JF1998: Changing How You See Life-Insurance With Russ Morgan

Russ’s goal is to teach people how to build wealth without wall street. He shares the first step to building his client’s wealth by looking at the five pillars; Building cash flow, Cash Value, Real Estate, Business, and Lending. Russ will change how you see life-insurance when most people have the Walmart shopping mindset of paying as little as possible with the hopes of big returns, he suggests the opposite and explains an old secret in Whole Life Insurance. 

Russ Morgan Real Estate Background:

  • Started career in the financial industry, just to be in shock when the DOW Jones plummeted 800 points in 2008
  • Now Russ, with his company Wealth Without Wallstreet, helps clients invest their money in something safer, develop financial strategies, and plan for retirement
  • Based in Birmingham, AL
  • Say hi to him at http://www.wealthwithoutwallstreet.com/
  • Best Ever Book:

Best Ever Tweet:

“An Insurance Policy when somebody pays a premium, I kind of refer to it more as a deposit. When that money goes into an insurance policy, it’s going to have to buy life insurance.  ” – Russ Morgan

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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.

Best Real Estate Investing Advice Ever Show Podcast

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:

[spp-tweet tweet=”If you don’t want to change something, you’ll be stuck there forever. “]


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.

Break: [00:19:16.27] to [00:20:14.06]

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.

Best Real Estate Investing Advice Ever Show Podcast

JF1080: After a “Guru” Class, he Applied the Teachings and Earned $10,000 in 30 days! With Brian Trippe

If you’ve been skeptical of going to the classes that charge a couple hundred for a weekend of education, listen up! Brian went to one of those classes, and it paid off big time! Now he’s closing in on owning 80 cash flowing doors and teaching others to do the same. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet: [spp-tweet tweet=”I don’t want to compete with anybody, I want to collaborate.  “]

Brian Trippe Real Estate Background:
-President of Alabama Real Estate Investor Association, and a local coach/mentor
-Holds over 70 rentals, tax liens/deeds, buys and sells notes, sells homes with owner financing, and has a mobile home park
-Full-time real estate professional since 2012 and his main focus is wholesaling
-Based in Birmingham, Alabama

-Say hi to him at info@alareia.com

-Best Ever Book: Cash Flow Quadrant

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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, Brian Trippe. How are you doing, my friend?

Brian Trippe: I’m doing awesome, thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Brian – he is the president of Alabama Real Estate Investor Association. He holds over 70 rentals, he does tax liens and deeds, buys and sells notes, sells homes with owner financing, and has a mobile home park. He’s a full-time real estate professional since 2012, and his main focus is wholesaling. Based in Birmingham, Alabama.

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

Brian Trippe: Yeah, that’s kind of crazy you named off all that stuff; it makes me sound like I’m a bigger deal than what I think I am… But I started with nothing about five years ago. No money, bad credit; I went to a little seminar and heard a little spiel, and I bought into it and just kind of took it from there. At the time I was a college basketball coach, believe it or not.

I made more money on my very first deal that I did in an entire year coaching basketball, so right then and there I just knew that I needed to make a change. I still love basketball, it is still a passion of mine, but I had just got married at the time, so I just had to stop kind of chasing that dream and start taking life a little bit more seriously.

Joe Fairless: You started with nothing, five years ago you went to a seminar – what was the seminar?

Brian Trippe: Rich Dad Education. I read the book a long time ago, and I’m not even joking, I thought Robert Kiyosaki was coming to town to speak, and I was gonna go, I was like “Oh man, I’m excited.” I get there and then they sell me into a package.

Joe Fairless: When I went to the three-day event for like $300 — I didn’t go to the $10,000 stuff, but I went to the three-day and that was incredibly influential on my career path. Is that the same one you went to, that $300 for a weekend?

Brian Trippe: Exactly. It cost me $200 at the time, and me and my wife went… And every time the guy that was up there – every time he said something, my wife would like tug on my sleeve and she’s like “We need to do that. Hey, let’s do that.” And I’m just looking at her like, “Are you kidding me?”

