The Spouses Flipping Houses Podcast With Doug & Andrea Van Soest

by Doug & Andrea Van Soest | Spouses Flipping Houses

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Download Episode 31 Transcript

Andrea: Welcome back to Episode 31. We are live in our car.

Doug: Coming to you from 75 miles an hour on the Interstate 215, and we’re excited to come back to you today doing this episode in our car. It’s kind of fun.

Andrea: Yeah. Well, killing two birds with one stone.

Doug: And by the way we just dodged a wedding dress on the freeway, which was interesting. The first time I’ve seen that floating around.

Andrea: I just keep playing through my head how that went down. Did they just get in a fight and she tossed her dress out the window? Not really sure.

Doug: Probably a story there I’m sure. But we went and checked out a couple of rehab projects we’ve been working on and are driving home, and earlier this week though Andrea and I were at our Mastermind meeting (we’re part of the collective genius Mastermind group), and it was in San Diego.

Three days jam-packed full of great information, networking from some of the nation’s top real estate investors, and we’re so honored to be a part of that group. I don’t know— do you have any thoughts on that?

Andrea: Yeah it was just really, really, really good. Yeah, golly. I don’t even know where to start. I think we both came home with our heads spinning and full of so much great information. It’s hard to kind of stop the spinning and pare it down to let’s take this, and implement it, and what are we going to do here.

Doug: If you ever go to any educational event, real estate or otherwise, and if you’ve been through these, you sit there and just take a bunch of notes, and you’re listening to different speakers talk. And in this case, everybody kind of shares a quarterly: what they’re doing, what’s working for them, and shares their successes and some of their failures so we can all learn from each other and improve.

And it’s just a great group of people, really sharp and dynamic, and so our brains are just on overload.

Andrea: You know what I appreciated so much was at the very end, the guy that leads the group said, “Basically what I suggest is you guys have all learned probably a hundred amazing things that you’d want to implement in your business, but pare it down to two or three things. What are two or three things that you can go home and do, and do well?”

Because obviously we can’t take all of these ideas and be so scatter brained implementing them. Everything is not going to happen. You can only do a couple things really, really well at one time. And I really appreciate the fact that he said that, so now that’s our process. We’re trying to figure out what the most important things we want to do here are.

Doug: And that jives right with my personality because I’m a focus guy, and so is he, and he talks about, “Listen. Narrow it down the most important one or two things.” And now I can deal with that. I can just put everything else in a file.

Don’t forget about it, but just maybe write it down somewhere as something you can look at down the road, and that’s one of the main two things. We thought we would talk today about our big takeaways from this meeting.

Andrea: Yeah, okay so I’ll go first. My biggest takeaway is the fact that I would really like for us to read the book Traction and go through that, and try to implement those entrepreneurial operating systems into our business.

And we’ve known about this book for a long time. I think we’ve both at least started it, gotten maybe halfway through, and it’s such good stuff, but it’s a little overwhelming to try and think about putting these really, really detailed systems into our business. But I think in the long run it would be super, super helpful. So that’s one thing that I am really, really wanting to implement in our business.

Doug: Yeah, this book just really makes you get serious and think about your own goals within your business, and how you operate, and kind of breaks it down into a detailed level on what everybody’s role is, and defining that, and defining your procedures and systems, and ultimately the culture of your operation.

Even if it’s just you and maybe one other person, it still applies on how you want to run things.

Andrea: But it gets so detailed as to who turns on the light in the morning and who turns it off in the afternoon when you leave? And who takes out the trash? I mean it gets down to the nitty-gritty. But when you do that, things don’t get forgotten about. When you have those systems and plans in place, you can go back and see okay, who was supposed to do that again?

Down to all the big and important things, it helps you to be certain that nothing falls through the cracks.

Doug: Somebody raised a question this week: if you were to leave the country or leave your town, go on vacation for two weeks and just not even connect to your business at all, not working while you’re traveling, you’re just detached for two weeks— what would happen to your business, your operation?

It kind of really makes you think how involved we really are.

Andrea: And then to take it even further, your question is whether your business will fall off a cliff but for us, our answer was, “No we’d probably maintain the same, but it’s not going to grow.” Some people I think have answered the question saying, “I could leave for two weeks, and my business is actually going to grow because that is the culture, and that is the way that I have it set in motion.”

Well for us, I think that it would stay status quo, but I don’t think it would necessarily grow without us being there. So there’s things we can improve.

Doug: Yeah we’ve got a little work to do. And it’s a great eye-opener, so we’re really excited to dig into that book and the EOS, Entrepreneurial Operating System, and start applying that. For me, one of the takeaways was I realized that I think, myself included and some of our team, that we have in place right now is operating above our capacity.

So let me explain that. We’ve got tasks to do, and we’ve got business coming in and leads coming in, and appointments to go on, and you know my brain says we can try to maximize everybody’s time and their energy and really over maximize it. Like I think we can handle more than ultimately we probably really can at an efficient level.

So our leads have been increasing over the last several months, and yet our staff has stayed the same. And just one thing I think I’ve realized is that our people, especially on the sales side going out and trying to get contracts or deals, I think we’re operating above our capacity.

So everybody is maxed out and even though the work might be getting done, I don’t think it’s getting done as efficiently as it could if our people were operating at the optimal level of the work that they can handle. Does that make sense?

Andrea: Totally.

Doug: So bottom line is I think we need another person.

Andrea: Yeah. Basically I think we’ve got to figure out what is each person’s maximize capacity, or what was the word that you used? Their optimal capacity, like that.

Doug: Their optimal capacity, yeah.

Andrea: What’s their optimal capacity? And then at what point do we hire a new person? And then what are the indicators for that? So okay, one person can handle X amount of leads, and when we go beyond that we get another person. So what are those indicators that let you know it’s time to bring in someone new because we’re beyond our optimal capacity?

Doug: And the indicators I start seeing are tasks that are taking maybe two days to complete sometimes rather than a couple hours, that maybe they should take. Or people aren’t getting called back quickly enough. And that’s not due to the fact that we don’t want to talk to them; it’s just we’re too busy or operating over capacity.

So those are key indicators, that I’ve noticed anyway, that make me say, “You know what? We’re probably missing out on deals and business here, because we just aren’t operating efficiently enough.” So that was kind of the big thing for me.

Andrea: And then I had one other big takeaway. Every night we would go to dinner with all of the people there at this Mastermind meeting, and so one night we were sitting across from Justin Williams, who is a good friend of ours and somebody that we really respect, and I was kind of throwing around this idea I’ve had for a long time of creating this design product that I think could be really beneficial to real estate investors.

And he said, “Do it. You should really do that.” And I was like, “Okay, I’m going to do that. That’s all I needed was to here somebody that I respect say they would use that. That’s good.”

Doug: Sometimes that little encouragement or approval from someone else gives you that extra incentive to just go ahead and do it.

Andrea: So I’m really excited about that, and I’ll tell you more about it in the future.

Doug: Alright, so there you go. Stay tuned for that. Well those are the big takeaways. We just wanted to chime in real quick and let you guys know that. If you haven’t, please go visit us on our website, SpousesFlippingHouses.com, get your free gifts. I wish we had some of those reviews to read to you.

We’ve been getting some great reviews on iTunes, and we’re so humbled and grateful for the awesome responses we’ve been getting and just wanted to thank you for reaching out and letting us know what you think of the podcast.

Andrea: We’ll read a couple next time, maybe not safe while we’re driving.

Doug: Yeah probably not safe. And we’ve been getting great questions also and hopefully are able to answer those in a timely manner. So go ahead and keep sending those to [email protected], and we’ll feature those in an upcoming question and answer episode.

So I think we’re about to get home and probably wrap this up.

Andrea: Have a good weekend!

Doug: Talk to you later.

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The post Episode 31: Live from our car! Mastermind Meeting Takeaways! appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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In today’s episode we’re back with another Listener Q&A session! We received some REALLY great questions from our listeners over the past few weeks & narrowed down the ones (we think) would be the most beneficial Q&A’s for all our listeners. Tune in now for the 2nd Spouses Flipping Houses Q&A session!

Make sure to also check out the Flip Hacking live event we’ll be speaking at in October right here: https://spousesflippinghouses.com/fliphack/

Download Episode 30 Transcript

Doug: Spouses Flipping Houses, Episode 30.

Andrea: This week we are going to be answering your questions that you have been emailing to us, so we have compiled some of our favorites and some that we think would be most beneficial for everyone to hear the answer to. And so we will be going over those.

Doug: Yeah we’ll be diving into that. Thank you for sending great questions by the way. We’ve been talking about this episode coming up for probably five or six weeks now and getting a lot of great questions. Thanks for being patient with us on replying to you in the emails. Sometimes they’ve gone to random inboxes that we didn’t know we had.

Andrea: I think we found them all though. I hope. If for some reason you sent us an email and we did not respond, then it’s probably because you might have sent it through our website on the ‘Contact Us’ form, which we realized there was a glitch with that.

So if you have questions, send them to [email protected]. We’ll definitely get your question answered and maybe it will be featured on the next Q & A episode that we do.

Doug: Yeah because we will do more. So Andrea, do you have an update for us on the cat pee house?

Andrea: I do. So funny enough, we mentioned this on last week’s episode, and I got tons of people emailing me to let me know what I could use to solve this problem.

Doug: Apparently odor hiding and odor problems are common out there.

Andrea: So funny enough, I think four or five people recommended the same product, which is something called Bin.

Doug: Like B-I-N from Home Depot.

Andrea: And it’s something that basically seals the smell in, so it traps it into wherever it is in the wall or flooring, baseboards, whatever it might be. So that’s kind of interesting. We didn’t check that one out, but the fact that so many people recommended it must mean that it’s good.

A few other people recommended some other different things. What we actually ended up using worked great, and it was an industrial orange oil product. It’s a little bit more natural. Seriously, walking up to the house it smelled amazing, and I hadn’t even opened the front door yet, just the smell of citrus.

Doug: Did it smell like a citrus grove?

Andrea: So if you’ve ever ridden that ride at Disneyland, Soaring Over California.

Doug: Oh, yeah! Soaring Over California.

Andrea: So as you’re going over there’s the winery, and the golf course, and you see a golf ball fly at you. And then at one point you’re flying over these orange orchards in California because we’re known for our orange orchards here I guess, and it smells amazing. So you have to go to Disneyland and ride that ride so you’ll know what I’m talking about. That’s what this house smells like.

Doug: Good, good. So it’s nice, fresh, orange juice smell.

Andrea: Super fresh. Smelled great. So anyways, it’s called Angry Orange. I bought it on Amazon, pretty affordable.

Doug: That’s where all of the best things are found, Amazon.com.

Andrea: Yes, I love Amazon. So if you’re having this problem and you want something that’s going to neutralize the odor and smell fantastic. I mean I can’t even tell you. This house went from smelling so gross to smelling really, really good.

Doug: Well, there you go. And it was pretty cheap too. It wasn’t that expensive.

Andrea: Yeah it was $20 a bottle, and that mixes with a gallon of water. We actually had to use ten bottles, ten gallons for this house.

Doug: And this is not a large house. This is like a thousand square foot house; it’s a small house.

Andrea: But we wanted to make sure that the problem was solved, and the problem was solved.

Doug: Okay good, oranges, orange juice.

Andrea: So another interesting thing happened this week Doug. We thought it was interesting, and then it turned out to be really interesting.

Doug: Yeah, there’s always something different in this business. So we thought we had a homerun deal a couple days ago. We got a contract back and first of all, we sent the contract via email, and it came back in like five minutes signed.

Andrea: Which is a little bit.

Doug: It’s red flag number one.

Andrea: Well not necessarily a red flag, but it just doesn’t usually happen that way.

Doug: Well and the fact that our offer was about $75,000 less than what he said he would take. I think he wanted $650,000. We offered $575,000 and boom! Contract came back signed, and we thought man, this is fantastic. Again, one eyebrow raised here.

