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Most “good” deals fall apart under real scrutiny, great deals survive it. We walk through a complete, real-world blueprint for finding, underwriting, financing, and operating investment properties in Northwest Arkansas, sharing the exact steps we use to source off-market opportunities, filter fast, and close with confidence. From direct-to-seller campaigns and broker relationships to the power of a clean reputation on social media, we show how serious investors build a steady pipeline by mast...
Most “good” deals fall apart under real scrutiny, great deals survive it. We walk through a complete, real-world blueprint for finding, underwriting, financing, and operating investment properties in Northwest Arkansas, sharing the exact steps we use to source off-market opportunities, filter fast, and close with confidence. From direct-to-seller campaigns and broker relationships to the power of a clean reputation on social media, we show how serious investors build a steady pipeline by mastering one or two channels and broadcasting a clear buy box.
The analysis section digs into the documents that matter, rent roll and T12, and how to verify them with bank statements, utility bills, and lease audits. We unpack expense benchmarks, property tax reassessment, and insurance volatility, then map out CapEx planning for roofs, HVACs, and mechanicals using real bids. You’ll hear how to model total return beyond cash-on-cash, when to prioritize IRR and equity multiple, and why rosy proformas without a renovation plan are a fast path to disappointment. We also share two-minute triage tips that help us kill weak deals on sight so we can go deep on winners.
No deal closes without the right team. We highlight the lender’s role in creative terms, how to align with property managers on leasing and renewals, and the value of a strong title officer, attorney, insurance broker, CPA, and core trades. Then we break down the capital stack, clean JV splits, GP/LP roles, preferred returns, and when to avoid extra layers like mezz or pref equity. Finally, we share a practical closing checklist and the first 90-day plan for renovations, rent strategy, investor reporting, and course corrections.
Subscribe, share with a friend who’s deal-hunting in NWA, and leave a review telling us which part of the blueprint you’ll apply first.
Northwest Arkansas's go-to show for real estate agents, brokers, and investors looking to zoom in on the local market. Join us as we sit down with the leading voices in the area to hear how they're investing in NWA.
Hosted by (in order from left to right) Brian Wagers, Zach Stanley, and Brandon Still.
SPEAKER_00: Welcome to Northwest
Arkansas Investing Podcast, your
go-to source for real estate
investing in Northwest Arkansas.
SPEAKER_01: Whether you're a
seasoned investor just starting
out, we bring you expert
insights, market trends, and
practical strategies to help you
build wealth through real
estate.
SPEAKER_02: From buying and
selling to property management
and long-term investment
planning, we cover it all so you
can make smart, informed
decision in this fast growing
market.
Let's dive in.
SPEAKER_00: Welcome to Northwest
Arkansas Investing Podcast.
We're here on another, have
another episode.
If you would have listened to
the last two episodes, we would
have heard Mayor Molly Ron, uh,
the mayor of Fayetteville.
And then we just talked, we just
had a really good podcast.
If you go back one episode about
financial freedom and some
bigger, broader concepts on um
why to be financially free, what
does it actually mean?
Just diving in and picking apart
some of those bigger, broader
concepts.
And I think that's a really good
one you should listen to.
Right now, we're gonna talk
about um a real estate blueprint
and how to put uh real estate
deals together.
Uh, the complete blueprint from
start to finish.
I think this is something that I
have a lot of conversations on
per week.
I know Brian and Brandon do as
well with like, hey, how do you
run numbers?
What do how does a deal look
like?
Like, how would you put to get
together a deal?
Um, and I have I'm gonna have a
bunch of group messages with
like, hey Zach, what's the
cash-in-cash return on this?
What's blah, blah, blah.
And so we're gonna go over that
on this, um, maybe a little bit
shorter of a podcast, but um,
something that I feel is gonna
add a lot of value.
So um we're just gonna dive um
right in with like um some five
ways um deals realistically come
uh to us.
Um brokers.
So I would say like when I say
brokers, it could be brokers
slash um real estate agents.
I think that's kind of what that
means.
Um, and so it's like um Brian,
in in your field, when when
deals come to you, when the when
it says brokers, is that like
and I'm I'm almost playing dumb.
Who who does that mean to you?
SPEAKER_01: Yeah, it means real
estate agents.
That's people that sell your
home that sell the commercial
building you see on the side of
the street.
It's people representing buyers
and sellers.
SPEAKER_00: Yeah, yeah.
That's I mean that that's a
great way.
Brandon and I are both real
estate agents um and in the
investing sphere.
And so we bring deals to people.
Um what like I'd love to bring a
150-unit apartment complex to
Brian, but I usually we usually
bring a duplex or a or a
quadplex or something to like
these out-of-state investors um
direct to seller.
And so this is like um Brandon
Cole calls on somebody and they
say, Yeah, I wanna I want to
sell my home.
Or that correct, Brandon.
SPEAKER_02: Yeah, yeah, 100%.
I think I mean one of the most
effective forms of marketing.
I mean, uh anybody who really
wants to find deals, whether
you're a flipper or a you know,
long-term buy and hold, I think
if you're not marketing to
sellers directly in some form
and it doesn't have to be, you
know, large scale, then I think
you're you're missing the boat.
SPEAKER_00: Yeah.
I mean, I have a lot of people
coming to me and looking for me
to be Superman and find them the
best deals being a a broker
slash uh real estate agent.
And I go, well, honestly, like
my my my investors that see the
best return are putting together
off market deals to our ways to
find properties off market.
I I can't I have 700 people I I
I represent.
And so I'm what do you want me
to do a campaign just for you?
Yeah, yeah.
SPEAKER_02: The other 500 people
like the best the best investors
that I work with and know uh
that are doing it at the largest
scale have mastered the direct
to seller.
I mean Brian, you got your start
doing direct to sellers, putting
together seller financing deals.
Um, you know, most recent deal
I've done was direct to seller
as well.
So I just it's I mean,
especially in Northwest
Arkansas, your best deals are
gonna be found there.
