BiggerPockets Podcast 044 with Michael Woodward Transcript

Link to show: BP Podcast 044: Creating Systems to Flip Houses While Still Employed with Michael Woodward

Josh: This is the BiggerPockets podcast, show 44.

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Josh: What's going on, everybody? This is Josh Dorkin, host of the BiggerPockets podcasts.

Brandon: Podcast. Podcast. Podcast.

Josh: You're my echo. That was cool.

Brandon: Nice. Introduce me already.

Josh: That was Brandon who rudely interrupted me. What's up, Brandon?

Brandon: Not much. How are you doing?

Josh: I'm good, man. I'm good. Things are going well. It's getting close to ski season here in Denver, so we're starting to get excited. Everyone in town is starting to freak out and shake with anticipation.

Brandon: Nice. It is also coming up in the holiday season, which we all love.

Josh: Oh, yeah, we love the holiday. There's no pressure and no anxiety.

Brandon: Nothing.

Josh: No, you know.

Brandon: Yeah, peace and love.

Josh: Yeah. Holidays are awesome. Anyways, let's not talk about any of that stuff and get right to the show because that just gives me anxiety.

Brandon: Do it.

Josh: All right. So today, we are going to introduce everybody to a guy named Michael Woodward. Mike is active on BiggerPockets. He's a house flipper in Nashville, Tennessee area who's flipping multiple houses every year while holding a full-time job as an engineer. I know that working a full-time job and doing anything is difficult, let alone flipping houses. So the show is going to be kind of cool and we'll get the opportunity to learn some cool stuff. I know a lot of our listeners currently have full-time jobs and do struggle with running their businesses, so I think you guys should definitely pay close attention to this one.

As always, you guys can connect with our guests by visiting the show notes at aBiggerPockets.com/show44, and you'll also find links to all these stuff we talked about during the show. Otherwise, if you haven't already, please jump on iTunes and leave us a review and a rating, hopefully a five-star one, but leave us some feedback there. The show continues to grow and we love getting your feedback over there. It helps inspire folks who haven't yet listened to the BiggerPockets podcasts and helps us rank a little bit better. So definitely, please do take a minute or two if you haven’t, and leave us a rating and review.

So with that, let's get to this interview. Mike, how is it going? Welcome to the show.

Michael: Thanks, Josh. It's good to be here.

Josh: Awesome, awesome. Yeah, it's good to have you.

Michael: Yeah, we're looking forward to it.

Josh: Yeah. Before we get started, I just want to say the reason I asked you to be on the show is because I've always really, really appreciated your responses in the forums lately. I just want to say publicly say "thank you" for chiming into the forums and helping newer investors out.

Michael: That was very sweet, Brandon.

Josh: Thank you. Why don't you say that to everybody?

Michael: I'm really glad to do it. BiggerPockets has been very important to me and my career already, so I like to give back. I like to help people to have real questions about things. I'm a fix-and-flip guy, so when people ask about "I've got a sink, if I should change it or not?" "What kind of flooring?" There's just a lot of things that I deal with every day, and it's a shame to hold it in. I think that's the nice thing about BiggerPockets, is it gives us a chance to share what we know. I gain a lot too. It's good. I appreciate it.

Brandon: Cool.

Josh: That's awesome. Awesome. So you say you're fix-and-flip guy. Where are you based out of?

Michael: East Tennessee, close to Nashville.

Josh: I don’t know that area that well. I've been down to Memphis once before, kind of cool. Enjoyed it.

Michael: I've been at Nashville a few times. It's a good place.

Josh: Cool. Well, how did you get started, Michael?

Michael: Really, it was kind of an accidental flip in a way that I got a job in North Carolina. I got a mechanical engineering degree. Right out of college, my wife and I moved over there; bought a little farm house, a house in five acres. I paid about $85,000, I think, for the house.

Josh: My god. 85,005 acres.

Michael: I know. I know. That was in '97, '98. Even then, that was a good deal. I knew it when we bought it. So 18 months later, the company I was working for actually shut the plant down, and we needed to move back to Tennessee. So we did. We sold it for 125. I've been working on it while we live there. I went back to Tennessee, paid off all my student loans and made a good chunk of change. It really got my attention. That was the moment, at least, that I saw real estate as something to do.

Josh: That's cool.

Brandon: I started an accidental flip in the same way about a house to live in and ended up selling it, I think, nine months after I bought it. So, yeah, I think it's an awesome way to get started flipping is just to flip your own house. Yeah, very good way to start. So are you full time now or do you have a day job as well? Are you still working in the engineering?

Michael: Well, I am, right now, full-time engineering and part-time real estate. So there was a time, when we moved back to Tennessee, that I got back into real estate while I was still engineering. I quit my job but really didn't have the real estate infrastructure in place. That was a big mistake. I didn't know about BiggerPockets. I really hadn’t put a lot of effort into making sure that my business model was really a business model. It was just kind of I was figuring out as I went. It worked, so I kept going, but I really took a big step, a risky step, to quit my job and go full-time into the real estate without having all the pieces in place to make sure that the business would survive.

Anyway. So I got pretty quickly over my head in that I bought and sold some houses, had some success. Then when the real estate market collapsed, it took me down with it. So I ended up having to fall back in my engineering after that. So go back to engineering and then flipping part time, but I'm actually doing more flipping now part-time and big part of BiggerPockets and really learning about what I need to do with my business to make the business solid. So now, I've got enough time to do both.

So right now, it's a good thing, although I still want to get out of the engineering job and full-time into real estate, but I'm just going to make sure that it's solid before take the leap.

Josh: That's great. So you lick your paws a little bit, right? Had a challenge like a lot of folks did in the late 2000 nots, I suppose. What was that, 2008, 2007?

Michael: Yeah.

Josh: We've done a lot of interviews with people who've gotten their backsides handed to them in that period, and we've talked to some who then. But I think it's really important that people hear how others, call it screwed up or not, whatever you want to say. I'm not going to say that you screwed up because it was really easy for anybody to get hurt by the downfall, but what did you learn, what did you do that you might have done differently now that you look back, aside from not quitting your job potentially?

