@Vickie Yang  thanks for your words of encouragement.

@Branden Yang REO properties get listed on the MLS, therefore, it's going to be difficult to wholesale because most investors will have already come across the deal before you have time to get it under contract.

My name is Yang, I have a degree in the social sciences but have always been interested in personal finance and investing. 

Tristan Yang

Basically what happens is they're tracking that materials that comes in and out on the job okay that also is critical we use cameras on our sites and the reason why is because if a contractor tells you they're going to be there at 8 o'clock in the morning and they show up at 12 and leave at 2 then you know that they're playing again because the other thing the contractors do is they'll do three jobs at once and they'll bounce from the jobs so they'll show up at your job for one day and then give you some kind of an excuse and then go to the next guys the next day and give you some kind of excuse and then go to the next guys the next days the reason they do this is because a contractor's goal is to keep as many of their jobs busy as they can so they don't have a gap in time so the way they strategically do that is they come in and they get your job first you you hire them and they come and hit your job your job real hard for two days and or three days or whatever and they get you rolling and now that they got you committed on the job then they're going to shift and go to the next job they're going to spend two to three days doing that one and then they're going to shift and go to the next job for two to three days all the while they're going to have an excuse of oh i had to do this johnny's sick susie's having problems my wife is my job this my tools this right and so what they'll do is they'll go two two days on this one two days on their then and then when you're heating up and you're getting fine and you've now lost you know four or six days on a burn rate and you just know that they just hit you for 750 and burn then they'll come back to your job right and so the strategy i have to do is this if i was a contractor i did it the way i was supposed to what i would do is i'd come in and i'd say job's gonna cost you five grand i'll have it done in seven days but give me ten just in case any problems are here okay and then what i do is i'd uh go in knock that job out get you to pay me and be on to the next one did you just hear how easy i made that sound a contractor who knows what they are doing goes in gets the job done no extras makes it happen and heads down the road and gets paid and goes to the next one okay those guys i don't even know if they exist to be frank with you anymore now i get it they're out there but you know what i'm saying it takes a lot to find them the common mistake that people do is they get three bids and pay the cheapest guy and he's the one that's running the racket he knows exactly how to get your job and he knows how to run the racket on you right so at the end of the day that's what you're looking for right now the next thing i hear people say is well i hired three people and i went with the most expensive one or i went with the middle one here's the deal guys money that you pay them in contract the contract price you pay them does not determine how good of a contractor they're going to be and most people associate money with that so they will come in and they will say listen i'm gonna pay this guy this guy was at five this guy was at seven grand and this guy was at 10 grand so i picked the middle guy and he's going to do my best or i paid 10 and he's going to do my best i can tell you i have had guys that have come in and bid my job that have been the most expensive and i've hired them thinking i'm going to get a better job and they still play all the tricks to the trade so a lot of times what you think i was going to tell you is don't hire the cheap guy okay that doesn't matter it doesn't matter how much they're charging whether it's five seven or ten that doesn't mean that guy is going to get it done any quicker for you okay so what you got to do is you got to sit down and interview that contractor before you hire him so here's what you say when you hire the first thing you say is you say listen when you come on my job i want you here every day until the job is done and then i'll pay you okay i don't pay you during the job production unless it's a big job and then i'm going to break it down into phases and if i break it down into phases what they're going to do is front end and load the job i it's so funny i hear people say this all the time they pick up the phone and they call me and they say i'm 80 done right because they've hung all the easy stuff and they say i need 80 of my money because they've hung all the easy stuff well what they didn't tell you or what you don't know is the easy stuff hangs in a day and the hard stuff hangs in two more days after that so they're about a third of the way done right so they're going to come in and they're going to say i'm 80 done when they're 33 done okay so what you got to do is you got to build a scope in that shows exactly what has to be done to get this amount of money and what time frame it's got to be so listen joe okay the job cost you five grand when all your easy runs are done you get 33 percent okay because we know it's going to take you an extra two days on the hard stuff and then you get paid on the hard stuff at the end so we're going to give you fifteen hundred dollars half of a third of the way in when all your easy runs are done so we're gonna give you fifteen hundred dollars on the easy ones and then the balance the thirty three hundred dollars or the thirty five hundred dollars that comes to you at the end okay you've got to stay ahead of your contractors in payment because if they get the thirty five hundred dollars up front your sol you're done you're toast and the reason why is because the minute they get the 3 500 they can go in and do the easy runs and then bounce to the other jobs and then come back and give you all the excuses known to god and man right so you've got to control them by the money you fill out a scope and and a timeline with these guys you you sit down and interview them tell me what you're going to do first well i'm going to get all the easy ones to them first and i'm going to tell it to you they're not going to call it easy runs they're going to say listen i'm going to hang all the boards in the on the on the lower