But it was tenant-occupied, so there was some kind of different weird situation with the tenant that the seller didn’t really have all of their information. He said like a partner had rented the property, so we needed to inspect this house. So we got a hold of the tenant and set up an appointment for a few days later.

And then sure enough, the next day an attorney gets in touch with us and says, “Um, you’re the third person that this guy has tried to sell this property to.” Even though he was on title, his name is on title. We checked that, but, “he actually fraudulently transferred this property into his name years ago through a power of attorney situation, and he won’t be selling you this property as there is litigation pending right now.”

So that kind of put the kabosh on that deal immediately. This guy was trying to pull some fraud, and he’s going to be dealing with some legal issues, but we did let the attorney know, “Oh okay. Is this property going to be sold eventually?”

And she actually said, “Yeah there’s an estate that owns it, and they do want to sell it once we get through all of this mess and get it figured out.”

So we said, “Great. Put us on your list. We want to buy it when that time comes.” So who knows, maybe it will come back around.

Andrea: I hope it does because I was most excited about it because I think it would be a fun rehab project. It’s in a very cool area. I think it would be a super fun project.

Doug: Yeah, it would.

Andrea: You were super excited about it because the numbers were really, really good, so we’ll see if it comes back around. But that was kind of a first. We have had title discrepancies where maybe someone has inherited a home and their sibling is squabbling over it, but we have not come across that yet where a person has completely fraudulently taken title to a property that absolutely did not belong to them.

Doug: Yeah and this is why you go through an escrow or title company, whatever state you’re in and get title insurance on everything. Do not buy property, in our opinion, without title insurance because this kind of stuff happens. Somebody may have done something in the past that could come back to bite you if you buy this property uninsured, so definitely do that.

Okay, but enough of that. Let’s get into the good stuff here, the questions and answers.

Andrea: We’ve got a total of four questions that we’re going to be going over, and the first one comes to us from Anna. I’m not going to read last names. I’ll just keep people’s privacy intact.

Doug: Keep it private.

Andrea: We’ll just go with the first names. Okay so question number one from Anna.

Doug: Let’s call her Jill.

Andrea: Well no, she needs to know that it’s from Anna. Okay, Anna. Anna said: I just listened to your number 18 podcast again and in it, you say that you do not provide a refrigerator. I went back three times because I wasn’t sure if I had misheard, but there it was again. Can you explain? It seems like something that would be essential to a rental. A dishwasher the tenant could do without, but how do you say that a refrigerator is an amenity?

So I thought that this was a really great question. I think that a lot of landlords or prospective landlords might be curious as to why we don’t provide a refrigerator, if that’s something they’re not familiar with. And there’s no right or wrong answer here.

This is just how we choose to do it.

Doug: Yeah I think it’s a little bit area-specific and also property-specific, so let me explain that. Here, it seems like, at least in Southern California where we are, that not too many people who are renting houses actually provide refrigerators. At least that’s our observation, that’s our experience.

When we first rented a home in this area before we bought a home, I don’t believe it had a refrigerator. It’s just something that typically people own their own, around here, and they move that from place to place. It’s kind of like your domain for your food, and you want to keep it clean, and it’s kind of their own personal belonging.

Andrea: And technically speaking, from an appraiser’s perspective, a refrigerator is considered personal property. It’s not considered a fixture to the house like the dishwasher or the stove might be.

Doug: Right, and that’s a good point. It is personal property. When you sell a house, a refrigerator is not considered part of the house because it’s not attached to the home. Dishwashers, stoves, because they’re kind of plugged into a gas line and things like that, for whatever reason they’re considered part of the home, just like ceiling fans and things like that.

But washer/dryer and refrigerators aren’t. They are typically an amenity. So with single-family homes, it’s just common in our area not to put them in. So we choose not to do that. The tenant can provide their own.

Andrea: I think that it’s more expected from a prospective tenant if they’re going to be renting an apartment or a condo. Those are typically very turnkey. It’s expected that a refrigerator will be provided but in a home, believe it or not we’ve never lost a tenant due to the fact that we didn’t provide a refrigerator.

Doug: Right. Now you could provide refrigerators in a home, and maybe that’s a bonus to some people and you might get some tenants that way. We’ve never seen it as a negative that we know of. Nobody has not rented one of our properties because we didn’t have a refrigerator there.

And this is also how we kind of look at it: if you have one rental, well that’s one thing. You have one refrigerator to worry about, but when you start getting multiple rental properties and adding up, pretty soon you have 30/40/50 rental properties. If you have 50 refrigerators that you now have to worry about as well, those things break. They need cleaning.

Things fall apart. That’s just an extra item for you to worry about and an extra expense for you if you’re renting these properties. So we choose not to do it.

Andrea: It just cuts into the cash flow. If you’re replacing ten refrigerators a year, that eats up a lot of your cash flow.

Doug: Yeah now there are instances when we buy a house that has a decent refrigerator already in the house that the seller left there, and we will sometimes leave that if we’re going to rent the home. And what we will do though is say, “There’s a refrigerator, but we’re not going to maintain it.”

We’ll put this in the lease agreement, “If it breaks. It’s up to you to fix it and repair it.” Same thing with the washers and dryers, we’ll do that too because we’ve made the mistake the other way before. We provided it, didn’t really mention anything about it, and all of the sudden we’re getting calls six months later, “Hey, the washing machine isn’t draining.”

And those things are expensive to maintain. You’re almost better off buying another one for the cost that it can run you to fix something like that. So we would disclose, “Hey, we’re not going to maintain this, but you’re free to use it.”

Andrea: Right, exactly. So basically to recap, if you’re going to be somebody that just has one or two rental properties, and you want to go ahead and provide a refrigerator just as one extra little bonus thing to help you get a better tenant, and you think that’s going to help you, then awesome.

Go ahead and do that. There’s no right or wrong answer here. But if you start creating a business of this and you have lots and lots of rentals, you might want to consider not providing a refrigerator.

Doug: Yeah, I think just like selling a home, check your comps. If it’s expected in the area and everybody else is providing a refrigerator, maybe you need to do it. It just depends.

Andrea: Yeah, okay question number two. This question is from Sam and Kylie, and the question is: when doing a wholesale, the fourth way that you mentioned with an agreement (so from that last episode, a couple of episodes ago on wholesaling).

Doug: The fourth way was an assignment, right?

Andrea: Yeah, assignment of the contract. Do you use a real estate agent and does the real estate agent write the agreement into the offer?

Doug: Okay, let me tackle the first question there. When doing an assignment as a wholesale, do you use a real estate agent? The answer to that is no, and that is because in our business, we are primarily buying homes directly from the owner.

So we are advertising to them; we’re sending letters, mailers, Internet ads, things like that directly to an owner of a property, and then we’re coming to an agreement and buying the home. So there are no agents involved.

Andrea: When you’re buying a property directly from a seller, it will operate like a for-sale-by-owner transaction, so you are going directly to his person, saying, “Hey can I buy your house?”

They say, “Yes.” So no agents need to be involved and that way they’re not paying commissions. You two come to an agreement with your contract; you take that contract to escrow, and escrow can handle it from there.

Doug: And you bring up a good point because a lot of people, even sellers, are unaware of this. They think that you have to have an agent to sell a house. I don’t know if the Board of Realtors have just brainwashed us into thinking that we have to, but they’ll often ask us, “Do you have a license to buy a property?’

And we’ll say, “No. You don’t need a license to buy a property.” The agents are there to assist you and help you if you need it, but you do not have to have an agent. So yeah, this is a for-sale-by-owner.

Andrea: And then Sam and Kylie asked as a follow-up question: Do you need to provide a prequal letter when you’re meeting with a prospective seller?

Doug: Yeah and again, if you are in the normal transaction world where you’re making offers with agents on the Multiple Listing Service, probably yes. You need to provide some kind of proof of ability to buy the home, but we’re not talking about that type of transaction.

We’re talking about buying a home directly from the owner and in order to even get into that place where you are dealing with an owner, you have probably advertised to them, marketed to them somehow, or they came to you through some kind of referral— where you are the expert, the investor.

And you need to go into this negotiation with confidence. And therefore, because we approach it that way when we’re talking to the sellers, there’s no question in their mind we have the ability to buy this property, because we do.

I think one time in all of these years have we been asked for some kind of proof of funds or prequal letter of some kind, so it really is a non-issue. You absolutely don’t need a proof of funds; don’t worry about it. Just go into the negotiation with confidence, and it’s not going to be something that they’re going to ask you for.

Andrea: Yeah I think that if these people have seen your bandit sign or they’ve gotten your postcard that says, “We Buy Houses! Fast Cash, Close in Seven Days,” whatever it may be, they are already viewing you as an expert. They just assume you have the funds to close, so I wouldn’t even stress about that.

Doug: Yeah absolutely.

Andrea: Question number three comes from Ben and Rocio. I hope I am saying your name right; I’m sorry if I’m not. Their question is this: my wife and I have been investing in real estate for eight years now, however we only have two rental properties. How can we expedite accumulating more properties? The buy-and-hold strategy works well with our lifestyle, but we want to grow our business much quicker than our current pace.

And then their second question was: one of our rental properties has approximately $200,000 in equity. Should we use that equity to invest in a flip or should we buy and hold?  And they were always curious with the two of them working full-time, if it’s realistic for them to flip a house.

Okay, so this is a very subjective question. You can get probably several different answers if you asked several different investors, so I’m going to just tell you what we would do here with your main question being how can we expedite the process of getting more rental properties.

So if it was Doug and I, this is what we would probably do. You have $200,000 in equity sitting in one of your rental properties, so the way to access that equity is one of two things. You can refinance it and pull out that $200,000 in cash to use or you can sell that property to use that $200,000 in cash.

We would probably sell that property because let’s say that home currently has a loan for $200,000 on it, and it’s collecting $2,000 in rent. If you want to pull that equity out through a refinance, now that home has a $400,000 loan on it and is still only getting $2,000 a month in rent.

You’re probably upside down on your payment. It’s no longer a cash flowing property. So we would most likely sell that house, take that equity. The fact that you both have jobs and W-2 income to qualify for some of these fantastic loans right now…

Doug: That’s a good thing.

Andrea: You could split that up into chunks of $20,000, $25,000 down payments and quickly pick up an additional eight to ten rental properties.

Doug: Yeah, and you wouldn’t even have to buy them significantly below market. The financing is such a great deal right now on the low-interest long-term fixed rates that you can get. If it makes sense from a cash flow perspective and you’re not being foolish, go buy several of those with the loans you have the ability to get right now.

Because we’re jealous of that. We are self-employed, and we don’t fit in the box for most typical lenders wanting a W-2 and all of this history of employment and different things. So it’s very challenging to get loans.

Andrea: Just the sheer fact that we’re self-employed, we automatically take at least a one percent higher interest rate on all loans that we get. So you guys are in a great situation as far as that goes.

I kind of focused my answer on how you can hold more properties because you did say that fits best with your lifestyle, and I think that’s a great option. I love buy-and-hold. However, if you wanted to try and flip a property instead, I absolutely think you could do it while working full-time.

Obviously, just like anything, it’s going to take a lot of hard work and effort in your off hours, because the hardest part is finding that deal. So if you’re working nine to five, it’s going to be a bit tricky to find those deals because that’s going to have to be where you spend most of your effort in the beginning.

Once you have a deal, totally you can flip a house all day long while you have a job, no sweat. On the weekends, evenings, you’re lining things up with contractors and what not, easy. But it will just be a matter of finding that deal, and it can be done.

Doug: So I would, in your case, working full-time, I would try to leverage everybody that you can. Try to find wholesalers, reach out to wholesalers who may have deals. Sure, you’re going to go through a lot of them that may not be deals, but there are some diamonds in the rough there.

Agents that are familiar with investors, we had an episode a while back on working with agents, get little birddogs (we call them) or little minions who are looking for you for deals since you’re working full-time. Leverage some of that, have people try to bring you deals. That’s what I would do.

