Invest Anywhere, From Anywhere Podcast

Episode #18 Tim Winders & Mark Jackson: Theory vs. Practical Real Estate

May 23, 2019 Appraiser Secrets Season 2 Episode 18
Invest Anywhere, From Anywhere Podcast
Episode #18 Tim Winders & Mark Jackson: Theory vs. Practical Real Estate
Show Notes Transcript

Theory versus Practical Real Estate has become the go-to Valuation Specialist for people who want to achieve more in their real estate investing business and works with many real estate experts who share with us their individual theories and strategies in real estate and general business success.  

Back in the day, MJ’s book of business was extensive and through his work, he developed a network with a variety of industry experts and others. Through his years of experience in the industry, learning and with his network, MJ has been coaching real-estate investors to achieve success with a great focus on developing yourself to serve others. 


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Speaker 1:

Growing that knowledge ourselves, we actually are able to transfer to other individuals for our greater understanding of everything that is we work on in touch. Well going out and taking these folks that only had the theory, okay, adding the theory I have plus my practical allows you to see once you're out in the field, the House that you saw on paper did you just got that appraisal order for my have any number of different nuances to it that affect how you apply the value and that's the practical side. So I can give just a simple example. All right? You get an appraisal order, it's for a single family home in a brand new subdivision. No one's lived is homeless. Under contract you have all the cops you could ever possibly want right there instead of it, you have to go drive around. The data is going to hit you right smack in the face. So you go to your subject property, you pull up, you start walking around and you look at the size of the dry. It's the same as 20 other homes that had the exact same footprint diagram. Everything. I mean the bathrooms in the same place, the garage in the same place. Then you walk around the back of the house,

Speaker 2:

you are listening to the razor secrets podcast with your host Mark Jackson. You will get straightforward advice for how to make a profit on every new transaction that you do, compounding your net worth and grown your wealth substantially all through real estate. Get more information and appraiser secrets.com.

Speaker 1:

Okay.

Speaker 3:

Welcome everyone to the a appraiser secrets podcast powered by investor comps. I am Tim Lenders and I have marked, you can call him Mj Jackson on the line. How are you today, mark?

Speaker 1:

Doing absolutely partly wonderful terms. Could be a great time, Kevin Boxer to care and share with the listeners today.

Speaker 3:

Yes, absolutely. At the time of this recording, I can see that you're still in your office in Denver currently. Yup. Just outside of Denver up in the upper room that we like to call it and uh, I have to put forth a little disclaimer, uh, from the RV. I am on the coast, I'm on the shores of the rogue river somewhere in Oregon. And so like we were talking earlier, if you hear birds chirping and all in the background, it's because I'm out amongst nature.

Speaker 1:

It's a beautiful thing, man. It's a beautiful thing.

Speaker 3:

Anyway, I want to welcome everyone. Thank you for joining us today. We have a very fun topic. We're going to be talking about theory versus practical real estate and we're going to break it down. We're really going to dive into each one of them and then stay tuned to the end because what we're really had to do at the end is giving you the answer to what you really need to do. In other words, how do you balance those two? And we're going to give you very specific steps on what to do with. But again, we thank you for joining us on this podcast. Please share it. Please rate it. Please give us feedback and comments. We welcome that. So, uh, so having said all that, we're going to dive right in. And again, we're talking about theory versus practical real estate. And the first thing I'm going to do, mark, is I'm going to ask you as a well trained real estate experts to talk to us about the theory of real estate. And I'm going to let you go for a while. I'm going to stop and ask a couple of questions, but tell us about the theory of real estate.

