JF994: Investing with Your Mastermind Network, Leveraging REALTORS, and a Road Trip with Contractors

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Those mastermind events are extremely valuable, so you better start attending! Our guest was able to find investors for his projects through masterminding! Hear about how he leverages realtors and other real estate professionals, and yes, he took his contractors on a road trip.

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Kevin Carroll Real Estate Background:
– Kevin and his team have sold 1000 units, and flipped almost 100 homes
– Specializes in REO and investment properties with nine years of real estate business experience
– Recently released his new book “A Journey To Financial Independence”
– Based in Boise, Idaho
– Say hi to him at http://idahoriverrealty.com
– Best Ever Book: Rich Dad, Poor Dad

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Kevin Carroll. How are you doing, Kevin?

Kevin Carroll: I’m doing outstanding.

Joe Fairless: Nice to have you on the show, and looking forward to diving in. Kevin specializes in REO and investment properties, with nine years of real estate business experience. He recently released his new book, “A Journey To Financial Independence”, and he and his team have sold 1,000 units and almost flipped 100 homes. Based in Boise, Idaho… With that being said, Kevin, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Kevin Carroll: We started out nine years ago selling bank-owned properties, and two years ago we realized that those banks have taught us how to flip houses… So I raised a bunch of cash and reached out to my friends across the country that I knew, and started looking at deals. If anyone wants a copy of my free flip sheet, they can go to AJourneyToFinancialIndependence.com and get my free flip sheet. It’s something I use every day to analyze these flip properties.

So I just kind of started looking around and trying to make a little bit better money, or doing things myself and controlling more of the process. We learned a lot along the way. You can’t do that many properties without having a few fumbles. So we’re learning as we go, and we’re definitely looking for more deals, but we’re being a little more specific. I know what I’m good at, so I’m trying to focus on that, as well.

Joe Fairless: Alright, well you’ve given me a lot to work with. I’ll approach it from a more chronological standpoint, because there are a lot of directions we can take this. You started working with banks, and you said they taught you the flipping process. Can you elaborate?

Kevin Carroll: When a bank gives you a property to list, it usually comes in an e-mail and they say “Here’s an address, go tell us what we have.” So we go to the property. If it’s occupied, we have to find out if it’s a tenant or it’s an owner occupant that got foreclosed on, and ask him to leave, and give him cash for keys sometimes. That means we give him a check for whatever the bank agrees upon, and then they leave the house in broom-clean condition. So they either do or they don’t, and then we get the house and get bids to clean it up and fix it up to a standard that we want, and to say like “If we do these things, we can get this kind of offer, and this is the price we think we should list it for, and this is the route we think we should go” and then we’ll give them repair bids to that effect.

Then the asset manager that works at the bank takes that and creates a marketing strategy based on our advice, and then also they may get a second opinion of value. So then they’re gonna make a marketing plan, and then they want us to implement that plan for them. “Okay, do these repairs, list it at this price, and present the offers back to us.” We’ve done that almost 1,000 times, and when you do it that many times, you have really good subs and contractors. I know exactly how much it costs to fix anything. Then we were able to take that knowledge and say, “Okay, well what if we do it for ourselves, what does that look like?” So that’s what we started to do.

Joe Fairless: Let’s talk about how much it cost to fix anything… What is something that surprisingly is inexpensive, and what’s something that’s surprisingly expensive?

Kevin Carroll: I can answer that a couple different ways. Our typical remodel is about $40,000. In that is kitchens and bathrooms, maybe a roof, maybe an HVAC system, something that makes a huge difference. Some of the banks have a lot of handcuffs where their investors say they can only do a certain amount of things or they can’t spend more than $500 [unintelligible [00:05:52].06] I don’t have any of those handcuffs, so it makes sense to me I’m gonna do it, and I’m able to execute it a lot quicker, because I don’t need to get three bids; I want you to pick your best contractor and use them and get it done fast. So I’ve kind of taken the best parts of what I learned, and then taken out some of the inefficiencies.

Some things that make a huge difference are curb appeal. It might not cost much to paint the front door and put a new lock set on, but it makes a big difference. And some of the more expensive things, we’ve had some water mitigation issues where there was water in the [unintelligible [00:06:24].16] or something like that. That’s kind of a huge unknown. So we’ve had some things like that where I thought it’d be easy to fix, and it would cost $20,000.

Joe Fairless: Ouch!

Kevin Carroll: Things like that, that you didn’t account for along the way.

Joe Fairless: On the water mitigation front, anything that you look for now with homes that would be a red flag?

Kevin Carroll: Yeah, a wet crawl space. [laughter]

Joe Fairless: A bunch of standing water in [unintelligible [00:06:52].17]

Kevin Carroll: Yeah, I mean it was pretty obvious, but it was like “Oh, that’s gonna be easy” and it wasn’t. Sometimes it is, sometimes it isn’t, but stuff like that. Or we had one we had to cancel; it had a cracked foundation and it just wasn’t fixable. So there’s certain areas of the country that are more prone to… Like, Florida has sync holes. I live in Idaho, I’ve never even heard of a sync hole until I started buying houses there, where the house literally caves in upon itself, because there’s a hole in the ground, and like termites and things. So different areas of the country have different challenges, but a house is a house, and they’re all kind of built the same way.

Joe Fairless: Let’s talk about how you have evolved your business. You were initially taking properties that the bank had and listing them, right?

Kevin Carroll: Yeah, and I still do that quite a bit.

Joe Fairless: You still do that, okay. But then you said you were doing that for a while, you learned the process, and then you went out and raised a bunch of cash and started looking for your own deals. How much cash did you raise?

Kevin Carroll: 2.5 million dollars.

Joe Fairless: Okay, you raised 2.5 million… How many people put in the money to make up the 2.5?

Kevin Carroll: Not very many, just a couple of close friends.

Joe Fairless: About how many? Two? Five? Three?

Kevin Carroll: Three.

Joe Fairless: Okay. I guess when I said “About how many?” I meant exactly how many… [laughter] “About how many? Give me a specific number.”

Kevin Carroll: Yeah, and I’ve been doing business with these people for a long time too and they trust me. So that’s half the battle, but then it’s proven you can do it, and then working on becoming more efficient and getting better. And when you start buying stuff for cross-state lines, you have to register your business in these states… It got really complicated really fast. I’m buying properties in eight different states, and there’s accounting stuff, and attorney stuff, and different things that I didn’t even know we had to do until we started to do it… [unintelligible [00:08:43].01] where is this document?”

We’re learning as we go, but when you start doing it at a little bit higher level, you get introduced to new friends and new opportunities, and I’m not afraid now to look at properties. Now I’m looking at a piece of dirt with a couple duplexes that we could put 11 more in Indianapolis right now. I would have never even thought I could do that before, and now I’m just starting to analyze that. So I’m able to look at opportunities in other places and it opened my eyes up to a lot more opportunity.

Joe Fairless: The 2.5 million from three people – on average that’s $833,000 a person that they’re putting in. Not looking for names, obviously, but I am curious – I know the Best Ever listeners are curious, or I think some of them are – how you met these three people? You said you’ve been doing business with them for a long time, but tracing back exactly where you met them – where did you meet each of these three people?

Kevin Carroll: Well, one is my mother and one is my brother, so I’ve known them for a while… [laughter] And then the third lady I’ve known for about seven years. I’m in a networking group with her and she’s seen me grow as a person and she knows my experience, and it’s not a lot of money to her, so it was more of a test, really.

Joe Fairless: What networking group are you in?

Kevin Carroll: I’m in a couple different ones. GoBundance – have you heard of that?

Joe Fairless: I have, yeah. That’s with Pat…

Kevin Carroll: Pat Hiban, yeah.

Joe Fairless: Hiban, thank you.

Kevin Carroll: Yeah, he’s one of the founders of that. Super outstanding group. And then the real estate group is called ERN – Elite Real Estate Network. It’s a pretty tight-knit group of real estate agents that are in non-competing markets that we travel and network together and help each other get business… So it’s a pretty small group of close friends I’ve known for a long time.

Joe Fairless: Which of those groups did this investor who you’ve known for seven years come from?

Kevin Carroll: The Elite Real Estate Network. The GoBundance is an all-guys group.

Joe Fairless: Oh, that’s right, yeah. Dude fest. I remember now. Okay. So you raised the money… How did you structure it? Did you create a fund?

Kevin Carroll: No, it’s just an LLC that I don’t own, but I’m a member. So I’m a 0% owner/member. I have signing rights on those corporations and I have access to bank accounts and stuff like that. So I can encumber and sell properties in those corporations, so I became an authorized agent and a member of them, so I’m able to do that. I had a couple of documents I had to get notarized.

Joe Fairless: If you’re a 0% ownership member, then how do you make money on this?

Kevin Carroll: The way we structure it is say you’re a realtor in Chicago and I do business with you… I look at all my real estate agents as partners, so I don’t think of you as a real estate agent, I think of you as a partner. So we find a deal, we analyze it, we say “Yeah, it’s gonna make money”, so the real estate agent takes the property, and just like I do for banks, they do the same thing for me. They analyze it, coordinate the repairs… So I buy the house in that LLC, and then they coordinate the repairs, finish those, list the house and sell it for free, and then they get 40% of the profit of the deal, I keep 25% and the investor gets 35% for their time.

It enabled me to scale, because I don’t have to make all the small decisions; they do, because they make a large portion of the profit. So I’m not picking out paint colors and making all these little decisions, but when we list it, they say “This is the plan, this is what we execute” and we just move forward. If something needs to be fixed, they fix it; they don’t have to ask me for any small details, because they’ve now become more of a partner in my eyes than just an agent where they’re asking permission for things. It’s more of like, “Hey, what’s gonna make the most sense? Let’s do that.”

Joe Fairless: That’s an interesting structure, thanks for sharing this. How did you come up with that idea?

Kevin Carroll: I just thought of it, I don’t know. I just made it up. Real estate agents that are really good ones don’t get paid enough, in my mind… Especially for doing that much work. So I wanted to make a model that compensated them significantly, so that they start wanting to do more of this. Because a lot of people, if you just make a 3% commission and you have to manage all that work, and the contractors and all that stuff… Just selling a house is fine at 3%, but if you’re managing the renovations and stuff, you should be paid more. That’s what I believe.

Joe Fairless: What’s the last deal that you did?

Kevin Carroll: I’m in a couple right now that are kind of interesting. I bought a non-performing note up in Spokane Valley, Washington from a junk note dealer, and had to foreclose on it… I’ve never done that before. So I became the bank. And then I foreclosed on it, I set the foreclosure price at the auction, nobody bought it, so then I listed it in the MLS – and it’s in a kind of messed up state – for a month and no one bought it, so then I hired a contractor to fix it. He started working on it, and he worked on it for about two months and then stopped. Dude did nothing for two months. [laughter]

So I paid him about $7,000. Too much… But he was working. I gave him money, he did the roof; I gave him money, he did the siding; I gave him money, he fixed the inside. I gave him more money to order the cabinets, and then he just vanished. So I took my crew from here in Boise and we drove up there, we spent seven days there and we fixed the house.

I put it on the market on Friday, got four offers within a day and a half, and now it’s pending. So as I go and I learn, I’m able to kind of adjust, and I’ve got such great contractors here that I’m just so lucky to have them… And I think they feel the same way about me, so I try to keep them as busy as I can and make them as much money as I can. So that one we kind of repaired and fixed, and I’ve had another one like that one with the water damage in Seattle. It had the same problems, and I had to take my guys and we had to go there and fix it.

Joe Fairless: The non-performing note – what city is that in?

Kevin Carroll: Spokane Valley, in Washington. It’s right on the Idaho border.

Joe Fairless: How far away is that from Boise?

Kevin Carroll: It’s a seven-hour drive.

Joe Fairless: How many contractors drove from Boise to Spokane and did this…?

Kevin Carroll: Me and three guys.

Joe Fairless: What were your all-in costs? And when I say that, I mean what did you buy the non-performing note for…?

Kevin Carroll: I bought it for $6,000 and  then I got a hard money loan on it… It was supposed to go a lot quicker. A lot of it went sideways, but I had a contractor bid for $40,000 to fix the house, and I think he may have underbid it and that’s why he stopped… But I paid him 16k, and then I spent another 30k fixing it, or something like that…

Joe Fairless: Okay, so all-in a little under 100k?

Kevin Carroll: Yeah, but then there’s some hard money costs and loan fees… These are the ones you learn on, right? It wasn’t connected to the city sewer, and it was supposed to be, so I had to pay a $5,000 fine because it had three years of back-due sewer bills that weren’t paid because it wasn’t connected, so I had to pay someone to connect it to the sewer, and then to pay the $5,000 back-due penalties, and a couple years of back taxes… Some of those things I knew about, and some of those things I didn’t.

Luckily, when they have a surging market, some of those things are forgiven. But we’re gonna do okay… We’re not gonna hit a home run, but we’re gonna get our money back and lick our wounds and go again. You learn from these things, so…

Joe Fairless: What is it under contract for?

Kevin Carroll: We listed it at 130k and we got it a little higher than that, so… [unintelligible [00:16:07].17] That was probably close to our breakeven point when you think about all the numbers and everything like that… But luckily, I was able to save it, get our money back and make a little bit, and make our contractor some money and move on. But every time I learn a little bit, and a lot of it comes down to execution and speed and picking the right subs and contractors. For me now, any time I pay somebody anything, I have someone I know and trust verify they did the work [unintelligible [00:16:34].00] That’s my lesson – verify, then pay.

Joe Fairless: Yeah, that makes sense. What is your best real estate investing advice ever?