Andrea: So if you choose to spend your equity to flip a house, it’s definitely possible. Question number four is from two of our favorite Instagram followers, Brent and Sarah. And they are with Green Key Homes. I hope they don’t mind me saying that.

Doug: @GreenKey

Andrea: @GreenKeyHomes on Instagram. They are doing some cool stuff too, so follow them. This is their question: when you buy a house off-market directly from the homeowner, how do you find a good title company that is familiar with the investor process? We have only bought houses with real estate agents, and they made the process really easy.

Everything just comes via a document you sign. Is there much paperwork for the seller to sign when it is a direct sail?

Doug: Okay, so I’m going to start with that first question there which is how do you find a good title company familiar with the title process? And this is a great question because I can remember ourselves in this exact situation maybe six or seven years ago when we needed a good title company.

So there are a couple of ways. First of all, I would say try to get referrals. There’s several places you can go to find that. Real estate investing clubs in your area, real estate investors associations if you’ve ever been to those, most areas have them and they’re usually meeting once a month, $15/20/30 to go and there’s usually a speaker.

A great place to go anyway if you’re going to be getting into real estate investing, but there are investors there. And ask for referrals, “Hey, what title company do you use? What escrow company? What closing attorney?” depending on the state that you’re in. Get a referral.

If that’s not available to you or you just can’t get referrals, you can do what we did. And I would just open the phonebook, or that’s kind of dating me.

Andrea: That’s a little dated.

Doug: What I mean by that is open up Google and start googling title companies, escrow companies in your town. And just start calling them, and what you want to say is just ask a few questions: “Hey, I’m an investor and am going to be buying some properties directly from owners. Are you guys familiar with the for-sale-by-owner process? Do you work with other investors?”

And also ask them, if you’re talking to an escrow officer which I would recommend doing, try to get an escrow officer on the phone, “What’s your experience? How long have you been in business?”

I’m looking for someone who yes, is familiar with investors and how they work because we do creative deals and different types of deals. Yes, we’re familiar with the for-sale-by-owner process and handling all of that paperwork, and I’m looking for at least 15 years experience.

I want somebody that has been around the block a couple times in real estate, because old transaction types, old strategies seem to come around again. And we want someone who has seen a lot of different types of transactions, and knows what to do, and has handled them. And just has experience dealing with these things.

Andrea: Not only that, but a seasoned vet escrow agent has seen everything. They’re just not shocked, and weird stuff comes out. You wouldn’t believe it. So they’ve seen everything. They’re not shocked by it, and they usually have a solution that you might not have thought of. It can be super valuable.

Doug: Yeah this is a very valuable member of your team here. One question I don’t ask really is how much they charge. I’m not really concerned with that. It’s getting the good service and experience behind that, especially on the title side, that is super valuable, and I would pay top dollar for it because if you find a good title or escrow company, they’re well worth it.

So that’s what I would do there.

Andrea: And the second part of his question is: is there as much paperwork for the seller to sign when it’s a direct sale?

Doug: Okay, simple answer is no. We have a one-page purchase contract. That’s what we use, so if you go through an agent and buy a home with a realtor, you probably have 30 to 40 pages of contracts, and disclosures, and all of these kinds of things.

That’s the difference. You will have escrow paperwork that’s on every transaction. So escrow will generate their own, what’s called escrow documents or if you’re a title company/closing agent, whatever it is, they’ll typically have their standard set of documents that are going to be filled out on every transaction.

But they’re not overwhelming. They’re reasonable. So there’s far less paperwork in dealing directly with the owner.

Andrea: You may want to do a little research for your own state just to make sure that there is not something specific you need to provide that we don’t know about. But in our state, this is what works.

Doug: Yeah.

Andrea: So that is it for this episode of question and answers. I hope it was helpful to more people than just the original question-askers. But if you have questions that you would like answered, please feel free to email them to me for our next question and answer episode, which will probably be next month.

[email protected].

Doug: Yep, and we want to again ask you to go give us a rating and review in iTunes. If you would, please.

Andrea: I know we keep asking for ratings and reviews, but the way that iTunes works is the more ratings and reviews you have, the higher that they rank you. It’s just kind of how they work, and so the more ratings and reviews we have, the higher up that we will be in our category and the more people that are able to find our podcast.

So if you’d be willing to do that, we would so appreciate it.

Doug: And if you have already, thank you so much. We read them; we love them. It really helps us out. We do appreciate that. We mentioned this on last week’s episode, and we again wanted to mention that we are speaking in October in San Diego at the Flip Hacking Live event, so you can get a lot of information about that event and sign up if you want.

And you can go to our website, SpousesFlippingHouses.com/FlipHack, for more information on that.

Andrea: Yes.

Doug: And that’s a wrap for today.

Andrea: That’s it. Have a great week!

Doug: Take care.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

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The post Episode 30: Listener Q&A #2 appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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In today’s episode we’re talking about “winning the tie-breakers” in a rehab project.

Our mentor Bruce Norris talks about this, but what exactly is it?

In today’s episode we’ll uncover what this means, and how “winning the tie-breaker” for your rehab, can help YOUR house become the clear choice for a buyer!

Download Episode 29 Transcript

Doug: Welcome back to Spouses Flipping Houses Episode 29. We are back and ready to rock and roll today.

Andrea: Yes we are, and we are talking about tiebreakers today.

Doug: Tiebreakers, so you mean like Steph Curry hitting a half court shot to win a game tiebreaker?

Andrea: No nothing like that. Okay, maybe a little like that. But we’re talking about tiebreakers and how that relates to your rehabs. So with every rehab that you do, there is a tiebreaker that you can win, and we’re going to talk about that.

Doug: Oh, good, good, good. Well we’ve got several rehabs going, and it’s actually been quite a while since we’ve had anything maliciously stolen or broken into.

Andrea: Yeah for a while last year, I think we had a string of appliance thefts where it was almost like somebody knew our combo to our rehabs and was breaking in to steal appliances. Maybe that wasn’t the case, but it kind of felt that way.

Doug: It seems like certain houses will get hit over, and over, and over.

Andrea: Yeah, and it could just be the neighborhood or people knowing that it’s vacant, but we’ve had people breaking in to seek refuge or sleep, but nothing super malicious until yesterday.

Doug: Wah-wah-wah. So what happened?

Andrea: Well we have this house that we bought in Riverside, and it smells like it used to be a cat sanctuary.

Doug: Which is not that uncommon by the way.

Andrea: No it’s really not unfortunately.

Doug: But this one was real bad.

Andrea: So bad that the house has been stripped down to the studs, new drywall put in, new fresh paint. We had to halt them at that because it still smelled so bad with the old wood floors that had been left, even though we’re going to cover them, it smelled so bad we didn’t want to put anything else in there because it’s going to absorb that smell.

Doug: Yeah, it just smelled like a litter pan, still when you walk in the house. We have got to take care of that smell.

Andrea: So anyways, our solution for hopefully taking care of that smell was to put an ozone machine in the house. And we’ve done this before; it’s worked quite well, where you put one of those ozone machines in the house. You seal it up for a couple days. You come back, and it smells a lot better.

Well, contractor puts the machine in the house, closes it up, and somebody breaks in and steals the ozone machine.

Doug: Comes back, no ozone machine.

Andrea: I guess they had a stinky house too.

Doug: So, my question: did the ozone machine work before they stole it or do you know? Does it still smell? Have you been there yet?

Andrea: It did not work. Bummer. So I don’t know if it didn’t have the appropriate amount of time to take effect. I think it did actually; I think it sat there all weekend, and it still stinks. So our only other option now at this point is to chemically treat the wood floor.

Doug: I was going to say, what about air fresheners?

Andrea: No!

Doug: You could overload the house with air fresheners, just every plug-in, candles.

Andrea: It will smell like florally cat pee.

Doug: And candles might be dangerous.

Andrea: Yeah, so we’re going to chemically treat the wood floors that have already been scrubbed, and scraped, and every other thing you can think of, so this is basically our last option. So if anybody listening knows how to get rank stink…

Doug: Cat urine smell.

Andrea: Cat urine smell out of a property, please let us know [email protected].

Doug: That would be beneficial to know because we’ve actually had several properties that have had some stank smell before, but we always put some of that “Kills” product on there. And if you replace the drywall, usually that takes care of it. But this one *whistles*.

Andrea: It’s a special kind of nasty.

Doug: It’s another level of nasty, but the house looks good.

Andrea: It does, and it’s going to smell good. We’ll find a solution. We’re not going to sell it like this. We’re not even going to put in anything else that could potentially absorb the smell until we’ve got it taken care of, so kind of a bummer that the ozone machine didn’t work. Or maybe it would have worked.

Doug: But hopefully one of the neighbor’s houses is smelling better now. So stay tuned until the end of the episode. We have a special announcement. What’s our announcement about?

Andrea: It’s about an event that we’re going to be speaking at.

Doug: We are.

Andrea: Or maybe you’re going to be speaking at.

Doug:  We are, I think.

Andrea: I don’t know. One or both of us will be speaking at an event coming up.

Doug:  Spouse Flipping Houses, may be speaking at an event coming soon, so we’ll be talking about that at the end of the episode. So stay tuned for that but now let’s get to the meat and potatoes of this podcast. And I say that, and I’m getting hungry when I talk about meat and potatoes.

Andrea: We just ate pizza.

Doug: Yeah but I mean a little pot roast you know, with those potatoes and carrots in there, mm. Sunday afternoon just came rushing back to me. Anyway, one of our mentors Bruce Norris, when talking about rehabs, he would often say, “You need to win the tiebreakers when you’re rehabbing your property to sell.”

And as he dug into it and as we’re going to talk about today, it’s a really important topic. So Andrea, what exactly was Bruce referring to in regards to a “tiebreaker” when rehabbing a property?

Andrea: So this means that all things being equal, what is that one special or unique feature that can make your house the clear choice for a buyer, thus breaking the tiebreaker and making your house the winner. So in every rehab project that you do, you need at least one thing that will make you win the tiebreaker so that you’ll be the next listing that goes pending the soonest.

Doug: Okay, so it helps you stand out.

Andrea: Exactly.

Doug: Okay, and this typically is a little more important in a buyer’s market when the available houses are plentiful. When there are tons of listings available, and buyers have their choice. So what is it that is going to set yours apart?

Andrea: Right, exactly. But as somebody who loves design and feels like every house should be done right, I think it’s important in every market because the longer that your house sits, the more carrying costs that you have; it helps it to sell more quickly. And so you really do want to win that tiebreaker— I think always.

Doug: Good point, so cat pee would probably be losing the tiebreaker.

Andrea: That would be an “L.”

Doug: Doesn’t help you win that tiebreaker. Say you have a house, what are some ways to determine what that tiebreaker could be for that particular house that you could win?

Andrea: Well the first thing I would say is that your tiebreaker doesn’t have to be something that is expensive. So you want to study all of the comparable sales and listings in the area of your subject property, and you want to look for the common features and upgrades that are present in those comparable properties.

I think that the biggest mistake that first-time flippers and even some experienced flippers make is one of two things. They either rehab a property as if they were going to live in it, and they way over-improve it and spend too much money, which cuts into their profit.

Or they actually under-improve it, which you kind of heard of on those TV shows as “lipstick on a pig,” and they don’t fix all of the issues that are important to the buyer. And so both of these are a problem. With one of them, obviously you spend too much; you cut into your profit. And with the other one, your property is going to sit longer, and your comps are going to sell faster than yours because yours is not the standout winner.

Doug: So then what’s the proper way to rehab a property and not over-rehab it, but make sure you’re going to win the tiebreaker still?

Andrea: So it goes back to the first thing that I had mentioned: you have to look at the comps. You only need to be as good as your competition, but you really want to be just slightly better. So that’s the one tiebreaker issue that’s going to make your house sell faster.

