In this episode, we’re on part 17 of our series that’s all about keeping things simple in investing by bringing it back to the basics.
I’m back with my business partner and friend, Peter Vekselman, who is averaging 30 deals a month.
In today’s episode, we’re talking about comps and the sources we use when comping.
This is short but sweet, so get going…
Listen and Enjoy:
- 2:25 – Peter’s advice for newbies who may be concerned about how best to utilize comps in their business
- 4:40 – The one tool that Peter’s team uses first for comps
- 6:25 – Peter’s best source for comps when you need speed and accuracy
- 13:00 – Sites Joe uses for comps
Mentioned in this episode
- Peter and Joe’s book: Free Basic Book
- How to work with Peter and Joe: Peter and Joe
Joe: Hey, everybody, Joe McCall of Real Estate Investing Mastery Podcast. Glad you’re here. This is another Brilliant at the Basics episode series with myself and Peter Vekselman, the most basic guy you’ll ever meet. That’s a compliment.
Peter: Thanks, Joe. I do think that was a compliment.
Joe: We created a book. And I don’t have the book with me but I have our brand-new DVD. This is actually a DVD we just created. It’s called Brilliant at the Basics, which is what we’re all about. And there’s actually a real DVD in it. And the book that we wrote, we’ve sold over 1,000 of those books, and that’s New York Times best seller status for me right there. We’ve been introducing a lot of people to this whole concept of being really good at the basic things in this business. And that’s the best way to make a lot of money is being really good with that. Whether you’re doing the typical real estate agent stuff or you’re doing wholesaling or rehabbing or whatever, it’s about keeping it simple and being really good at the simple things.
So that book, Brilliant at the Basics, we did it. We did four webinars. We got those videos transcribed and turned them into a book. And the book is doing really well; we got great testimonials. And now, we’ve just created the DVD. So for you guys that want to watch the book instead of reading it, you can get this DVD. And so I’m working on creating a page for this. And by the time you see this podcast, I’m not sure if it will be up yet but this is a book and it’s pretty cool. The other thing… So I want to tell you to get the book. It’s FreeBasicBook.com, FreeBasicBook.com. And maybe the DVD will be FreeBasicDVD.com. I don’t know yet. But if you want to work with Peter and I, if you to PeterandJoe.com, you get more information about that.
Peter, on this episode, we’re going to be talking about comps. That’s a question you get a lot in your coaching business when you’re… I mean, not just in your coaching business. I mean, you’re doing 20, 30, 40 deals a month. You’re always looking at comps. This is just something that maybe is second hand nature to you because you’ve done so many deals. But what do you say to somebody that is maybe just getting started or somebody who has done a few deals already and they’re nervous about comps? What do you tell people when they’re looking for comparables?
Peter: Sure. That is kind of a common question that comes up everywhere. And although for a lot of questions that come up in this business we tend to have answers for, comps is one of those tricky things. I don’t think there is just that one perfect source that we could send people to across United States, no matter where they live, no matter what kind of deal they’re doing and just say, “This right here, this source is the end-all, be-all.” There are no perfect websites out there. There are no perfect tools out there. But having said that, at the same time, you and I both know comps is an important thing. I mean, let’s face it. We’re making decisions based upon these comps.
So one of the things I tend to tell people is in reality situation, we, as investors, just need to know the market. We’ve got to know where we’re investing in. We’ve got to know what the values are. We have to know what’s going on in the market place. Now having said that, I’ll tell you just from personal experience; I’ve been in Atlanta market for 15 plus years. I mean, I’ve done thousands of deals here. And to this day, there are deals that come into my world consistently that I’m not sure about, because all of us live in areas where things change. You can literary be dropped… For example, I tell people if you can be dropped anywhere in United States, and you can walk five miles one way and five miles another way, and get guess what? Values are going to change.
Peter: I mean, sometimes it’s not even a mile thing; sometimes it’s a block-to-block thing. So there’s usually now way no matter how well you even know the market, again which is what I encourage to really truly dwell in and understand every single comp of every single property. But I will tell you, the first starting point is learning the market, understanding what you’re doing and how you’re doing, and what’s going on. At the very, very basic level, even in my office here and you’ve been here, you see how intense we are in terms of deals we do. We get thousands of seller calls consistently here. So every person here starts out with just a basic tool that’s available to everybody and that’s Zillow.
We start out with Zillow and that’s gives us the starting point. That gives my negotiators here in Atlanta a starting point here in Atlanta, but guess what? It also gives us a starting point in other side right off the markets that we’re doing. When we’re negotiating deals in Florida, when we’re negotiating deals in The Carolinas, it’s a starting point to see if you’re at least even in the ballpark. It’s not a do-or-die number. It’s not a number that you would spend necessarily hundreds of thousands of dollars based upon what Zillow say. But at least it is some kind of a starting point to know if you’re even on track in terms of the kind of deal you’re working with.
