JF2334: Talking With Full-Time Investor Melissa Johnson

Melissa Johnson has been flipping houses in San Antonio, TX since 2003, growing and expanding the business into a thriving real estate investment operation. With over 1000 houses flipped, she has also built a portfolio of rental properties and real estate notes while raising five children. She provides coaching, support, and education for other high-level real estate investors nationwide. As co-founder of the San Antonio InvestHer meets up group and an active member of the Forbes Council on Real Estate, and the National Association of Women Business Owners, she is dedicated to the success and empowerment of women in business. 

Melissa Johnson  Real Estate Background: 

  • Full-time real estate investor, and the Co-Founder of San Antonio InvestHer meetup group
  • 17 years of real estate experience
  • She has completed over 1000 flips and has a portfolio of rental properties and notes
  • Based in San Antonio, TX
  • Say hi to her at www.themelissajohnson.com  
  • Best Ever Book: Everything is Figureoutable 

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Best Ever Tweet:

“Find a coach or a mentor” – Melissa Johnson


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today we’ll be speaking with Melissa Johnson. Melissa, how are you doing today?

Melissa Johnson: I’m good. How are you?

Theo Hicks: I’m doing well. Thank you for joining us today. A little bit about Melissa. She’s a full-time real estate investor and the co-founder of the San Antonio InvestHer Meetup group. She has 17 years of real estate experience and has completed over 1,000 flips, as well as has a portfolio of rental properties and notes. She is based in San Antonio, Texas, and her website is themelissajohnson.com. So Melissa, do you mind telling us some more about your background and what you’re focused on today?

Melissa Johnson: Sure. So like you said, I got started 17 long years ago; a lot’s changed since then. Came from a sort of a corporate background, working for a defense contractor, and started flipping part-time while I was still working for that company. And gradually, I transitioned into doing real estate full-time, which has been awesome, because I have five kids, and I love the lifestyle and the flexibility that real estate has provided for me especially as a mom, it’s been a really big blessing. I do mostly a lot of rehabbing. Over the last few years though we’ve transitioned more into wholesaling. I still do rehab, but I cherry-pick those, and I’m still working toward building up my portfolio. I really like creating notes. I’ve got a few rental properties; really, it’s not my favorite place to be, but I know it’s important to have a diverse portfolio, so I’m still working on those.

Lately, I’ve been kind of moving into the coaching space, just because I’m really seeing a need for that, especially for women right now. There’s a lot of women that want to get started, but they don’t know where to start, they don’t know what to do, they don’t have a plan… So I was finding myself doing that anyway, just randomly here and there, talking to people… I do a lot of networking, been part of masterminds, and things like that. So I was really starting to see that coming around as a thing. So I’m still doing the real estate thing, but I’m also trying to help and coach women in the business too, right now.

Theo Hicks: Thank you for sharing that. So a big thing that people like to focus on, or I guess a goal a lot of people have is they’re working a corporate job, and real estate is their way to get out of the corporate job. And so you mentioned that you started in the corporate world, started flipping part-time, ultimately transitioned into full time. And I’m assuming you left that job. So can you maybe walk us through how that process worked for you? How did you know that it was time to leave your job? Was it based off of some dollar amount? Was it a feeling that you had? Were you just “enough is enough”? How did that work?

Melissa Johnson: It was more the “enough is enough”. I’d reached a place where I knew that there wasn’t anywhere else to go in that company… And it was a great time, and I loved the people and everything there, but I knew that there was a glass ceiling there for me. And the big thing was – I’ll never forget, when we did our first or second deal, maybe. And we got this check, and I looked at the check and — I looked at my paycheck, and I said, “Oh my God, that’s what I take home in a year, from one deal.” And it didn’t take much longer after that, maybe like a month or two, and I just said, “I can’t go to this place anymore and be miserable. I really just want to focus on real estate at this time. Because I’d be crazy not to.”

Theo Hicks: So it was pretty quick after your first or second deal when you left?

