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

Not knowing the difference between a “good” real estate dealWhat if the only thing keeping you from your first deal is not knowing what a good deal actually looks like,Or maybe you’ve got your first flip lined up, but you can’t decide if you really need a general contractor or if you can manage it yourself.And finally, the million dollar question every rookie is asking is now the right time to buy. We’re answering all three of those questions and helping you make smarter moves in any market. This is the Real Estate Rookie podcast. I’m Ashley Kehr.And I’m Tony j Robinson. And with that, let’s get into today’s first question. Now this question comes from Eric in the BiggerPockets forms, and his question is, I’m new to real estate investing and just finished reading Brandon Turner’s book on investing with no Money Down. I found myself particularly interested in multifamily properties, but I’m struggling to grasp what exactly defines a quote. Good deal when evaluating listing. Should I primarily focus on properties that seem undervalued? Are there specific market indicators or property traits that I should be paying attention to? I feel like I’m missing the bigger picture of what makes a property a great investment. If anyone could share some pointers or insights on how to identify a good deal, I would appreciate it. This is a really good question, right? Just how do we know if a deal is a good deal? And he asked a few different data points that he should be considering property traits or the value of the property.
And I think the first thing that I’ll say is that a good deal to me could be a bad deal to you and vice versa. And what Ashley looks at as a good deal could be a bad deal to me. And part of that is because we all invest for different reasons. We all invest with different inherent skills and we all invest with different amounts of time, effort, and energy that we’re willing to put into real estate. So for someone who is a busy corporate executive that works 80 hours a week and makes half a million dollars a year, a turnkey property at 20% down at a 6% cash on cash return could potentially be a good deal for them because they don’t have the time, energy, or desire to do anything more than that. And that could be a great deal to the person who asked this question 20% down on a turnkey short-term rental that’s cash flowing at 6% could be a terrible deal because you just talked about, hey, you’re looking for no and low money down strategy, so that doesn’t work. So I think the first thing to ask yourself is what am I looking for when it comes to real estate investing? What are the things that I need to understand before you even get into good deal versus bad deal as guess? I’m just curious, is there anything else just like strategically or from a theory perspective that we should be focusing on before we get into the details of the answer?I think maybe just what is, like you said, your why for getting started, but define what actually gets you to that point. So if your goal is to build legacy and build wealth, well, do you want to put a ton of time and effort into doing that or do you want to maximize passive income to be able to generate that wealth? So I think the time and money commitment are two big pieces to the puzzle that you need to be really heavy on either one of them or have a mix and balance of the bolt so that one doesn’t outweigh the other six, seven. If you’re watching this on YouTube,If you don’t have a kid that’s maybe my son’s 17, so 17 or younger, you probably don’t get that reference, but six seven’s been everywhere, but I couldn’t help myself. I just saw you doing this. I was like, we got to getThat in, I’m proud of you. Yeah,My son’s going to be proud of me too when I tell him this story. So I think let’s talk a little bit about what actually makes a good deal. So when we talk about real estate, we talk about a specific property as an investment. There’s the cashflow that it produces, right? Like the actual cold hard money that comes off of the deal on an annual basis. There’s the cash on cash return, which is a measure of how good of an investment it is because maybe I’m getting a hundred dollars a month in cashflow, but if I invested nothing into that deal, technically I’m getting an infinite return if I get $1,000 from month in cashflow, but I’ve got a million dollars of cash sitting in the deal, more cashflow, but it’s actually a really bad return on my investment. So we look at the actual cash flow, we look at the cash on cash return.