You know, what’s really interesting about it is it was a passion I never knew existed. Real estate – I just devoured every piece of content I could get my hands on, get my eyes on, listen to… I actually got a little book – it’s on my shelf right now, it’s called Find It, Close It, Profit. They just gave it to me as a gift; it’s about a 150-page book. I read that in one sitting, I was so interested in real estate… Because I didn’t know anything about real estate, and I just knew that it could be something.

The trainer that we had — I’ve got a lot of bad and good things that I could say about it, but the trainer that we had actually gave us a 15-day action plan and I just went and did everything he said to do and I ended up making $10,000 on my first deal.

Joe Fairless: Wow. In a month and a half… Let’s talk about that – it was your first deal… Then we’ll talk about other stuff, but first deal, 15-day action plan, coming out of the seminar; it took you about a month and a half to make $10,000 on it?

Brian Trippe: It was a wholesale deal, and to be honest, I had no idea what I was doing. Looking back on it, I made every single mistake possible, there’s no question about it. I didn’t know how to talk to a seller, I didn’t know how to talk to a buyer, I didn’t know how to put them together, I used the wrong attorney, the attorney didn’t even know what was going on, they didn’t even know how to do the transaction… I did everything — I was kind of like, “Yeah, I’m the owner of the property, that kind of thing.”

I’ve learned since to obviously be honest about everything and upfront about everything, but I just kind of did everything wrong, that I would not normally do, and just kind of fell backwards into it. That’s just kind of a testament to just kind of taking action and just going for it and just trusting the people that had done it before you.

Joe Fairless: You mentioned the wrong attorney – why is it the wrong attorney?

Brian Trippe: Well, I said the wrong attorney because they had never even heard of wholesaling; they didn’t even know what it was, they didn’t even know if it was legal, but they kind of like looked into it a little bit. I was just like, “Well, do you think you could do it? What’s the bottom line here?” and they said, “Yeah, I think we can do it” and by the time we actually got done with it, the guy goes “Wow, that was really cool! You just made $10,000, you need to show us how you did that!” [laughter] That was really cool.

Joe Fairless: You never wanna be teaching the counsel what you’re doing, that’s always a bad sign. It’s okay to teach real estate agents sometimes, “Hey, this is the type of deal I’m looking for.” I had to do that on my property, but holy cow, teaching the actual legal counsel – that’s a whole other set of–

Brian Trippe: And I’m teaching him something that I didn’t even really, fully understand either. [laughter]

Joe Fairless: That’s pretty good stuff. You said you didn’t know how to talk to the buyers and sellers – what were you saying, compared to what you would say now?

Brian Trippe: Well, I wasn’t being 100% forthright. I’m sitting here saying that I’ve got the money, I wanna close on this property asap. I’m telling the eventual end buyer that yeah, it’s my property, and I’m selling it. Really kind of illegal, to be honest with you. You can’t really do it that way and be legal, and I just didn’t know any better… But I think through doing is how most of us learn the best, and man, I’m telling you, that one deal gave me confidence. I wanted to just go out and do more deals; it gave me a little bit of experience, and it was a really, really good thing.

I don’t know that if I hadn’t done a deal that soon, I don’t know how serious I would have taken this whole real estate thing.

Joe Fairless: Yeah, you built on the momentum.

Brian Trippe: Yeah, for sure.

Joe Fairless: You’ve got a mobile home park – please talk about that.

Brian Trippe: Yeah, I love it. I’ve been listening to your podcast a little while and I know that one of the questions is the best investment you ever made… This mobile home park is the best thing I’ve ever done in my entire life when it comes to real estate. Mom and pop owned it, they called me off a WeBuyHouses bandit sign, and they said “Do you buy mobile home parks?” and I was taught a long time ago “Don’t ever turn anything down”, so I said “Maybe. Let me take a look at it.”

I ended up talking to this guy for about six months. He wanted way more for it than what I thought it was worth…

Joe Fairless: What did he want, and what did you think it was worth?

