JF1052: He Purchased his First Flip at 21 Years Old With $0 Out Of Pocket! With Nick Armstrong
Nick had 3 kids and a full time job when he got started, the only thing he knew was to TAKE ACTION! Today he shares a lot of real insight into the world of fix and flipping. He’s made a lot of mistakes, fortunately he learned from all of them and kept moving forward. While he has had success so far, it seems as though this is only the beginning! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Nick Armstrong Real Estate Background:
-Owner of Armstrong Investment Groups, LLC At 23 years old
-Within his first 18 months he has done over $1,000,000 in transactions
-Recently secured 3 private investors over the course of the past 3 months
-Runs a video blog: Armstrongs in Real Life
-Based in Birmingham, Alabama
-Say hi to him at www.flpbhm.com
-Best Ever Book: Success Curve
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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, Nick Armstrong. How are you doing, my friend?
Nick Armstrong: I’m doing well, man. You?
Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Nick – he is the owner of Armstrong Investment Groups at 23 years old, and within his first 18 months he has done over one million bucks in transactions. He has recently secured three private investors over the last couple months, and we’ll talk to him about why he’s doing that… And he runs a video blog.
This interview is actually going to be on YouTube as well, on his video blog, as well as mine. With that being said, Nick, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Nick Armstrong: Yeah. I’m 23 years old, I got married when I was 18; I married my high school sweetheart and we had three kids, fourth on the way, due in October.
Joe Fairless: Congrats!
Nick Armstrong: Thank you, I appreciate it. I started in real estate probably less than a year and a half ago (about 18 months ago); I actually got started through Bigger Pockets [unintelligible [00:03:28].22] just started networking. It really came down to me searching for opportunity. I knew nothing about real estate, I got started through a book.
Joe Fairless: Which one?
Nick Armstrong: Rich Dad, Poor Dad – that one got me kind of started, which lead to 50 other books, which ultimately got me here today… But my first step really started from networking; I was scraping for any kind of opportunity. My first deal – technically, it wasn’t my first deal, but I tried to buy a duplex we were gonna house hack in and then rent the other side out… And we got this close to closing on it, and I was getting an FHA loan (FHA was basically gonna be the loan). I was gonna have to put 3,5% down, and they wouldn’t fund it.
Joe Fairless: Why?
Nick Armstrong: They said that they would not fund an investment property. The way that it was structured – it was a USDA – my down payment was gonna be piggy backed onto another loan, because I was broke. I was 20 at the time, and working full-time at a fast-food restaurant.
Joe Fairless: Which one?
Nick Armstrong: Chick-fil-A.
Joe Fairless: Okay.
Nick Armstrong: I’m actually still there part-time until July. So that’s kind of how I got started; I’m scraping every day, looking for any kind of opportunity that I can find, and I’ve found one.
Joe Fairless: One million dollars worth of transactions… What does that entail?
Nick Armstrong: Basically, what I do is I flip houses; I don’t mean wholesale. I fix, flip, renovate and then resell. The way that I got started was a joint venture partner reached out to me – it was an out of state partner. I don’t like the idea of asking for money, I just like to find opportunities out there and say “Hey, would you like to get a piece of this opportunity?”
That’s basically what happened – I said “Hey, I’m in Birmingham, and I’ve got this deal.” Somebody reached out – he was a JV partner – and it was kind of a dream come true for me, but his terms were “We fund the acquisition plus the rehab, 100% of everything, and then we split 50/50 at the end of it.”
That to me was a dream come true, because I’ve always been somewhat of an entrepreneur, I’ve just never had the funds to do anything; I was gonna try to start wholesaling, but I didn’t.
Joe Fairless: Where did you post — was it the Bigger Pockets forum?
Nick Armstrong: It was.
Joe Fairless: Okay… In like the Marketplace area, or…?
Nick Armstrong: It was. Basically, what I was doing was I was driving for dollars, looking for houses in Birmingham that had For Sale signs, and I was trying to get in touch with the owners. A lot of the people were actually wholesalers (I didn’t know this), but there were also people that were willing to seller-finance their properties, so what I was doing was I was calling these owners and I was saying “Hey, would you be willing to seller-finance this property?” and they said yes.
I would take pictures of it and all that kind of stuff, I would go on Bigger Pockets, and I’m like “Hey, here’s this opportunity. Who wants to get on board with it?” Like I said, essentially, that’s how I got noticed on there; it was from doing stuff like that.