Speaker 1:

Well, I'll take it even a step further back than that is I go back to the idea of the threat, the theoretical application of appraising. Um, when, you know, when a bright light went off and said, you know, I can do something else other than work in a corporate world and went to appraisal school, uh, with the hope of desire becoming an entrepreneur and eventually being an appraiser or opening a farm. So as a fourth, uh, in that classroom setting, we actually spent a wealth of time diving into the theory that is real estate appraise. This idea that you're establishing a value for a moment in time, uh, something can change from one day to the next on a piece of real estate, land conditioning, single family dwelling with her case may be that changes that value. So we're doing it for a moment in time, but overwhelmingly, uh, the things that we looked at, the, the different types of foundation from slab to cross based to basement and what that meant, not only to the structure of the home, but also to the overall application of value to that piece of real estate. There were a number of different books, theories, case studies that we did in the classroom. Now was fortunate to go to a school that actually took us out in the field as well. So in addition to doing the book work, we actually got, she has to pull out a tape measure and measure the extras willing of a house, uh, draw out the actual framework of the dwelling, things of that nature. Uh, we got to see different lots and, and how homes were positioned on those properties. So there was a measure of some practical application of appraising to as solely as relates to the single family residence and maybe some of the comparables. But we didn't get a chance to do that. And I mean I look at some point this man, we all, they'll go to school. We got a lot of books. I have a wealth of data that I still reference from time to time on appraising. This is um, the appraisal of real estate books that we can handle the pages of that one's, that one's the thick one. This is another one. This is a appraising residential properties. So that one's pretty good. I mean, he's a copies, I'm telling you. And they do serve me well. Uh, one of the things that they'll want to bring out for this particular conversation, cause we'll go to take a four. This is the dictionary of real estate appraisal. So there's any number of different terms that we use in real estate of relates to the physical dwelling as it relates to the land use. The different municipalities that have zoning offices. Again nature, even if it relates to finance up, here's a good one, the mortgage coefficient and how we actually apply that to the gross rent multiplier when we're doing income applicants, all that stuff that takes place on paper, but even when it comes to rent application or particular these dynamics as it relates to a single family residence, you got to the site. That's the actual practical. When I was appraising, I actually had a book of business that was a little bit bigger and I can handle and through relationships. I've had some friends that were actually dow going to appraisal school who also had friends that were going to appraisal school now for them, they were going to a different facility that just taught the book knowledge. They had never been out with a camera with a tape measure and driven and actually measured properly, so I had a little bit different skill set on the practical side. Okay. Actually touching houses as compared to only being in a classroom for 90 hours. As a result over time, it allowed me to teach and we know overwhelming anytime when we're teaching. Not only do we solidify the knowledge for ourselves, grow in at knowledge ourselves, we actually are able to transfer to other individuals for our greater understanding of everything that is we work on in touch. Well going out and taking these folks that only had the theory, okay, adding the theory I have plus my practical allows you to see once you're out in the field, the House that you saw on paper, they just got that appraisal order for my have any number of different nuances to it that affect how you apply the value. And that's the practical side. So I can give just a simple example. All right? You get an appraisal order, it's for a single family home in a brand new subdivision. No one's lived this homeless under contract. You have all the cops you could ever possibly want right there in a set of it. You have to go drive around. The data is going to hit you right smack in the face. So you go to your subject property, you pull up, you start walking around and you look at the size of the job. It's the same as 20 other homes that had the exact same footprint diagram. Everything, I mean the bathrooms in the same place, the garage in the same place. Then you walk around the back of the house and you find that this one, I'm just using a visual example for Metro Atlanta. Metro Atlanta is the area that's sitting in the foothills of the Appalachian mountains, and so it's got rolling. All kinds of different types of biography is nowhere near flat. Okay, I'll work on this property and what do I find? I find that it has literally no backyard that is level. Now it's got another 75 80 feet of backyard, but it's all on a 14% grade going straight down hill. There's a fence around it, and right behind it is a detention pond because that's the detention pond is what holds the water management for all the impervious surface. So that's one of the words that come out of the book impervious surface. Okay, well this is the keywords you've used coefficient in pervious. You'd actually use some theoretical words already that are probably some people going, oh my goodness. Anyway, so, so the, so visually what I'm saying is you've got the same cookie cutter House that's throughout the entire subdivision, but unlike the other ones that have a backyard front yard, this one sitting on the land, it's got a serious 14% grade of the backyard just goes down, which is not usable. You're not going back there and putting up a play set or you're not going to have the capacity to drop in and above ground or in ground pool of any kind and then visually for your view, okay, you look out your back window, you're looking at a detention pond that even says slow in that all it is is either going to be dry bed India event, that there's enough runoff words that go fill it up and it's just going to grow up with grass like that or some Kasians. It might have a little bit of water or mud or whatever case it. So now you've got to take and actually come up with an 80 essentially he deuce how you're going to evaluate the contract has been written on his property. The other comparables that aren't going to have this same characteristic to it. That's the actual practical side of doing real estate and applying valuation to a deal that either you're looking at or that someone else has brought to you. And it's not until you actually get out there, go look at that. The, I mean, I always use the phrase before you put the kid condition, you want to smell money. Well, based on the numbers on this deal, what you're actually getting for it with the values, you have smelt money. But now you've gotta determine if that money's still smells sweet based on the property that you're dealing with. And you only get to do that when you take action, actually get out in the field and act on the lead that has come to your desk. Sure, sure. So, so tell me, because I'm sure you went to school with a lot of people that were maybe good with theory that maybe were a little bit weak when it