Michael: Yeah. I'm a huge fan of failures really. I think they're important. I think it's important for everybody to fail. It's kind of a basic business premise that if you're going to go big, you're going to fail somewhere. At least most people do.

Josh: That's a tweet of a topic right there. The tweet of all topic. Anyway.

Michael: That's really real for me, because I learn so much with the failure that when it happened, like I said, I didn't spend any time on the business infrastructure, really the business plan. I didn't have time for business plan because I was too busy trying to figure out the business, which really was the backward way to do that. I should have been doing it that way. I should have done the business modeling first and then went back.

So in real terms with the real estate, where to start with that? I mean, there's so much to having a successful real estate business that you have to know so much. I really feel kind of bad in a way for new guys because I know how much they have to learn, especially somebody that's new and they say, "I want to buy a house in the next three months and I want to jump and get going." I look back to the last 10 to 12 years and think I've got everything I've learned over that amount of time and realized you've got a pretty steep hill in front of you.

So don't short your education. You really have to spend a lot of time on your education. So for me specifically, getting the numbers right. Everything that you guys talk about every day, the fundamentals – making sure that the property is in the right place; that it's the right price; that you understand what's a good deal and what isn't. That's really, I guess, the place to start. If you understand what things should be selling for, then you can run the numbers. I just didn't do the numbers to the level that I should have.

Josh: Got you. I think a lot of people that; did the exact same thing. Many got caught up. A lot of people didn't thought that the trend would continue forever. Instead of sticking to their numbers, they said, "There's a little more room. I got patting and market's hot. Look, I've got houses all around my neighborhood right now where these guys have done some flips and work." They were super excited about the market. The market was super, super hot and now these things have been sitting on the market for weeks and not selling.

I know for certain, at least on one of them, that their numbers aren't that good. They do not have a lot of patting, and they put a lot of money into these things. I knew when they bought that if they were going to flip it, they'd have to be super careful. I'm watching it and I'm just saying, "Oh, boy, this guy is starting to get real close to bleeding." It's easy to happen. So I pressed upon anybody who's looking to flip that they just be really smart about the numbers, just like you said.

Michael: Yeah. You really have to. They're just no short cut to it. I think for me, the problem I used to make is if you're estimating what the property is going to be worth and you say, "Well, I think it will be worth somewhere between 120 and 140." In the height of the market, almost everybody, myself included, used the 140 number. The thing I think that the crash taught everyone is to use the 120 number and then maybe deduct a little bit lower. It trained me to be more conservative. I don't know if you found the same thing, but…

Josh: Well, it's such a temptation really to want to get into a deal, especially when you're new. I want to do it. I want to get one. You can talk to yourself into any deal. You could say, "Well, I don't have to replace the shower. That big sink hole in the backyard is not a big deal; I'll make a pool there." Just crazy stuff that you can talk to yourself into making anything look good on the numbers. But if you're really going to be honest with yourself and you're really going to do the hard thing by saying, "You know what, this doesn't look good. These numbers are too tight." I'm going to back away from it. Walking away from that is like walking away from an auction. People get excited and they want to stay plugged in and they can't walk away. So if you can resist that, still to your numbers, then you will be much better off in the long run.

Josh: And that's key right there: stick to your numbers. That's huge.

Michael: Oh, yeah.

Josh: Let's get a little more specific about the kind of properties that you're currently flipping. Where are you finding them? I guess before actually, what are you looking for – price range wise – and where are you finding them?

Michael: In my area, I analyze sold all the time; I'm always looking for the sweet spot. I'm a huge systems guy. I always look for what the number is telling me. I've always been analytical, so that's where I start. In my area, the price range for the most activity is between 100,000 and 200,000. If you really dig into the numbers, you can see where the hot spots are with that. In my comfort level with the funding that I have available, I'm tending to pick them up at around 60 to 75. I've gone a little bit more than that on a few. Of course, my selling target is somewhere between 140 and 175, something like that. So in my area, that's the sweet spot.

Josh: So you say between one and two is your kind of range, and then you said you're able to find kind of some sweet spots. What other criteria do you use other than the peer pricing?

Michael: Well, of course, location is always important. But honestly, I really just go by the pricing, and there's some exceptions to that. If I see that something is priced really cheap, I looked at one this morning, $30,000. It's like 1500 square feet. You Google the street and you look around and it's a dump all the way around. The realtors say it was a meth house that'd been recently remodeled. $30,000 for 1500 square feet on the surface, by the numbers, looks good, but that's where the education and just really the street smarts start to kick in. You can recognize the difference between a good deal and a bad deal by the numbers. Did I answer your question there?

Josh: Yeah. I think that's fair. Are you looking at three two's? Are you looking at any kind of specific floor plans? Are you avoiding anything? A lot of people will say… I know flippers who only work on historic homes, so just trying to figure out kind of your specific.

Michael: Well, last year, I made a mistake to buy a house that was too cheap, really. That sounds impossible but house was $11,000. I thought, "There's no way I cannot make some money on this." But it was only 500 square feet. So that turned into a very, very difficult thing to turn in the end because people don't typically like houses that small. They just can't live in it. That's for college student.

Josh: It is.

Michael: It had a nice kitchen, but it was just too small. I ended up selling it to a college student and made money on it; didn't lose money on it, but that was a tough sell. I learn my lesson from that. So I tried to stick to three bedroom. At least three bed room, two bath is better. But it's tough for me to go as low as two bedroom one bath. It has to be a real deal in an area that I know will sell, and there's a market for that too. But three, two. I really look for square footage. If there's enough square footage, then I can tackle the floor plan. I have a background and instruction and so forth.

So the rehab doesn't scare me at all. If I've got enough square footage, then I can usually make it something that's desirable – three, two or bigger.

Josh: Nice. And are you doing your own work then or you're hiring it out?

Michael: Well, that's the other part of my education, is that I started out early doing everything myself. At high school, I needed to pay for my first car, so I went to work for the local contractor building a house. So I learned how to do it. I was capable of doing it. So when I started flipping, I did do it. Really, it all boil down to I don't have a guy that can do sheet rocks, so I need to learn how to do sheet rock. I could do it so I did do it without thinking about whether or not I ought to.

