Thanks @Sharon Tzib I really appreciate the encouraging words. I really don't think anyone means any harm, and our educational industry is pretty full of sleeze balls so I can see where they are coming from. Thanks for sharing your story.
@K. Marie Poe We (my company, and I assume the same with Steve) count and have goals for net profit as well, but I have found that when working with my team I really like to count goals that are very measurable and more controllable. Things like, agents, or sellers contacted, offers made, and even deals under contract are a little more in their control than when a house actually closes, so it is easier to really track and use those things to motivate. For example it is very easy for me to say our goal is to put 3 houses under contract each week and hopefully hit that goal. If it is Friday and we have 2 I can say "Are we going to get that last one for the week?" and we can still really push and see if we can make it happen, vs like @Steve L. mentioning there being a title issue or even yet a house that we get under contract but won't close until 14 days. The truth is we all like to see those measurable goals and see those results. I have just from personal experience that it is easier to track and motivate, and have goals and incentives from counting deals under contract, but of course nothing really matters unless those deals close, which very rarely does not happen, unless we have a seller back out for some reason, but even then we go back and take it from our total count. oh and to your point about never getting them under contract yes you are correct, there are many houses we just open escrow on, and when I use to buy trustee sales we of course didn't have a contract. It is more a matter of semantics but basically when we either lock up or "buy" a house (in the case of a trustee sale) that is when we would count it. Sounds like you have a lot of experience and know a lot about creative financing (something I am not all that great at) looking forward to getting to know and learn more from you in the near future.
Also I totally agree with your assessment of bigger operations doing bigger volume. To tell the truth although I am proud of what we have been able to accomplish, I know a lot of people who are doing a lot more, and you probably won't see many of them on here or at the investment clubs. and yes I feel like VERY small potatoes compared to some. In fact sometimes I feel like I am only scratching the surface of what can be accomplished.
I want to be clear that we are not only working the MLS, but many of the houses we buy come from wholesalers who are doing direct mail or other campaigns as well, but yes we do buy on the MLS as well. I will see if I can get a break down on the % of deals that come from the MLS vs DM or other marketing strategies. Thanks again for your comments. Let me know if I missed anything.
@Mike S. Great questions. I believe I already answered #1, and will try to get some more data on those details (Please give me until at least early next week :-))
RE # 2) You mentioned you have moved into higher end markets like coastal OC and LA, How have you managed the construction differently on such projects? are you adding square footage? staging? higher end finishes? A property in west LA requires a completely different rehab than a property in the IE.
We do add sq ftg on projects where it makes sense for example if we are buying a 2/1 900 sq ft house in San Diego, Orange, or even LA county, that has a pretty high price per sq ft neighborhood and a decent lot size to account for the set backs, then we will most likely add square footage. If this is the case then we know our turn around time is going to be much longer and we will need to get a higher one time return closer to around 20% or so depending on how long we think it will take. It's not an exact rule but we do usually stage higher price point properties. Basically ones that are in Coastal Counties in nice neighborhoods, same thing with higher end finishes. Same with finishes. The nicer the neighborhood and house the nicer we go on finishes. Usually just depends on what the neighborhood and area demand, but I would say around 80% of what we do is pretty standard using basic laminate wood flooring, basic, carpet, mid range granite, basic stainless steel appliances etc.
@Sam Craven oh I forgot to comment on your PS. That is very encouraging to hear about the LOC. I really think it could make a HUGE difference in our business as well and I am almost embarrassed that I haven't taken advantage of that yet! Do you mid sharing some more details on how you went about getting it, points and int rate, how much they are lending, is it purchase money or refi money? Anything else. I understand if you can't go into too much detail but anything you can share would be appreciated.
Thanks @Rolanda Eldridge @Rolanda Eldridge
NP @Michael Moikeha Happy to help. Let me know if you have any other questions.
Thanks @J Scott your words mean a lot. Much appreciated. I got your book the day it came out. You are a perfect example of someone who gives WAY more value than what they charge. I don't claim to come even close to as generous as you have been and I do hope to grow a profitable educational business, but couldn't agree more with your comments on opportunity costs. Since my business is focused on relationships that is where it makes it worth it but as far as direct income vs hours put into only those who have attempted it can really understand. Love your definition of "Guru" and couldn't agree more.
Thanks @Sam Craven. Glad you are getting a lot out of it!
I started buying higher volume in 2011. Mostly through trustee sales and online REO's etc. When I started with the higher volume I was trying to hit closer to 16-18% margins or around 50% annualized returns. As things got more aggressive we went to 15% or 45% annualized. Then eventually things got even tighter but the market was on fire and we were willing to go as low as 11-12% on your basic flip (3-4 month turn around) At the beginning of last year trustee sales got so tough that we decided to stop completely. In many cases houses were going for more than our ARV. Now as the market isn't going up quite as aggressively, we have settled on 13-14% margins for the time being.