But if you're not able to figure
out a way to maybe that's mail,
you know, maybe you can start
doing mailers or even sending a
letter to owners in an area that
you like.
Um, but otherwise, if you're not
one a lot of times you're gonna
find your best deals picking up
the phone.
Gotta gotta talk to the owner.
SPEAKER_00: I mean, yes, brokers
and real estate agents can bring
you the deals, and that does
happen.
But your best and highest chance
of getting more and getting the
best deals is gonna be through
um mailers, cold calling, door
knocking, REI call center, which
is like call centers that will
basically make calls for you,
um, doing things yourself,
writing letters in the mail
yourself, having paying mail,
like having campaigns that
you're actively um moving
through these different types of
homes and finding that that's
where you're gonna find your
deals.
Yep.
Um social media brand slash
reputation, and that's where I
see Henry probably get some
deals from.
And I think if he were on, he'd
probably say the same thing.
He's really built a brand for
himself and like, hey, this is
what I do, this is how I do it.
And you know, being transparent
on that and having a brand on
social media that I think he's
maybe got 70 or 80 or maybe
maybe over a hundred thousand
followers, um, maybe a hundred
or fifty, I can't remember
exactly what he had, but he has
a lot of followers.
Um, and Henry, I promise, gets
deals because of his reputation,
and and I and that works both
ways.
Like, you can have a good
reputation, you have a bad
reputation.
And Henry has a very good
reputation in the community.
And I I see I hear a bunch of
stories where like Henry did me
right, I recommended this
person, you know, people
recommending people to him
direct seller where it's like,
hey, it's a great deal.
Maybe he didn't work out for him
on this, but recommended this.
So people like Henry um having a
great social media presence in a
brand um that he's built.
And if you're listening, like,
you know, maybe maybe that's the
path you take.
So that that is a way.
Um investors bringing
opportunities.
SPEAKER_01: Um I mean, that
could be like I would say like
if I I I think uh on that I
found like hey Brandon, hey
Zach, like there's this
property.
I don't like like this is the
property I want.
Can you like get a hold of them?
Like, yeah, can you put me like
I'm very interested in buying
this property?
Do you have ways of looking at
the owner information?
And can you make the hunter
calls that I want, like the
email, the phone call, the
letter, like that can that
consistently for the next couple
months?
Like, I I that's what I picture
that like in bet like I have
done like trying to do it
yourself, it can be that's why
there are brokers because it's a
full-time job, like trying to
get a hold of these people.
So you know, there's been cases
where I'm like, hey, like this
the I I would love to buy these
properties, these are targets of
mine, these are five to a
hundred units, or like, but even
further than just the hey, I'm
looking for five to a hundred
units, it's there's a couple
addresses here that they look
pretty crappy, like a hold of
them.
SPEAKER_00: Yeah, 100%.
Um, I I would agree with that
fully.
I think another avenue is like,
and this leads into lenders,
attorneys, contractors feeding
leads, is no one is gonna,
you're not gonna get any leads
if no one in no one knows you're
looking for leads and no one
knows that you're looking for
these types of properties.
So you have to let your sphere,
you have to let people around
you know that you're looking for
this stuff.
And I think that's a really big
one is like attorneys that you
know, lenders that you know,
hey, hey, Mr.
Lender, like if there's somebody
that comes in and they're like,
Oh, I'm looking to sell my
house, you know, if you if you
know anybody, I would love to
sell it, you know, uh, because I
got to buy some another place or
something.
And you're and if you're not in
their ear, like, hey, I'm
looking for a property like
this, or now that lender's gonna
never know to contact you.
That attorney's never gonna know
to contact you, that banker's
never gonna know to contact you.
So, like being in the people
around you sphere to know, like
a contractor, like make some
friends with some contractors.
They get calls for a reason
that's to do work on houses, and
some of the best houses for
buying off-market need some work
done.
Contractors aren't doing work on
great, great, great homes.
So, I mean, maybe sometimes, but
like these contractors are going
into these off-market
opportunities all the time, and
they're oftentimes the first
boots on the ground in these
places.
And so it's like, I know a lot
of contractors are like, Yeah, I
buy a lot of investment
properties.
I go into a spot and kind of
sucks.
I'm like, Well, would you would
you let me buy it?
And they're like, sure.
Oh well, you know, like so.
There there's a lot of
opportunities like that.
SPEAKER_01: Of those five, I
would say brokers are like the
most reliable and best way to
find it.
Direct to seller, that's ideal.
That'd be great.
So you don't you can do deal
direct with them, you know.
Just because you're dealing
direct, you can still get do
seller financing on broker deals
or social these other ways.
It's a little harder.
Direct to seller, you're not the
time, like you're not there's
not as much pressure.
Like there's not like a hey,
we're competing against these
other people too.
But sometimes with a broker,
that doesn't necessarily you
could be working with a broker
and they're only talking to you,
like or you and a couple that
can range from just you to you
just you and a couple people to
they've send it to people uh 700
people for a thousand or ten
thousand people on their list.
So, you know, for me and that I
I would say broker is direct to
seller.
SPEAKER_00: You gotta let the
broker know you're looking for
what you're looking for too.
SPEAKER_01: Yeah.
And that and that kind of leads
us into the next is like what
did what determines if a deal is
worth your time?
SPEAKER_00: So well, so I'm just
gonna go over each one of these
and then we can kind of say what
it what determines if a deal is
worth our time.
So some things to analyze of
what the deal's worth your time
is what's the price per door,
cap rate versus rents,
condition, age, seller's
motivation, uh market
fundamentals, job growth, comps.
Um so at least to be in the
beginning of that, a deal is
worth your time.
SPEAKER_01: Before that, we're
going back to the five ways to
get deal, like figure out what
kind of deals you want to do.
Are you like what is your risk
tolerance?
What is how active do you want
to be?
How passive do you want to be?
What what do you actually like
doing?
Do you like do you think you can
be in and out in a year?
Do you think are you okay
holding for three or five years?