Melissa Johnson: Well, not necessarily. It started that way, but there was buffer time. But I knew that I needed to have that escape plan. But that’s when I knew that I couldn’t stay there anymore. So I think it was maybe six months after that, something like that, that I knew I wanted to do it full-time.

Theo Hicks: Sure. Did you make enough money on that deal to cover living expenses for a certain amount of time? How’d you pay for living expenses once you had to left the job?

Melissa Johnson: By doing more deals. It’s like, when you get pushed out there, you’ve got to do what you got to do, right? So I had the security blanket of the job for a long time, but then when that was done, every bit of energy, focus, money, went back into the company to grow that and to do more deals. But not to do so many deals to where I was overwhelmed. It was more of a building the business around our life.

Theo Hicks: Okay. And then how were you funding the deals in the beginning, so right away? Was this your own personal money, were you doing lines of credit, credit cards? How were you finding the deals in the beginning?

Melissa Johnson: So all of my deals, even to this day, are all funded with private money. I’m a big fan of private money, and I like to encourage people to go out there and find and raise private money and build those relationships. I think that’s been a really big key to our success, is being able to leverage private money.

Theo Hicks: So let’s talk about the journey, really, to private money. So let’s talk about your first deal. Who were your investors on your first deal?

Melissa Johnson: It was actually a really cool thing when I look back at it now. There was a mentor, and the mentor was actually our private money lender. So it worked out beautifully, because we were able to work with him as far as being mentored by him. We did a lot of the self-education stuff on our own, but he was there when stuff would come up; we would say, “Well, this is happening. How should I handle this?” So that was a big plus. But then it was great too, because he had the funds available… So I’d be able to send him all the info on the deal, he’d say, “Yeah, that sounds good.” And he would fund it, he would take 50% of the profits, which sounds awful… But we would subtract from that all of our marketing costs. So that helped.

And then we went on like that for, I don’t know, maybe two years tops, something like that. And eventually broke that relationship off and turned that into just a strictly private money lending relationship instead of a mentorship. But it was a good way to get your feet wet and to have the benefit of somebody’s experience that’s been doing it for a really long time, and then to have those funds available, too. It was just a great overall strategy for us in the beginning.

Theo Hicks: How did you meet this person? And then not having done deals before, how did you get them to trust you and give you their money to invest?

Melissa Johnson: That’s a good question. I don’t think anyone’s ever asked me that before. It was really great, because it was actually somebody that we knew. So that’s something that I encourage people when they are looking for private money, is to reach out to people that you know. So it just happened that we actually knew this person already. He had done some deals with my father-in-law at the time, and he had been working with him for a while, so we had a lot of credibility already going into it, which I think helped out a lot.

Theo Hicks: So you said after two years he was no longer your mentor, just a private money lender. So is he, to this day, the only person to invest, or did you eventually grow to a kind of a larger pool of investors? I’m assuming you did. And so what are some of your tips for after you’ve established yourself with people that you know? ..friends and family, because usually that how people start. How do you then expand out to others?

Melissa Johnson: One of the things is just going to where the money is. If you’ve worked on your network, it’s just talking about what you do all the time, I guess, is really the big key. It’s really about networking, it’s connecting with people… So say you’ve done a couple of deals… Like, we did a lot of deals with that private money lender. Well, then we put this whole — it was awful at the time… Like a cheesy presentation kind of thing. But it worked, because then we were able to say, “Okay, these are deals that we’ve done, here are the numbers, here’s the holding time, here’s how much money was made on the deal, here’s how much interest that we paid out…”

So once you have a proof of concept there that you can take that to other people, and as you’re talking and you’re networking with all these other people, you have actual things to show them, like “Here is a sample of our deals that we’ve done.” It’s proof. So that gives you credibility, and then being able to just build those relationships from there.

