892: The BRRRR Method: Infinite Returns on Real Estate Investments with David Greene

Aaron: Rockstar nation. This is Aaron Amuchastegui. I’m so pumped. I’ve been trying to get this interview for so long. Good friend of mine, David Greene, he’s always been super busy because he is one of the hosts of the Bigger Pockets podcast. David Greene, he also runs the David Greene team with Keller Williams out in the bay area. He has a great story of being in real estate. He loves real estate. He loves studying it. He loves being an agent and having a team and everything else, all-around great guy. There’s going to be so much fun stuff we get to talk about today and I’m glad I finally got you on here. David, how’s it going today, man?

David: Aaron, it’s great, man. The sun is out. It’s another crazy good, busy day. It’s funny when you’re an agent because you’re either complaining that you’re too busy and you don’t have time to do everything or you’re complaining that you’re not busy enough and you’re not making any money, but you’re always looking at something like, “Oh, this sucks.”

Aaron: Yes, you’re either always half full or you’re always half– but it’s like as an agent, every day is a grind. There’s always something to do if you’re not answering your phone, something else happens.

David: Yes. It’s just like when you’re buying houses to flip or buying rentals, the more successful you are, the more problems you’re going to have with contractors and lenders and problems that come up. You almost have to learn to look at things going wrong like a badge of honor because it means you’re taking a lot of action, you’re doing a lot.

Aaron: I love that perspective. I’m actually traveling in Maui right now. I missed you by just a day.

David: Yes, you did.

Aaron: I’m on vacation and yesterday, I’m getting all these calls from a buyer’s agent from a house that we’re selling. All these little complaints over, “There’s trash left in the trashcans and we’re going to charge you $250,” and I’m thinking, “I’m on vacation. Why do you keep blowing up my phone right now over something like that?” You’re right. If we thought about all of our stuff like that instead of going like, “Man, sometimes I hate transactions,” to going like, “This is a badge of honor. If I wasn’t busy all the time, this wouldn’t happen. No one would be calling me on vacation. If it was just an active listing, it would suck. I’m glad it’s an escrow.”

David: Hundred percent. Another thing I’m always telling my team members when they get frustrated that a transaction wasn’t easy, is like you should be thanking God that you have this problem. Because when transactions don’t require someone to jump in and be creative and fix it, they won’t need agents anymore. It’s not like the world loves real estate agents and they’re doing everything that they can to keep us a part of the transaction. When people see agent, all they think is, “Commission that I don’t want to have to pay.”.

The only reason that agents have firmly embedded themselves into this world is because things are always going wrong and there has to be a person to A, fix it, and B, communicate what was done and help calm the client’s emotions down. That was something I had to just embrace and make peace with was that when my clients were freaking out and I’m irritated that I have to talk to them on the phone, or like I just got out of a meeting with my team and we’ve got about 25 houses in escrow right now.

When you’ve got that many at one time, there’s going to be problems. There’s no way you’re going to avoid it. When you have four or five in escrow at a time, you’re dealing with a couple problems. You’ve got to amplify that by five or six. It’s tons of stuff going wrong and if you let that ruin your mood, ruin your attitude, make you not like your job. It’s going to affect your lead generation, it’s going to affect your attitude when you talk to people, it’s going to affect your bottom line.

You just got to make peace with the fact that, “Thank God stuff’s going wrong,” because that’s why I have a job. That’s why I’m making my commission. That’s why people are always going to need me because there’s always stuff going wrong. That was a big thing. I know we just jumped off talking about this, that’s weird. It was a big thing that I had to embrace personally because I was always frustrated.

Why do people have to need so much hand-holding? Why do I have to calm people down all the time? Why can’t they just be like me who does this for my own self and buys houses all the time and not worry about it? I started to see how much people really just don’t like real estate agents. The world doesn’t like us. Agents, we know what we do behind the scenes, but nobody else really does. Our clients see what we show them.

That’s just how real estate works. You’d be a terrible agent and your client would never know it because you’re never going to tell them all the mistakes you made. You’re going to blame it on the lender. Blame it on the title company. You blame it on the other side. People don’t understand what actually goes on with real estate agents. They’re just going to resent that they have to use one in a transaction. You have to be grateful that you’re needed, and you’re needed when things go wrong.

Aaron: Yes. When I’m teaching people about foreclosures and the courthouse steps, it’s a similar philosophy where I say, “You have to fall in love with the problem.” People get discouraged and they’re like, “No I drove all these houses and I showed up and only one house sold.” You’re like, “Yes, that could be discouraging, but you also need to fall in love with the problem because if it was easy, everybody would be doing it or they wouldn’t need you.” If you didn’t have to hold their hands, they’d be doing for sale by owners. They do it themselves.

David: You’re buying the problem. The whole reason there’s an opportunity is there’s a problem tied to it. It doesn’t make sense when you criticize, “Oh that’s too much work. It’s the same thing when I’m representing buyers. This house needs this and it needs that and it’s not upgraded and it’s not on the water. I wish it had all those things then I’d buy it.” I was like, “Yes, if it had all those things, it’d be 30% more money and you wouldn’t be able to afford it. Then if you could, you’d be saying, “Well I want a bigger one.”” You have to be okay. The problem is the opportunity. You’re 100% right and the quicker you make peace with that, the quicker your business will actually scale because your subconscious isn’t fighting. You say, “I don’t want to deal with this and I don’t want to deal with that.”

Aaron: That’s so funny. I’m so glad to hear that from you today because that’s something that I preach but I needed to hear that today as a reminder because I was so ticked off for this agent for like ruining my vacation when This is why we make money in this business. This is why we could make a career out of this because it’s not easy as we jump in. 25 houses in escrow. How many people are on your team? Because 25 houses in the bay area, that’s a huge volume. How much do houses sell for out there right now?

David: I think my average sale price is probably between 800,000 and 900,000 on those. There’s a big jump. Like the stuff in the San Francisco South Bay is all over a million. Probably half of them are over a million. Then the other half are like the East Bay where prices can range anywhere from 500-650. Then you’ve got to the area in between the far East Bay in San Francisco where you’re in that $800,000- $900,000 range.

