All Forum Posts by: Justin Williams

Thanks @Rick H. Really appreciate the kind words! Really means a lot coming from someone like you.

Great seeing you at Tony's seminar the other day. We need to catch up sometime!

I appreciate you pointing it out @Steve Babiak

Definitely not the first basic mistake I've made and won't be the last. Just want to put that out there and make sure we keep the expectation low.

122 to go! Darn I'm even more behind than I thought! ;-)

@Account Closed Thanks! I may eventually have to have Vanessa post these for me! She makes much less mistakes than me. Unebelevable about your experience. Thanks for sharing!

@Bill Gulley Yes very true about the .70% "rule" While I do think it is hard to lose money using this rule (assuming you are doing a basic rehab in a decent market/area) It is very in accurate, and I will go as far as to say very "outdated" IMO. Once again if it works for you and you want to stick to it then go for it! But if you are finding that you aren't really buying as many houses as you would like to or you would like to better understand actual returns on your investment or how you can work more with JV partners and help them understand their returns then it might be very beneficial to consider a different form of deal analysis that helps you better understand where your cost is going instead of just wrapping it all up in one ballpark formula, and calling it good.

And RE my site/podcast/Mastermind program, yes it has been a LOT of work and just like anyone trying to get into RE is not easy at all! In fact just for fun I was running some #'s on opportunity cost and it was probably several hundred K since I started the podcast last year.

However on the the other end I do it for a lot more reason's than just the direct profit from coaching. I love it educating and the challenge of something new, and I get a huge benefit from the networking opportunities so I guess the opportunity cost really wouldn't be accurate. Also I have learned a TON about techi stuff and marketing which I think is pretty valuable. Having that been said I do think I can create a coaching/mastermind program which does add an incredibly higher amount of value to others than it costs them and still have it be profitable, but without the other benefits it would be very hard to be able to rationalize doing something this crazy! ;-)

First Weekly Update

4/6-4/12 results

Ok so here is my first weekly update. I know I started this thread in the middle of last week but since it is the beginning of the week, I will give an update for the entire week.

Last week we fell a little short of our goal for 3 a week, and ended up putting 2 deals under contract.

The first one was from my Main Agent on a property he got from a mailer. He was able to structure a seller carry which was really cool. Here is the e-mail sent to me by my agent on Monday letting us know the details. He has since put it under contract, and we are set to close on...

Got a mailer call verbally accepted over the phone just now. It's been quite a bit of back and forth, but it looks like we got it. I'm mailing the seller a contract today for purchase. Here are the details.

Purchase price - $90,000

*Down payment of $22,500; seller to carry a note of $67,500 at 8% with interest only payments of $450 a month for 12 months.

Rehab - $14,000 (subject to interior inspection)

ARV - $135,000

As soon as I have the contract back I will start the rest of the process on inspections and making sure that our contract requires the tenant to be out of the home prior to close of escrow.

Then on Thursday Vanessa (my assistant) let me know that she got a call from wholesaler # 6 with another property.

The ARV is right around 300k and is in a great area with some potential upside.

Estimated repairs are 25k and he was asking $220,000, and the property does come with occupied so we needed to account for Cash for Keys and additional hold time. However this is one of my favorite wholesalers to work with and we do see some potential for upside since the comps aren't rehabbed as nicely as ours would be and it is a great area. Vanessa asked him if he would be willing to take $215,000 now and if we ended up selling it for more than $300,000 we would give him the more on the backend up to $5,000. He said he would prefer to split the difference and get paid $217,500 up front, which we were good with bc #1 we really like to try and accommodate when possible with our wholesalers so they can get as much as possible out of the deal as well, and like I mentioned we do see the potential for some upside so we decided to move forward with it.

In my first thread I mentioned the package of 4 that we were hoping to get under contract. As of now this ended up being an example of maybe sometimes it is better to take the bird in the hand. We were willing to pay what they were asking for the 4 houses but were seeing if we could negotiate them down just a bit more. When we realized we were close we just decided to pay what they originally wanted but by that time they were considering just listing the properties. I am still hopeful, and am trying to see if I can line up some bank financing to allow me to offer even a little more than what they were asking, but we may have lost these ones! Argh!!! ;-) Oh well what can you do! We aren't going to give up but have to move on mentally so we can continue to move towards our goal.

