When he came to America for work, he shortly realized he was here for good. Geremy almost immediately started looking for ways out of the corporate world. He enjoys house flipping, he has flipped over 250 houses and knows where in the process each house is at any time, thanks to the system he uses to keep track of everything. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Geremy Heath Real Estate Background:
- Owner and director of Texas All Cash Home Buyers, which he founded with his wife Melanie in 2009
- Primary focus is the redevelopment of single family homes in the San Antonio area
- Flipped over 250 properties, currently has a goal with his team to complete more than 100 rehabs this year
- Originally from Sydney Australia, Geremy moved to the US in 2006
- Prior to real estate, he worked as a management consultant for 12 years
- Based in San Antonio, Texas
- Say hi to him at www.TexasAllCash.com
- Best Ever Book: The Master Key System
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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 of that fluffy stuff.
Today we’re gonna be talking to a fix and flipper or redeveloper of single-family homes who’s based in San Antonio, Texas. How are you doing, Geremy Heath?
Geremy Heath: Hi, how are you doing?
Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Geremy – he is the owner and director of Texas All Cash Home Buyers, which he founded with his wife in 2009. Primary focus is the redevelopment of single-family homes in the San Antonio area. He has flipped over 250 properties and currently has a goal with his team to complete more than 100 rehabs this year. Originally from Sydney, Australia, and he moved to the U.S. in 2006. We also have a couple mutual friends – one is someone who I worked with in New York City, his cousin is friends with Geremy, and then someone else who I currently work with, they are in an Australian group. I said that “All you Australians stick together, don’t you?” and he said, “Yup!”
With that being said, Geremy, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Geremy Heath: Yeah, thanks Joe, and thanks to the Best Ever listeners out there. My background is — I originally came from the corporate world, so that’s what brought me over to the U.S. back in 2006. I met my wife here in San Antonio, Texas. It was around the time that we went on our honeymoon that I realized I was gonna be stuck in the U.S. probably for the rest of my life I was committed, so that’s when I ended up kind of thinking about my exit strategy from the corporate world and what I can get involved in, and real estate is where I landed.
Joe Fairless: Okay. Tell us about your business – what have you been up to since you landed here in the U.S. in 2006?
Geremy Heath: Our main focus is buy, fix and sell. We primarily rehab properties. We do do some wholesaling of properties as well, but we’re really trying to [unintelligible [00:02:54].11] effective rehabbing model focused on doing a large volume of rehab transactions per year.
Joe Fairless: You do buy, fix and sell, versus wholesaling; why buy, fix and sell versus wholesaling? I’m just gonna play devil’s advocate, because when you buy, fix and sell you have more risk associated to it, longer timelines…? Versus wholesaling where you’re simply signing a contract.
Geremy Heath: I guess for me – I originally studied civil engineering, even though my career was never in that space; my career was in management consulting, but I came from my career work of having a big process and process improvement background, and so for me it was really a challenge. I really enjoyed the challenge and the complexity of the remodeling, and the way that I’ve always seen it from the beginning is just like a factory, because I used to do supply chain management, and so I’d always view this business as a factory, where a finished product that I’m putting out is a high-quality retail property [unintelligible [00:03:53].02] qualified buyers, and the raw materials coming in are the distressed properties.
Over the last few years I’ve really been just trying to refine my processes so that we can get the product out there as quickly as possible at the highest level of quality, for the best cost.
Joe Fairless: Let’s dig in there. What are some of the things that you’ve done throughout your process to refine, so that you now have a well-oiled machine?
Geremy Heath: I think through my evolution I identified early on that there were always just three main constraints for me to be managing in the rehabbing business. The first is the deal flow – you need enough leads and you need enough deals coming into your pipeline, and I think when people get started, that’s often the first challenge.
Once you get the deals coming in, the next challenge is having enough cash or enough capital to close on those deals, and then if you have those two going, the third challenge is gonna be your capacity to remodel the houses.
