Concept to Retirement: Real Estate Investing Process

Real Estate Investing Podcast

In this episode Brett talks us through his process for working with real estate investors. He discusses getting to know the investor, identifying goals they have, and how he assists in finding and making a winning offer on a property. He calls this process, Concept to Retirement!

Brett Bernard: All right. Welcome to another episode of Behind the Curtain Real Estate Podcast. I’m Brett Bernard with EPM Real Estate, and with me today is also Aaron Ivey, who’s the principal broker, Enterprise Property Management and EPM Real Estate. You know, we talk a lot about investments, the process as far as what an investor goes through, rate of return types of properties. We talk a lot about strategy, but, one thing we haven’t really talked about is the process that we use. To assist an investor, and I really wanna take some time and do that today to kind of go through our process in hopes that if you’re listening to the podcast and you’re a new investor, if you find an agent in another state that’s not doing this for you, you need to dump that agent and find you somebody else. You know what I find is that the more I can do for an investor, In the investment process as far as getting an asset that’s performing for ’em, the more successful that investor ends up being because they don’t have the expertise that I might have or that Glen may have, or you may have that, you know, we’ve been doing real estate for so long, we, we know a lot of the. The alligators are in the water that a lot of new investors don’t see until one takes their leg off and they’re trying to recover.

Aaron Ivey: Right? Yeah. And you know, one of the things about, investors that are coming to Memphis for the first time is that they need help translating our city, our community.

Brett Bernard: That’s very difficult. .

Aaron Ivey: Yeah, I mean it’s, we have a, we have a, a very, varied demographic here in our city. There’s the people, right? But there’s also the properties, and so investors need to hear from us what’s risky, what’s not risky. We need to understand what their goals are because there are a lot of people that come in, they say, I don’t want to fix a, you know, I just want to clean it up and I wanna get it out there.

Brett Bernard: Yeah. You know, get it running.

Aaron Ivey: And and then there are other investors that say that they’re willing to buy a fixer-upper and basically, double what their purchase price was. You know, like buy $60,000 house, but $60,000 in, have a house worth $150k, and have it rent for $1,350, $1,400.

Brett Bernard: Yep.

Aaron Ivey: And so, yeah, you as a Realtor, I know one of your main focuses is understanding what their goals are, right? Assisting them with the knowledge that you have.

Brett Bernard: Yeah, it’s a simple process. So if I get a call from an investor, by the way, if you need to reach out to me, you can directly, if you’re interested, investing in the Tennessee market. Brett Bernard, (901) 692-7401. Call me 24/7. If I don’t answer, it’s cuz I’m asleep. Other than that, I will answer and call you back.

Aaron Ivey: Yeah. And you can text him as well,

Brett Bernard: So yeah, text me. Absolutely. Matter of fact, I got a text from someone this morning, who listened to one of our podcast episodes and has a house over there near downtown. They sent me a box code and a comparables they ran themselves and want me to go check it out for ’em.

Aaron Ivey: Awesome.

Brett Bernard: So they heard all the podcasts.

Aaron Ivey: Hey, we’re really glad that you’re listening. You know if you’re hearing us right now, we want you to know that the reason that we keep doing these podcasts is to, Number 1: stay in touch with our existing investors. They like to hear our voices. They like to hear, you know, how we’re innovating and what we’re doing now. There are gonna be a lot of changes coming up in the real estate market, especially here in towns like, like Memphis, where investment is popular. There are gonna be more opportunities for single investors. But the other thing, as we’ve mentioned in previous podcasts, especially with Tina Talarico on funding, is that funding is always changing too, and so you really need to keep up with these changes as they’re happening. So we’re glad that you’re listening. We want you to reach out to us, call us, ask for our advice. We’re here to give it. Brett is a phenomenal resource and so I just would encourage you to reach out to him, ask him what his experience has been. Ask him what has worked for other investors.

