Upgrade from “Driving for Dollars” to “Street Time”

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For many real estate investors, one of their primary sources of property leads is “Driving for Dollars”—driving around town, looking for properties showing signs of distress or abandonment. And while Driving for Dollars is great, Thoughtful Real Estate Entrepreneurs know there is a similar—but far more valuable—activity: Street Time. In this episode, Jeff explains what Street Time is, how and why it creates more and better opportunities than just Driving for Dollars, and describes how to do it.

Episode Transcript

It’s one of the most common things for real estate investors to do, hey, let’s go jump in the car, grab a notebook, and let’s drive around some neighborhoods, looking for signs of distressed properties or people moving, and opportunities like that, and we call it driving for dollars. And driving for dollars is great, but there’s an important upgrade that you can make from driving for dollars that will serve you very well as a thoughtful real estate entrepreneur. And in this episode, I’m going to give you the details on the difference and the upgrade you can make from driving for dollars to street time. So, let’s cue up that theme song and we’re going to jump right into it.

Welcome to Racking Up Rentals, a show about how regular people those of us without huge war chest of capital or insider connections can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans nor are we posting We Buy Houses signs are just looking for quote, motivated sellers to make lowball offers to you see, we are people oriented dealmakers, we sit down directly with sellers to work out win-win  deals without agents or any other obstacles, and buy properties nobody else even knows for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants a long-term wealth, not get rich, quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Hey, thanks so much for joining me for another episode of Racking Up Rentals. This is episode number 52, which means you can find show notes for today’s episode at www.thoughtfulre.com/e52. Would you please do us a big favor, and also does yourself a big favor at the same time. By hitting the subscribe button in your podcast app right now that absolutely is powerful for sending a message back to iTunes and your other podcast providers to let them know you like the show so that they share it with more thoughtful real estate entrepreneurs like us. All right onward with today’s episode.