Kevin Carroll: I would say look into the real estate space and figure out what you like to do, and then find someone that’s doing it at a high level and study and shadow them and pay whatever cost to get around them and learn from them. That’s your fastest way to succeed, in my opinion. Get some new friends that are doing exactly what you wanna be doing, shadow them, do whatever it takes to get in front of them and learn from them.

Joe Fairless: And you are not just talking the talk, you’re walking the walk, because you’re a member of a couple masterminds, and one of them, The Elite Real Estate Network – one of your big time investors came from that network.

Kevin Carroll: Yeah. And the GoBundance groups, there’s tons of resources there. I’m building a 100-unit rental portfolio in Tampa, Florida right now with another GoBundance guy, so we’ve got lots of fun things happening in our world.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Kevin Carroll: Sure.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [[00:17:25].10] to [[00:18:29].14]

Joe Fairless: Best ever book you read?

Kevin Carroll: Best ever book I read? Rich Dad, Poor Dad.

Joe Fairless: Best ever deal you’ve done?

Kevin Carroll: Double landed a piece of land here in Idaho, made an $80,000 commission check. That was pretty nice.

Joe Fairless: What do you mean “double landed”?

Kevin Carroll: We represented the buyer and the seller.

Joe Fairless: Okay. Best ever way you like to give back?

Kevin Carroll: By writing the book and doing podcasts like this, I really hope to show people, your listeners and people out there that this is an amazing industry that we’re in, and I think that we all have a responsibility to figure out a way to become what I like to call a “one hundred percenter”, so have your passive investments – have them pay more to you every month than you need to live. I wanna teach people how to do that so that they don’t have to work anymore.

Joe Fairless: What’s a mistake that you’ve made, tactically speaking, on a deal that you haven’t mentioned already?

Kevin Carroll: Usually, when we make mistakes we overestimate what we can sell it for; we think we’ll sell it for 200k and it really sells for 180k. And we underestimate what the repairs are gonna be – that’s probably the easiest thing to get away from you. If you have a $30,000 budget and you spend 50k – that’s obviously a problem. But it’s very easy to do, so that’s probably the hardest thing, to stay in budget.

Joe Fairless: Where can the Best Ever listeners get in touch with you?

Kevin Carroll: Go to AJourneyToFinancialIndependence.com and you can contact me, e-mail me there, get my free flip sheet, all that fun stuff.

Joe Fairless: Excellent. Kevin, I enjoyed our conversation, learning about your business model with the LLC and how you work with other agents who oversee the projects and how you structure that with your investors, and how you met one of your big time investors through a networking group… And then the case study of buying the non-performing note. I’ve interviewed non-performing note investors and I haven’t heard as detailed of a case study as you just gave when it didn’t work out. Previous guests certainly told me about when it didn’t, but I haven’t heard of anyone taking contractors on a seven-hour road trip…

Kevin Carroll: We lived in the house…

Joe Fairless: Yeah, living in the house…

Kevin Carroll: Lived in there and fixed it. I really have good friends here. You can’t do that with a regular contractor.

Joe Fairless: Right, yeah. Well, that’s a testament to the relationships and playing the long game and treating people right. Thanks so much for being on the show. I hope you have a best ever day, Kevin, and we’ll talk to you soon.

Kevin Carroll: Awesome, thanks Joe!

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JF967: Why You Should Use Your REALTOR to Manage Your Rehabs

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If you’re flipping in multiple markets and you decide to pull the trigger to hire contractors far from you, it may be wise to have a second pair of eyes ensure that the job gets done… And who better than someone who is constantly reminded to protect their fiduciary duty to you, that’s right… Realtors! She fixes and flips properties in two markets, Denver and SoCal, hear how she leverages other professionals to get the job done!

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Susan Eliya Real Estate Background:

– Full-time real estate investor
– Over the last 5+ years, we have completed more than 70 deals utilizing various strategies in many markets
– Her strategy is to flip in hypermarkets and create passive income utilizing the profits from these flips
– Based in Denver, Colorado
– Say hi to her at 201.424.0247
– Best Ever Book: Chase the Lion by Mark Batterson

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluffy stuff. With us today, Susan Eilya. How are you doing, Susan?

Susan Eilya: I’m great, thank you, Joe. Thank you for having me.

Joe Fairless: Nice to have you on the show, and looking forward to digging in. Susan is a full-time real estate investor. Over the last five years she’s completed more than 70 deals, utilizing various strategies in a bunch of markets. Her primary strategy is to flip in hyper markets and create passive income utilizing the profits from those flips. She’s currently based in Denver, Colorado.

With that being said, Susan, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Susan Eilya: For sure. As you said, I’ve done about 70 deals going on — this is my sixth year in it. My husband and I started this business, jumped all in about six years ago. We do everything from basic cosmetic rehabs of 15,000, all the way to brand new builds and to scrapes. My examples also include condo and single-family rentals, as well as I’ve done some short-term and vacation rentals. Always looking for another strategy… The focus is to master one strategy, keep that going, keep those systems in place and then jump to the next and jump to the next, and create various streams of income.

Joe Fairless: Yeah, the good stuff. So what are you doing right now as far as the main types of projects that you’re working on?

Susan Eilya: I’m mostly doing fix and flips. I live in Denver, it’s a really hot market. I also do fix and flips in California and San Antonio… Just focusing on those three main markets. I’ve done stuff in other areas, so trying to hone in there. That is the focus, but I think the ultimate goal, like a  lot of us real estate investors is – the flips are fun, but ultimately owning rentals and multi-units for that passive income, and really building that wealth.

Joe Fairless: Yeah, so that is the fix and flippers and wholesalers – to take those profits and then invest them long-term into something. You’re doing flips in Denver, which is a hot market… You mentioned California, I suspect… Where in California are you doing flips?

Susan Eilya: Mostly Southern California, outside of L.A. A few years ago you could pick up a property for a couple hundred thousand, paint the cabinets white and still make 20% on your money… It’s changed over the last few years, but the market’s still there, despite the prices increasing [unintelligible [00:04:30].14] and the profits are still there. So mostly Inland Empire, Southern California area. I’ve done everything from Pasadena, all the way to La Quinta in Palm Desert. Big area.

Joe Fairless: You’re based in Denver, but you’re doing it out of state in California… How are you finding those deals?

Susan Eilya: Actually, when we started I was living in the DC Metro Area, and that was when the California market was hot, so we started doing deals out of state, which is rare for most people. Like anything, it’s just having a solid P. My realtors there are invested just as much as I am, because they know if they find me a good deal, they’re gonna sell it a few months later, so they’re double dipping on the commissions; also overseeing my GCs… It’s all about teams, and I’m  mostly getting those deals on the MLS, whereas in Denver almost all of my deals are pocket deals or directly from the sellers, just because the way the market is here.

Joe Fairless: What did you say about the general contractors?

Susan Eilya: I was just saying that your team is everything, and my realtors in California, for example, are overseeing my GCs as well; they’re just as hands-on as I am or my partner is, or my GCs, because they’re just as invested as far as they know that they’re gonna be able to make money on the front end and the back end.

I’ve got a few sets of eyes – not just my GCs, but then I have my realtor sort of GC-ing the GC to make sure that things are moving smoothly, because again, we all have something to win in that project.

Joe Fairless: Wow, that’s fascinating. You have your real estate agent oversee the general contractor… How official is that and what are their specific responsibilities?

Susan Eilya: Well, they just make sure that the project is still moving. We have the GC who’s got the teams, but we’re out there fairly often. I don’t do much traveling; my husband does most of the business traveling. I’ve actually done a lot more in the last several months or so… But they just make sure that the project is moving on, and what I tend to do too is I actually, because of my relationship with my realtor, I actually will send him funds to distribute to the workers, because we’ve had a six-year relationship and I trust the guy, and we’re also discussing even making him part of my California entity, so he’s actually making profits out of the profits as well. So again, another level of commitment on his end, because of what he’d be gaining as well.

Joe Fairless: And why send the funds to the real estate agent to give to the GC? Why not just do it directly to the GC?

Susan Eilya: Well, in California my GC in particular is managing that, and he’ll say “Hey, here’s the bid”, let’s say for the kitchen, and I don’t pay anything until the work is done anyway, but a lot of times I’ll send some money to him just so that it’s available immediately to pay to the guys once it’s done. But just like any state, I’m not generally paying anything obviously until it’s done. You’ll get in trouble when a GC asks you for 50% down. I see people do that all the time… Give them 50% and then wonder why the project’s not done a week later, or hasn’t started. When you hold the money, you hold the control.

Joe Fairless: How do you structure your contracts with general contractors, knowing that your beginning, which is incredible – you were in Washington DC, but had flipped projects in California… How do you structure that with GCs?

Susan Eilya: You know, in the beginning of any business or any location that you’re cranking out your business or whatever, you really need to be present… So you’re building the teams there, and in the beginning we were out there for two weeks every four to six weeks, so we were out there very often, building those teams. And just like any other business, you have to consistently build those teams.

We’ve been present a lot, but once you get those teams in place, it’s a little easier to manage and run the projects. I’m sorry, I went off topic there and I don’t think I answered your full question.

Joe Fairless: No, you were on point, but how do you structure it? Maybe the payouts and what documentation do they need to provide you before you pay them?

Susan Eilya: First of all, we always have a contract between us and the GC. Additionally, yes, they can send pictures, but I always like a second set of eyes and get my realtor to send pictures of completed work as well. I get bids all the time. I also get invoices… I have my GC actually in San Antonio – he’s probably one of the most organized GCs ever… He’ll send an invoice with what was done, what is pending and what we need payment for for the next week. It’s like clockwork, every Monday I’ll get this invoice and then I will wire what was completed, and then either get the invoices for what was already paid for and reimburse that, or I’ll just pay for items directly.

A lot of times I even pay for items directly to the suppliers, whether it’s the window guy, whether it’s Home Depot or Lowes, or the kitchen designer… Generally, a lot of times I’ll pay for that directly so that I know the vendors are paid, and then the labor is paid to the contractors.

Joe Fairless: You’ve done 70 or so flips utilizing different strategies in many markets… Whenever I’m reading your bio and it says “different strategies in many markets” – what does that mean?

Susan Eilya: So I’ve done 70 deals… You said flips, and I just wanna clarify – those 70 include fix and flips, they include rentals that I picked up, they include properties that I renovated and refinanced and held, they include wholesale deals… I guess that’s mostly the strategies.

So anything from flips to new builds to buy and hold, or buy renovate, hold and refi, and even small wholesale deals. I don’t wholesale much, but I usually just wholesale for guys that I know that can close if I have a few extra deals. So those are most of the strategies that I do.

Joe Fairless: Are there any types of strategies that you’ve done before, that you wouldn’t do again because you got burned or you just don’t think it’s a good one after doing it?

Susan Eilya: You know, what I love about real estate is that you can either make it a business or a hobby, and whether the market is good or not, you can always find a strategy that’s good for your market. So despite what CNN or the news is saying about real estate, there’s always a strategy. So really, no, there’s not a strategy that I’ve ever done that I felt like wouldn’t work…

And frankly, if I got burned on something, I’m not gonna let that one bad experience deter me from creating a portfolio of wealth and great projects. So no, I really don’t have anything where I can think off the top of my head where I didn’t like that strategy.

Joe Fairless: You just roll with whatever the market’s giving you and you implement it based on what makes sense?

Susan Eilya: It’s that for any business, whether it’s you running your podcast or your rentals or other businesses that are unrelated to real estate. You have to constantly adjust to your market, whatever that is. I’m doing different strategies in different markets because of what it’s providing me. I’ve done some stuff in Chicago and I know people in Chicago are picking up these cheap properties and just renovating them 30k-40k, all in less than 100k (even 90k) and then they’re putting in section 8 tenants, and that’s a great strategy for that market. You’re buying low and you’re renovating it as a rental, and then you’re putting a renter in… So there’s just strategies in every area.

Areas like [unintelligible [00:11:29].10] which have a tremendous amount of foreclosures, or areas like Colorado where inventory is so tight and the population keeps growing… People can’t even find anywhere to live, whether it’s rentals or flips or whatever it is.

Joe Fairless: With the money that you’re getting from the flips, where are you investing those dollars for your long-term holds?

Susan Eilya: I’m mostly putting them back into some of the things that I have in Denver. I do love Texas, I’d love to own some multi-units down there. I’d love to own multi-units period, as long as the numbers are good. So I care about the numbers, I don’t care about really anything else. But I’ve been reinvesting a lot of that cash in my current deals, but I’m starting now to kind of just push on the side and not reinvest them and put them into longer term holds, because I do sometimes put them in flips.

Joe Fairless: Let’s talk about the last deal that you took from start to finish. Can you tell us the numbers, the story about the deal and give us the details on it?

Susan Eilya: Sure, actually I’ve got two selling at the end of this month. I picked up a property from an owner directly, and I’m actually buying two more from him. It was a 142k purchase, put about 18k-20k in… Let’s just say 20ish, so we’re all in at 160k, and I put it on the market and sold it for — I’m getting two mixed up, but they’re exactly the same… It’s under contract for 215k.

I have two of the exact same deals. For the first one I had two offers that went over list, and in Denver you’re giving a lot of multiple offers, people are losing out on deals… They’re both actually VA loans, so they’re both veterans, which was really cool for me. They both went over list; the second person felt like he missed out, but the cool thing was I was able to say “Look, you didn’t win out on this one, but I have the same exact property a block away, the building next door, and I’m gonna list it for this and that” and we ended up putting it under contract actually for five less than I was gonna list it. So whereas he felt like he was gonna miss out, he actually won, because he got the exact same product… Though I actually like that one a little better, just because I like the flooring and it had a parking space.