So what actually inspired this podcast episode was the house that we talked about a couple of weeks ago that we bought here in our own hometown of Marietta, and Doug and I were going back and forth about whether or not to scrape the ceilings. And we ultimately decided that this could be the tiebreaker issue for this house, and we decided to go ahead and scrape the ceilings.

And the reason we decided to do that was this is basically a track neighborhood that was built in the 80s. All of the houses in this neighborhood have just a slightly funky architecture different than the way homes are built now. They all have these weird 45° angles in different places and things that, from a cost standpoint, don’t make any sense to go in and change or upgrade that.

But all of the comps have it too, so there’s nothing we can do about that. It’s normal. All of the comps in that neighborhood have pretty average landscape, and so does ours. Most of our comps back to a busy street, and so does ours. Most of the comps have been recently upgraded in terms of the kitchens and the bathrooms, within the last five years or so, and that’s what we’re going to be doing to ours.

So there’s really nothing else that makes ours stand out. We noticed that a lot of these comps still actually have the popcorn ceiling, so we felt like that is the one thing, that’s the tiebreaker that we can win. Yes we back to the busy street; yes we’re built in the 80s and have the weird angles, just like yours. But hey, our ceilings are awesome.

Doug: Definitely

Andrea: And it doesn’t cost that much to do it. It ended up being I think about a dollar a square foot for the house. We’ll spend about $1,600 extra, but I really do think that it’s going to be a big benefit.

Doug: Yeah, and I think you’re going to be right on that. I mean people when they go into a house these days, even if everything else looks new, and upgraded, and fresh, and clean, and then you look up to the ceiling and are like, “Eh. Nobody does popcorn ceilings these days.”

Andrea: It’s just a big fat time stamp, date stamp.

Doug: Exactly, exactly. So then what would be some common examples or common ways in which a rehabber could take their house and do something to make it win these tiebreakers? What are some common tiebreakers?

Andrea: Well it’s hard to say exactly because every house is going to be unique to its own comparable properties, and I know I keep saying this, but it is so true.

Doug: It is true.

Andrea: So you really just have to look at the comps and figure out what these properties have and what can be your extra little sizzle feature. So the three places that you’ll get the most bang for your buck are what you hear everybody always say: the kitchen, the bathrooms, and the curb appeal.

So for example, if the other kitchens that are the comparable properties to yours have the tile counters, then maybe you want to spend a little bit extra, and you’re the one who has the granite counters in the neighborhood.

Doug: Okay, good. What about another example in the kitchen, like maybe appliances?

Andrea: Yeah, you know I read an article recently that said houses with stainless steel appliances sell I want to say it was like 30 percent faster. Don’t quote me on that; you can Google it. But they sell faster. It’s been proven.

Doug: Yeah they’re a little more expensive than your white or black appliances but for the most part, I mean in general, that’s what a buyer would desire, a stainless steel stove and dishwasher. So yeah, spend a little bit extra for that. What about maybe landscaping in the backyard?

Like I know in our area, there’s a lot of desert areas around here, and people just don’t landscape maybe any of their yard, but at least the backyard they’ll just leave dead or as a natural landscape.

Andrea: Right. Landscaping is one of those places where you can pour a lot of unnecessary money into the property, so I would say to look at your comps. If that happens to be the one and only place you feel like you can win a tiebreaker, then go ahead and put a little bit extra into the back landscaping, but I think the front is a little bit more important.

Maybe you have an upgraded, little bit nicer front door, maybe you put a little bit of extra money into that front curb appeal. I would do that before I would put money into the back.

Doug: Okay, good. So that’s a good point— you brought up front door. I think that’s also, depending on the house and area, that’s huge as well. Just have a new, cool, fresh front door, maybe a bright color or something like that to really just show that somebody has poured effort into improving this house.

Andrea: So there really is no magic formula for winning this kind of a tiebreaker. You just have got to look at all of your comps. What is your competition? Pay attention to every feature that they have, and make sure yours is just as good. And then find that one little extra thing that doesn’t break the bank that is going to put your house at the top of a potential buyer’s list.

Doug: Absolutely. Make it stand out and make it the obvious choice because of this.

Andrea: Right.

Doug: So that’s it for winning tiebreakers. I think there’s a theme with that in recapping, and the main theme that I heard you say there was to pay attention to your competition. See what’s listed; see what they have. You have to really know what you’re up against.

Andrea: Yeah it’s really essential because your sales price and the length of time your property sits on the market depends on it.

Doug: Yep. So tiebreakers are very important. Take them seriously okay, so on to our announcement from the beginning of the episode. Andrea and I, or one of us, will be speaking at the Flip Hacking Live in San Diego, coming up this October 6th through 8th.

Andrea: It’s going to be three days packed full of great content. It’s being put on by Justin Williams, and Andy McFarland is going to speaking to. He is awesome. Also, a panel of other very talented investors, so if you want to find our more about Flip Hacking Live— that’s kind of hard to say— Flip Hacking Live, you can head over to SpousesFlippingHouses.com/FlipHack.

Doug: Yes, we’re really excited about this so go there and get some more information. And oh also, please continue to send in your questions for our upcoming question and answer show.

Andrea: Yes that will be next week. So if you have questions, go ahead and send them to me quickly if you would like that to possibly be included in this next episode, and we’ll answer your questions regardless. So you can send those to Andrea, [email protected]

Doug: Sounds good, so on that note, we will talk to you next week.

Andrea: Talk to you later.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

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The post Episode 29: Are You Winning the “Tie-Breakers” with your Rehabs? appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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Last week we talked about wholesaling. We covered what it was & why it’s such a great strategy. This week we’re following up on that topic and talking about how to actually ‘sell’ your wholesale deals.

Download Episode 28 Transcript

Doug: Welcome back to the Spouses Flipping Houses podcast. We’re on Episode 28 today.

Andrea:  We are recording this on a Tuesday, but it’s going to air on a Thursday, but we’re kind of pretending like it’s our Monday because yesterday we took the day off.

Doug: It feels like Monday.

Andrea: It does feel like sort of our Monday, because yesterday we took the day off to take our six-year-old to Disneyland for his birthday, and we had such a blast. He’s so much fun, especially one-on-one, and just a great age. But it was just exciting to realize that’s what this business can do for you, just the freedom of lifestyle, the freedom of time to be with your family and do the things that you choose.

And we just felt so grateful all day yesterday to be in this business that affords us the opportunity to take a day off whenever we want to, so that was pretty cool.

Doug: Totally, yeah and it’s fun to get your kids one-on-one and take them to a special place like that, to just have special mommy, daddy day, and he’s in preschool.

Andrea: He’s in kindergarten.

Doug: Oh yeah, he’s in kindergarten. He’s the third kid; you kind of lose track after a while. He’s in kindergarten, yeah, so we yanked him out of school for the day, went there, and just had a ball.

Andrea: The funny thing is that his favorite ride of all time is Splash Mountain and so literally we walk in the gates of Disneyland, and he wants to make a beeline straight for that ride. And he’d probably ride it all day long if we would let him. But I don’t know if you’ve ever been on Splash Mountain, but the ride kind of goes round and round in this little briar patch story and at the very end, you go down a steep, steep decline.

And they take your photo, so every single time his photo, he looks petrified, absolutely terrified. But then you get to the bottom, and he says, “Let’s do it again. That was the best thing ever.”

Doug: His face was classic on the picture this time. It’s always good, but he just looks like we’re torturing him bringing him on this ride. And of course we’re soaking wet, and it’s cold for Southern California yesterday. It was kind of windy and chilly.

Andrea: And that was our first ride of the day, so we went around soaked for the whole rest of the day, but it was a blast.

Doug: But we had a great time. We should post that picture.

Andrea: Yeah, I will.

Doug: But today we’re going to follow up on what we talked about last week, which was wholesaling, what that was, and why it’s such a great strategy, and why we like it. And we’re going to go into a little bit about selling your wholesale deals today, and sort of the two main schools of thought with that, and dig into what the positives and negatives are to those different strategies.

And we’ll also, at the end, let you know what our favorite thing is to do. So I think we should get right into it. What do you think?

Andrea: Yes, let’s do it.

Doug: There are two schools of thought out there when it comes to approaching the wholesale business. If you’re going to be beginning in wholesaling, there are two angles to come at it that I hear taught a lot in different podcasts and from different teachers that I listen to or that we learn from.

And not to say that one is right or one is wrong. We are going to talk to you about both of those today and the differences. So the first school of thought would be that you don’t need a ton of buyers to work with; you really just need a handful, just a few good, proven buyers that are going to be repeat buyers from you.

And that’s all you need, and then you can focus on getting the deals because you’ve got these great buyers that you know are going to buy the product. The second school of thought would be no. You need to build a massive buyers list first. Build this huge list, you have all these people that are hungry for deals.

Andrea: Before you even focus on getting a deal, you’re just building a buyers list. That’s what they’ll teach.

Doug: Yeah, they’ll teach to go after the buyers list first before you even get a deal. Then when you have a deal, you can send it to this massive buyers list, and the thought is that you’ll have tons of people fighting for these deals, and you’ll have them sold quickly.

So we’re going to break down these two different schools of thought a little bit more. So let’s talk about the first one.

Andrea: Okay so we’re going to give you the positives and negatives from our perspective of each of these schools of thought. So for the first one, which would be working for a handful of buyers, the positives are that you are working with a few people that you know they buy lots of property, and they know what they’re doing, and you can trust that number one— they probably have the funds to close.

Hopefully, you have most likely worked with them before. If not, maybe you got this person as a referral but however you found this buyer, you know that they can perform because they have done it time and time again. And they’re capable of closing when they say that they will.

And this is huge because when you are working with a seller, you’ve found this wholesale deal, you’re ready to sell it, if you’ve told the seller, “I can close in ten days,” you need a buyer that can close in ten days. And you need to be able to trust that buyer is going to be able to close in ten days or else you are in major hot water with your seller.

So being able to trust your buyer is very, very important.

Doug: Yeah this is a huge positive to this strategy, just sleeping good at night knowing that you’re dealing with a capable and trustworthy buyer.

Andrea: Yes, and then I think that the second positive to just having this handful of buyers that you work with, once you’ve found this handful of people that are proven, solid investors, then you can just be focusing on getting your deals. Whereas if you’re focused on developing this massive buyers list, that can take a lot of time.

And so here, your energy and your efforts can be all focused on finding the deals.

Doug: Yeah. So let’s talk about the negatives of this school of thought. First of all, if you get a deal and let’s say you have four or five buyers that you have that could potentially buy this deal. And what if all of your buyers pass on it? They say, “Nope. Not interested in that one.”

Well now you’re scrambling. Now you have no other options, and you’re forced to try to do some other desperate method to hopefully find a buyer for this property, so that can be a negative. Secondly, just like supply and demand, the less buyers you have, the less sort of negotiating power and leverage that you have.

Let’s say you’re down to one and they know that. Well they might low-ball you because what other options do you have? Your negotiating power is lessened at that point. And also, typically when you’re dealing with proven, seasoned, investor buyers, these are pros as well.

And as all investors are, they want a good deal, and most of these buyers are probably flipping these homes, maybe they’re keeping them as rentals but most are trying to flip them and make a profit. So they’re looking for a low price too. They’re looking for a good deal and therefore because of that, they probably aren’t going to be paying you top dollar for the properties.

Also, and we’ve had this one happen, you can have a great buyer that buys multiple properties from you, and they’re really hungry during that phase of their business. And then for whatever reason, next month they may be out of business or they may choose…

Andrea: Or they bought too many that month and they don’t want to buy any more.

Doug: Right. They just may not want a deal at that given time, so you’re going to have to be continually replenishing even your good, trustworthy, small group of buyers, so that can happen to you too, and you may not have too many options.

Andrea: Okay so school of thought number two, which is building your massive buyers list so you can blast your deals out to everyone. The positives to that is that you can potentially get much more for your deals when you get them under contract because you’re going to have multiple buyers bidding each other up basically.