So I would get um try to get
specific.
You know, it's hard to get too
specific and then you pitch a
hole, but there is, you know,
it's it's kind of a art, not a
science, on getting dialing in
on that.
SPEAKER_00: Have at least a
direction.
Yeah.
You don't have to have an exact
paved path, but have a direction
you're gonna be walking.
If you're gonna be like, well,
I'll buy anything from
apartments to single family to
uh commercial buildings.
It's like if you tell if you
tell me that, I'm gonna be like,
okay, like I'm probably not
gonna like that's so my broad.
Like, but if someone comes to
me, they're like, hey Zach, I'm
looking for single family
seduplexes in this area uh
because of this, and I need them
to be about this price, and they
need to be getting uh I need to
be having this type of cash and
cash return, I'm probably gonna
find you something.
But if you came to me and you're
like anything from one to 60
units, make it happen.
And and it's like I I mean, what
do you want me to do with that
information?
Like that, okay, you want me to
send you every listing that
comes like so I yes, before you
even dive into this, have some
type of area strategy that
you're gonna go after.
If it's I mean, I will say like
there's if you're like, hey,
duplexes that are built after
1980, that's that's okay, that's
a great start.
Like we can look at duplexes
that are built out of 1980 and
then we can analyze from there.
And so that's that's a great
start.
SPEAKER_01: Figure out where
your price range is too.
Like, am I looking for
properties around 300,000?
Like the top I want to go is
300,000, or am I looking at a
million dollar properties?
And you can go back to our last
episode and kind of hear how we
re reverse engineered some
things, but I think uh getting
specific on that.
So, like for me, like on the the
price per door, I think is
pretty important.
It depends on what market I'm
in.
The cap rate also depends.
You know, you talked about cash
on cash, so that could determine
if a deal is worth your time.
And that's where a lot of people
start, is a cash on cash.
But we also talked about that on
the last episode is don't get
too hyper-focused on that
because you'll miss a lot of
opportunities and you won't do a
lot of deals too if you're just
hyper-focus on cash on cash.
For me personally, I'm I'm
looking at what is my average
annual rate of return.
And that includes a little bit.
Sometimes that's cash flow,
sometimes that's no cash flow
for three years, but that's a
30% average annual return at the
end of three years.
Like, and so I think for me
that's what what is my total
return is is a big
determinability.
SPEAKER_00: I I think I think
I'd say cash on cash, and I'm
thinking like yes, cash flow,
but that's I'm really not even
thinking about cash flow when I
say cash on cash.
I'm thinking about okay, if I
exit in 10 years and I profit
this much, then what's the money
that ends or what would that do
for me at that point?
You know what I mean?
So that's closer to your average
annual.
Right, right.
It's it's bait I'm basically
saying you're saying it right.
I'm just had a weird way of
saying it.
Yeah.
SPEAKER_01: Um a lot of people
do talk about cash on cash too.
Yeah.
I need 8% cash on cash.
Okay, go buy a Memphis.
No.
SPEAKER_03: Yeah.
SPEAKER_01: Like not North
Arkansas.
Or you're gonna put that's fine,
eight, eight percent cash on
cash, but you're gonna have to
put 50% down.
You're gonna have to put 60%
down.
SPEAKER_00: Like you're gonna
have to figure out it's like,
okay, we can get an 8% return in
five years with the type of
appreciation and then exit in
five years.
Like, okay, if 8% is what you're
going for, it just might not be
in the form of cash in your
pocket every month.
SPEAKER_01: Yeah, or if it is in
cash in your pocket, you're
probably sacrificing like you're
not gonna get a big return, like
you're not gonna hit those 30%.
Like with an 8% cash from, you
know, maybe I'm naive, but if I
if I'm getting 8% cash on cash,
I'm probably not getting 30%,
20%, 30% average annual returns,
you know.
So it's it's okay.
Yeah.
If I'm if I'm dead set, I need
eight percent cash on cash, then
you need to look at how much
you're putting how much what
your total return is on that and
how much cash you're gonna be
putting in to get to that.
SPEAKER_00: Are you collecting
rent with a nine millimeter?
Are you um is are your tenants
great?
What kind of tenants are you
attracting with eight percent
cash on cash and ten percent?
You know, people are always
like, I want the one percent
rule.
I'm like, okay, so that means
that uh a two hundred thousand
dollar house, you want two
thousand on rent.
I mean, it's not just not gonna
happen.
I mean, as I'm sorry, it's not
gonna happen here.
And that three hundred thousand
dollar house, you want three
thousand on rent, four hundred,
you want four, four thousand.
Like, it's just not gonna
happen.
And so I think in what'd you
say, annualized rate of return.
Yeah.
I think that's more so what the
not what you need to be focused
on if you're thinking about, and
this is a Northwest Arkansas
investing podcast.
So if you're thinking about
Northwest Arkansas, it needs to
be a mindset of less of like
quick, fast now, and more like,
hey, here's what's happening in
this area.
Let's look at five, 10, 15 years
down the road and projections
and like what's it's going to do
for you on an overall return
instead of like a right now
return.
SPEAKER_02: Yeah, but I mean, I
would even say still there are
people are still stealing
properties out there that you
know exactly on an insane basis.
So again, it goes back to those
five ways of being able to find
deals.
I mean, if you're if you become
great at any of these, maybe
it's direct-to-seller, maybe
it's great relationships with
brokers and ability to close.
Everybody knows you as the guy
knows you as the guy who can
close.
Uh you know, deals are happening
every day.
And although it's not common,
you know, not as common, uh, if
you're great at what at that,
then you're gonna be able to
find that you're gonna be able
to go find out deals that nobody
else is getting access to.
SPEAKER_00: I love the idea of
dialing in on one or two of
these and being like, I'm gonna
be really good at being a
direct-to-seller.
Yeah.
Or I'm gonna be really good at
creating relationships with
brokers, or you know, I mean, if
you try to be really good at all
these, you're gonna fail.