Brian Trippe: He wanted 1.3 million, and I thought it was worth about 900k. I ended up getting it for 760k. I put 60k down, he owner financed the rest of it. The payment on it is pretty high; I always ask this question to any seller, “What do you need to make this deal work?” and he just needed $6,000 a month to live, for what he felt like was the rest of his life. So I said “If I give you that $6,000/month you need to come down to my price”, and $6,000/month equates to a 12-year mortgage, so I’m paying this thing off – I’ve had it for about a year and a half now; I’m [unintelligible 00:08:37.02] I’ve got so much equity in this thing; I owe about 600k on it right now. I’ve turned it around, I think it’s worth between 1.1 and 1.2 right now, and on top of all that, I’m cash-flowing it between $4,000-$5,000 a month.

Joe Fairless: Good for you, congratulations on that! That’s fun to talk about, and listen to. It had to be a learning curve…

Brian Trippe: The mobile home park?

Joe Fairless: Yeah.

Brian Trippe: I’m gonna give a huge shoutout to Frank and Dave, the mobile home park gurus. I don’t know if you know who they are or if you’ve spoken to them…

Joe Fairless: Yeah, I’ve interviewed Frank on the show.

Brian Trippe: Frank Rolfe – yeah, he’s come on my podcast as well. He is a super, super down to earth, great guy that gives so much value. I took their course, which is dirt-cheap compared to real estate courses. I took their course about two years before I actually bought this thing, because I wanted a mobile home park. I was kind of sold on the idea of owning dirt and not having to own trailers, not having all the maintenance requirements that come with all that; I just wanted to own dirt, and I was kind of sold on that from my very beginning stages of researching real estate in general.

So I’d always wanted one, and this one just kind of fell in my lap, and it’s been the best thing that I’ve ever done in real estate.

Joe Fairless: You took the course, but then implementing content that you read and watch is a lot different in real life, because there’s a lot of grey between the black and white… So what was the grey area that you had to fill in as you went?

Brian Trippe: I think it’s like anything – you don’t know anything until you’re actually doing it. Theory is fine, some of us go to college and we learn a bunch of theory, but none of it really matters until you get out in the real world. A couple of things I took away from the coure was if you’re new or you’re an inexperienced mobile home park investor – city water, city sewer. If you have city water and city sewer, you are gonna get yourself out of like 90% of the trouble that you could possibly get yourself into. By not having well water and not having sewage treatment plans and septic tanks and all that garbage, if you’re new you can easily, easily get into big time trouble and get way over your head.

The biggest problem that I identified with this park right off the bat was that the previous owner was not charging for water. Even though it was city water, they came up to the road, the park owned the whole water system, and everything was individually metered, he just wasn’t reading the meters.

If you’re just charging everybody $40/month for water, if you’re just getting charged a flat fee for water, you just leave the post pipe running; water’s not valuable to you, so you just do whatever. What I found was the average water bill was about $100/month is what they were using, but they were only being charged for $40. As soon as I corrected that and I fixed about 30 water leaks… I learned all this through that program that I did. As soon as I did those couple things, I just increased the value of this park almost by two times.

Joe Fairless: How many lots were at the park?

Brian Trippe: 59 lots, and there’d been 100% occupancy since June of last year, so almost for a full year.

Joe Fairless: And you bought it a year and a half ago, you said?

Brian Trippe: December 2015, yeah.

Joe Fairless: What were some of the first things you did other than the water approach?

Brian Trippe: Water was by far and away the biggest deal. I raised rents on day one.

Joe Fairless: How did you justify that to the people who were complaining about you doing it?

Brian Trippe: There were two complaints. The lot rent was $155, market rent was $250, so I brought it only $20 and I told everybody right off the bat, “Do you want me to go up to $250 today, or do you want me to go up $20/year for the next four or five years?”, so everybody agreed they wanted to do $20/year for the next five years, and that’s fine.

Joe Fairless: It’s like saying “Do you want a million dollars today, or do you want a dollar for a million days the rest of your life?”