side first and then i'll get up and i'll get the upper side what's going to take you more time as you start to walk him through this job a contractor will educate you can interview three drywallers and by the time you interview all three and you ask them enough questions you're going to be able to tell who's lying to you and who's not or who's giving you a story and who's not notice the way i'm saying this i'm treating my contractors as though they are an enemy check that one out why am i doing that because at the end of the day if you do this business and your lotte da about it and you think you can trust everyone and you think life is great and the world is lovely you're out to lunch bro or sister hands down you're out to lunch because you have to look at your job from the perspective always of worst case scenario because if you don't they will hand you your lunch you'll end up with burn rates out the yin yang and you'll also end up with extras on every one of your projects and your twenty thousand dollars over budget so don't you dare just joking right fact of the matter is is the end of the day you got to be the one that's in control of your job so number one make sure you set up your timelines right and that you do not allow your contractor to front and load the job okay you light you pay them light on the front side and keep your money heavy on the back side and they will battle with you on this so the way you do it is you set it up that way up front because if it's that way up front you'll get your end result with no matter which contractor you hire because when the first guy does it wrong he's out if you're front and loaded and you paid him 1500 and he walks off the job you still have enough money to fix it kick him off the job send him packing and go find the guy that's going to do it right and if he knows you're going to kick him off the job he's going to think twice about what he's doing sounds pretty rough and tough doesn't it so you need to make sure that you set your scope right your timeline right on that trade get your budget right make sure you have three two or three contractors that educate you and then you control them by the release of money this is the number one fundamental mistake that contractors or people renovating a home make is they let the contractor get ahead of them on the money absolutely critical okay second thing and this is really important write this down sear it into your brain the word you tell the contractor is if you cover it up you own it okay and this has to be in your contract you can write it down you can have them initially you can have them understand it here's what often happens with the contractor they come in they look at your job and they say oh yeah that drywall is great we'll get it done yadda yadda and then when they start running your drywall there will be a stud that's out of line or the the proper or the uh the walls won't be square or plumb very common things that happen studs are all tweaked out they didn't straight edge the wall the corners aren't plumb and square so your walls are all out that throws your tile off it's a it's a it's a nightmare it's a food it's a chain reaction if your framing is not plumb and square and your walls are bumped out then everything you do after that is going to be a mess okay because you're going to drywall and finish it and then when you go to put your trim in your trim is going to match up because your walls aren't square plumb okay or and then once you do your trim then you go to put your tile floors down and now your tile floors are out of whack because your walls are square and so now you're narrowing one end and wide on the other right and so it all starts with the foundation you got to start that that renovation right or that construction job right because as you go out and i've seen this i had a framer i had him do a job and i went to him and i said listen i want you to walk this entire framing and make sure everything's right before you even start to hang the drywall okay they said oh yeah i walked it it's all good do you think i'm gonna believe a contractor no at the end of the day i walk my hat my chops i make sure that they're all the walls are plumb i make sure all the walls are square and i straight edge those walls to make sure that they are there's no studs bumping out of the walls so i make sure my job the quality is there because if you leave it to the other guy to check it he's going to tell you that he's going to mess it up and he's going to come and hit you with an extra so what i say to them is if you cover it up you own it and you fix it so as an example if a drywaller comes on to my job here's what i say to him go walk the entire job plumb every wall square every corner run a straight edge on every wall make sure your backing is there for all of your drywall so that at the end of the day when you get my when you do my job you don't have any excuse of an extra right because if the if the surface that your contractor is applying to is done right then you can't get hit with an extra as easily and this is what they always do you can have a flooring guy they'll come in and look at your floors and say yeah i can lay all your floors it's two bucks a foot it's gonna cost you six thousand dollars for material and labor or whatever his number is and then what does he do he can see your floor these guys are professionals remember that when they walk your job they see all the problems before they even start the job what they do is they figure this look i can see that his studs are out i can see that his floor is not prepped so the minute i go in to lay those floors i'm going to come back to them and point right at that floor right there right that stood on that wall right there and i'm going to say to them look i got to fix this it's taken time it's an extra so a contractor will literally walk through your house and know the problems and not tell you right he won't tell you what the problems are because that's his money right so what you got to do is you got to walk your floors you got to straight edge those floors you got to have them walk through and tell you hey listen do you see any problems with this floor and you walk every inch of the floor you watch every inch of the walls and you make sure it's right now here's the common thing that happens to people when they do that what they say in their mind is oh that's going to take me too long to do that that's their comment it's going to take me too long to do it let me