If you want to be the best
social media person and be
direct best person,
direct-to-seller and be great
with brokers, I mean you you
you're a unicorn or your name's
Henry Washington, honestly, at
that point.
Like Henry's I mean, Henry's
good at all those.
I mean, he's just really
perfected a lot of these.
So I mean, tips hats hat tip to
him.
Um what's a deal that took y'all
two minutes to look at and
walked away?
SPEAKER_01: Was there is there a
deal recently where you're like
nah, like I can that's about my
average time I spend on deal,
like I guess a deal like
multiple deals a day, like
daily, daily, daily.
Look at like I I have I probably
do multiple two-minute analyst
of deals a day.
And that's probably like to
repetit, you know, I love our
last episode, but like you talk
about the what are your 20, 26
goals, but what I'm really good
at is putting those goals.
But what I'm working through
doing now is what am I daily
action, what am I doing weekly
and daily to get to those goals
I think is is important.
Yeah, um, but yeah, uh most
deals I look at too many.
I get a deal, uh and that's not
including the deals I get sent
in, Little Rock or uh like
Russellville or Jonesboro, or
just because I'm in Arkansas or
or some parts of Oklahoma and
Tennessee, that uh you could say
two seconds looking just
deleting.
SPEAKER_02: Yeah, like that's
not even I was gonna say
location can have a big big
piece of that of knowing when to
walk away quick.
You know, Little Rock for you
could be one Betty Joe drives,
you know.
Like uh those are those are ones
that come to mind.
Like it comes if I see that come
across my email, new listing,
multifamily, and I see Betty Joe
Drive, it's Dilly Auto.
SPEAKER_00: I mean, it's just I
when I first got into real
estate, it was like my first
year in, and I was like starting
it representing investors, and I
saw like a fourplex on Betty Joe
Joe Drive come up, and I was
like, I and I don't know why I'd
never heard of Betty Joe Drive,
but I was like, this is an
insane price.
It was like 400k for a fourplex,
and I was like, send, send,
send, send everybody.
And then I contacted my broker,
I was like, I found this great
deal.
He's like, You did not send that
to your database.
I was like, We did.
He's like, just respond with I'm
sorry, never mind, there's ball
wall.
It's like one of the worst, it's
like death.
SPEAKER_01: One of our investors
is gonna be like an investor on
one of those Betty Drive.
If you haven't been investing
long enough, somebody's gotta
own it.
I mean, somebody's making it I I
too at one point in my career
have looked at deals on Betty
Drive Drive because it it's it's
tempting, but yeah.
Uh I hope uh one of the owners
just owns it all cash, or for
sure.
SPEAKER_02: But I think that was
one of the the quick like two
minutes can walk away to is like
you know, location, it's not for
me or not, it doesn't fit my
box.
SPEAKER_00: Honestly, like
something I I paper napkin or
mental math, a lot of stuff, and
like you just get so good at
like what are the rents for this
type of stuff, what's the rent
for this type of stuff, and like
people would be like, all right,
let's put together a whole
spreadsheet on something.
And I'm like, I need like two
seconds on this.
Like, how much is it?
What what area is it in?
What's the bed bath, and what's
the square footage?
And like I can tell you if it's
worth diving into more like
someone the other day brought me
a duplex, it was like 450, but
it was two bed, one bath each
side.
Um, and I know the area, and
you're maybe getting 1500 on the
rents, and I was like, uh
immediately you're naked.
Like, let's just naked if it was
400k, three bed, three bath each
side, and it was decently
updated, okay, it might be a di
we got a different conversation
here because we got an extra
bedroom, we got an extra couple
bathrooms, like that that suits
more of a family that we we
could we can maybe work make
that work.
But like there's a lot of stuff
that if especially as an
investor, if you bring into one
of us and we just go, or yeah,
like let's or like oh you know,
like let's let's peek a little
further.
What what what's worth it?
And and there's a lot of value
in that uh with being with
somebody like us that can um
think about that beforehand and
not what waste a bunch of time
like oh let's let's do a full
analysis on this thing, and then
you're like, oh, you know, we're
minus a thousand bucks a month.
You're like you couldn't have
like mentally done the math on
that beforehand.
So I I excuse the r investors I
represent in my first year in
the business.
SPEAKER_01: Um and that's and
that's another we're gonna be
talking about it on the next
segment, but is under like get
before we dive into that, it's
it's getting it's underwriting
this through like hundreds of
bad deals to get to that point
where you know you can you can
tell what a bad deal is quickly
and but that it takes time like
that's almost as like, you know,
another measure is how many
deals are you underwriting?
Like this it could be a measure
of your success.
How many deals are you
underwriting a day or a week?
Yeah.
And that that can also excel
your uh your path there.
SPEAKER_00: Yeah, let's just
roll right in that.
Um this next segment is
underwriting deals plus due
diligence uh phase.
Um some of the things that we're
gonna look for uh with
underwriting I'm just making
sure it's good uh this does go
to the next page.
Um some of the things we're
gonna be looking for and then
we'll we'll tag in on some of
these but rent roll t12
financials if you don't know
what T12 means that basically is
like your rent role for the last
12 months um expenses versus
market norm sorry I got hiccups
expenses versus market norms
value add potential capex budget
if you don't know what capex
means it that means like bigger
ticket items we're talking roof
HVACs mechanicals uh something
wrong with foundation like
bigger ticket items that's what
capex means um debt assumptions
return to investors cash on cash
IRR equity multiple sensitive
sensitivity testing worst case
scenario planning um and so
those are some of the things we
need to be thinking about when
we're underwriting a deal um
Brian is one of those that
sticks out to you that like well
I have to have this every time
yeah the top two we've talked
about it multiple times on this
podcast is the rent role and the
T12 financials with the T12
being like you spoke about how
much you've collected in the
past 12 months uh of income and
then also how much what are your
expenses the last 12 months and
I would be very careful on that
T12 you know some some people
include some expenses in there
and some don't so when you're in
your due diligence period you're
not just looking at a rent roll
in a T12.
