In this episode of The Tactical Empire, Jeff Smith and Shawn Rider dive into real estate investing strategies and overcoming market challenges. They discuss handling delayed closings, leveraging private money, and optimizing business finances to eliminate waste. Learn key tactics for underwriting deals, hosting local events to attract clients, and making strategic real estate moves. Jeff and Sean also share insights on evaluating different markets, the value of equity, and the importance of writing multiple offers to secure the best deals. Tune in for actionable strategies to level up your real estate investing game!
In this episode of the Tactical Empire, Jeff Smith discusses various aspects of real estate investing with Shawn Rider. They delve into the challenges of navigating the real estate market, particularly when using private money, and highlight the importance of staying organized and minimizing waste. The conversation covers strategies for underwriting deals, the practicality of waiving inspections, and the importance of casting a wide net when making offers. Sean shares his experiences and mistakes, while Jeff provides insights into setting realistic expectations and exploring higher-end market opportunities. The episode concludes with tips on optimizing investments and leveraging resources effectively.
00:00 Introduction to Tactical Empire
00:33 Real Estate Updates and Challenges
01:32 Financial Strategies and Insights
02:57 Hot Dog Social and Marketing Tactics
05:23 Private Money and Real Estate Deals
10:26 Flipping Homes: Tips and Strategies
19:00 Evaluating Market Opportunities
22:00 Conclusion and Community Engagement
211 FULL
[00:00:00] How do you find the will to fight back against a world that wants to keep you sedated, averaging, stuck in place? Join us for the tools and strategies you need to create a life of abundance, discipline, and high achievement. This is the Tactical Empire, with Jeff Smith.
Welcome to another episode of the Tactical Empire. Today I'm joined by Sean Ryder. How are you man? What's Dude, we are trying to make some moves in the real estate game, trying to sell some stuff, trying to buy some stuff. So we had, uh, our next BRR LTR in Texas has been hung up with title for like two and a half, almost damn near three weeks.
But I think, I think we're getting close to closing on that. And that's the first time me and my partner are using. [00:01:00] Uh, private money. So we'll see how that goes. Um, but yeah, ready to, ready to push that forward. That's been taking a while. How about you? I'm doing great. I'm doing great. Just continuing to move my things forward, get more organized, try to try to make sure I'm getting my, uh, back end taken care of more and structured.
I'm a, I'm a front end guy. I'm a mover and a shaker. And I just let all the chaos. Settle behind me, which is not always a good thing. How's your financial Fridays going? They're, they're going well. They're, they're bringing some clarity to a lot of things. And so I'm staying more organized on a regular basis, which is helping things at a macro level.
So you don't have to spend crazy amounts of time chasing things down and not remembering things. Yes. I think, I think with the changes in our life with, with wife going full time into businesses, and I've been staying on top of finances more than we needed to. When we just had [00:02:00] the incomes coming in, um, it's been, it's been, it's been eye opening and helpful to stay on top of it.
Then Sammy Knight was in the Taco Empire's inner circle, uh, call last week, and he talked about looking for waste, um, and that's been good. So like the next day I looked at one of our businesses and just found a service. That I was like, you know what? I don't, I don't need that higher level service. I can for less than an hour a week, I can cover half of that service.
Cause I mean, it revolved around money. It was, it was an accounting service. So I downgrade basics and it's like, I can, I can label my expenses. I mean, bookkeeping super easy for me. I don't have a million. Transactions every month. So, uh, that's going to save me about four grand a year right there. So I not take much of my time.
So I appreciated that call about looking at waste. Um, but yeah, I mean, yeah, we're moving forward. You got any, uh, real estate moves on the horizon, buying, selling, anything closer? Yeah, we're, uh, well, I'm driving back [00:03:00] to, uh, Houston, uh, this weekend to host a, uh, hot dog social at the, uh, storage facility. So we've got a, we've got a grand opening going.
We think we need some boots on the ground there. And so I'm, I'm going back to, uh, sling some hot dogs and kiss some babies and get some units rented up. And, uh, then I will be back in Florida after that. We're, we're slinging hot dogs to get clients to rent the units or you're slinging hot dogs to bring in potential buyers.
No, just to have people walk it. Well, I mean, we're both. Are fine, but the reality of it is I want people to know we're open and they don't yet. And so, like, that's been part of our issue because we, we haven't had signage, which we're getting today and we haven't had some other necessary things. So, um, we are working through that and I just wanted some people there so that we can start getting some units [00:04:00] rented.
