How to Find Great Real Estate Deals in 2026 (Before Anyone Else) (Rookie Reply)

0:00What if the only thing keeping you from your first deal is not knowing what a good deal actually looks like? Or maybe you've got your first flip lined up, but you can't decide if you really need a general contractor or if you can manage it yourself. And finally, the million-dollar question every rookie is asking, is now the right time to buy? We're answering all three of those questions and helping you make smarter moves in any market.

0:28This is the Real Estate Rookie Podcast. I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's get into today's first question. Now, this question comes from Eric in the BiggerPockets forums, and his question is, I'm new to real estate investing and just finished reading Brandon Turner's book on investing with no money down. I found myself particularly interested in multifamily properties, but I'm struggling to grasp what exactly defines a quote-unquote good deal. When evaluating listings, should I primarily focus on properties that seem undervalued? Are there specific market indicators or property traits that I should be paying attention to?

1:03I feel like I'm missing the bigger picture of what makes a property a great investment. If anyone could share some pointers or insights on how to identify a good deal, I would appreciate it. This is a really good question, right? Like just how do we know if a deal is a good deal? And he asked a few different data points that he should be considering, right? Property traits or the value of the property. And I think the first thing that I'll say is that a good deal to me could be a bad deal to you and vice versa. And what Ashley looks at as a good deal could be a bad deal to me. And part of that is because we all invest for different reasons.

1:42We all invest with different inherent skills. And we all invest with different amounts of time, effort, and energy that we're willing to put into real estate. So for someone who is a busy corporate executive that works 80 hours a week and makes half a million dollars a year, a turnkey property at 20 % down at a 6 % cash on cash return could potentially be a good deal for them because they don't have the time, energy, or desire to do anything more than that. And that could be a great deal. To the person who asked this question, 20 % down on a turnkey short-term rental that's cash flowing at 6 % could be a terrible deal because you just talked about, hey, you're looking for no and low money down strategy.

2:30So that doesn't work. So I think the first thing to ask yourself is, what am I looking for when it comes to real estate investing? What are the things that I need to understand? Before you even get into good deal versus bad deal, Ash, I guess I'm just curious, is there anything else just strategically or from a theory perspective that we should be focusing on before we get into the details of the answer? I think maybe just like what is, like you said, your why for getting started, but define like what actually gets you to that point. So like if your goal is to build legacy and build wealth, well, do you want to put a ton of time and effort into doing that?

3:10Or do you want to like maximize passive income to be able to generate that wealth? So I think like the time and money commitment are like two big pieces to the puzzle that like you need to be really heavy on either one of them or kind of like have a mix and balance of the both so that like one doesn't outweigh the other like six seven if you're watching this on youtube if you don't if you don't have a kid that's maybe my son's 17 so 17 or younger uh you probably don't get that reference but six seven's been been everywhere um but i couldn't help myself i just saw you doing this i was like i am proud of you my son's gonna be proud of me too when i tell him the story So I think let's talk a little bit about what actually makes a good deal.

3:59So when we talk about real estate, we talk about a specific property as an investment. There's the cash flow that it produces, right? Like the actual cold, hard money that comes off of the deal on an annual basis. There's the cash on cash return, right? Which is a measure of how good of an investment it is because maybe I'm getting$100 a month in cash flow. But if I invested nothing into that deal, technically I'm getting an infinite return. If I get$1 ,000 per month in cash flow, but I've got a million dollars of cash sitting in the deal, more cash flow, but it's actually a really bad return on my investment.

4:34So we look at the actual cash flow. We look at the cash on cash return. The other piece that we can take into account is the appreciation. If I hold this property over the life of the loan, 30 years, is it reasonable to believe that this property is going to appreciate a significant amount over that timeframe? Some markets appreciate faster. Some markets appreciate slower. Nationally, post-COVID, I think we've seen a lot of appreciation across most of the United States, but some markets do it faster than others. So I think those are really the two big things that most investors today. There's also the tax benefits, and maybe that's an entirely different story.

5:08But I think based on how this person asked the question, they're probably not too concerned with tax sheltering at this point. So cash flow, cash on cash return, and equity growth or appreciation, I think, are the big things to focus on. Am I missing anything there? No. And like I just thought of this and we don't ever really talk about this as one of the pieces of a good deal. But also like I would say like regulation security, as in like there's been towns near me where people have short-term rentals and all of a sudden the towns say, you know what? were, unless this is like your primary residence, you can't do short-term rentals anymore.

5:43And like all of a sudden people are like, what am I going to do with this house? Like I can't rent it out. It doesn't make enough money as a long-term rental. So I think like it would be a good deal if you can actually do that strategy long-term. So just another little aspect. And there's, I think a lot of those little nuances we could probably do a whole episode on, but thinking a little outside the box too. Yeah. Real estate nuances as our next episodes. If you guys want to see that, let us know in the comments. And then I think the next piece here too is just defining your buy box. And I think that'll also help you identify whether or not what you're looking at is a good deal for you specifically.