Brett Bernard: Literally Memphis is a street by street city. I say that to everybody and some people are like, oh okay. Yeah, street… No, literally a street by street. You can have million dollar homes on one street and literally be Section 8 housing one block over. Now, there are certain pockets in Memphis that aren’t like that. Small pockets, but majority of Memphis is very hodgepodge. It really is. When an investor calls me, the first thing I do is I take the time without any distractions just to talk to ’em. I don’t just don’t talk about business. I find out a little bit about who they are, you know, are they married, kids? So I understand. I can try to understand what their risk level is. If you’re 30 years old, got a couple of small children, married, your risk level’s gonna be relatively small. If you’re 22 years old, your hair’s on fire, you have no kids, and you got some money in the bank, your risk level’s gonna be a lot higher at that point. So I, I first try to understand who they are, understand a little bit about them, and then try to determine their risk tolerance, their level of ouch. That they’re willing to go to. I spend a lot of time talking about the markets, like what you said, the Raleighs of Whitehavens, and I try to give as best description of the neighborhood by grading it from A to an F. Memphis doesn’t have a lot of Fs. They got a few, but majority of Memphis is about a C, C plus. That’s pretty average.

Aaron Ivey: And that’s a future podcast topic by the way. I’ve done some research. Brett’s done some research. It’s time that we caught you up. This is towards the end of the summer, which means that things are slowing down just a little bit. The Fed is messing with our interest rates, and so things are slowing down just a little bit for us. It’s just gonna be long enough I think, for us to be able to bring you some of the information that we’ve learned from having operated this entire city, and Brett, you’re the reason why we are in a lot of those neighborhoods. I often roll my eyes at night and I’m like, Why am I in this neighborhood? Oh, yeah, Brett.

Brett Bernard: Well, I, yeah. I do go on some neighborhoods and I stop and just look. I’m like, what the hell am I doing?

Aaron Ivey: Sure. But I know why you’re there. And it’s because that’s where the opportunity is.

Brett Bernard: Well, if an investor calls me, Is interested in a home in a bad neighborhood, I tell ’em it’s a bad neighborhood. Crime’s gonna be a problem. When we go back to my discussion with investor, that’s the one thing I zero in on is, what are you looking for? Some investors, like you said, that want a $30,000 house in a bad neighborhood with great return on investment and the risk is high. Some want 3/2’s only Some wants you know, a brick home, some want homes that are built after the eighties, so I really zero in on what their goals are, what they’re looking for. The step two of that would also then be to zero in on what kind of return they’re expecting. Typically, we go for the 1%. Pay, hundred grand for a house to rent for a thousand a month. Some investors use 10% gross, which is actually less than the 1%. Some want a 12% roi, cash on cash with a cap rate of 8%. So there’s all these different variables and most investors that call me for the first time have no clue what any of that means. All they tell me is that I wanna make 250 bucks a month, okay? After expenses, after management, after whatever. But I can, from that point, I can kind of click into what we need to do. So I’ll guide them toward Raleigh or Whitehaven if they’re looking for that 10, 11, 12% ROI, spend 80 grand on a house, rent it for 950 a month and your ROI exceeds the 1%, so it’s a good return. Not to mention those properties seem to increase in value faster because they pretty much remain a rental property forever and ever, and the value of those properties is now very tightly wound with the rent comps. If a house goes to $1,400 a month tomorrow, well, guess what? A smart agent’s gonna list that house for $135k even though a CMA says it’s only worth $120k. It’s cash flowing, and in a hot market you can do that. So step one of that is to get to understand who these investors are, know who they are, understand what they do for a living, understand their mentality, understand their risk level. Once that’s done, the next step would be to set ’em up with a search. I’m still flabbergasted at it. Most agents, a lot of agents don’t use this tool. It’s a phenomenal tool. So you tell me, we determine you want to be in Whitehaven, you wanna spend between $70k and $125,000 and you want a 1% return or higher. I will go set you up a, a search in Raleigh, for instance, you’ll get a list every single day at 5:00 PM of every property that’s available with pictures, realtor remarks, list price, and even a map of every single property that is available that fits the exact criteria that you and I discussed that we put into the system. You know, a lot of people go through Zillow and, and Redfin and all that, and they go through property after property after property. This narrows it down to where you understand exactly what you’re looking at. This is exactly what I want.

Aaron Ivey: It’s such a professional search. And this is Paragon.