The other piece that we can take into account is the appreciation. If I hold this property over the life of the loan 30 years, is it reasonable to believe that this property is going to appreciate a significant amount over that timeframe? Some markets appreciate faster, some markets appreciate slower nationally post COVID. I think we’ve seen a lot of appreciation across most of the United States, but some markets do it faster than others. So I think those are really the two big things that most investors today. There’s also the tax benefits and maybe that’s an entirely different story, but I think based on how this person asked the question, they’re probably not too concerned with tax sheltering at this point. So cashflow, cash on cash return and equity growth or appreciation I think are the big things to focus on. Am I missing anything there?No, and I just thought of this, and we don’t ever really talk about this as one of the pieces of a good deal, but also I would say regulation security as in there’s been towns near me where people have short-term rentals and all of a sudden the towns say, you know what? Unless this is your primary residence, you can’t do short-term rentals anymore. And all of a sudden people are like, what am I going to do with this house? I can’t rent it out. It doesn’t make enough money as a long-term rental. So I think it would be a good deal if you can actually do that strategy. So just another little aspect and there’s I think a lot of those little nuances we could probably do a whole episode on, but thinking a little outside the box too.Yeah, real estate nuances as our next episodes. If you guys want to see that, let us know. Let us know in the comments. Then I think that the next piece here too is just defining your buy box. And I think that’ll also help you identify whether or not what you’re looking at is a good deal for you specifically. And I’ll give you a recent example. When we were shopping for our first hotel, we had a very specific buy box. We had a buy box of, we wanted a purchase price between one and $3 million. We wanted a value add opportunity. We wanted to be in either an urban or a vacation market, and we wanted, I think there are 10 to 30 rooms. So those were all the things we were looking for. And once we had that buy box built out, it became significantly easier for us to say yes or no to certain deals because now it’s just like, does it match our buy box or does it not?
So I would encourage you to, and this is for everyone that’s listening, to think about building your own buy box and how that can make it easier to identify the right deal. And then just there’s some basic rules of thumb as well when it comes to buying rental properties that don’t necessarily give you the cold hard to the penny return, but directionally, I think they can kind of point you in the right direction. But there’s the 1% rule that says your revenue or your rent in this case should be 1% of the purchase price. So if I have a house that is $100,000, if I can rent that property out for $1,000 per month, that would be meeting the 1% rule. The other is the 50% rule where 50% of your revenue, or sorry, lemme say that again, then there’s a 50% rule that says your expenses shouldn’t exceed 50% of what that revenue is. So using that same example, if I’ve got a $1,000 a month in rent, my expenses hopefully shouldn’t exceed 500 bucks on that, right? So there’s different rules of thumb that you can use to help guide you in the right direction to quickly either say yes or say no to these deals aside from fully underwriting them.And just to remember that a good deal doesn’t mean it has to be the greatest deal of all, or you have to get the best benefit. You have this money because we see a lot of times like I have $50,000. What’s the best way that I can use this money? Even if it doesn’t turn out to be the best way there Ended up you could have got a 2% more return or something doing something a little different or buying a different property. As long as it ends up being a good deal, it is going to make you so much more money because that first deal propels you it, you took action and it’s going to start your investing journey. So don’t get too caught up in analysis paralysis thinking you need to find the perfect deal.Ash. That is a great point. The last thing I’ll add to that is we need to give ourselves more permission to learn when it comes to real estate investing. And I’ve given the analogy of if you have a child or if there’s a child that you’ve ever met in your life, chances are that child did not come out of the womb walking. And there was at some point in their early life, somewhere between eight to 12 or maybe sometime shortly after months where they started to learn how to walk. And I haven’t met anyone yet, though I could be wrong, but I haven’t met anyone yet who at 12 months old when they fell down for the first time after walking, their parents just kind of scooped them up and said, you know what? Walking’s just not for you. Usually the kid falls down, parent picks them back up, and then they keep that process going until they finally find the strength to sound on their own.
And I think real estate investing, and really this is for learning anything new, it’s the same process. The goal is that we can lay a foundation with that first deals not to be perfect. And sometimes that means stumbling. Sometimes that means everything doesn’t go according to plan. Both in my portfolio and Ashley’s experienced that and many of the guests that we’ve interviewed on this podcast have experienced that as well. So if we give ourselves more permission to learn on that first deal, we can take off some of that pressure of it being perfect and position it as an opportunity to get better for the second deal and the fifth deal and the 10th dealComing up. When you’re tackling your first flip, should you really pay for a general contractor or is that just wasted money? We’ll break it down right after this quick word from our sponsors. Okay, welcome back. Today’s second question is, my partner and I have started a house flipping business and plan to use local workers whom we trust and who we have done remodels on investment properties for us before. However, these workers are not licensed, but they work hard and efficiently. Most of the rehabbing we are planning for these flips is cosmetic. The most recent house we offered needs a complete remodel inside, but the structure is sound. For example, we need new kitchen cabinet, sink paint, flooring and drywall in certain areas of the house that have been damaged as well as new light fixtures and interior and exterior paint. The work is mainly cosmetic except for the drywall repairs.
