New Western

Alex Reeves: Welcome to Invest Smart with Steadily. Today we're diving into one of the biggest challenges for real estate investors: finding the right property at the right price. Whether you're doing a BRRRR or a fix-and-flip, or you just need more deals that make financial sense in this market, no one knows that better than today's guest, Kurt Buyers from New Western, which is the largest marketplace for investment properties. Kurt, I'm going to let you introduce yourself and tell us a little about how New Western helps real estate investors.

Kurt Buyers: Absolutely. Thanks for having me. I'm the head of business development here at New Western. We're a national real estate investment marketplace, the largest private source for investment properties in the country. We really help investors find what fits in their buy box, whether that's going to be a BRRRR or a fix-and-flip. We're largely single-family residential. We do some others if there's investor interest, but single-family is our bread and butter. We've been doing it since 2008, and we're doing a transaction every 13 minutes. We always have the properties available, and our investors always have some good opportunities there.

Alex: That's absolutely one of the biggest pain points, if not the biggest pain point, for every single real estate investor: finding good deals. How do you guys find off-market properties every day? What's the secret? Where are these deals hiding?

Kurt: We're finding them a little bit of everywhere. We do our own proprietary marketing. We have thousands of relationships with wholesalers and real estate agents where we'll automate their disposition process for them, because we have over 200,000 investors in our marketplace. We have such a good sales team that wholesalers and real estate agents will come to us to connect them with the right buyer.

We get a lot of inventory from your traditional real estate agent who is coming across property that would be terrible to list because it needs work and no one on the MLS wants to buy it. But we have investors who do want to buy that kind of thing. We get a lot of our properties through partnerships and relationships.

Alex: A question a lot of investors are thinking about right now is, there are higher interest rates, it's a tougher lending environment, things are shifting. People are not sure exactly what to do, maybe pressing pause. What's New Western's take? Have you seen from a deal flow situation, are more properties being listed? Should investors wait it out right now?

Kurt: For us on the investment side, February was one of our largest months ever. We're seeing a lot of inventory of the type of stuff that might not be a good fit on the MLS. Some of that's because if you're bringing a turnkey property to the market, there's still interest in that, but you're not really capitalizing on the opportunity to get that equity or find opportunities that all the other MLS buyers aren't finding.

As far as finding the inventory or the supply side, supply is definitely down overall from a market standpoint. But on the investment side, there's a real opportunity to find houses that typically wouldn't make it to market, because there's people out there looking for those types of properties, kind of like what we do on a national scale. The supply for investors is good right now, but it's just not a big opportunity for your first-time home buyer.

Alex: Most of the properties, if you can speak to it, are they distressed? What's the condition or scenario why somebody would be selling their property through New Western?

Kurt: Distress can be either financial or physical. Most of what we see is physical. Sometimes that means it needs $25,000 and you add a little lipstick to it and it's fine. Sometimes it needs $120,000 and every single major system is broken, needs foundation, needs a roof, needs paint, needs a kitchen.

We have a vast spread of the types of properties we see, but a lot of it boils down to there's some sort of situation that will give an investor an opportunity to buy it with equity and upside, whether that's physical repairs or some lipstick and they put it back on the market. Or it's a great addition to the rental portfolio because it has that upfront equity. It makes the cash flow aspect a little easier, knowing you can have that long-term appreciation with the equity versus instant cash flow.

Alex: Do you have a story you want to share? I'm personally a New Western customer. I purchased a property where there was a ton of upside opportunity. I don't know if that's a unique situation, or if you guys have an average or anecdotal situation you could speak to about some of those numbers, because on some of them there's just a ton of opportunity.

Kurt: It depends on the market, because every after-repair-value percentage is a little different. LA is going to be different than Birmingham or Indiana. Anecdotally, you take your average corporate worker who probably has the skills to manage a flip and then either Airbnb or rent it, but they don't really have the time.