Doug: Again, supply and demand.

Andrea: Right, exactly. The second thing is that it will be easier to sell those “unique” properties that other buyers might pass on. Maybe it backs to a railroad track or it’s in a flight path, sometimes when you have that big buyers list, somebody on that list isn’t going to care about those unique qualities.

Doug: Yeah or certain areas, or maybe commercial-type properties. Maybe your core group of buyers doesn’t buy that type of inventory, but somebody on your massive list might.

Andrea: Right. And then the third positive to this is that it can help you have a better gauge on what buyers will pay for properties. It’s really kind of similar to putting it out on the MLS. It’s the investor’s version of full-market exposure, and it lets you buy with confidence I would say as you’re locking these deals up, because you know what the market will pay for them.

Doug: Right, right. Some of the negatives to having this massive list of buyers that you’re blasting out deals to is that first of all, you might turn off some really good buyers, some of these really core investor buyers who could potentially buy a lot of properties from you.

Andrea: Like us.

Doug: Like us. You may turn them off, and here’s why. Because when we get an email, we get a lot of these blast-out wholesale deals, and we just immediately put it to the side.

Andrea: Delete. I don’t even read them anymore.

Doug: Yeah I’m not going to spend a bunch of time researching this property because I know a thousand other people got this email, and I don’t want to compete, and I don’t want to deal with it. So we’re not even going to give it a thought, so therefore you’re losing some potentially good buyers because now it has lost its luster to us.

It’s not just exclusive. You’re not offering this deal to me; you’re offering it to me and half of our city, so that’s a definite negative. Another one is that when you do it this way, you’re probably going to be dealing with a lot of new buyers, unproven buyers, different buyers each time almost, and that can equal a lot of problems and hassle for you.

You’ll have buyers getting loans, and maybe they’re trying to get a conventional loan on a deal that just needs a ton of work, and it won’t qualify for the loan. Or you’ve got people that just don’t know what they’re doing; they want to send an inspector out to the property, and then they want to send another inspector out to the property, and then they want to send their appraiser out to the property.

And you’re creating all of these potential problems in dealing with the seller, and attending it, and trying to coordinate all of this stuff.

Andrea: Or you risk people doing what is known as creating a “daisy chain.” So they’re tying up their property with you, and then they’re really looking for another wholesale buyer, and then maybe that buyer is looking for another wholesale buyer, and seven people down the line you’ve got their property sold.

Doug: You’ve got to put the kabosh on that if you sniff that out. That is a definite no-no and a definite problem to get into. Yes, definitely that’s a negative, so there’s just a lot of potential things that can go wrong when you’re dealing with new or different buyers on each one of these projects that you’re selling or blasting out to your list.

So ultimately, the negative is it can be a lot more management intensive, a lot more of a headache, a lot more stressful, a lot more moving parts when you’re dealing with sometimes agents involved, and partners, and just people you haven’t worked with or who don’t understand the wholesale process.

Andrea: You’ll be constantly educating your buyer.

Doug: Constantly educating them, yeah. They may have gotten on your list somehow and don’t even know who you are or what you do. So you’re having to constantly teach them.

Andrea: Okay so what do you do? We’ve just given you the positives and negatives of both, and they both have positives, and they both have negatives. Well for us, we would suggest that you try a combination of both. And to be honest, we mostly do work with a handful of buyers just for the sheer simplicity factor.

It’s people that we trust; it’s easy; it makes our life simple, and that’s really what we’re all about. But we recognize the benefits to a massive buyers list too. So our suggestion to other people would be to do a combination of both.

So first thing would be to find that core group of good, reliable buyers who you know they want to buy multiple properties. And I would say you want probably five to seven of this type of person on your list, people that you know buy a lot of properties, you know they can perform, and you can trust their word is good.

Doug: Yeah definitely. At the same time, I think you should always be working on having a bigger list of buyers, people that are hungry for a deal. Because although 80 percent of the wholesale deals we do would be sold to this core group, occasionally you’ll have one that just nobody is interested in.

So it’s good to have another backup method, if you will, of a greater amount of buyers that you can either send to them or go after them somehow, and let them know you have this deal and get it sold that way. So at the same time you have these core buyers, kind of in the background you want to be building a list of “reserve buyers.”

And then lastly what we suggest you do, whether it’s working with just your core group or especially if you’re working with a greater list of maybe buyers you’ve never worked with, is always, always, always get a non-refundable deposit from your buyers and have them sign a contract, whether it’s purchase agreement if you’re wholesaling it that way or an assignment agreement.

Have them sign that, and make it very, very clear in there that their deposit is non-refundable so that they don’t take you all the way to the day before escrow closing and then change their mind and back out for whatever reason, because that will happen. So at least this way you have a little bit of security, and their deposit is that risk.

Andrea: Right, so those are basically the two ways to sell a wholesale deal. You can either work with a small handful of buyers that you know are good and can perform, or you can work to build a massive buyers list that you can send all your deals out to.

There’s no really one right or wrong way. I think it might even come down to your personality and what works best for you, so we’ve kind of given you what works best for us. Hopefully you can pick and choose from these things that we’ve laid out here and figure out what would work best for you.

Doug: Absolutely, absolutely. So don’t forget to send in your questions to Andrea, mailto:[email protected] We’ve been getting some great questions, and we love that, so keep them coming. We’re going to have an upcoming question and answer episode that you might be featured on, but regardless we’ll respond to you with an answer that we have.

And also, if you haven’t given us a rating and review on iTunes, we want to encourage you to please do that. We love getting those ratings and reviews, and they really, really help us out on iTunes.

Andrea: Yep, so have a good week.

Doug: Talk to you later.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

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The post Episode 28: Sold!! Two Approaches to Selling Your Wholesale Deals appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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In today’s episode we’re talking about wholesaling! It’s definitely one of our favorite investment strategies that we use. Last month we had a record number of wholesale deals. So we wanted to share with you how it works, the benefits of it and 5 of our quick tips you should know BEFORE getting started with wholesale deals. Tune in now and make sure to leave any questions or comments you have in the comment section below.

Download Episode 27 Transcript

Andrea: Welcome back to Spouses Flipping Houses Episode 27. Today we are talking about one of our favorite subjects.

Doug: Yes it is.

Andrea: Wholesaling.

Doug: One of our favorite strategies, especially right now, wholesaling.

Andrea: Everybody knows what it means to flip a house; everybody knows what it means to be a landlord and keep a rental, for the most part, but not everybody knows or quite understands what it means to wholesale.

Doug: Yeah and it can be a great strategy, even if you’re not a wholesaler as your main strategy, it’s good to know this and utilize it when you need it or at least understand the process if you’re going to be buying properties from wholesalers, that kind of thing. Excited to get into that later. But before that, what’s happening in our rehabs this week?

Andrea: A lot! We got a couple that are almost finished and this is my favorite stage, when the cabinets are going in. I feel like when it comes down to the finish line, everything happens so fast, and it’s really fun. That’s when it gets really exciting. The cabinets go in, the tile, the bathroom deco tiles, all that sort of thing, the fixtures are all kind of going in at one time, and it’s so exciting.

We’ve got two or three that are in that same stage right now, and so I can’t wait to drive around tomorrow and check them all out.

Doug: Yeah finally. These are some big projects and kind of when they transform from a construction project to a house, so it’s exciting to see that.

Andrea: And then we’re starting up another rehab actually in our own town of Marietta. Believe it or not, in the last eight years, we’ve flipped a lot a lot a lot of houses, and this is only the second one that we have done in our hometown, so that’s kind of fun.

Doug: Yeah for whatever reason we just haven’t been able to land projects we wanted to do here that the numbers seemed to work, but this one is five minutes away. So it’s pretty cool, pretty exciting to start that. I like the convenience factor.

Andrea: Yeah super convenient, and then you and I kind of went back and forth on this one a lot as far as what we were going to do to it because we wanted to keep our budget small so it could be just a quick rehab, turn it around, put it back on the market. It’s in a great neighborhood that people want to live in, so the reality is we don’t have to do a whole lot to it.

But the house is full of popcorn ceilings, and I felt like that was completely unacceptable.

Doug: Well you know, a lot of the houses around here are newer-ish. So this was built in the late 80s, which is actually one of the older homes in our area because we’re just a bunch of new track homes. So there’s not a lot majorly wrong with these houses other than they’re typically dater, and they have popcorn ceilings, and they have obviously old appliances and stuff that we would want to upgrade.

But I’m thinking, Man, we’re just going to put this thing right back on the market. There’s lots of homes just like it. We can sell this thing for the market value and not have to put a lot of money into. But once we get in there, we always want to improve the house.

Andrea: Yeah, it always, and I think we’ve said this before, it always needs at the bare minimum, probably paint and carpet. Just to feel fresh, and clean, and new.

Doug: Yeah definitely.

Andrea: But this one had the popcorn ceilings that were just more chunky than your normal popcorn ceilings. It just felt so much worse.

Doug: Chunky popcorn.

Andrea: Well you know it’s kind of chunky.

Doug: Maybe it was kettle corn ceiling.

Andrea: It’s like cottage cheese has been tossed up there and stuck. It’s so ugly.

Doug: It was pretty bumpy, pretty lumpy, and it needs landscaping too. So once you get into it, it really needs more than I thought, but still. It’s a minor rehab on the scale of the rehabs that we typically do.

Andrea: Yeah we’ll still be able to do it really fast, and I won. Woo-woo! We’re scraping the ceilings.

Doug: Chalk another one up for Andrea there in the win column.

Andrea: It’s going to look really good though. I think you’ll be glad.

Doug: No, yeah. So that one’s coming up too. Well before we get into our main topic we wanted to encourage you again, if you haven’t visited our website, please do that. SpousesFlippingHouses.com, there’s a free gift for you there if you haven’t received that.

We have some before-and-after pictures. You can listen to our episodes there, leave some comments, and we love getting feedback from the listeners. So please check that out. Also if you haven’t subscribed on iTunes, do that and leave us a rating and review. That really helps us out. We really do appreciate the ratings and the feedback on iTunes.

Andrea: On to wholesaling, Doug, what is wholesaling?

Doug: What is wholesaling? Wholesaling is you have a owner of a property, and you negotiate a purchase price. Then, you find another buyer, and you negotiate a sale price for a higher amount and wam-bam, the difference is your wholesale fee. You connect the two, and you get paid the difference.

End of story. Pretty simple, right?

Andrea: Sounds pretty simple.

Doug: Yeah, it’s very simple. That’s its simplest terms. Now there are many, many ways to structure a wholesale deal. There’s not just one-size-fits-all. So, we thought we would talk about four of probably the most common or the most popular ways to do wholesale of property.

And we’re going to get into that. Now there are many more, there’s other ways, and creative ways, and things like that, but these are the four main ways.

Andrea: Yeah, the first way that you can wholesale a property is to actually use your funds to close on a property from the seller. So you go through the whole escrow process; you close on it in your name.

Doug: You own the property at that point.

Andrea: Yeah, you are the owner. The title is in your name. Then, you go and quickly find a new buyer, whether you quickly put it on the MLS or you put it out there to different buyers that you know of that buy that kind of inventory. And without doing anything to it, you quickly resell it for a profit.

Doug: Correct. That’s wholesaling number one.

Andrea: That’s kind of “a-to-b-to-c.”

Doug: Yeah, so a-to-b, you’re being “b.” And then b-to-c, “c” being the end buyer at that point.

Andrea: A few things about this method for wholesaling is that number one, you will need money to close on that property or you’ll have to borrow money, transactional funding.

Doug: Partner, something.

Andrea: Hard money, whatever it is. So if you don’t have your own funds, then you’re going to have the cost of money included that’s going to come out of your profit. Another thing you want to think about is that doing this takes a little bit longer.

You have the process that it takes to close on the property that you’re buying. Then you have to do your marketing to find a new end buyer, so that just lengthens everything plus all of the escrow time involved.