Then I learned really a difficult lesson. That was part of the demise of my business early on, was doing that. I fought a lot of that, with doing that. I don't have a passion to go out every day and hang dry wall or

Josh: Oh, come on.

Michael: Really. Really. I remember hating the business. Toward the end of that, I was almost glad that it ended because I'd go out and had plenty of freedom. I thought I had freedom but I go out to work on the house and I've realized, "I don't like this. This is not what I should be doing." So the down turn, it gave me time to re-do all that.

Now I hire everything out. I have a super, super contractor that does everything for me. I don't have to buy materials. I never go into Louis or Home Depot. He takes care of the whole thing. He gives me a quote at the beginning, and as he finish those things, I pay him. When he calls me and says, "I need the check," I get to him and give my check because he's really taken care of me.

Josh: Where did you find this guy?

Michael: Well, that's another secret to and what I've learned and not a secret at all. It's just a secret that's part of my secret.

Josh: You're charging 9.97 for that secret, right, Michael? I will teach you how to find a contractor. It's yours today free.

Michael: Actually when I was building new houses, I learned if I needed a good sheet rock dry wall hanger, then I need to talk to the guy, the painters. So I've called painting companies and said, "Hey, who do you like to follow?" And they gave me a list. "Stay away from this guy and use these people. These are the one we like." You can really follow that from the end of the project all the way back. Everybody follow somebody pretty much, except for the guy that breaks ground. So go to those people and ask them who do you like to follow. And that's what I did.

Brandon: Amazing tip.

Josh: Awesome. Awesome. Probably might be my first or second favorite tip as it goes to flipping

Michael: I know. I should have charged more for it.

Josh: Yeah. So on the GC, who's making the recommendation on the GC then?

Michael: As far as what he does?

Josh: Where do you find the top dog?

Michael: Yeah. It's the other nice thing about the contractor that I have is that he takes care of everything. So once I found him, I don't have to find anybody else. There's a few things that he doesn't do. He doesn't do roofing, but he makes arrangement for the roofing. I don’t worry about it. He gives me a good price. The flooring or something that I know the people that do good work area for flooring, so I just put him in touch with them and off they go.

Finding him initially was really the hard part. I looked for months. You'll have to try somebody else. You'll not going to know what they're going to do and how they’re going to do it until you actually hire them and you get into it. At least that's been my experience. They all say the right things. Most of them do. Very, very few of them actually filed through with exactly what the agreement was, and this guy knows that. So once I found him, it's actually an air conditioning guy that put me onto him. He's been my exclusive contractor ever since. It just makes it really huge for me.

Josh: That's cool. I think the huge key there is once you find the guys, take care of them. Don't try to undercut them and get an ever better deal every time because in the long run, the relationship is more important than a few dollars here and there. So I think that's great.

Michael: Absolutely.

Josh: Cool. I'm wondering, what is an ideal flip look like for you? Beginning to end, how much would you ideally want to pay? I know zero is ideal, but a typical good flip, what's it look like? Buy it for how much, put how much into it, sell it for how much, and how much profit?

Michael: Really the two that I've got right now are good representations of that. I paid I think 61 for one and 51 for the other. I put somewhere between 45 and 55 in each of those. The houses will be like new when I'm done. That's something that I found is important. Actually, I fully furnish the houses too. Although there's a lot of different opinions about whether that's important, but for me, the one 500-square foot house that I had was on the market for six months or more which was killing me. I mean, it was just terrible for my number. As soon as I furnished it, two weeks later, I had it under contract. So I found that it's key for me to fully furnish the houses and everything else in the house is like new – the flooring, the paint, kitchen cabinets especially. Women really buy houses, so I make sure that if nothing else in the house looks good, if the floor plan is not so messed up that you can't make it flow perfectly, at least we'll make sure that the kitchen looks good. So top to bottom, new roof; everything needs to look good and smell good for me to be happy with it.

Josh: When you say furnished, you mean stage, right? The same thing.

Michael: No. Actually I'm furnishing them; it goes with the house.

Josh: Really? Okay.

Michael: Yeah. Notches and curtains and everything. Everything, but the bedding.

Josh: Wow.

Michael: Pictures on the walls. The staging, a bowl of candy in the living room, refrigerator, it's running. One of my tag lines on my listing is, "All you need are the groceries" , so you can move right in. It's an added expense. I'm spending probably $7,000 or $8,000 for a house that most people say you don't have to, but if that gets me a contract in one to two weeks instead of one to two months, it's worth it to me. So that's what I found is part of the key.

Josh: And have you experimented with that? I would think there's probably somewhat of fuzzy line between staging and furnishing, right? I've never heard of somebody else doing this, so I'm kind of fascinated and my inclination is to say, "What the hell are you doing? Stop! You're wasting money." Have you gone the staging route, tried it that way and found that that wasn't as effective as offering the furnished house?

Michael: I kind of did test it in a way that I was not doing it before. I knew what my typical sale time was to get a contract. If my house is just one of another 15 or 20 with the same description, it's tough to keep that in front of people. You try to stay on the hot sheets for the realtors. You try to have relationships and somehow get it out there. That works to an extent, but when I finally decided to this, I just kind of went full in. I just said I'm going to this and see what happened. I've found that it's been very, very effective. In fact, every person that have bought houses from me since I've started doing this have said, "We want the furniture. We love the look of it. We want the pictures that are on the walls. If you want it back, you're going to have to negotiate something on the price." Everybody wanted all the furniture. I haven't have a single person complain about that.

The other side of that is you don't really know. I mean this fits my model so that's what I'm doing. I have sold the house earlier this year, and the guy that bought it, I ended up putting dry wall on the ceiling in the basement. It was unfinished basement but I put sheet rock on the ceiling just because it looks better to do that. Some people had said that they may want that, so I did that anywhere with the closing table and the guy looks across and says, "I really wish you would put the dry wall on the ceiling in the basement." I spent about $2,000 doing that because I felt like it was the right thing to do in general. So that's kind of where I am with the furnishing that I feel pretty strongly. Actually I have another tough house to sell and that case, it was a neighbor that was the problem. I made a mistake. Don't ever ignore your neighbor. Furnishing the house got it sold.

