What is happening, YouTube? It's Matt Faircloth. Thank you for watching this YouTube channel.
My name is Matt. My company is called The DeRosa Group, and we are a real estate investment
company that does all kinds of cool real estate education stuff, like my book, Raising Private
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but we'll answer your questions right here on our YouTube channel for you and everyone
else to learn from.
Today, I've got a good friend, as you can tell, already breaking my stones before as
we start here, Darren Sager. I've known Darren for years. Man, thank you so much for being
here, brother. You and I-
My pleasure.
... had a lot of bigger pocket stuff together.
Absolutely.
I believe you've been a guest on my YouTube channel before as well.
I don't believe I have, but-
No? First-
First time.
First
Virgin experience.
Right. So Darren is a very successful real estate agent, not just a real estate agent
for himself, but he also works with other investors. And you've been a real estate agent
for quite a while. Today, I want to talk about, and this is for our realtor friends out there,
on how realtors can be better agents and support real estate investors on a better ... on just
more and more effectively, right?
Sure.
Because let's face it, a lot of realtors don't really know how to deal with us, do they?
No. They don't.
Yeah.
No.
Right.
In fact, I was a real estate investor for more than a decade before I got my license.
Got it. And I mean, I would say probably 97% of the realtors I deal with don't know how
to deal with real estate investors. Now, that ... this is a fact for the residential stuff,
for like single family home fix and flips, small rentals and stuff like that. The realtors
that work on the large commercial stuff, apartment buildings, all they deal with are investors.
So they think they know how to deal with investors too. Those folks could use some coaching as
well, though we'll save that for another day.
But for this conversation, let's talk about the residential grade realtor that's selling
the beat up, single family home, the small multi whatever. What are some mistakes that
you see these realtors make? Either realtors that you're across the table from or from
your past experience when you were buying properties from them without your license.
What are mistakes you see these folks make?
I think most of them, the mistakes that they make are ... they're really out there just
speculating on behalf of the real estate investors. So they really don't understand numbers, what
it actually takes to do the things that the investors are trying to do. And that was my
initial frustration. So, I mean my biggest piece of advice that I would say right from
the get go is to actually do what it is that they're trying to do and put yourself in their
shoes in some way, shape or form.
Get involved in a project because again, most ... God bless you, most of them are just going
and advising on it, never actually having put in their own money into a project.
Right. And I see realtors abysmal a lot of times underwriting on deals. I've had realtors
send me a deal, then you should get the top line income, the .... they're all the rents
coming in and the only expense they're showing is the real estate taxes like-
Mortgage and yes, mortgage insurance and taxes. There you go.
Never need to get fixed up. Your self insured, you'll never need any repair and maintenance.
Never have any vacancy.
A vacancy rate. What's a vacancy rate?
Right. Utilities. The-
Capex, what's capex?
No, we don't do any of that.
Of course not.
So I think that understanding the financials of a real estate transaction are the biggest
thing that I'd say, what's probably, I would agree, one of the biggest mistakes I see realtors
make, another mistake I see realtors make is they are really just driving for the transaction.
They will send me a deal that clearly does not make sense. It's clearly overpriced. The
financials are off. It's not what I told you, but you're still going to sending it, you're
going to send it to me as if it's the best thing since sliced bread and proud of it.
Like, hey listen, I really think you should look at this completely overpriced, over expensed
property where ... in a rough location. But hey, it's on the MLS. I can show it to you.
Would you like to see it?
Of course. I would probably also say part of the issue is that it's not the center of
their attention. So the majority of what it is that they're doing on a consistent basis
is working with a residential buyer. And the mindset of a residential buyer is much different
than the mindset of an investor. Residential buyers are much more emotional about what
it is that they're there to do. They're trying to find a home and a place that they're going
to be there with their family. Whereas, an investor's looking at the home from a totally
different perspective.
So they're ... they always go in with that kind of residential mindset because chances
are it's greater than 90% of the transactions that they do. For myself, it's almost 100%.
This is investor work?
Absolutely. So that's why it frustrates me when I go in and look at listings, even on
multifamily and the way they manipulate numbers and think something is working great when
it actually won't work is just absolutely crazy.
So understanding the numbers, getting yourselves into the high ... and I think that if you
want to, if you're a realtor and you want to work with real estate investors, run the
numbers, put yourself in our shoes. That's number one. I think that realtors could also
benefit quite a bit from walking job sites halfway through renovations to understand-
Oh, without a doubt.
... what really goes into tearing these places apart and putting them back together, that
like, oh, well you didn't just clean this up and put a coat of paint on the wall. You
actually really tore the place apart and did new plumbing and electrical and did new ... did
real work and this actually costs a lot more than a couple bucks.
I was going to say, actually go in and look at the expense of what it is that those things
cost because most of them are out of touch when it comes to that. They don't understand
that it's going to cost 20, $30000 to rewire a house.