SPEAKER_01: Anyone could get an
Take their word for it.
Yeah you can anyone could create
a PDF or an Excel.
So you're looking at bank
statements and you're looking at
utility bills and you're
verifying that.
So that should be part of your
30 to 60 day due diligence is
verifying that the what they are
charging is true.
So rent roll but just because
someone's on a rent roll and try
paying 800 bucks a month doesn't
mean it shows that Natalie is
paying$800 a month but have we
collected when was the last time
we collected her she's only been
paying$250 she's been$250.
She's she's three months behind
and you're gonna have to evict
her which is going to take
another 30 days and then you're
gonna have to go improve that
improve her unit.
So and she's a smoker and yeah
yeah sorry Natalie Natalie we
got to get priority better.
Natalie needs Jesus uh Zach has
a church for you guys.
Um but but the rent role yeah so
doing financial due diligence on
on that like what they're
actually charging and then the
physical due diligence like
you're getting in every single
on the multifamily I say every
single unit but in a single
family you're you're inspecting
everything you're hiring a
professional.
Yeah like for me I'm getting in
my due diligence I like getting
like bit like I know like I know
that I'm going to have to put
some capex into it or I know
like I have an idea of what uh
GCs are charging for on price
per vertical but like getting
actual plans and like putting
them uh in front of them I think
is like getting hard numbers is
important in that due diligence.
And and you have to be careful
because you don't want to waste
people's time then the deal
doesn't come through.
And some people understand that
that's part of the due diligence
process too but um like as much
real information as you can get
from contractors that are
actually going to go replace
that roof or going to replace
your windows like go out to a
couple of those I I think is
important.
SPEAKER_00: And then it's as
piggybacking off of that
expenses versus market norms
there could be a property that
they give you the T12 and it
shows the expenses and stuff and
you're like okay okay but cross
checking that with other
property managers in the area
and going okay for a property
like this with 12 units like can
can I could I see y'all's T12 or
something and then you're going
like okay the one that I'm under
contract on has way more
expenses.
What's going on here?
Because these other I'm
cross-referencing this with
other data points and I this
what's happening over here is
not ringing true at this data
point that I'm under contract on
and digging into that and and
going like four other 12 unit
properties was what did expenses
look like and I think that's
something to dive into you don't
you don't just want to take
their word for it and be like
okay it just is what it is
because it could be high
expenses and you're like oh it's
because every HVAC unit is
getting replaced every month now
because we're on year 20 of HVAC
units and they're all old as
Christmas and now we're
replacing a furnace or a
condenser about every month now
and that's an extra seven and so
like it's like okay well to get
this back to normal we're gonna
need to change all the roof
we're gonna have to get new roof
and we're gonna have to get all
new HVAC and new hot water
heaters and that that's an and
then in your due diligence
period you're like hey Mr Seller
you know your expenses are
higher and this is what's going
to cost us and laying all the
math out and that you go okay
you know I'll do the new roof
and the new HVAC and stuff like
that.
Is that kind of ring true?
SPEAKER_01: 100% expenses you
have to be so careful with like
uh people that have these 30%
rate like expense if I see
that's another thing like a
sniff test or whatever you know
if the expense ratio is 30% it
better be a brand new
development and it's like we
have everything new in the
property like you know I I'm
seeing closer to 50% depending
on the prop type of property but
it it also depends on what is
the tenant paying and what is
the standard for that type of
asset class that the tenant is
paying.
Are they paying are they being
billed back for water are they
paying that directly are they
paying for electric directly are
they being billed back for that
you could go all the way to
where mostly you know for a
triple net lease where the
tenant is covering most the most
of the expenses if not all of
them so making sure under your
due diligence you're figuring
out how looking at the lease
lease agreements like analyzing
lease agreements is there's some
whack lease agreements out
there.
Yeah expect in the com
especially on the commercial
side and the residential side
with mom and pop guy that put
together it basically on a
napkin.
SPEAKER_02: So I think
definitely uh I mean the yeah
I've gotten T12s before on like
literally like someone writing
on a piece of paper and scanning
it to me and like y'all haven't
been tracking this or like no
some of those are the best of
the best deals fine opportunity
unless you're a real investor
most people most of them don't
keep the T12 no yeah not sure on
the single like if they do keep
a real T12 you're like oh this
ain't got a better the most
recent T12 yeah it's very yeah
it was like a legal pad with a
name phone number and their
written deposit that was it on
the like in your traps.
SPEAKER_01: Yeah for sure
boomers got it so easy they
don't I mean their their debt is
nothing and they because they
own the place outright.
I know all the tenants no
offense to our boomerlessness.
SPEAKER_00: Told me that so um
what what's one big underwriting
mistake beginners make uh what
what would you guys say?
SPEAKER_02: What is up I think
yeah I think under uh estimating
expenses I mean yeah one uh
trying to make it work probably
underestimating taxes and not
recognizing that they're gonna
be reassessed stuff but those
kind of things increasing income
too much pro using brokers pro
like brokers get like a bad rep
of having rosy proformas like
where it's like you're like this
is a broker pro forma great
investment opportunity that
ain't the act that's not the
actual foul yeah I mean they'll
be like they'll type out this
chat GPT uh description saying
how great of investment stable
cash flow and it's like a two
cap or whatever so yeah but yes
I mean or a pro forma five cap
you know when it's but pro forma
is it's showing rents that are
just not attainable.
SPEAKER_01: You need a you need
a pro forma like pro forma is
good because you're seeing how
they are managing it and how you
expect to but be careful on the
assumptions that you're making
like how how what percentage are
we increasing rents?
If we're increasing rents a lot
what's the justification behind
that are we just buying it and
we're the new owner and now we
increase rents?
SPEAKER_00: It's probably you
got to put some work in there to
get those increases we just
expect everyone that's already
if it's super leased up but if
we're gonna increase the 500
bucks a month what vacancy are
we expecting now because a lot
of people are going to say no.