I was thinking back to a deal that I did several years ago. And this was a small home in a working class but desirable, overall part of my city. And I found this property by driving around. Of course, I was driving for dollars. And when I saw this house, it looked just like kind of I described it — it looked like a simple rundown home, it was on a corner lot. And so my thought was there might be an opportunity to buy low, sell high. Right? That was my mentality. And that’s great. It’s a simple way of thinking about it. And I thought I could buy this and resell it, I could buy it and fix it and resell it. I could maybe even wholesale it if I wanted to. But that was the extent of my analysis. I looked at it with my eyeballs. And I said, Hey, now it looks like it could be better. It could be nicer. And if I could get it for the right price, it could be worth a lot more after I or somebody else fixed it up. So, I did actually put this property in contract. And that was great. And as I began doing my due diligence, I did my inspections. I started just trying to figure out what exactly what the best path forward for me to be on this. I learned a couple things I learned. Number one that there was other new construction happening in this general neighborhood in this general vicinity, right, I’ve been driving around, they’re driving for dollars. But and I had seen those things, but they hadn’t really registered in my mind these other construction sites as meaning anything necessarily. And the second thing I learned was that this particular type of zoning in my city, because it was on a corner lot would allow somebody to build two houses on this lot as long as they were attached in some way. So, I saw there is new construction going on. And I saw that you could actually turn this single dwelling lot into actually two units. And I started to think about how much more opportunity that might provide to somebody who’s in the business of building new homes, who likes to build attached homes, or you’ve got basically one house facing each of the two directions. It’s on a corner. And so what I did is I bought it, I bought it was seller financing. And then I found a developer who wanted to build that exact product. And I resold that house to that developer for a nice profit. So you might be thinking, all right, well, great story. I mean, that sounds like a deal that went really well. But here’s the point that I actually want you to see. I almost completely missed the real opportunity that this deal presented itself because I was just driving Going around driving for dollars. And what I saw was a buy low sell high opportunity, very simple, you know, it’s a rundown house. Now, it could be a nicer version of this house in the future. And that would make it worth more. But the real opportunity came in the development potential. And in order for me to understand the development potential, I had to understand things like zoning, I had to be in touch with what was going on in the bigger picture of the rest of this neighborhood. And that is what I want to talk with you about today. Driving for dollars is a great activity. However, it is fairly one dimensional, and it’s fairly simple. And what I encourage you to upgrade your thinking, and your process, from driving for dollars to is something that I call street time, street time is about getting out into your market, and just being present. It’s about putting metaphorically your finger on the pulse of the market. It’s about having a feel for what’s going on. It’s about having your eyes open to see what’s happening, where the trends are, and all those things. And as a side note, but a very important side note, street time is a huge reason why I don’t personally do out of market investing, I cannot have my finger on the pulse of every town in America, I can’t close my eyes and picture, any intersection that you name for me in any town in America. And I know there are a lot of people who like to be able to do deals virtually. But I like to have a very, very strong feel just an intrinsic gut feeling for what’s happening in the markets that I do business in. And that means I can’t have too many, because I just cannot attain that level of feel and Sensibility for that many different markets. So moving from driving for dollars to street time, street time, is really about opportunity vision. Now, we’ve talked about opportunity vision a lot on this podcast before. And that’s a term that I made up. But what it really means is your ability to see all of the possibilities with a potential property, a potential seller, financial structure, see what could be there, and then sort through the options of what could be there and then ultimately choose the one that is the most valuable or most advantageous. And so when you’re thinking about opportunity, vision, this, this exercise of street time, is about upgrading your ability to see that opportunity both now and into the future. Okay, I’m going to circle back to how it can be done now and, in the future, after I make a couple other points for you here. So driving for dollars is really about looking for obvious things, right? It’s looking for visual signs, visual clues. I see some moving boxes stacked inside of that garage and the garage doors open. It looks like that lawn hasn’t been mowed in about three months. It looks like this house is vacant. And there’s 27 newspapers piled up on the front porch stoop. It’s about looking for obvious things. And obvious things are low hanging fruit, we always want to see the obvious things. But there are other less obvious things that can be so incredibly valuable as well. One thing I want to highlight is it’s literally called driving for dollars. So driving means you’re in a car, right? Well, even if you’re driving absurdly slow and creeping around a neighborhood and people are looking at that looking at you going, why is that person driving so slow driving, because you have to be steering and making sure you’re not running over things or people means that you actually can’t really give it your full attention. And it generally happens at too fast of a pace. So if you’re moving quickly, that means again, that you’re really only focused on the extraordinarily obvious things, the signs that could be there. Driving for dollars is one thing, street time is actually best done on foot, maybe on bike, you could argue but a foot pace is such a better way for you to be able to truly take in everything that you see around you. And it’s a great way to get some steps and get some exercise as well. But you’re not really worried about steering the vehicle, you’re not really worried about running into somebody, you can just have your head on a swivel. Have all of your senses going and be observing what’s going on around you. So when you’re doing street time, there are really two goals you are trying to see and find create opportunities certainly right and that’s not by itself any different than driving for dollars. But the other thing you’re trying to do besides identifying areas where there might be opportunity is, you’re trying to calibrate your knowledge and your sensibilities about your market. I love this idea of calibration. I love the word calibration. If you were walking through a certain neighborhood that you do business in, and you see a block away a sign that says two bedroom unit for rent, I want you to be able to tell me with a very close, you know, reasonable level of like variance what that rent is going to be. Similarly, you see a sale sign, you can see, all right, that looks like kind of a three-bedroom, two bath houses from the 70s. single level, it’s similar to the other houses in this neighborhood.