Josh: Nice. Well, that's fascinating. Let's jump into that neighbor speak for a second there, because I think that's another issue that is oftentimes ignored by newer investors. I knew I made that mistake big time early on and bought properties where neighboring properties really screwed me, for a lack of a better word. I mean, it was just pretty disastrous. So how does somebody know that you find a great property but the property next toward is going to burn the sell. How do you avoid that?

Michael: Don't stop. Just keep going. Literally I say that as if I'm joking, but I don't. If I pull up to a house and all the numbers look great and it's a killer deal and I see the neighbors have got trash or dogs or anything that smells bad, anything that would turn somebody off, I just walk away from it. I wouldn't even consider it.

Josh: Okay. The house I would have now, we actually purchased it in the winter time here in Denver and it was during a year of some wicked snows. So we showed up. We were the only ones house hunting in the winter. We were walking through a foot of snow looking at the houses and I didn't even think about landscaping, didn't think about the neighbor's properties, how they were maintained until the first spring came and I noticed the guy across the street wasn't taking care of his lawn. His lawn wasn't a lawn; it was a pile of dirt. Super nice guy, but he wasn't about it. So it took years until he sold his place for the house to start looking good. So that would be my tip amongst your tips, which is if you're going to shop in the winter when there's snow on the ground, you might want to keep in mind that there's more that meets the eye underneath.

Michael: Yeah, yeah. Absolutely. It's just one of those things that you can't overcome. I've had many realtors tell me if you can't get somebody to stop, you can’t sell them the house. If they won't stop and get out of the car and go in, you can't sell the house. So that really struck me. When that finally sunk in, I realized I can't have anything on the outside that looks bad. People are going to just keep going, until I have the price to the point where it's a killer deal. I don't want to get in that position. There's always too much time that passes if you try something like that. It's just better.

Josh: Yeah. So what do you usually do for the landscaping? How much do you spend on that and do you have any tips for curve uphill?

Michael: When I build new houses down in Florida, it was kind of a standard which you really needed to meet, and that's a little bit different because you're starting from all ground. But I always wanted it to look really nice. We put palm trees out front and a nice entry, plant flowers and so forth. Here in Tennessee, we get quite a bit arranged, so it's typically pretty green. So if the lawn is in good shape and there's a few plants outside, some landscaping mowns and that sort of thing. It needs to be soft and pleasing. It just can't be something that's ugly. I don't really have a good, specific response to that. The new houses, I had a package. I told them, we need to package out of this address and they go and do it and they know exactly what to do. Here, I just kind of take it house at a time. It needs to have curve appeal. I mean, it's, again, the same thing as the neighbors. When the people pull up, they need to say, "This looks nice, so let's go and take a look."

Josh: So how do you decide then, expanding off that topic, how do you decide how much to go? How far do you take it? I call it like if you give a miles of cookie problem, it always going to need more. So you update the front door and you need a new lock on it. If you update the new lock, you need a new light to match it. How do you know how far to go and when to stop?

Michael: Really, the condition of the house will determine that. If the front door is good, the front door is good on one of them that I have and it's not good on the other one, so we have, like I said, every house needs to look and feel like new. So if it doesn't look and feel like new, I budget to replace that. The pricing, the numbers have to match that. If the house is priced toward the top of the typical budget but it needs a lot of work, I'm probably going to have to walk away from it, but if it's priced low and it needs a lot of work, that doesn't bother me because I can budget it in. It just that I have an analysis, a spreadsheet and actually it's linked to my smartphone. So when I go into a house, I fill this out and it tells me exactly the price of everything in there. When I walk through the house, it needs doors and trim, it needs new lighting. Flooring is almost always a given. The roof, maybe, maybe not. So when I get down to this house, I've got this complete list. I actually fill it in on my smartphone and then it gives me a number at the bottom.

I've already talked to the realtors so I know what the after repair value is, I know what my repair costs are going to be, and then I can call them right back and say, "Okay, we can make an offer or we can't make an offer." Actually, we can always make an offer; it's just a matter of what's it going to be. It's listed at 43, but that's too tight. I got to buy it for 30, so let's offer 25. Or it's listed at 33 or 43 and I could buy it for 50. So we offer 44. So we make a win above asking price just to try to get it if it's a good deal.

Josh: You know earlier, to go back to what we talked about a while ago, I asked you what the kind of ideal flip was. You talked about these properties you're buying for 50 or 60, you're putting 45, 55 into them. So what do you plan on actually selling them for and then what's your profit look like on those properties?

Michael: My target is always 25,000 in the end. When it's all said and done, that needs to be my target. Twenty, I might consider really good about it, and 30 and above, of course, it's an arranger. You just go with it. These price ranges, if I'm buying for 60 to 65, again it depends. Some I'll put 20,000 in and some I'll put 60,000 in. So I have to know in the end that the numbers are going to work. So I'm typically selling around 150.

Josh: Okay. Got it. So you had mentioned the smartphone thing. I want to ask a little bit more about that because I think it's a pretty cool way of dealing it if you're going in there. A lot of folks say I bought, but I think it's nice to be able to have a system like that. You said you're a system guy. Is this just a Google doc that it’s a spreadsheet where you've got all your estimations on there or is it some kind of little piece of software you wrote or is it something that you paid for?

Michael: This is something that's taken a long time to really develop. I had a smartphone that works pretty quickly if I was going to do it this way, I needed something better. I've got a Note II right now from Samsung which I found works really well, and it can handle spreadsheets. So there's apps on playstore market that you can get that you can pull up a spreadsheet and fill it out. That's what I ended up doing. I've got everything actually on DropBox. That's where I keep my files. When I get to a house, I've got through the network, so I just get to my DropBox account, pull up the file and I start filling it out. I can actually save it. When I get back to my desktop at home, the saved file was there. DropBox has really been my key for that.

Josh: Nice. That's great tool. Really quick before we go on. This is show 44 of the BiggerPockets podcast and you could find links to all these things we're talking about at BiggerPockets.com/show44. Anyway, how are you funding your flip? What are you doing? Has this changed over time? How did you find them initially and what are you doing today?