6:22And I'll give you a recent example. When we were shopping for our first hotel, we had a very specific buy box. We had a buy box of we We wanted a purchase price between$1 and$3 million. We wanted a value add opportunity. We wanted to be in either an urban or a vacation market. And we wanted, I think there are 10 to 30 rooms, right? So those are all the things we were looking for. And once we had that buy box built out, it became significantly easier for us to say yes or no to certain deals because now it's just like, does it match our buy box or does it not? So I would encourage you to, and this is for everyone that's listening to think about building your own buy box and how that can make it easier to identify the right deal.

7:04And then just there's some basic rules of thumb as well when it comes to buying rental properties that don't necessarily give you the cold hard to the penny return, but directionally, I think they can kind of point you in the right direction. But there's the 1 % rule that says your revenue or your rent in this case should be 1 % of the purchase price. So if I have a house that is$100 ,000, if I can rent that property out for$1 ,000 per month, that would be meeting the 1 % rule. The other is the 50 % rule, right? Where 50 % of your revenue shouldn't, or sorry, let me say that again. Then there's a 50 % rule that says your expenses shouldn't exceed 50 % of what that revenue is.

7:53So using that same example, if I've got a$1 ,000 a month in rent, my expenses hopefully shouldn't exceed 500 bucks on that. So there's different rules of thumb that you can use to help guide you in the right direction to quickly either say yes or say no to these deals, aside from fully underwriting them. And just to remember that a good deal doesn't mean it has to be the greatest deal of all, or you have to get the best benefit. You have this money because we see a lot of times, I have$50 ,000. What's the best way that I can use this money? Even if it doesn't turn out to be the best way, there ended up you could have got a 2 % more return or something doing something a little different or buying a different property.

8:36As long as it ends up being a good deal, it is going to make you so much more money because that first deal propels you. It gives you, you took action and it's going to start your investing journey. So don't get too caught up in analysis paralysis, thinking you need to find the perfect deal. Ash, that is a great point. The last thing I'll add to that is we need to give ourselves more permission to learn when it comes to real estate investing. And I've given the analogy of if you have a child or if there's a child that you've ever met in your life, chances are that child did not come out of the womb walking.

9:15And there is at some point in their early life, somewhere between 8 to 12 or maybe sometime shortly after months where they started to learn how to walk. And I haven't met anyone yet, though I could be wrong, but I haven't met anyone yet who at 12 months old, when they fell down for the first time after walking, their parents just kind of scooped them up and said, you know what, walking is just not for you. Usually the kid falls down, parent picks them back up, and then they keep that process going until they finally find the strength to stand on their own. And I think real estate investing, and really this is for learning anything new, is the same process.

9:51The goal is that we can lay a foundation with that first deal. It's not to be perfect. And sometimes that means stumbling. Sometimes that means everything doesn't go according to plan. Both in my portfolio and Ashley's, we've experienced that. And many of the guests that we've interviewed on this podcast have experienced that as well. So if we give ourselves more permission to learn on that first deal, we can take off some of that pressure of it being perfect and position it as an opportunity to get better for the second deal and the fifth deal and the 10th deal. Coming up, when you're tackling your first flip, should you really pay for a general contractor or is that just wasted money?

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12:39PropStream also gives you AI-powered insights and comps that are over 99 % accurate, so you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step-by-step. Start your 7-day free trial and get 50 free leads at PropStream.com. That's P-R-O-P-S-T-R-E-A-M.com. slash BP. Don't just dream about real estate, make it happen with PropStream. Okay, welcome back. Today's second question is, my partner and I have started a house flipping business and plan to use local workers whom we trust and who we have done remodels on investment properties for us before. However, these workers are not licensed, but they work hard and efficiently.

13:20Most of the rehabbing we are planning for these flips is cosmetic. The most recent house we offered needs a complete remodel inside, but the structure is sound. For example, we need new kitchen cabinets, sink, paint, flooring, and drywall in certain areas of the house that have been damaged, as well as new light fixtures and interior and exterior paint. The work is mainly cosmetic, except for the drywall repairs. We are concerned about hard money lenders requiring licensed professionals to do the work or requiring licensing later on, having a scramble to find a general contractor. Fortunately, one of our hard money lenders said they will not ask to see any licensing as long as we are not doing anything structural to the house.

14:01Another one of our hard money lenders has stated that they want to see licensing anytime we were going to have any work done to pull permits. We are brand new to this, as you can tell. So the first thing that kind of stands out to me is like the hard money lender that's saying they'll want to see any licensing when they pull permits. In my experience, I mean, I live in very rural areas where a lot of my projects are like no permit or like very like get a permit this morning, start the roof that evening. But like the flip I did last year was in like more of a village within the city and there was a lot more stricter permit requirements, but I had to show, like, for example, the plumber was a licensed contractor just to get the permit on the property too.