I always found that it was always one of those three that was a constraint, so whichever one was the constraint would get the majority of my focus to remove that constraint, and then that would enable the business to grow to the next level until the next constraint kicked in, and that’s still the way that I’m looking at it.
Joe Fairless: With your civil engineering background, what’s something that you’ve implemented in either one of those three constraints that you’d probably track back to your civil engineering experience?
Geremy Heath: I think in civil engineering – that helped me just from an overall construction background. But the main thing that I’ve really bought from my past is the way that I view things from a process perspective. When you’re looking at any process, the end goal is to produce something that has a high level of quality, that’s done quickly, and that’s done at the best cost. Those are the three dimensions that an output of a process would be measured on.
I’ve really focused on having a lot of systems and checklists to really drive quality and to reduce the amount of failures that occur in that process, and I think the simple tool, the checklist has been the cornerstone of how I’ve really built my business.
Joe Fairless: Give us an example of a checklist.
Geremy Heath: For example, an important process for us is when we sign off on the rehab process with a contractor. One of the frustrations for people that get into rehabbing houses is they finish the rehab, [unintelligible [00:06:09].18] final check, they then put it on the market, they sell the house, and the end buyer gets an inspection and a bunch of issues come up on that inspection report, and it’s always a bit of a hassle working through that. We’ve really used the checklist mindset to build in all of those errors that were coming at the end in the final inspection, and make them inspection points for us at the sign-off stage with the contractor, so that we could get the first time the quality of that property right, and get it done right at the time when the guys are actually on the job and working, not having to deal with it a month or two later when they’ve moved on to other things.
Joe Fairless: Anything on that particular checklist where you sign off on the rehab work that wasn’t on it initially, and then after going through a couple experiences – or one experience – you added it?
Geremy Heath: Yeah, a big one — there’s tons of things; one was water heaters, for example, having like the drain pan and having it lifted at the right elevation and the drain lining up, pouring to the outside of the house. On electrical there’s always tons of little nitpicking things that the inspectors bring up on electrical, like having anti-oxidant on the connections and having the panel labeled, or even things like open splices in the attic on the electrical as well.
What I really love about the checklist is that the checklist has an in-built memory, so anything that you learn, you add to that checklist and it avoids that mistake happening again, and it’s kind of like the checklist gets smarter and smarter all the time.
Joe Fairless: From an administrative standpoint with this checklist, is it a piece of paper, or is it on an iPad, or is it a program you created? What is it?
Geremy Heath: I’ve gravitated to a tool which is called Process Street. You can find it online on Process.st. It’s a really simple, cool, online software that I use in every area of my business, and it’s really enabled me to build out systems in every single function over time. What’s really cool about it is once you’ve created a checklist template, you can then open up that template for a specific property.
For me, for example, at the moment I have 38 properties in my pipeline, but I could go into Process Street at the moment and I could see where every single one of those properties are at and specifically within each process what’s been completed and what hasn’t.
Joe Fairless: How did you come across Process Street?
Geremy Heath: That was through a buddy of mine that was in a real estate mastermind group. We just met up for the weekend and he started sharing it to me, and I was like “Dude, this is awesome. I’m stealing it.”
Joe Fairless: [laughs] Do you know how much it cost?
Geremy Heath: You can get a free trial subscription, but for me at the moment I think I’m paying somewhere in the order for $70, and that allows me to have multiple users accessing it.
Joe Fairless: Got it, $70/month, right?
Geremy Heath: Yeah, yeah.
Joe Fairless: Cool.
Geremy Heath: And the cool thing about it is at the moment I’m actually looking into building out my rental side and setting up like a property management function, so the first place that I’d start now is I think “What are my high-level processes for that particular function?” and then I start building out checklists. The checklists are not something that you necessarily have to sit down and build in one hit. You can slowly build them over time, and I’ve found that having that online tool made it so easy… Whenever you had an idea, you could just quickly log on and throw the task in there that you were thinking about and keep building it.
