JF1162: Get Out of Debt Through Real Estate! With Joe Turney
4 years ago, Joe had a negative net worth (had more debt than income and assets). Joe self educated himself by reading real estate books and taking online courses. He took another full time job for one year to gain some capital, after a year of working 16 hours a day, he had enough saved up to purchase his first rental property. Now, 3 years later, Joe has accumulated $2 million class A single family homes. Hear how you could do the same thing Joe did, he’s living proof that it really does not have to be complicated! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
Joe Turney Real Estate Background:
- Owner Blue House Realty LLC
- Accumulated $2 million in A class single family homes which generate $100k passive net income each year
- Starting from a negative net worth, in less than 4 years
- Complete 10 to 12 flips each year with an average profit of $25k each
- Based in Birmingham, Alabama
- Say hi to him at Joe@joeturney.com
- Best Ever Book: Leading An Inspired Life
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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. We’ve spoken to Barbara Corcoran from Shark Tank, Emmitt Smith, the hall of fame football player – who is also a real estate developer, I bet you didn’t know that; go listen to that episode – and a whole bunch of others.
With us today, Joe Turney. How are you doing, Joe?
Joe Turney: Hey, I’m doing great.
Joe Fairless: Nice to have you on the show. This is gonna be fun. A little bit about Joe – he is the owner of Blue House Realty. He has accumulated two million dollars in A class single-family homes, which generate $100,000 of passive net income every year. He started from a negative net worth and has gotten to this point in less than five years. He completes 10-12 flips each year with an average profit of 25k, and he’s based in Birmingham, Alabama. With that being said, you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Joe Turney: Yeah, Joe, no problem. I’m basically just enjoying a new career change; I was in the software development world for many years, and the corporate world, and basically just got a little too old, so I started a career change. I found a local mentor, a local person who had done well in real estate, he gave me a few pointers and I took off from there.
I’ve never seen anything where I could turn just a savings account into a lifetime of retirement income in just a few years. I’ve had a lot of success in a short period of time.
Joe Fairless: Let’s talk about this… Let’s dig in deeper and in more detail. You started with a negative net worth – how do you have a negative net worth? I’m trying to think about that.
Joe Turney: [laughs] That’s a really easy question to answer, actually – you owe more than you’re worth on everything that you have.
Joe Fairless: What did you have that was putting you in the negative?
Joe Turney: Our mortgage on our home was too high, [unintelligible [00:03:04].25] very little in savings. Just a combination of several factors put it right at zero or negative.
Joe Fairless: So four years ago you have a negative net worth, right?
Joe Turney: That’s right.
Joe Fairless: And what was your job?
Joe Turney: Software development. I owned a computer software company.
Joe Fairless: Okay. You had a negative net worth, so clearly things weren’t going incredibly well four years ago.
Joe Turney: I’d been on a slow downward spiral for many years, and not paying much attention to it.
Joe Fairless: And then what happened?
Joe Turney: Well, basically I woke up and took some financial classes and learned about real estate and investing, and decided to make a change… So I took a second full-time job for a year, and got some savings accounts built up, and took that savings account and turned it into the real estate that we have today.
Joe Fairless: Which classes did you take and where did you take them?
Joe Turney: Well, I say classes, but it was mainly books and education on websites. Actually, one of the books I read early on was your book, The Best Real Estate Investing Advice Ever. But mainly books from Amazon, the books on there that were highly recommended – I got those and read them.
I’m kind of out in the country here and outside of town, so I didn’t have a lot of local support or anything like that. I guess if you wanna take classes, there’s really no formal education other than self-education.
Joe Fairless: So you read a bunch of books and you took a second full-time job for a year – what was that job?
Joe Turney: Just another software development job, just a second shift. [unintelligible [00:04:35].24] at the time.
Joe Fairless: What hours were you working in your full-time job, and then what hours were you working in your second full-time job?
Joe Turney: Basically, from 8 to 4 during the day, and then from 5 to midnight, roughly. There was a little bit of overlap, but in the computer world you can work remotely sometimes, so…
Joe Fairless: So you were able to work from home for those hours?
Joe Turney: Partially, yes.
Joe Fairless: Partially. And then did you have to go in some days?
Joe Turney: Yeah, it was a busy, hard year. I don’t recommend it, but it was my way out. If you don’t wanna change something, you’re gonna be stuck there forever, so I just changed something.
Joe Fairless: Good for you! I applaud you for doing that. 8 AM to 4 PM, and then 5 PM to midnight – you did that for one year. You put money into a savings account, and what did you buy?
