Is a We Buy Ugly Houses franchise Worth It?

[Lane Ewert]

My wife and I have gone around and around on different approaches to get into real estate investing. So today she shows me the We Buy Ugly Houses franchise. It's 50k to get a franchise and what you get is 2weeks training course, their proprietary software that help you evaluate cost/profit on a property and marketing. But my first thought was to come and ask bigger pockets if anyone has either had experience with them or had their own franchise. I think one of the key points of their model is you have more access to hard money lenders. Any and all advice would be greatly appreciated.

[Jamaal Hunt]

Originally posted by Lane Ewert:

My wife and I have gone around and around on different approaches to get into real estate investing. So today she shows me the We Buy Ugly Houses franchise. It's 50k to get a franchise and what you get is 2weeks training course, their proprietary software that help you evaluate cost/profit on a property and marketing. But my first thought was to come and ask bigger pockets if anyone has either had experience with them or had their own franchise. I think one of the key points of their model is you have more access to hard money lenders. Any and all advice would be greatly appreciated.

I'l be honest I wished I had 50K lying around like that to make things happen in the Real Estate game. I can guarantee it wont be to a franchise though.

[Eric Hettena]

I am curious, what exactly comes with this franchise? I would then be curious as to how much each item that does come with it costs to get on your own. I imagine it would cost someone a ridiculously less amount than $50k.

The proprietary software is nothing more than a fancy phrase. There are plenty of free spreadsheets that will help you analyze a deal, but more importantly I wouldn't want to rely on a program to tell me if a deal is good or not. Too many variables to allow a program to tell me that.

Use some of that $50k to go get a deal. Use it to market, for a domain name for your website, down payment on a property, books for education...etc.

[Albert Hasson]

Complete waste of money. You can discover all the info you need right here on BP for free.

[Lane Ewert]

I have the same misgivings about it. Hoping someone can shed a little light on there operations.

[Sam W.]

I agree with Jamaal Hunt , Eric Hettena and Albert Hasson - There in many, many better uses for the $50K, and much of what the Ugly House folks will tell you is available for free here on BP.....and a lot of the analytical spreadsheets are available to download free as well!

On the other hand, you won't have the right to use their 'catchy' phrase....but if you asked (or started a thread), I'm sure lots of people will help you come up with your own catchy phrase.

[Tom Lafferty]

I spent a few months recently looking at the same decision. I was looking at the associate franchise though, which is $12K. Or was, now its $15. I didn't like some of the fine print, such as a monthly fee for each month you don't buy a house. The full franchise may not have that, I don't know.
The big selling point for many of the franchisees I spoke with was the brand. One actually stopped his HV marketing, and did his own without the brand name. He said the quality and quantity of the leads he got was significantly worse than the marketing he did with the branded mailings, posterboards, etc.
I basically decided there was no reason to spend the money until I had tried it on my own. I've also been killing myself with the decision you and your wife are, where to start! I'm thinking some sort of mail campaign is going to have to be a part of whatever I do (unless I go apt complex route) given all the talk of how hard deals are to find now. With HV, youre going to have to pay lots of monthly marketing as well.

[Lane Ewert]

Tom Lafferty No I think w/ the 50k you are still required to pay marketing fees. And since writing my first post on this topic I read one guy saying that your "area" is dependent on how much advertising you spend. And if there is more than one person in the franchise in your area the larger budget gets more attention.

[John Jackson]

HVA has changed hands, but in the old days, your leads depended on how much you put into the "kitty" each month...I know guys that paid $30k a month for advertising to HVA.
They had to flip 5 -8 houses a month just to break even on the "marketing kitty"

[Tom Lafferty]

Yeah, the full franchise definitely has to pay marketing. I was saying that the assoc. franchise has a fee you have to pay each month that you don't buy a property. Its only $350 or so, but still....
I called up several franchise owners, and most were quick to point out that the money they paid to HV for marketing was only a part of their overall marketing efforts. Some said that the HV marketing was actually provided a "small" part of their overall leads.
Not promoting or bashing, just relaying what was shared with me.

[James Hiddle]

I can sell you my "James Buys Ugly Houses From Poor Old Ladies And Rips Them Off By Draining All Of Their Equity" franchise and it will only cost you $25K. That's half of the WBUH franchise and I'll throw in a cute teddy bear as a bonus.