So basically we’re looking at — as far as an ROI, I sold it for… When all is said and done — I’d have to kind of pull up my numbers, but we’re still looking at a double-digit ROI, and we were in and out in a matter of months, about six months.

On average, my investors are making double-digit annual returns, whether it’s on one deal or we do a couple in a year, whatever, but when you annualize it, they’re making double-digits easy, every time.

Joe Fairless: And that was the next question, and you segued perfectly into it – how are you financing these deals?

Susan Eilya: Most of my deals have been with private cash partners. When I started, I really didn’t have much… I put everything in to start this business, so where my credit was amazing, it kind of got a little hit… But most of them are cash partners. I started to use a little bit of unconventional lending, because my goal is to stay a little more liquid and leverage the funds that I have. So instead of raising $300,000 on a deal, I could bring in a lender at a reasonable rate for hard money, and then only have to raise 50k or bring in the 50k myself, so I’m making a little more cash.

With my equity partners, I tend to give up more of the profits than I would if I had brought in a lender, when we kind of look at the numbers. But for me, giving up more equity to build a relationship with a creditor, cash partner for the long-term is totally worth it. I’m not here to do one deal, obviously… This is my livelihood, it’s a career that I’m building and wanna keep for a long time, so for me to have those partners that I have year after year that wanna keep their funds moving deal after deal, it’s worth giving up a little extra equity if I have to.

Joe Fairless: What type of terms are you offering or have you offered in the past to partners?

Susan Eilya: A lot of times I just go 50/50 on the deal. They bring in all the capital and we have the teams, the opportunity, the deal, we do the work, we do everything; they just kind of send the wire, sign some documents, and then I’ll go 50/50 on the profits. They get their capital back, and  then we just go 50/50 on the profit. That’s usually if I have one partner who wants an equity partnership on the deal.

I have some people that have said to me “Susan, I just wanna make 6% annually.” I’m like “Great, I can absolutely do that.” Depending on how much money they have, I can put it to work.

So yeah, I have partners who are like “Just send me a check quarterly”, so I borrow their funds as working capital, and I put it into play wherever I need it, and then I pay them out quarterly with their interest payments. The benefit to that for me is that the funds are always turning and I don’t have to write a check each month, an interest check. Then I have some partners that are like, “Hey, Susan, I wanna jump on this deal” and I’ll just give them a flat return on the deal. Generally my deals are 6-8 months. The ones I’m doing now are six months. Then they make their flat return at six months, we [unintelligible [00:16:22].00] most of these people, to the property, and then after sale they get their principle and interest, and if they’re happy, they do it all over again, which most of my partners do. And again, we’re averaging significant returns annually.

Joe Fairless: For someone who’s looking to bring in private money into their fix and flip business but they haven’t yet, what advice would you give them?

Susan Eilya: I think one of the biggest fears of new fix and flippers is they feel like they’re asking for money, and they have to remember that they have an incredible opportunity where their partner can make a really nice rate of return that is secured, and a rate of return better than what they’re gonna find anywhere else.

A lot of times I talk to these new flippers and they’re like “Well, I don’t wanna ask for money” and I’m like “You’re not asking for money. You have an incredible deal in your hand, you’ve got a great opportunity, and you’re securing these people’s funds to an appreciating asset. And frankly, if something happens and you strategy is to fix and flip it and for whatever reason you can’t sell it, you’ve created equity in it and you can actually refinance their cash out of it and pay them out, or you can put a renter in and still make money one way or another.”

There’s various strategies, but I think that – to really go back to your question – a lot of times they feel like they’re asking for money when they’re not; they’re really presenting an opportunity which is secure, and that’s the key there… They’re presenting an opportunity that most people don’t have and can’t find, and probably can’t manage themselves.

Joe Fairless: Once we internalize what you just said and then apply that within our approach, it’s gonna have a tremendous difference. If we think we’re asking for money, then we’re not gonna be successful. It is about giving investors an opportunity that is, as you said, secured by an appreciating asset in most cases… So yeah, thanks for that.

I found the same thing when I speak to people and they ask “Well, what if I’m not good at sales?” You don’t have to be good at sales, you just have to have a good opportunity that you believe in and you wanna help others by sharing it with them.

Susan Eilya: For sure… I get that all the time, “I’m not good at sales…” If you feel like you’re asking for money, you’re gonna look desperate, instead of focusing on what a great deal it is. Like you said, if you have a great opportunity, you’re gonna find funders.

Joe Fairless: Based on your experience as a real estate investor, what is your best real estate investing advice ever?

Susan Eilya: I’d have to say to jump in. Do your due diligence, but jump in. You have to move fast in this business. In an instant, an opportunity can be taken away; if you don’t jump in, someone else will and you’ll lose out on the opportunities. Like I said before, I don’t care if the market is good or is bad, real estate is always good. You just have to find your niche and hammer that strategy.

Joe Fairless: There was a quote… I forget who said it, but it was a guest on the show and he said, “Every deal is a good deal in 50 years”, and it’s so true. I mean, of course, there’s exceptions to every generalization, but just going with that, most deals are good deals in 50 years. I think he actually said 20 years, which I’d still agree with.

Susan Eilya: Are you’re saying that you’d have to wait 20 years to benefit from it, or you’re gonna look abck 20 years later and say “Damn, I should have kept that!” or “I should have done that deal!”

Joe Fairless: Yeah, the latter.

Susan Eilya: Okay… That’s what I figured. [laughter]

Joe Fairless: Yeah, you don’t wanna lose money for 20 years and be like “Okay, finally I’m making profit on this…” No, it’s just holding on to it for as long as you can, because in 20 years it likely will be a good deal.

Susan Eilya: Amazing… And there are definitely deals that I’ve looked at even a couple years ago and just go “Oh, I should’ve kept that…!” but at the time what I needed to do was sell it, and it’s okay, I’m always gonna have another great opportunity. It’s not like there’s just one a year.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Susan Eilya: Yes, let’s do it!

Joe Fairless: Alright, let’s do it… First, a quick word from our Best Ever partners.

Break: [[00:20:03].18] to [[00:20:45].21]

Joe Fairless: What’s the best ever book you’ve read?

Susan Eilya: I’m actually currently reading a book called Chase The Lion by my pastor in DC when I lived there years ago, Mark Batterson. It focuses on the fact that if your dream doesn’t scare you, it’s too small. It’s something that my husband and I are both reading and kind of go in each chapter together… It just kind of pushes you to the limits, it’s great.

Joe Fairless: Best ever deal you’ve done?

Susan Eilya: It would have to be the two that I spoke with, that I’m gonna close both on this month. On one I received two offers that went over the list price, and the second-place guy felt like he lost out, but instead I was able to come to him and tell him I have an identical property that I was gonna list that next week.

To me, that’s one off the top of my head. I was generally more excited for the second buy than he probably was, but I loved knowing that I could help him out, help veterans out and also put a deal under contract in zero days.

Joe Fairless: What is the best ever way you like to give back?

Susan Eilya: I feel like a lot of times we wait until something happens before we can give back; I don’t need to wait until my career has hit a certain number or mark to give back. We can give back daily, which is what I do, whether it’s helping someone learn this business and make a little extra on the side, or whether it’s me [unintelligible [00:21:55].19] who’s taking care of the much less fortunate… I’m grateful I can do something to help. I give back every day by doing what I do, which is why I love this business – I create jobs, I make homes beautiful, again… They were once beautiful and I’m making them beautiful again and I help new owners create beautiful communities.

Joe Fairless: What’s a mistake you’ve made on a deal, that comes to mind?

Susan Eilya: Well, the biggest mistake I was thinking would just be not to start sooner, but I can’t really focus on that because I’m here now, and I’m making the best of it. But if there’s a mistake… There’s always hurdles in this business, you just have to adjust to them. I guess for me maybe just this one deal – I took the owner’s report for the sewer, instead of doing my own sewer scope, and then I had to kind of change it.

After the whole project was done, the new buyers did a sewer scope and there was a crack, and I had to spend another $10,000 to fix it and change it. Maybe that one… I mean, there were still profits in the deal, and that’s 10k out of my pocket; my investors made every dime that they were promised… But maybe just not getting that sewer scope done sooner…

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Susan Eilya: You could call me directly… I kind of prefer the phone, although I’ll e-mail and text sometimes. I like meeting people in person, and I think that this really is a people business. So the best way they could contact me is either my phone number. Do you want me to share it? It’s a Jersey line, don’t judge me… I am in Denver, but haven’t been in Jersey in 10 years… Hopefully I’ll get a business line…

Joe Fairless: What’s wrong with the Jersey line?

Susan Eilya: Nothing, it’s just every time I call someone they’re like, “I wasn’t gonna answer because it said New Jersey…” So that was my cell, and I do have a business line, but it comes to my cell anyway, and I just kind of work out from this one. My number is 201 — and I can’t ever get rid of that 201… 201 424 02 47. Or they can shoot me an e-mail at Susan@greenstarrising.com. I did not realize how long that would be when we first created that entity two years ago… [laughter]

Joe Fairless: Well, Susan, thanks for being on the show. I enjoyed our conversation, hearing how you’re structuring deals with investors, the advice you have for fix and flippers who are wanting to take on private money, but are concerned about asking for money… Well, it’s not about asking for money, it’s about presenting an opportunity that is secured by an asset, and having that mind shift. So thanks so much for being on this show… I hope you have a best ever day, and we’ll talk to you soon!

Susan Eilya: Excellent, thank you so much!

 

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https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

JF958: Why Your Vacations are LAME if You’re Not ADVENTURE FLIPPING

Listen to the Episode Below (24:41)
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Vacation plus rehabs doesn’t equal humdrum work…out guest turned it into an adventure. The whole family goes to the property selected for rehab. Cosmetic upgrades, paint, and other easy expenses are put into the property while the family rocks! Hear how else he is investing in real estate!

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Doug Larson Real Estate Background:

– Real estate investor for 17 years with being full-time for 11 years
– Rentals, fix and flips, land, & lease-options in Hawaii, California and Utah
– Bought and sold over 100 properties
– Philosophy is not about collecting a certain number of doors, it’s about financial independence balanced life
– Based in Park City, Utah
– Best Ever Book: The Progress Paradox

Click here for a summary of Doug’s Best Ever advice: http://bit.ly/2oK5QYa

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
With us today we have a real estate investor who’s been investing for 17 years. How are you doing, Doug Larson?

Doug Larson: Hey, I’m doing great. Thanks for reaching out, Joe.

Joe Fairless: My pleasure, and nice to have you on the show. A little bit about Doug – he is a real estate investor, as I mentioned, for 17 years, with 11 of them being full-time. He’s done rentals, fix and flips, land, lease options, and he invested in Hawaii, California and Utah, where he is based in Park City. He has bought and sold over 100 properties.

Doug, with that being said, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Doug Larson: Late 1990s I was a college student and working on a traditional path. I saw an infomercial, late-night TV [unintelligible [00:03:01].07] No money down! Make millions while you sleep!”, you know the routine. I just thought, “You know what? I wanna do that. If there’s really money to be  made, then I wanna do it.” I ordered the course and read through it like three times, and kind of dabbled in it. I made some phone calls; I probably looked like a fool on the phone, but eventually when I moved back to Southern California, I bought a house in [unintelligible [00:03:24].04] that was my first live-in-flip. I live there for a little over a year, I made some money on the resale… I thought, “You know what? I need to do this on purpose.”

At the time I really wanted to move back to Hawaii, where I had attended school. So I went back over there, I lived on Maui for five years. I had a day job, but on the side I also did four single-family residences, lived-and-flips [unintelligible [00:03:49].13] Then I also renovated and sold a condo.

In 2004 I met and married a wonderful woman from Utah, and I decided to move to Utah – I did have some family that lived up here – and I decided to do real estate investing part-time.

The first couple months were a little rough in Utah, just trying to get a feel for the lay of the land, and I actually started investing in the Park City market, because it was very similar to Hawaii; not the temperature, but the same kind of buyers, the same kind of homes… There’s their second homes, third homes, you have kind of a retail buyer that’s not constrained by the “Oh, it’s gotta qualify for an FHA loan”, and those kinds of things… You know what I mean.

So I started investing up there and it worked out really well after the crash – they kind of licked their wounds – and I have branched out into other spots, even back in California. It all worked out really well; I lost some money in the downturn, but we did not default on a single property. We just ended up losing a lot of money, but we still came out the other side doing okay, and life is good.

Right now we’re doing mostly rentals, land, a few wholesales… I do two or three flips a year in Utah, in California… The ones in California I call adventure flips.

Joe Fairless: Why adventure flips?

Doug Larson: Well, I live in Utah, so to do something out of state, you either have to have a lot of boots on the ground and organize things by phone, or you can go down there. This last summer we went down and picked one up about five miles from the beach, in North San Diego County, ocean-side. The whole family came down, and we lived in the property… More like camping, really, but… We went to amusement parks and the beach and all that kind of stuff. We lived there for almost three months while I was managing contractors and things. It really was a lot of fun, it was an adventure.

Joe Fairless: What type of condition was the property in?

Doug Larson: In good condition, just dated. All the cosmetics… I think we spent about $45,000, and probably two-thirds of that was labor with subcontractors.

Joe Fairless: Okay, it was enhancing it, it wasn’t anything major… It’s interesting that you turned a flip out of state into, as you call it, an adventure flip. I wouldn’t necessarily say it was a vacation, but it was an extended road trip with your family. That’s pretty cool, I hadn’t thought about that. What made you think of bringing the whole fam and moving into the house that you were flipping?