tell you how crazy that comment is the minute you go to a laziness in your mind and you think it's going to take you too long to do it you step back and think about the last time that contractor burned you what's going to cost you money and it's going to take you longer by far is the fact that that contractor is going to come and tell you it's an extra and then you're going to negotiate that price and then it's going to take you even longer because he's not going to do it right or this can be an argument it's going to cost you money the way you save time is by getting the job prepped and checked right the first time do you hear me on this wake up and listen to me i'm telling you that when you do a job the minute your mind says this is gonna waste me time you need to do an about face and go do it because it's actually going to save you time that's huge so coming back to this basically what you're talking about is you have to make your contractors accountable for the surface that they're applying to so that what you say is you say this if you cover it up you bought it okay so now what you'll do is you'll have a drywaller who will come and i can tell you right here in my own guesthouse because i'm not perfect at this either there's too many ways these guys can get around you even the best of us can't control them all the time everywhere it's a battle hands down so i'm telling you how to do this it's not perfect for me either so i have to i have to run my jobs as quickly as i can as effectively as i can obviously on the guest house i don't have a burn rate but if it's a job then i'm going to be a lot more serious about it but i can tell you i'm just looking right now at the baseboard in this this room i'm in and there's a bow in the wall so the drywaller hung it over bad framing and the finished guy hung the finish trim over bad framing and drywall so the problem started at the framing right and so what you have to do in these projects is you have to walk your jobs you have to have your contractors walk your job so what you say to that drywaller is you say listen i want you to watch walk every wall that's framed i want you to check for backing i want you to straight edge it i want you to plummet and i want to make sure i want you to make sure it's square and the reason why and he's going to say but that's the framers job and i'll say no it's your job and the reason it's your job because remember the minute you cover it up you bought it right that's the key that's the statement so the minute you cover it up the minute you cover it up you buy it okay your contractor will have this statement if he covers it up it's on you because it's not his fault and it's the framers fault so therefore it's now an extra on you so basically what we're going to do is we're going to look at the fundamentals here or protocols that are critical to this this whole scenario right okay so number one is what you're going to do is you're going to go in and you're saying going to say to the contractor if you cover it up you fix it or you own it so if you cover it up you want to remember an ounce of prevention is better than a pound of cure right so you're going to go to that contractor and you're going to walk him through the job you're going to make sure he gets everything done right and you're going to make sure that he knows that if you covered up the owner the second principle is you don't pay extras okay the way you get around the extras you go walk the job you make sure all that's right it's all right you make sure that there are no extras you have the contractors come in and if you're interviewing three of them you make sure that you have every single one of them come in and look at that job right and you to have them point out to you all the things that are wrong walk them through it hey listen this floor tell me about this floor what's the process what's the manufacture recommendations okay you sand it then you put stain how long does the stain say it has to sit or be in the wood before you can go to the next step how long is each substrate gonna take so after you stain it what's that first coat of finish what's that second quota finish what's the standards in the industry when you ask people that question three contractors three times they'll give you all the applications all the way through remember this is the key okay my wife when she goes and she stages a home what she does and she's good at what she does she knows that what she's going to do is she's going to go into that property and let's say she's going to stage a bedroom she doesn't use a foot board she doesn't use side rails she uses a headboard and she uses a platform right the reason because the headboard is easy to carry up there are no rails to scuff up no end board to scuff up you carry that headboard up you set it up you take the platform you it's metal so what do you do you unfold it lay it out once that platform is down you throw the you carry that mattress up drop it on right as soon as that mattress is on you then put your skirting around the bed then what do you do for your nightstands you don't use wood heavy nightstands with drawers in them you get a metal nightstand that has some fancy looking application on the bottom or some design with the table that goes on the top so that that's that nightstand you grab the top of it carry it up you put the little holder up you don't need drawers if it's going to be staged you don't need if it's airbnb at the end of the day that thing can be carried up in two pieces it's lightweight bam that thing's set up right then you have your lights you have your shade right boom both sides that's done very simple okay then you have all your linens they come out of the boxes because you have the same size box all the way through so all your linens come out of those boxes all your little pictures come out that you have wrapped up all your little appliques or your little potted plants or whatever you got to make it look fancy and then your dresser so as an example what my wife does is she goes in and she takes that bedroom and she puts it all into boxes has it organized and says this is bedroom one okay every single time she needs to stage something she goes right in there there's four bedrooms let me get four bedrooms of boxes they're set up in their little their increments right she goes in bedroom one boom it's there bedroom two is there bedroom three is there you do the exact same way with your contractors what you do is you you build in your