t survive. However there’s so many alternative varieties {that a} mentor can take. Like Tony stated, you’re studying a guide, you guys listening to the podcast, possibly me and Tony will be your mentors and be underneath our wing, however I believe much more so is surrounding your self with a neighborhood. And I believe that’s simpler to seek out than a mentor as a result of that neighborhood, there are such a lot of completely different voices, so many alternative opinions, a lot completely different recommendation that individuals can come from and surrounding your self with the neighborhood. There are paid communities, I’ll say identical to there are paid mentors and free mentors, however with the neighborhood, simply go on the actual property rookie Fb group and simply begin partaking.

Ashley:Even in case you suppose you recognize nothing about actual property, when somebody posts one thing like their submit, congratulate them, ask a follow-up query so you’ll be able to study extra. There’s this particular person, Lawrence Briggs, who we had on the podcast and he really got here on to study from us and we had been serving to him get his subsequent deal. The a part of the actually large motive he was on the podcast episode as somebody we had been studying is as a result of me and Tony continually noticed him on Instagram. We didn’t know something about him. We didn’t know him, however he preferred each single submit, each single story commented on all of our stuff, every part in the actual property, rookie Fb group, each single day you’d see him partaking. So once we noticed his software in comparison with the tons of different individuals who wished to return on for this spot factor we had been doing, we acknowledged him simply from social media and fascinating with folks. We’re like, you recognize what? We really feel like we all know him, we don’t know him, however you recognize what? Let’s have him on. He’s actually making an attempt to get began right here. And so yeah, you by no means know what alternatives will come about by placing your self on the market.

Tony:Tremendous legitimate level, Ashley. And I believe that asking somebody, will you be my mentor? Most likely isn’t the proper method. Say that there’s somebody that you simply need to be your mentor. Simply going to them and saying, will you mentor me? Is I believe a troublesome factor for most individuals to need to say sure to. I believe a greater method is a, doing what Ashley stated is getting your self into the rooms the place your potential mentor might be. And it might be the native meetup the place Ashley stated it’s the outdated man with grey hair with 50 leases. It might be going to occasions like BiggerPockets and we speak about BP Con a bit, but it surely’s as a result of I actually do suppose that apart from all the content material that’s being shared on stage, it’s the relationships, it’s the connections that you simply make in between classes, the after hours time on the bar, wherever else you guys could also be, the place these connections are actually propel you to that subsequent section of your investing journey since you’re speaking to people who find themselves possibly one or two steps forward of you who’ve already gone by means of the struggles that you simply’re at the moment going through.

Tony:So moving into the identical room as these folks I believe is likely one of the greatest methods to seek out your tribe of mentors. I believe one factor although really that I do need to touch upon, and I may need a barely contrarian view, however I do suppose there’s worth, and I’ll put an enormous caveat on this, you bought to seek out the proper particular person. You bought to seek out the proper neighborhood. I do suppose there’s worth in mentorship and training since you get somebody who’s now financially incentivized to just remember to’re profitable and also you’ve acquired to make it possible for no matter program it’s that you simply’re becoming a member of is vetted that they’re on the up and up. There are a whole lot of of us on the market who’re doing it for the flawed causes, who don’t actually have efficient processes for assist whenever you get the outcomes they’re speaking about.

Tony:But when yow will discover a neighborhood, if yow will discover a program that truly delivers on what it’s they’re promising you to do, I believe a, you’re going to take it extra critically since you’ve voted together with your pockets to say like, Hey, I’m not simply going to purchase a 9 99 guide, however I’m going to take a position nonetheless a lot, possibly three, 4 figures for this assist. So now you’re dedicated to it. After which on the opposite aspect, they’re dedicated since you’ve invested into their neighborhood as nicely. So I believe it’s a technique to shortcut, however you bought to be sure to do the homework to seek out the proper neighborhood. Alright, we’re going to take one final break earlier than our final query, however whereas we’re gone, make sure to subscribe to the Actual Property Rookie YouTube channel. Should you’re watching on YouTube, go forward and hit subscribe.