Like what are we going to do?
So yeah that that that's super
good.
I think um piggybacking off what
Brandon said, I mean a big
mistake I see is property taxes
a lot property taxes and
insurance and just expecting
insurance and property tax are
going to be around this.
I mean I see a lot of single
family homes with property tax
with um oh the county says it's
1400 bucks a month for property
tax it's like okay because that
person's 79 and they don't
haven't had property taxes
assessed in years and once you
buy it now it's getting
reassessed and the millage rate
is fifty is 51 and so you're
gonna take that 400 000 times
20% and times it by the millage
rate now your property tax is
4500.
So like you just went from a
deal cash flowing to a deal
being upside down big time.
And if you're not smart and
you're not a smart real estate
agent or an advisor, you're
going to miss that.
And I would say piggybacking
into the next what's the fastest
way to kill a deal um I would
say almost what's a bad way to
lose your reputation as an
advisor is to miss that kind of
stuff is to miss the hey it was
good now but I I totally forgot
about the the and I've been I've
been I've I've been I've had to
have some hard conversations
early on in my career with a few
people of like hey I told you it
was 2000.
I know you just got reassessed
for 4000 I'm sorry I missed
that.
And that's something that comes
with time and learning and and
that will kill a the those will
kill a deal and probably I mean
getting quotes way beforehand
early in the because usually
insurance is like okay I'll give
the quote at the end or whatever
and get it right now because
like insurance is wa is wacky
and funky and it could kill a
deal as well.
SPEAKER_01: Go to your and and
to that you know we are looking
for sponsors like vendors and to
be able to recommend on the show
but like go to your insurance
guy like and or go to your uh
painter or go to your roofing
guy or go to your contractor and
call the city call them call the
city and get them new military.
SPEAKER_00: Hey are you
expecting a reassessment soon
like talk have conversations.
SPEAKER_01: Yes 100% and that
that's that's right into the
next segment uh building the
team that makes a deal work.
SPEAKER_00: So so I mean uh yeah
like building the team is what's
gonna get you the deals and
that's what my best out of state
investor clients do out of state
and in state investor clients do
is they build a team broker
lender mortgage broker uh banker
equity partners LP investors
property managers contractors
attorneys CPAs insurance broker
architect um and I would say
like you can keep going you can
go it says contractor but like I
would say having HVAC guys
electricians plumbers um and
that's something you know if
you're talking with Brandon and
I I know for sure like we'd be
able to say hey you know we're
buying this property and they're
like and one of my biggest
questions from people that don't
know anything is they're like I
don't know any contacts it's
like and my line is like hey I
have all of them for you I build
homes um I've already gone
through the bad people so I'm
gonna only give you the good
contacts and I have everything.
So like when someone punches a
hole in the wall and you need a
drywall guy I got you.
When the HAC goes out which it
will eventually I got you.
When the roof has hail I got you
like I you'll give you all these
contacts like a broker slash
agent can be the segue to
getting giving you like
basically all these contacts um
and at least giving you a couple
to try on each you don't have to
go find them yourself and be
like hey if you find a really
really good agent or broker they
can um assist you in a lot of
these like hey here's a CPA I
use here's a you know you want
to create an LLC for from
Arkansas here's the person that
can help facilitate that for a
$400 fee or something like that.
So um Brandon what would you say
is probably the top couple most
important people on that list.
SPEAKER_02: Yeah I think number
one comes to mind for me as a
lender.
Yeah you know I was I've had
multiple the the last couple
deals I've done uh very unique
and very different and you know
I've got two kind of go-to guys
when it comes to commercial
lending that I I really like um
and you know it's almost every
on both of those deals like one
guy the first deal one guy
couldn't do what I was wanting
to do and the other guy could
and he made it work and and it
worked great.
And then this next deal came up
and same thing like this guy who
couldn't do the one before could
get creative for me and make it
work and make it you know and
this other guy couldn't.
So I think number one lenders
will can make or break your
deals so and and you know all
have different terms all have
different things that they like
to lend on and not like to lend
on uh so I think that's really
important and property manager I
think is number uh number two if
not number one there if you're
not you know if you're managing
yourself I think you need to
check your processes and figure
out uh you know are you are you
doing this at a high level
because you're either killing
yourself or or uh you're doing
it the right way and then if
you're doing third party
property management then uh you
know I think getting a real good
understanding of because they're
they're not gonna care for your
property like you are
necessarily but I think
understanding you know what are
they great at?
Are they great at at renewals?
Are they great at um you know
marketing in general and getting
units leased up uh you know they
could be good at getting them
getting someone in there but
once it comes to the management
side of it it could be bad yeah
could they be great at you know
maintenance and helping you kind
of work through maintenance uh
you know in a way that's really
affordable compared to others so
it could be something where
you're like okay I'm going to
lease my properties and then I'm
gonna hand it off after that.
SPEAKER_00: Like I'm gonna I I I
know that I can do that very
well.
Like for the future for for my
properties that I buy I know
that like I'm gonna be the
person that like probably finds
that that in being in the real
estate field I'm gonna find the
tenant most likely but when it
comes to day-to-day management
I'm probably gonna hand it off
to property management.
SPEAKER_01: Yeah and but for
other people it may be like they
really need help with finding
the the tenant but they're good
at the day-to-day stuff they got
the time during the week so it
could be it could be a mixed
match of of that yep those are
those are two biggest for me
yeah I think uh Brian what would
you say top two for you yeah for
on the development side I would
say architect and engineer yeah
I'm like super learning that
like it's super important to be
engaged with them and we have
we're lucky to have some good
ones around this market and and
all these guys we're like in WA
we have a lot of good part like
uh vendor partners here so um
it's a it's a good community all
of these are super important I
think uh probably the most
important is your partner like
kind of leading to the next
segment before we go there but
you know it is the partners on
the deal that's who's running it
the GP and the LPs like yeah
who's the who are you investing
with who's running the deal like
on that like if you're not just
doing it all yourself with these
vendors.