Brett Bernard: Part of the MLS system.

Aaron Ivey: Yeah. And part of the set of realtor tools that are realtor only. And the great thing about Paragon is that you don’t have to weed through all of the poor reporting. When you go on Zillow, and look guys we love Zillow. It’s like we don’t, we don’t love it.

Brett Bernard: It’s a 30,000 foot overview that’s what Zillow needs to be for people. There are agents that list properties based on Zillow’s value. And I, I find that hilarious.

Aaron Ivey: It is funny. But the thing about Zillow too is that it is late in reporting whether or not a house has a contract on it, whether or not it’s been sold, and so how many times have you had investors call you and say, Oh, oh, this is the one I want this one, and then you go on the mls, you’re like…

Brett Bernard: It closed two weeks ago.

Aaron Ivey: That’s right. And you’re like… So we’re trying to save you time by putting you on this paragon. And the other cool thing about Paragon is you never have to shut it off. Like, if you say, You know what? I don’t, I just don’t feel like 2022 is gonna be the year that I’m gonna buy.

Brett Bernard: Just pause it.

Aaron Ivey: Exactly. Exactly. You can pause it if you.

Brett Bernard: I can adjust criteria in a matter of minutes. If you say, Hey, I’m looking at the, the $100,000 homes I wanna go to $150, I can adjust that in minutes and your list will change. The beauty of it is you can literally can be an armchair investor. Right? Sitting in your chair with your laptop looking at properties. That’s the beautiful thing about Paragon. If you do it right and you do the parameters right, then you can really narrow your search down to exactly what you’re looking for as an investor.

Aaron Ivey: Yeah, and let me tell you this too. We have investors who are also realtors where they live. Okay. That’s what they do for their profession. Those realtors, like a hundred percent appreciate the MLS and they understand the value of it. They would much rather see an MLS listing, like a, like an actual breakdown of the property that’s reported through the MLS than they would. Turning over rocks and like looking into weird websites and like this one…

Brett Bernard: Going down the rabbit hole.

Aaron Ivey: Right? This is a wholesaler and does that work? And how does it, So instead these realtors that are buyers, they’re also like, Hey, I got the mls, I looked this up, it said this, I’m interested in that. And so just know that in our industry, that is a very, very valuable product.

Brett Bernard: It is. So we set up a search. And, apparently I’m a unicorn agent. My phone’s on 24/7. I always answer, even on Saturdays and Sundays. If I’m out on my boat, my phone rings, I pick up the phone and I answer it. “Hi, this is Brett. How can I help you?” Apparently investors like that.

Aaron Ivey: Um, yeah!

Aaron Ivey: But yeah, I’ve been called a unicorn because I actually answer the phone and call people back. So my next step for every investor, once I set your search up, as I tell you, Anything that shows up that catches your eye, you shoot me a text. What do you think about this address, Brett? Give me time, I’ll put together a 30,000 foot overview, I’ll send you the MLS listing sheet, I’ll send you a MAR data report, I’ll send you rent comparables, I’ll grade the neighborhood and tell you what I think about the area. And then I’ll even offer or assist and make a suggestion on a possible offer. Do we offer asking? Well it’s been on the market 60 days let’s go below asking Well it’s been on the market one day. Great. Let’s offer asking with an escalation clause of $5,000. For those of you who don’t know what an escalation clause is, they became very popular this year when we were fighting to buy homes. That’s where you make an offer and you have an escalation clause that says, I’m offering you a hundred thousand, but I’ll pay up to $105,000 in increments of a $1,000 above the highest offer. So it allows you to be more competitive. So once we determine, yes, we want that property, I make my suggestion, they make their decision on the offer price, then we just put an offer together and then Authentisign electronically. Get the proof of funds and send it out. That’s the easy part of being a realtor – and unfortunately that’s when most realtors kick back, put their feet on the desk, and wait for it to close. Right? They’re done. They allow the investor to deal with trying to figure out who’s doing the inspection. If you’re lucky, maybe your agent will get you the lease and rent roll that you’ve asked for in a contract so you can review it and make sure you got a good tenant when you buy it. At that point, I find most agents become, even listing agents that I’m doing business with on behalf of my buyers now, they go dark. I send emails. I won’t hear from ’em for days. It’s like once they get a contract, they just stop. Buty not me. The unicorn is different.