Doug Larson: Well, before my oldest – who is now 10 – was even in kindergarten, we did three fix and flips in the San Diego area, while still technically living in Utah. It’s just the market that I grew up in, I know it, I understand it, and beyond that, in some of those nicer areas there’s a little more upside. There’s people who really appreciate the turnkey, and maybe for living there, the doctors and lawyers – they don’t get their hands dirty. They see something turnkey and they’re like, “Hey, you know what? I know it’s 50-70k more than this nasty fixer-upper down the street, but I’m willing to pay for that because I just want turnkey. I wanna move in and not have to worry about stuff.” I really appreciate that in those kinds of markets – Hawaii, Park City… Certain parts of Utah will allow for that, but California – I just love it and it was an excuse to go and visit…

I did three of those in 2010-2011. The last one I sold in 2012, and then we just decided we wanna do it again. My wife wants to do it in Florida now. I’m like, “Okay, honey… Maybe we will, but maybe not this summer. We’ll see.”

Joe Fairless: Have you thought of doing the flips based on where you wanna spend time?

Doug Larson: Yeah, absolutely. That’s a big criterion. If you’ve read The Four-Hour Workweek, or the E-Myth (The Entrepreneur Myth), or books like that where they talk about — and I don’t agree with every little thing in all those books, that “you owe it to your business to get to this level” or something, but I do like the fact that they talk about “your business works for you, and not the other way around.” Make sure that it fits your lifestyle and the things that you really wanna do in life, instead of your business owning you.
There’s a lot of things that I think I’ve done, properties that I’ve had that helped with the lifestyle design and not just “Oh, will this make me money? You have to work yourself to the bone…”

Joe Fairless: Well, adventure flips – and I’m gonna keep using that term because I like that term – is one way of having your business work for you and not the other way around… What are some other ways you structured your business to align with that?

Doug Larson: I would say the move to Hawaii in the first place and the kind of lifestyle that I had over there was certainly conducive to that. As they say in Hawaii, “Any time off is time in Hawaii.” Everybody has to have a job still, everybody works and they’re busting around doing things, but hey, if you’ve got two hours off, you’re at the beach in Hawaii.

Things I’ve done here in Utah… In Park City there’s this couple neat condos up there that have quarter share rentals – almost like a tiny share, but they’re quarter shares, so you have 13 weeks. I was able to purchase about five of those at different times over the last ten years. They had day use privileges, so they were an investment, but we could also go up there, and I’ve made money on all of them except one. Collectively, I’ve made money more than that money would have made sitting in the bank. They’re between 40-60k dollars for these quarter share units, but you get access to this five-star resort. They’ve got owners lounges, full kitchens, pools and hot tubs, sauna steam room, and you can go up there and just spend the day like you own the place, but you can also get the revenue from renting the property out. You can use their management system and it’s a pretty hands-off thing.

I also own some recreational property quite a bit East of here – about an hour and a half East – and we go out there, we’ve got a couple of little mini-cabins, we spend time with the extended family and we play with quads, and go fishing and stuff like that. And again, I think those are good investments; maybe not as good as some other investments, but they help the overall freedom and lifestyle factor. They give you some fun, and it’s not just drudgery.

Joe Fairless: I’m glad you mentioned some of those specific examples. For the quarter shares, which I haven’t come across that term, but you said it’s just like time shares, but you rent by the week, right?

Doug Larson: You get the quarter share of a unit. You actually own 13 weeks. They have a schedule and they say “These are your 13 weeks.” Your weeks come up around Christmas time – those are the golden weeks – and you [unintelligible [00:10:08].04] for your unit, Christmas and New Year’s, and also President’s Day weekend because it’s a ski resort. It’s kind of a unique kind of a time share, but I’m only buying these resale; I would never buy one retail, because there’s just too many commissions and other things involved. But you buy these on the secondary market and they actually work out for [unintelligible [00:10:25].15] investment. The return on investment might be 5% per year, but if it’s incorporated into your lifestyle and the money is doing more than just sitting in the bank – at what, half a percent these days? – then that’s good to me, and it can really help to give you some more fun, freedom, adventure, rather than again just, as I say, toilets and termites.

Joe Fairless: Yeah. For someone who is interested in doing quarter shares, you said three of them have worked out well enough, but one of them you lost money… What’s the difference between the three and the one?

Doug Larson: I think there were actually five in total; I remember I bought two at one point from a bank that was selling some after they foreclosed, and I think one did not… We lost about 7k on that one. The only reason why we lost is because we sold it – I really needed to raise some capital for something else, and I could either borrow at hard money terms, or I could sell one of these units, and there was somebody that had said they were interested, and I said “Oh, what the heck, I’ll just sell that.” So I did, and we lost a few grand on it. But again… Vacation money.

The other ones… If you average them all together, we came out ahead. My wife’s on board, and anytime it’ll make sense we’ll probably go buy another one, but we’ll see how it goes and how it fits into our lives. We’ve got three kids now, so [unintelligible [00:11:37].22]

Joe Fairless: The recreational property – you called that it an investment, where you have a couple cabins, so I assume you rent those out?

Doug Larson: I don’t actually… I just let friends and family stay there. They’re not income-producing, but I sent out letters to people who had property on water – there’s a really nice stream out there – and I actually got responses… I sent maybe 20 letters and I got responses from about 5 people  who said they were interested, and I said “Well, what the heck?”, so I bought five different parcels that all are kind of in a similar area, and they’ve got water access, and good fishing, hiking, biking, off-roading and things like that. Eventually, we’ll probably market those.

I think a couple weeks ago we had somebody on that talked about investing in raw land, and I was very intrigued in his method of doing it, but I figured it works for me.

Joe Fairless: Are those five parcels connected?

Doug Larson: No. Actually, two of them are connected to each other. The rest of them are not, but they’re within five miles of each other.

Joe Fairless: Okay. What did the letter say?

Doug Larson: Probably the standard thing – “Hey, I’m interested in buying your property. I see you own this five-acre piece. I like it if something’s on the water, like yours is. Here’s what I can pay.” I don’t think I say “Can’t pay retail”, I just said, “Here’s what I can pay for your property.” And then they called back.

I actually got one person who called that was very irate, but anybody who sends out letters knows that. I don’t do a lot of wholesale letters and cards and yellow letters and things like that, but I knew what I wanted, I had the tax record and just printed things out… I’m glad I only offended one person.

Joe Fairless: You put the amount that you were willing to pay in the letter, so every letter was different?

Doug Larson: I think I said “per acre”. One was a four-acre, one’s a five, one’s a ten, one’s a twelve-and-a-half… So I just said, “Here’s what I want you do to”, and I had them call me back.

What I was hoping was that maybe some of them said, “Oh, by the way, I own this one next door” or “The neighbor next door might be willing to sell as well”, or something like that, so they could kind of have something to pass along. But I think I said, “per acre.”

Like I said, I had a pretty decent response. There’s was a lot of “Don’t want to” as far as property goes, especially if they’re delinquent on their taxes, or they’re just getting old and they just don’t have a use for this property anymore.

Joe Fairless: You sent it out to roughly twenty and you got five responses?

Doug Larson: Yes. You could say six if you count the guy who swore at me.

Joe Fairless: Yeah… [laughter] You definitely got six responses. When someone calls irate and they just are laying into you, what do you say to them?

Doug Larson: I say, “Well, sorry I offended you, I didn’t mean to do that. I’m just looking for some recreational property for me and my family. If you ever do change your mind, you can certainly give me a call back.”

Joe Fairless: [laughs] And what did they say?

Doug Larson: I can’t even remember. I don’t think he was still very happy.

Joe Fairless: Got it. So the five people that called you interested – you bought all five of their properties?

Doug Larson: I did, all five. I see a good potential for resale on these properties and making some money. I did have some ideas about improving them, with mini-cabins as well, but I just got so involved in other things that I haven’t taken that to full fruition. But it’s one of those things [unintelligible [00:15:02].17] legacy properties in the meantime, and hopefully appreciation of the asset in the meantime, and we’ll just see how it goes.

Joe Fairless: What do you attribute having a 25% response rate to on that direct mail?

Doug Larson: Again, I think if you find the right motivated sellers and you push some of the buttons, you’re gonna do well. I know that’s the case when wholesalers talk about their [unintelligible [00:15:25].12]. I attended a meeting very recently where one wholesaler said that he sends out 125,000 tickets of mail every month, and it’s “We’ll buy your home, we’ll buy it in any condition”, and those kinds of things. They get a 2% or 3% response rate with housing, and the people who do call are motivated.

Out there, I would say, these properties are not bringing in any income. They are mostly older people who’ve owned them for a long time. I didn’t necessarily look at tax records as a stipulation, but there were a couple of them once I pulled all that information up and I thought, “Oh, they’re delinquent a year or two”, so they’re probably getting tired of owning them, and sure enough, those are some of the ones that did respond back and said, “Yeah, it’s an offer… I’d be willing to sell.”

If they’re not paying their taxes, and their taxes are $100/year, then they could probably use a couple thousand dollars, right?

Joe Fairless: Yeah, exactly. How did you determine how much you were gonna pay per acre?

Doug Larson: I just called sold comps; there’s a lot of property for sale, but there might have been a dozen similar properties that had actually sold, and I just said, “Okay, if that’s what I can get it for, then I’m gonna reduce it by about half, and see if I can get the properties for that.”

Joe Fairless: You look at sold comps by the acre and then you divided it by two and that was what you were offering?

Doug Larson: That’s right.

Joe Fairless: Of those five people you closed on, how many of the five did you pay above that 50% threshold?

Doug Larson: I don’t think.

Joe Fairless: None of them negotiated with you, and you didn’t budge with any of them?

Doug Larson: I didn’t budge… A couple of them asked for a little bit more, and I just said, “Well, I’ll take a look at it”, and I was pretty firm on my prices. I just said, “Here’s what I need to pay. I really like your property…” I never insult anybody about their property. I never say, “Oh, it’s a piece of junk because of this or that.” I just say, “Hey, I really like it, and here’s what I’m willing to pay.”

Joe Fairless: Doug, based on your experience as a real estate investor, what is your best real estate investing advice ever?

Doug Larson: I would say networking. They say it’s easier to make friends than money, and it’s easier to make money with friends. By friends – it doesn’t have to be the guys that you’re hanging out with every weekend, but when you network at real estate clubs and when you’re online on some of the forums and you’re making connections and contacts, people begin to see what you’re really like, and they know you, like you, trust you, and you can make deals happen.

Most of my other deals, my rentals and flips – it’s about relationships. I don’t really have to search very hard to find deals. I’m not out shaking the trees very much, because a lot of deals just seem to come my way as long as I’m networking, talking to people and telling people “Hey, I’m looking for a rental right now, under $150,000. I wanna be all in with repairs at 150k, but it needs to rent for about 1% of the purchase price… Like $1,600/month. It can be anywhere from this point to this point, this city to this city.”

I’m also looking for flips and I’ll go up to $350,000 or $400,000 on purchase price, so long as there’s $100,000 margin. As long as you’re specific like that, you get in front of somebody’s face and say, “Here’s what I’m looking for”, eventually stuff just comes your way.

Joe Fairless: If you’re at a real estate meetup that you are attending for the first time, you walk in the door, what’s your approach at the meetup?

Doug Larson: Good one. I think everybody is kind of like, “Hey, hi. What do you do? Hey, what’s your specialty? Hey, what are you looking for? What can I help you with?” and that’s kind of my emo as well. I come loaded with business cards, and sometimes I’ll circle a couple things. The business card says, “I buy land, I also like fix and flips”… I might actually write in pen on 20 business cards specifically what I’m looking for: “I want to buy now, under $350,000 flip” and almost like they took my card and wrote something on it for them to remember later.

I get a million business cards, but as you’re going back through your pockets when you clean them out, you’re like, “Oh, cool, here’s this guy. What was he looking for? Oh, it’s right here.” And then they can go, “Oh yeah, I do remember this guy… He did tell me that’s what he was looking for.”

Joe Fairless: That’s a great tip, thanks for sharing that. Are you ready for the Best Ever Lightning Round?

Doug Larson: Sure man, let’s do it.

Joe Fairless: Sweet. Alright, first a quick word from our Best Ever partners.

Break: [[00:19:47].07] to [[00:20:29].08]

Joe Fairless: What’s the best ever book you’ve read?

Doug Larson: Do I have to pick just one?

Joe Fairless: You’ll kill the format of my show if you don’t. [laughter]

Doug Larson: The Millionaire Next Door, The Progress Paradox and How Much Is Enough? Okay, I’m sorry, that was three.

Joe Fairless: You said them so fast! Give me one.

Doug Larson: How about The Progress Paradox?

Joe Fairless: Alright, I’m gonna put that on my list. What’s the best ever deal you’ve done?

Doug Larson: I think 2011 I was down in San Diego and I was working on one of those adventure flips I mentioned, and a real estate agent up here in Utah called me and said, “Hey, I’ve got this deal… It’s a land deal, I would totally buy it, but I’m a little capped out on cash right now, and they need cash and a quick close. Income property, $50,000; they’ve just dropped from 100k [unintelligible [00:21:15].11]” and I said, “Send me the info.” They sent it, I ended up buying it for 38k. A little bit of legwork, I found out some of its issues, [unintelligible [00:21:23].01] and things like that.

Long story short, I got all those things cleared up, I was all in for about $40,000. I sold it a year and a half later for 190k, so a pretty good flip.