You're taking the person who on the side wants to create some financial wealth through a rental or an Airbnb, and there's no time or money involved to find a property from New Western. You essentially find the property comes to your inbox or on our marketplace. You flip either on the weekends. My wife and I have done live-and-flips. We basically every two years I've lived after we've flipped it. You hire out a trusted investor-type contractor, and depending on the house, some margins are a little tighter based on the market, but there's always enough margin to fix it and either flip it or, if you want to go the long-term route, you have higher rates now, but as you can refinance, that boosts your cash flow later.

There's people making $50,000 to $75,000 a flip, and they're doing that three times a month. Or there's people doing one rental a year. It's a vast difference of experience, how much time they're spending on it. There's a lot of money to be made doing it. You just have to plan ahead.

Alex: For sure. Talk me through the process, because I think you hit on something super important about investors who want to get in the game but really don't know how to find a deal or where to start, and they don't want to pay retail on MLS. That's one of the biggest benefits of New Western, honestly: somebody does the really hard sticky part for you in finding the deal, negotiating it, and serving it up to you. Tell us a little more about that.

Kurt: Traditionally you would have to spend quite a bit of money on either direct mail or pay-per-click or pay-per-lead, and then hope those convert, and you might not have the system in place with a lead manager or a follow-up system. Luckily for us, we have 600-plus agents who are all local to their markets, who know the markets and everything. Unless you're able to really go out and find the right deal, you're at such a disadvantage trying to just be on the MLS, because that's going to get you the highest price. If you're buying it at the highest price and trying to do something with it, the margin is so small.

If you want to go out and do your own marketing, some people really enjoy that aspect. But for me, it's like, sign up with someone like New Western, tell me what your buy box is, and I'll send you properties. There's not a ton of upfront work, other than just having a conversation with us. To do it on your own, it can be really cumbersome.

Alex: I completely agree. For more of a corporate employee who wants to get in, it's a really good option to consider.

A lot of investors, myself included, love a good BRRRR: buy, rehab, rent, refinance, repeat. But refinancing is a little tougher lately. Are you seeing more people just flip recently, or are people still doing BRRRRs? I know you guys have a financing arm that helps support some of that. I'm curious about your perspective on flipping versus buy-and-hold, and how we can finance it to get refinanced.

Kurt: So much of it is what your goal is. If the rates are a little higher right now, you still have the opportunity to buy at a discount, rehab it, and rent it out. You might not cash flow the same way you would when interest rates were at 2%, but you're still getting long-term appreciation. You're still getting the tax savings. You're still getting all that aspect of it. You're just maybe not cash flowing immediately the way you used to, but you're still adding to a long-term rental portfolio that can be generational wealth.

Flipping, you have the opportunity to make a ton of money, but you have to manage that, whether that's in more flips or other investment strategies. Either way, we still have a lot of people doing both. Some of it is market-dependent. You're going to be able to BRRRR a little easier in some of your more Midwestern markets that are hot right now. But if your goal is to replace your current income and go full-time, fixing and flipping is a very good strategy. There's a lot of people that just do both depending on the deal. They know it's a good deal, but it's like, do I want to manage this one long-term, or do I just want to fix and flip and make $50,000 and get out of there? It depends on what your long-term goals are and how much you want to manage it on the side.

Alex: That makes a ton of sense. With New Western it's cash or hard money essentially. Traditional loans aren't really used because you have to close very quickly. Talk to me about those requirements and how New Western helps people get the money they need to buy these properties.

Kurt: To buy properties from us, or most investment properties like this, you'll need to use either hard money or private money. That allows you to get a 3, 6, 9, or 12-month loan, depending on how long that'll take. That's really for that upfront fix-and-flip portion. Whether you BRRRR or not, you will need to get that initial loan, because we close a lot of our properties as soon as title's clear, and that could be seven days.

A lot of the lenders in our Sherman Bridge marketplace are basically hard money and private money lenders throughout the country where New Western investors can get access. We'll help you underwrite it and then send it off to that lender. Because it has requirements about how much will rehab be and what are your plans with it, there's a little thinking upfront. Whereas with cash, you can just pay and then decide what to do.

