The creative shortcuts I used to acquire 30 rental homes in just a year while devoting 50 hrs to my full time job.
Every time someone gets sold on rental investing - the flood of boring and unsexy work drowns the motivation. And then, people go back to buying stocks! 😎
When people buy real estate, they have to:
♟ Pick a strategy
📈Pick a market for the strategy
📄Put offers and close
🏣Manage the properties
So to improve your speed, you need to challenge the status quo affecting those five decision-cycle steps.
Below is a list of rare hacks and tricks to help you get an advantage and move fast while reducing risks. Let’s dive right in.
Picking a strategy
There are hundreds of strategies. With full-time jobs, we can’t do everything at the start.
Reduce the cognitive load with this framework
💰Set a dollar goal
No goal is like driving without a GPS.
☑Has to be harder than what you think you can achieve
☑Set a timeline
☑Write it down and ready] it every night
Me: I had set $3k as my first-year goal.
🎯Set a mission
Mission helps us filter decisions on a daily basis that don’t fit our mission.
Is it money, power, freedom of time, freedom to work alone? etc. Think about what your ideal day looks like when you have FI.
☑Write it down and every night, visualize the day when you have FI
Me: I want to work on my own and be fully passive to have the time to pursue my million interests and give back to the world
🦾 Strengths and constraints
Strengths will help us move faster to our goals by neutralizing our constraints.
Me: Strengths are my network and my tech and business experience. Constraints are my time and capital to scale after initial acquisitions and I am not local to the market I invest in.
💂 3 Guards
Let the $ goal, mission, and strengths/constraints be the 3 guards showing you the way when you get overwhelmed with information overflow or start chasing the shiny objects because you heard a podcast where someone bought 100 units in 2 yrs. Ahem, BP!
♟ Pick an investing strategy
Write down all the strategies out there and then reduce the cognitive load by filtering the ones that do not make sense
Me: Read this post on how I did it when starting out
The post explains how to use the three guards to help you pick a strategy and maintain focus
Picking a market/local hood
Narrow down to a market that fits your objectives and your risk tolerance
5 immutable laws
We want to ⬆ returns and decrease risks so
☑Buy in cash-flowing markets. I look for at least 10% cash on cash return
☑Have 6 months of expense reserves. I keep 3 months of gross income per property
☑Get long-term loans. We don’t loan term to end when the economy is in the pit
☑Market needs to have at least a few diverse industries
☑There is population and job growth
Check this actionable step-step-step playbook on how to analyze and pick a market
Zillow Hack for rental demand
If you are unsure about the demand in a specific hood, find properties for rent in that hood on Zillow. Pick one and scroll down till you see the [views, contacts, apps] section.
This is a great indication of rental demand in the area.
See this post for more
Picking the properties
We want to look at a property and instantly know if the #s will work. We don’t want to do excel analysis for every property, which could be time-consuming.
We need to make mental models around numbers.
I did so by looking at all the properties where I did excel analysis and looking for a pattern where the #s were working. I found that:
3 numbers that change the most with a specific type of property(eg- SFRs) in a market
1) Purchase price 2)Gross Rent 3)Property Taxes
Insurance, PM, Vacancy, Capex/Repairs, Interest, Downpayment, and Loan term remained more or less the same.
We know this but if the rent was around 1% and property taxes were around 15% of rent, # usually worked for me and at this point, I would pass this property for deeper analysis.
Most listings don’t make this cut so you can imagine, how much time I saved.
See this post for more.
How to know what to offer
Assuming there is no rehab needed, check Redfin and Zillow estimate and take a mean.
Now check the market conditions to tweak this number ensuring your return goal is still met.
See this post for more
Put escalating offers
Make your offer auto-adjusting with an escalation addendum. If someone puts a higher offer, your offer automatically increases until a certain maximum price.
I closed 30% more offers with this technique
Forego appraisal contingency
Offers with more contingencies are weaker.
Consider giving up on appraisal contingency b/c if the property does not appraise to the offer price, the bank will not approve the loan for the offer price.
You can back out using the financial contingency since the bank is not approving the loan.
Or use this appraisal contingency hack
I sometimes put aggressive offers on properties I really like and use appraisal contingency to bring down the price at a later stage in the closing cycle.
When I put a really high offer to beat other offers, sellers get excited and choose my offer.
They forget that the property might not appraise for as much. And most times it does not. By this time, it’s already been a month or two so the seller does not want to relist and will usually bring down the price.
If not I can back out using the appraisal contingency.
Use pre-qual with better.com
Most sellers like to look at pre-qual letters and getting one from the bank every time you put an offer is a nuisance.
Consider using www.better.com to get a pre-qual letter. It’s instant!
Work directly with the seller’s agent
This one is self-explanatory.
Sellers agents do not have to split the commission with a buyers broker so they prefer your offer over others where there is a buyers agent.
Use your own DocuSign offer templates
First in offers are the strongest. When you depend on your agent to send offers, it introduces a drag because they have other things to do.
I write my own offers using DocuSign templates. Takes me a couple of minutes per offer.
My agent just has to forward them.
Use Zillow rent, Rentometer, and Rentcast
The most important number in your rental analysis is the rent. De-risk by looking in three places and take a mean of those three.
Asking your agent often takes longer and I have found that the estimate usually has a high margin of error.
Outsource property management
I set up my team abroad that attends to tenant requests and even does leasing remotely.
Considering using services like Showmojo or Rently for prospective tenants to tour the property on their own.
It saves a ton of coordination