And, uh, then the buyer thing is going to take care of itself. We've got a couple of buyers that are interested right now. And then we've got, um, it going to a broker at the moment as well. So it'll be listed within two weeks on, uh, at the brokerage. And so. We should be good there I cannot wait to see the picture of you with a charcoal grill and a grilling cover and you standing in front of storage units, uh Cooking some wieners.
It's a it's a it's a small enough town that um, something just As low barrier as that is going to put enough word of mouth out that we're open that it I I think we'll see a big Bump from it. So we'll see unless you burn the wieners. Don't burn the wieners. Don't piss people. It's true They want a good long hot wiener[00:05:00]
Maybe maybe there you go All right shifting gears here from wieners. Okay, uh question question and just so people know that At least I'm out there. I know they, I know they know you do a lot of transactions, uh, but just so they know that I don't know everything and I'm still out there learning the game.
In this next deal, the BRRRR LTR. We have not taken private money on any of them. I'm the financer. So I have my capital that we're using, but I wanted to know what it felt like to take private money. So, um, we did not underwrite the deal with private money. And then I went and found the private money afterwards.
So the private money makes the deal a little tight and potentially, depending on the appraisal, at the end of the day, we may owe the private money more than what we get back. So what are your thoughts in today's market? [00:06:00] On I mean, obviously the goal is not to lose 25, 000, but you know, you come out a couple thousand, uh, in the red potentially after the appraisal and you pay off private money.
Is that I know it's contextual and independent, but like, is that a strategy or a situation you found yourself in? At the end of the day, even if you're out five to 10 grand, in essence, you bought a property for five to 10 grand as opposed to 150 grand. So what are your thoughts on that? That's, I'll admit that's a mistake I made is not getting the private money first and underwriting the deal with private money.
But now again, lesson learned and we'll do it better on the next one. Um, but what are your thoughts on that situation? Well, it's, uh, it's unrealistic. It's an unrealistic expectation to assume that you're going to get a bunch of houses for zero out of pocket, like true zero out of pocket. Yeah. Like, I mean, I think a realistic expectation of them is five to 10, 000 of cash out of pocket.
Um, [00:07:00] sometimes it's 15, sometimes it's 20. Five, but like at the end of the day, your equity is always parked in there. Your equity is like 50 grand. So like if it costs you 20, 000 and you've got 50, 000, which is a net 30 grand to your net worth statement. Okay. And you've got the cashflow asset that is still sitting there.
So like, it's not the end of the world to have to come out of pocket. And just so you know, it's unrealistic to assume that you're not going to come out of pocket at all on these. Um, because generally you, you do have to contribute something. And, and the, the idea is get that thing as close to zero as you can.
And, um, that that's the best case scenario, right? I mean, sometimes you can walk away with some more in excess, which is fine. Um, but that's not something you should expect every time by any means. Well, fine. Uh, episode over. Good. You, you answered my question [00:08:00] and made my feelings feel better, but yeah, I guess I got spoiled on the first two deals cause the, uh, the cash out replies came back more than what we put in now we, we ended up using the.
to be the six months of capital reserve. So we didn't pocket the difference, but it filled the coffers. So, uh, yeah, I mean, good. Good answer. Makes me feel good. I guess that only really screws people over if they, if they only have 20 grand extra and they got to pay off a private money, then they have zero money.
They got to make the next deal underwritten a little bit better. But what other, is there any other comments to that or any other general mistakes you've seen or assumptions that people have that you can kind of wipe off their wipe off the plate and correct it for them right now? Well, I mean, you have to understand it's still a really good deal.
Let's say if you're talking to 150, 000, 200, 000 house, and you're getting 50 to 70 K in equity, and it costs you 10 grand. Like, that's a really good [00:09:00] deal. I mean, people don't understand. I mean, not people don't understand that, but like, it's also a safety play because if you need to chip away 20 percent and sell it for 30, 000 less than you've got in it, you've still got a delta of 20K.
So, like, if you've got 60K of equity in there, you knock 30, 000 off the price to sell it fast. And you have 10, 000 worth of equity. There's still 20 that you're taking back and you're getting your original money back, your original principal back. And so that, that is, it should give you some, a level of security that feels pretty good.
And there should be a couple hundred bucks a month cash flow. So I think it's, it's unrealistic when people say you can do it 0%. You can do it 0%, but you've got to really be underwriting aggressively or not aggressively, like very well. That's why I [00:10:00] tell the guys in the group when they're getting into long term rentals, they just need to be underwriting.
10 or 15 deals a day. And so they can get good at it, see what it looks like, see what repairs are like, understand all that. Um, cause if you mess up those numbers, it only costs you money. So, and it can, it can go, it can run pretty fast. I mean, it's really easy to miss by 10, 000. So that's actually shifting gears here just a hair.