I hear people sometimes when I go to events like they sell houses in Kansas City or something like that and their price point’s 80,000. They tell me it’s the same amount of work. I got to sell 150 houses, but it’s the same work. I always wonder because I’ve never sold out there, so I don’t know, but is it really the same amount of work? How often do you have 15-20 other buyers trying to buy that same property as you? You have to be able to convince your client why spending $200,000 over the list price is actually a smart financial decision and finding comps that would support why that would be the case.

How often do you have to manage a full rehab of a listing that you’re going to take and know how contractors work and know how to help them spend the money the best way? It’s harder, I think, when you’re in a more expensive market, there’s more competition. Everybody out here is a real estate agent. You can sell three houses a year and you could make $50,000. There’s a lot of people that are doing that. I think your original question was just like I have 25 in escrow. How am I doing? I totally went on a tangent there.

Aaron: It’s a good point though, because you’re right. You’re in this hot real estate market right now. It’s a hot real estate market, prices are going up. You see pictures of like this little shack sold for $4 million in Bay area like, “What’s going on?” Again, people, like you said, hate real estate agents, or they think you’re overpaid. You’re actually saying, even though it’s a hot market where people are like, “Oh it’s so easy to be a real estate agent during a hot market,” you’re like, “No it’s way harder,” because you’re competing against 17 other people to do this, to get the job because everybody wants to be a real estate agent and they expect so much more out of you. If the commission is $50,000 on a house, they expect you to take their dog to dog care. They expect you to wash their car. They’re saying, “What could I have you do as my agent because I’m giving you this money?” You’re like, “Trust me, I’m giving you the house of your dreams.”

David: I’m trying to keep you from paying more than you would need to pay. It’s a hot market, everyone’s saying, “We’ll just go get a listing, then you don’t have to worry about it. Just go get a listing when everyone else is trying to get the listing.” What happens is all the other agents say, “I’ll do it for 1%. Even at 1%, they might still be making like $10,000, $15,000 and that’s better than they were going to make, so now you got to compete with the person who’s undercutting the industry and saying, “Well, I’ll just be the cheapest. I’ll come in and I’ll be the Walmart and that’s my value proposition.”

You got to convince the seller why paying you 3% is still better for them because the more expensive the house is, people think that, “It’s more expensive, so I should discount the commission.” They don’t understand that the more expensive the house is, the more you stand to lose by getting a bad agent. I can routinely negotiate way over asking prices for my listings when I’m already priced at the top of the neighborhood. Sometimes when I only get one offer, you just get the other side to think that you’ve got more than one and they have to be really aggressive to take it.

I think I’ve got three listings in escrow that we listed in the 500-600 range that went 80,000 over on average between the three. Two of them got one offer, the other one got three.

It’s often that they don’t even appraise as high as we were able to negotiate the price. We just did such a good job. Those sellers, if you look at the 1% or 2% they’re trying to save, the 5,000 or 10,000 versus the 80,000 that they could be losing by going with the wrong agent, it’s a terrible move for them, but because there’s so many agents that are coming and giving bad advice that sell one or two homes a year–

Like the guy you were talking about, if he’s messaging you while you’re in Hawaii to say that there was trash in the trashcan, that’s a guy who’s got one house in escrow. He’s babysitting the heck out of it because that’s all that he has to do and that’s what he does to avoid getting on the phone and looking for another client. There’s a lot of that when you get into a hot market like this.

Aaron: It’s a great point too, whether it’s $1,000,000 house or $100,000 house, agents out there, it’s like knowing your value and knowing your worth because as an investor, there’s a lot of times I’ll use flat rate listing agents and things like that. I had a friend of mine listing a house for me in Portland, Oregon. Lately, my average price points are like $200,000 or $300,000 but it’s a $900,000 house. When we finally get that thing in escrow, I was going to take a loss on it, so I’m like, “Just take 800. I just want to be done.” We lower the price. He often gets two or three offers.

I’m ready to take any one of them and he gets me an extra $60,000. He does the negotiation. He goes, “Aaron you were okay with 800, I’m getting you 860.” It’s funny, I’ve done a couple thousand flips. It was just in the last couple of years where it really stood out to me that the difference of a great agent versus an average agent, absolutely pays for itself. If you’re an agent, go be a winner. If you’re hiring agents, hire winners rather than try to get a few thousand dollars off, Just find the guys that are going to get you that extra money.

David: It’s so big. Especially these big price points. One trick that I’ll share that, agents, if you’re not doing this, you need to stop right now. One of the things I’ve realized is that when you’re trying to buy a house, when you’re representing a buyer, all the power is in the listing agent’s hands. They are like the hot girl at the bar and every guy’s lined up to try to buy them a drink and they’re in complete control of that.

They pick and choose who they’re nice to, who they’re rude to, who they ignore, who they dismiss. There’s nothing those guys can do. The second that you actually go into escrow on a deal, all the power shifts to the buyer. Sellers can’t back out of the deal, sellers can’t say, “The house appraised for more. I want you to increase your price.” Sellers can’t say, “Wow. My inspection was amazing. Give me another $5,000 because this house is in better shape than you thought it would be,” but buyers can do all of that.

All the power shifts into the buyer’s hands. They completely take over the wheel and they’re the ones driving. As a listing agent, you have to understand, buyer’s agents are going to tell you every single thing you want to hear. They’re going to be that guy who’s going after that girl at the bar, they’re going to lie to her. They’re going to say anything that they have to. They’re going to tell her they’re a millionaire and they’ve got a house in Tuscany. They’re going to whisk her away there. They’re going to tell you everything you want.

The second it goes into contract, all that changes. Their clients get buyer’s remorse every time a house goes into contract. They get scared thinking, “Oh my God, what did I just do?” I anticipate what are the areas where you’re going to hurt me once we go into contract and you just look at their contingencies. Their loan contingency, their appraisal contingency, and their inspection contingencies are the three ways that a buyer could get money back from a seller.

When I have several buyers, what I do is I try to remove as much of the power to do that as possible. I talk to the lender and I make sure that they actually have all that client stuff squared away and they’re a really good candidate. I usually try to negotiate. If it appraises low, you’re going to pay up to $20,000 over the appraised price or whatever I think I can get or get them to waive that appraisal contingency altogether.