Michael: Yeah. Actually it's been the same at the very beginning, except for the accidental flip. That was one that I got a regular mortgage through the bank and bought it to live in. But when I started flipping as the business, I found a private source to do that with, and that individual has been with me going on 10 years now, I guess.

Josh: Wow.

Michael: There's been a single person. Eventually, I've actually been doing a lot of research also on other funding sources. Banking, I think , looks like the most affordable if you're in a position to do that. If you got enough to put down, it looks like the lowest cost of doing that. So eventually I'll do that. But right now, it's just all private.

Josh: How did you find this person when you first did?

Michael: Yeah. Actually it's a family member.

Josh: Okay. Nice. I actually do want to circle back, as my brain just started spinning. You are currently full-time, right? You're working a full-time job, right?

Michael: Working a full time job and doing roughly a flip every two months.

Josh: Flip every two months. I was going to ask you about your frequency. So that answers it obviously. How are you going about the process, because obviously an engineering job is a job that, at least, from my understanding, requires a lot of focus. You don't have a ton of time to go hang out on Facebook and play around and jump off site and disappear like some jobs, Brandon. How are you managing your flips with full-time job?

Michael: The only way, in my opinion, that is possible is, again, with systems. That's what I'm doing. The recent article from, I wrote his name down but I can't think of it right now that had the article that's like the great things about having a full-time job while you're doing real estate. Anyway, I really relate to that and he mentioned systems in there. I have the system and it's something that, you're right, I have basically no spare time at all. So whatever I do has to be the most beneficial thing possible. After a few weeks of doing the wrong things, you realize I'm not making process on the right things and I'm not getting anywhere. So I have a very specific system that I've been putting in place. I've actually recently got Microsoft projects up and running, and I'm still working on the details of that to get that going. But that will be the heart of my system. On that, there's links. There's timing for everything. So the list serves a template. Every time that I buy a house, it's a brand-new template that I use on each project so that I don't have to think about what needs to come next. That was always a problem with multiple projects. If you get two or three houses going at once, and sometimes they overlap that way, it's incredibly hard, and you spend an enormous amount of time thinking about what have I not thought about? Who do I need to call? What do I need to be getting going next? So the system that I have with this list tells me the next thing to do. It's a top to bottom, every single step of everything that I need to do from the beginning of the project to the every end, lawn care, getting the electricity turned on, every single thing is on this list and when it's done, I check it off. So it follows the project and it takes the thinking out. I found that I was spending probably half of my time just thinking about what do I need to be doing next, which was incredible waste of time. If you got it right in front of you, it says, "Do this next" and then your productivity goes through the roof at that point. So that’s the only way that this is possible for me to do that. If I didn't have that system, I just couldn't or I'll do one or two projects a year, something like that. By the end of this year, I want to be up to one a month. So the systems are critical for me.

Josh: Got you. It's interesting that the people that I know who flip houses that are engineers tend to be the most systematic about their approach. I think that's extremely helpful. I think the background comes in and actually establishing that makes a lot of sense. So your system is essentially, if I understand you correctly, it's really a list, right? So it's kind of step 1 through hand keys over to step 256. Everything in between is literally you're just following up and down the line and it's got timings for specific things in there and maybe some of those things are kind of get thrown into a calendar. Is that kind of how you run through that?

Michael: It really is. It's a list with links to other things. I'll have hyperlinks to email. If I need to send an email to the insurance agent, there's a hyperlink right on the list. So when it says email the insurance agent, I just click on that and it brings up the email template that already has most of the details on it. So I just basically update it with the address and send it on. I try to use the same people over and over, so they know what's coming. They recognize exactly how to handle it. It just on down the line, I actually a floor plan of the house as well. I found that that's a very useful thing for the flooring guys. They understand what exactly goes in which room. For the contractor, you can put a scope of work on that floor plan, put it in the house so that he doesn't have questions later on. Did you want to change that door or you want to keep it? It's on the scope of work. That scope of work, a lot of that is generated automatically.

When I fill out the initial evaluation, I take notes on that, detailed notes about what needs to be changed, what needs to stay, so when I print that and when I give that to the contractor, it actually populates in the scope of work. So anyway, if that makes sense, it kind of builds on itself. If you take initial notes and then that flows all the way through. Eventually, I've talked to some software developers about this, I want to have an online system that will do all of these seamlessly. Right now, I'm having to go between software packages. It's not the most efficient way to do it, but it works actually pretty well. But eventually, I hope to be able to do every single thing from the smartphone.

Josh: That's right. What about the amount of time that takes, because I don't think we've really covered that in any of the shows before. I have never flipped a house, so I just know from folks who've done it, right? How long does a walkthrough take for you on a property that you're picking up?

Michael: Well, that takes some time. It's an investment in that the numbers have to look pretty good from the gut. I mean, the first reaction, of course, is gut. Do I think that this looks good? If I do, then I'll dedicate the time to go into the house. So to go to the outside, the initial evaluation list has a line for everything that could be done to the house. That's quite a few. I haven't counted to see how many it is, but it may be more than a hundred lines. Not every one of them has to be filled out, but I'll typically take between an hour to two hours to go through the house initially to write everything down that it needs so that I know when I leave the house that time, I'm not going to have to come back and do this again. If I don't buy it, I've lost the time. If I do, then I've already got my list.

Josh: So there's definitely a commitment there. How many offers are… I think you said you're doing a property every couple of months. How many offers are you writing for every property that you close on?

Michael: Probably not enough. I don’t know. I've heard a lot of people say you see a hundred that offer ten, you buy one. I still have trouble with that because I don't have time to look at 100 houses, not physically. I might look at them on zillow or the MLS but I can't physically go and do that. So my realtor actually helps filter a lot of that for me. When he see something pop up in the MLS, he'll send me the link, I'll look at it, we'll talk about it. He understands this very, very well too. It's another critical piece. You have to have, for me, to have a full-time job and to do this flipping at this volume, I have to have a very good realtor. I've gone, Brandon, I think I heard you say that you've gone through your real estate courses but haven't gotten your license yet, and I'm in the same boat. I stopped that actually two years in a row. I did the same thing because I realized that the realtor is going to be critical. I really need a good person there. I don't need to be doing that.