So there's two guys in the inner circle separately that I've discussed who are, uh, operators, they're real estate agents, but they have experience. Flipping homes, um, and they want to move faster. So I've had conversations with them about being a financial partner on flips. I have, we have between the two of them, we've submitted three, which I think your, your gut reaction is going to be like, three is not enough.
We submitted three offers, um, that we felt were [00:11:00] competitive. We sometimes waived inspection, the last one we didn't, but they weren't, they weren't, um, accepted. Uh, and I don't know. I mean, we, we came in under asking price, so there's that issue, but like, we also don't want to pay too much for home. So, like, right now it's like, how do we get a deal?
I know this is super broad strokes. I apologize. Like, how do we, how do we get fucking property on a contract without, without, like, without wasting 4 months for only like 10 grand? Right? Like, sorry if that offends some people, but like, if you're fronting 150, 000 to 200, 000 and after four months you're only walking away with 10, 000, I feel like there's probably better, better deals out there.
When we offer, I mean, we're looking for 50, 000 to 65, 000 to split between two people for three to four months. And, and it's just like, we're not going to overpay for property. Yeah, you need to write a shitload more offers. Like that's the, that's the bottom line and you probably need to use [00:12:00] some different sources.
I would guess you're only using like the MLS right now because you're dealing with realtors. Um, but I, I would be hitting up wholesalers, making offers with wholesalers. I'd be making offers with Facebook marketplace. So there's a lot of different opportunities to be underwriting deals and then making offers.
And you really have to just, you have to cast a broader net. Is it how, and again, because I'm not an operator. And so like, I trust these guys cause they have some experience, but like, I do worry about. non inspection offers if you've only like walked the property, right? How, like, how easy is it to find foundation issues, roofing issues?
Uh, the, you know, the main five that we talk about, uh, plumbing, electrical, HVAC, roof, foundation. I waive inspections on almost every [00:13:00] property I've ever bought. Sorry, I interrupted. Say that again for the people. I said, I wave inspections on almost every property I've ever bought. I mean, like, those, those things foundation roof, things like that are very easy to tell.
Um, you don't need to do, like, a big deep dive and you've got, um. Like, I don't know that it's a good idea all the time, but the better understanding that they have of the area is important to like you. You can you can get enough reps in a certain area. So if they're flipping in a certain zip code or something like that, they can have a clear enough understanding on, like.
This property was built in 1963 and so were all these. Like, I know exactly what issues they're going to face because I've done three of these. And so, these are the main things we need to look for. And, and at that point, it would be okay to maybe waive inspections. Uh, but, [00:14:00] but you need to have an understanding of what you're dealing with and um, the potential pitfalls.
Because some of them can be expensive. And so, you've got to really understand that. But most of the time, a savvy general contractor or flipper can walk a property and identify those things. So is that what you do now that you're traveling? You have a GC that walks them or are you just, how do you do that?
Well, yeah, I've got people. That go over and look at them and then I'll have bid shot on them and they tell me what's going on I only use a couple guys and So we look for the main things that are going on and you can tell all that stuff very easily Like foundation is a huge one because it can it can run from like zero to infinity Cost wise and so you have to be clear if you're buying in Texas Um, other places are not as strange, but [00:15:00] we're built on sand.
So it's a little different. And, uh, but the roof is a really easy one to tell. Like, they should have the information on how old the roof is. If it's over 15 years, you're going to have to replace it at some point, but it should last 25. So then, then it's just a visual on how does it look? Is it beat to shit?
Or like, is it fine? Um, are there water spots in the house? Because like sometimes that's just a simple maintenance thing, like nailing and tarring the shingles, stuff like that. Like your guys should be able to walk that and tell that is, is what I'm saying. Like your HVAC is a, is a certain age. You can look at it and tell how old it is, like, does it need replaced?
Most of the time, if you're going to be flipping, you want to replace all of this stuff. So you should underwrite to replace all of the large mechanicals. So that they're buying a brand new house from a, a large expense output [00:16:00] standpoint. That's going to allow you top dollar in the marketplace. New roof, new HVAC, like, new piping.
You don't always have to do that type of stuff, but. Electrical needs to be updated if it needs updated at all. Um, so generally the underwrite, unless you're buying a cosmetic flip and cosmetic flips are just a different type of thing. I mean, they're like. Just a different amount of underwriting per square foot.
I mean, you're going to paint, you're going to do maybe new cabinets, like paint the cabinets, something like that. I don't know. Depends on the levels of flips that you're doing. What's your thought on like in my market? That's why I'm like talking to the other guys in the group. Cause they, they live in markets where you can still buy homes for.
