175-TNG Radio – Bill Shipp-Young 5-22-10
This week Bruce is joined by Bill Shipp. Bill has been investing in Riverside real estate for many years. Bruce thinks Bill is Riverside’s best kept secret.
Bill believes it is important to be true to your word when doing business. Bill has been working with his contractors for 10 years, and he has never had a bid on a home repair. These contractors know that if Bill hires them, they will get paid at the time he specifies. This is even more important than having people skills.
Bruce has taught many real estate investors. Some of them have great people skills, and that is what gets them business. There are also people that are trustworthy, and that is also attractive to business partners.
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In the last segment, Bill said that he is willing to do his job every day, and that attitude has allowed him to accumulate a wealth of knowledge. Bill’s knowledge of his market place allows him to live in Utah while still making good investment decisions in Riverside.
Bill has never closed an escrow with a person in it, and he has never bought a house at the steps. Bill does not want to deal with those hassles. This is why he uses the MLS and agents who know what they are doing. Bill gets over 50 percent of the houses that he makes offers on, because his realtors know not to call him unless a home shows promise. Bill works regularly with two realtors, but he receives calls occasionally from other REO agents as well.
Bill has a specific skew number for the paint which he uses on all his houses. Because he uses the same paint for his houses, it is easier for him to calculate how much repairs will cost when buying a new home. This also makes it much simpler for his repair men, because they know exactly what to do for every new job.
Bill discourages investors from traveling to see their investments. Do it for the first two properties, so you can figure out how to do the job. After the second, you should know what kind of property is worth your time, and trust your contractor to do his job. Traveling to your investment homes will cost you money and time. Also, Bill suggests that investors not bring their wives. His wife always has minor problems with his investments, such as the amount of flowers in the yard.
The typical repair cost for Bill’s investment houses is $15,000 or less. However, he has had home repairs that cost $100,000. In the early 2000s, he bought older homes. The oldest home he ever bought was developed in 1828. The house was so old that the home began to dissolve when the repair man tried to pressure wash it. Bruce once bought a home in 1898. Bruce had a termite investor inspect the home, and the inspector told him that there were no termites because the wood was petrified.
Bill does not have a construction background, but he has learned some things about that trade over time. When you buy a lot of older homes, you have to be creative to find a style that people will want to buy. In the late 1980s, Bill only bought homes that were 5 to 10 years old and did not need work, but Bill now only works with fixers built before the 2000s. Bill does not like to compete with home owners. When you are flipping new homes, you are not creating value. Bill thinks that working in the trustee market requires too much work. This is what Bruce’s company does, and Bruce agrees that the trustee market is too much hassle for Bill’s business model.
When reselling a property, Bill uses the listing agent that found the home for him, and he only uses two agents to keep the process simple. Using a large number of agents makes it difficult to determine whether or not those agents are doing their jobs correctly.
When Bill is selling his properties, he tries to control the escrow, but he never controls which lender is used. Bill’s buyers are always cross checked with the lender. Bill’s agent will not tell him that he has an offer until the buyer has been cross checked, and until he can know if he will get a good offer.
Bill is constantly educating himself in real estate. He reads many books, he has attended Bruce’s seminars, and he has been trained as a certified financial planner. Bill believes that many people know how to make a lot of money, but they do not know how to spend it. People do not often plan for downturns in the market, and their lack of planning ruins their financial health.
In the early 1990s, Bill had 40 rentals. It took 8 years to get those homes sold, and it was very frustrating because the market kept going down.
Bill began investing in Texas during 1989. He bought homes for $10,000 each and he owned them free and clear, but he was receiving negative cashflow every month because of property taxes. Repairing one roof could wipe out your positive cashflow for a year. In the end, he only made money on one of those homes. Do not buy real estate in other cities and states if you do not know what you are doing.
In 1986 Bruce was asked to speak on a panel of real estate experts. There were two well known attorneys on the panel, and all of their claims regarding out-of-state property ownership contradicted Bruce’s practical experience. When Bruce asked those attorneys how they came to their conclusions, he discovered that they had no out-of-state investment experience and were relying on theoretical knowledge. When people come from other states and tell you to buy homes in their areas, be careful. Why would someone travel across the United States to encourage you to buy their property if they cannot even get the people from their own state to buy?
If there are more listings in a region than sells, you should be nervous. On the other hand, if there are more sells than listings, then you should be happy. This is all Bill looks at when predicting whether or not he should be investing. Bill does not pay much attention to economic forecasts. He only pays attention to Riverside’s market, so he does not have to worry about general market forecasts.
The best deal Bill ever had was a wholesale in Corona. The property sold in 2 weeks and he earned over $100,000. If you want to find deals, you need to be watching the market every day. You never know why a seller might want to get rid of their property quickly. An agent once called Bill and told him that the seller was offering five houses and two lots on one street. The seller was the chairman of a bank who had stock options which were about to expire. The banker needed the money for those properties quickly, so that he could buy his stock. This deal shows that you never know why and when a great deal is going to show up. Bruce once bought a house from an agent once who was getting into the plastic extrusion business. The agent needed to buy an extrusion machine for $10,000, so Bruce bought two of his homes for that amount.
Bill has been approached with bulk buying opportunities over the last few months. The people offering these bulk buy deals told Bill that they have had bulk buys in the past that sold quickly. When Bill asked for an example of one of these bulk deals, he never received a response and he still hasn’t. Bill received a bulk buy opportunity from a company in Los Angeles as well. Because the company seemed professional, Bill had his agent check out the properties. The agent discovered that all 20 of the properties for bulk sale were short sales.
Bruce will be a moderator for Fannie and Freddie in June. These companies are putting together bulk sale divisions, so perhaps bulk sale opportunities will be available in the future.
For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.
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