So I backed away from that. He serves the purpose there to filter the houses. So I really, honestly, I'm probably buying one out of every three that I offer on, or maybe four, but it's definitely less than 10. Actually it's a lot less than five that I actually get.

Brandon: Yeah. I’m probably still kind of in the same boat too. I tend to not offer on one. It almost is the right way but I tend to not offer on them unless I’m pretty sure I'm going to get them, unless if it's almost perfect and it's been on the market for a long time, then I'll usually offer. But I'm not buying dozens of properties a month either. We're both kind of part-time whooping. It makes sense that way.

Anyway, let's, I guess, move over a little bit to the selling side of things. How do you decide exactly how much to sell for? Is that your real estate agent just tell you?

Michael: Yeah. I really am focused on a fairly small area, so I have a good idea of what it's going to be priced at. That, of course, really is the first decision that has to be made. When the realtor sends me a link of a house and says, "Take a look at this," every single time, I'll shoot him a text back immediately and says, "What do you think is going to be worse?" I wanted his opinion. I don't give him my opinion ever. I want his opinion about what it's going to be worth and then I compare that to my own local knowledge. I tried to be as knowledgeable as I can about my local market to make sure that I have a good idea. Of course, that's easier after you have some time in them because when you've own the three two with a certain floor plan and square footage, you pretty much know what its going to sell for. If it's sold in two days, you might have been priced a little low. If it took you three months, then you probably priced too high. So experience kind of teaches you to that, but I found that my realtor here pretty much nails it every time, he's very good at values and I pretty much confirm what he says. We've disagreed on very few of them, so I really rely on him.

Brandon: That's a really good tip, actually. I mean, like you said, don't tell your realtor your value. If you come up with them and they do and then you get into opinion. Excellent. You said you focus on a small area. What's your farm area look like?

Michael: Well, it's really a county. I don't have a feel for the population. It's not tiny but it's not huge, kind of a bedroom community sort of thing. Nashville is the biggest local metro area but it's not in Nashville; I’m outside of that. It's the area that I live. It's the area where I drive home from work driving those roads, so it really helps me to know the local market.

Josh: Where are you finding the properties? Are these listed? You're not doing any marketing for them or are you using wholesellers?

Michael: In the good old days, you could get on the MLS and have five or six projects to go and look at; it was effortless. It was before a real estate was cool, I guess, and people weren't really, in a big way. Banks were always looking to get rid of their few junk properties they had so it's very easy to pull them off the MLS, so I did that for years and years, and it's only really been recently that I've had to really get serious about the systems for marketing. I haven't had to implement them yet, but I know as my volume goes up, it's coming. It's imminent. I'm going to have to do some marketing. I've done some Craigslist. We buy houses, kinds of things, but I haven't gotten any vision responses. Out of everything I bought has been off the MLS.

Josh: As we kind of wind down this segment, I guess my last question is, if you have any other tips for selling a property quickly with, what do you call it again? Not stage but furnished. So you got the furnished house, you make the front look nice. Anything else you do to make it really stand out?

Michael: Really the first things have been the only thing that I would consider extraordinary to do. Like I said, every house needs to look and feel like new. It can't be ugly. You can't have a bedroom that separated by a bathroom from the rest of the house. You can't walk from the hallway through a bathroom to get into a bedroom. So it has to flow good, but not really. I mean, just understanding what people are buying. If the numbers match really, if it's the right price per square foot and there's nothing that's unappealing about it, it pretty much sells. Everybody I know does their search for the house they're going to buy by the numbers first. That's where they start. So without being able to see the world of realtors and what they see and hear from their buyers and sellers, that would be an advantage of having your license, I think, but without being able to see and hear that, I really just rely on price. I just make sure it looks good and there's nothing detracting from it. No bad neighbors.

Josh: Cool. Very good wisdom there. Well, I guess that kind of wraps up our initial part of the interview here, so why don't we move on to my favorite sound effects?

ANNOUNCER: It's time for the fire round

Josh: Very good. All right, fire round. These questions, most of these come from, they all come from BiggerPockets forums where these are questions people ask and we're going to fire them at you and you get to fire them back at us. Number one…

Michael: Okay.

Josh: What is your favorite flooring for a living room?

Michael: Well, it really depends. The trend, I think, is to do hard flooring. I know that that's my wife's favorite. She doesn't like carpet. Carpet can soften things. It would depend on the house, but generally I'm doing hard flooring through the living room and the kitchen. The layout of most houses in this area, a living room and a kitchen are pretty close and both the houses I have right now, we're removing the wall between the living room and the kitchen so that the hard flooring goes from the front door all the way through the kitchen and dining room. So I would have to do with a limonite or hardwood. A limonite is what I've been using. It's fairly inexpensive and it looks good.

Brandon: Well done. All right. So a flipper goes and buys a house that weeks of smoke, cigarette smoke or…. I guess two questions: fire smoke and cigarette smoke. Think of this as two questions. What do you do?

Michael: Really, I would do the same thing for either one. I actually, last year, invested an ozone generator. I bought the most powerful one I could find. Actually, it's one step down from the most powerful. They have an industrial size that will kill everything within a quarter mile or something. Crazy like that. But I have one that handles a large area.

Honestly, I found that when the demolition is done, when they tear out what needs to be torn out and they paint, that takes care of about 80 percent. But if I have something that's got pet urine or the smoke smell usually comes out pretty easy, but pet urine, that's the best killer in a lot of houses. If you got saturated some floors, you got a real problems on your hands, but the ozone generator between that and the paint, that's all I've had to do.

Brandon: Right. It takes care of it.

Josh: Okay. So I got to ask you a question that's not on our fire around here. Can somebody please explain to me how on earth you have a house where pet urine that leaks into the hardwood floors to such an extent? I just don't get it.

Michael: I think every house I had bought has that problem.

Josh: Every one.

Michael: It's amazing. You would not believe… I take my 11 and 13-year old boys with me as often as I can to look at these houses. We'll open the front door and, of course, you get nailed with the stench coming out of the house. The first thing I ask them is, "What's that smell like?" And they say, "Money."

Josh: Yeah.

Brandon: Yeah.