One thing about buying houses on the MLS or from Wholesalers is there is kind of a "Going rate" you're not going to get them all but if you aren't willing to get tighter margins then you are't going to be buying much on the MLS, from wholesalers or at trustee sale or any other auction for that matter. Is it possible to get a fatter deal? Sure, but not a high volume of them. My wholesalers sell to me bc they know we act fast, do what we say we are going to do and pay a good price! I won't say I pay more than anyone bc I know several trustee sale buyers buying at 8-9% margins so I don't actually feel like my margins are all that tight. But yes to your point the bigger margins can come from working directly with sellers. Although their is still competition it is generally speaking much less and not as direct or auction like. Regarding overall workload I am almost hesitant to respond now that I know what I am dealing with here :-) But I have a pretty good house buying system which allows me to not spend a lot of time on the day to day operations of my house flipping business. I guess when you consider the fact that time spend on my site, podcast, mastermind group, and stuff like this thread, then I probably put an average of about 50 hours a week. (sometimes 20 and sometimes 80) but on the actual day to day details of my house flipping business it is pretty minimal. I am in no way saying this business is easy! It is probably the hardest thing you could possibly do, but putting in the hard work and setting up some good systems can really go a long way over time. I'm won't go into exact profitability right now but I can say it is probably MUCH less than many are assuming! I really had no intention on saying directly exactly what I make here publicly. Hopefully that is understandable. Feel free to let me know if you have any other questions based off of what I have said so far.
@Michael Moikeha Great questions Michael.
1. How closely do you stick to the 70% rule in your flips?
I don't use the 70% rule at all. I detail how I evaluate my properties just a little higher in the thread, so check it out and feel free to ask any specific questions you have.
2. Many people say that in the flipping niche, using a broker isn't the best as the good deals don't make it to the MLS. Thoughts?
We buy many houses with agents and many without agents, so I would say both are great sources. Not to be confused with EASY, but both good options.
3. What are your stats on success rates throughout each stage? I.E. Offers per contract. Contract per close. Closes per timely resale?(obviously the last one may be harder to measure, but how many do you hold onto longer than planned.
The best way to answer this question is to better understand my current business model. I primarily develop relationships and work with others to buy houses from them. As you can see I work with MANY wholesalers and am not totally aware of each of their individual stats. Quite frankly I don't want to hear about a deal until it is under contract.
4. Someone earlier asked your return per flip, and you said it varies based on property, as some you buy at $70k others at $400k. Is there a ballpark percentage for your ROI?
Yes like I mentioned I try to get a 13-14% margin on basic flips that take 3-4 months. If it is more involved and will take about 6 months then I shoot for a 20% margin. If it is going to take an entire year then I would shoot for the 40% margin I mentioned earlier. This is based on total capital invested into the project and is how many trustee sale buyers also analyze their properties.
5. What is your goal ROI when deciding to purchase a flip or passing?
See above.
Hope that answers your questions. Let me know if I can help with anything else.
@Joel Owens I am glad you like Jay's blog. I am a big fan as well, but my goal is not to be just like Jay or anyone else :-) If you look closer you will see that I do have a lot of case studies on there but that is not the main focus of my platform, but thanks for the feedback. I think I covered just about everything else you mention previously so I'll just leave it at that oh and if you read my initial post (which details my purpose as well etc.) you will understand what Stan is referring to in regards to wholesaler # 6.
@Karen Margrave Hey Karen, I appreciate the private message you sent me about being too harsh, and potential deal you have for me, and would love to work with you, but I was always taught to compliment in public and criticize in private. Sounds like you are sincere but there area a lot of people who are or will be following this thread and your post was pretty brutal, and I my reputation in very important to me so a more public mention of what you said to me privately would be very appreciated :-) Regarding the deal you mentioned, we are pretty weary of "high end" deals in that area, but if you can send me an e-mail with the info, I will be happy to have my agent/assistant check it out and get back to you :-)
As far as you agreeing with Bill, I'm not sure what there is to really agree about. This is my goal, and I have stated how I am measuring it, and that is with deals we get under contract, minus anything that falls out. Am I happy to share details on how many we close etc. YES absolutely, but this is a goal my team has been working towards for over 3 months now, and this is how we are measuring the goal, so it's not really a matter of debate :-) I already discussed my margins, so go ahead and read the entire thread and if you have any specific questions then I will be more than happy to elaborate on those.
You ask about where the bulk of my income comes from. Once again I don't think this is the purpose of the post but like I said before (just read the thread) I have spent WAY more on my site/podcast than I have made. I hope and plan to turn this around, but as of now I haven't actually made anything from my coaching/mastermind group other than help offset some of those expenses.