I’m going to guess that that’s about 325,000. Whatever the numbers are, you need to be calibrated to your market. And this process of street time, not only helps you seek opportunities and identify them, but to calibrate yourself to your market, which is, of course, an ongoing activity, because things are always changing in a market. So let’s talk about some of the questions you are going to be asking yourself, as you are doing your street time. Now first, I should clarify, we’re not going to be doing street time and a brand-new subdivision, that’s not really going to going to help. Because everything there is very much in flux at this exact moment. But let’s say you’re walking through an established neighborhood, in your town, maybe it’s filled with old homes from the 20s and 30s. Maybe it’s filled rooms from the 70s or 80s, or even from the early 2000s. But it’s an established neighborhood. So the first question you’re going to ask yourself is, what if anything do I see being built here? You know, in some neighborhoods, you’re going to see a trend of smaller homes being knocked down and being replaced, like 800 square foot homes, from the 20s being replaced with 2700-foot homes that are being built right now. So what types of things are getting built? Are they single family homes? Are they multifamily homes? Are they homes with accessory dwelling units, for instance? Is it something else? Are they attached homes? Are they Is it a commercial building, even maybe for a different example? What is getting built? And then that leads you kind of to the next question is that is why is that getting built? You know, what’s going on in this neighborhood that would make somebody want to build that particular thing? Or another version of that question is, what is a possibility in this neighborhood that is allowing that to be built? You know, for instance, if you’ve got a whole neighborhood full of detached single family homes, and you see a couple examples of some construction going on, where they’re building two new homes that are attached? that begs the question, what is enabling that because apparently, previously, nobody either wanted attached homes in this neighborhood, or it wasn’t possible to build them with the zoning code or the building code in that area, but now it is happening. So why is that happening? How is that happening? Who is doing these projects, who are the people that are building these things, you know, as you’re doing your street time, if you see a porta potty, you need to be stopping, and you need to be looking that property up, you might be carrying a notebook and write it down and say, when I get back to my desk, I’m going to look all of these up, or the other thing and what I do personally is I just keep the county assessor’s website up on my phone and so when I see a project going on, especially one that’s you know, meaningful in size, I will just simply stop and look that property up and I will see who owns that property. If it looks like a big project, oftentimes, it was just sold recently and I can see now who the builder is now you might be asking, well who cares who the builder is why would you want to know that? Okay, well, what if you are into wholesaling? What if you are into managing your deal max right this we’ve had episodes about deal Max and deal mixes the unique recipe for your life in your business, it says I do, you know, usually ever every two rental properties that buy flip a house and maybe I will wholesale a deal as well where somebody else might say I wholesale, seven deals, and I take that money and I buy one rental property and I never flip or whatever the recipe is for you. But at some point, if you have an opportunity that might be best dressed or handled or captured by a wholesale transaction, it’s super, super important that you know who are the people or the organizations who are already buying properties in this area. So if you see a construction site and you look it up and it says it’s Acme Investments, LLC. Acme Investments, LLC should be somebody that you are planning to reach out to develop a relationship with because you very well may have something in the future. That you can wholesale to them and create a win-win deal. As you’re walking around to you’re looking at things like what is the zoning, I am always surprised at how little a lot of investors know about kind of just like the basic principles of zoning. And ideally, you should be able to go into any neighborhood in your town. And just from familiarity with having spent time there and spent time perusing the maps associated with your city, you know, in the tax assessor’s website, you should know what kind of zone you are in, is this a multi-unit zone as a small multi-unit zone? Is it? Is this a zone for high rises? For crying out loud? Where you could build a skyscraper here is this zone? That’s commercial use where you could you know, build a store, you could have an Airbnb that wouldn’t be probably restricted by local Airbnb rules, because it’s in the same zone that a hotel would be in, what is the zoning because what the zoning is, will tell you what levels of possibility there are. What are the rent prices? As I mentioned before, you should definitely have a very good, natural feel for what should the rent price for a certain type of unit be in a certain part of town? What are the sales prices likely to be? And how do you continue to calibrate your rent understanding and your sales understanding on an ongoing basis. But overall, you really want to know the general trends and dynamics that are happening in your neighborhoods, because when you know those things, then you will be able to see levels of opportunity that other people don’t, right back in my example, I didn’t appreciate the opportunity that the zoning allowed there to be with that one particular deal. I was just thinking, Hey, this is a small house, that’s rundown, it could be a nicer, small house. And my thinking there was very basic and simplistic but the zoning actually enabled so much more. So imagine, if I knew that those zones in advance were enabling those types of deals, and I went specifically seeking out those types of zones, so that