So we did a lot of outreach kind of things just to network and, “Okay. Well, if you can’t lend, do you know somebody that might?” and then reaching out to those people. Finding business owners that had money, finding people that have lines of credit, people that have IRAs that are looking to invest money out of those accounts, are all good places. And then even doing searches on MLS and looking for cash solds, and going back in the research and finding out who funded those deals, and reaching out to them and pitching them on lending.

Theo Hicks: So what does that reaching out process look like? Are you just sending them your presentation? Or is it more just talking about what you do and then see if they’re interested? Is it a proactive, hard attack? Or is it more like a soft, “Hey, I’m doing this,” and then they’re like, “Oh, that sounds great. I’m going to do that, too.”

Melissa Johnson: It’s a conversation. It’s just, “Hey, we’re doing this stuff. I know, you might have some money lying around. If you’re interested…” And once you can show people what their money can do for them, it’s a huge game-changer. If you can say, “Hey, I’m willing to pay you 8%, 10%, 12% interest. You’re not going to make that at a bank. Let me show you how to do this.”

And the great thing about this too is you’ve got real estate, so you’ve got property actually attached to this. So it makes it a lot more desirable for them, I guess, knowing that there’s real property attached to all these deals, instead of just, “We’re going to loan you $100,000 to spend on whatever. Marketing, overhead, blah, blah, blah.” Hopefully, you get that money back, but you might not. But when it’s backed by real estate, at least there’s some security there for them, too. So as personable as you can be, as much information as you can give, I think those are the most important things. Just really connecting with people and really showing them what you can do for them.

Theo Hicks: If I invest with you, am I investing in a particular deal? And then what does that structure look like? So how long is the loan? And what are the terms of the loan?

Melissa Johnson: So what I do – I typically borrow, purchase plus rehab, because I’m getting private funds for rehabs. So when we do wholesales, we’re just assigning contracts; we’re not double closing those anymore. So I don’t count those. But for rehabs, it’s purchase and rehab costs. It used to be 12% interest, but over the years – and this is another thing, with just proof of concept and time, and building the relationship – I’m down to 8% with my private money lenders. And then one of them charges a point, and then another one, they just charge a straight loan origination fee. I have a couple of lenders that just do that. So it’s like a $200 origination fee that gets paid on the back end. I do no payments, so when we close the property on the sale, they get all the money back then plus the interest. And those are the main points. And we do a term for one year also, because I don’t want to hold anything longer than that. If we need to extend it, we do have a clause in there that allows us to extend, if the lender agrees to it.

Theo Hicks: Okay. So up to one year. So whenever the deal is sold is when — okay.

Melissa Johnson: Right. Right. And I don’t think I’ve ever had to use that extension clause because we move everything within that time period.

Theo Hicks: Okay, and then the last question before the money question. What is the number one source for your deals? And let’s say, since you now aren’t doing strictly fix and flips, and you’re cherry-picking those… The actual fix and flips, not the wholesale – what’s the number one source for the deals that you get in and you actually take to fix and flip?

Melissa Johnson: I know at one time it was primarily through organic traffic, just because I’ve had a website before most people had a website. So I got that going in my favor. So a lot of them come in organically through the website. And then recently just started direct mail again, which I had quit doing for several years, because the online was doing so well. So most of the deals that we’re getting now are from direct mail.

Theo Hicks: Okay, Melissa, what is your best real estate investing advice ever?

Melissa Johnson: Best advice ever is to find a coach or a mentor. I cannot stress enough how important it is to have somebody to guide you and to show you the benefit of their experience. And to have that good relationship with somebody that can really help you along the way.

Theo Hicks: Okay, are ready for the Best Ever lightning round?

Melissa Johnson: I am.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:15:56][00:16:41]

Theo Hicks: Okay, Melissa. What is the Best Ever book you’ve recently read?

Melissa Johnson: Best Ever book I’ve recently read hands down is Everything Is Figureoutable by Marie Forleo.

Theo Hicks: If your business were to collapse today, what would you do next?