The last thing you need to know about this is that there’s a little bit more risk involved because you are going to be the owner of the house. You will take title; there’s expenses and liabilities that come along with that, and then what if you can’t find an end buyer at a higher price than what you paid? Well, that’s a big fat bummer.

Doug: Too bad for you.

Andrea: Now why would you want to do this? Because we just kind of made it sound like maybe it’s not a great strategy, but there are reasons why you would definitely want to close a wholesale deal in this way. And one of the main reasons is to protect a large profit.

So if you have created a very large wholesaling profit for yourself on a particular deal, well, the seller might freak out if they see that on the closing statement or the buyer might freak out if they see that on the closing statement. Should they? No they shouldn’t because they’re both getting to sell or buy a property that they want to sell or buy, but it’s human nature.

Sometimes people will freak out if it’s a large wholesale fee that you’re going to be earning. So it might be in your best interest to protect that by actually closing on it, and then reselling it, and nobody knows what your profit it. So it’s kind of an element of privacy.

Doug: Yeah. The second way or popular way to do a wholesale deal is much simpler, less risk, a lot less moving parts. And it’s basically to just take a finder’s fee, also known as a referral fee or acquisition fee, and with this method, all you’re doing is basically locating a property and letting another buyer know about it, your wholesale buyer, your end buyer.

And they will pay you a fee for that service. You can negotiate any fee you want as long as it’s okay with both of you. Sometimes that’s paid through the escrow closing process; sometimes it’s paid outside of escrow. You’re known as what’s called a “birddog” in the industry. This is called bird-dogging.

And if you get the visual of a dog retrieving a bird or going to stir up the birds for the hunter, you know it’s essentially what you’re doing. You’re looking for deals for a buyer and then getting paid for that. Be sure you check the laws in your state, because sometimes there could be tricky ways that you want to make sure you’re getting paid in a legal manner for the services you’re providing if you’re not a licensed agent blah blah blah.

We’re not attorneys, but anyway. Just check on that stuff, but that’s a simple way to do it.

Andrea: Probably the least risky way of starting if you don’t have money, right? Because your end buyer will be the one putting in the earnest money deposit. You’re not doing any of that.

Doug: Yeah your end buyer typically is going to be the one on the contract as the buyer. The end buyer is the only buyer. You’re just sort of assisting that buyer and getting paid a fee for it.

Andrea: Yeah, you basically just found it. You’re telling them about it. They’re hooking you up.

Doug: Right, so that’s method number two, finder’s fee.

Andrea: The third method that you can use for wholesaling a property is what we call the double close or the simultaneous close. So in this instance, there will be two escrows that are happening at the same time. So your seller of the property is “a” and you are “b.”

So we’ve got an escrow between “a” and “b,” and we have a separate escrow going on at the same time between you and your end buyer, that would be “b” and “c.” So you are involved in two escrows at one time. So the end buyer, “c,” will be using their money to close the first escrow between “a” and “b.”

Doug: Have we lost anybody yet?

Andrea: And so usually these closings would be concurrent. They’d happen at the same time so you’re not bringing any money. Your end buyer that you have found is going to be funding the first escrow.

Doug: Yeah. The “c” buyer funds the a-to-b escrow. So it’s really not that complicated, but sometimes you have to wrap your brain around what’s happening. You just have two separate escrows. One closes literally minutes before the other, so they call it simultaneous or a double closing.

And you actually are on title, in the chain of title, for about five minutes or whatever it is. And it’s a-to-b then b-to-c concurrently.

Andrea: And this can be structured in different ways. So maybe your end buyer is supplying the earnest money, maybe you’re the one supplying the earnest money for the first transaction. It can probably be written up in different ways, and this probably varies state to state because…

Doug: It does, I think.

Andrea: Yeah, a lot of escrow companies won’t actually do this type of transaction. Some will, but a lot won’t.

Doug: In our experience in California, most escrow companies don’t do this. It’s just too many moving parts. You really have to have a lot of disclosures, disclose to everybody what’s going on, what you want to do legally. And you know what? Quite honestly, we don’t really like this method because of that.

It’s just too many moving parts. Then you’ve got two escrows, fees, yeah you’ve got all of this different stuff. And it’s just, to me, there are too many things that could go wrong with it. But it is a method that people use.

Andrea: This is another way to keep your profit private from the buyer and seller. So when you’ve got these two separate transactions, they don’t know who is making what. So that’s why people do this.

Doug: Yeah, that’s why people want to do it, if you have a larger spread typically. The fourth common way to do a wholesale deal, and this is our favorite; it also happens to me in my opinion, one of the simplest ways, and that is just an assignment. Okay, so what are we talking about with an assignment?

Well, you get a contract with a seller, and it’s in your name or your company’s name, whoever is the buyer. And then all you’re going to do is market that contract, you’re going to sell your interest in that contract to another buyer, and that’s called an assignment. You’re actually going to assign the contract to another buyer in escrow, and then collect— you’re going to charge to do that, assignment fee, marketing fee, wholesale fee, whatever you want to call it.

So you actually never buy the property in this instance. There’s no risk because you’re not using your money. You’re actually not going to be the buyer. You are on contract, but then you are just selling your position as the buyer to somebody else.

Andrea: However, your profit will be on the closing statement generally.

Doug: For the buyer, it will. You have to have a buyer that understands this process, is okay with whatever fee you make. Because some people, like Andrea mentioned earlier, just weird out if they know you’re making a lot of money on a deal, even if it’s a great deal for them, they just get funny if they see a big fee there. So that’s one risk.

You’ve got to make sure you’re dealing with someone who is okay with you making money doing this deal and obviously is okay with how it’s all structured. And also you need to make sure that your contract is assignable, that is says in the contract, “you have the right to assign this contract,” which is very, very common.

Most escrow companies totally understand this method and are okay with it, and it’s just a simple way to do it. So we really like this method. This is our favorite. And one thing you need to be careful of with this strategy, certain states are a little more harsh on this than others, but in this strategy when you’re looking to find a buyer, you want to market the fact that you have a contract to buy the property.

You’re not actually marketing the property itself. So if you’re putting things out there on the worldwide web, like on Craigslist or however (that’s a whole other podcast episode on how to find a buyer), but you just want to make it clear in your advertising that you are selling a contract, not a property. Make sense? Okay good.

Andrea: Yeah, that you’re not the owner.

Doug: You’re not the owner, correct.

Andrea: Now we did nine wholesale deals in the month of March and every single one of them I believe was this strategy, number four, the assignment of contract.

Doug: Yeah, it’s the absolute best way to do it in our opinion, and we are dealing with buyers that we normally deal with that are familiar with this process, and that makes everything easier too.

Andrea: Right. So those are the four types of wholesaling strategies that people generally use. The first one, completely close on the purchase and resell it. The second one, you just take a finder’s fee where you’re essentially a birddog. The third one is the double or simultaneous close, which you can’t always do depending on your escrow company. And the fourth one is the assignment of contract, which is our preferred method of wholesaling.

Doug: Right. So let’s just quickly touch on some of the benefits of this strategy of wholesaling.

Andrea: Yeah the first one is that it’s basically low risk because even if you do close it and resell it, you’re not the one taking on all of the liability of fixing it up and going through that whole process to get it to the finish line. You’re making your profit really quick and moving onto the next one.

Doug: Yeah, and it doesn’t have to require a lot of money to do this strategy. In fact, it doesn’t require any money if you are able to locate properties for free through your network, through the MLS, however you can find properties. It doesn’t require a lot of money.

Andrea: It’s a good way to start.

Doug: Yeah it’s a great way to start.

Andrea; Yeah, the third benefit is the fact that you get paid immediately. When you do a flip, you are taking on this challenge, and you’re not going to get paid on it for four to six months, maybe longer— maybe shorter if you’re really, really good. But your payday comes much later, so in this strategy you get paid right away.

Doug: Right, and the last thing is you basically can create your own income here. The better you are at finding below market deals, however you go about that, the more money you can make because there is typically a price range that a flipper will pay. And the more you can get the property below that, the better pay you can get. So that’s up to you.

Andrea: Now I have a feeling that a lot of people are going to be curious, what is an acceptable profit margin? Or what’s an acceptable mark up on wholesale deals?

Doug: Good question. And here’s how I’ve heard that answered in my favorite way by our favorite quoted person Mike Cantu. They say, “Mike, what do you charge typically on a wholesale fee?”

He says, “I charge as much as I can get with still leaving a little meat on the bone for the buyer.” So as long as it’s a good deal for the buyer, charge as much as you can get. You’re in business for a profit. Right?

Andrea: Right.

Doug: So you may hear people answer this with, “Well $5,000 is a standard wholesale fee,” and you know what? I wouldn’t listen to it. There’s no standard wholesale fee in my opinion. I know people who make far less on wholesale fees, people who make far more. It varies quite a bit, so there’s no real answer to that.

My opinion is you charge the most you can get for it.

Andrea: It might also depend on your method of marketing and how costly that is to you. So if you’re door knocking, you might be totally cool with taking a couple thousand dollar market because it cost you nothing to get that, whereas we are sending out thousands and thousands of mailers.

It’s very expensive, so we generally don’t like to do a wholesale that’s less than $10,000. It just doesn’t make sense.

Doug: Yeah because we’re spending a lot to get those deals. And the other thought that I just was thinking about is that if you’re working with consistent buyers over, and over, and over that are easy to work with and good buyers for you, you want to provide them with a good deal because they’re going to be repeat buyers from you.

So if you mark it up so much that you’re squeezing their profit out of it, they’re not going to buy from you again. So to keep them coming back for more, and more, and more, you definitely want to leave some meat on the bone for them. That’s one thought.

Andrea: Yeah, I think that’s really, really important actually because this whole business is about creating win-win relationships, whether it’s win you’re buying a property or especially when you’re selling because you do want to have that repeat business.

Doug: Yeah, and if you sell somebody a deal and they end up losing money on it, not only do you feel bad, but they’re not going to come to you again for a deal. You’ve just lost that customer.

Andrea: Yeah they won’t trust you.

Doug: Right, so just keep those things in mind. Alright, so we’ve got five quick tips for you here in regards to wholesaling. When we get a property under contract typically, we just know it’s a deal. We don’t necessarily know what we’re going to do with that deal every time we get it under contract.

We need some time to analyze that, so we may end up buying it, fixing it up, and selling it, the traditional flip that you can think of. We may end up wholesaling that deal. We may end up wanting to keep it as a rental. We don’t always know from the very beginning, and sometimes it takes a day or two to analyze the deal and find out what’s best for us in that situation.

Andrea: And it may also have to do with what else we have going on at that time. Maybe we have a lot of fix-and-flips going on, and so it’s best to just wholesale it.

Doug: It absolutely does which is another good reason if you’re a traditional flipper and you come across a deal, it’s good to know about this wholesaling strategy because if you’re just too busy with all of the projects you have going, you still could possibly make a little profit on a wholesale deal by selling it to another friend of yours who is looking for a deal at that time. So it’s a good thing to know.

So the first tip would be to have plan A and then have plan B. We typically go into an escrow, let’s say we have an intent to wholesale it. Sometimes, we aren’t able to find a buyer for an acceptable fee that we’re willing to take for that wholesale deal. Well in those cases, we know that we bought a deal when we got it under contract, and we will go ahead and close on that deal and just flip it ourselves.

So that’s what we’ll typically do, so just have options. You don’t want to just have only one exit strategy and all your eggs are riding in that basket, because what if you can’t find a buyer for that? So just be flexible and be willing to do something different.

Andrea: Our second tip for wholesaling is don’t string a seller along if you can’t find a buyer. This is really important to us. Our reputation is important to us. These sellers are usually in a tough situation in their life, and the last thing they need is for you to string them along when you really can’t perform.

So stick to your contingency dates and perform according to the contract that you agreed upon as best you can. If you can’t, let them know right away so they can move along and figure out another solution to their problem.