Peter: Now ultimately, when it comes to buying decisions, when it comes to moving forward or moving backwards decisions to renegotiating decisions, all of us come to a point in every single deal where we have to have some kind of a black and white number, where we can’t just kind of go with a range. You know, this is an $80 to $100, $10,000 property. And so what I suggest at that point for people that I work with, and it’s something we do ourselves is sometimes you have to go to outside sources. And a lot of times when people think about outside sources in this business, they’re thinking things like, “Well, does that mean I need to let’s say get an appraisal done?
And so I got to hire a third party to go out there to look at it, to measure it, to comp it out with sophisticated formulas and sophisticated databases. In my opinion, you really don’t have to do that. I mean, there are very reliable sources available that you could spend a little money with, and I’ll discuss in a minute how you could utilize the same reliable sources and not spend any money with them. In my opinion, the best source for comps is in those situations where you need speed and you need accuracy is to connect with the local real estate agents.
The reason I love to recommend real estate agents is that again they’re accessible. There is no part of the country where you’re going to be at where you’re not going to have access to some kind of a real estate agent. And the good thing about most or all real estate agents is that they have certain requirements. There are certain basic standards that they have to meet. And one of those minimum standards is they all have access to the MLS system across united States and they all have access to databases that you and I don’t as non-licensed investors have access to.
Peter: And pretty much, any agent that’s been through their basic MLS course is licensed. They have been taught along the way how to pull good comps. So the source that I tell my people to go to, that I recommend, and again source that we use here is to contact some local real estate agents and work something out of that. So I think ultimately, everybody agrees agents can give us a lot more accurate comps that we ourselves as non-licensed investors can get. Then the next problem comes in. Well, how do I get an agent to do it? I mean, let’s face it; why would an agent out of the blue just tie up their time and their resources and their efforts, and start comping things out?
So what I teach people is basically a model that can be applied anywhere, again across United States with pretty much any agent with pretty much any investor. It’s basically a two-option model. It’s got a paid side to it and it’s got a non-paid side to it. Now interestingly enough, here in Atlanta, we use both of those models, the paid and non-paid. We actually have two separate agents we work with here in terms of pulling comps. One agent is on the paid side; the other agent is on a non-paid side. On the paid side, we basically pay our agent $10 because we feel that for the kind of effort that it takes for them to pull comps, the kind of comps we need… again, we’re not asking that agent go to the property. We’re not asking that agent to inspect the property. This is a decision whether or not to put a property under contract. Obviously…
Joe: So you’re doing this before you get the property under contract typically? Is that right?
Peter: Yeah, because look, the due diligence period only starts afterwards. So we’re still going to do our inspections in the backend if we’re flipping the deal. Our investors will do the inspections. But we’ve got to know. We have some kind of a fine decision or at least a move-forward or a non-move-forward decision. Again, this happens in those times when we’re not really sure ourselves where the numbers need to be.
Joe: So it’s not every time. Sometimes you’ll do this.
Peter: That’s exactly right.
Peter: Sometimes… And again, it all comes down to… and for those of you that are listening to this podcast, it all comes down to, “Can you yourself with what you have available to you make that decision whether or not to move forward or not?” More times than not, we can make our own decisions here without using an agent because the cash flow deal is not obviously… At that point, it’s not an equity-necessary-driven deal; it’s a cash flow deal. But in certain circumstances, when you are dealing with retail type of deals, and you’re not quite sure about the pocket it’s in, or maybe the configuration of the house, or maybe you’re a brand-new investor; you’re getting started and you’re totally lost, absolutely I’ll connect with the local agents and on a paid side, I’d use about $10 bucks for comps that they pull.
Joe: Yeah, that’s simple enough. Now, do you…? In your office, you have access to agents in your office who have MLS access, right? So is that… this realtor that you’re paying, is that someone outside of your office or this somebody in your office?
Peter: Well, in my regard obviously, it’s somebody that’s already working with us. But again, the good thing about agents is there is no shortage of agents anywhere. So again, if you’re a brand-new investor or if you’re an investor that you understand that’s your weak spot, you’re having a hard time making your decisions on whether to move forward or whether not to move forward; I promise, you can literary get on the phone in any part of the country, go to any major brokerage and just dial for dollars. And if you contact 10 random agents and tell them this is what you’re doing, “Listen, I’m putting deals together. I need some third party perspective on it. I’m willing to pay whatever, $5, $10; I think there will be no problem to finding somebody that’s willing to do that. And again, we pay $10 bucks. We work on the paid… That’s how we handle the paid side model.
Joe: I will say…
Peter: But at the same… Go ahead.
Joe: I’m just going to add a few notes. But go ahead; I’ll have them when you’re done.