Joe Fairless: Pretty good flip indeed, I love that! What’s the best ever way you like to give back?

Doug Larson: My wife and I have been adopted three times, by three awesome kids, and we give a lot of time and energy to them. We’re also pretty active in church, in helping and teaching adults and youth, so… It pretty much takes up all our time.

Joe Fairless: What’s the biggest mistake you’ve made on a deal, or just any mistake that comes to mind on a deal?

Doug Larson: On a deal… A specific deal, probably over-improving. The biggest mistake was believing the hype of 2002-2006 and that things were always going to go up. I think we all knew the music would stop somewhere, but just not how fast and how hard it was going to drop. I would say one particular deal – in buying into that hype, I invested in a condo up in Park City, and the wheels fell off during construction. I could either lose 25k earnest money, or just go all in. I went all in, and I lost close to 90k.

Joe Fairless: What do you do differently now?

Doug Larson: [laughs] Well, I wouldn’t buy that, that’s for sure. Again, it really is all about the numbers, and good, solid fundamentals. Make sure you’ve got cash flow, make sure you’ve got a plan A, plan B, plan C. Plan A – if it’s gonna be a flip, that’s great. If that doesn’t work, can you rent it? Can you lease-option it? Do you wanna live in it, maybe? What is your plan B? Plan C is “If I really had to get out of this thing really fast, with my lowest price, am I gonna lose my shorts? What are the other options? Can I wholesale it to somebody else? What are the other things?”

Have that all mapped out before you begin. If you know the fundamentals, it should tell you what to do.

Joe Fairless: Where can the Best Ever listeners get in touch with you, Doug?

Doug Larson: On LinkedIn, but I don’t really go there much, I’ll be honest. I’m on BiggerPockets, and I’m there at least a couple times a week. I’m giving some advice and talking to people, so if somebody wants to find me, they can find me there.

Joe Fairless: I have really enjoyed our conversation, as the focus has been — like you said earlier, your business has to work for you, not the other way around. We talked about your adventure flips, where you move your family for three months into a house five minutes from the beach. The move to Hawaii, the recreational property, the direct mail within that, how you acquired those five properties, and how you priced it out to offer the properties in the direct mail piece, as well as a networking tip, where you write in blue ink on the business card exactly what you’re looking for.
Doug, thank you for being on the show… Some interesting stuff, a different type of conversation than we usually have, and I’ve really enjoyed it. I hope you have a best ever day, and we’ll talk to you soon!

Doug Larson: Thanks, Joe. Good talking with you!

 

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JF945: How to Make Real Estate Your Business Instead of a Hobby

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Turn it up a notch! OK we’re not cooking anything in the kitchen, but we are about to cook up some recipes for success in real estate. From flipping, to meet up, to networking, it’s all necessary to be well-rounded and self-reliant. Hear what our two guests have to say about getting started in taking the business to another level.

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Bill Bronchick & Bobby Dahlstrom Real Estate Background:

– Co-founder of the Colorado Association of Real Estate Investors
– Nationally known attorney, author and public speaker
– Say hi at bill@bronchick.com
Founding board member of the Colorado Association of Real Estate Investors, leader of Northwest group
 Well-known investor, entrepreneur and real estate broker
 Based in Denver, Colorado
 Say hi to them at www.legalwiz.com and www.alpenlux.com
 Best Ever Book: Think and Grow Rich

Click here for a summary of Bill and Bobby’s Best Ever advice: http://bit.ly/2oK1srY

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluffy stuff.

With us today, Bill Bronchick and Bobby Dahlstrom. How are you two doing?

Bobby Dahlstrom: Great, thank you.

Bill Bronchick: Doing great, thank you.

Joe Fairless: You’re welcome, both of you, and nice to have you both on this show. I’m really looking forward to digging in. They are based in Denver, Colorado. They are co-business partners in real estate deals, they co-authored a book called “The Business of Flipping Flips” – did I write that down correctly?

Bobby Dahlstrom: The Business of Flipping Homes, Joe.

Joe Fairless: [laughs] I don’t know how I wrote that… You know, I do like “The Business of Flipping Flips”, though… That’s pretty catchy. “The Business of Flipping Homes” – they co-authored that book. With that being said, do you two wanna give the Best Ever listeners a little bit more about your background and what you’re focused on?

Bobby Dahlstrom: Wow, that’s a long silence. I hope we didn’t lose Bill. I will start in… This is Bobby, and I started investing full-time — I’d been a marketing consultant and started investing in real estate full-time back in the mid-nineties. Bill and I met each other and did several projects together, and were involved with the group that he founded, called The Colorado Association Of Real Estate Investors.
Over the years I’ve done hundreds of flips and had many joint ventures with Bill, and we also wrote another book around 2001 that was a best-seller, called Flipping Properties.

Bill Bronchick: Great. This is Bill Bronchick. I’ve been investing since 1992, I’ve been practicing law as a real estate attorney since 1990. I quickly figure out after about two years of practicing law that it doesn’t matter how much you make an hour, it’s how much you make an hour when you’re not working, so I got quickly into real estate and my client’s deals, and I soon discovered that the law of practice pays the bills, but you get rich in real estate.

I did a lot of deals pretty much full-time since 1992, weaving in and out of my law practice and the association in Colorado. I’ve done just about every type of deal you can imagine – residential, commercial, flips, wholesales, lease options… Just about every type of deal, but Bobby and I fell into a nice little niche together flipping homes, and we wrote the best-seller in 2001 called Flipping Homes. Our brand new book is “The Business of Flipping Homes”, which is a business approach to the real estate strategies.

Joe Fairless: Well, let’s talk about a business approach to the real estate strategies of flipping homes. Walk us through the premise of the book.

Bill Bronchick: The premise of the book basically is using certain real estate techniques to run a business. A lot of people do it as a hobby or a part-time thing, or really haphazardly… Real estate investing, in my mind, is not like stock market investing – you don’t throw money at it and wait for something to happen; you have to be active as a participant. And it’s like any small business, you have to worry about things like cash flow, marketing, keeping your books and records, and so forth. So what we do is we give a blueprint on how to run your investing like a business.

Joe Fairless: Let’s talk about that. What are some ways to run your real estate business like an actual business, and not a hobby?

Bobby Dahlstrom: One of the first things that people need to do is realize it’s gonna be a time commitment. There’s a lot to learn, and you need to surround yourself with other successful people and build a team that you trust, that you can work with on a repeat basis. That’s kind of the basic place to start. Then you have to go out and start looking for your first deal.

Many people get lost in trying to find the perfect deal, which probably doesn’t exist. You need to find one that makes sense, go with that, learn from your mistakes, which hopefully we will help you to avoid, and then move on to the next one, as you grow.

Bill Bronchick: Also, one of the most important things in a business I mentioned earlier is cash flow. You have to make sure that you have enough money to not only run your business on a daily basis, but to fund the deals you’re working on and don’t get all your money tied up to the point where everything is hanging on a couple of deals, and if they don’t go through you’re broke. It’s like any business, you have to anticipate your expenses and your cash flow needs.

Joe Fairless: And with flipping, how do you look at cash flow?

Bill Bronchick: We talk about two types of flipping in the book – wholesaling and retailing, retailing being the traditional stuff you see on TV, buy, fix and flip… Wholesaling being more of a short-term deal and selling it to another investor as is.

Wholesaling will bring you short-term income, and the fix and flipping will be every three or four months, but you have to be able to anticipate your projects. For example, if you’re in the middle of two fix and flips and they went over budget and you’re feeding it and feeding it, and all of a sudden you have to pay other expenses of your business, like your phone in your office and all the things like that, you have to make sure that you have enough cash on hand so you don’t run out of cash for your deals.

Joe Fairless: Earlier I heard that you want to avoid the mistakes… What mistakes have you two come across, either personally or through the investors you know that you wanna share, so that the Best Ever listeners listening can avoid those mistakes?

Bobby Dahlstrom: To continue on our train of thought sort of along the lines of cash flow, let’s talk about cash flow mistakes. There’s various ways to control a property and then purchase a property. If you’re going out and getting a new loan for it and it’s gonna be a flip, most likely what you’re doing is because flipping’s become so popular, [unintelligible [00:07:38].23] money that would be considered hard money loans. And those can make sense, you can get in and out quickly. But a lot of times these hard money loans have a little upfront cost, as you’d expect; they also have, however, a high interest rate, and usually a balloon payment in six months or so. So you wanna be realistic… Most flips that we do, we get it from purchase to ready to sell in, say, three to six weeks, so even with the hard money loan, that would work out.

If for some reason you’re planning to do an addition, or something, or you don’t have a crew and a seasoned, experienced contractor that can get the work done quickly, and you think it possibly might take longer than that – and it’s really not just when you finish, but when you get is sold – then especially be careful, be aware that that balloon payment is coming, and the carrying cost is much higher than what you might expect for just your traditional home payment.

Now, ideally, you’d be able to fund the deal with your own either savings, or you might have some money tied up in a retirement account to utilize – which is a whole different strategy; that’s a little more advanced – but also just your own lines of credit. Even though they have less upfront expense, they are probably gonna make sense… It just depends on your state of mind, if you’re comfortable using your own credit line in this business.

I think sometimes people don’t realize how long it’s gonna take and they get their money tied up… And like Bill mentioned, if you’re trying to juggle more than one deal, it gets complicated because you’re having to get your resources, including yourself, to two different places. It’s usually better, like in most things, to start slowly, one deal at a time.

Bill Bronchick: Right. And just to add to that, a lot of people do get hard money loans for their fix and flips, and they don’t realize that, let’s say they have a six months loan – after six months, the interest rate goes into default, which means it might step from 12% to 20%. Then all of a sudden it’s racking up at 20% while you’re trying to get your closing done on the backend, and all of a sudden your profit is eaten up to be nothing or even negative.

But even though it only takes a couple of months to get a rehab done and ready for resale, you could have delays, you could have contractor problems, you could have weather, you could have more often than not a buyer that says, “Yeah, I’ll buy” and then a month-and-a-half later, right before closing, they can’t buy, so then you have to put it up and get another buyer.

The six months may seem like a long time, but what I recommend people do is make sure if you’re got a loan that’s due in six months, you have the right to buy an extra two or three months, otherwise you’re either getting hit at the default rate of interest, or potentially foreclosure by the lender and you’re gonna lose the house.

Joe Fairless: Earlier you’d mentioned building a team you trust… What team members need to be on this team for fix and flippers?

Bill Bronchick: Us two. [laughter] An attorney, a contractor, a real estate broker, a title or Escrow company rep, a good insurance person, an accountant, an inspector… Just all the players — and it’s not like you have to have every one of them lined up before you make your first offer, but that’s one of the things you wanna do right up front, start getting your things lined up so that you don’t end up having some bad experience because you’re just rushing to get something done with someone.

Joe Fairless: What are the best ways to meet the attorney, the contractor, the real estate broker, the title company person, the insurance person, the accountant and the inspector?

Bill Bronchick: Local real estate investment groups is one good way, ask for referrals.

Bobby Dahlstrom: That’s where I was gonna start, too. Almost every city has some type of a real estate organization that’s sort of a creative thinking, like-minded people type get-together scenario, they’ll meet monthly. You can find those online, and sometimes going to some of the seminars, whether they’re free seminars or a paid weekend event like I believe we have coming up – those kinds of things are a great place to meet other people and just get a sense of what this flipping is all about. Then also, as you read and learn more about the different people that you’re gonna need in your group, when you speak to, say, a real estate broker – and I’m a broker, I’m also a contractor…We don’t all think alike and we don’t all have the same experience. It’s not that difficult to become a real estate agent. So you wanna start looking for the ones that have worked with investors and ideally own investment properties themselves, so they understand what you’re trying to accomplish.

Bill Bronchick: Meetups are also a good place to find groups. If you go to meetup.com, there’s dozens in your town.

Joe Fairless: What are some lessons learned as far as creating a real estate group or meetup? Because Bill, I know you are the co-founder of The Colorado Association Of Real Estate Investors and you did that in the late ’90s, I think you said… Or early 2000s? Mid-nineties, and you’re still active. What are some tips that you have for someone who wants to do something like that?

Bill Bronchick: Well, you’ve got to be able to have an organized organization that’s gonna help… Maybe get some volunteers in the beginning, so you don’t have to spend money on employees. Some of these groups are run like a board, like government, and they have a board. Mine was run as a benevolent dictatorship, and therefore was much more efficient, just having one person or two people be the point people to run everything and make the decisions.

You’re gonna have to build an e-mail list, you’re gonna have to find some place that’s fairly reasonable, but reputable, to have your meetings, and most importantly, you just gotta make it interesting with the topics. A lot of these groups have speakers who come in and sell things – sell seminars, books and CDs… Which is okay, but if they have that every month, you’re not getting a lot of information.

Joe Fairless: One other follow-up question — I know I’m kind of going back in a kind of scattered approach, but I was taking notes as you two were talking, and I wanna make sure we address all these items. You mentioned earlier, Bobby, that there will be a time commitment; that’s the first thing that you said. For someone looking to get started and going full-time, what type of time commitment should they expect?

Bobby Dahlstrom: Well, I think as a minimum you’re probably looking around ten hours a week. In our previous book we spent more effort of gave more emphasis on the idea of wholesaling, which basically you don’t necessarily need any money to do. If you go out and identify a property that’s a good deal, then with a little effort you’re gonna find someone who will definitely take that off of your hands. So the idea as a wholesaler is you spend your time looking for bargains, and you’re probably not gonna find it by just having your real estate broker go out and look for you. That is one way to identify deals, but usually it’s really pounding the pavement and being creative… But it’s hard work, so that’s gonna take some time to go out and find that deal, and then you need to secure it.