Speaker 3:

came to going out in the field or maybe even vice versa. Um, what are some observations that you have about, you know, one of the things that people that maybe don't do as well in school, in his eye, they joke about people that are book smart but not practical, smart, you know, theory smart, sir. So tell me some observations you have about people that are theory smart but not necessarily out in the field proficient. Uh, give some examples or maybe even, I mean, cause you've obviously been able to marry the two very well and we're going to talk more about that towards the tail end of the podcast, but, but just some observations about that. And let me give you that topic.

Speaker 1:

Well, it comes to fold in most in most cases, especially on the appraisal side. And then, um, even in the real estate deal side, it really was a showing up when the review appraisal comes in. When an appraiser go out that basically as applied their theory, their, you know, their in class knowledge, they've gotten it, they've, they've, they've gotten their personal license, they've gone out there getting appraisal works that they've got to order, comes in, they're doing their background analysis or going online or in some municipalities they've actually had to go to court house. They pulled up the subject property data. They've now have some comparables that have actually sold within a certain proximity and it's grown timeframe around this separate property. Or they may even have gone the extra step of guiding some lists that gotten some listings. Some sales are actually on the market about to sail. So they've got a framework of the value. They'll go out, they'll look at that subject property, see the circumstances are there. They'll take their pictures, do analysis, they'll go right back to their desk. They'll sit down and put the appraisal in a go off to the bank and the bank will, um, have a review appraisal done on it. And if you appraiser says, this person did not take the care and diligence because there's this circumstances. Matter of fact, even just looking at the maps, given the technology we have with Google maps or any of that nature, it's easy to make a determination about, uh, a certain location of plot of land that are dwelling is on. That doesn't show up anywhere in the notes on the appraisal. So now you have a challenge. And this goes right to the real estate investor. Miller said, investors looking at the data, they see that they're acquiring this property. Uh, it's a$200,000 value. It's foreclosed on, they're getting a discount and they see that they can acquire this property for about$130,000, maybe do a little bit of work to it, and then they'll be able to guard that$200,000 value to challenges because of location and the circumstances with that particular property. Two things are gonna happen. One, the value is not going to be the whole 200,000, because it's an inferior location in. The second thing is good. The second thing that's going to come up is that they're going to be on market so much longer because it's not a desire of is desirable property at the prices listed at and that's going to really impact that investor because overwhelming they're, if they're really looking at their deal, they're actually analyzing how long the houses in the area on market, how long they're gonna wait before they go into contract. If in fact there's someone that's getting financing the type of findings and that person might doing where they're doing FHA or conventional, all those things are going to come back and bite us when we're not looking and taking the experience of the practical work that happens in the field when it happens and comes to a piece of real estate they were investing in versus just the classroom stay in the lane. It's in a box and you're treating every unit like itself because it is easy to do in the circumstance we're talking about where you've got seventh floor plans or sets of plans for property. Though seven plans are throughout the dwelling. They might change the color, maybe change the stack stone versus a brick. Maybe they'll have all brick on the front, maybe they'll have three sides, brick depending on the desires of the different spec homes that are built in the neighborhood. And so those are little nuances that will impact the value, but that location and what it means to an investor when they're trying to turn that deal quickly and certainly know that it's going to appraise right. So that they can move it and recognize and harvest those resources and then go do another deal. Overwhelmingly the practical side, someone that actually understands how that location will impact the profitability of that transaction is invaluable. And you can't put a value on it versus just what you get on the theory side. Yeah. So, so here's some