Seriously though why not create your own business instead of buying into someone else's business? It would cost you much less and you don't have to worry about their rules and marketing tactics.

[Mike Hambright]

I'm a HomeVestors franchisee, and many of the short sighted comments to this original post explain why 90%+ of those that try to invest on their own fail. Yes, HomeVestors is a franchise system. Yes, they charge fees...that's what franchisors do. It's the same for McDonalds and Subway. Could you create your own burger shop? Yes? Could you ever compete against McDonalds....it's unlikely.

I started my first HomeVestors franchise (Yes, $50K franchise fee...but there is now a cheaper option), nearly 5 years ago. My wife and I had zero residential real estate experience...had never bought a single house. By working hard, leaning into the HomeVestors system and brand, and working hard (yep...twice as hard as everyone else), we bought 65 houses in our first year. BTW - this was 2008 when the market was "crashing".

The primary things that benefit HomeVestors franchisees are:
1. The Brand - over $200 million has been spend advertising and building the brand. It's known from coast to coast. It's a well known fact that people generally trust national brands, and would prefer to work with national companies that have a reputation to uphold. We're professional, and that allows us to..all else equal...be much more successful in getting contracts than the 'next guy'. It generally also allows us to buy houses at deeper prices, because we're more trustworthy.

2. Lead Generation - nobody can compete with us. I won't dwell on this. This is the single most important thing in real estate investing. As an investor...you have to decide...do you want to be a "Real Estate Investor", and focus on what makes you money (i.e. buying and selling houses), or trying to become an advertising professional? It's hard to do both well. Most that do it well are doing something illegal...like bandit signs (sloppy, and illegal about everywhere), or stealing the We Buy Ugly Houses terms for online advertising (which HomeVestors protects like a hawk - and has won every lawsuit protecting).

3. Ongoing mentoring and support - The franchise model has evolved over the last few years to include a 'Development Agent', or coach and mentor. I've purchased over 250 houses at super deep prices over the last 4 1/2 years. I'm now a Development agent, and coach and mentor a large and rapidly growing group of franchisees from coast to coast. Most real estate investors are on an island. They don't have anyone to learn and grow with. Others in their markets don't talk to them, as everyone is afraid of 'arming' their competition. HomeVestors team based approach allows us to surround ourselves with hundreds of other people doing the exact same thing as us, and generally willing to share all we know with each other. This is completely invaluable in an ever-changing industry like ours. Also - for most investors across the country, there's very little focus on what that individuals GOALS are. To be frank, this is such a feast of famine industry that most investors goal is "More". As a mentor and coach, I spend a lot of time working with people on what their goals are....and a lot of focus on treating this as a BUSINESS, when most others treat it like a HOBBY. BTW - some of the folks I coach now buy more houses than I do!

4. The Network - what else can I say. Over 300 franchisees. Purchased over 50,000 houses in the last 16 years (who else can even say they've been around for that long...in good and bad markets). I'm proud to be associated with the best group in real estate investing. For me...very truthfully, If I wasn't able to join HomeVestors nearly 5 years ago...I would not have made it as a real estate investor. Truth is...I wouldn't have been willing to work as hard to climb the learning curve, as I would have had to figure our every component of this business on my own.

For the record, about 18 months into my franchise, my wife and I purchased a 2nd franchise in the market next to us. Franchise agreements last 5 years. If in good standing....there's no cost to extend. Despite the fact that my wife and I are smart people....could go do this on our own and escape paying fees that we pay now...we're in the process of renewing our franchise as we speak. To be frank, we never even spoke the words "should we renew". I'm part of a world class team, and always will be.

For the haters - yep....we're not for everyone. Despite the fact that most fail in real estate investing, heck, even real estate investing isn't for everyone. If you don't understand that generally speaking, franchise models, are significantly more successful than non-franchise businesses...than you don't 'get it'. If you're hung up on the fees...consider that those things that you're being charged for, in many ways, are simply paying for things that you'd have to pay to create on your own (that's what good franchise systems do).