Joe Turney: I bought a rental property. My first house was a local foreclosure just about a mile from my house. I bought it through the foreclosure process, and I kind of stumbled upon the concept of the buy it, renovate it, rent it and refinance it strategy. I kind of stumbled upon that on my own, before I even heard about it. I bought that with cash, got it rented, and I went to my local bank and they gave me a loan on it for 70% of the appraised value, which happened to be more than I had in it.
The light bulb went off for me immediately, that I did that ten more times in a two-year period. I renovated, refinanced as fast as I could go.
Joe Fairless: Wow… With the same bank?
Joe Turney: Well, what I found was a lot of the local portfolio lenders, they have personal limits that they can do in-house, so when I would hit a limit with a bank, I’d just start over with a new bank. It was divided over three local banks.
Joe Fairless: Okay. I mentioned that you’re buying class A single-family homes, because that’s what was written in your bio. What is a class A single-family home?
Joe Turney: Like I said, there are properties where there’s very little [unintelligible [00:06:38].29] in the neighborhood, where most of the buyers in that neighborhood are gonna be homeowners with mortgages. That’s probably the best definition I have. In my area, that works out to about $125,000 to $150,000 range is about the minimum per house.
Joe Fairless: And on average, what are you getting in rent on those?
Joe Turney: Approximately $1,200/house/month.
Joe Fairless: So you have $1,200, and say you’re buying it for 150k…
Joe Turney: That’s the appraised value, but I’m paying roughly 70% of retail.
Joe Fairless: Okay, now it’s getting clearer. So the appraised value is 150k, so in that case you would buy it for around $105,000. Yes, that’s right. Or buy it and renovate it for 105k.
Joe Fairless: All-in.
Joe Turney: Yes, all-in.
Joe Fairless: Is that your rule of thumb, 70% on the retail price all-in?
Joe Turney: Yes, and that’s based on my local lenders; they told me that’s what their limits are.
Joe Fairless: Oh, okay… To do the refi?
Joe Turney: For refinance that’s what they told me their limit was, so that’s what I work with.
Joe Fairless: You have two million dollars in these homes… How many homes do you have? Like 20?
Joe Turney: Yes, exactly 20, actually. I have 15-16 single-family homes, and one fourplex.
Joe Fairless: Okay. That’s incredible. Are you using the same approach for all of them, where you buy it, renovate, rent it and then refi it out?
Joe Turney: Yes. I’ve done that basically 20 times in a row now.
Joe Fairless: [laughs] I love this story, because it doesn’t have to be complicated, does it? You’re doing the same thing over and over and over and over again.
Joe Turney: Basically, the 20 provides me with enough income to cover all of my living expenses and day-to-day bills, and we paid off all those debts to fix our net worth problems, and then decided we don’t wanna live at the bare minimum anymore, so we started doing some house flips a few years ago, and that’s been a fun ride, too.
Joe Fairless: Each property, what does that make you every month on average?
Joe Turney: If I had to average them, probably about $450 net, after all mortgages and expenses.
Joe Fairless: Wow, $450 net… So you’re all-in at $100,000, and it’s renting for about $1,200. Let’s see. That’s 1.2%. Let’s say $1,200 is the rent, and the expenses, mortgage and everything – it’s gonna be around $750, $800, $850 you said?
Joe Turney: Yes, that’s with everything added together – taxes, insurance…
Joe Fairless: All-in, yeah. I bet you’re self-managing.
Joe Turney: No, actually I don’t. My biggest priority at this point in my life is lifestyle, so I don’t manage anything. The property manager takes care of 100% of all maintenance and problems, and the rents come in through ACH transfer, and the mortgage payments go out through ACH, so it’s 100% hands-off.
Last year I may have gotten three or four phone calls for the whole year.
Joe Fairless: What would be — and I’m not asking you the money question yet; I always ask everyone “What’s your best real estate investing advice ever?” I’m gonna ask you that later, but what would be your advice for someone who wants to do exactly what you’ve done with this model?
Joe Turney: The first thing – I really don’t think it works without capital. You’ve gotta have either a line of credit, or home equity, or cash. It doesn’t work at all unless you can pay cash upfront for the house. Because generally, a cash offer on any house, you can get at least a 20% discount off retail, and your banks are gonna loan you 70% of retail, so you’re really close. You only need a 10% bargain to make the whole thing work.
So the best advice would be to get some capital or a line of credit or a lender or a partner with money, something to start the process.
Joe Fairless: Are you a handy person?
Joe Turney: I can be. I don’t really enjoy it, but I can be if I have to.