The Numbers

So as of right now we are currently at 28. I mentioned 27 on my first post bc we already had one of the ones from last week. Only 112 to go! Not only do we need to get up to speed of our 3 a week pace but figure out a way to get ahead.

Catching Up!

We are currently in the process of hiring a full time marketing and acquisitions manager, as well as implement some other marketing strategies. Also been working with more agents and wholesalers, a couple who have read this thread on this forum, so thank you for reaching out to us, and hopefully we can do some business together! We have even considered opening up an out of state market so if you are an agent or wholesaler who is out of state who does a decent amount of business, I would love to hear from you as well!

That wraps it up for last weeks update! Onward and upward!

Very True @Jon Brown

Thanks @Jon Brown I really just didn't want to promote my group on the site but I am generally very open about what I do. In fact when I have time I intend to blog about my online marketing experience as well, and document lessons learned and income made etc. This thread will definitely make for a great post on that blog lol

Once again RE any vagueness I think it is important to understand 1) the intent of the post. We ALL know @J Scott is the man!, but we are two totally different people and the http://www.123flip.com/ blog already exists and people can get a TON from that! Don't get me wrong I do get into a bunch of details about deals and case studies on my site and I intend to get into more of the details on deals I lock up, on this thread but this thread is really simply meant to document a goal I have set out for, and things I learned from it.

Also if you follow my blog and podcast, you will know that my entire focus is to not only teach people how to flip houses but how to create and scale a systematic business, so I am honestly not much a huge details guy. Don't get me wrong you gotta know your #'s but my focus is more towards creating a house flipping business that will work for you vs covering the exact details of every single deal. I'm not claiming this is easy. In fact is it incredibly hard, but it is more of the focus of my "platform" if you will.

Oh and I didn't spend that much for my site, but I do have a web guy (he hates it when I call him that) and VA that have worked with me for several months on creating the site and podcast. Between that and all the other costs. This dang Mic set up and Mixer I have were close to 1k as it is. I have probably spent about 50k. All I'm saying is just like RE trying to come up with a quality, affordable educational program that you can actually profit from as well, is not quite as "sexy" or even close to easy as some may think. Those who have done it or tried it probably know exactly what I mean, and like J said FORGET about opportunity cost! lol

@Jon Brown Thanks for your comments...uh I think lol

I tried to be clear of my intentions from the beginning. The only thing I left out was the fact that I have a coaching and mastermind program bc I knew this would be seen as promoting my program so of course I had to leave it out.

However I think you are misunderstanding my willingness to share just about everything I do in my business. If anyone has been to my site and listened to my podcast, they know I don't really hold back much of anything. Ok maybe I don't give out the contact info for my agents, and private money lenders, maybe I don't give the exact copy of my letters and the addresses I send them to, and maybe I don't send them a list of the properties and addresses of houses I am making offers on and what I am paying, but other than that I am pretty much an open book. I don't think we have seen anyone on here so far who follows the content I put out on my site and podcast have had anything negative to say. I do the webinar so people are able to hear about my program if they are interested. So like Steve Landis, J Scott, and many others have said I think you guys are looking a little too far into it, and although this post is not about all the details of house flipping (I think there is plenty of that out there) I am pretty sure I have answered just about every question asked, and considering this is suppose to be a post that goes through the year, I'm pretty sure there will be many more questions and details to come.

Once again do I have a master mind program that I charge about the same as a seminar for? Yes! Do I give WAY more value for that program than I charge? Well, I would let anyone who is a part of it answer but I am pretty sure every single one of them would say I give 10x more than the cost, and since inquiring minds (not saying this is you) seem to want to know I have probably spend about 50k on developing my site and content and brought in about 15k in revenue so as of now I am about 35k in the hole. How's that for details? So I guess it would be considered more of a hobby vs an actual business, but yes I do hope to turn that around, but the only thing that makes it even remotely worth doing is the fact that I REALLY do love teaching and sharing what I do, and I have found that the more I share with others the more I usually end up getting back. I don't mean to sound all mystical here, just saying the relationships I am able to create from sharing with others usually end up being pretty valuable.

After doing this business for over 7 years I have had so many people want to be mentored. The truth is I didn't have the time to do anything one on one. Many of them would ask if they should pay 10-25k to join a program. I would say no but then still wouldn't have time to teach them. I finally decided to put something together that would help me help these people but have it make sense for me at the same time.

I hope and just like I built up my house flipping business fully believe I can create an incredibly successful educational business while helping others achieve their goals and getting back WAY more than they ever bargained for.