Mike Hambright
HomeVestors Franchisee (We Buy Ugly Houses)
Coach and Mentor

[Chris Martin]

Well, Mike kind of beat me to it... although my words were not from a franchisee experience. I also think Tom nailed nailed it regarding a big 'value add' of having a franchise: "The big selling point for many of the franchisees I spoke with was the brand. One actually stopped his HV marketing, and did his own without the brand name. He said the quality and quantity of the leads he got was significantly worse than the marketing he did with the branded mailings, posterboards, etc. "

It's kind of like starting a real estate brokerage business. The top performers are the national brands. And the UFOCs I've reviewed have a price tag about the same as HV, many are more.

[Rick H.]

Some great posts on a controversial topic. The original post concerns making a decision to spend the $50k for the franchise. I think a few other points ought to be touched on before making a decision.

I'm not a franchise owner, however it might be a good value. What I presume you are purchasing is a geographically exclusive area, specific training, marketing systems and a platform to operate and manage this biz in a box. You must provide the energy, motivation, staying power, etc. to get up every morning and show up to work.

Before signing up, I'd ask myself if the business is really for me, for my partner/spouse and how hard I want to work, for how long and what my exit strategy for the business is. I'd also really zero in with other franchisees about why less successful operators fail. That's a biggie! Be prepared to ask yourself some probing personal questions, too.

I don't really have an issue with the money, myself. It should mean that the quality of other franchisees is higher. Hopefully, the franchiser does a good job of vetting unqualified prospective operators who also happen to have the dough.

In my market, CA, I'm not aware of any Homevest 'We Buy Ugly Houses" franchisees. Perhaps there are a few, but they either operate stealthily or not at all, because I've never ran into them here, ever.

BTW, what's a McDonalds franchise cost today? Ray Kroc, in his 1977 book, 'Grinding It Out' stated in at least four places that McD Corp is not and will never be in the hamburger business. They're in the real estate business!

[Joel Owens]

Let's keep this discussion civil and stay away from strong words such as (haters) etc. That does nothing to help talk and expand on a topic in a productive way.

There are people who can build businesses from the ground up and then those who need help and a blueprint for them to succeed. Nothing wrong with either approach.

I would say if you have 50,000 and it is all that you have I wouldn't give it to a franchise. I hope that is not what WBUH does. Most franchise companies around the world have liquidity requirements in addition to the money down. They do this because they know to succeed you need capital and not just paying a franchise fee. If most of the new franchisees opened and went under it would be bad for the brand.

If any company out there you are looking to invest in will take the fee but will not probe to see if you are a match or that you have the capital to get going I would be very cautious of them. I am talking in general and NOT about we buy houses.

The number ONE reason businesses fail is being undercapitalized. So if you have 200k to 300k sitting around and you have the time also to put into something like this then a 50k investment might make sense.

Carefully weigh everything out and do not make a quick decision on anything. If something that is being sold is quality it will sell itself.

[Bill Gulley]

Well, good comments, welcome to BP Mike!

Almost like someone claiming thier college football team is number one, a bit, but as a franchise tehy may have the sales volume.

I have seen very few ads by the company, I have seen the bandit signs and so has the city.

I don't know who has the franchise here, if someone does and thet bandit signs aren't bandit-bandit signs. I'm pretty sure they aren't the biggest operators here. So, I'd say there is no guarantee and you need to examine your market carefully.

$50K, I satrated to say fo that, I'll give two weeks of 12 hour days, that's about $300 an hour, second thought, maybe not. Besides, if you're here on BP you can ask questions and get guidance for free.

I'd suggest you do a few deals yourself and learn the basics which are probably not taught. Do 10 to 15 deals, flips and by then you'll have a good idea of your farm area and then acces the benefits offered. See if there are other alternatives to Mike's points and what the value of those alternatives might be.

I'd think there are national HMLs that can provide financing. I'd want to see or know the cost of money from the franchise sources before jumping on for the access to money. It may or may not be a deal.

50K could keep you on local TV for 5 years with spots or 10 years sponsoring some local co-op advertsing group, like the local homebuilders, with RE tips. Banners run about $2 a sq. ft. Printed material isn't bank busting. Walking and talking is the best bang for the buck, almost nothing to buy.

If you have a local university, they marketing students, classes look for new start ups to devise ad programs for, just apply with the teacher. The students are in tune to the area, have great ideas, some unconventional and they are aware of the old stuff and technology. The teacher will screen out the wild stuff I'd think and it's free and up to you. There are also tried and proven ads for housing, it's not rocket science.