I think I cover the rest of your questions/concerns in the previous post so I won't go on and I know you already apologized, but just wanted to answer those questions for anyone reading the thread.
@Steve L. What's going on? Long time. I don't know that you know this, but I am pretty sure you are the one who turned me on to BP many years ago. You have also inspired me to help me realize that I could do more (and buy more) than I was doing. When I realized how many houses you were buying a few years ago, it was super encouraging! In fact I think you were there when I first mentioned my goal of buying 100 houses in 2012! Ok not to keep pushing it but you also inspired me to blog about my journey! Ok I'll leave it at that, but just wanted to make sure you knew, and thanks for your comments. I completely agree that it is important to know EXACTLY how you are measuring your progress. Do we track deals we close and what we make etc etc. OF COURSE!!! but when setting out goal for this year we had to be exact on how we were going to measure progress. In years past it was by deals closed, but I like the immediacy of putting a house under contract and feel that is the better way to motivate my team this year as we push towards our goals.
@Mike S. Thanks Mike, glad you are liking the thread so far. I will be happy to go into more details on deal specifics and will do so, as we go along. It has only been 2 days and there are still many days left this year and lots to cover :-)
Ok, this is getting a little weird lol It's been a while since I've spent time on BP. I joined a couple of years ago and started to get back involved a couple of months ago (for the record I didn't check exactly how long it was now that I realize there are some serious investigators here ;-)) but just got too wrapped up in other things and wasn't keeping it as consistent as I had hoped.
I have considered doing some articles for the site, but was trying to think of what people would find most valuable. I was considering documenting my purchases and my goal in more detail on my site but then just the other day it hit me, why not do that on the BP forum?
For anyone who actually read the thread, my goal was/is to have you follow my journey as we learn from each other and hopefully develop some great relationships along the way. (which is how my business thrives!) I was pretty clear that I will be giving details on deals we get under contract, and am happy to answer any questions along the way, and will even try to go back and give some more details on ones we have closed earlier this year, but wanted to catch everyone up to speed as to where we currently are. It has been LESS than 48 hours since I began this thread, I think so far I have given quite a bit of detail. Now only if I could focus on the detail instead of feel like I am up for trial or investigation, that would be great, and probably most beneficial to everyone who actually is interested and wants to learn. :-)
Did I recently launch a mastermind group? YES! Am I proud of it? YES! Do I do webinars where I teach details on my business, share about the mastermind group, and answer any questions people have? YES, YES, YES! Do I hope to make that a thriving 2ndary business where I can add a TON of value to others for WAY less than the cost and create a great (and INCREDIBLY PROFITABLE) along the way YES!!!
There we go! No need to do the detective work. I just did it for you! ;-) It's like I am trying to avoid promoting my program, but am forced to do so by the same people who are trying to accuse me of being "sneaky"
Ok Now can we move on for those who want to actually learn? ;-) Believe me there will be plenty of detail, and like I said feel free to ask any questions you have. With very few exceptions I am pretty much an open book so ask away, and if you want more detail on anything specifically I will be happy to answer that as well, but seriously people BE NICE :-) I might come across as loud and outspoken (ok I am) but I am actually pretty sensitive and have really poured my heard and soul into what I do, and teach. I know I should be more concerned about all the people who are getting value and not the naysayers, but that is something I am still getting use to. Maybe I should just chalk this up as a practice in developing thicker skin :-)
Thanks Travis! Really appreciate the kind words!
Hi Mike, great questions!
1) It is very hard to come up with an average profit per property bc I flip all throughout Southern California, and prices range drastically, for example Vanessa is looking at a house that Aaron Mazrillo just sent us in Barstow. I haven't heard the #'s but houses we buy there range anywhere from 20-100k or so. Then you go a little further South and you get into the 70-120k buy range, then you get into the Inland Empire and houses range from 100-300 depending on the area and house. Then coastal counties the houses range from around 250-500k and then of course you have your houses that are really close to the beach or in really desirable areas and you get up to 1M or more. In 2010 when I first started doing higher volume flips I was buying just about everything in the lower price points of the high desert. Now we are all over so Cal so it really varies.
It might be helpful if you understand how we analyze the houses we buy. In the current market my goal is to get a projected 40% annualized return on the total capital invested into the project. This calculation does not include the cost of money but accounts for what we pay for our capital. So for example if I am going to buy a house for 170k and I have 30k of repairs and other hard costs such as initial closing costs, cash for keys, utilities, insurance, lawn maintenance etc then that would be a total cash investment of 200k. Since my goal is to make at least a 40% annualized return on the invested capital then I would determine how much my return on that specific project would need to be in order to make that happen, so for example if we have a pretty basic project that is vacant, and we can turn in 3-4 months then I would shoot for a 13% return on the total cash invested. So in that case I would be shooting to have the deal make 26k. If it were an equity deal and I were splitting the profit then I would be making 13k and giving 13k to my money partner. If I were using private money and paying a 12% annualized return then that means 3-4% would be paid to my private money lender, and I would walk away with around 20k on the deal. If I were using Hard money then you can add an additional 2% (for points) to that 3-4% so I would end up with closer to 15k profit.