The number one thing that top producing agents know is their deals fall apart because of inspections. If you get an inspection report back that shows there’s $12,000 worth of section one damage and $5,000 worth of miscellaneous damage and $4,000 worth of roof damage. There’s $20,000. The buyers are going to say, “I’m backing out unless you pay for all my closing costs and lower the price by 5,000, something like that.

You’re going to have to do it or you’re going to have to go back on the market, wait another two months, make two more mortgage payments before you can go into contract. What I have my clients do is we get our inspections ahead of time. I have the client pay for a home inspection and a pest inspection, roof inspections out here are typically free. I give it to the buyer before we even go into contract when I still have all the power, when I get to choose which of these offers I’m going to take and when they’re in the honeymoon phase, they still think that this is the most amazing house ever.

I say, “Ask for whatever repairs you want upfront and you’re waiving your inspection contingency because we’ve already done these. You tell us what you want.” Then inevitably, one of the other buyers comes in and says, “Oh I’m not asking for any of that. I’ll just take it as is at this price.” They don’t even really get to ask for what they really want because somebody else is going to say, “Well, I won’t do it, so they’re going to have to waive it.”

Your client’s spending $800 on inspections will save them $5,000- $10,000 later because there’s no negotiating power for the buyer. That one little trick will more than cover the commission that most sellers are trying to get the listing agents to drop their money by. “I don’t want to pay 3%. I want to pay two to that person.” That extra 5,000 is more than covered by just this one little thing. There’s so many things agents can do if they care about their job to earn more money for their clients and then keep their commission.

Aaron: That’s really great advice at the beginning, especially buyers at the beginning of the transaction they’re in the honeymoon phase, they’re excited about the property and they aren’t even thinking about the little things that cause different nets of the seller. The home inspection stuff, the home warranties, all that extra stuff that costs money. Buyers are thinking about, “This is the price I want to pay. Here’s my credits that I need for the loan or whatever, or here’s the price I want to pay,” because that’s what’s in their head.

There’s so many extra things that change that bottom line. Then by being able to negotiate ahead of time because yes the transaction is someone gets an escrow. They get an inspection, after that, they get a credit back. You’re saying, “No, right now, I’ve got three offers. Here’s the inspection. Put it right now at the beginning and then you won’t do it later or you could do the credit right at the beginning.” “All right, we’re going to give you this credit.” That way you can’t even question the amount of work, but you know at the beginning when people are excited and then it’s one less thing to worry about. I think that’s great.

David: I totally do that. On this last house I was telling you about that listed at 500 and I got into contract at 580, because her client was willing to come up to 580, but she wasn’t happy about it, I knew the minute we go into contract, she now has the power. She’s going to look for some reason to get us back. You know that that’s coming. What I said is, “Hey, just because your client’s been so awesome to work with and she’s done everything we asked, I’m going to just voluntarily give you guys $5,000 credit towards your closing costs.

Just as a sign of goodwill because I really appreciate how hard you’ve worked to help put this deal together.”

That psychologically gave the buyer this understanding of, “Oh, they’re not screwing me. They’re giving me $5,000.” Then if they would decide to get inspections even though we gave it to them, I’m going to say, “Well, yes, we gave you $5,000 to cover that. There’s no way that actually costs $5,000,” or, “Yes, there’s a total of 7,000. We’re already giving you five. That’s more than half of it.”

I’ll have some bargaining chip so that they won’t come back and ask for more. Does my client care that they had to give $5,000 in closing costs to get $80,000 more than what that fair market value really would be? You have to understand as an agent that we make decisions typically based on what we understand about real estate. Our clients just make it on their emotions. They’re going to get hit with emotional waves. If you can anticipate those and limit how much ammunition that they have once you’re in contract, you can save your clients so much money, and then you’ll have the confidence to stand up to them and say, “Absolutely not. I’m not going to work for 1%.”

Aaron: Yes. Being able to show that. I think that those are great tips.

Aaron: Switching gear a little bit. When you and I were hanging out in Dallas a few weeks ago, at the big the big convention, we started talking about the Real Estate Rockstars podcast and how you’ve been a listener for so long, and as a new agent, there were some tips that you got that you applied it. Can you tell us about that a little bit? Like what was that tip and just listen to your podcast and how you got?

David: This is why I’m so in love with podcasts. Because there’s so many ways to make money in real estate and they don’t all work for everybody. Like I’m never going to be a door knocker. I went door-knocking one time. This first guy that basically was rude to me, I called him a door warrior from the other side of his own house. I was like, “Why don’t you come out here and say that to my face, big guy?” I realized, “What am I doing? Why is this guy ever going to be my client? I’m not a door knocker. I shouldn’t do it.”

That doesn’t mean you shouldn’t try real estate because there’s a million things that will work. I heard somebody that was being interviewed. They were newer agents in like the Santa Rosa area in California, I think. They were saying how they help their clients on moving day. They’re like, “We’re new. We don’t have a ton of clients, so the ones we have, we just give them everything we got. When they sell their house, we show up on moving day, we rent a U-Haul truck, we load up all their furniture, we carry all the boxes down, and we load them up, we drive it to the new house, we unload it for them. We just go over and above and beyond.”

I thought, “Oh, I could totally do that.” That’s a great idea. I took it a step further. I said, “Okay. I’m going to rent the U-Haul truck. I’m going to pay some guys $12 an hour to show up and help me. I’m going to send boxes to the client that are branded with my picture and my name and stuff on it so that they keep them around. I’m going to tell them to pack up all their stuff before we let their people see the home.”

I just said you’re going to have to pack anyways, you might as well get it all packed up and stick it in your garage before we even put your house on the market. That helps us because the house shows better when it’s not full of cluttered stuff. It also psychologically prepares the seller, like you already packed up and moving, you’re going to take whatever comes our way. We’re not going to be like, “Oh, that’s 4,000 less than I thought. I don’t want to sell my house,” type of thing.