Michael: That's right. Nobody else wants it. If there's piles really, if there's piles of you know what all over the house, 99 percent of the people are going to walk away. But I know that my contractor doesn't mind. He's going to get in there and take care of it.

Josh: Yeah, I am with you. I don't understand. I'm clean guy. If I see cat hair or a dog hair on the floor, I freak out. You watch your dogs and cats pee on your floor? How do you do that? I don't get it.

Michael: Honestly, they live in it. I walked in the houses in the summer time wearing shorts because it's hot. I walk in and I feel the sensation all over both my legs. I look down and I’m literally covered with fleas from the first step into the front door. The people were still living in the house. So you got me. I'm with you. I don't know how they do it.

Josh: Yeah, I don't get it.

Brandon: Brandon, do you live with cats?

Josh: If I see a flea…

Brandon: … we like throw the advantage on them and I don't let that happen. But I always say the same thing. My favorite aspect of a house when I go to look at is smell. I don't want it to smell it like the worst house I've ever been in, because again it smells like money every time I love it.

Josh: Next question of the fire around – asbestos popcorn ceiling, what do you do?

Michael: Avoid it. If I see asbestos sighting is the big thing around here. There was tons of it back in the '40s and '50s. I've dealt with it before, I've had it removed. The requirements that are out there right now for remediation for that and tenting the house and positive air pressure, all these kind of things that you got to do to do that right to stay out of trouble honestly, if that's the only house left to flip, I'm going to do something else for a while. I'm not going to touch it.

Josh: Okay. Smells like money to me.

Michael: That looks like jail time. No, thanks.

Josh: How many days is too long for a house to sit on the market?

Michael: I want to contract, I want a serious interest within two weeks. Of course, it's gone a lot longer than that. I've had them for, I don't know, I'd have to look and see for sure, probably eight months or something was the longest, most probably that 500-square foot house that I had. But if I don't have serious interest in two weeks, then I'm questioning what went wrong with the plan. But right now, it's what I put together – the pricing, what's included with the house, the way it looks and smells – within three to four weeks, I pretty much always got a contract. If it goes beyond four, then, like I said, I'm not super concern. It depends on the time of year, too. This time of year, the late fall coming after Thanksgiving and Christmas, I'll let that out a little bit. People don't make housing decisions this time of the year, so I'll give it a little more time. If it's in the hot season – late spring, summer – that needs to be locked to the activity. But it's the week of Christmas, I really don’t expect anything for several weeks. I'm sorry, that's kind of an open-ended answer to that.

Josh: That's good.

Brandon: Fair enough.

Josh: I had one set for nine months. I think that was my longest, miserable, but…

Brandon: It is. It is miserable.

Michael: It is miserable.

Josh: This is the one that I just dealt with, and I like this question. Pink tub, a pink bath tub – do you professionally repaint it, replace it, or leave it?

Michael: A contractor loves demolition. So it gets the salsa and the hammer's out and just beats it out and put something else new in there. I've dealt with them before, I've refurnished them, but I probably put twice as much time and money into refinishing that stupid pink tub. I really have had that. It's a nice older porcelain tub. It looked great when I'm done, and it did, but financially it was not the right thing to do. Unless you're on the six floor of a high-rise building or something crazy, I would get it out of there.

Brandon: Finally, what's the best place to buy appliciances?

Michael: That's a very good question, and that was something I always, for years, assumed that the big buck stores which every is your favorite in your local market would have the best prices, but I found that going to the local specialty appliance stores gave me much better deals. So we have a local appliance store, and that's what they do – washers, dryers, refrigerators. I get those for probably, I would say, between 10 and 20 percent less than the big buck stores locally here. So I've really learned that that’s the best place.

Josh: Cool. That's a great tip.

Brandon: And if I could add a little quick tip here, I always get my appliances I try anyway, the day after Thanksgiving sale at the big buck stores because you get like four washing machines for a buck, 50. Like they're like throwing. Like, I load up on appliances every year the day after Thanksgiving. I get up at 5:00 AM and go shopping. So that's coming up here in just a few days.

Michael: Yeah.

Josh: Anyway, maybe some can take advantage of that. But cool.

Michael: That's excellent advice. I really, from top to bottom, I've tried to use the specialty shops, not just for appliances but I found that cabinets as well is the same thing. I got beautiful cabinets that come from a local cabinet supplier and I'm just very, very happy with the specialty shops.

Josh: That's cool. That's very cool. And you're supporting local business too, which is always good.

Michael: Absolutely.

Josh: Cool. Okay. Well, let us.

Brandon: We're having a problem with big buck stores who might want to sponsor the BiggerPockets. Offer discounts to the thousands and thousands of people on the site.

Michael: I spent tens of thousands in the big buck stores, so there's definitely a place for them. .

Josh: Sure, sure. Final section of the show are world famous for. What is your favorite real estate book?

Michael:This one's easy for me. Last year, I discovered the millionaire real estate investor by Gary Keller. I listened to it. I use audible, so I listen to my books to my two-hour commute every day, grabbing actually an hour to work and an hour back, so that gives me two hours a day to absorb podcasts and audible books and so forth. So anyway, I listened to that one last year, and it was a lot of good information and then studying BiggerPockets, I found that really BiggerPockets backs it up. It's a very good system. If you just follow the book, it's the same advice that all of us are going learn that get successful. Anyway, that's my favorite book.

Josh: Cool. What about your favorite business book and non-real estate?

Michael: That one's a little harder. Josh will love this because I…

Josh:

Michael: You are Richard and Michael seriously, the original. You don't even have to start saying. I know you're a magnificent gentleman and I want to hear something new out of you.

Josh: I want to hear this. I want to hear your favorite business book.

Michael: I would have to make it up now because honestly, true story, I'm in Florida. It's been about seven years ago and this realtor comes up to me and says, "Here's this book. You got to read this." And he said, "You're knocking your head against the wall. Check this out. You'll enjoy it." He gave me the book. I thought it was a real nice gesture on his part. It really was a pivot point for me. It was a point where I realized I'm not doing the right thing here. I need to leave and quit doing all the stuff myself and get out and get somebody else to help me with the work on the business instead of in the business. The other pivot point…

Josh: It was when you read the 4-Hour Week, of course.