If you’re starting kind of skipping that step and you’re willing to work with people that have already found wholesale deals, or with real estate brokers, or buy foreclosures at the trustee sales, those kinds of things, then in some ways it takes less time to find a deal, that’s true, but then you still have to manage the actual process of getting it from under contract to closed, to then fixing it up and then selling it.

To really be successful, you need to spend time on your education along the way, too. So again, even if you’re not wholesaling, and you just skip that step and you’ve got the money to do your own deals, it’s still gonna probably be, let’s say – and this isn’t a rule of thumb I’ve set in the past, but Bill, you can chime in – ten hours or so a week would be a good place to start. If you have more time… We see a lot of people get into flipping that have the money tied up in the stock market, and maybe they’re empty nesters… They still have another career – we don’t advise people to go and just leave their existing career, but maybe in addition to that, or if they’re sort of semi-retired, they can work their way into the investing at their own pace, if you will.

Bill Bronchick: Just to add to that, I would agree, ten hours a week is a good place to start. I think the approach that people need to have is that after they come home from five o’clock from their regular job, it’s time to go do the second job. Like I said, treat it like a business. You’re setting aside two or three hours a day, and that’s just your second job for a while, and you’re gonna have to get your family and friends to understand that and accept that. At some point, maybe when you get up to 15 or 20 hours a week, you’re gonna have to decide which job is more important. If you’re doing it right, the job that’s more important is gonna be the real estate, because it’s gonna make a lot more money.

Joe Fairless: Alright you two, what is your best real estate investing advice ever?

Bill Bronchick: My best real estate investing advice ever… My knee-jerk reaction would be “make a lot of offers.”

Joe Fairless: Why is that?

Bill Bronchick: Well, I think too many people dance around it, they look at it, they research it, and then they haven’t even made an offer yet. You can’t buy a property from a seller in a good deal until you find out what the seller’s problem is. You gotta sit down with them and get personal and get them to open up, and go “What’s the real reason you’re selling?” Not because you wanna sell the house, but there’s some problem attached to that that you need to find and get to the bottom of, and then solve that problem and buy the house; if you solve their problem, you make money.

It’s not always price they’re looking for. It might be speed – closing quickly, it might be closing later, it might be terms… You just don’t know. So make lots of offers, but don’t make an offer blind, without knowing what the seller’s needs are – their personal needs, not the property needs.

Joe Fairless: I love that.

Bobby Dahlstrom: Yeah, I agree. I would say — we’re not inventing this one, so I’m not gonna count this as my best advice, but what really does matter is you have to buy it right; you just can’t overpay for a property… So where my advice might come in from there is don’t take things personally. People get really attached to one potential deal, and they try and make it work; they go backwards and forwards and try and make it work, and get all these other people involved, when maybe it’s just not a deal. Or maybe it will be a deal in a year, so you can always leave a verbal offer with the potential seller in a respectful way, maybe they’ll come back to you. That comes back to really making more offers.

People get really caught up also in the renovations, so they start doing things the way they would want to do it for their own house. If I happen to like light blue interiors for my house – which I don’t  – that would be fine, but I don’t wanna use that in a flip. We wanna be a little creative, get most bang for the buck – that’s part of the fun of the business – but don’t try and project your personal case and your personal opinions too strongly into each deal.

Joe Fairless: I love that. Are you two ready for the Best Ever Lightning Round?

Bill Bronchick: Go for it!

Bobby Dahlstrom: Sure!

Joe Fairless: Alright, sounds good. First though, a quick word from our Best Ever partners.

Break: [[00:18:21].02] to [[00:19:03].01]

Joe Fairless: Best ever book you’ve read?

Bill Bronchick: Think and Grow Rich.

Joe Fairless: Best Ever deal you’ve done?

Bill Bronchick: Oh, there’s so many…

Bobby Dahlstrom: Bill and I were partners on a duplex in Washington Park which went against the grain of some of our typical deals. It worked our really well, we bought half a duplex.

Joe Fairless: You bought half a duplex…

Bill Bronchick: Right, we bought half a duplex for a 100k, put 80k into it, sold it for 263k in eight days, cash.

Joe Fairless: How did you find the buyer?

Bill Bronchick: The buyer was easy, because it’s Washington Park, the most desirable neighborhood in Denver… So that wasn’t hard. We put it on the MLS and we had it sold in a minute.

We found the seller’s property was vacant for eight years, and it was a disaster. 1,200 square-foot, half a duplex, we put 80k in it – that’s a lot of work for a little half a duplex.

Bobby Dahlstrom: That’s right. We purchased it from another investor who… Really, they were new, and it would have been a little too much for them to take on. As I recall, Bill felt bad a little bit that we made so much and he paid for a vacation for her, in addition to the money we had already agreed upon for the purchase.

Joe Fairless: Nice.

Bill Bronchick: Yeah, that was good. And just one other thing I just wanted to mention with that deal… This deal in particular – it was a wholesale from another investor to us, and then we sold it retail, so it was kind of back-to-back. It was half a duplex, so there was another side to it, and the other side looked terrible… So we had to actually fix up both sides in front, so it matched, otherwise it would have looked like the monsters with [unintelligible [00:20:30].02], one half good and one half bad. [laughter]

Joe Fairless: And did you have to get their approval to do that? Because I imagine they didn’t pay for those renovations… You just paid for it to help your investment.

Bobby Dahlstrom: We’ve done that in the past, as well… We kind of encouraged the neighbor, with their houses dilapidated, and said “Look, we’ll do a little renovation while we’re here, just to help you out, too. It’s win/win.” An awkward conversation, and then after that, it usually goes just fine.

Joe Fairless: What is the biggest mistake you have made on a deal?

Bobby Dahlstrom: Well, if I stick with deals with Bill, it might be the time that he verbally told me we had one ready to go, and I got a crew in there over the weekend and then found out that we actually didn’t have the deal signed. We had already done all kinds of demolition and emptied the place out, took out some [unintelligible [00:21:19].16] walls, that kind of thing. But it worked out… We luckily didn’t lose anything too valuable of the owner’s, and we worked it out.

Bill Bronchick: If we’re talking about the one in Baker district, my biggest mistake was selling it to Bobby for a quick 10k cash, and then he fixed it up and made the lion’s share of profit. I was greedy. I was looking for a new car and he flashed cash in my face, so I sold it in two days after I had it, to Bob.

Bobby Dahlstrom: Oh, that’s right.

Joe Fairless: What is the best place the Best Ever listeners can get in touch with you two?

Bill Bronchick: The best way to get me is my website, legalwhiz.com. Bob…?

Bobby Dahlstrom: You can send me an e-mail, Bobby@alpenlux.com, or go to my website, alpenlux.com.

Joe Fairless: Alright, Bobby and Bill, this has been an educational conversation. Thank you for being on the show, thank you for talking about the best ever advice that you have, which is to make a lot of offers – don’t dance around the property, just make offers. I loved the “solve the problem” – I think that really resonates with me even more… Identify what the seller’s problem is and solve that problem, because we are dealing with people, we’re not dealing with properties. We’re in the people business.

And Bobby… I think I have your voices down, by the way, at this point, but correct me if I’m wrong – I believe you said, Bobby, “Don’t project our personal taste into the deal”. I love that. That is a mistake that I have heard a lot of beginning flippers make. Then lastly, when you two mentioned paying to renovate the outside of your neighbor’s property – in this case it was a duplex; in other cases it might be just your neighbor, if it looks really bad… It’s a win/win – that certainly is a win/win/win: you win, they win, and the neighbors all win. Everyone wins, all the way around. Really interesting stuff.

Thank you two for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Bill Bronchick: Great, thank you.

Bobby Dahlstrom: Alright Joe, you have a great day! Thanks.

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JF944: How to Get to 75 Rehabs a Year and 10 Employees

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Big business, it all started thinking big. Our guest has a 50-50 partner with responsibilities of his own, that is how they know who does what… That is how they scale. Hear how he was able to do 75 rehab the year.

Best Ever Tweet:

Brian Elwood Real Estate Background:

– Business Coach, Real Estate Investor, Entrepreneur
– Does 75+ rehabs per year and owns 25 rental properties in Middle Tennessee but resides in Denver
– Passionate about business development and helping entrepreneurs
– Based in Denver, Colorado
– Say hi to him at BrianEllwood.net
– Best Ever Book: 4 Hour Work Week by Tim Ferriss

Click here for a summary of Brian’s Best Ever advice: http://bit.ly/2nZJzXU

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Brian Ellwood. How are you doing, Brian?

Brian Ellwood: I’m great, Joe. How are you?

Joe Fairless: I’m great. Nice to have you on the show, and looking forward to digging in. Brian does 75+ rehabs a year and owns 25 rental properties in Middle Tennesse, but lives in Denver, Colorado. He is a business coach, real estate investor and an entrepreneur. You can say hi to him at his website, which is in the show notes link.
Brian, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Brian Ellwood: I lived in a bunch of different states growing up, but Tennessee from sixth grade on, went to the University of Tennessee, graduated and moved back to Nashville, and that’s where I started my real estate business. That was 4+ years ago or so from now, and two years into it we started to build the business to where we can run it from our houses, without having to leave our house, but investing in the same city.

Then we decided to test that theory and moving across the country. Now I live in Denver, and we have a team of about 10 people that live in Nashville. Not everybody does… The marketing guy would not need to be local, but your sales guy would; certain people are boots on the ground, other people are not.

I really have a passion for creating passive income and for teaching other people, helping other people get into this business and create the lifestyle that they want to live.

Joe Fairless: I wanted to talk about your responsibilities now, as someone who does 75 rehabs a year and owns 25 properties and employs 10 people. How do you spend your day?

Brian Ellwood: I have a 50/50 business partner, so the work is divided up between the two of us. I am over marketing and finances and operations, and he is over sales and renovations, so we kind of divided it down in the middle. It’s kind of like we have two CEOs on our org chart.

My day is basically spent working with our marketing director, working with our CFO and our COO. I know these sound like big, fancy titles; the marketing guy and the COO are the same person, okay? [laughter]

Our COO, he spends one day of the week working on operations and four days on marketing, because marketing is more important to a business of our size. So I’m on the phone with them for several hours a week, and I’m focusing on our vision for the year and holding them accountable to getting certain results done by certain times.

I should also throw in there that 75 rehabs sounds really intense, but we don’t do expensive rehabs. We have, and we have a couple more going on right now, but over time we’ve decided that $10,000 or less is the sweet spot for us. We focus on being a marketing and sales organization at our core, so the backend monetization has to be kind of simple, because you can’t really be great at every part of it, at least not in the beginning… So that decreases the simplicity a lot.

A lot of times we’ll just do five, seven thousand dollars… Just trying to get properties in rent-ready condition, put it back on the market; either a landlord would buy it, or someone who wants to move in and finish the renovation will buy it.

Joe Fairless: So you’re staying away from the big time distressed properties and you’re looking for something that just needs some lipstick?

Brian Ellwood: It’s not that we wouldn’t buy a big kind of distressed property, as long as there’s equity in it when we buy it, as long as we can get it for a discount. It’s just that we’re only gonna put the first ten grand or so that it needs into it, and then put it back on the market.

If it was really distressed and needed to be torn down, we wouldn’t do anything to it. We would just buy it and list it as is. Sometimes it doesn’t make sense to put any money into a property, but in our experience, running a business virtually is tough when you’re putting $110,000 into a rehab and they’re opening walls and finding all kinds of different stuff.

We have a great team there, the project manager and another guy who oversees all the projects, but we’re just trying to create a more focused business model. I always hear the mantra that “Focus makes you rich”, so we’re not trying to be great at everything.

Joe Fairless: What usually comprises of the five to ten-thousand-dollar rehab budget?

Brian Ellwood: It’s probably like paint, carpet, [unintelligible [00:07:13].28] just cleaning it, taking out all the trash, doing some landscaping… It could be like windows, if the windows are broken out. If the property is gonna be listed and it’s gonna be sold to a homeowner, someone who’s gonna live there, then you’re gonna just do the first $10,000 worth of work that’s gonna make it livable, for someone to buy. But if an investor’s gonna buy it and do like a rehab on it, then we may just clean it up and not do much to it.

Joe Fairless: That’s an interesting model. I haven’t come across this model where you’re doing the initial part of it, or you’re just doing the five to ten thousand dollars worth, and then flipping it to either the end buyer or another investor. Did you start out that way?

Brian Ellwood: We started out wholesaling, and we kind of over time have just come to think that closing on everything is the best strategy – just closing on it, listing it on the MLS, selling it with a realtor. We still focus our efforts on marketing and sales, but instead of signing a contract to an investor, we decided to put the resources in place to allow ourselves to close on every property and sell it the traditional way, because then not only can you sell houses to investors, but you can also sell them retail, which means you can expand your business to a lot of other zip codes, or maybe investors aren’t looking, because you’re selling everything to retail buyers.

Joe Fairless: You mentioned that a lot of your conversations — or maybe not a lot, but you mentioned a priority of yours is holding the team members accountable to get the results done. What results do you outline for them to accomplish?

Brian Ellwood: Just as an example, our marketing director’s key indicator, of whether or not he’s doing a good job, is how many leads he generates each week. Of course, there’s a lot of other variables that go into that, like cost per lead, but that’s the main thing that we look at. And he has goals for each quarter, to get to a certain point.