Then on moving day, I show up. The story I was telling you is, I had a friend who I called just to check in with as part of lead generation and she said, “Oh, we’ve always wanted to move into this neighborhood, but we can’t afford it.” We started a conversation about how much equity they have in their house. They had a lot. I was able to say, “Look, if you took your equity from this house and you put it into the area that you want to be you can buy a house for $900,000 in the neighborhood you want to be and your payment is not really going up that much. Interest rates are low, you have PMI. You wouldn’t have PMI.” We ran through the numbers.

They got super excited. I sold their house. We got 70,000 more than what we thought we were going to get, which was aggressive. We went and got them another house that was 950,000. That was about $1.7 million worth of sales just off these two homes. On moving day, I show up and I help them move and I meet grandma and I meet aunt and I meet the cousins and I meet their new neighbors and I meet their friends. I meet all the people who show up on moving day, which typically are like the people who love you the most in life. Nobody wants to be there on moving day.

Aaron: Nobody wants to be there on moving day, for sure.

David: That’s when you find out who your real friends are. I have my assistant send pizzas and soda to everybody because we’re all running around. Everybody’s hungry, they’re all working hard we’re going up and down stairs. It’s in the middle of July. It’s 100 something degrees in California. They all see me just sweating and working hard and happy. You get to know these people and they realize, “I trust that guy. That’s a good agent.”

Fast forward, I end up selling aunt’s house for around 870,000. I then sell grandma’s house for 740,000. I helped aunt and grandma buy a house they could all live in together for 1.35. Then I meet two friends of hers that are both in the process of being pre-approved and they’re going to buy after they get married. That one phone call, when you work it right, turns into $5 million to $6 million worth of sales. Now, not everybody’s price points are going to be where I am in the Bay Area, but I don’t think anybody out there would be too unhappy about getting six deals out of one phone call and that was all information I got out of a podcast.

Aaron: Yes. Go help people move because it’s not just that service for them. You’re going to meet the neighbors, you’re going to meet the people and you get all day for them to realize, no matter what, even if it’s not going to be next week when they buy or sell a house, when they buy or sell a house, they’re going to call you.

David: That’s exactly right.

Aaron: Because you’re friends with them now. You were there and you were there on moving day sweating with them and going through all of that. When I first met you, I don’t know how many years ago it was now. It was at a spaghetti place in Roseville and there’s 10 of us sitting there, bunch of our GoBundance friends from our Mastermind. There’s guys in there that have flipped a bunch of houses or had a bunch of apartments and things like that and everybody shared their story and it was the first time I met you.

I told you, “Of all of us here, you have the most fascinating, most interesting story that everybody needs to hear.” Because of how you started and you went part-time into real estate at that beginning. Can you tell us a little bit about that? When you got into real estate, what was your day job as we were like, “Why is he doing this? How is he doing this?” How did you turn that into everything? The David Greene team now, your investments, everything. Just talk about that transition for a little bit and the experience of life.

David: I’ll give you guys as much of a summary as I can here. It’s probably going to be kind of long-winded because there is a lot to pull out of it that other people can benefit from. That’s why I like to talk about it.

Aaron: There’s so much to benefit in this, for sure.

David: If you listen to the BiggerPockets money podcast, I think it was Episode 12, I go into more detail about it. The gist of it was I was working as a waiter and saving up as much money as I could while I was in college. I just went to work, worked harder than all the other waiters, stayed later, got there earlier, worked more, lived with my parents, ate their leftover food and I had a cell phone and gym and gas was the only things I really had to pay for, maybe car insurance.

When I graduated college, I had all my school paid for, no student debt, and a little over $90,000 in the bank. That was with taking about nine months off from work because I had broken my ankle playing basketball and I was on crutches for six months, so it was really bad. What I was thinking is, “Well, I’m going to need to buy a house someday.” This was like ’05 where prices just kept going higher and higher and I’m like, “How do you ever buy a house? The more you save, the higher they go.”

I wasn’t going to buy until I could afford it, but I knew at some point I was like, “Fine, I’ll just save up money and build one if that’s what I have to do.” Then I got a job as a deputy. I started working as a deputy sheriff and the housing market crashed in late 2009, 2010. It was just everything was for sale. I bought my first house which I had no intention of being a real estate investor. I had a friend who got into Bible school and he had a house in contract with like $5,000 on his money deposit. He was leaving, so he couldn’t buy it.

He was telling me about it at church and I’m like, “Oh, maybe I could buy it. I’ll need a house someday. I’ll have a family. I’ll want to live in it.” I drove and I looked at it and it looked like a really good price. It was 215,000, five years old, 2500 square feet, needed nothing but to have the carpets vacuumed. I ended up buying it instead of him and then the agent was able to give me an even better price. I got it at 195 and I had a rental. I did know what to do, so I just put it on Craigslist and I picked a tenant. I picked a horrible tenant and they basically took me for a ride.

I learned a lot. Got a property manager, let them take care of it. Next year, kept saving up money, buy their house when it came up for sale where my mom was, bought that house. Next year, my grandma passed away, I bought her house. I now have three rentals. Next year, I bought a fourplex, which was my first understanding of like– I didn’t even look at ROI. I didn’t know that was a thing. I didn’t really understand cash flow. I just knew that it would make more than it costs me to own it and I just figured I’ll just pick one of these houses to live in one day or maybe I’ll pay them off.

When I bought that fourplex I realized like, “Oh my God, there’s something here. This is a 34% ROI.” To me, that just meant I’ll make my money back in three years. I didn’t really understand that ROI was a metric that you should look at. I need to buy a lot of these. Then the market took off on me and it was too late. That was 2013. All the boomerang buyers from 2010 that had short sales, they were not coming back into the market, and so I had to learn how to invest out of state.

Once I realized these rental properties are where it’s at, you buy these houses, the cash flow, they keep going up in value, I keep paying down the rent, interest rates are really low. I’m just going to work as much as I can and buy as many of these houses as I can. I just started working as a cop, literally every single day, double shifts, sleeping in my car, working seven days a week. I think in 2015, I took off like three days for the whole year. I just was working nonstop. I started buying as many rentals as I can.

I did that until I realized that this was taking a really long time and instead, I was just going to use the BRRRR Method. That was where I learned what BRRRR was and I put together that whole system and I started buying, rehabbing, renting, refinancing, and repeating. I had been working as a cop doing this and then I met a couple of GoBundance guys, Aaron West and Daniel Ramsey and Daniel and they were like, “You’re way too smart to be a cop, man.