We are concerned about hard money lenders requiring licensed professionals to do the work or requiring licensing later on, having a scramble to find a general contractor. Fortunately, one of our hard money lenders said they will not ask to see any licensing as long as we are not doing anything structural to the house. Another one of our hard money lenders has stated that they want to see licensing anytime we were going to have any work done to pull permits. We are brand new to this, as you can tell. So the first thing that kind of stands out to me is the hard money lender that’s saying they’ll want to see any licensing when they pull permits. In my experience, I mean I live in very rural areas where a lot of my projects are like no permit or very get a permit this morning, start the roof that evening. But the flip I did last year was in more of a village within the city and there was a lot more stricter permit requirements, but I had to show, for example, the plumber was a licensed contractor just to get the permit on the property too. So I think that no matter what, depending on your city’s regulations, you might have to show that it’s somebody licensed doing the work like electrician and plumber. Two big things that usually you would have to show.And I also, if your lender is requiring that you have a GC to do it, then I mean that kind of answers the question for you, right? I wouldn’t tell my lender that ham, I’m going to use a licensed contractor and then I don’t because that could create its own world of issues. But I think maybe the bigger question here is why are you opposed to using the general contractor? Is it the idea of cost savings? Because if so, unless you’ve got a lot of experience managing these types of projects before because you didn’t say nothing, right? It wasn’t like you were just doing paint or you were adding some turf or replacing some hardware. We need new kitchen cabinets, sinks, paint, flooring, basically an entire new kitchen drywall where there’s been damage.
It does seem like a decent amount of work for someone who’s doing this for the first time. And even though you’re not changing the layout as a rookie investor, sometimes there is value in having an experienced general contractor guide you through on this first project and the amount of insights you can pick up and gain from that person, they’ll stick with you for the rest of your life. One of the first rehab projects that we did, we had a juicy walk through it. He ended up not taking the job because he was too busy, but I remember he gave us a layout suggestion we had never even thought about before. He was like, Hey, you should actually close this wall off that way we can make your master bedroom bigger and we can do this and do that. And we’re like, man, I walked right through this a thousand times. I never even thought of that. And he was in there for 20 minutes and was like, yeah, you need to do this, you need to do this, he needs to do this. So there’s value I think in just learning from a good general contractor, especially if this is your first time out, obviously you want to make sure that they earn their keep and hopefully a good GCL do that. But I dunno, I think there’s value Ashton and rookie investors when they’re first getting started having a good GC to lean on.Yeah, two of my easiest projects, I had really great GCs that actually did a lot of the work themselves too. When I built my personal residence, my GC pretty much built the house himself. He was a licensed electrician, a licensed plumber. He was a jack of all trades. And if I could have him do every house that I ever touch, I would 100% consistently use him. No matter how much he paid, I’d work it into the numbers because that was just the easiest most passive thing I ever did was build that house. And he did one rehab for me for a house that was flipping. He came in after it became too much for just me and my partner to try to handle ourselves. And he came in and finished the whole thing with very little oversight. And that I think is just tremendously valuable.
Having somebody you don’t have to micromanage that can make basic decisions without ever having to bother you or tell you decisions you should be making in your point Tony, as to put a door here or something like that, that’s going to maximize your space. Or I had a GC that did put a slider door here, don’t, you’re limiting the bathroom by putting the same door back in. Do this and it will be cheaper and had all these great ideas. So I think a GC is worth it for the project, especially if you don’t have experience yourself. But also another thing they could do is they could go and one of them could get licensed to be a gc. I have no idea what the process is, but I’m assuming it’s achievable and doable to go and get your GC license.I think just one thing to call out, we’ve all heard the horror stories of general contractors or even just tradespeople in general disappearing into the middle of the night. So my strong recommendation, whether you hire a GC or a sub yourself, is to make sure that the payment structure protects you in the event that the work isn’t done correctly. So do not give them a super large deposit upfront, right? So say that the labor for this job, maybe the total bid for this house is like 60 grand. Don’t give them $30,000 upfront to go start their work. It does not cost that much to go buy whatever materials they need to go buy to get this job started, break it out into very clear milestones, and then only issue those payments once you validated that those milestones are done like demo. Once they finish demo, then you can release another payment.