Doug: Right, good tip. The third tip would be to disclose in your contract what you intend to do. We have a disclosure in our contract, and it should say something to the effect of, “the buyer is an investor and intends to rent, sell, assign, or joint-venture with other partners for a profit.”

Typically they’re going to know up front that you’re an investor but in the event that they don’t, you’re making clear that you’re looking to do this deal for a profit, and you’re listing several ways that could happen, which is, in our case, very accurate because we don’t always know what we’re going to do with the property. We just know that we intend to make money on it somehow. So definitely put that disclosure in your contract.

Andrea: The fourth wholesaling tip is to get a nonrefundable deposit from your wholesale buyer or your end buyer along with your signed contract or agreement with them, just in case they back out.

Doug: Yeah, you don’t want your money to be on the line if they fail to perform. At least you have their earnest money deposit that you can give to the seller because you failed to perform on the contract.

So tip number five, just know that it’s okay to make money doing this. The wholesale world exists not just in real estate of course but all products. You have middlemen who sell at a wholesale price to the grocery stores, or Target, or whoever that then sells at a retail price. That is what you’re doing in this business, and it’s okay to make a profit doing it.

Andrea: Yeah, you are providing a service. You’re providing a service to the seller, and you’re providing a service to the buyer. If seller A knew how to find buyer C, they would just do that, but they don’t, and you do. You know how to find seller A, and you know how to find buyer C, and you connect the dots. So you’re providing a service, don’t feel bad about it.

Doug: Absolutely, absolutely. So that’s wholesaling in a nutshell. Great strategy, one of our favorites. We do love the fix-and-flip. That’s like our bread and butter. We love to take a house and turn it into something beautiful, and that can generate a great profit for you, but this is another great strategy to have in your toolbox so to speak.

So we hope you got a lot out of this episode.

Andrea: Coming up really soon here, we’re going to have another question and answer episode. I have a feeling that this podcast episode may have generated several more questions.

Doug: Hope so.

Andrea: So feel free to send us your questions at [email protected]. We will definitely answer your questions via email, and we may read it on the next podcast and answer it for everyone.

Doug: Yeah, so send in those questions and until then, I guess we will just talk to you next week.

Andrea: Have a good week.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

For questions or comments please fill out the comments area below and we’ll answer them. Thanks!

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The post Episode 27: Wholesaling Explained! The “How To” of One of our Favorite Investing Strategies! appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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Here’s part 2 of Doug’s interview with Real Estate Legend, Mike Cantu. If you haven’t already, make sure to listen to part 1 so you don’t miss all of the great advice from one of our top Mentors.

mikecantu.com

Download Episode 26 Transcript

Doug: Welcome back to the Spouses Flipping Houses podcast, Episode 26 today.

Andrea: We are back this week with the second half of our interview with Mike Cantu. He is one of our most respected mentors, a really great guy. He has over 30 years of experience as a real estate investor. He’s been super successful, and he is chalk-full of wisdom.

Doug: Definitely, definitely. You’ll really want to stay tuned for the second half of the interview. Mike gets into his decision making process when it comes to tough decisions in this business. He talks about working with his daughter and working with his brother, so you have that aspect of the business there.

Good stuff, get your pen and paper. You’re going to want to pay attention. But first Andrea, fill us in on the drunk driver situation.

Andrea: Yeah, you know it turns out that it’s really not that big of a deal, and we thought it was. We got a call from our contractor saying that a drunk driver has driven into the back of your property. You’ve got to check this out. And so we did.

Naturally, we totally freaked out and it ended up being not that big of a deal. A drunk driver did crash into our back fence. It took out our fence and the neighbor’s fence, so it kind of stinks but not really that big of a deal. We’re in escrow, and we’ll just fix it and move along.

Doug: Good. So the car didn’t hit the house, no damage there?

Andrea: Nope. It didn’t even go into the yard, just knocked down the fence.

Doug: Okay, driver’s okay. Everybody’s good.

Andrea: I have no idea about the driver.

Doug: And then we had an interesting conversation with our six-year-old yesterday as we picked him up from kindergarten.

Andrea: Yeah, he sort of uncovered that our middle son, our nine-year-old, is following in his father’s creative childhood entrepreneurial footsteps.

Doug: I’m a little bit proud, just a little.

Andrea: So we’re driving home with our son, our six-year-old son Owen, and he says, “I can’t wait to get home. After I finish my homework, I’m going to play this certain game on the Xbox, and I got to the next level. I can’t wait to play the next level.”

And we’re like, “Wait a minute. You’ve been stuck on that other level for so long. How did you get past it?” And he said, “Oh well Weston helped me.” And we said, “Wow, what a great big brother you have. That was so nice of him.”

And he said, “Well yeah, I had to pay him.” Wait a minute, back it up, “He made you pay him to help you get to the next level?”

“Oh yeah, just a few dollars.” Well he’s six, so to him dollars, he doesn’t really recognize the value quite yet. And we said, “So how many dollars did he charge you to get to the next level?”

“Fifteen.” Oh my goodness.

Doug: So I’m looking at Andrea at this point, and I’m half boiling inside that one son was taking advantage of the other son, but then I’m half smiling and proud that wow, that’s a great way to make some money that he discovered.

Andrea: Off knowledge that he had that his brother didn’t have and was quite willing to pay for.

Doug:  So I, in good conscience, could not be the one to discipline him on this because yes, I’m guilty as a youth of charging my younger brother twenty-five cents, only twenty-five cents…

Andrea: Yeah we have some serious depreciation in order.

Doug: …to play a game in Nintendo, so inflation has really kicked in for the video game knowledge.

Andrea: Yes and your little brother was so loyal that he would set quarters on your Nintendo if he played it when you weren’t home.

Doug: Hey you know, he thought I had hidden cameras, which I’m glad he thought that. He was a good paying customer.

Andrea: Did you charge the neighbor kids too?

Doug: Yes, I think I had a sign with a little jar that said $0.25 per game, so pretty much anyone who wanted to venture in and play my Nintendo, you’ve got to pay up. You know what I mean?

Andrea: Well you started young, what can I say.

Doug: Well if you haven’t visited our website we have a free gift for you: SpousesFlippingHouses.com. Notice I didn’t say “www.”

Andrea: Good job. And then also, if you would leave us a rating and review on iTunes we would really appreciate it.

Doug: Yes so definitely do that. It really helps us out. Also keep sending in your questions. We’re getting feedback from people, and we love it. We’ll have another question and answer episode coming up ahead, so send in some more questions and we might address it in a future podcast.

Andrea: And you can send those questions to [email protected]

Doug: Alright, so that’s enough chit chat. Let’s get into the interview, the second half of the Mike Cantu interview.

Doug: One thing that I’ve heard you talk about over and over is that lifestyle and overhead has taken down more investors than you know. Could you touch on that a little bit because you had a good point about keeping your overhead down?

Mike: Yeah, and Doug I’ve witnessed that over, and over, and over again, and the first time around most people make a lot of money, they want to show it off. It’s part of human nature; it’s part ego-driven. I’m not sure what else it is. But people want to show the world how well they’ve done, drive the fancy car, be in the big house in the right neighborhood, and fancy clothes.

And it’s just upgrade, upgrade, upgrade, and you know I made the comment about food/shelter/clothing and beyond that and a few upgrades, it’s all scoreboard after that. I have always tried to be self-sufficient and have things sustainable.

Sustainable is one of my favorite words that I feel very fortunate that I haven’t had to have major, major lifestyle cutbacks because of finances. But then again, I’ve never lived a really high-profile lifestyle. I like the sustainable part of it.

A couple of scenarios here: I live in a nice neighborhood. It’s a 1903 house made out of rocks, looks like Fred Flinstone’s place, but it’s on three-quarters of an acre, and there is a 1950s stucco house off to the northeast on the property. Most people don’t even know that it’s on my property, but that house runs for $1,500 a month, and the property is paid for.

All of utilities, property taxes, everything to do with this property where I’ve lived for years is about $500-$600. So there’s a thousand dollars in positive cash flow on my own residence. Then I have the place in Huntington Beach where I spend the other half of my life.

It’s two duplexes on a double lot downtown, walking distance to the beach, pier, and Main Street. But one of the rents there covers that entire four-unit property. My daughter, and her husband, and my grandson I gave them one of the units. I stay in one of them, and there’s two more units.

And one of the rents there covers property taxes, gardener, water, trash, all of my utilities, everything to do with everything, and there’s money left over plus the rent from the other units. So both of my living arrangements pay me monthly rather than cost me monthly.

And that’s very sustainable, and I try to live my life like that. My office house down the street, my corporation rents that from me, but there’s also a lifelong friend that has a travel trailer that he lives in there. I call it my one-space trailer park, and the income from the one-space trailer park covers all of the utilities and everything else on that property.

So my existence isn’t a dream; it’s at best or at worst a breakeven, and most of the circumstances actually pay me. So I thought I tried to carve out a lifestyle that everyday there’s a lot of money left over.

Doug: Yeah I think you’ve painted the picture before to imagine a bathtub and you turn on one faucet. And most people have a drain there, and everything coming in that faucet is going right out the drain, and that’s kind of the 30-day cycle you’re talking about.

Mike: Yes, and there’s such a glaringly obvious answer to that problem. With one faucet, one drain, and they’re usually about the same size with nothing left over, so 100 percent of the income goes down the drain. The glaring obvious solution to that is to line the walls with many more faucets, to have tub spouts coming out everywhere and turn them all on full blast, and watch your tub overflow.

Doug: And the thing with that also is don’t increase the drain size too much.

Mike: We want to shrink that drain size down as much as you can. I know early on I shrank mine down to the point of making the decision of growing my own vegetables and sewing my own clothes. But be very, very, very consciously aware of the monthly outgo.

And I’ve always tried to run a low overhead, and I’ve realized you can only get it down so low otherwise you’re going to start doing a lot of minimum wage activities that I have no interest in doing. Those have to be delegated, and then you’re going to create some overhead there but just a manageable overhead.

A good example Doug is a good friend of mine who, oh in about 2005 out in the Palm Springs area, had a bricklaying business and at lunch one day, he told me his overhead was $50,000. And it was part of a fixed overhead, and I thought unbelievable.

Then he smiled, and he says, “But we bring in $150k.” And I thought you know, that’s not such a bad business model, but I wonder if it’s sustainable. And the answer to that question was a big fat no. But when the market changed, that $50,000 stayed the same, and I remember months where he’s bringing in $10-15,000 paying out his $50, and yeah that tent folded up a long time ago.

So back to that word sustainable, such a key word.

Doug: Yeah, very good lessons in that. I want to shift gears a little bit and talk to you about your decision making process. I had a problem come up a few months ago where we had a property under contract, and we were moving in on the purchase, and it was going to be a great deal for us. And then the seller at the last minute called and backed out, basically broke the contract, and I suspected it was because he had another buyer that came in a little bit higher than we did.

So it was frustrating, and I called you up for advice, and you had an interesting way of dealing with situations like that. Can you go into that?

Mike: Oh sure, well first of all Doug, I want to tell you that it’s my philosophy that I like to leave a trail of happy people in real estate. And an unhappy seller prior to the close of escrow will remain an unhappy seller after close of escrow. So if things aren’t right, I’m not going to force a sale.

I have never sued somebody for a specific performance to close a real estate deal. I’ve had several deals fall apart over the years because of other investors offering more, and that’s always a frustrating one but for the most part, if they’re not happy with me and my proposal and everything else, I’m going to let them out of the deal.

But my decision making process that I shared with you that day Doug, there’s four people in my life, very, very successful real estate entrepreneurs, all very different people. Between the four of them, there’s close to a 150 years of combined experienced, and I am very close with all four of these people.

And when I have a real estate challenge and I’m not sure which direction to go, I will start to question: What would Mick do? What would Earl do? What would Bruce do? And what would Art do? And with a little bit of thought and a yellow pad, within five minutes 100 percent of the time, I have my answers.