Joe Fairless: Let’s talk about a specific deal that you have done… Maybe it’s the last deal, or just one that comes to mind. It doesn’t have to be your best ever, but just a typical one that you do in San Antonio.
Geremy Heath: A typical deal for us would be — I guess my best deal ever would be my first deal, just because it was my first deal, and overcoming… When people get started, there’s always those fears and doubts, so just to overcome that, take action to get leads coming in, take action to make the offers and to lock a deal down… I’ll always remember that.
I bought a nice watch after to [unintelligible [00:10:01].25] so it’ll always be special to me. But for typical deals now in San Antonio, we’re typically in an ARV range of between 150k to 300k, which is where most of the ARVs are for retail, and we typically like to buy them at 65%-70% of the ARV.
On average, we’re looking at between a 30k to 50k+ profit on our deals.
Joe Fairless: With the three constraints… You said 1) deal flow (you’ve gotta get leads), 2) cash to close and remodel, and 3) capacity to actually implement the business plan, so remodel the houses – what’s one way you have enhanced number one, the deal flow to get leads?
Geremy Heath: I think with deal flow it comes down to — the basic thing it comes down to is you have to spend money on marketing, and that’s what I’ve learned more and more, and I think that most people’s fear is… Particularly, most people get started in real estate as a part-time gig; they’ve got their regular job to keep them going, and they’ve gotta spend some money. But if they’re gonna cut the cord on that full-time job and commit to spending money to make the business work, it’s a very difficult thing to do. But I guess what I’ve learned is that that is the most critical thing to do, because without it there’s no business.
Joe Fairless: What about the having cash to close and remodel…? How do you get the cash and make sure that you are properly funded?
Geremy Heath: I work with several private investors that I have personal relationships with. The relationships have sort of been built over time, and I guess they’ve evolved through improving the record. I guess at the beginning — because finding capital for a lot of people getting started is often a constraint, but my approach to it was to just get super focused at the times when I needed money, and pound the phone and try to find the investors. And as I got more experienced, I got more of a track record, I found that the capital was actually the easiest part, because I think once you’ve shown success with certain people, they speak to their friends and it kind of continues on from that point. But I think in the beginning if you take massive action and believe that you’ll get it and take action until you do, you’ll be able to find the capital that you need.
Joe Fairless: What are your terms that you have been getting from investors?
Geremy Heath: I range between 8% to 12% with my investors, it’s typically where I’m at. It depends on the type of deals that they’re doing, but that’s kind of the range.
Joe Fairless: Any points at closing on top of the 8% to 12%, or just straight 8% to 12%.
Geremy Heath: Yeah, straight 8% to 12%, and note points and interest paid at the end when the deal closes.
Joe Fairless: You mentioned the capacity to actually remodel the houses… What is something that we haven’t talked about that you wanna mention in terms of that constraint so that it’s not a constraint for you?
Geremy Heath: I think for most people if trying to do remodeling on a significant scale – even a decent scale – that’s where most of the issues come up. People can spend on marketing on the deals, and get the deal flows, and have the capital, but then they have a ton of rehabs going on and the execution, to be able to go from a trashed house to a pretty house – there’s so much execution that goes into that… So you definitely need to be very systematic about what you’re doing, but you also need to understand… Like, if you’re the real estate investor who’s building the business, you need to get yourself out of that tactical execution as quickly as possible, because if you’re focused on that, you can’t focus on the other things at your business.
For me, when I had enough deals coming through, I added in a project manager to support with that, and the level of skill of that project manager was much less and I was paying him much less than my current project manager, but what I found was over time as I grew I had the ability to pay more for that role and hire a stronger skillset. It has just evolved over time.
Joe Fairless: What does a project manager cost in terms of what we should budget if we were to hire one?