Once they’ve done the rough plumbing and electrical, you can issue another payment. Once the flooring is in, you can do another one. So identify what those milestones are based on the scope of the job and that’ll save you in the event that these contractors don’t work out. We actually had a rehab once where we withheld the final payment because the general contractor just wasn’t great and we had a lot of issues throughout the life of the project and I ended up managing the subs myself because GC wasn’t doing a good job. So when it came time for the final payment, and Sarah, my wife still recall this, one of her crst moments with me, but we’re in the house arguing with each other and I’m like, dude, I’m not paying you. I’ve done more work on this project than you have. So anyway, you can save yourself, I think from some of those bad experiences if you make sure the payment structure is set up in a way that protects you.
Alright, we’re going to answer our final question right after we’re from today’s show sponsors while we’re gone. If you haven’t yet, be sure to subscribe to our channel on YouTube. You can find us at realestate Ricky. Alright guys, we’re back with our final question. So let’s see what we’ve got today. The third question comes from Grant in the BiggerPockets forums. And Grant says, is there ever a right time to buy a house? A lot of people around me keep saying, wait until the market crashes, because right now it’s high, but it always seems like it’s going to keep going up. So I know that there were times or moments when it goes down a little bit, but it’s always going to go up, isn’t it? This is a great question. And we just recently interviewed Thatin and James Dard about a topic very similar to this because they both invested through 2008.
Thatch was even investing in the nineties during the dot-com crash. Now, that impacted the markets, and I think they both echoed the same message. Ups and downs will always happen in real estate, but it’s the people who continue to invest through those downturns that make the most money when the market starts to swing back up. So is there a right time to invest in real estate? Yes. And that time is today, right? Very simple answer. There is a right time, and it’s right, actually it’s yesterday. Yesterday was the best time to invest in real estate and today’s the second best day. I think where people get into trouble is trying to time the market, but no one has a crystal ball. No one has a crystal ball. And I would venture to say, grant, that the majority of the people who are telling you to wait for the market to come down or wait for the market to crash, probably haven’t invested in a lot of real estate themselves because I only hear that advice from people who haven’t done it.
And I almost never hear that advice from people who are doing this actively every single day as their main way of making a living. So we’ve got to be able to filter out the advice that we get from very well-intentioned friends and family and be able to say, Hey, look, I appreciate that you’re looking out for me, but I’ve got to take advice on wealth building from the people who’ve actually done it and not necessarily from my friends and family who have only seen the headlines or maybe heard stories from a friend of a friend of a friend about why real estate investing is the wrong thing to do. So it’s all about time in the market, not timing the market.And one thing that thatch and James said too was making sure you have exit strategies as in, especially if you’re doing a long-term play on a property, you can ride out the cycles, get that 30 year fixed rate loan, your mortgage payment is going to stay steady and you can hold that property long term and let it appreciate and your mortgage pay down happen. But if you’re on a shorter term project such as you’re doing a flip, what is your exit strategy to get out of that deal? If the market does take a big downturn, right? When you list it, is it, can you turn it into a rental? Can you furnish it, turn it into a short-term rental? If you unload it, how much of a loss can you actually take? And they both told how they’ve had bad years, they’ve taken losses, but they keep going because the winds during the great years outweigh those bad years.
So you have to be prepared to ride the rollercoaster and be in this for the long term. For the long play. This really isn’t a get rich quick scheme. Yeah, maybe a couple years ago you could get rich real quick off of a couple deals, but that was not sustainable. You can’t consistently do that every single year and make those great returns that everyone talks about a couple years ago with your 2% interest rate. So having those exit strategies and also having a long-term game plan and growing consistently, but not growing and scaling too fast too. Well, thank you guys so much for listening to this episode of Ricky Reply. I’m Ashley Hughes, Tony, and we’ll see you guys on the next episode.