Brian Trippe: [laughs] But I was very honest and forthcoming with them. I said, “Listen, your lot rent – you’ve been getting away with super low lot rent for a very long time, you’ve been paying only $40/month for water and sewer, but you’re using $100/month on average, so a lot of things have to change”, and everybody in the park completely agreed.

I came and I cleaned it up — which there’s no accountability, it was just stuff everywhere, just garbage everywhere, a bunch of vehicles on blocks and all this stuff that I had to get corrected. They saw me, I was coming in there, I did it myself. I came in there with a team of a couple of people, and we went in there and worked on it and they saw how much I was actually putting into the park. From a time standpoint, I was there, addressing their concerns, and they respected it. I don’t wanna say they liked me, but they respected it.

Joe Fairless: What has been the most surprising part of owning the mobile home park?

Brian Trippe: Oh man, I don’t wanna say it’s easy, but it’s kind of easy. It’s been kind of easy. In the very beginning it was really hard. It took me about three full months of being there almost every day, but I don’t really know how to answer the question. I’m kind of on cruise control; even though it’s only a 20-minute drive from where I live, I’ll go check on it only once every couple of weeks, once a month, just because I’ve got an on-site maintenance guy, and he texts me everything that’s going, “Hey, this guy’s doing this.” He texts me pictures, and I can kind of address things from there. It really has just been a really great investment.

Joe Fairless: You have 70 buy and hold rentals – is that correct?

Brian Trippe: I’m actually approaching about 80 doors right now. Just full disclosure – I include the 59 mobile homes in that.

Joe Fairless: Well, they have doors, so that makes sense.

Brian Trippe: That’s right, that’s right.

Joe Fairless: Okay. So are those single-families, the eleven?

Brian Trippe: Yeah, I’ve got single-families and I’ve got an office building as well where my office is, that’s kind of like a strip mall. I was kind of taught this from the beginning, and this is what I teach as well, when I teach; I’ve got the REIA and I’ve got the podcast (I do all this other education), and what I was taught and what I teach is you either need to wholesale and take those profits and buy passive income, or you need to fix and flip and take those profits and buy passive income.

You’ve gotta have an end goal in mind. You can’t just go and wholesale forever, or fix and flip forever. It’s the very rare guy that can do that. You’ve gotta have some sort of end in sight, and for me the passive income piece — I love commercial, I love multifamily, I’m in the market right now for an apartment building, but I’m kind of on the belief that we’re about to take a little downturn, so I really haven’t bought a whole lot lately. I’ve just been kind of stockpiling cash and just waiting for the right opportunity.

Joe Fairless: And the podcast that you referenced – is that AlaReia Masterclass?

Brian Trippe: That’s correct, we started a REIA, we call it AlaReia. We’ve got the AlaReia Masterclass Podcast – it’s completely specific to Alabama real estate, and then obviously goes with our meeting; we have our meetings once a month, it’s the second Thursday of every month.

I do a little daily show on our YouTube page as well; you can just search AlaReia.com… I’m kind of creating this cloud of real estate education that’s specific to Alabama, and in particular Birmingham. We’re going to [unintelligible 00:15:29.21], we’re going to Montgomery and some other places, but I have a huge passion for affordable real estate education in our area, and just kind of helping and teaching our community.

Joe Fairless: What type of investing — because you’ve done tax liens, buying and selling notes… What’s your least favorite or has been the least successful for you? Fixing and flipping, wholesaling, or whatever?

Brian Trippe: Yeah, I would definitely say fix and flip is — I don’t wanna call it weakness, it’s just not something I like. I just don’t like doing it, I guess because I got started wholesaling and seeing that instant check, versus holding something for 4-6 months, and then you could open up a wall and find this or that… I just feel like there’s so much risk to it. I do 2-3 a year, but managing the projects becomes just a bear, and it’s not something that I like doing very much.