14:54So I think that if you, no matter what, you know, depending on your city's regulations, you might have to show that it's somebody licensed doing the work, like electrician and plumber, like two big things that usually you would have to show. And I also, like if your lender is requiring that you have a GC to do it, then I mean, that kind of answers the question for you, right? Like I wouldn't tell my lender that, hey, I'm going to use a licensed contractor and then I don't because that could create its own world of issues. But I think maybe the bigger question here is why are you opposed to using the general contractor?

15:35Is it the idea of cost savings? Because if so, unless you've got a lot of experience managing these types of projects before, because you didn't say nothing, right? It wasn't like you were just doing paint or you were adding some turf or replacing some hardware. We need new kitchen cabinets, sinks, paint, flooring, basically an entire new kitchen, drywall where there's been damage. It does seem like a decent amount of work for someone who's doing this for the first time. And even though you're not changing the layout, as a rookie investor, sometimes there is value in having an experienced general contractor guide you through on this first project.

16:26And the amount of insights you can pick up and gain from that person, they'll stick with you for the rest of your life. One of the, one of the first rehab projects that we did, we had a GC walk through it. He ended up not taking the job because he was too busy, but I remember he gave us a layout suggestion we had never even thought about before. He was like, Hey, you should actually close this wall off that way we can make your master bedroom bigger and we can do this and do that. And we're like, man, I walked right through this a thousand times. I never even thought of that. And he was in there for 20 minutes and was like, yeah, you need to do this.

16:54You need to do this. You need to do this. So there's value, I think, and just learning from a good general contractor, especially if this is your first time out. Obviously, you want to make sure that they earn their keep, and hopefully a good GC will do that. But I don't know. I think there's value, Ash and Rookie Investors, when they're first getting started, having a good GC to lean on. Yeah. Two of my easiest projects, I had really great GCs that actually did a lot of the work themselves, too. like when I built my personal residence like my GC like pretty much built the house himself he was a licensed electrician a licensed plumber like he was a jack of all trades and if I could have him do every house that I ever touch like I would 100 % consistently use him no matter how much he paid I'd work it into the numbers because that was just like the easiest most passive thing I ever did was build that house.

17:48And he did one rehab for me for a house I was flipping. He came in after it became too much for just me and my partner to try to handle ourselves. And he came in and finished the whole thing with very little oversight. And that I think is just tremendously valuable, having somebody you don't have to micromanage that can make basic decisions without ever having to bother you or tell you decisions you should be making. Like in your point, Tony, as to like, you know, put a door here or something like that's going to maximize your space. Or, you know, like I had a GC that did like put a slider door here.

18:28Don't put like you're limiting the bathroom by like putting the same door back in, like do this and it will be cheaper and had all these great ideas. Um, so I think a GC is worth it, um, for the project, especially if you don't have experience yourself, but also another thing they could do is they could go and one of them could get licensed to be a GC. I have no idea what the process is, but, um, I'm assuming it's a achievable and doable to go and get your GC license. I think just one, one thing to call allowed. We've all heard the horror stories of general contractors or even just trades people in general disappearing into the middle of the night.

19:09So my strong recommendation, whether you hire a GC or a sub yourself, is to make sure that the payment structure protects you in the event that the work isn't done correctly. So do not give them a super large deposit upfront. So say that the labor for this job, you know, maybe the total bid for this house is like 60 grand. Don't give them$30 ,000 up front to go start the work. It does not cost that much to go buy whatever materials they need to go buy to get this job started. Break out into very clear milestones and then only issue those payments once you validated that those milestones are done.

19:49Like, you know, demo. Once they finish demo, then you can release another payment. Once they've done the rough plumbing and electrical, you can issue another payment. Once the flooring is in, you can do another one, right? So identify what those milestones are based on the scope of the job, and that'll save you in the event that these contractors don't work out. We actually had a rehab once where we withheld the final payment because the general contractor just kind of wasn't great. and we had a lot of issues throughout the life of the project and I ended up managing the subs myself because GC wasn't doing a good job.

20:28So when it came time for the final payment and Sarah, my wife, still recalls this as one of her cringiest moments with me but we're in the house arguing with each other and I'm like, dude, I'm not paying you. I have done more work on this project than you have. So anyway, you can save yourself I think from some of those bad experiences if you make sure the payment structure is set up in a way that protects you. We're going to answer our final question right after we're from today's show sponsors. While we're gone, if you haven't yet, be sure to subscribe to our channel on YouTube. You can find us at Real Estate Ricky.

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25:21So I know that there are times or moments when it goes down a little bit, but it's always going to go up, isn't it? This is a great question. And we just recently interviewed Thatchwin and James Daynard about a topic very similar to this because they both invested through 2008. Thatch was even investing in the 90s during the dot-com crash. Now that impacted the markets. And I think they both echoed the same message. Ups and downs will always happen in real estate, but it's the people who continue to invest through those downturns that make the most money when the market starts to swing back up.