Joe Fairless: How did you fix up the properties along the way?
Joe Turney: Well, the first two or three I did actually myself; I do recommend that, too – when you’re first starting out, to at least do it enough where you know how long things take, how much they should cost, how hard they are… But after two or three homes, I just hired local contractors or handymen to fix the properties.
Joe Fairless: What’s that experience been like?
Joe Turney: Very challenging, to say the least. In fact, just a few months ago I just started a salary payroll and put some of the best people I know on salary, so that I don’t have to keep trying to hire and chase new contractors.
Joe Fairless: I haven’t heard of doing this yet, especially since you have a third-party management company. Why not have the third-party management company handle the renovations?
Joe Turney: What I found is I do at least want to know what’s happening with the property. Now, my people that are on salary, they do some maintenance on the rental properties, but it’s only mainly repairs. For the most part, they’re working with me on house with the projects, but the property manager has the direct phone number of my employee, so they can call for help.
Basically, it’s just pre-paid… Maintenance costs – it’s already paid for on a consistent basis. There’s no unknown expense for maintenance. [unintelligible [00:12:14].00]
Joe Fairless: How much do you pay a person on salary to do the maintenance and how busy are they with 20 properties?
Joe Turney: They’re not very busy at all on maintenance, but if I didn’t have house flip projects going, then it wouldn’t work financially. But roughly $20/hour will get you a really high-quality person. And on a flip, you’ll come out way ahead, but if you’re paying people maintenance on properties that didn’t need maintenance, you would actually lose money.
Joe Fairless: And how many people do you have on salary?
Joe Turney: We have three.
Joe Fairless: Three people? And you’re doing 10-12 flips a year, so basically you’re averaging about a flip a month.
Joe Turney: That’s right. These three guys by themselves can renovate a single-family home in four weeks. It works out really nice.
Joe Fairless: Wow. That’s interesting… What a fascinating model and approach. You make it sound so simple.
Joe Turney: [laughs] Simple is one word, but maybe not easy. It takes some work, because I have to buy things at such a discount, and my market is so strong in this area… It takes me a lot of legwork and a lot of research to find a good deal; it takes a lot of time.
People believe they wanna do it until I show them my 50-60 written offers that I made in the last few weeks, that all said no; then they realize it’s not that fun every day.
Joe Fairless: You make 50-60 offers a week?
Joe Turney: Oh no, in the last few weeks… About that much a month.
Joe Fairless: Okay. Is there a way that you learned to scale that so it goes more quickly than how you started doing it?
Joe Turney: Delegating, obviously, was a big step for me. We let people run the office side of things. I still do basic bookkeeping, but I hired on some help for accounting and things like that. But for the most part, it runs by itself. The employees are very trustworthy, they run everything; once they get started, they don’t need any supervision. The rentals run without any supervision… Basically, my full-time job is just finding the next good deal. I enjoy that part of it, so it works out really good.
Joe Fairless: Let’s talk about how you find that next good deal… How do you do it? What’s your approach?
Joe Turney: Well, I know a lot of people spend a lot of money on marketing to houses and things like that, but I haven’t had very good luck with that personally. I really just watch public sales, for sale by owners, the MLS system… I look primarily for vacant houses or bank-owned houses on the MLS system. Anything that’s been on the market for 120 days or more shows up on my report each day… Things like that.
It’s hard to sell properties in my local area.
Joe Fairless: The last deal you bought, what are the numbers on it?
Joe Turney: Actually, we’re under renovation right now on the last one I just bought… It’s a local property, a single-family home, a four-bedroom home. The value – it will be worth about $145,00 when it’s finished. I paid – I’m trying to remember the numbers off the top of my head… I believe I paid $57,000 for it, and we’ve got roughly a $30,000 budget for renovations, and that’s gonna be a flip.
Joe Fairless: How do you decide which ones to flip and which ones to keep in your portfolio?
Joe Turney: Well, at this point I’ve got a really good portfolio that I’m happy with. It performs well and it has very low maintenance. At this point, everything I’m buying is just for flips, primarily… Unless I happen to get an unbelievable deal on a great house, everything else I’ll just sell at the end.
Joe Fairless: And assuming that you continue to make money on those flips, you’re gonna collect more and more money, so what do you plan on investing that money into?
Joe Turney: The best return I’ve got right at this moment is to simply pay off the properties I have; it gives me a really good return. But then I really want to expand out into some larger multi-family. I’d like to get some down payment money built up for some multi-family, just to get higher cashflow.