Joe Fairless: So you were initially looking for seller-financing properties to basically help the individuals who were selling their house sell their house through seller financing, and you were trying to wholesale the deal, right?
Nick Armstrong: Yes. It was basically anything and everything that I could try; I was just taking action, and it obviously led me to the right place… But I’m still working with these partners and I’ve secured two others, but we actually just closed on a house yesterday, and then — we bought a house yesterday and then we sold a house last week, so things are moving pretty well hopefully for this year.
Joe Fairless: Let’s go back to that first one – the joint venture partner reached out to you after you posted about the deal, and they said “The terms are we’ll finance 100% of everything, split 50/50 at the end of it.” What were the numbers on the deal?
Nick Armstrong: This one was a foreclosure, it was a Fannie Mae. We bought it at 67k, we put about 27k into it, and we sold it for 134k [unintelligible [00:07:09].13]. We bought two more after that, so I’m at five with them right now… So five purchases with them right now.
Joe Fairless: Over what period of time was that first one?
Nick Armstrong: A lot longer than I thought it was gonna take… We were doing it with a flat fee; we didn’t use a realtor to list the property. We were using a flat fee company.
In my area, it took a little bit longer because we were pricing it kind of at the top of the range for that area. I learned that as I went. It took me less than 35 days to rehab the property, but then it sat for five months. Those holding costs – they’ll kill you if you’re not careful. We learned a lot on that one, but that’s kind of how the numbers [unintelligible [00:07:44].27] with that.
Joe Fairless: And roughly you and the joint venture partner each came away with about $20,000?
Nick Armstrong: Less than that. The holding costs, depending on what market – especially if it’s an HOA area or certain things like that, that will hurt your bottom line for sure.
Joe Fairless: What ended up being the profit to each of you, roughly?
Nick Armstrong: We made about 23k off of it.
Joe Fairless: Total?
Nick Armstrong: Yes, [unintelligible [00:08:06].14] We purchased it for 67k, we sold it for 135k. For my first deal, it was probably the best that it could be, because I’ve had a lot of nightmares going into the first deal; I didn’t sleep a lot at night. I went out of town and I came back and I was like “Oh gosh, the basement wall is gonna cave in” or something like that. I kind of got freaked out, but it worked out.
Joe Fairless: How did the joint venture partner know that there was an alignment of interest, other than the 50/50 split?
Nick Armstrong: So I’m in Birmingham, and they were in Florida; they told me that they didn’t do any business with anybody that they didn’t meet in person, so I drove down there, kind of on a leap of faith, because you hear all kinds of stuff… You hear all kinds of stuff like that.
Joe Fairless: Yeah, you probably brought a hunting knife with you, right?
Nick Armstrong: I did [laughter] That’s kind of one of the things I wanna get as far as a point across for this – you create the opportunities, you don’t stumble upon them.
So anyway, we drove down there, they met me, shook my hand… It was like this two-day conference and I learned a whole lot. They knew what they were doing, I was pumped up…
Joe Fairless: Was it an actual conference, or it was like experiencing a conference?
Nick Armstrong: I said conference, but it was like a get-together with like 12 people. It was very, very secluded; there were not many people in this group, for obvious reasons.
Joe Fairless: What are the obvious reasons?
Nick Armstrong: How many places do you know that fund 100% of the rehab plus the acquisition? You want it to be more tight-knit, especially whenever you’re talking about that amount of money; some people are purchasing 30 houses at a time. I would probably wanna keep it pretty tight-knit, too.
So I went down there, shook everybody’s hand and I met them. They had actually done two or three deals in Florida with these people; I met up with them and I asked them how their experience was, and I studied up on the company a lot before I got my feet wet with anything. Then once I was assured that this was the real deal — it was still a leap of faith, I’m not gonna lie. People laughed at me, my friends laughed at me, I lost friends, family laughed at me… They were like “You’re an idiot, these people are scamming you”, but now these same people are coming back and ask me for jobs or money, so it’s kind of funny. But I took a leap of faith, I went down, and it’s rewarded me.
Joe Fairless: Just from an alignment of interest standpoint – you didn’t have any of your own money in it; did they make you sign anything? Because I’m putting myself in their shoes… Certainly the 50/50 split on the upside sounds really appealing, but I’m sending you $94,000 total, and you don’t have any money in it. Did you have to do anything to put their mind at ease or sign anything?