Speaker 3:

thing. Let's maybe, let's maybe have a conversation geared towards the investor that may not have an appraiser background. Um, and this investor wants to go out and start doing deals, may not have a lot of the theory. So they're, they're heavier on the going out and doing it sign. So talk about number one, some ways that they could not, you know, get burned a mess themselves up because they don't have theory. Maybe some ways that they can get some theory without reading those books you just held up that are way too big for most people. Uh, and uh, but not getting too bogged down with that theory. You know what I'm saying? So talk to that. So the, so the people we're talking to right now, let me clarify, these are real estate investors or people that are buying real estate are interested in real estate that may not have the appraiser theory training and background. Okay,

Speaker 1:

go. So in this situation, you're still, I think we talked a little bit about getting training and actually applying it for your VOST in investing. And so that's important. Again, you don't want to be going to training after training training and not applying the knowledge. Get, get a couple of different um, courses, seminars under your belt. I highly recommend taking evaluation. First of all, shameless bribe here. Use Your investor comps. There's on demand training there that we'll remove the burden of having to actually become, you know, one on one or one oh two type a train or two or one touch frame appraiser. Okay. But pay attention to the details. When you go out to the site, you want to be in a situation where those are properties that you look at, that you engage with are or have similar characteristics both with the physical dwelling and with the lot that it sits on the location as the subject copy versus the comparables. That way you'll know you're in good, you're a good physician. I mean grant is square footage is going to change and adjust from house to house. Um, some of the um, uh, Carrie curbside characteristics are going to change your product, copy those things as long as they're in reasonably good proximity to each other, not a mile away, but you know, within a quarter mile, within the same neighborhood, those are going to be good things that you can rely on. Okay. To actually compare subject property comparable to know that that value you're looking for is going to be consistent. Um, but overwhelmingly don't allow someone else to tell you what the value is. They'll allow someone else to tell you, uh, what you should be looking at on a practical side of application for property because those wholesalers, those other marketers of the deals they're trying to sell to you and obviously it's going to be the best deal that the largest margin you possibly could earn. So on and so forth. Allow yourselves to take an evaluation first approach, use investor comps and our on demand training that guide you through being well aware of what you're experiencing on the practice out. When you're actually out there looking at property, anything you care, forgotten, just come back and ask us. We've got a great support desk, we can help you with that. But again, core elements, square footage, you're building room counts, lot size and similar locations or conditions on those lots are going to be those core things that are going to help you look at that property from a practical application as compared to just being willy nilly or not having any theory to apply to it.

Speaker 3:

Okay, good. So what I, here's what I got. Let me tell you what jumped out at me. Something you said towards the tail end was to take ownership. Uh, do not, do not allow, um, uh, you know, something that comes across your desk where someone says this is, you could buy it for this. The ARV is this and you know, we've all seen those and then people go off and they immediately start repeating that that's the after repair value, whatever. Um, naturally build a relationship with someone. Maybe you have a little more confidence but, but I think the term a lot of us is trust but verify, you know, you want to trust them but you want to go out and verify. That's kind of what I heard you say. And then I liked those core elements that you gave, uh, to look at. Um, there, but then I think the tool, I mean for those that aren't aware of that or listen to his podcasts, you know, investor comps has a lot of these tools available for the investor. They have all the tools really for, for the, for the investor to get that information. So, uh, you know, there's nothing shame. It's about that plug to plug. We're going to let people know that that's available and it's out there. I'm keeping an eye on our time here. I think we're doing pretty good here. So, um, so all right, so we've, we've talked about the investor that might be out there working on things. We've talked some about theory and then he helped people can get bogged down with that for the last few minutes here. Um, mark, let's, let's kind of bring them two together and, and let's talk about a formula, uh, for success. In other words, how do you marry theory and practical and do it consistently longterm and do well with it?

Speaker 1:

Oh, it's, um, you know, the thing about becoming an investor, we all come at from different walks or certain emphasis from it. Uh, we're in different marketers across the country. I offer references, idea that you want to have a certain affinity for the market area that you're investing in. Whether it's something where you grew up, where it's where you now live. Maybe it's where you went to college. It might be somewhere where you visited with, um, a sibling or an aunt or a grandparent and there's something about that market area that just kind of parks your interests. You think that you could do well there because of the different characteristics of the market area. So this is, um, that's more of the, it's not so much this is theory because you got to start somewhere. Okay. And then you start having conversation or getting some knowledge about the type of investing you want to do. Um, because valuation of, uh, comes in to play with your being a lender, whether you're the rehabber, whether you're the wholesaler with you're actually buying the property to own it long term as a wealth building, building units, or if you're going to flip that property, if you're going to buy it, fix it up and resell it for property, you know, somewhere between six to 12 months. So yeah,

Speaker 3:

tax liens or notes or any of that kind of stuff,

Speaker 1:

facts, plaintiff notes, all that plays into the valuation side as well as what is going to be the idea of the type of investing that you're going to do. Then you get a little bit of education. Okay. And then you transition to the actual doing of that business in real estate and be mindful. Um, I just started relistening to, uh, this book. I want to share it with everybody, the e myth by Michael Gerber, Ie myth by Michael Gerber, but he did a subsequent version called the e myth revisited. And in here, and this, this really does apply to real estate investors, whether you're a novice or you've been out a full about it, just getting started. And this theory, this idea of that theory part of real estate investing and the practical side because you're starting a business and yes, you want, maybe you're trying to create some more income, maybe you're trying to get away from the job just about just over broke. I think it's one of scat kickers refer to it, but you want to get beyond um, going in and doing real estate as a means of ways to create income and finding out all you're doing is all you've done is create another job. So I recommend reading that book because it gives you a framework of actually how you want to go about transferring your idea, your concept, your theory that you want to be in a real estate investor and start putting it to practical use. So getting that basic Coraline knowledge, determining what marketer, where do you actually want to do business, choosing that market and how you want to engage there. Then defining, okay, what type of investing through I want to do in this market. Am I going to be acquiring properties just to rent? Am I going to be a properties to flip? Can I do both in this marketing? Is there a part of that market area that is specifically all they want to do is rent and then there's another little part of that same county city municipality that actually is a up and coming marketing and people are moving there because of the schools. They're moving there because of the commercial activity, the different shopping and stuff that's being developed and so there's a draw to be in that location. Look at those marketers, determine how it is you want to engage that market and then be ready to move forward with the right tools. Overwhelmingly having evaluation tools like investor comps, if Pacific is going to put you in an excellent position to determine the value that you should buy at, but then also what the after repair value is of that property. You also want to know who are the buyers and sellers in your market area. Okay. Is it just an area where, um, Tim[inaudible] and Jay and Mj selling, it's him in a variety of transactions or are banks actually releasing property and selling it to an LLC is an that actually required apart from my bank and now as remarketing it to a homeowner. You want to see who those buyers and sellers are using investor comps, allowing you to apply these different little appraisers secrets so that you can actually be more on the practical side of applying and doing real estate than just the theory side. Actually taking action, touching the different lead sources that are coming your way, analyzing them to see how profitable you actually can be as you set up your entrepreneurial endeavor to be a real estate investor. Those are some of the core things to put in place in touch so that you could overwhelmingly be more on the practical side than just the theory because, okay. Oh, I couldn't get into another conversation about how the, just the theory side can buys you time and time and time again, stripping away all of the valuable resources in and that includes money that you put in the beer real estate investor that you'll never ever see again if you don't have or utilize the practical side of real estate investing in a prison. And we've been talking about in this podcast.