Aaron Ivey: Yeah. We get to work with Brett tightly in property management and our head of onboarding, as we’ve mentioned before, works directly with Brett and so property management is involved very, very quickly, and Brett freely sends the leads over to me, also to my leasing manager, Melinda, and so that we can talk about what property management looks like. The hand in hand approach to preserving your best interest as you are acquiring a property is really, really key. And the cool thing about being at Enterprise is that it’s all under one roof. Brett. Walks in, talks to us ,and now we know stuff. There were two points that I thought about as you were talking and you were talking about agents going dark. One is timely action. But time is of the essence. That’s what we say as Realtors.

Brett Bernard: In the investment game.

Aaron Ivey: Oh, it’s absolutely, Yeah. Time is of the essence and things are gonna become, you know, they’ve been competitive, but they’re gonna become more competitive in a different way moving forward and it’s gonna be about who you know, not necessarily how much you know, as to whether or not you’re gonna get that property that you’re interested in acquiring. One of the things about Brett, and then also about me, is that we love annoying people if we’re not getting the answer we need. We will call them twice a day. We will call them three times a day. We will reach out to their broker. So the point is a lot of these realtors that we work with are slow to act, and that’s not good enough for us. We know that your best interest is for us to take action quickly, and so we will hound them in order to get them to respond

Brett Bernard: Well the real estate market changes daily. It literally changes daily, especially here in Memphis. Now you add interest rates, not knowing when they’re going up again, what they’re going to. Getting a contract in place, so someone who’s using commercial lending can go ahead and get their loan locked in, is extremely important, and 24 hours can be devastating for an investor’s rate of return based on what they’re calculating. So yeah, time is very, very, very important.

Aaron Ivey: Yeah. And the other thing that I thought about too is timely documentation. And this is the great thing about Brett. So I will often say to Brett, like, he’ll sell a package, there’ll be 10 houses, 20 houses involved in the package, and our head of onboarding says, I really need those leases in advance of closing so that we can see what we’re working with; what property management is going to inherit when that sale closes and Brett, as soon as he has them they are in our inbox. Here’s a quick caution. The last thing that you want to, or last scenario that you wanna find yourself in as a buyer is somebody promising, promising, promising to have that documentation to you, you get within five days of closing, and now all of a sudden you’ve got to do some radical calculation to determine whether or not you’re gonna go to closing. Having that information, in a timely manner, is really, really important, especially with occupied properties and Brett, hilarious like does so many things that an agent wouldn’t have to do. I remember at least one package where you went around and you had tenants sign estoppels. Like you’ve knocked doors, you’ve been in situations, but they don’t make you uncomfortable, you realize that that is what the contract requires.