How's that for being clear about my intentions?

On Monday I will continue with my original intent of giving weekly updates of the week before. I have been encouraged by all those of you who have reached out to me privately, (and especially many of those who have commented publicly) and some of you who have filled me in on some of the "not so encouraging" commentators.

Knowing that there are many of you who are enjoying and getting a lot out of the thread is enough encouragement to keep going with the initial intent of the thread and just ignore the others.

Not to mention I have already made a couple great connections who I hope to work with here in the near future, so that in and of itself makes it worth it!

@Michael Moikeha Yes you are correct about the 70% rule being 70% ARV less repairs. Can I ask you a question? Is this rule working for you? Otherwise are you buying houses and running a profitable business using it? If you are then great! Keep at it. It has plenty of built in margin for error in case your hold time is a little longer than normal etc. However if you are finding that you are getting outbid on every house you make an offer on then you may want to consider another method for analyzing properties that is more based on total return on capital invested.

I have found for me personally also understanding what I am making on the total capital invested as well as annualized returns REALLY changes the way I look at my business, how I am able to explain things to potential investors especially potential JV partners. To me is is much easier to show a JV partner that the projection on their invested capital is 20% than to try and explain the 70% rule.

I'm not saying it is wrong or right. Just saying the 70% or 75% or 80% rule or whatever % you are using isn't a very accurate measurement of the return you are getting.

For example let's say you have 2 properties where the total cost of purchase and repairs (hard costs) is 300k

On one of those properties is fairly new and you only have to do carpet and paint, you could probably turn it in under 3 months.

On the other hand if you had a property that you are adding sq ft, and dealing with a tough city, and doing a custom remodel, on a house that is occupied with a stubborn tenant on purchase. Otherwise let's say this property will probably take almost an entire year to turn. (I am intentionally using an extreme example here)

If you are using an %ARV-repairs rule on both of these projects then you could get yourself in trouble on the more involved project and probably won't really stand a chance on the property with the fast turn time.

Assuming you are paying a private money lender 12% then you would be making 27k less on the deal that is taking MUCH more of your time and has a much higher risk, when it should actually be the opposite way around.

Great question @Teresa Keith

@Teresa Keith

Thanks @Sal AlSudairy

Your welcome and no worries @Wendell De Guzman

Ok so back to your question about the ".70% rule" Don't take this the wrong way but I am surprised when I hear of people who still go by this calculation. Ok let me make sure I am clear here. I actually do think it is a quick way for someone who is new to analyze a property, but #1 I am amazed when people are still able to buy with that kind of margin. I get it if you are working only directly with sellers but if you are doing anything online or buying from wholesalers or auctions you probably won't be buying much, but then again as @Mike S. mentioned I do live in CA, so that might explain it.

But #2 aside from the good margins I think going by a rule like the .70% rule really doesn't give you a very accurate measure of what you are doing unless you REALLY understand what it is that you are accounting for. In many cases it can actually really get you in trouble or like I mentioned you get out bid bc you don't really understand what that "rule" means. It is important to take into account, hold time, risk involved, market conditions, cost of capital, velocity of capital, closing costs, HOA/Melrose/other holding costs etc. For example you can't use the same set rule for a house which you buy with an occupant, need to add sq ftg, and has longer DOM's and some potentially unknown's. On the "flip" side, you can get much more aggressive with your evaluation if you are doing a newer very simple carpet and paint job with very little work, in a solid neighborhood where houses fly off the market. Now once again don't get me wrong. If you are only doing basic rehabs that take 3-4 months and are able to get these margins and this rule works for you and you are buying properties then great! Stick with it, but if it isn't working for you or you realize you need to take into account other things, and get more aggressive then you should probably change up your model for evaluating properties. I think the thing about this rule if you can actually get these margins then it usually works bc there is room for margin of error, but if you are pushing your values to buy more houses then you really don't have much room for margin of error so you really need to know your numbers.

So really no-one is violating any rule bc that rule really doesn't exist for those who don't analyze properties that way. ;-) But very good question Wendell so thanks for asking it. It's late and I can tell I'm getting tired so hopefully I explained that ok enough :-) Let me know if I can clarify anything.

PS if anyone out there is actually wholesaling properties right now on a higher volume where you live using this rule of .70 minus repairs, I would love to talk! Might be time for me to consider starting to buy in another market! Could be the answer I am looking for to reaching my goal?! ;-)