You need to at least go be a full-time investor or real estate agent or something.” They forced me to commit to working no overtime that wasn’t mandatory at my job for a year to get my real estate license. I did it. I didn’t really love it, but it was still better just being a cop in the Bay Area where you’re completely hated. I did both for a while and then right around the time that I left doing both is when I met you and that story started.

Aaron: There is so much to unpack there. At first, it was just working really, really hard and saving money and living frugally to figure out how to invest and it wasn’t even supposed to be as an investor. It was like, “I need a house.” Because everybody needs a house. Everybody wants a house. Then you would continue to do more and more. About that time I met you, I think you had just become an agent, also but you were still a police officer.

You were making good money from your rentals and I was like, “Why would you be out risking your life doing that right now?” That’s truly the example of one of the dreams out there for people that that decide they want to invest or they want to get into real estate, but they have these good solid stable jobs, like how do they make that transition? There’s been so many times I’ve told people to reach out to you and follow you, and they’re like, “Hey, I’ve got this really good job, but I also want to start doing this.”

What could that transition be like and what could they learn? Because you went through that and you got to see being a cop and being an investor and going through that and then really how that was able to convert to become a very successful real estate agent using that personal stuff to where now people don’t– You’ve said everybody hates real estate agents but man, police officers in the Bay Area gets such a bad rap.

It’s such a rough job that you were doing, but for you, it was a means to the end. You were going to work hard and you were going to make money to invest in this other career and now you’re David Greene 2.0, this new part of your career. Let’s talk about the BRRRR Method for a second. You have several books published through BiggerPockets, part of the podcast there that we’ll probably talk about. The BRRRR Method, tell us what is that method, and does someone need to be an agent to do that? Do you think all agents should do it? Does it help you a lot?

David: The BRRRR Method is an acronym that stands for Buy, Rehab, Rent, Refinance, Repeat. It’s not nearly as complicated as it sounds. You’re just moving around the order in which you buy a property and fix it up and refinance it. Typically, you finance a property when you buy it, then you fix it up, then you rent it out. The problem with that method is you sink 20-25% of a down payment into the house, then another 10-20% of the house’s value into the rehab.

You’ve got this house that you made worth a lot more than what you paid for it, so you’ve got some equity, which is great, but you don’t have any capital. My philosophy is that you make your money when you buy. I think you’d agree with that, Aaron. It doesn’t matter, if you buy the deal wrong, you’re going to be tempted to spend more than you should on the rehab or try to skimp on the commission to the agent. It’s only going to hurt you more.

You have to buy right if you want to make money in real estate. What do you need to buy? You need capital. The BRRRR Method isn’t as important if you can raise other people’s money. Most people when they’re getting started, they’re not in that position. What I realized was if I buy it for cash, or hard money, or someone else’s money or something, and then I put money into the rehab, let’s say I buy it for 60 and I spent 30 to fix it up, I’ve got 90 into it, I can then refinance when I’m done and take out 75% of the value of that house or sometimes 80%.

If that house appraises for 120,000, and I’ve got 90 in the deal, the bank will write me a check for $90,000 and I’ll still have $30,000 of equity into that deal. More importantly, I got back my 90,000. I can go buy my next house because you make your money when you buy. The velocity of your money increases rapidly. I can take the same 90,000 and I can buy, say, a house every six months, so two houses a year with the same 90,000. That 90,000, if I put $30,000 of equity into each house, is bringing me back $60,000 a year in equity, plus whatever the appreciation is going to be, plus whatever the cash flow is on those deals, plus all the experience that I gain buying more properties.

We get good at things the more we do them, that’s why agents who sell two houses a year never really get very good at being an agent. What can you be good at that you do two times a year? While I’m doing that, I’m saving up another $90,000. Now I’ve got two of those $90,000 wheels that are churning. They’re each adding $60,000 a year of equity and a couple $100 a month of cash flow every single time and more experience.

Now, wholesalers are coming to me with their best deals because I’m the one buying them all. They want to keep me happy. Contractors are giving me better rates because I’m keeping all their guys employed. Lenders are giving me better deals because I’m doing more deals with them. Everything gets easier because I’m doing this more often. That was the BRRRR Method.

I wrote a book on that called Buy, Rehab, Rent, Refinance, Repeat. It’s published by BiggerPockets. I think it’s the number two best-selling book on Amazon right now for the real estate category. It’s doing really well. All that you have to understand is if you just try to sink big down payments into properties, you’ll run out of money. If you put your money in, you make the property worth more, you build equity, then you refinance and get that capital back. You can do this with more volume

Aaron: Robert Kiyosaki, Rich Dad, Poor Dad, one of the things he talks about is having an infinite return. At the beginning, you said, “Here’s the ROI on the property. If I buy a house for $100,000 and it rents and I make $10,000 a year, I make 10% ROI, like 10% on the money I have invested,” which is good, right? A lot of people say “Yes, a 10% return on your money.” What you’re saying is you’re going to buy it, you’re going to add value and instead of leaving that money sunk and just get a 10% ROI, you’re going to get a loan for $100,000 on it, because now it’s worth 150, right?

David: Yes.

Aaron: You get that money back and so now you don’t have any money invested. You’ve got all your money back. That becomes that infinite return that Robert Kiyosaki talks about because you don’t have any money invested in it, yet you still make money every month and you can do that as many times as you want and that asset grows in value. You’ve still got equity in there if you need to sell it, it’s still real estate, it’s still liquid, you can cash it out.

Let’s talk about the BiggerPockets podcast. If you’re one of our listeners and you’ve been living under a rock, it’s the biggest podcast out there for real estate investing. So many different people– I love listening to it. You guys are my friends over there. We actually had Scott Trench on here in a segment we’ve been doing as a side segment called What makes a CEO and talked to him about him phasing into becoming the CEO when he started taking over from Josh and he brought you on full time and the podcast just exploded and took off. How’s it been for you to work over with BiggerPockets? How much fun has that been with Scott and Brandon and all the guys and what’s next over there?