Nick Armstrong: Yeah, there’s a joint venture contract that you sign that basically says that everything is theirs. So if I [unintelligible [00:10:43].07] and run, everything is theirs; they’ve got all that equity in that property. Essentially, I was just gonna do everything. It was per property, so it wasn’t like “For six months I’m under contract with these people.” With every property it was a different contract.
Joe Fairless: Alright. One question that I’m gonna start asking guests – and you just helped me with this – is in addition to your purchase and your renovations costs, what were your holding costs, and are you including that? Because on the surface it’s $41,000 profit, but then when you said it took five months and the holding costs, it knocked down the $23,000 profit, and that’s huge. Was it the HOA fee that was the main thing? Because that’s $17,000 or $18,000…?
Nick Armstrong: Yeah. You’ve gotta figure the insurance… Basically, what we figured into the holding costs were 1.5%. We still had to pay to list the property, we had to pay concessions; concessions are a huge thing down here. Everybody wants to buy a house with zero money; they don’t wanna put any money down.
This house was beautiful. It was completely remodeled, but they wanted the roof checked, the HFAC checked out, they wanted everything fixed… I had to build a [unintelligible [00:11:57].27] at the back of the house. Crazy stuff, and all that stuff adds up, and it just kind of compounds every month. You’re cutting the grass… I live in Alabama; humidity is crazy, so the grass is always up six inches every week. It’s a lot.
Joe Fairless: That’s good to know. That’s something that I will start asking moving forward with all fix and flippers, so I’m glad that you told me about that and we talked about it.
Okay, so that was the first deal, you made money. Congratulations, you made money on the first deal; you got into it with no money of your own, you went down to Florida with your wife, with your hunting knife and you made sure that things were on the up and up, and you didn’t get kidnapped, you got funded, so great. How many deals have you done to make up that million dollars worth of transactions within the first 18 months?
Nick Armstrong: We’re at five with them. We’ve renovated three… We sold three so far. So we bought/sold, bought/sold, bought/sold. We got an offer on one of our properties yesterday. We bought that one at 59k, we put 27k into it and they offered us 120k, but I’ll be countering back, because it’s listed at 125k I think right now.
The one that we just purchased yesterday, we purchased it at 60k, we’ll probably put 30k into it, and it will sell for 135k easy.
Joe Fairless: Just so I’m calculating correctly – you’ve done five total deals?
Nick Armstrong: With my out of state people.
Joe Fairless: With your out of state people. What I’m tracking towards is that million-dollar in transactions in the first 18 months. Five total with your out of state people, and then how many without the out of state people?
Nick Armstrong: Without the out of state people we closed one yesterday. Like I said, I’ve just secured these two local people, so the funnel is filling with buying more, but as far as transactions buying and selling, [unintelligible [00:13:51].04] Does that make sense?
Joe Fairless: Oh, so you’re double-dipping?
Nick Armstrong: I’m double-dipping, but yeah, that’s how much money I’ve made, if that makes sense.
Joe Fairless: Got it. So for example, towards that million dollar mark that I mentioned earlier, each property is counted twice.
Nick Armstrong: Yes, I would say probably a little bit more, because the first property that I’m talking about, we bought it for 67k and then we put 30k into it. So I’m counting every dollar that I’ve managed, if that makes sense.
Joe Fairless: Okay, cool.
Nick Armstrong: Give me a couple years and that will be in net worth, or whatever, but…
Joe Fairless: No, that’s fine… I was just trying to track how you got to the million dollar in total transactions within 18 months, and I get it now… It’s including the purchase and then the sale. Alright, got it. Five total deals that you’ve seen through from start to finish, correct?
Nick Armstrong: Yes.
Joe Fairless: What was the most challenging one other than the first one?
Nick Armstrong: The second one. The first one, I figured that I knew everything and I would use the same people and they would take care of me as far as my contractors, and stuff… [unintelligible [00:14:52].28] he’s actually a mutual friend, and I trusted them… And then I got burned.
Joe Fairless: How so?
Nick Armstrong: I paid them weekly… Don’t do that, ever. Pay them by the job. It took four weeks longer than it was supposed to. I’m a very compassionate, laid-back guy, and the fact that I knew this person added on… It was just stressful for me. So I got burned, let’s just put it that way. I trusted somebody I shouldn’t have trusted, and it was my fault.