Tony:Should you’re on Apple Podcast or Spotify or another podcast participant platform, look us up at realestate rookie on YouTube and we’ll be proper again with extra after this. Alright, let’s soar again in. Our final query in the present day comes from Garrett. Garrett says, I’ve two questions for you. Primary, is it price it to get your actual property license in case your investing technique is to flip homes? Quantity two, are there any drawbacks to getting your license which may hinder any a part of your actual property? Investing from expertise, what are the professionals and cons of getting your license? Alright, so this query pops up each every so often. I suppose Ashley, I’ll ask you first, do you may have your actual property license?

Ashley:No. And as you recognize, I’ve paid to take the course in all probability 5 instances, however I’ve really by no means executed it in in all probability 4 years in the past. I gave up and I ended paying for the course to really get my license.

Tony:And I believe that’s a typical story we hear from a whole lot of actual property traders. I believe we are going to get into the professionals and cons, however we had David Inexperienced on the podcast and he’s a excessive quantity agent in addition to being an investor. And I keep in mind asking him this query and he gave very type of straight to the purpose reply. He stated, until your aim is to develop into a excessive quantity agent, I don’t suppose it is best to develop into an agent as a result of it distracts you out of your core job, your core focus of being an investor. And simply at a excessive stage, or essentially possibly a good higher phrase, essentially, actual property traders and actual property brokers are completely different folks with completely different talent units as a result of there are a whole lot of brokers who know completely nothing about investing in actual property. They will let you know all concerning the transaction of shopping for and promoting, however what makes an precise nice actual property investor, most brokers don’t make investments. And the identical is true for being an actual property investor. There are a whole lot of superb actual property traders who would make horrible brokers. I’m certainly one of them. I’d be a horrible actual property agent. I’ll be a horrible agent. So I believe the concept that the 2 are linked, they’re solely linked a lot and in order that they’re each associated to actual property. However when it comes to the aim, when it comes to the talent units, they’re utterly various things.

Ashley:I believe to a extremely essential piece is definitely understanding what an actual property agent does or what they need to be doing for you. You see the agent take you thru the properties, present you homes, how enjoyable you get to go and see a bunch of homes and see what’s occurring in your market. But additionally you must be accessible on a regular basis to do showings if you wish to have shoppers, but additionally on the again finish. So in New York state, you must have an lawyer to shut. My agent does all of the follow-up with the attorneys continually messaging like, okay, we’ve acquired dedication. Okay, we’re good. Retains it transferring alongside. They do the contract, they do the paperwork. Something that modifications with the deal earlier than we shut on it, they’re negotiating that. The one property that I purchased one time, this was in all probability my fourth property possibly, and it was the primary time I used to be utilizing a traditional mortgage.

Ashley:The opposite time I’ve used non-public cash or my companion’s cash, so it was like money, however this was the primary time I used to be doing typical mortgage and the folks I used to be shopping for from had been doing a double closing the place they had been closing on the sale of their home to purchase their subsequent home. In order that they actually was transferring out the day we closed once I did my last walkthrough, after which they had been ready to shut after which transferring into their home later that day to their new home, they left just like the fridge disgusting and the home equipment had been included, and I wished them to pay 100 {dollars} for a cleaner to return and clear as a result of they left the kitchen disgusting. And I simply keep in mind my agent negotiating with the vendor’s agent. Lastly, the brokers determined that they agreed on $50 cleansing payment or no matter. And to look again, now that simply sounds so ridiculous, however 100 {dollars} was some huge cash and I didn’t need to should pay a cleaner.