David: What’s cool about BP is I was a huge fan of their website. They interviewed me on their podcast. That’s how I got to know those guys. Then they said I did a really good job, so I said, “Hey, can I write on your blog?” They said, “Okay, here’s the blog person.” I went to the blog person and said, “What does it look like to be the best blog writer here? What would the blogs look like?”

She said, “Well, they’d have to be really long. People like those. They’d have to be on these topics and they’d have to be written this way.” Instead of just writing the way that was comfortable for me, I tailored my writing to fit with that blog person Allison was saying she wanted it to look like, and lo and behold, Allison starts tagging all of my blogs as Editor’s Choice. “This is the best one, everyone should read it.” She’s putting at the top.

Now, I’m getting a lot of positive comments. People really like what I’m writing. I’m going back to her and saying, “Hey, what’s the stuff that’s trending on the site? What are the topics everybody’s looking at?” She would tell me, I’d write a blog article about that. Allison really liked me. Then when they decided they wanted to publish more books, they came to me and they said, “Hey, would you want to write a book?” I said, “Sure.” They said, “What topic?” I said, “What about long-distance investing? I don’t think really anyone does that.” I wrote that book. The book did well.

Then because I wrote a book that did well, next year I said, “Can I write another book?” “Sure. What do you want to write it on?” “How about the BRRRR Method?” “Sounds good.” Get that book deal, write that book, that book does really well. I said, “Hey, can I come on the podcast to talk about the new book?” Now I’m on a second time. Now I’m good at doing podcasts because, I didn’t mention, but when I released my first book, I went on this podcast tour of 40,50 different podcasts to talk about it because I really wanted BiggerPockets to see. “Hey, I’m trying to make you guys some money. I’m trying to sell a lot of books here.”

I improved my skills just talking, articulating thought, and explaining how real estate works. The second time I did the podcast, it went really, really good. Then at that point, I’d built up different skills. I had some credibility from the blog writing and the two books sales, so when Josh Dorkin said, “Hey, I think I’m going to step down. I’m not doing the podcast anymore,” they were just plugging random people from the company in to do with Brandon. Brandon said, “Hey, why don’t we get David? This guy is really good.”

He put me in. People really liked me. The next thing I know, I’m the co-host of the biggest podcast for real estate in the world. I realized this just got real. I got to get really good at learning what makes a good podcast. Just like I had talked to Allison and said, “What do you have to do to write a good blog?” I started researching who had the best podcasts. I started listening to Joe Rogan all the time. He has a huge, huge podcast and I would learn, “Joe communicates with people this way. This is how he gets them to say good stuff. This is when he interjects and this is how long he interjects for.”

I would listen to other podcasts as well. I’d listen to our own podcast and I would cringe sometimes like, “Oh, why did I say that?” or, “Why did I not jump in here?” Then I’d remember that the next time that we were recording. I just really wanted to be good at doing that job. I think that what I found is I’ve had so many levels up in the last three years or four as far as my own success. I would attribute 100% of that to the fact that when I get an opportunity, I want to be good at it. I just want to be good.

What does it take to be good at this? I really want to learn how to do it. I think you can agree, Aaron, as someone who’s a business owner, we are constantly looking for somebody who cares and wants to be good. It’s this never-ending cycle, all we hear is people that say, “I wish I had a better job. I wish I made more money. I wish I had financial freedom.” They all want the result of being good at something but very few people actually care enough to want to go be good at it. It drives me crazy because when you hear people that are not business owners talk and say, “There’s no opportunity, there’s no chance, there’s so much inequality in the world,” but then when you actually own a business, you’re just dying for somebody who cares to come in and do their very best and ask questions like, “What would it take to be good at this?” and then really pursue it.

When you see them, you’re like, “Oh, my God, give that person everything. Give her whatever she wants, give her a raise, give her money, give her an opportunity to make more money for both of us, give everything you can to that person.” It’s a fallacy that there’s no opportunity in the world. There’s a ton of it, people like us are scouring everyone we know to say like, who would be good, who could I bring in. I think I’m just a case study in if you give a crap and you try hard at something, doors just start opening, opportunities just start coming. Most of the time, it’s our own head that’s getting in the way from us being more successful.

Aaron: I absolutely agree. Anything you want to do in life, whether it’s in real estate, or whether it’s certain clients that you want to represent or certain deals, or anything out there, we’re looking for the person that is staying late and asking a ton of questions and listening to their craft. Even as an agent, you could be listening to the recording of that phone call, of, “Did the script go good, or did it not?” Not just studying other people, but resetting your own stuff.

There was a public speaker that I was watching one day, and he was saying the way he got good at public speaking was he spent hours watching every recording of his speech instead, and then redoing it as, “If I would have done that right, I would have done this instead.” Constant studying, constant loving it. You were a huge fan of BiggerPockets out there, and you kept learning and providing value.

Now, as a group, you guys are providing much value for real estate investors out there and I think it’s really cool that you’ve also taken– Along the way, you started as an investor, and then you became an agent, then you’ve got all these different tips that really helps you build your team. I went to a meetup in Roseville, when you guys were given a presentation to local people, it was like, “Hey, here’s some possible ways to invest in the real estate market. If you guys are interested, we’re agents in the area, let us do that.”

It seemed like that was probably a niche where you guys were getting lots of buyers and it even made me think. I’m an investor all the time and it was in my local place I hadn’t been thinking about. I’m like, “Oh, maybe I should look at investing down there. They know what they’re talking about.”

What tips would you give, if you were looking back at yourself as a young agent? Your transition of an agent was kind of funny, but if somebody comes to you and says, “Hey, I want to be really successful as a real estate agent, what’s one thing I should be doing? You shared a couple at the beginning, what’s another thing you would tell somebody if you want to increase production now, or if you want to be successful in real estate agent. We talked about falling in love with the problem. We talked about some of those. Anything else you can think of?

David: Yes, I’ll give you a principle, and then I’ll give you some actionable steps. One of the things that I see on the BiggerPockets podcast that stops people from making money in real estate, is they want to start with where they are and they want someone to give them a step-by-step process to get where they want to go and they won’t move until they know every single step.