I think if you're partnering
like in the beginning for me it
was every single one of these
was like super important like
putting it together the the
broker the lender the property
manager the contractor the
attorney and the insurance
broker you know CPA was an
afterthought but they are
important to have a good one.
You know but then uh that
involved to like who you're
partnering with is uh is super
important.
SPEAKER_00: I 100% agree.
I I think uh there's a prompt on
here it says who is the first
person you call when you have a
live deal since I'm an agent I
I'd I if I weren't an agent I
would call an agent first and
then my my first call since I'm
since I am an agent is my lender
because um it which transits
into the next section which team
member has saved you the most
money on a deal because I'll
call my lender and be like what
do you think about this like I I
kind of think of pencils and
they're like I some oftentimes I
call Heather long with Armstrong
Bank and I'm like I'm thinking
about doing this and she's like
well have you thought about this
and I'm like I haven't I'm glad
I talked to you first and that
in turn saves me a lot of money
so yep shout out Armstrong
December sponsor.
SPEAKER_01: Yep shout out
Armstrong Bank they're great
they're awesome let's go into
the capital stack how the money
comes together um equity LPs and
GPs um personal cash Brian can
you speak on someone who doesn't
know what LPs and GPs are yeah
me and uh Brandon actually did a
really good up uh podcast a
couple of episodes about that
the GP is basically the managing
partner the the person who is
putting together all these team
members on that we just talked
about and is the quarterback for
them and then the LP is the
person that is putting the up up
the money and should be getting
if it's structured correctly
should be getting the majority
of the upside yeah for the but
it because they're putting in
the risk capital where the other
member is putting in more the
the time capital.
SPEAKER_00: Let's work through
um raise structure like like
what does that mean?
Like 80 20, 70 30, 90 10.
SPEAKER_01: Yeah so that's been
a huge evolution for me.
Like I I've been a part of all
sorts of different structures
you know in the beginning it was
just me and the seller or me and
myself and then it was friends
and family where I I typically
did an 80-20 structure where
they got 80% of the deal for
putting up the investment and
then I put I got 20% for do
doing everything what we talked
about.
So they would get 80% of the
profit 80% of the upside um you
know when I worked with a
syndication company it was
structured as there was a 3%
acquisition fee then then the
investors would get 100% of the
profits until they achieved an
8% return.
And then after that it was split
70% to the investors and then
30% to the managing partners.
And then sometimes there was
what's called a waterfall hurdle
so if they achieved a 16 17 or
18% then the profit split would
go 50% to them and 50% to the
managing partner.
So that's a complicated
syndication structure.
So there there's a ton of
different ways to structure a
deal whether that's 50-50
whether that's return on capital
or return of capital then then
your return.
So you know for an investor
partner I you know structure it
you should all these things that
we talked about is important for
your your partner to have in in
place but how the how your
investment is structured is
probably the most important part
of the deal too.
SPEAKER_00: Yeah um I I 100%
agree um it's got a uh prompt
for us to to work through a real
deal I'm kind of gonna skip that
part and go what's the what's
the hardest part of the capital
stack and I'm I'm leaning a lot
on Brian because you do this
every day.
SPEAKER_01: Yeah yeah yeah
putting the deal like capital
stack like I'd say like for me
right uh I guess the LP like the
uh the equity is is like you
know knowing where that's going
to come.
Like where what you asked before
like what you have a uh a deal
who's their first call and it's
for me it's you know a short
list of investors that have
expressed interest to me that
they're they have a certain
amount of money they want to
invest possibly and I I send it
to them but um I I would say
that's the hardest part.
You know when I was doing the
syndications there was multiple
parts of the the capital stack
there was the lender then there
was mezzan E or preferred equity
and then there was equity.
So that equity would sit in be
there was a another layer that
would sit in between the bank
and the investor.
Yeah and that part was hard and
that that's like a whole nother
partner.
So totally you know knowing what
I know now I wouldn't invest in
a deal that has that second
layer.
You know I I as an investor I
want it to be either just me and
you know just me as the investor
group or me and the bank.
Yeah.
Um not another you know person
in between me and the bank.
SPEAKER_00: Tot tot totally
agree and I think if you're
listening this is a a great way
to um invest in real estate um
on in just a different just a
different manner.
Um I want to go to segment five
Closing and operation and
operating the deal, closing
checklist when you're getting
ready to close a property out
under contract, you're uh
approaching close.
Uh what are your final loan
terms?
Uh, what does appraisal look
like?
Um, surveys, attorney
commitments, um, insurance
binders, final walkthrough, make
sure you have your cash to
close.
Um, a lot of this, I mean, all
this is something that me and my
assistant or Brandon or
whatever, we would we would say,
hey, uh a lender would even say
appraisal's ordered.
Um, surveys would be in the
contract.
We would say, hey, are we
ordering them?
Are we not?
I would do me to order that for
you.
Um, attorney commitments to like
basically title commitments,
hey, this pro there's not an e
there's not a gas line running
through the middle of your
property that they're gonna have
to dig up in in five years, like
uh making sure that the property
is clean and clear and there's
no um liens around the property
or things like that.
Uh making sure you have your
insurance in order, final
walkthrough.
I mean, I do final walkthroughs
of my stuff early on in my
career.
Um, people are like, oh, is this
final walkthrough needed?
I've walked in in a raccoon and
gotten in the house.
So, I mean, we just make through
before we close, there's a paper
you sign off on before you
close.
That's the final thing you sign
off on.
Before you do that, you're gonna
make sure that that rec
raccoon's out of your house and
all stuff, I mean, for any
property.
Um, and you want to make sure
that you have enough cashier's
check.
Here's my cash to close, you or
you wired the money.
You don't want to show up to
closing and be like, all right,
I'm here.
And they're like, All right, you
need$100,000 and 37 cents.
And you're like, oh, I only
brought 92.
You don't you need to know your
cash to close.
Um operating after closing.
Um, you need a you need a
business plan kickoff.