scope you go and you interview the flooring guys figure out exactly how it's going to done you interview the drywall guys you figure out exactly how it's going to be done you look for the problems hey listen tell me all the common things that's going to happen as you do this as a contractor right so tell me all those common things what are the normal things that you see people do wrong because you blame it on the person that's the flipper right you so you say you say to them what is the what are the extras that you normally charge a flipper that you see happen all the time right and then what you do is you go in and you line everything out like that cubicle or that that set bedroom right so when you do a floor you do these things you walk it you go to the contractor right you lay out that whole spec or scope of work where you know exactly what the flooring guy needs every time you do the same thing with the walls the trim the plumbing the electrical right on out you use the same ceiling fan every time i use a 52 inch fan it's a brushed nickel and costs 50 of those right and i get a 10 discount when i go to cheaplowes.net right yep that's right i use cheaplowes.net because i can get a 10 coupon every single time so i'm gonna get my 10 percent discount right so at the end of the day you go in and you have a model a standard that you do with every single trade and you replicate it and you put it in cubicles right so that it's this is every what i do every time when i do floors this is what i do every time when i do finish on my my drywall or my drywall this is what i do when i do cabinets or this is what i do when i do the plumbing it's like with me i use a company called e-builder direct to order all my hardware right what i do is i i go in and i i order that stuff online it's drop shipped right to the house i send the guy over there he removes all the hardware after the paints done don't put your hardware on before and then he puts his hinges his door stops his door handles you name it your bathroom hardware right all that stuff all that goes in in one day four hours bam it's done right so you have a scope and then you have a set time you know it takes and you have a set crew that does it right and you know what the extras are or not and you lay that package in right remember you're doing reps so your goal is to buy renovate and flip every time you buy renovate and flip or every time you buy renovate and hold that's one rep right so if you're doing four houses a month then that's four reps a month if you're doing one house every three months then that's one rep every three months your goal is to get a system down to where you are buying renovating and flipping and it's like clockwork right exactly exactly how you're going to do that every time okay right so at the end of the day your goal is to basically make it so that it's like work it's the same every time the quick the more you perfect that renovation system the more you can get those reps in the quicker you can flip the tighter turn times you get remember renovation risk rate of return turn time the more that you do those same reps and you get them down the the tighter your turn times become the quicker your flips happen the quicker you make money the quicker you're on to the next thing right so you got to get those reps down one two three four five six seven eight nine ten right so you got to get those things down to where you're doing it so what are the things that we're looking at here so let me back up to go over what exactly we're talking about here right first you got to build your scope then you got to interview your contractors and find out all the issues that are going to come right it's kind of your precursor your protocol is this what you cover up you own two so if they cover it up they own it they better tell you ahead of time or it's on them two you don't pay extras right that's critical how do you do that make sure you know ahead of time everything that could be an extra have them educate you so that it's not an extra to you three you control it by money remember you pay them one third up front when they're halfway done and two-thirds at the end when they're all the way done you stay ahead of your contractors on the money never let them get ahead of you because the minute they go ahead of you you're gonna have problems okay number four this is critical time have them commit to a time how long's this job gonna take remember on my jobs when you start a job you complete a job you cannot leave my job and go to another job so if you're going to work for me you start a job and you complete a job you don't bounce from job to job to job and how do you stop that from happening you make sure that you have them give you a clean material list that the job is locked is double triple check so that when you go to get the materials if it's the drywall or the flooring that you make sure that you're getting the right amount of drywall needed for the square footage of the home the right flooring that's needed for the square footage of that home don't let them over order you because if they do they can walk off with those extra six boxes of wood flooring don't let them under order you because if you do you've got another trip to the store and that gives them a break to go to the next job so you got to make sure your materials are right critical the better your jobs are prepped there are more efficient and systemized you are the better off you're going to be remember that it's critical that if you think it's going to save you time or that's what comes in your mind or your contractor says it's going to save his time that's a red flag that it's really not and it's going to double or triple or quadruple your time okay these are the protocols right burn rate got to pay attention to that burn rate Remember how you can get burned with extras and burn rate and a bad contractor or a bad flipper or buy an old investor which is you and the mistakes that you can make that'll cost you literally thousands if not tens of thousands of dollars due to your contractors and how you're running your job.

@Daniel Yang welcome.  

@Yiting Yang I can possibly help you out with a few contacts.

Originally posted by @Winston Yang:@Chris MasonSo, the 2.5x rule applies before the new purchase, or do rental incomes from the newly purchased property count toward the 2.5x? 

@Allen Yang my experience with buying occupied property has never been fun.

Hi @Branden Yang, hard money would be your best option here.