Michael: Option B was when I work with…

Josh: I'm on page 27, by the way. And for those people who are listening for the past podcast, I'm on page 27 for about three shows, four shows.

Michael: You can go the grocery store. You listen…

Josh: I don't leave my house, man.

Michael: When you're going to sleep at night.

Josh: There we go.

Michael: When you go to the sleep. But that was seriously was another pivot point for me when I realized that I can't make everybody happy. I really can't. I can't make everybody happy, and at some point, I've tried to make everybody around me happy, and I found that I'm spending my life making everybody happy and it’s not getting through the things that I want to do with my life, and I would like to have a four-hour work week, although I'm kind of driven and I'm not sure I'll ever like to get that low. But I think that the information in the book, for me at least, it was something that changed by outlook. It changed my perspective on it's okay to say no. It's okay for somebody not be happy with what you got to do because this is what you go to do.

Brandon: Sorry, Josh.

Josh: You know what, I actually – no, I’m just kidding. I have no problem with the two books. I just… I want to hear other new authors out there writing stuff to inspire us besides these two guys?

Michael: You know what I did? I went to my audible library because I knew you were going to ask me that. I look through my library and I said, "He's going to hate it but I have to do it."

Brandon: That's awesome.

Josh: I thought you're an e-myth and 4-Hour Week kind of a guy. The system thing, it's exactly. Love it. We will have the links to those in the show notes at BiggerPockets.com/show44. So hobbies, Michael. What are your hobbies, Mike?

Michael: It's been so long since I've done any, I don't know. I like the outdoors. I bought a motorcycle a couple of years ago, and this is a beautiful part of the country to ride, so I like to ride. Eventually I'd like to have my pilot's license. I think you have somebody else on a podcast that likes to fly.

Josh: I think there are a couple.

Michael: So let's… something I enjoy. What little time I have, I spend it with the family. What thing that is kind of nice about engineering job is that once in a while, you have to travel, and sometimes you can take your family with you. So, I've tried to do that a little bit.

Josh: That's cool.

Michael: Yeah. Hobbies will be after I get out of my full-time job probably.

Brandon: Cool.

Josh: Brandon, you want to ask the last of our famous four?

Brandon: That I shall. All right. What do you believe sets apart the successful investors from those who never gain any traction?

Michael: Doing the right thing. I mean, it sounds like a cliché really, but we've heard it over and over but if you ask the question, you have to say the same thing. You got to run the numbers. We have to do due diligence. You can't take any shortcuts. You can get lucky, somebody has to post one time that talk about is your business successful? Have you been successful because of your business plan or you're just lucky? I was just lucky for the first few years because I was doing what is in front of me and leaving myself vulnerable. So the people that will get in and educate themselves and follow those numbers and do the right thing, it's a recipe. If you want to make chocolate chip cookies, you use the right ingredients. When you put them together, the chocolate chip cookies come out every time. If you don't, then you're going to get something else. Part of that is my system side and analytical side; that you get out what you put in. So you put the right stuff in and you'll be successful.

Josh: That's great. Listen, I think the focus on systems is something that a lot of people might be unfamiliar with, especially, as I said earlier, it come from that engineering background and I'm really glad that we spent a fair amount of time working or talking about it here on the show. Definitely appreciate you taking the time to be here. Of course, if anyone has got questions for Michael, feel free to jump on the show at BiggerPockets.com/show44 and ask him. I'm sure you're more than happy to answer folks with their questions about systems and things like that, yeah?

Michael: Yeah, absolutely. And a couple of other things that I just wanted to plug in there at the end. I got to get Brian Burka a shoutout because he said something one time back to the systems thing that what he said was the bigger you get, the bigger you get. I have a system. What I want to do is two houses a month, and I want my system to fit that. That's what I want. I don't want a system where I just have to keep hiring more and more just for it to get bigger and bigger for bigger sake. So that was a pivotal point for me when I heard him say that. The bigger you get, the bigger you get. I don't want to just get bigger; I want to have happy time. The other thing, too, if this is okay, I hope this is, I contribute to BiggerPockets financially because it's valuable to me, and I hope that those that are benefiting from BiggerPockets will consider doing that, even if you don't have anything to put in the market place, which I really don't, I do it anyway because I get a lot of value out of this and I appreciate what you guys were doing.

Josh: We appreciate that and that was definitely not pre-arranged.

Michael: No, not at all. I thank you.

Josh: Obviously everybody who signs up helps support the site and helps support our staff. The bigger we get, the bigger you get. We're pretty big and we're trying to get the pieces in place to maintain this place and make it even better. Those donations and the pro contributions, those certainly help. So thank you so much. Thank you again for being on the show. Where can people connect with you besides BiggerPockets? Do you have a website or anything like that?

Michael: It's in the system but it's not in place yet, so BiggerPockets is where to find me.

Josh: Cool. Fabulous. We appreciate it and we'll look forward to seeing you on the site.

Michael: Thanks, guys.

Brandon: Yeah, thank you, Mike.

Josh: All right, guys, that was our interview with Mike Woodward. Lots of good tips, lots of good stuff. What do you think, Brandon, as a flipper? Yeah, a lot of amazing little tidbits in there, huh?

Brandon: There was. I can think of like a dozen things that I'm going to use in my own business. It is not easy to try to do anything like flipping while having a job. It's insanely hard.

Josh: Yeah. That's great. That's great. So thank you, everybody, for listening. Again, it's show 43, so check the show. That's BiggerPockets.com/show44. Otherwise, definitely make sure to follow us and track us and stalk us. Don’t stalk but…

Brandon: You can stalk.

Josh: You could stalk Brandon. I don't like stalkers; it's weird. Kind of creepy. But yeah, keep up with this on Twitter and Facebook, G plus, LinkedIn and, of course, make sure to connect with us on BiggerPockets. As Mike said, it's an amazing place. If you're not really active, definitely take the time to do so. Of course,

You should definitely check out our pro accounts at BiggerPockets.com/pro. There are some cool tools and upgrades that come with the program. So definitely we'll check that out. Otherwise, that's it. We thank you so much for listening and we'll look forward to getting back with you on show 44 next week. I'm Josh Dorkin signing out.

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