I would REALLY love to say that I am averaging 60-80k profits but NOT even close! :-)
2) It really depends. If I am buying a house that needs a lot of work and all the other comps need a lot of work then yes, I have no doubt that my house will sell for more than those other houses. It also really depends on the market. If the market is going up then yes you are probably going to set the comps for the area. We are very careful about this however, and don't push out luck. Last year the market was on fire, which is probably why you have heard a lot about it and see it no the flipping shows. Probably won't be as common in a flat or declining market, but if you do a really nice rehab and the market is on fire it is not very hard to set the comp for the area. However I never calculate my ARV based off of what I think that market will be. Do I get a little more aggressive in an inclining market and more passive in a declining market? Absolutely! So for example if we were in a declining market I would probably be looking to make closer to a 20% of so return on a basic 3-4 month flip.
3) Regarding design tips, I am much less of a designer and much more of a converter belt type personality. We use the same color paint for every house, same laminate wood flooring, same tile, same carpet, same stainless steel appliances, same granite, same fixtures, etc It's all about the creating a turn key system you can use time and time again. On some of our nicer rehabs we will use nicer finishes, and we do a couple high end homes which are more custom but even those are becoming more streamlined.
Being in a situation where you understand rental properties is a great place to be in. I actually got into high volume flipping after I was trying to gain financial freedom through rental properties. I ran our of capital and had to flip 4 of the 12 hours I acquired 4 months. I looked at my profit and thought "I wonder if I could do that every month?" From there I was HOOKED!, and continued to systematize and streamline ever since. The thing that helped me buy a higher volume was starting out buying houses that would work well as rentals as well, then I would always tell myself that if something ever didn't work out then I would still have the rentals I had originally set out to acquire! It was a great mind hack to help me just take action and really helped reduce the risk.
Hope that helps! Good luck with the foot dipping!
@Jacob A. yeah I don't totally get it either. I think we have all been taken advantage of before in one way or another which can sometimes make us skeptics by nature, but I try not to let it get to me too much. Just like investing in Real Estate there will always be critics and people will say and do things to try and tear you down for one reason or another, but at the end of the day as long as know your heart and believe in what you are doing that is really all that matters. Really appreciate the comments! Means a lot!
Thanks @Anthony Aguillard! Really appreciate it!
@Kurt K. You are the man! Really appreciate the feedback!
@Mark Ferguson I use an S-Corp for flipping and an LLC for the 10 rentals I have. I am the sole owner of the corp but I do have investors that of course I pay interest or equity to on a per deal basis, and I will sometimes give a wholesaler a % of the equity on deals we do together so I guess in that sense I have some partners but as far as my company goes I am the sole owner. I have had partners in the past but not currently. Hope that answers your question. Let me know if I can elaborate on anything else.
@John Horner Thanks! Will do! Appreciate you comment!
@Bill Gulley No worries Bill! No harm no foul! I know you don't know me and meant well so all good, but I do appreciate the clarification.
@Anson Young Thanks Anson! Anyone who knows me know's I am anti high priced coaching/mastermind programs or people who sell education and don't actually do the business, not to mention when you pay $25k to be a part of a program and then every "free" seminar you go to or webinar you listen to they sell you on someone else's "amazing" course that you can't succeed without! I have spend $40k on such programs before I realized that it didn't have to be like that, however on the flip side I now see some people who no matter what anyone has to offer they are often very quick to judge and I can tell you from the perspective of someone who has recently started educating that just like investing in RE it is not always as easy or even "sexy" as it appears to be, and takes a LOT of work!!! So I don't care if you don't participate in my or any other program, contribute financially to BP (if you don't you SHOULD bc of all the value they give you, and trust me they work their BUTTS off!) but all I would ask is that you aren't so quick to judge when you really don't understand all of the sacrifice it takes to create something like this. I mean you really have no idea! If I were to spend the same amount of time on my house flipping business as I do on my educational platform, I would be WAY better off financially, but then again I love what I do and love educating, and actually wouldn't meet nearly as many people amazing people as I have that I now work with so maybe my statement is inaccurate. The only way for me to compensate the 3 employees I have for my site (without taking from my flipping business that is) is to have some kind program or sponsors, and if someday I can take that business and actually make it profitable, for me while giving incredible value to others than I have NO shame in that!
Ok that is all for my rant lol Sorry I guess I just needed to get that out :-) Hopefully now we can focus on what this thread was meant for! Really thanks again for the comments guys really appreciate it!