Joe Fairless: Yeah, maybe if I had the skills to fix and flip (which I don’t), maybe I would… But just from all the interviews I’ve done, wholesaling by far is smarter, in my opinion, than fixing and flipping, because of what you said. The limited liability or zero liability that you have in terms of financial commitment, as well as the velocity of money that you have when you wholesale, versus a fix and flip… You don’t make as much usually, but you certainly don’t have the grey hairs and the headaches and the risk that’s associated to it.

Brian Trippe: Yeah, absolutely. And you can do as many as you want at the same time. You don’t need a certain amount of money to do two, three, four, five wholesale deals at a time, like you would for flips.

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

Brian Trippe: I’m a big believe in honesty and integrity. I’ve built a reputation… I’d rather give up some profit in order to preserve that. I’d just say, walk in integrity, walk with honesty, and do your business the right way, ethically. There’s no way I would have been able to build this REIA — we’re young, too. I mean, we’ve five months old. We’re averaging about 75-80 people right now, we hope to have 100 at our next one, but there’s no way that that ever could have happened if I would have smeared my name, if I would have given up integrity for profit, stuff like that. And there are people that do it. It’s so cutthroat, real estate investing locally, and I’m sure it is nationally, as well. It’s so cutthroat, and it’s so competitive that I just take that equation completely out of it.

I don’t wanna compete with anybody, I wanna collaborate – I say that all the time. I don’t believe in that, I don’t believe it has to be that, I just believe 100% with honesty, integrity, and then the chips will kind of fall as they may.

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

Brian Trippe: Let’s go.

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

Break: [00:18:14.11] to [00:19:12.29]

Joe Fairless: Best ever book you’ve read?

Brian Trippe: The Cashflow Quadrant.

Joe Fairless: Best ever deal you’ve done?

Brian Trippe: The mobile home park, no question about it.

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

Brian Trippe: Through REIA, it’s my baby right now. I’m doing everything to nurture that thing and to grow it and to do it the right way. I’m not bringing a bunch of sleazy sales people… It is genuine real estate education. There’s a huge need for it in this area, and I’ve got the support of a lot of the big-time local real estate investors. They come to it and support it, and there’s no way that I could have been able to do that without their support. So no question about it, the REIA, and just real estate education in general.

Joe Fairless: What’s a mistake that you’ve made on a transaction that you haven’t talked about already?

Brian Trippe: I have made a couple of mistakes – I think we all have – but I haven’t made just the massive, tens of thousands of dollars mistake. I’m very conservative.

A couple of mistakes that I’ve made is I’ve gone into some areas – even within our town, even within Birmingham – that I didn’t know as well; I thought I knew them, but I really didn’t, and I would go ahead and make a purchase and it’d not really be worth what I thought it was, after the fact.

I’ve done that a couple of times, but you’re talking about losing $3,000-$4,000, not tens of thousands.

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

Brian Trippe: You could definitely connect with us anywhere; you can just search AlaReia. The best way to reach me is my e-mail address, info@alareia.com. Go to AlaReia.com. You can go to our Facebook page, which is /AlaReia. You can look us up on YouTube… A lot of great ways to see what we’re doing here in the Alabama real estate market.

Joe Fairless: Well, Brian, thank you for being on the show. Thanks for talking about the mobile home park case study certainly, and also your start with the Rich Dad, Poor Dad seminar and how you got going, did that 15-day action plan, made 10k on a wholesale deal, made a bunch of mistakes along the way too, course corrected since then, that’s for sure… And I liked the case study with the mobile home park in particular, because we got into a very successful deal that you did for the first time in terms of asset class, and your approach, and how you got up and running. Frank Rolfe has been on the show before, and he just provided a bunch of really good information on mobile home parks. So Best Ever listeners, you can go to BestEverShow.com and search maybe “mobile home” and Frank’s episode will come up.

Thanks for being on the show, Brian, thanks for sharing your best ever advice, and we’ll talk to you soon!

Brian Trippe: Awesome! Thanks, Joe.


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Best Real Estate Investing Advice Ever Show Podcast

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!

Best Ever Tweet:[spp-tweet tweet=” I knew nothing about real estate, I got started through a book.  “]

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.

Break: [00:21:22.01] to [00:22:24.11]

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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