It’s this idea that we have that we never want to make mistakes. We don’t want to lose anything and we don’t feel comfortable moving until someone gives us a perfect process. As you and I know, Aaron, you’re buying problems when you buy good deals. They come with it and there’s no way that you can anticipate every problem that’s going to occur. It’s much more like being in a fight.

I know this guy that I’m trying to fight maybe has a boxing background or a wrestling background, I know that there’s tendencies that they’re going to want to do, just like I know houses in this area are likely going to have these problems or a seller in this position is likely going to have this problem, but when the fight starts, I don’t know what order he’s going to throw punches or what he’s going to do to me.

All I can do is practice and train and trust my gut when I have to respond to what they’re doing, and understand principles of fighting. I don’t want him to mount me, I don’t want him to take my back. I want to be able to use this to stuff what he’s tried to do to me, and I want to counter with these types of things. The best fighters are very instinctively good. They’ve seen it over and over and over. They don’t ask, “What is everything that’s going to happen in this?”

Sports are the same way. Football teams do not know when they run this running play where every defender is going to be at all times. They have to respond to what’s in front of them. The best people that I’ve seen that are successful, don’t say, “Where I am, what are the steps to go forward?” They actually say, “Where do I want to be?” and they work backwards from that point to get to where they are.

One of the things that drives me nuts about our industry is agents will usually say, “How do I find leads?” Okay, but they don’t really want leads. What they’re actually saying is, “How do I find easy leads? How do I find people that are so motivated that I don’t have to be that good at my job?” They’ll just buy a house.” Every agent does three to four deals a year and that’s because you get three to four easy wins a year. Your sister wants to buy a house, your mom wants to sell her house, your next-door neighbor wants to sell their house. You get someone who’s like, “Hey, I’m moving from out of state, I have a family with two small kids, I need a house.” Everybody can close that person.

What we should be saying is, “What does somebody want in a real estate agent and how do I become that?” Then the leads will kind of find you when you can close the difficult ones. An example would be, I never tell people, “Oh, you should buy Zillow leads, or you should use Boomtown, or there’s these platforms that are going to just hand you what you want,” because the clients, they’re not thinking like that. They’re not thinking, “I’m somebody’s lead, and I’m supposed to do whatever they tell me to do.”

Put yourself in their head. They’re thinking, “I’m scared. I don’t know how real estate works. This is a huge deal. I don’t know what all these fancy terms that people keep throwing around, like contingencies and EMD.” “I don’t know what all this means. What’s an FHA loan? What’s a VA loan?” I hear people say FHA loan all the time and what they really mean is low down payment. They just think that that’s what FHA means. They don’t understand it means Federal Housing Administration, and it’s a very specific loan program.

The better you can explain to the people you’re working with how this whole thing works in a way that takes away their fear and uncertainty of what’s going and reduces their anxiety, the closer that they’ll stick to you, and the more likely they’ll be to move forward. As the answer of your question, What do you have to do to get more business?” You start off by falling in love with real estate. You’re asking questions all the time, “What is the lender’s job? What is an appraiser’s job? What does the title company do?”

Don’t even call it the MLS until you’ve explained to people what MLS even means. They don’t know and they don’t want to say that they don’t know what that means, right? Just call it the place where all the realtors put their listings and then you can explain how the history of the MLS started. Now you look really smart, now they’re more likely to trust you. When it comes to how do I find clients, you can hold 100 open houses, but if you just stand there and you watch people sign in, and you wait for them to come to you and say, “Will you be my agent?” It’s not going to work out very well for you because the client isn’t looking for somebody that’s like a random person they can walk up to and say, “Will you be my agent?” They just know they’re scared, and they want something that makes them feel better.

You have to talk about real estate constantly. Everywhere you go, you got to be in love with it. You have to be telling people what the market’s doing, a cool thing that just happened in a transaction you had, some new law that’s passed and how that benefits buyers or benefits sellers, you have to be basically setting yourself up as the person that knows all the answers, loves doing his job and the people who listen to you start to feel comfortable, they feel less scared.

That’s what you’re really trying to do. You’re just understanding sellers are afraid. They’re afraid that they’re going to pay too much in commissions. They’re afraid they’re not going to get their house sold for enough, they’re afraid the markets going to tank before they can sell, they’re afraid the markets going to go up if they sell right now, they’re always afraid. You have to be able to answer questions and make them feel like this is the right move and buyers have all their own things that they’re afraid of. You have to be able to put them at ease.

If agents would stop looking for the magic pill that would give them leads, which is kind of like, “Just give me a hostage,” like, “This person has to sell their house and they’re just going to use me without knowing me,” and instead they thought, “Well, what would I feel like if I was in that situation? What would I want to hear?” and they worked backwards from there, you would see like people’s businesses would just explode.

Aaron: Yes, putting yourself in their shoes and not thinking about them as a lead and what you can do. Loving real estate, listening to the podcasts, listening to this stuff, figuring out what’s going on in the news. Real estate is just a fascinating, fascinating thing, right?

David: Yes.

Aaron: Because it’s not necessarily a job, it’s not a career, it’s not an investment, it’s bigger than that. Real estate means so many things, it’s investing, it’s buying and selling, it’s houses, it’s land. It’s super cool, man and I’m a super fun student of real estate. I love all sorts of deals, all sorts of different things out there, and how it works, and I think that does help so much.

It also helps when we find that problem or falling in love with that problem. You might find by loving real estate so much and studying it and figuring out what’s out there, you might find that niche of that special buyer that needs you, or you might find that you’re the guy that loves door knocking, or you might find you’re the person that loves helping people move. Finding those different things out there, but you get that from being involved and loving it and really treating people like people. You gave the example of when you helped the person move, you got all those different leads from it, but that was really because you were like a person helping a person, carrying a couch, and talking to the person on the other end of that couch. All of a sudden now, you’re David Greene the person and you can do so much.

David: It worked because everybody’s afraid that that agent is going to take advantage of me. I’m in the same boat. If I got to go talk to a lawyer because I want to sue someone or I’m getting sued, I don’t know how that works. I’m going to be scared, “Can I trust you? Is what you’re charging me what you charge everybody else? Are you taking advantage of me?” Do you ever like the process, Aaron, when you go buy a car? Well, you’re a freak, you might actually like doing that-

Aaron: Yes. [chuckles]

David: -because you negotiate so well.