Our CFO is actually responsible for maintaining a certain profit margin – net profit margin – in our business and forecasting the revenue that we’re going to make against the expenses and saying “Hey, the next quarter does/does not look good, so we need to make this or that budget cut of this amount to maintain our healthy margin where we wanna be.” Sales guys – there would be appointments attended and contracts signed. Another position we call our CRO, which would be chief revenue officer. He is responsible for pipeline revenue added, and we have one other that we call our brand commitment score, and that is something that our COO — he calls every customer after the property has closed and surveys them on how good of a job we did creating a certain experience for the customers, and it’s on a scale of 1 to 10. That gets reported. There’s a lot of other KPIs, but those are the main ones that we focus on.

Joe Fairless: Do you have a software program where you log in every week and just check the software program, or do you have a spreadsheet that you created and each of them fill out what they accomplished? How does it work?

Brian Ellwood: Each team member has their own dashboard where they have all their KPIs clearly displayed, that we look at on our call each week. We also have kind of like an assistant position, and one of the things she does is takes the KPIs that I mentioned, the core ones that we feel drive our business, and puts those in a little report that she posts to our KPI Slack channel each week, just so it’s front and center for everyone on the team to see how everyone else is doing in terms of hitting their numbers. Every person is responsible for tracking their own KPIs on a simple Google spreadsheet.

Joe Fairless: What is your best real estate investing advice ever?

Brian Ellwood: Well, I struggle a little bit to come up with a great answer for this, but what I wanna say is to start with lifestyle as your number one goal when you’re going into business. What that would look like would be write out your perfect day in detail, like where you are, who you’re with, what you’re doing, how much time you’re working, how many hours do you work etc. and figure out what that lifestyle that you’re imagining costs, and figure out what type of business model would allow you to live that lifestyle, and then work backwards from there to building your business.

I’m sure you’ve read the Four-Hour Workweek, right?

Joe Fairless: Yup.

Brian Ellwood: It’s probably the most mentioned book on your show, if I had to guess.

Joe Fairless: Rich Dad, Poor Dad.

Brian Ellwood: Okay… Yeah, I thought about that one, too. [laughter] Well, in the Four-Hour Workweek he talks about the difference between being a CEO that makes 500k/year working 80 hours a week and he’s gone all the time, or a dude who makes 50k/year working ten hours a week from a coffee shop, doing something that he loves. Two extreme ends of the spectrum, and there’s no wrong answer as to where you should be on that spectrum, but it’s just a really important question to ask, because there’s way too many stressed out, unhappy billionaires out there in the world.

What intrigued a lot of people about our business is “How do you do this virtually and you seem like you sit at home and you must be laying on the couch, watching soap operas?” Well, I’m not, but I don’t do a lot of stuff that I don’t enjoy, and I had to be intentional about creating this day-to-day experience, instead of just saying “I wanna make a million dollars and not thinking about what it’s gonna take to make the million dollars.”

A lot of people will sacrifice lifestyle for money, but they want the money because they think that will give them a certain lifestyle… It doesn’t work that way, unless you’re intentional about it.

Joe Fairless: That’s so true. What a great point. Are you ready for the Best Ever Lightning Round?

Brian Ellwood: Let’s do it.

Joe Fairless: First, a quick word from our Best Ever partners.

Break: [[00:13:36].25] to [[00:14:19].17]

Joe Fairless: The best ever book you’ve read?

Brian Ellwood: Four-Hour Workweek.

Joe Fairless: What’s the best ever personal growth experience, and what did you learn from it?

Brian Ellwood: One of my biggest personality flaws is that I have shiny objects [unintelligible [00:14:27].16] really bad, the visionary type, and if I see new ideas coming across my plate, all over the place… Every time you scroll Facebook there’s a new piece of software that’s supposed to connect to your business, or something. For the first four years we were in business we changed our direction a lot. “Well, let’s focus on this. Oh, you know what? Let’s change. Let’s invest in this other market. That didn’t work out… Let’s try to do new construction. Oh, that didn’t work out.”

I learned over time that you never get anywhere if you keep changing direction, so now what we do is we develop a vision for the next year and we stick to it. One year is about all I can commit to, because I still have issues… But once that yearly vision is in place, we don’t sway from it. We can make tweaks to it, but that’s what we do the whole year, even if great ideas come up and try to make us change course, and we get a lot more results from being focused.

That was the hardest and best growth experience I think I’ve had to go through.

Joe Fairless: Yeah, that’s probably some advice I should take myself… Thanks for sharing that. What is the best ever deal you’ve done?

Brian Ellwood: The best deal… We bought a house for $35,000 and it was in an area where new construction and things were maybe 10 to 15 streets away at that point; the area was still pretty rough, but the growth was spreading towards it, and we held it as a rental for about three years, and then sold it not too long ago for $225,000. So we bought it for $35,000, sold it for $225,000. The house was on two lots, and each lot was good for two houses, so four houses total, and it sold for land value.

Buying on the fringes of areas that are gentrifying I think is the easiest money you can make.

Joe Fairless: What’s the best ever way you like to give back?

Brian Ellwood: I’d say two things… One is that inside of our company culture we have — I mentioned the idea of living your perfect day in the beginning of this interview, and we have what we call our Perfect Day Crew where we meet quarterly and everyone goes over what their perfect day is and what’s holding them back, and we all give them feedback and advice. In between those quarterly meetings we are assigned an accountability partner. They hold their partner accountable to doing these things that they set out to do, to move them more towards living their ideal life. So I help not only our team members to do that, but friends and family as well.

Another thing I’ll say is that I really like to donate to Kiva – have you ever heard of Kiva before?

Joe Fairless: No.

Brian Ellwood: It’s a nonprofit… Some guy in San Francisco started it, and it’s micro-loans for people in third world countries that need money for things like water filters and building toilets, and stuff… And they actually pay you back. They have like a 90-something percent repayment rate. An $800 loan can buy a clean water filter for an entire village of people, and they collectively can pay you back in a year or so, and they even pay I think a little bit of an interest.

I like to throw a few hundred bucks a week to my Kiva account, and there’s always money coming back when I’m getting repaid, and I just keep pushing it back and it kind of creates a snowball.
I really like the idea of the money getting paid back. There’s something about that, because then I can just keep redeploying it. I think Kiva is a great organization, and I tell people about that a lot.

Joe Fairless: What is the biggest mistake you’ve made on a deal?

Brian Ellwood: Probably not doing enough due diligence, not getting a professional home inspection on the deal, and then thus overlooking major foundation issues that cost us $20,000… Basically, taking the deal from being profitable to just barely breaking even. So not doing thorough due diligence I’d say would be the biggest mistake.

Joe Fairless: Since you live in Colorado, your properties are in Tennessee, what safeguards have you put in place to prevent that from happening again?

Brian Ellwood: Well, we do a home inspection every time now. We have a contractor go out there and give us an estimate. We have a member from our team that we call the renovation manager go meet the contractor. Then we get a professional home inspection and a termite inspection on every single deal. We also have photos and videos uploaded to Google Drive that we can check out. That’s about all the due diligence I need to be comfortable. That’s our current system now.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Brian Ellwood: The Best Ever listeners can visit my website, it’s BrianEllwood.net. They can also feel free to send me an e-mail, Brian@BrianEllwood.net. I’d love to hear any of their questions and I’d be happy to help them out if they feel like there’s anything holding them back.

Joe Fairless: A couple major takeaways for me… One is your philosophy, and that is be intentional about your day-to-day experience, and you certainly have lived that and are walking the walk because of how you built your business. The other is how you are holding team members accountable because you have a different type of lifestyle where you are working remotely. I love how you went through the majority of the people on your team and what they are being held accountable for, and then lastly, the best ever deal, where you’re buying on the fringes of areas that are gentrifying is the easiest money you can make, according to you.

Thanks so much for being on the show. I really appreciate you sharing your advice with the Best Ever listeners, and we’ll talk to you soon.

Brian Ellwood: Thanks for having me, Joe. I enjoyed it!

 

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JF937: Why Picking the RIGHT Partnership is Key in Wholesaling

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Our guest is doing many types of deals, but he does them with a partner makes up for his weaknesses. If you have any weaknesses, which I’m sure you do, you need someone there to compensate for your loss and leverage what you can’t or shouldn’t do, get a partner!

Best Ever Tweet:

Travis Daggett Real Estate Background:

– Owner at CornerstonePropsCo, a Premiere Real Estate Redevelopment & Renovation Company
– Full-time real estate investor for five years
– Made 5 figures on his first wholesale deal..correction: 4 figures…you’ll hear about it in the interview 😉
– Married 19 years and has three amazing kids
– Based in Eugene, Oregon
– Best Ever Book: Visioneering

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Travis Daggett. How are you doing, Travis?

Travis Daggett: Doing great, thanks Joe!

Joe Fairless: Nice to have you on the show, my friend. Travis is the owner at CornerstonePropsCo, a premier real estate redevelopment and renovation company. He’s been a full-time real estate investor for five years. He made five figures on his first wholesale deal. He’s married 19 years and has three amazing kids, and he’s based in Eugene, Oregon. With that being said, Travis, do you wanna give the best ever listeners a little bit more about your background and your focus?

Travis Daggett: Yes, sure. Well, the five figures doesn’t really sound that impressive… However, I did start with literally no money, so that was a deal where I think I had an earnest money deposit in the deal, and I netted $7,000+. So it was a little better… That could be a $1,000, that’s no big deal, but for my first deal, it was alright.

Joe Fairless: Well, five figures would be $10,000+, because that would be five numbers.

Travis Daggett: Yeah, see…? This is the truth, that you don’t have to be a genius to be a real estate investor. [laughter] There’s a lot smarter people doing all kinds of things, but they’re not necessarily making more money, and sometimes they’re too smart for their own good.

Joe Fairless: [laughs] Alright, so you made 7,000 on your first… Let’s start there, how about that? Let’s start with your first wholesale deal. You made $7,000 on it. Can you tell us the story about that a little bit more?

Travis Daggett: Before this I was a sales trainer for an insurance company, and I was traveling all over… They’ve laid off about a quarter of the staff, so that was the blessing in disguise. I just started learning everything I could. I had a couple of rentals before, and that was about the extent of my real estate investing experience. I started learning about wholesaling, specifically HUD properties. This was 2011 when there were a lot of HUDs, and there was just a little loophole where you could make bids every single day on HUD properties, and you really could do it yourself. You could just find an agent that was sympathetic, I guess, and get their login information, essentially, work with them as their assistant if you needed to be an unlicensed assistant, and make bids every single day… So that’s what I did.

I got a property under contract, and then I found the buyer and did a back-to-back closing, because the HUD won’t allow assignments. So I bought it for seven and sold it for seventeen. All I had was the earnest money deposit out of pocket, which I think was $500; I had some closing costs, and type of a thing, so I think I netted over seven.

Joe Fairless: Alright, that was your first wholesale deal. Catch us up to speed, from then until what you’re doing now.

Travis Daggett: Well, 2012 was great, because there were a lot of HUDs, and I started thinking (mistakenly) that I was in the real estate investing business. At that point I really wasn’t in the real estate investing business, I was more in a tech business and real light on the real estate investing. That lead me to think I knew more than I knew, and started buying at the auction… Which, of course, was okay and I did alright, but then I thought I could get into rehabbing without really understanding it.

2013 is when I bought a property or two wrong – when I say “bought wrong”, I made the first and maybe the most deadly mistake in real estate investing, which is just buying for too much. It’s really hard or impossible to overcome that mistake.

So I made some mistakes along the way, and then HUD dried up, as a lot of people probably know. Auction properties dried up – by that I mean the supply went down, competition went up, so I needed to learn to source my own deals directly from sellers. I started doing that in 2014, and it’s been a rollercoaster, both results-wise, and when you’re self-employed, it’s an emotional rollercoaster too, but I’ve been really fortunate to partner with somebody that knows more than me and learned from him for the past couple of years.

We haven’t bought off the MLS since 2013, I think, and we sourced our own deals for the last two or three years.

Joe Fairless: And what type of volume are you doing on a monthly or annual basis?

Travis Daggett: Nothing crazy… I used to think that was the goal, to do more deals, but now I’d rather do less deals that are more profitable. Probably the average is a deal a month, but we did have one deal that was over six figures, and we had a wholesale deal that was almost $50,000, so we’ve been able to get some more profitable deals, and focus on that instead of volume.

Joe Fairless: And since you are selective with the properties that you end up working on, what is your criteria that you look at for a property to pass the test?

Travis Daggett: Well, we have two main targets or lists that we’re going after, because most of our deals come from direct mail… So the first one is properties where we’ve actually driven through neighborhoods, seen the property, wrote down the address, looked up the owner information, sent him a letter… That’s really the most valuable and valuable list that you can have – at least we believe – because we don’t have to guess at whether the property is a property that we wanna buy. When we’ve marketed to the absentee owner list in the past, we got people calling, they have a move-in ready house, and really that’s not good for them, not good for us. There’s really no way for us to create value or margin in a transaction like that, because we’re not real estate agents looking for listings.

So the first target is residential properties, mostly single-family, and we just call it our “driving for dollars” or our neighborhood list. The second is foreclosures, when the bank has filed either a notice of default for non-judicial foreclosure, or a lis pendens for a judicial foreclosure, because in Oregon we have both.

We’ve gotten a number of deals that way, targeting that list. That’s a lot more labor-intensive for each transaction.

Joe Fairless: Will you walk us through the process for how that works, and your role, and what data resources you need to have access to?