Brett Bernard: Let’s face it, anybody can get a real estate license. Right? We’ve met some people that, quite frankly, after meeting them, I’m like, how in the hell did you even pass the test? But, being a good investment agent is not about the test. It’s not about getting a license. It’s about how you approach the process, how you approach your investor’s goals, and do everything you can to help ’em achieve those goals. Well, now that we’ve gotten through the initial discussion, we set up a search, we found a property, wrote a contract that contract’s now been accepted and bound, earnest money’s been sent in. The next step and a lot of my investors are shocked when I tell ’em this, the next step, they’re like, Well, I need to get an inspection. Can you recommend somebody? I’m like, I already got that lined up. Inspections are next Wednesday. Oh really? I’m like, yeah. I’ve lined up the inspector, termite guy, and I have a contractor ready to walk with me and the two inspectors on the day of inspections. So not only are we getting an inspection report and termite report, we’re also getting a contractor’s view on an initial, probably gonna need about five, six grand worth of work. So now we have at least a number we can negotiate with if we need to negotiate that price backwards. Once we accomplish that, I’ve already sent the contract to the title company, we’ve already lined up title work to be pulled – I’m handling all of this for you. At that point, we’ll go through the process, we’ll negotiate terms, we’ll settle on a price based on repairs, we’ll have a bid from a contractor so that you know exactly what you’re gonna be paying to get it done when it’s over, once you close and at that point, and we just wait until we’re ready to close. Once we close. Most agents do what? Become genies and go back in the bottle and you never hear from ’em? No, not me. I actually then take it a step further. I make sure they get onboarded at EPM and then I stay involved in that asset long term. Like I’m still, you know, Michael Gibson and other investors of mine that bought homes three years ago. Guess what? I just talked to Michael yesterday. He called with a question. I stay involved in your asset to make sure it’s performing properly. I’m not gonna just poof and get my commission check and disappear. You’re gonna hear from me. I’m gonna check in with you every couple months, say, hey how’s it going? anything you need me to do for you? I tell every investor when you close, if you need anything, I don’t care what it is. Anything at all regarding your asset, just call me, shoot me a text. We’ve had some confusion between investors and management a couple times, and they just, you know, they got came to me, I came to you and boom, done. We fixed it. So that’s my process and I think that’s why we’ve been so successful. I’ve done an enormous amount of sales this year and the only investors I’ve lost, have been investors that I have fired because, for one reason or another, I’ve gotten rid of. Our investors stay with us. So that, that’s our process. We put a lot of time, we put a lot of effort into our investors, not just short term to make a commission, but long term, and that’s key to our success. If you are in another state and you’re listening to this podcast and you’re looking in properties that aren’t in Tennessee, if you are looking in Tennessee, (901) 692-7401, call or text me and my name is Brett Bernard, I’m the best agent you’ve ever had. But if you’re in other states, you should demand that the agents that you pick up that are gonna represent you, that are gonna, a decent amount of money off of your business that you’re buying, you need to demand that they pick up the torch and run with it for you. They need to make sure that you’re not able to step foot in their city, so they need to make sure that you have got every advantage as if you had landed there yourself and walked the house yourself. Pictures, videos, reports, inspections, opinions, all that has to be provided to you for you to feel comfortable. So make sure that your agent is giving you that kind of a service. I think all agents should do that service. All agents should give that level of service, but let’s face it, most agents are just lazy. They’re just not going to.

Aaron Ivey: It’s a work ethic. You know, like one of the things that I look for when I hire people is, do they have a work ethic? It’s a temperament. Even if it has to be coached a little bit, in my opinion, it’s something you’re born with. We’ve both got kids and so when I look at my kids, I, I know which ones that needs some help, you know, with their work ethic. Agents are the same way. Property managers on the same are the same way. You learn pretty quickly, right? Through experience when you find somebody that does not have a good work ethic, and it’s not their fault. They just, they don’t have it. If they don’t have it, they don’t have it. And listen, that is like a really important point just in general in real estate. If something doesn’t work, it doesn’t work. If property management is not working for you and your experience, it may not improve. You don’t need to expect it to improve. If you’re working with an agent that is really, really struggling and you’ve presented your concerns to that agent and they don’t improve in what they’re doing, they’re not going to improve. So this is definitely a fisher cut bait kind of market.

Brett Bernard: So what do we call this episode? How to Find a Good Agent?

Aaron Ivey: I don’t know.

Brett Bernard: That’s what we need to call it. Because frankly, I’m just tired of dealing with some of the agents I deal with and understanding that they’re just lazy. They don’t have a process. They just kind of fly by the seat of their pants. We have a specific process. We call it concept to retirement. We’re involved from the time you come up with a concept to be the next Donald Trump and call me all the way through, you know, retirement, when you’re ready to liquidate your assets and retire or whatever you’re gonna do. Our concept’s built around that. Not just a one and done, thanks for the commission check. Have a nice day.

Brett Bernard: Guys, my father is the one that started this company. He started it, gosh, Enterprise was started in 1985, and he’s still a practicing realtor. People who purchased through Bill Ivey can still call him on the phone or ask for advice or say, Bill, this is what I’m going through. Can you help me out? Just had a talk with him this morning. He’s one of the sharpest men with a 44 year career that I’ve ever known, and it is the antithesis of lazy.