If you're prepared and ready to know what you're going to do with the property, hard money or private money is a huge benefit, because instead of cash, you can do five properties at once with hard money instead of all cash. It's a little bit higher rate, but you're paying it back in three or six months, so your holding costs are a lot lower. If you're going to BRRRR it, you're going to have to refinance, which, as you alluded to, the rates are higher on the traditional side, but there are a lot of different bridge loan options people are doing. When rates go down, probably won't be 2% in our lifetime, you can refinance that one again.

Alex: That makes a ton of sense. With the financing, if you're using a hard money loan, you've got to have insurance. That's part of the closing process. That's where Steadily and New Western are forming a partnership to help each other get those closings done a little bit quicker. What's your take on insurance? Why do you think investors should know about that final step getting to the finish line? I know speed is very important, but do you have any perspective on insuring properties, ensuring fix-and-flips, those types of things?

Kurt: Especially if you're going hard money, it's going to be required. As we've talked about in our partnership meetings, let's just be prepared and have it upfront. You're going to get a good quote, you're going to have it ready, and it's a no-brainer. If something happens during your builder's risk portion of that or the landlord portion of that, you really do need to be covered. It's a ton of money to lose out on. To me, it's a no-brainer to get the insurance aspect, builder's risk, and then landlord insurance.

Alex: A lot of people don't understand or don't know, because they're buying a property in such bad condition that they're thinking, "I don't really need to insure this because it's already in really bad condition." But something we see on the insurance side, and why you should have a builder's risk, is that you're buying a ton of materials, and you're going to have things at that job site that cost money. If they are stolen or burned down or any number of things, it's going to be very detrimental to the project. Fires and theft and vandalism are very high with any type of property under construction.

It's something that unfortunately does happen, and we try to really educate people and encourage people to get that builder's risk policy. It's a necessary part if you're trying to lend on the property, and it's going to protect you in those situations.

Kurt: Some people just assume it's like homeowners insurance. You own the home for that short period of time, but there's a lot of things that can go wrong before you even live in it. It's definitely worth getting.

Alex: Is there anything else you want to add? Just tips for investors in this market that you've seen things that are working well for New Western investors.

Kurt: Understanding your exit strategies and what you want to do up front, and being very vocal and prepared with your buy box for who you're working with. If you need a specific thing in the right neighborhood, we can go out and try to find that. But if you don't know that, or come to us with what you're looking to do, it's a lot harder for us to maximize our relationship. You'll be seeing a lot of properties, but if that's not what you want to see, and we could go out and find that for you, that makes a world of a difference.

Really just being prepared in what you want. If you want a BRRRR that might end up being a short-term rental, so you need a bigger backyard to maybe add something exciting, or you need something like that, just be very upfront about it and have your plan. That way our agent can help you maximize your time. Saying yes is a lot easier because you're not having to evaluate a ton of things. You know exactly what you're looking for.

Alex: I love that. It's honestly such a relief to a real estate investor who has a very specific buy box but doesn't necessarily have the time to go knock on doors or send mailers. We all know those areas, especially for short-term rentals, those areas you might want to be in, maybe long-term you want to make that a second home, eventually retire there. I love that you have a whole team of people that can go out and find an actual deal for you. That's amazing.

Kurt: Yeah, that helps for sure.

Alex: Awesome. Well, thank you so much, Kurt, for joining us. Where can investors learn more about New Western and get signed up for property deals? What's that next best step to engage?

Kurt: The best and easiest way is to go to newwestern.com and visit our marketplace to sign up. You can also reach out directly to an agent and they'll get you started with the process. Newwestern.com, LinkedIn, whichever way. We're always happy to onboard new investors and help you build your portfolio.

Alex: Awesome. Thanks so much for joining us.

Kurt: Yeah, happy to be here. Thanks.