Geremy Heath: I think that if someone’s just getting started and they’re doing something like 25 deals a year, 25 rehabs and are looking for a project manager, you can probably look at getting someone in that 40k range. But I think if you’re looking for a more seasoned guy, who has the ability to build houses from the ground-up himself, and really has that deep construction expertise, you’re looking more in the range of 55k to 70k for somebody like that.
Joe Fairless: In terms of San Antonio – you’ve been there since 2006, you founded your company with your wife in 2009… What have you seen in the market as you’ve been there from 2009 when you started to today?
Geremy Heath: It’s been pretty crazy actually, the last few years. When I first got started it was pretty flat. The country was going through a downturn, but I think San Antonio was pretty resilient. It didn’t really go down, it just stayed flat for a few years there… But probably over the last five or six years it’s been incredible how houses have been appreciating, particularly in the range under 100k.
Just to throw some data out there, about five years ago, I think around 27% of the houses in San Antonio were worth less than 100k, and today it’s probably only about 7%-8% that are worth less than 100k. So it’s been like a huge shift in that bottom end, and with that you’ve seen houses that may have been worth 80k or 90k five or six years ago is now worth 140k. So we’ve seen increases of like 50%. But then the funny thing is on the upper end, if you start to get above 250k or 300k, there really hasn’t been that much appreciation on the higher end, so it’s kind of like the bottom end is just squashed up and the top end has stayed pretty flat.
Joe Fairless: What do you attribute that to?
Geremy Heath: I think that San Antonio is definitely a fast-growing city, so there’s a lot of growth here with companies moving here, migration… So I do believe that a lot of that growth is really more like — I’d call it a base growth. It’s probably younger people, first-time homebuyers who are coming into the market, whereas the top end – there’s just not as much demand for those particular houses. And I think as the population is growing, it’s more common for young people who are getting started here, rather than those high-end, seasoned people.
Joe Fairless: What are the areas — if we were to divide San Antonio into quadrants… North-East, North-West, South-East, South-West – what would be the quadrants where the growth is happening?
Geremy Heath: There’s huge growth — if you look North-East, that’s the direction that heads up I-35 to Austin, and Austin is less than an hour away, and that corridor through there is just growing like crazy. We have San Marcos between the two cities, but there’s tons of growth up in that direction. And then just generally more in the North direction, San Antonio is continually pushing up in the North. The higher value properties are more on the North side of the city, whereas the Southside of the city is more Hispanic… But that South side is also the area that used to have a lot under 100k, and which have now gone up into that 150k range. They’ve had a ton of appreciation down in the South.
Joe Fairless: Where are your deals typically found?
Geremy Heath: We look all over the city. For us, we’re not so focused on location. Our main criteria is that it’s within a 45-minute drive from our office, but we’ll look at things in any direction. And it’s really because we look at the opportunities from the perspective of value. I always use the example – and my accent sounds bad when I use this example, but there’s the TV show Pawn Stars… [laughter] I can never say it the way I’m supposed to…
Joe Fairless: I think you kind of maybe slide in a little bit of ‘porn’ instead of ‘pawn’ whenever you say that, don’t you? [laughter] Is some of that intentional?
Geremy Heath: Yeah, in Australia we say it the same way.
Joe Fairless: Alright, fair enough.
Geremy Heath: Yeah, but that show — and to be honest, when I first started getting into real estate and buying and selling, I used to watch that show a lot, and the thing I learned from that show is that everything has a value, and you can profit from it as long as you can get it under-valued. Somebody was trying to sell an old baseball jersey – you need to know what the retail value is and then you need to be able to get it for a discount on that.
Real estate is exactly the same, whether it’s a $15,000 house or a million dollar house. If you can find the discount from the retail and then have a way to sell at retail, you can always make a spread.
Joe Fairless: What is your best real estate investing advice ever?
Geremy Heath: I would say the best advice ever… I think that you should always dream big and you should have unwavering faith and belief in [unintelligible [00:18:45].19] vision and then you should take massive action every day to get there, even if things aren’t going 100% according to plan, you need to just keep taking those actions forward and keep your vision strong and you’ll get there.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Geremy Heath: Yeah, let’s do it.