I could find those exact type of corner lots, small, rundown homes, that would be a completely different investment process and would yield totally different opportunities. Now, in addition to seeing all this understanding who’s doing projects and what they’re building, what the zoning is, and what the prices are, and all that you also are, of course, doing the normal driving for dollars thing, which is simply keeping your eyes open for those levels of possibility with things that are visually obvious, that are going on, hey, it looks like that house, that person might be in distress. They’re out there in the front yard. And I’m going to go ask them a question to see if they would be willing to talk to me about having me buy their piece of real estate. So I want to circle back in summary to this idea of opportunity vision. And as I said before, opportunity vision. And the process of street time allows you to see opportunity now, and also allows you to see opportunity later. So I just want to break that down for a second. It’ll allows you to see opportunity now. Because once you are tuned into some of these other things like the zoning and who’s doing deals and what what’s getting built, what are the trends, what does it seem like buyers or renters want in this particular neighborhood, you are going to start to see opportunities that others don’t see. And when you see opportunities that others don’t see, you often find yourself in pursuit of deals without much competition, because it’s not so obvious. And these other people have not taken the time to train their eye and their mental eye and their ear and all that to look for these types of opportunities that now you can see. And they can’t. So just literally right now, in this street time session, you very well may find opportunity that you would have walked right past before. But there’s also so much value in this for seeing opportunity later. Because as you calibrate yourself to the market, you start to see where opportunities could be with future deals. For instance, let’s say that without spending much energy on market calibration, you think that an average one bedroom would rent for $1,000 a month, right? So you let’s say you find a duplex and you’re thinking to yourself, Well, I think this would probably gross out at $2,000 a month and you find your seller and you’re talking to your seller and the seller says my current rents are $900 a month and you’re thinking to yourself, I think the market rents are 1000 if you were actually market calibrated and let’s say the market rents were escalating upward pretty quickly now maybe the real market rent for that unit is now 1200 dollars. You are going to be analyzed. that opportunity and evaluating the sort of potential of that deal from a completely different angle, because you’re thinking No, no, no, the seller is getting a 1500 total, I was thinking it would be 2000. Total, I actually see, it’s 2400. Total. And that completely changes your analysis. And if there is another buyer who’s looking at this deal, and they’re not understanding the real market calibration, they too are going to feel like they can’t maybe pay as much or make the deal work one way or the other. Whereas now you can, and you understand why this deal would actually make sense. So here’s the thought that I want to leave you with. Money is really made in real estate, when there is a gap between your vision for what’s possible with a property or a person or a situation, and the other party’s vision of what is there or what is possible. And the more you increase the sophistication of your ability to develop that vision of what’s possible, the more gaps you are going to create. And the bigger those gaps will be what I like to call this is selling an apple and buying an orange, if the seller is selling their property, and they have their perspective on what it is and what its possibilities are. Their perspective is an apple. And so they are pitching the selling, offering whatever this property to you as an apple. But if you are looking at this property, and what you see, is an orange, that is a completely different thing. Now, you’re not going to step right up and say hey, you know, I don’t think you really realize what the zoning is upon, you know, making possible in this case, know that that gap that you’ve just created between their vision of it being an apple and your vision of it being an orange is how you now go and create value, which is what entrepreneurs do, we create value by widening that gap. So the bottom line here is we always want to be increasing the sophistication of our ability to see a vision for what is possible, and that my friends are accomplished not by driving for dollars, but by taking the same time, the same amount of energy.

This the same overall general process you would put into driving for dollars, but doing street time looking for different things, thinking about different things, taking different kinds of notes, and asking yourself different questions. I encourage you to upgrade from driving for dollars to doing street time right away.

And that is it for today’s episode of racking up rentals. Show Notes for today’s episode can be found at www.thoughtfulre.com/e52. Please do us a big favor, hit that subscribe button. And if you would take just two seconds and rate and review the show on iTunes also that would be so helpful for us and I would be really grateful. Did you know also that we have a Facebook group for thoughtful real estate entrepreneurs. It is called Rental Portfolio Wealth Builders and we would love to have you join us there. You can find it on Facebook or you can just type in group.thoughtfulre.com and it will redirect you right there and you can hit the nice big Join button. Hey, if you liked this episode, take a screenshot of it if you wouldn’t mind and post that screenshot to Instagram. You can tag us We are @thoughtfulrealesate all spelled out. So I’ll see you in the next episode. And until then, this is Jeff from the thoughtful real estate entrepreneur signing off.

Thanks for listening to Racking Up Rentals, where we build long term wealth by being a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.