Joe Fairless: What is your best real estate investing advice ever?
Joe Turney: I believe if I had to tell someone what to do, I would say to design your lifestyle first, before you even start your real estate business. Decide what you want your life to look like. What I have today is word-for-word exactly what I wanted five years ago. My daily routine is exactly what I wanted it to be, but if I didn’t know what I was trying to build before I started, it’s very possible I could have built the wrong real estate business, that didn’t give me the lifestyle I wanted.
Joe Fairless: What’s your daily routine look like now?
Joe Turney: Basically, my biggest pet peeve is there’s no alarm clock; so I get up whenever we wake up…
Joe Fairless: What time is that, usually?
Joe Turney: Roughly eight o’clock.
Joe Fairless: Okay.
Joe Turney: I check the morning MLS listings, see if there’s nothing new or interesting, then I go to the job site and check to see how folks are doing there, and then the rest of the day I’m really out looking for other properties. I’m meeting with for sale by owners, or talking to other agents in the area to find anything new that’s happening.
A lot of times I’ll read the legal ads in the papers to see if there’s any foreclosures coming in my area.
Joe Fairless: Has that resulted in any closed deals, the reading legal ads in the paper?
Joe Turney: Yes, actually my favorite one I ever got came out of a legal ad. Sometimes it works. No one process works everytime, but that one works occasionally.
Joe Fairless: Please elaborate on that deal.
Joe Turney: It was actually a lakefront property right here in my area; very nice, level, lakefront [unintelligible [00:17:42].04] with its own boat ramp… There was a legal ad in the newspaper that had an attorney’s name in it, with no contact information. There was no property address, there was only a legal description. It took me a lot of homework to figure out where the property was to start with, and then to find contact information for the lawyer who would answer the phone, to find out when the sale was gonna be. So that was a great investment.
We ended up paying about $60,000 for it, and it was worth close to 200k… And it was just because I was the only one — it seemed like I was the only one that did my homework ahead of time to find out when the sale is gonna be, where the property is, is it vacant, who is the attorney doing the sale, what time is it; I went to the courthouse and did my title research ahead of time… So there was a lot I had to do for prep work to get ready for it.
Joe Fairless: How did you find the attorney’s name to contact?
Joe Turney: Well, the attorney’s office name has to be in a legal ad, but they don’t have to give you contact information; they just have the name of the law firm, so I had to do my own research to find out how to get in touch with them.
Joe Fairless: Was that just a simple Google search?
Joe Turney: It started with that, yeah, but a lot of the phone numbers I got went straight to voicemail, so I had to call some other closing attorneys in the area and ask them if they knew how to get in touch with them, and eventually someone knew the attorney. They gave me a cell phone number and I called them.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Joe Turney: I believe so.
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Joe Turney: I’d have to say Leading An Inspired Life, by Jim Rohn.
Joe Fairless: Oh, I love Jim.
Joe Turney: Leading An Inspired Life – I look at it like an encyclopedia of personal development.
Joe Fairless: I’ve never heard of that book, so I haven’t read it. It’s gonna be on my list. I’ve watched a bunch of YouTube videos.
Joe Turney: It’s my favorite; it’s the biggest one he ever wrote, so you’ll recognize it.
Joe Fairless: [laughs] Best ever deal that you’ve done that you have not mentioned already?
Joe Turney: That I’ve haven’t mentioned… So I mentioned the lake house already; probably the next favorite one I’ve got is a single-family home I bought. Actually, it was another foreclosure. I got it through a foreclosure sale, but I had already done a lot of due diligence on it. It was actually move-in ready when I bought it; it was on the MLS for sale, and it was already move-in ready. The day I bought it, we put it up for rent and it rented the next day, and within three days we had a tenant living there.
That’s been almost four years ago now, and I’ve never been back in the house again. It’s been probably my favorite one.
Joe Fairless: How come you haven’t mentioned the four-unit as being one of the top two favorites?
Joe Turney: [laughs] It’s kind of like picking your favorite kid, I guess.
Joe Fairless: Right, okay.
Joe Turney: That one has a unique story, too. Actually, I went to a local seminar a couple of years ago where there was a speaker talking about the power of owner-financing. I had never even considered that before. I came home from that seminar and sent an e-mail to every multi-family in my area – the listing agents – and asked them if they would consider owner financing. And out of about 39 listings, I had one that came back and said “Yes, maybe”, and it was that fourplex. I bought it with owner financing.
Joe Fairless: [laughs] How did you do it? Tell us the deal structure, please.