Aaron: No, but I went to the doctor yesterday, and I’m having to think like, “Should I be negotiating this? What’s going on here?”

David: Because you don’t know that doctor, but if it’s your family doctor, you don’t feel that way. You trust what they’re telling you.

Aaron: Yes, I’m at a random one in Maui, the–

David: That’s where the fear comes from, right?

Aaron: I’ve never met him.

David: That’s exactly right. So as an agent, they don’t know me. They’re supposed to be scared of me. They don’t know me from the next guy. Of course, they’re worried about if I’m going to charge too much, or they’re not going to sell their house. Like I was just saying, nobody knows if their agent’s any good. All they know is what we tell them, you have to understand that. It’s normal for them to feel scared.

So when I show them I’m willing to sweat through my shirt at 105 degree weather, walk up and down stairs, play with my client’s little kid, it’s obviously not just about a commission for me. I have a relationship with this couple, and they were friends, and I would never burn them. Because of that, it makes it easy for them to trust me. That’s all that it was. They didn’t even know I’m smart, or I’m good. They didn’t understand that I can make them more money than another agent.

All they knew is, “We trust that guy, we’re not as afraid of him because we’ve seen what he’s like.” That’s another big part of being a real estate agent, is develop those relationships first, so it takes away the fear. Once the fear is gone, most people don’t know what agent they’re going to use. The minute they find one they can trust, they’re like, “Boom, you’re my guy or girl.”

Aaron: They don’t want to have a stupid question, right? If they trust you, they’re willing to actually say, “Could I actually qualify for a house right now or could I actually buy–” Because so many people think about real estate, but if they are not in it all the time as potential clients, you want to be so approachable that they love you already, and they are like, “Hey, David, maybe I can’t buy this, but what if the three of us go buy a house together, is that a thing?” You’re like, “Yes, we can totally do that.”

David: You want to be saying that stuff. People do that all the time, and I can show you exactly what to do. It’s not as hard as you think.

Aaron: Yes, just having the conversations and knowing people. As we wrap this up, this has been just an awesome hour. Just getting to chat with my friend, but getting to talk about stuff that we love as we get to catch up. What is next for the David Greene team out in the Bay Area? Are you going to try to get more team members, do you have a big goal this year for houses, things like that, what’s next for you in real estate?

David: Thank you for asking that. My biggest struggle is finding agents that are confident and competent, that could come in and– I just have way too many leads than I can keep up with right now. I’ve done a great job of generating leads, but now I’m the only one that can close it because most of the agents on my team are new. So if I get an agent that’s willing to learn my system, willing to be coachable, even if they’re a really good producer, I can guarantee I could take them up higher than what they’re doing by giving them leads and training different than what they’ve thought. I’m definitely looking to hire agents for my team. I’m in really bad need of another admin or two that are really good because my system is designed with a– You ever heard that saying that,” Look like a duck, you’re calm on the surface, but underneath your feet are spinning furiously under the water,” right?

Aaron: Yes.

David: That’s my admin. They’re running around like crazy doing the lion’s share of all the work, and the agent looks really calm when they talk to the client presenting the information that the admin went and found for them. I need a couple of more of those admin that I can bring in and they can help. Then I’m actually in the process of starting a mortgage company now, too. Where I’ll be able to start doing loans for our clients or other agents’ clients. Because that’s another problem with the industry, is it’s really hard to find a good lender. Most lenders aren’t giving a ton of value back to the agents, they are just getting leads from the agents. So I’m looking to figure out a way to stop that. I’ve fallen in love with real estate. I love every aspect of it.

Aaron: Yes, that’s what we’re saying.

David: I love representing sellers, I love helping buyers find houses, I love explaining it, I love flipping houses, I love working on the loans, I love buying rental properties. I think if you’re not some guy that understands how to computer code like a whiz or have some super-specific skill set, real estate is the best way to build wealth for yourself in a boring and slow way over a long period of time that becomes incredibly powerful.

Aaron: Yes, we do love real estate around here, so you guys heard it. If you’ve got a referral, if you’ve got a friend or family member in the Bay Area that needs an agent, have them listen to this. See if David’s a person that they want to talk to, that he’s trustworthy, they want to go work with. If you’re an agent out there in the Bay Area and you’re needing leads and something that helps you grow– I didn’t realize you were hiring on your team and growing it. I think that is super cool, I’m excited about the mortgage company for you. People, go reach out to David. David, what’s the easiest way to find you? We got all your social handles, where do you want people to find you? [crosstalk]

David: My social handles are davidgreene24. There is a ‘e’ at the end of ‘Greene’. So Instagram is the best way to get a hold of me. Facebook, Instagram, Twitter, all of that, it’s all davidgreene24. My email is davidgreene@kw.com. That’s another good way to get a hold of me. Just make sure you’re very clear in the email what it is you’re looking for, so I know the best way to get back to people. Messaging me on Instagram is probably the best way to get my attention. I try to keep that inbox as close to zero as I can actually get it. Like you mentioned, we’re in Sacramento as well. There’s a lot of people that are leaving the Bay Area and moving to Sacramento.

Aaron: Yes, you got the Sacramento team.

David: Yes, I put up a Sacramento branch together for that also. That’s another really good market.

Aaron: Yes, and I can tell you guys, David is a super, super approachable guy. You look at it on Instagram, he’s got 30,000, 40,000 followers or something like that. He’s an approachable guy, real guy. For us, for listeners also, we’re @rerockstars on Instagram or @aaronamuchastegui on Instagram. A lot of the guys that I have been interviewing this week, that are going to be up over the next few weeks, you guys are going to be listening to, are people that reached out to me on Instagram and said, “Hey, here’s my story, can you interview me on Real Estate Rockstars?” Looking for more people out there. Go give us a review. Tell us how you do today. David, like I said, I’ve been trying to get you on here for so long. Thanks for coming on to talk about real estate. You’re definitely a pro, and that was a ton of fun.

David: It was a blast, man. Thanks for having me on.

Aaron: All right, we’ll have you on again soon.