Right.
They just think it's, after it's behind the wall they're not concerned about it.
And if they don't understand ... and if you don't understand construction costs and what
really goes into redeveloping the properties that we redeveloped, you may be that realtor
that sends your client with pride, a fixed and flip that's selling for 500000 as what
the asking is, and with pride, tell your client that it would sell for 550 if it were fixed
up and it only needs 80 grand worth of work, right?
Kind of like most wholesalers.
Right. Sounds like a wholesaler. Well that's a whole different day, that's a whole different
animal. We can talk ... we can throw some rocks at wholesalers too at the end here.
Oh, that'd be fun.
But the bottom line is, is that you would agree, you're primarily an investor's agent.
Yes.
If not, 100% investors agent. How often ... how many, let's think of one of your clients that
you've worked with in 2019, best client, how many transactions did they do with you in
2019?
Two.
Two. Good. One more than most home buyers are going to do. So as a realtor you maybe
find a client and there's people out there that are buying quite a bit of properties
with their agents and things like that. So if you work the, here's the why, if you're
a realtor and you work with real estate and work with real estate investors, the why is
a real estate investor is the one client you've got that's going to give you more than business
... more business than once every six, every seven years.
And they can give you referrals too. And I get realtors may say, well the homeowner that
bought their property can just refer his brother to me. I get it. They can do that too, right?
They're relying on that referral there, but they're just constantly chasing referrals
versus taking care of their customers who are just going to come back over and over
again, would you agree?
Yeah. But I think that most real estate agents don't realize is really what's coming down
the pike when it comes to agency just in general. If you look at whose actually purchasing homes
right now in the marketplace, I mean I think that a lot of agents have a love hate relationship,
let's say with Zillow, right? But Zillow out ... is there right now in certain markets
competing with realtors themselves and out there purchasing homes directly and not just
them, Offer Pad and other companies and now you literally have a collection of institutional
buyers that are out there purchasing and they're going to be utilizing realtors in some way,
shape or form for that.
So if realtors aren't aware of what it is on how they evaluate these properties by the
numbers, they're going to be left behind.
Well the games are ... the times are changing and I believe the real estate industry is
one of the few that's left and still operates as if it is 1980 with regards to the commission
structure. Now, thanks to the MLS, thanks to the internet, thanks for things like Trulia,
Zillow, those kinds of stuff, we are in the 21st century in with regards to how people
are made aware of properties.
But I've sold a lot of fix and flips that we just put on Trulia, and the ... they ... the
buyer ... Like, we've sold a flip in South Jersey. The buyer literally just had to go
and find the local agent to show him the house because they couldn't get in without an agent
to bring them in. There's that little, the one little twist right there that has to shift
and realtors are going to really have to change their game up because the days of just making
6% with your eyes closed on a transaction, I believe are going to change in our lifetime.
I mean, and I'm talking about in the next couple of years they're going to change. Don't
you agree?
I would probably say that at some point in the future, commission structure may get pressed
a bit, but at the end of the day I think that there's still a service that realtors still
do and they still do a lot of work if they're a good realtor that can make all the difference
in the world.
So you're saying that through the awareness that Zillow and well, again, Zillow and those
guys are really trying to, they're not trying to, they are taking realtors into the equation
sometimes in their efforts of-
Well, I would think that what realtors have at the end of the day is the ability to take
Zillow out of the question and Trulia out of the question. Because if it wasn't for
realtors, Zillow would have no inventory for people to come and look at.
I know.
And then overnight they can literally shut Zillow off.
I still wonder why they haven't done that because they're seeing what's going on and
they're seeing that Zillow [crosstalk 00:10:19].
If the writing's not on the wall. And that's why there's a lot of places now where there's
a lot of stuff that's being done off market. I'm thinking of Russell Brazil, he's part
of an organization where they were marketing a lot of stuff off property. I'm not exactly
sure how it works. You'd have to ask him, but there was a group down in the Washington
DC area that was literally trading homes, agent to agent, but off the general market,
because there's a lot of people who don't want to be public about what it is about them
buying homes.
And now the national association of realtors came out and said that every single property
has to be on the MLS and you have 24 hours to put it on or you're going to get fined
and all that other good stuff. And who are they to say at the end of the day, as much
as I'm a member of them, how a homeowner says that their home can be marketed. If you're
a public individual well [inaudible 00:11:13], you don't want the world to know that you're
selling your house right, or that it's your house for some ... in some way, shape or form.
You want to sell your house, have people through it and everything else like that, but you
don't want the general public to know you can't do that, now which is very unfortunate.
That's really unfortunate. I think that the ... I think we haven't seen that fully play
out yet because-
It's going to be interesting to see.
... there's a lot of people that are just, they just want to sell and if I can get my
number, I'll sell. And a lot of times it might not be getting me highest and best and best
and final and getting me-
Well, that's where all [crosstalk 00:11:44].