Joe Turney: The property was valued probably in the $230,000 range roughly, maybe a little higher… But I just made an offer. I had to ask the listing agent ahead of time what the seller wanted, so I just wrote word for word what the seller wanted in my offer, and sent it in. They wanted 10% down payment, and then we amortized it over a 20-year loan, the balance.
Joe Fairless: That’s phenomenal. Wouldn’t you wanna do that every time?
Joe Turney: Yeah, absolutely, but that’s the only one I’ve ever gotten with owner — well, I can’t say the only one, but that’s the best one I ever got with owner financing. It came out of a seminar. Like I said, just go do it; I went and did what he said, and it worked. I got one out of 39.
Joe Fairless: Wow. This is such a fun interview, because you’re so matter of fact with the simple approach, but it’s effective, too. What’s a mistake you’ve made on a transaction?
Joe Turney: Every time I fail to do enough due diligence ahead of time, I’ve ended up not coming out [unintelligible [00:22:56].01] The biggest mistake I ever made I believe was I bought a single-family home off the MLS system; it was a two-story home, nice-looking; behind the shrubbery around the front of the house, the foundation was white around the house, and I just made some basic assumptions, and that assumption really cost me a lot of money.
That assumption was that the white stuff behind the bushes was the foundation. It was not a foundation, it was plastic; the house had no foundation. It was sitting on blocks, like a mobile home, and I was shocked to say the least when I discovered that. That was just because I didn’t inspect it closely when I bought it.
Joe Fairless: How much did that cost you?
Joe Turney: It cost me about $13,000 to have the house raised up and put a foundation under it.
Joe Fairless: What’s the best ever way you like to give back?
Joe Turney: Now I really like for people who are in my situation five years ago, people who want out of the rat race – I really like helping people get out of that rat race, showing them what I do and say “Here’s your steps, you go do it.” It’s not complicated, but it’s very rewarding.
Joe Fairless: What steps are in that process, that you tell someone to do, that we haven’t talked about already?
Joe Turney: I guess the biggest step we haven’t talked about is you really need to have a good working relationship with a local portfolio lender, or someone who lends out of the local branch of their office, a local bank who will loan you money, because obviously, the whole merry-go-round doesn’t work unless the lender is gonna loan you the money at the end of the process.
I would recommend starting with a credit application and a loan application with a local bank before you buy your first property, just to make sure you can do it.
Joe Fairless: And you said “credit application” – so if you don’t have a house identified, you can still do a credit application with them?
Joe Turney: What I tell people to do – in fact, I’m teaching this to my own son at the moment – is go put your application in and tell them a fictional property, that you’re willing to buy a single-family home, and finance 70% of the appraise, with a rental income of $1,200. “Assuming those factors, would you approve my loan?”
Joe Fairless: So you’re telling them about a fictional property, you wanna buy it at 70% of appraise value, and it rents for $1,200?
Joe Turney: Yeah, and then they take the loan office — because it’s a local bank and you’re dealing directly with a loan officer who can make a decision without underwriting, it just goes much better. They actually can talk to you one on one and tell you yes or no in person, without a lot of hassle.
Joe Fairless: How can the Best Ever listeners get in touch with you?
Joe Turney: E-mail is the best way – Joe@JoeTurney.com.
Joe Fairless: Thank you for spending time with us. Thanks for talking about your story, sharing all the lessons learned, simplifying the process for us so it’s easy to understand. You’re buying at 70% discount, you’re renovating, you’re renting out and then you’re refinancing out the proceeds, and then doing it again. Is that right?
Joe Turney: That’s in a nutshell, that’s it.
Joe Fairless: Yeah, that’s it, and you’ve accumulated two million dollars in single-family homes in four years by taking that approach. You’re finding good deals by looking at the public sales, talking to for sale by owners, looking at the MLS – the vacant houses on the MLS in particular – and anything that’s been on the market for 120 days or more. I also loved the story about you just go into a seminar, hearing some guy talk about owner financing, you e-mailed 39 listings for multifamily deals, e-mailed the broker, asked if they’re interested in owner financing, one of them said yes, and you just wrote up the terms exactly how they were wanting them written up, and there you go, you’ve got a place… And it worked out just like that, right?
Joe Turney: That’s it. It’s still the highest cash-flowing property we have obviously, because it’s a fourplex. Yeah, it’s been a great deal.
Joe Fairless: Well, this has been a great interview, Joe. Thanks for being on the show. You did our first name proud, I’ll tell you that right now. I hope you have a best ever day, and we’ll talk to you soon.
Joe Turney: Thank you, Joe.