Ashley:And I undoubtedly, I’m a germophobic. I didn’t need to have to scrub it myself. So my agent was so affected person with me sitting there at closing, I’m sitting actually the county clerk’s workplace the place they’ve all of the closing tables and I’m sitting there with the financial institution lawyer signing and he or she’s over standing there and there’s the opposite household that’s promoting you the home, they’re speaking. Then the brokers would come and meet within the center and discuss after which return. However it’s like all of those little issues. One time each brokers agreed to pay for snow removing as a result of the vendor refused to plow the driveway they usually really did that out of their very own expense simply to maintain the deal transferring. So you must order indicators, you must put your join, you must be sure the inspection goes nicely, the inspection doesn’t go nicely, you’re serving to negotiate that. I needed to have a sump pump inspection as soon as to really shut on the property. My agent helped me by means of that complete factor. So I believe actually perceive what an agent really does in addition to write up the contract and do showings as a result of for my part, a extremely good agent there may be much more that’s executed behind the scenes.

Tony:Yeah, I believe an enormous piece too is simply understanding why do you need to get your license? What’s your motivation? Would you like it since you really need to be an awesome agent for both major dwelling patrons or for traders? If that’s the case, in case you simply have a want to be an agent, then yeah, by all means go do it. However in case you’re doing it since you suppose that it’s going to present you some kind of distinctive benefit as an actual property investor, I believe I’d not less than simply double test that. I imply, there are some execs, proper? The professionals of getting your license, particularly in case you plan to flip, are that you possibly can doubtlessly save on commissions. And I say doubtlessly as a result of possibly you suck as an agent and you’d really make more cash giving up 5% on each sale to brokers than making an attempt to listing your self.

Tony:Possibly they’re simply going to have the ability to market your property higher and also you’ll simply get extra in every flip. So I say doubtlessly as a result of not paying commissions doesn’t all the time imply making more cash. The second professional I believe, is you do get MLS entry. So in case you’re flipping out there that you simply get your license in, MLS does have generally extra information than what’s available on Zillow or Redfin. Typically you may get entry to possibly expired listings extra rapidly. You don’t should undergo a website like Prop Stream or one thing to that impact. So the info availability could be a bit of bit stronger, however there’s cons as nicely. And clearly that is going to fluctuate from state to state, however you’ve acquired to reveal that you’re an agent. And generally possibly in case you’re working off market offers, possibly that causes some friction in making an attempt to get offers executed. There’s the price of sustaining your license and also you’ve acquired to do persevering with schooling to maintain it lively. And so there’s execs and cons. So I believe it’s weighing each of these to grasp is the worth of getting your license well worth the cash, the time, the vitality that goes into sustaining it.

Ashley:However you undoubtedly don’t have to have your license to be an actual property investor in some states, in case you’re going to be a wholesaler, that’s a special case the place you’re beginning to want your actual property license. So I imply, it additionally depends upon what technique you’re doing too. Possibly if you’re flipping properties and also you’re doing a whole lot of shopping for and promoting, possibly it makes extra sense. However in case you’re simply shopping for one rental a yr each two years and that’s all you’re doing, it won’t be price it in any respect to save lots of that little bit on fee to do such low quantity and doubtless price you extra anyhow to take care of your license and to take the persevering with schooling programs. I had my insurance coverage license for a short time and people programs are usually not low-cost. Effectively, thanks guys a lot for becoming a member of us in the present day for this episode of Rookie Reply.

Ashley:You probably have questions for us, be at liberty to submit them within the BiggerPockets boards. You may all the time ship us a DM on Instagram at a BiggerPockets rookie, and we may reply the query on the present. And we additionally pull questions from the Actual Property Ricky Fb group. I’m Ashley. And he’s Tony. And we’ll see you guys in Las Vegas. Yep. I tricked you guys. You thought I used to be going to say the following episode, however be sure to guys get your ticket to BP Con as a result of Tony and I will likely be there and we sit up for this second each single yr once we get to do the Rookie Meetup, the rookie networking occasion at BP Con. So make you guys get your ticket. Should you guys want an additional low cost that will help you get there, ship us a DM and you’ll message me at Wealth from leases on Instagram or Tony. You may message him at Tony j Robinson. And now we’ll see you guys on the following episode.