One aspect of any national organization is that thier program, while it may be compliant with law, it may not be in tune with local custom. That can only be accessed if there are other boots on the ground in your local area, kinda hard being a protected geographic area if you're the only one. How things are done in Springfield are different than Branson or Kansas City, so networking around the campfire with others has limitations, but I'm sure it's motavational. So, can you get and stay motivated on your own or do you need folks pushing you along the way?

The two largest RE brokerages here (and among the largest in the state) are not the national bunch but locally owned, with individual's names. One has thier own weekly home show on TV, both with over 1,500 agents in the area. OTH, there are niche brokers who make more out of thier one man shops with a small staff than any in those large companies not including the owners. Just saying, bigger doesn't mean better or more profitable.

Lastly, I'd suggest if anyone goes the franchise route in RE that they do so based on population in an area and not by a geographic area. An area in a 50 mile radius may only have a population of 200,000, that will only yield so many possibilities, a population of half or a million regardless of area gives a better basis to estimated opportunities. :)

[Mike Hambright]

We absolutely have a thorough process for considering franchise prospects, and make sure candidates meet minimum requirements of capital levels. We only want franchisees that have passion, motivation and drive to be successful in this space, as well as those that will represent the brand well. As a franchise model, we're overseen by the federal trade commission, so we are held and hold ourselves to high standards.

[Bill Gulley]

Mike, that's much like any franchise, that they have money, not only to pay the fees but not go belly up casting a cloud over the blue sky, then they need to be excited and excitable, follow instructions and perform in the manner adopted by the franchise as a lose cannon can sink the ship. :)

[Michael Quarles]

Joel Owens
The number ONE reason businesses fail is being undercapitalized

I'm going to disagree. At least in real estate investing. In fact being over capitalized may be a negative for some.

Money isn't a fix all solution. Without unwavering drive I don't care how much money you spend on a crutch.

IMHO,

[John Jackson]

Michael Quarles makes a good point. The biggest marketing mistakes I've made were when I had unlimited money to spend. The best marketing came from creativity, not money.
As far as HVA, I'm not saying it's good or bad, just review the UFOC carefully..Actually..I guess now it's the FDD...and talk to other current and previous franchisees.
Corporate has changed hands, as HVA found themselves in a mess with HML's gone bad, but I think the support may still be solid.

[Dev Horn]

HomeVestors is a solid organization. A franchise is not for everyone, but for the right people, they provide a good system.

And - I guess I may be disagreeing with some but I'm gonna say - to some degree, it takes money to make money. If you have no money for deals and no money for marketing, you are going to struggle in this business.

[Lane Ewert]

thanks to all of you for your insight!!! Bigger Pockets it great. I will keep HV as possible option which has opened me up to looking at flipping houses. I have narrowed it down to another option in another thread. Thanks again to everybody!!!

[Lane Ewert]

really? advertising in old posts sigh

[Lynn Henley]

What's everyone's opinion on the non-franchise real estate license brands you can join? I've found a few of them out there. I know Dev Horn works for one.

You pay a monthly fee, get to use their phone # and website, and any leads from your area come to you. You pay no royalties or separate marketing fees, other than what you actually use.

Thanks,

Lynn (FL)

[Miguel G.]

Just talk to a real estate attorney about a Purchase and Sale Agreement as well as an assignment of contract and start doing your own deals. It takes patience and perseverance but you don't need a $50K program to get started.

[Jeffrey Hotz]

Dont know f this post is still valid but Im also a HomeVestors Franchisee and have been active for the past 4 years in 2 different Markets, Chicago, IL and Cleveland, OH. (not so active here in BP unfortunately, but looking to change that)

I can say HomeVestors is not for everyone and certainly pros and cons but from my opinion the value of the brand, their ability to target QUALITY leads, and also hard money lending arm make the costs very appropriate. Ive seen someone throw away 7k on marketing that got them 0 calls...thats expensive. With us, at least theres a track record for leads per ad spend, so not a shot in the dark.

The reality is we have franchises that come in at all stages of success in the industry and all different backgrounds. We work together as a cohesive team in order to thrive in this difficult industry. Some prevail, and some fail.

More than happy to discuss if anyone is interested. I'd certainly tell you the good and bad and let you decided if its a fit for you.