10, 20, 30 people through my house. Right. And maybe I just want my number, maybe that's
all it is. So that's interesting. I believe there's, regardless of whether realtors, the
commission structure changes or whatever the real estate world is changing and I know that
you work for a brokerage that really is ahead of the curve with regards to changing the
real estate world and getting away from the concept of the physical office, and having
to go and look on the glass on the window to see what they have for sale and stuff like
that.
Tell us a bit more about the brokerage that you work with and how it's really changing
the industry.
I work with EXP Realty. They're the first cloud-based office, real state company. Started
by Glenn Sanford who came from Keller Williams. He basically took, in I guess in layman's
terms, kind of the KW model and eliminated the offices, eliminated the franchises and
decided to give ownership to the agents themselves instead of all the franchisees. So most of
us, at least for me, and in working in the industry, I never used my Keller Williams
office. I would just basically use them to cash checks but at the ... and they never
really provided me any leads the entire eight years that I was there.
So I was there basically building someone else's business that I never had ownership
for. So us as realtors we're out there and we're explaining about the benefits of home
equity and building equity over time and yet we're not building equity in the business
that we were sold that we were going to own our own business when it comes to real estate.
You're creating true ownership because a lot of people have viewed realtors as well, you're
almost like an independent business owner because you kind of eat what you kill. If
you sell a lot of properties, you make a lot more money, but you're really not.
You're not at all. All you are is-
[crosstalk 00:13:30] old model.
Well you're a 10.99 sales person is what you are and that's all you are.
You can make a ton of money as a salesperson but-
You can make a lot of money. But at the end of the day, the traditional brokerage model,
they do whatever they can to possibly help you sell more houses, right? So they will
give you all different tools and everything for you to sell more because at the end they'll
make more with ... but will they ever give you a way to find a way to retirement? No,
they don't talk to you about real estate investing and taking advantage of what it is that you
know best or they're not going to have an equity program unless you go and buy a franchise-
Or a benefits package or any of those other kinds of things that you can really help you
create stability and longevity in your life. So good. I ... you've told me a lot about
EXP and I think it's a great organization, so that's great. Just, the real estate world
is changing, the brokerage world is changing and I think that to bring it into a final
thought here guys, is that there are becoming more and more renters in this country. I don't
think that the pendulum is going to shift back to pre '08 crash or you probably would
agree that I think we're going to be in a society with more and more renters, more almost
like a European model where there's a lot more-
I was going to say that and I think that's the way that they've kind of forced their
hand now and they want that model and we can talk about conspiracy theories and all good
stuff like that regarding that. But it's kind of unfortunate, but yes, we're becoming much
more transient. But I think it also has to do with the American society in general and
who we are versus let's say the people that come to this country, Americans in general
that were raised here, we're not getting married and there ... we're having families that have
single parents and we want more life experiences now versus being in one particular area.
So we like the idea of, let's say being in Seattle for two years and then going down
to San Francisco and then coming to the East coast because experiences now seem to be more
[inaudible 00:15:26].
Even if you've got kids. If you've got kids you can pop around with the kids like that.
I know several people that are literally traveling the country, and moving to different place
to place with their kids and really exposing their children to a lot of different things.
So as society continues to change, real estate ownership changes as well. The tea leaves
are saying that more and more people are going to be leaning towards being renters so they
can be more nimble, conspiracy theories aside and that.
So if that's the case, if society's moving more towards renting, realtors need to support
landlords because landlords are going to be who more and more of home buyers are and that.
So take it for what it is, realtors, there's still going to be home buyers out there, but
if you want to work with someone who can buy two, three, four or five transactions a year
from you or even buy a fix and flip, they buy it from you on the buy side and then they
likely, I would hope would give it to you on the backend as well and that.
Real estate investors are one few out there that can effectively work with you on a regular
basis and be true repeat customers. So-
Absolutely. Cool.
So Darren, great conversation. Thank you. How do people hear more about you? How do
they find you and talk to you more about everything that you've got going on?
They can find me at darrensager.exprealty.careers or they can Google me at Bigger Pockets. Just
do Bigger Pockets Darren Sager.
How do you spell that last name?
S as in Sam, A as in Apple, G as in George, E, R.
S-A-G-E-R, Darren Sager. And you can just Google Darren Sager. Darren Sager EXP or just
look up Darren Sager on Bigger Pockets. I know your a regular contributor there as I
am too.
Yes sir.
So cool. Darren always a pleasure to see you. Thank you so much. Darren and I are really
good friends and fellow New Jerseyans and that. So-
Fellow pizza lover.
Fellow pizza lover. And if you guys are anywhere in New York city, you should check out Darren's
event that he has in New York on a regular basis as well. So Darren, thank you.
My pleasure.
Thanks for watching guys. Have a very profitable week.