Joe Fairless: Same thing happened to me when I was living in New York City and I bought my fourth house… The first three did not need renovations, the fourth one I got a little cocky. Even though I was living in New York, I bought in Texas, and — the first three were in Texas, that was fine, but the fourth was in Texas and needed work. I hired a family friend’s family member who I knew really well, grew up with, and they took me behind the woodshed and just beat me with delays of the project, and went like $15,000 over budget. I had no clue what I was doing, and I learned the same thing – it doesn’t matter if you know them or not, you have to have an alignment of interest and structure it properly. So instead of paying weekly, like you did, now how do you pay contractors?
Nick Armstrong: Basically, it’s obviously per job, per item. We’ll have a spreadsheet now to where if we’re [unintelligible [00:16:12].02] like “This is how much I pay per door.” If it’s not Joe, it’s gonna be Bob. “Bob, if you don’t want that job, then I’ll pay Joe, per door.”
Joe Fairless: What do you mean “per door?”
Nick Armstrong: A prehung door. Let’s say I’m gonna pay you $50 to hang a prehung door; regardless if that’s Joe or Billy – it really just depends on who wants the job – I tally it all up and I’m saying “Hey, this is how much this job pays. Who wants it?” Most of the time it’s the same people that asked for it, because they’re the people that are hungry and are willing to work. You’ve gotta deal with that stuff… Contractors are probably the hardest part of this whole business, especially if they start trying to get buddy-buddy with you and you start getting emotions attached to it… You can’t, you have to break that off.
Joe Fairless: So you have identified what each task will cost and what you’re willing to pay for it, and you go to the contractors and you say “Here’s what needs to be done, here’s how much I’ll pay you per task” and “Do you want this?”
Nick Armstrong: Yes.
Joe Fairless: Okay. Do you also pay them up front?
Nick Armstrong: No, not unless — so the way that my out of state people work, and I’ve learned this and experienced it, too… The only people that I’ll pay up front is flooring people – people that are installing carpet, and stuff like that – just because that kind of makes sense, and it’s only like $60 up front, especially if you’re buying it at Home Depot, or Lowes, or what have you. That’s the only money up front we’ll put. Everything else – materials, everything – we paid for separately.
We Home Depot has a cool thing where you [unintelligible [00:17:34].18] you scan everything and then it sends to the officer’s cell phone number and they confirm payment… So it’s all simple. These contractors – they’ll upcharge everything that they can.
Joe Fairless: You said you’ve got three private investors… Are those three in addition to the Florida people?
Nick Armstrong: No, two are local, one is out of state, and I haven’t even done any deals with my second local person. My cards are right right now, and I just wanna make sure that I play everything correctly. As of right now, it’s working. Where I plan on my business going is just to have a big group of people and funds to work with, and to borrow money from each other… That type of thing. This is years down the road, but I’ve secured two so far in the past 18 months, so hopefully I’m on the right track. We’ll see.
Joe Fairless: How does the conversation go when you talk to private investors about investing in your deals?
Nick Armstrong: Basically, I show them what I have done and I explain to them the structure that I’ve used to work with my out of state partners. If you have money sitting in a bank, that’s not doing anything, who wouldn’t want to earn extra money on the side? Does that make sense?
I’m basically selling a product, and the product is money. Who wouldn’t want to be making 12%-20% return on their money that’s just sitting in the bank right now? When I go through these spreadsheets that we use for all these houses and closing costs that we talked about earlier, and they know that I understand what I’m talking about and how extensive all this stuff is… And even if the market dips, 10%-12% overnight, because we were gonna net 30% at the end of it, we’re still gonna come out clean, even if the market does dip overnight.
So that’s kind of how — I had everything well organized. Everybody likes organization, especially people that have money; they want somebody coming in there that’s giving them a clean presentation of what they have to offer. Like I said, I go back with what I’ve done in the past, and most of the time they’re good with it.
Joe Fairless: What is your best real estate investing advice ever?
Nick Armstrong: Other than “Don’t trust anybody ever…” — I’m just kidding. [laughs] But you really do, you have to keep a tight leash on people; so trust, but verify business. It’s also a numbers business. I think that my biggest advice that I can give somebody, especially if they’ve already started – if they haven’t started, then my advice is start; start somewhere. I started by talking to homeowners in Birmingham that were just trying to sell their house, and I was putting it on Bigger Pockets. Just start somewhere… But don’t ever trust anybody just because they’re a professional… Whether it’s a real estate agent, whether it’s a contractor, really get three, or four, or five, or ten bids per property for anything, whether it’s plumbing, or even just trying to sell a house.