A hundred to 150, 000. But like in my market on, on this side of the mountain in Virginia, I mean, you're not getting a home for less than two 50 and that's a really old shitty home. Um, so like a cosmetic flip, are those. Maybe not in all instances, but would they be more reserved for like a [00:17:00] newer home that just needs modernized?
Right. There's a lot of neighborhoods in my town that the homes would still be 300 to 350, 000, but they have the older cabinets and not as great landscaping and, and no accent walls and all that, and maybe stained carpets. You could go in there, paint, add some accent walls. Put some landscaping in, clean up the fence, and, and shampoo the carpets or rip them out, put new ones in, and call it a day.
And you could sell it for 450, 000. Would you say cosmetic flips are more so for the bigger, newer homes, or am I just pontificating? No, I, I absolutely, you can do those all day. I mean, like, it's like grandma's house, like something that hasn't been updated since 1980. Like you can come in and just update it, remove the walls like you talked about.
Like even if you're talking newer, like these were built in 2005. Yeah. Like they haven't been updated in 2005, since 2005. So you can go in there to those and you could [00:18:00] easily spend. Just a little bit of money and just move some things around. The mechanical should be good. You might put a new roof on it if it's that old and, uh, then move on down the road.
Those are easy. Like flipping is not 150, 000 houses. You don't want to be in that market. You want to be getting higher end and not higher end stuff, but middle tier type stuff, in my opinion, I mean, you could go down to 150, but you'd need to sell it for 300, 325, something like that. If you could try, cause you're going to put.
A decent amount of money in it. So, I mean, even if it's cosmetic, like the, the stuff you're talking about moving walls and stuff is beyond cosmetic. So, um, but like moving walls can also be done for very little cost if it's non load bearing. So if I were to send this podcast episode to. Operating partners on flips.
What else off the top of your head would you mention generally [00:19:00] if anything? That was pretty good right there in my opinion I mean, I just I think they need to understand their buy box and be looking for other opportunities I mean if they're if they're narrow and what they want to buy is there an opportunity a hundred thousand dollars more?
Or a hundred and fifty thousand dollars more in price point Um, so I, I would be evaluating your market constantly, like, okay, we're doing these 150, 000 houses, but we're only making 50 grand on them when we're done with them. And so like the opportunity cost is high and the benefit is low because it takes us four months to do these.
We're making 12, 000 each or 12, 000 a month, essentially. If I move up to 400, 000 price point, we're going to make 125, 000. And then in the four months I carry it, I'm going to make 32 grand a month instead of 12 grand a month. Should we be looking for that opportunity? And I think that that's where you can get narrow in what you're doing.
Now you don't want to go completely out of your [00:20:00] wheelhouse and do like luxury flips if you don't have any. Any background in doing that is like there's, there's certain areas that you'll, you can lose your ass on for sure. And it's also a market timing thing like we've talked about, but, but if you're not risk averse to something a little bit more and getting into another tercile of price point, that's a real healthy way to increase your profits.
Um, now you've got more carrying costs and, and you've got a higher outlay of cash on the front end, but the reward, the reward on the back end is worth everybody's time more so than I would say for 40 grand. Well, that's the point I was trying to get because. The, the guys not here that I'm talking about, they're smaller markets.
And so those numbers are smaller, but I could also partner with someone that I know locally that used to be a builder, um, that she's done flips. And we just had a conversation two weeks ago, but those numbers [00:21:00] are like 300, 000 just to buy the house and you're putting 60 to a hundred into it. Um, yep. And it's just sell for five 50.
Exactly. Exactly. And she, she's the one that told me, she's like, I won't even entertain a flip if I'm not making at least 65 to a hundred grand on it. Um, and so that's not her full focus, full business, but she definitely has experience. I just have to, if I'm going to be the financial partner, I have to get.
I have to get comfortable with those numbers. Um, the, the end game sound, the end game sounds better to me for sure. Uh, but that's definitely, uh, last episode, you said that there's different levels to learning when we were talking about financial literacy for privatized education. And that's kind of like where I'm at now at 36.
Like if I want to get more bang for my buck, I have to get. Comfortable not buying 10, 000 items. It's it's things with a few more zeros and a bigger number at the front. So, uh, Jeff, I appreciate your [00:22:00] insight, man. If there's anything else, give it to the people. If not send the real estate. Guys follow us on.
YouTube, give us a subscribe, like, whatever, um, we put a lot of content out there. Come follow us at the Tactical Empire Community on Facebook and you can DM Sean and I on Instagram. We are on every platform. Please give us a like, subscribe, follow, whatever it is. We appreciate you listening and let us know if we can provide any resources or topics for you guys.
DM us anytime. Have a kick ass week. We will talk to you next week.