Travis Daggett: When I started in 2011 on HUD properties, again, it was real admin-heavy, it was really more of a tech business, and thankfully that’s an area where I’m stronger… So I started using virtual assistants, and I couldn’t have done what I did then without them, and I couldn’t do it now. We use virtual assistants to do a lot of the scrubbing on our lists. We’ll go out and drive through a neighborhood… Let’s say we take a day and we come up with a few hundred addresses, and then the VAs – they’re usually overseas, they’re in India or the Philippines – during the night (over here), they’ll use Property Radar (or whatever other site we need for that county) to find the owner’s names and their mailing address, because they may be different, and that completes our list.

With the foreclosure properties, we just get those from the title company, that’s free. There’s scrubbing involved there though as far as prioritizing the properties that we’re gonna go after more heavily in the beginning. Equity, for sure, a property with a good interest rate in case we wanna assume the mortgage or purchase it subject to the existing mortgage, that type of thing.

Joe Fairless: Will you tell us about the last deal you did? Give us the numbers and tell us which one of these paths allowed you to find it.

Travis Daggett: Yeah, sure. The final numbers aren’t in on that, but that’s fine, we can go through the process pretty well. The property that was on the foreclosure list, it was non-judicial foreclosure. We always have to have a cooperative seller, of course, or a cooperative homeowner. We wanna help them, they have to want the help, and it’s really a win for the bank too, if you understand negotiating for the bank. They’re not in the business of property restoration, or property management, or really anything to do with properties, so it’s a win for them.

So there were two loans on the property, we went through a number of rounds at the bank of negotiating, and we were able to postpone the sale a couple times, which helps us. In this case, we actually worked successful in negotiating a discount with the first lender, but we knew even if we purchased it for the amount of the first mortgage and the second it’d still be a deal, so we went ahead and paid off the first – they were the ones foreclosing – and then we continued to negotiate with the second, even though they really had no reason to negotiate with us… But we thought we’d just give it a shot, and ended up getting it for the amounts in the first and the second. But it was still a deal, especially when you consider the market here, where it’s less than two months of inventory, so it’s very competitive.

Prices are going up — we’re not buying for speculation, but were all in on our purchase I think at 140, and as it sat, it’s probably worth in the upper hundred, and then with a renovation of probably 30,000 (nothing major), it’d be worth in the low two-hundreds, and we’ll probably rent it out for 1,500/month, I would guess.

Our aim high is definitely a 1% rent-to-cost ratio. In that Eugene area we also have appreciation, so we’ll go anywhere from 0.75 to 0.8%, up to 1% rent-to-cost ratio.

Joe Fairless: Is your goal to buy and hold these properties?

Travis Daggett: Right, so my partner has a property management company, and that’s our partnership: I find the properties, so I’m in charge of the marketing and finding the deals, and then at that point he really takes over as far as the property management side. That’s what we’ve done on all but one; we’ve wholesaled one, but everything in the last couple of years, we’ve held on to through this property management company.

Joe Fairless: And do you just split the costs 50/50?

Travis Daggett: Well, cost of the marketing — again, I was really fortunate to find a guy that really knows this stuff and he’s honest. We met at a real estate investing REIA group (Real Estate Investors Association). So yeah, we basically split the costs upfront for the marketing, and then since we’re not cashing out the property so to speak, we just did an appraisal on the property, because usually we’re gonna finance out of it with a bank loan… So now we have an appraisal, we know what we’re all into it, so we have our equity in the property.

At that point, I can either say, “Well, okay, I’ll take the equity as a payout right now” or I can say “Well, I’ll stay in the property and we’ll just split the cash flow.”

Joe Fairless: Oh, okay. Alright. Either one of you have the flexibility to cash out your equity at closing and be done with that property, and the other person holds on to it, or you both have ownership and enjoy the cash flow and appreciation…

Travis Daggett: Yeah. I mean, it’s really more of his choice than mine. I’m fine with that, of course, because he’s got the property management company. But it’s just one of those — I’m sure people have been in bad partnerships (and good ones) and it’s probably pretty rare (I’m thankful for that) that there hasn’t been that tension when we feel like we’re on opposite sides of the table. For the most part, we feel like we’re on the same side of the table; we’re not negotiating against each other, so it’s been a good situation.

Joe Fairless: Yeah, it’s refreshing when you have a business partner like that. Just for point of clarification, you said it’s really up to him on that… I don’t understand that point. Can you elaborate?

Travis Daggett: We have different ways of looking at who controls a deal, and whose it is, so to speak, who owns it. So since I’m finding most of the deals, I could say “Okay, these are my deals.” However, early on, just because of the nature of our partnership and relationship, we both just agreed all the deals we just throw into the pot.

We were in a situation where I was saying, “Okay, here’s the deal. How much do you want for it?” It’s a traditional wholesaler type of attitude. I said, “Here’s the deal, let’s see what we can do with it?” A part of it is he has access to a lot more capital than I do (at better rates, at least), so he’s funding the deals, so I’m happy to give him a lot of the decision-making that way, too.

Joe Fairless: That makes sense.

Travis Daggett: Yeah, we’re both in agreement. It’s not like I’m saying, “Hey, we should flip this thing because we’re gonna make six figures just after doing floor and paint” and he’s saying “No, I wanna hold to this.” Most of them it’s pretty clear when we buy it it’s gonna be a rental.

For example, we purchased one for a few hundred thousand in Eugene, so that one we know it’s gonna be a flip when we’re done with the rehab.

Joe Fairless: Okay. The point I had missed was that he was financing them and you were finding them. Once you said that, it made a lot of sense.

If you partner were to move away – for whatever reason – and you had to find a new partner, how would you qualify that new partner so that you would attempt to have the same caliber or partner that you have now?

Travis Daggett: Tough question. In partnerships in business, and I’m sure just generally in life, it’s usually (from my experience) more of the intangibles or the character issues that damage partnerships or damage businesses, as opposed to people’s aptitudes. I think we all know really smart, skilled people that can self-destruct and destroy partnerships.

In the case of my partner, I was able to thankfully observe him for a couple of years just through the REIA and just through some acquaintances, and watching him and his business, and seeing that he was someone that did what they said they were gonna do. He had a track record of success in partnering with other people… Without that knowledge, it’d be really tough to find a partner or to choose a partner.

I’d have to start with somebody that plays to my weaknesses… Kind of like a marriage – if you have the same strengths and weaknesses, that can be a little bit of a challenge. So it should be somebody that is strong where I’m weak, and maybe where they’re weak, I’m strong. In our partnership now, I’m certainly not strong in negotiating and funding. I’ve gotten pretty strong in admin and stronger in marketing… So I’d say somebody that’s strong in the funding side and the construction side, that’s who I’d look for.

Joe Fairless: What is your best real estate investing advice ever?

Travis Daggett: I kind of alluded to it earlier… I’d say don’t be confused about what business you’re in and what your strengths actually are, because I think pride and arrogance and blindness in that area can really destroy you.

Joe Fairless: Now, are you ready for the Best Ever Lightning Round?

Travis Daggett: I’m ready!

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [[00:18:26].14] to [[00:19:07].24]

Joe Fairless: Best ever book you’ve read?

Travis Daggett: Visioneering, by Andy Stanley.

Joe Fairless: Best ever deal you’ve done.

Travis Daggett: A deal in Eugene… It was a short sale, over six figures in profit.

Joe Fairless: Now, is that six figures, is that seven, or is that five or four or three? I have to ask you now a second time.

Travis Daggett: I got it straight now, this is tax season. [laughter] I gotta nail it.

Joe Fairless: Best ever way you like to give back?

Travis Daggett: I think it’s just the lifestyle, it’s really plan. All of us can give emotionally when we see the kid on TV with the belly sticking out, but I think giving is really a lifestyle, so it’s planned. We plan that we’re gonna give a certain amount, we’re not just surprised at the end of the year when we do our taxes.

Joe Fairless: What’s the biggest mistake you’ve made on a deal?

Travis Daggett: Well, I think I talked about this one earlier, but I’ll relive that painful memory again… Bought at auction, so of course, it’s done, paid cash; trusted a partner who unintentionally — he just was outside of his area of expertise as well… Then we made it worse by over-rehabbing it by about double, then we made it worse still by selling with seller financing — not that that’s a bad strategy in general, but just delaying our misery… And then ended up taking the loss I think two years after we bought it. We should have just swallowed the poison a couple of years earlier and taken a loss.

Joe Fairless: Tell us about the six-figure profit that you made. Tell us the numbers on that one.

Travis Daggett: Really desirable area near [unintelligible [00:20:41].28]. It took over a year to finish it, to close on it. When we first shot – short sale, direct mail marketing, they called us… As soon as we looked at it, even online, looked at comps and stuff, we knew that it was a great area property, we really wanted to have it. Even before we looked at it, we said “If we can get this anywhere near 300,000, it’s a deal.” So we met with the sellers, they were very cooperative – he was actually a patents attorney, so he knew a little bit about the legal process. It took a long time, a lot of handholding – I don’t mean that in a condescending way – just walking him through the process and negotiating with the banks, meeting the VPO agent there, dealing with all kinds of liens that popped up with credit cards, and just going through that whole process.

We ended up buying it for 244,000 I think, so just right out of the gate we had probably 50,000 in equity, and then it was a light rehab… Of course, over the years, from when we started to when we finished, that area went through the roof even in property values; it probably went up double digits, so we ended up with over a hundred thousand dollars in equity when we ended up closing on it, finished rehabbing and then appraised.

Joe Fairless: That’s great. How much did you put into the rehab?

Travis Daggett: About 30. Maybe less. Maybe 25.

Joe Fairless: And what did you sell it for?

Travis Daggett: No, we held on to this one, because it’s a hot campus rental area. I really don’t know off the top of my head what we rent it for, but I would have to guess it’s in the twos. I couldn’t see it renting for less than 2,000/month.

Joe Fairless: Yeah, sounds like a great buy and hold, that’s for sure. Where can the Best Ever listeners get in touch with you?

Travis Daggett: The e-mail address is selltocornerstone@gmail.com. That’s my business, Cornerstone Properties Eugene is the name of the business.

Joe Fairless: Travis, thank you for being on the show, and talking about the deals that you’ve done, how you’re getting those deals, the hundred-thousand dollar in equity that you have as a buy and hold, how you found it and the short sale process… Along with the partnership stuff, because that’s really important. Real estate really is a partnership and team environment, and we have to be careful who we partner with.

I love the approach that you take. It is really about having someone who plays to your weaknesses, and I found out the same thing with my partners that worked out – they are strong where I’m not, and I’m strong where they’re not, and it makes for the best partnership.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon!

Travis Daggett: You’re welcome. Thanks, Joe!

 

 

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JF823: How to Delegate Everything and Become a Nomad While Running Your Business #SituationSaturday

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Best Real Estate Investing Crash Course Ever!

Have you ever wanted to live outside the country while still running your business? Seems impossible doesn’t it? It’s not, it’s a matter of selecting the right team to hire, setting an expectation, and preparing yourself in the business accordingly. Hear how our guest had closed her biggest deal while living in Thailand.

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Micki McNie Real Estate Background:

– Owner, Broker, Investor at 33 Zen Lane, a Denver real estate team that focuses on “investment-minded” clients
– A commercial leasing broker and a residential broker
– Owns rental properties, hold notes, and flip houses
– Based in Denver, Colorado
– Say hi to her at www.33zenlane.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple.

Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF814: How He Turned $10,000 into Over $10 MM in Real Estate Developments

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Starting with $10,000 in his bank account our guest was able to surround himself by the right people and begin his fix and flip ventures. Developments, fix and flips, and other ventures have built his total net worth above $10 million. Also, find out how he is able to only do a project the year and make it out alive!

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Slava Menn Real Estate Background:

– Principal at Labrador Real Estate & Contributing Writer at Inc. Magazine
– Guest lectures at his alma maters, BU & MIT, and writes for Inc Magazine
– Started with a $10K savings and has developed $10M worth of real estate
– Since 2013, Labrador Real Estate has developed over $6.5MM in real estate
– Based in Boston, Massachusetts
– Say hi to him at http://www.labradorre.com
– Best Ever Book: Unique Ability by Catherine Nomura

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Click here: http://www.adwordsnerds.com to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF799: How to BOOST Your Profits Per Hour, Direct Mail, and High End Construction

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So you’re deciding if you should wholesale or rehab your new found deal… Well have you asked yourself how much time and energy it takes to rehab? Today you are going to hear why some deals are better to simply wholesale while others make more sense to fix and flip. You will also hear about how our guest went from accounting to a direct mail business and why he loves high-end flips.

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Justin Silverio Real Estate Background:

– Founder of Open Letter Marketing, a direct mail company for investors
– Managing Member at JS2 Homes LLC, his own investment company on rehabbing, redeveloping and wholesaling
– Prior to starting his company, Justin was an accountant in the private equity space
– Over 10 years experience in the investment industry
– Based in Boston, Massachusetts
– Say hi to him at http://www.thebostoninvestor.com
– Best Ever Book: Millionaire Real Estate Investor by Gary Keller

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment. Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF:772 How He Scored $10 MM at the BOTTOM of the Real Estate Market

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Rob Swanson is an icon in the real estate investing world and owner of the CRM Freedom Soft. He was able to convince a group of individuals to lend him $10 million in 2008, or at least he was able to create a fund. In this show he shares what he did with the cash and how he structured his overall operations in a weak market. Turn up the volume!

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Rob Swanson Real Estate Background:

Owner of Freedom$oft; A successful real estate investing software
Has flipped houses in over 20 states for over 15 years
Currently writing a book called CASH IN, What To Do Before, During & After The Next Housing Market Crash
Based in Denver, Colorado
Say hi to him at www.freedomsoft.com

Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!