Uh, what are you doing for
renovations?
Which honestly, like operation
after closing, the renovation
mindset, the the planning behind
that needs to happen like
literally like before you go
under contract like that.
Um, but like I guess executing
on renovations can be
post-closing.
Um, increasing rents, that
happens, of course,
post-closing.
Uh manage tenant relationships,
which will happen between
property manager most likely if
it's a deal that you're not uh
managing yourself, uh, monthly
reporting to investors.
Um, I'm sure Brian does a lot of
that.
Distributions, adjusting the
plan as the market changes.
Um, I'm sure every deal isn't
exactly according to plan.
Uh we wish it were, but you have
to be being able to adjust.
Um, what's a mistake uh we made
in the first 90 days of
ownership?
Um for me, I think one of my
properties um in Tulsa, my first
90, first 90 days of ownership,
I turned it into a short-term
rental when it should have just
been a long-term rental the
whole time.
Um and I cut, I thought it was a
cool idea.
Um, and I was getting like four,
4,500 bucks a month off
short-term rental, but it was so
much extra management.
And I just was like, you know
what?
I'm gonna put it up for$3,200 a
month for long-term rent and
just$400 a month of cash flow.
Let's see if we can get it.
And we got it immediately.
And I was like, praise God.
So, like, uh honestly, like my
my plan of action was wrong for
the very very beginning.
And my first, honestly, 120 to
150 days, I messed up on that.
Um, that that's honestly been a
mess up for me.
Brandon, have you even have you
had a mess up yet?
I mean, every deal you do is
great.
SPEAKER_02: That's not true.
I'm in it right now, so we'll
see.
We'll we can revisit this
conversation in in a in a few
months.
But yeah, I'm uh I just closed
on one recently and have started
renovations like within the last
five days.
So um so anyway, we'll we'll
see.
Uh I think I could have been
maybe a little tighter on uh on
having you know subs lined up uh
and having my process tight.
But I'm you know, this is the
first time I've had to turn a
rental unit, first time uh, you
know, yeah.
I mean, first time trying to
turn a rental unit.
I've done remodels, but they've
never had a budget.
You know, it's been kind of like
for personal reasons and
remodeling as we want.
So we will see.
I think the process, I mean,
time is money on these things,
yeah.
And you you know that too.
So I think just having process
dialed in um on remodels, yeah,
you know, is it's gonna help you
execute the business plan.
SPEAKER_00: So I I 100% agree.
SPEAKER_01: The uh, you know,
I've been pretty prepared and
pretty eager to like when I get
a deal, like that that's
probably my favorite part of the
deal is putting a deal together.
So like I do I have all the subs
ready to swing hammers day one.
Like some some of the mistakes
that I've seen in my personal
investing is they didn't happen
in 90 days.
They happened like in like 12
months and two years, and that
was more like on the partnership
side, like realizing that I
didn't partner with the right
people.
Yeah, like they weren't putting
up their work with their weight,
and like it things weren't going
according to plan.
Like within the first, you know,
sometimes it takes 12 months to
see that things aren't going to
plan.
So um I I would say like the
partnership not being aligned uh
would be the biggest mistakes
that I've seen.
SPEAKER_00: Totally personally.
I think that was a great
episode.
Yep.
Um we're gonna end it with I I
think it'd be cool to read this
at the end.
Brian, me, then Brandon.
Yeah.
And then we'll just cut in.
So Brian, you go first and I'll
I'll read my part.
And then Brandon.
A deal is like building a
machine.
Every part has to work together
and nothing works.
The team is everything.
A bad contractor or bad lender
can destroy months of effort.
SPEAKER_02: And don't
overcomplicate this.
Every big deal is really just
small deals stacked together.
Learn the pieces and and just
repeat the process.
Thanks for tuning in.
SPEAKER_00: We'll see you in the
next episode.
Thanks, guys.
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it's going to be taken care of.
There's no second guessing.
I almost am able to treat them
like a second transaction
coordinator to my transaction
coordinator that I already have.
I know that they're going to
handle the systems and processes
correctly.
As an agent, as a homeowner, as
a buyer or seller, they do an
incredible job of handling your
transaction and communicating
throughout the process.
They do a great job with
communication, especially Kayla
Phillips over there.
I would highly encourage you if
you're looking to close on a
home, buy a home, if you're an
agent listening, to use
Advantage Title and Escrow,
specifically Kayla Phillips.
So you're going to reach Kayla
best at 501-358-1601.
Or you can email her to Kayla C
A Y L A at Goadvantage
Title.com.
Advantage is A D V A N T A G E
Title.com.
Again, thank you guys for tuning
in.
I'm gonna go ahead and uh list
some sponsors off here.
We're gonna start with Winstone
Private Lending.
This episode is brought to you
by Winstone Private Lending, one
of the top private and hard
money lenders now serving
Northwest Arkansas.
Whether you need short-term
capital for a flip, a bridge
loan, or creative financing,
they've got you covered with
very flexible products to fit
nearly any deal, including 100%
financing.
What sets them apart is their
deep expertise, fast response
times, and ability to think
outside of the box to help
investors like us close quickly
and efficiently.
If you're looking for a real
lending partner, check out
Winstone Private Lending.
Link is in the show notes.
Banks are about community, and
Century Bank of the Ozarks has
been your community bank for 131
years.
That's over a century, since
1894.
They've been helping neighbors
build homes, grow businesses,
and plan futures.
Because they're locally owned,
your loan approval happens here,
not miles away.
Visit their locations in
Fayetteville and Mountain Home,
Arkansas, as well as
Gainesville, Theodosia,
Bakersfield, and Ava, Missouri.
Century Bank of the Ozarks,
local bankers make local
decisions since 1894.
Member FDIC and Equal Housing
Lender.
If you enjoyed the show, make
sure to give us a follow on your
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SPEAKER_02: Have a question you
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And if you're interested in
sponsoring the show, visit NWA
Investing.com to get in touch.
Thanks for listening, and we'll
see you next time.