Speaker 3:

Yeah. So that's probably a cool topic for another day because it reminds me of some calls, he reminds me of people that invest, invest, invest in education. It's a sunk cost but then they never get Roi than ever get return on it because they don't, you know, break the friction between their backside and the seat that they're in and go out and do something. And you know, everything you listed there as you were going through the list and I highly recommend people back this up, listen to it over and over again cause they're probably gonna want to write that down. And that is everything that you said to me was all about doing something, taking action, that sitting around that if you and I were to just sit around and talk about real estate or appraisal or the theory of it or you know, you know, if you value the properties this way in this way, if we talked about it for the next 10 years, how much money would we make?

Speaker 1:

[inaudible] very far based on talking about it. That's for sure. Yeah.

Speaker 3:

Then we're talking about, so what we're seeing is, and I, and we're, we're coming up against our buzzer here where we need to jump off is that we, we know that you got to take information, go out, take information guy. You know, I want to go back to something you said earlier and kind of remind people in this, they're, they're basically three things. You, you learn about something, then you go use it and then you also can teach it and that was very valuable I believe. I think that people have been in learning mode. They need to go out and start using it. That's how you make the jump from theory to practice. And then, and then I agree with you really eternal internalize these things. When you start teaching it like you're doing right now, uh, that's when you get to the point where it's internalized and you are ready to with it. And that, that may be something that some of them people that are listening in. So, you know what I eventually want to do with an Mj is doing, I want to talk to other people about this. We, you know what you need to start doing. Don't go from learning to talking about it. You've got to get out there and do it. Right.

Speaker 1:

Yup. It's interesting just before we give me a wrap ups and stuff and um, and definitely folks that have comments about this on that idea of getting into some of those awkward positions we should do a session on deals are duds. Woo. Yes. We can actually walk through. Um, we could probably do a couple of different episodes on that and maybe do two or three different units and talk about the characteristics, everything reanalyze into it and just kind of put out there is this a deal or get some comments going, that type of thing. And then just kind of reveal which one it is. Because surprisingly, what may or may look like a dud isn't and what looks like a deal is something you could run from. So we definitely want to look at doing potentially is a couple of sessions on deals are duds.

Speaker 3:

Excellent. Well, I liked the thought of it. I wrote that down. I think that's a great teaser for people to want to listen into podcasts coming up. So, so here we've talked about theory versus practical and basically we've told people learn some stuff and go out and use it, learn stuff, go out and use it. So, uh, that's excellent. So well listen folks, we're here at the, uh, not the 35 minute mark. I believe if I'm counting correctly, I may not be, but uh, we like to keep them in that sweet spot so that people can get some information. Once again, I encourage you, if you're listening in, we welcome your feedback. We honor you, we want you to give us some feedback, let us know how we're doing, some topics you might be interested in and then to share that, share this with others because we know, you know, people that would be interested in hearing this. So, uh, having said all that, Mj last words and we'll jump off.

Speaker 1:

Oh, without a doubt. I definitely, uh, just coming out of this, go ahead and grab a coffee or that you book e myth revisited by Michael Gerber. I truly think that you enjoy it as entrepreneurs and getting engaged in real estate. It's a wonderful thing to do. Uh, without a doubt. As we're recording this one, it is springtime. We've just celebrated mother's Day. I'll go back even on any day of the week, honor your mom, tell her how much you love her, that type of thing. And then every day do something that challenges you to do something that scares you. You only make you stronger.