Peter: Well, there is also the non-paid side. On the non-paid side, we have agents that we work with. And how we reward them is we give them listings on the back end, okay? So that’s the other option. You could tell the agent just like you would tell a contractor that it’s best to go out there and bid out ten properties for you and both of you, and he knew he may only do one or two of those deals. That’s just the price that the contractors pay for being in this business. Well, on the agent’s side, if you’re an investor that actually does do deals, that does close deals, that does have potential to give that agent some business, the other deal that you could make that we do with our other agents here is we give them listings. That’s the reward for comping properties out.
Joe: That’s good.
Peter: So we actually have a lot of retail listings we do here. So we have an agent actually that does over 100 listings right now. She’s got a whole team around her in terms of what she does. And that’s part of their responsibility, their team’s responsibility to us in terms of us feeding them all these listings on the backend. They comp properties out for us in the front end. So there you got the paid model and you got the non-paid listing on the backend-side model.
Joe: I think, I like… Even though I have access to the MLS, I like the $10 comp model because that’s something that if you got a realtor that you’re working with, you just pay them $10 and they can comp you a property. I was making some notes here, Peter. I think the key thing is to keep this really simple, because you could complicate this and find yourself at the end of the day spending a couple of hours every day just comping properties, which is absolutely ridiculous. It doesn’t need to be that complicated. And one of the things I was thinking about was in addition to Zillow; there are sites like Eppraisal and Express.RealQuest.com. Again, Eppraisal and Express.RealQuest.com.
And with Eppraisal, Zillow and RealQuest, you can sometimes get three different numbers, and then take the lowest of the three or average the three as your comp value. There are also active listings, which I think is really important because when you’re looking at figuring out what a property will sell for, it’s important to know what current properties are actively selling for right now. So if there’s a nice house that’s selling for $200 but your comps are telling that your house should be worth $200… I mean, should be worth $220, you need to go with the lower number. So if you see somewhere a house is selling over the $200,000 price range, that’s where you’re… That’s probably a better or more accurate comp. And anybody can get active listings at Realtor.com or Zillow or whatever so don’t forget active listings.
I have one more thing too. Another option… I’ve never done this myself, Peter, but I know people who have. They hire BPO agents to go do comps for them. And for $50 to $100, you can find a BPO agent that will go drive by the house, take some quick pictures, and give you some comparables, prepare a nice little report and give that to you. That is something that you can do. The other thing I was going to say is you need to know who your buyers are, right? Because a lot of times, your buyers will tell you what the house is worth to them. And there’s different… Cash flow deals are different than retail deals, because cash flow deals, that’s just an ROI calculation, so you work from the rent backwards to come up with an offer.
But your cash buyers will tell you. Many times, if you’re new in the business, you can just call up some of your cash buyers and say, “Hey, listen. I got a property in this zip, three bedrooms. What do you think it’s worth?” And if you have a good relationship with your buyers and they know you’re hustling and bringing them deals, they can give you not only the comps but they can give you what they would pay for it, which is extremely valuable. So one more website I’ll mention is Redfin. In a lot of markets, Redfin is available, like in St. Louis; Redfin will give you sold comps when Zillow and Realtor.com will not. Why that is I don’t know. Redfin has always been a thorn in the side of some realtors in some markets.
But I think there’s always websites out there that are free where you can go and get sold data. I really like RealQuest, Express.RealQuest because you can get an account that will give you information on properties in your current counties or nationwide and will also have a pretty good comparable engine in the back that will give you sold comps within a half mile radius, within 15% of the same square footage, things like that. Helpful stuff, the key to this is to keep it simple; keep it basic; don’t complicate it; don’t spend too much time on it. Again, when you get the property under contract, right, Peter…? You can always renegotiate it if you have to if you’re in it to a deal, right?
Peter: Yup, absolutely.
Joe: You’ve got to make that offer as quickly as possible. Good.
Joe: Well, thanks. Again guys, this Real Estate Investing Mastery podcast, another Brilliant at the Basics series. Go get your free book or DVD at FreeBasicBook.com and we talk a lot in here about the systems and the tools that we’re using to close 30 plus deals a month. Peter and I have a coaching partnering program that we do together where we’ll actually kind of give your business in a box, and we will do all your marketing for you. And now, I just talked to Peter about this and I’m putting him on the spot. We will actually negotiate and close your deals for you on the phone. You pre-screen the leads. We’ll do the marketing for you; you take the calls and you pre-screen the leads. And Peter, how many negotiators do you have in your office now?
Peter: A lot. We always have about 12 to 14 here all day.
Joe: So one of those guys that Peter has personally trained will close your deals for you. I think that’s huge. And so if you’re interested in that program, just go to PeterandJoe.com to get some more information, PeterandJoe.com. All right. Thank you, Peter. I’ll talk to you later.
Peter: Thanks, Joe.
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