On my first deal, a contractor tried to sue me because I didn’t pay him for an estimate. A free estimate – I didn’t pay for it, so he went to his buddy that was a lawyer and wrote up this [unintelligible [00:20:20].25] letter and sent it to me, and was like “I’m gonna sue you for $5,000.”
Joe Fairless: What happened with that?
Nick Armstrong: Nothing. He was just trying to scare me.
Joe Fairless: Did you act on it?
Nick Armstrong: No.
Joe Fairless: You didn’t respond in any way, and it just went away?
Nick Armstrong: This is how I responded… I do a lot of yellow letter campaigns, so I was doing pre-foreclosures in the area, and a property that he owned was actually foreclosing, so I sent him a yellow letter saying that I would like to buy his property [laughter], and I never heard anything back from him. I’m sure that was probably enough for him. But I never heard anything from that… Me and him both knew that he was just trying to get money. It’s just kind of how that worked, but it scared me to death for the first little while, but then I was like “There’s nothing that he can sue me from.”
It’s just kind of crazy, but that’s my advice… Especially if you’re already in this and you’re newer, don’t trust anybody just because they’re a professional or because they’ve done it. Really verify yourself and never assume anything.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Nick Armstrong: Absolutely.
Joe Fairless: Let’s do it. First, a quick work from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Nick Armstrong: The Success Curve, by Jeff Olson.
Joe Fairless: Best ever deal you’ve done?
Nick Armstrong: Probably the one that we just purchased yesterday. We purchased it for 60k, we’ll put probably 25k into it, and it’ll sell for 130k.
Joe Fairless: Oh, that’s the one you mentioned earlier. Are you including holding costs there?
Nick Armstrong: I am. This is a different area, so it’s just a little bit different, and it’s with a different partner, so it’s structured a little bit differently.
Joe Fairless: How is it structured?
Nick Armstrong: It’s the same, it’s still 50/50, but with the way that [unintelligible [00:22:51].02] on the money, basically; it’s like a certain little percentage out of every month, basically. That’s another reason why the holding costs are so much. You’ve gotta figure out how much your money is gonna cost you per month.
Joe Fairless: What’s the mistake that you haven’t mentioned that you’ve made on a transaction?
Nick Armstrong: Man, there were so many… That’s pretty terrible to say, but…
Joe Fairless: You’ve already mentioned some really good lessons.
Nick Armstrong: Yeah, I’ve learned from every single one of them. The biggest mistake really is just assuming something without verifying; that is the biggest mistake that I’ve ever done – assuming that something is gonna cost this, whenever I haven’t really verified it; I’ve just kind of got an idea, basically. Those little things add up so much at the end of a project…
Joe Fairless: What’s the best ever way you like to give back?
Nick Armstrong: I love mentoring people, and especially kids that are my age and younger than me. They ride around with me because they’re interested in some of the deals that I’m doing. Some people are interested in wholesaling, so I talk to them about how to actually generate off-market leads with yellow letters, and stuff like that, and the success that I’ve had through that. That’s kind of how I can give back – developing people that are younger than me.
Joe Fairless: Where can the Best Ever listeners get in touch with you?
Nick Armstrong: YouTube – Armstrongs In Real Life; it’s out daily vlog. We video everything, mostly to remember us and our family. I’ve also got [unintelligible [00:24:05].20] Instagram – I post all the videos of my business, and pictures, stuff like that. I’m hitting it really heavy with social media marketing right now.
Joe Fairless: Nick, thank you for being on the show. Thanks for talking about how resourceful you were getting going – and you still are, but that’s just the foundation of everything… You were driving around, finding houses that had Sale signs, and then talking to them, seeing if they’ll do seller finance, posting those… Eventually, that lead to an opportunity where you had a good deal, you found a joint venture partner (thank you, Bigger Pockets) and you were able to get the first deal done.
Lessons learned – holding costs (that’s a big one), and just overall maybe competitive pricing in certain submarkets, as well as the contractor stuff. But overall, holy cow, congratulations! You’re not leaving your Chick-fil-A job and you’re gonna be doing this full-time. Props to you, my friend. I’ve really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you soon!
Nick Armstrong: Alright man, thank you.
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