Joe Fairless: Alright, let’s do it. First, a quick word from our best ever partners.
Break: [[00:19:06].05] to [[00:20:08].14]
Joe Fairless: Best ever book you’ve read?
Geremy Heath: I’m reading one at the moment called The Master Key System by Charles Haanel.
Joe Fairless: The Master Key System?
Geremy Heath: Yeah, and it was actually a [unintelligible [00:20:18].12] to Napoleon Hill’s Think And Grow Rich, but he also had the laws of success… And if you listen to The Master Key System, it was written before that and you can see a lot of the ideas that Napoleon Hill actually has [unintelligible [00:20:29].24] It’s awesome, it’s a great book.
Joe Fairless: What’s a mistake you have made on a transaction?
Geremy Heath: I would say that there was one time when I went big on three bigger houses, like higher ARV houses that were all around the 500k, and I hadn’t really had experience in that realm. I should have just taken one on to see how it worked out, but I took on three at once and I ended up losing on all three of those houses. It taught me that if you go into a new space, it’s okay to scale, but you’ve gotta prove that it works first.
Joe Fairless: Yeah. What was the reason why it didn’t work?
Geremy Heath: I think when you get into those higher ARVs, the rehab model was off, because finishes needed to be better-quality finishes. I think when we tried to sell it, people were way more picky, and it took longer to sell. Then we were also off on ARVs, so it was kind of all three things happening.
Joe Fairless: Best ever way you like to give back?
Geremy Heath: Personally, I really enjoy coaching, and a lot of that comes through the people that work with us. I’ll get a lot of satisfaction out of it. For me, the business is about building a team, setting a big goal and then going for it, but then helping the team to grow so that they can do their best. There’s nothing I love more than to see them really producing and doing well through the advice and coaching and mentoring I’ve been able to give them.
Joe Fairless: How can the Best Ever listeners get in touch with you.
Geremy Heath: The best way to get a hold of me – you could go through the Contact Us form on my website, which is TexasAllCash.com, or you could e-mail me directly at Geremy@TexaAllCash.com.
Joe Fairless: I love how you walked us through the three main constraints that you have and how you are addressing them. And that’s not just you, but any fix and flipper. That is deal flow, how to get the cash to close and remodel, and the capacity to actually implement the business plan.
Some tips that you gave within those three along the way would be that with the cash, you’re providing an 8%-12% return to your partners on those. With the marketing and leads you’ve gotta just spend some money in your case to get those leads… And what’s the number one place you spend money to get the leads, by the way?
Geremy Heath: We do some radio marketing…
Joe Fairless: Radio?
Geremy Heath: Yeah.
Joe Fairless: Huh.
Geremy Heath: We do a lot of radio. Then we do a bunch of other things, like direct mail and some online stuff, things like that.
Joe Fairless: But radio has been the number one best ROI for you?
Geremy Heath: What radio gives you is the ability to have a large marketing spend without a lot of effort; you’ve just gotta pay for the spots and let it roll.
Joe Fairless: Okay. And then the last thing is the checklist that you created in terms of you’ve gotta have the capacity to remodel the houses, and one of the resources you gave us is Process.st. I always say ‘process’ [prawcess], but now I’m spelling it out, it really is process; I don’t know why I say process [prawcess]. I think a lot of Americans say process [prawcess], but I think we’re wrong; I think it’s process.
Geremy Heath: I’m glad I had this positive influence on you.
Joe Fairless: Yeah, yeah… Process.st, and then also we have the salary range for a project manager. Depending on experience, it could be around 40k if you have around 25 rehabs a year he/she is overseeing, or as high as 55k-70k for someone more seasoned.
Thanks for being on the show, Geremy. I hope you have a best ever day, and we’ll talk to you soon.
Geremy Heath: Yeah, no worries. Thanks, Joe, and thanks to the Best Ever listeners.