Melissa Johnson: I would do one of two things – evaluate and execute, or plan and pivot. So by evaluating and executing, just looking at the situation – was there anything I could have done differently? Was there something out of my control? Can I change this? Can I fix this? If I can, what are the things to do? And then execute on that. If it doesn’t fit in any of that, then plan and pivot. What am I going to do now? Am I going to do something different? And then figuring that out and then doing that.

Theo Hicks: What is your Best Ever deal? That’s going to be in terms of dollar amount, or some other definition of best.

Melissa Johnson: Best Ever deal to date was in 2017. It was a flip; it came in from our organic lead from the website. And it was a perfect example of how important it is to buy right. So we bought the property for 130,000, and we rehabbed it, spent 44,000 on the rehab, spent about another 23,000 getting it closed, all the realtor fees, cost all that. And sold it for 292,900, and made $95,395.01.

Theo Hicks: And then what about on the flip side, a deal that you’ve lost money on – how much money you lost, and then the lessons that you learned?

Melissa Johnson: I try not to lose any money… And I’ve only lost money on a handful. But I did look back and the worst deal ever, I lost $18,754 on. And that was last year, actually. So it just goes to show you, no matter how much experience you have, you can still have those problems.

That one was an unknown equity lead that came in… And I learned a lot from that one. It was learning mostly about myself. I got busy, I got complacent, I let things go on for too long, and I had a multitude of issues. I had contractor issues, I had the house broken into multiple times, things stolen, things damaged, destroyed… Everything I feel that could go wrong, did, on that property. But it made me realize that no matter how long I’ve been doing this, I still need to keep my finger on the pulse of what’s happening, and it made me look at what I was doing and make some changes too with the business.

Theo Hicks: What is the Best Ever way you like to give back?

Melissa Johnson: I love helping other people. I love coaching people, I love mentoring people, I love talking to people about what they’re going through. I run a free real estate group for women in San Antonio, women investors. I do volunteer also with high school students that are looking to get into business, through the NAWBO, National Association of Women Business Owners. They do a mentorship program, so I’m a part of that… That’s how I like to give back.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Melissa Johnson: Best Ever place to reach me would be on my website. That’s themelissajohnson.com. And I’ve got a lot of things happening over there. Also, I’m on Instagram, I have a lot of content there, and Facebook and LinkedIn also.

Theo Hicks: Perfect, Melissa. Well, thank you for joining us today and providing us with your Best Ever advice. Some of my biggest takeaways was talking about transitioning out of the full-time job into full-time real estate… And it was mostly just “enough was enough”. You talked about how you saw one of your first checks and realized that it was essentially the exact same as how much made at your job. So eventually, after a few months, you decided to leave. And then as you no longer had that security blanket, you invested all of your time into your real estate business, because you had to make money to live off of.

We talked a lot about private money, your journey from starting off with private money from a mentor who you had a previous relationship with, and he was your investor. And eventually, you transitioned and scaled to other people, and you kind of gave us a lot of ways that you are able to raise money. The main way was getting out there and talking to everybody you know about what you do, and just having a conversation with them, providing educational content on how it works, how they can make money from investing in real estate as a passive investor.

You talked about how you had a cheesy presentation that you’d give to people at first; everyone knows about those. I like this – so you find people, and even if they said that they weren’t interested, or that they couldn’t do it, you wouldn’t just say, “Okay, let me know if you change your mind.” You’d also say, “But do you know anyone else?” And so using anyone you talk to to be a potential source, either themselves or someone that they know.

You talked about specifically targeting business owners, people with lines of credit, IRAs, looking at people who had bought real estate all-cash, be it looking it up on the MLS… You talked about the structure, and you talked about your deals are coming through organic traffic from your website, and then also from your restarting direct mail, which you had stopped for a while.

And your Best Ever advice was to find a mentor or a coach, which we kind of talked about – a great source for education as well as a great source for contacts, as well as money. So Melissa, thanks again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Melissa Johnson: Thank you.

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