And I’m a little bit like each of those four people. Now Mick and Earl are more alike, and Bruce and Art are more alike, but yet they’re completely different people. Earl and Mick are more men of principles, and they do a lot of things just based on principles. And Bruce and Art are sometimes the path of least resistance, sometimes it’s common sense, but I’m looking for four different answers when I ask that question.

And quite often I catch myself smiling when I ask that question thinking, I know exactly what Earl would do. I know exactly what Mick would do. So yeah, I look to the people that are living the life that I’ve always wanted to live, and their thought process and their decision making process have led to where they’re at now, so yeah, those four people are a huge influence on me.

And I can solve 90 plus percent of my real estate challenges just by sitting down and going through that exercise. What would Art, Mick, Earl and Bruce do? How would they handle this?

Doug: That’s fantastic. And you respect all of those four people in different ways.

Mike: And I love to have lunch with each of those four people, but they’re so different and so unique, yet they’ve all carved out their own niche under the great umbrella of real estate. They all live real estate from sun up to sundown. They’re all financially free, and they have a great life because of it.

Doug: That’s fantastic. Well this show, our podcast, is called Spouses Flipping Houses. It is centered around people, not just spouses, but loved ones— brother, sister, father, son, partners— partnering up in the business and doing that with that added dynamic. Now I know you don’t do the business with a spouse, but you have worked closely with your daughter and your brother I believe.

Mike: Yes.

Doug: Can you talk on that?

Mike: Oh sure, let’s touch on my daughter.

Doug: Okay.

Mike: Early on, I told her she was going to learn two things. She was going to go to community college, and I said well I’m not going to force you into anything; however, real estate is going to be part of your life. You’re going to learn management and if you’re too lazy to learn management, I’ll give this job to someone else when I’m done with it.

And that was the last thing she wanted to hear, so I thought okay, with this look on her face she’s going to become a very good property manager. The other thing I told her is you’re going to take college-level psychology. That is one of the most important classes I think I’ve ever taken, understanding human nature, why people do what they do.

I think it’s our job in this business to size up people: tenants, sellers, everybody in this business. Our job is to size them up and figure out how we can go about dealing with them. So I got her through the real estate principles. She learned the basics, and I got her through psychology, and I think she was 19-years-old when she came to work in my office.

I encouraged her to follow her passions, and she investigated quite a few things. Found out she didn’t want to do this, didn’t want to do that. She wanted to be a jockey, and then went to jockey school for a little bit and realized that’s a very dangerous sport. She still loves her horses but doesn’t want to be a professional jockey.

So she came to work in my office Doug, and I want to say that was about 2008. The market had just fallen apart, and we got 21 months of working together. December of 2010, she ran into some medical challenges that took her out of business for a year. Recovered from all of that, and then she got married.

Then she got pregnant, then had a baby, and as far as I’m concerned she’s still out on maternity leave even though my grandson turned two back in February, and she has another baby on the way due in June.

Doug: Hey, congratulations Grandpa!

Mike: She hasn’t been in my office for several years, but that 21 months that we did work together, we got together, bought and sold some houses, retailed some stuff, wholesaled some stuff, and we kept some stuff for her. And I realized that she was going to be out of the office for quite some time.

We had a five-year plan and like I said, we didn’t make it to the two year mark, but we did get enough houses together to where in the last few years, I’ve sold some of her houses and paid some of the other ones off. And right now she has four houses that are paid off, and she’s got some other houses still.

Everything cash flows, but it’s created over $4,000 a month net income, and that’s not bad maternity pay for being a full-time mother.

Doug: No, not at all, not at all.

Mike: And there’s a lot more upside potential. There’s still more houses to sell and more cash flow to create. So working with her, I told her I’m going to share my motivation. I don’t want to pay for everything for you for the rest of my life. I want to get you financially free.

So this is going to work for both of us. Every dollar you create, that’s a dollar that I get to keep.

Doug: Now how did that dynamic go? I mean, you know she’s your daughter. Are you telling her what to do? Is it a touchy work environment there? I mean I guess everybody is going to be different, but how did that work for you guys?

Mike: Yeah, at first I learned some lessons working with her, but you know she is my daughter. She does still have some tender feelings there, and tone of voice is everything. And if I have the wrong tone of voice she could have a meltdown over it.

I realized that I’ve got to really watch what I say and how I say it but of all the years in my office, those were definitely hands-down the favoritest years, seeing her every single day and being able to work with her and create a future for her.

And I know that there’s round two of that, but right now it’s all about being a mother, and expanding the family, and everything else. I’m glad we laid a solid foundation to where she’s got her core income. Her husband has got a great job; he works full-time. But her income isn’t too far off of his income.

And she wakes up and does whatever she wants or whatever needs to be done to be a mother.

Doug: That’s great. That’s great. I’m sure she’s grateful for it.

Mike: And my brother is a licensed general contractor, one of the best dealmakers that I know, and he’s finishing up a big job right now. But that plan is he’s going to be back full-time, and I’m going to be doing joint venture deals with him. We’ve already laid out the plan.

He’s been in real estate over 20 years and like I said, he’s one of the best dealmakers that I know. He’s got great people skills and a great toolbox of real estate skills.

Doug: So for anyone considering going into this business, or bringing in a loved one, or working with a loved one, would you have any words of advice for them going into that?

Mike: Well, now that has to be broken down into categories. First of all, if it’s a husband and wife, Jack Easton, who has been a big influence on me, is one of the most successful real estate investors I’ve ever met. He spends about half of his life travelling to exotic places with his wife, and it’s a wonderful existence.

But I’ve learned so much from Jack about working with a spouse, that the first question is find out what they don’t want to do.

Doug: Good advice.

Mike: And then take that off of their place.

Doug: Very good advice.

Mike: Now I’m speaking to the man and the wife, and the wife figuring out what she wants to do. I don’t have a wife, and I’ve never worked with a wife, so I’m not an expert in that area. But I have watched a lot of people that have gone down that road, and there seems to be a common theme, and that is the wife does what she wants to do if it’s pertinent to the business, and the man figures out how to do everything else.

You’ve got to cut the business off at some point in the day. You can’t live it from sunup to sundown, 24/7. Real estate in my world Doug has always been a means to an end. It’s certainly not the end-all. Once again, it’s not the houses that do it for me. It’s the monthly income.

You know, I’ve often said that if you take the money out of the equation, that my 35-year love affair with real estate will come to a screeching halt. I am in it for the money, and I make no qualms about that. I do this strictly for the money.

It’s an immediate goal, and it’s got to work for both people. My attitude is you let the wife pick and choose what she wants to do, and you do everything else or find someone else to do everything else.

Doug: Yeah, I think there’s a good lesson in that for anyone. If somebody is forced to do something they’re miserable doing, it may not last that long. It’s going to cause problems.

Mike: Right, but I do think it’s always good to do it once. Everybody in this business needs to do everything once that they pay somebody else to do. Mick gave me that lesson early on. Everything to do with the rehab I had to do one time.

I had to change out an electric panel while Mick sat in a lawn chair and used the stick and pointed, and it was terrifying because I got shocked good as a kid, and I still fear electrical to this day, and I did a complete service panel change out and lived to tell about it. So I encourage people to do everything once.

Jordan and I rehabbed a house. We spent the summer of 2009, a couple of months her and I, rehabbing a house on, I remember, it was on Lawrence Avenue. And she learned a lot. I loved working with her. I didn’t miss doing that part of the business, but I thought nope, she should learn how to do it one time, and it was great father-daughter bonding time.

Doug: Yeah and you can appreciate the next person who has to do it, and what they’re going through, and understand a little bit better.

Mike: I’ve also heard this: I heard Jordan on the phone, and she said, “Oh my dad loves real estate. Me? I like real estate. I love dogs and horses.” So I think that’s the difference. I am more passionate about it than she is, and she sees it completely strictly as a […] goal.

I’ve always used the analogy “money is a lubricant that lets you slide through life and without it, it can be rough.” And she has the lubricant mentality that you create the cash flow, you can do and live life the way you want. I create the cash flow so I can get out there and create more cash flow.

Doug: What are some common traits that you see amongst successful investors today? Are there some common traits you would be able to pinpoint?

Mike: Now, let’s define an investor first Doug. I read more than once two numbers that stick with me. The average real estate entrepreneur lasts about 18 months, and the average landlord lasts about 2.2 years, so those are two humps that everybody in this business that hasn’t been around that long should make it a goal to get past and not become the statistic.

Doug: So maybe let’s define it as people who have gone longer than that and surpassed the statistic, maybe three or four years full-time.

Mike: Yeah, okay several traits. First of all, persistence. I am an extremely persistent person and working with Mick Blackwell for years makes about as persistent as they get. He’s just relentless, gets out of bed while it’s still dark and he’s like that Eveready rabbit that they wind up in the morning and at six in the evening, he’s still going forward. So persistence, that is absolute key.

A desire, not just desire, but a burning white-hot desire, an obsessive desire, and a plan, a direction, a vision. There’s got to be a roadmap that you’ve laid out, and you’ve got to have that burning desire, and you’ve got to be persistent about it because you will be knocked down every single day, somehow one way or another.

Oh I heard I think it was a Japanese saying that you get knocked down seven times, get up eight. That’s always been my philosophy like the punching, no the clown guy, but he had the punching bag as a kid. It had sand in the bottom. You’d lay into him, and it’d pop right back up.

And I think that’s the story of my life: get knocked down, get back up and keep on going. So not giving up is an absolute, absolute key component of that Doug. I’ve been more than once in a position where I thought this is a turning point, how do I recover and keep going in my chosen direction here?

And you know, most people think that going from start to success is going to be a straight line, and it’s nothing like a straight line. It’s like an airplane flying from the East to the West coast, but 98 percent of the time, that plane is not on the straight-line track.

It’s correcting, getting back on track, 98 percent of that flight is correcting, correcting, correcting. And that’s the way my real estate has been. You cannot ever take your eye off the prize. Every day I wake up, and to this day I still have goals, and those goals are what got me going early on and keep me going to this day.

You’ve got to have some direction; you’ve got to have a reason, and you’ve got to have some goals.

Doug: And do you write your goals down?

Mike: There’s got to be a “why.” Why, the word “why,” is such a powerful word that it is usually the tipping point of whether you do something or you don’t do something. If you have a strong enough why, you will do whatever it takes. And I have several whys but like I mentioned earlier, being a single parent and having a young child means failure is not an option.

That was absolutely my attitude. Of all the things that could go wrong, failure was just unacceptable.

Doug: Yeah that’s just good stuff, good stuff. I don’t want to take all of your time here. We’re going to start wrapping it up, but would you have, if somebody who is fairly new getting into this business, maybe they’ve done a deal or two but they really want to grow your business. You’ve just listed off several great traits that you see amongst successful people, but what kind of advice would you give somebody like that today?

Mike: That wants to continue to grow their business?

Doug: Yeah they’ve maybe done a deal or two, or maybe not quite done a deal yet but they really want to get a rental property, or build a portfolio, or start flipping houses. I don’t know, what kind of advice can you give them?

Mike: The best advice I can give there Doug is to continue to grow your education. I have been in education fanatic most of my real estate career. Ten percent of what I earn is fair game to put back into bettering myself as a person, bettering my real estate skills, bettering my toolbox, but for bettering.

And the education process takes a while. It’s not cheap. You want to search out the best education you can find. Be very careful of who you learn from, and my requirement is they always have to be doing what they are teaching and they have to have something to show for it.

I didn’t ever want to hear about the guy that used to do it, and had a bunch of stuff, and now is teaching because he needs to eat. That’s not the guy I want to learn from. I want to learn from the person that doesn’t have to teach, and I think it keeps going back to the education part.

Looking back on my life Doug, as I grew education-wise, I grew real estate-wise. There was a very proportionate growth between the two of them. I don’t ever remember expanding huge in real estate without new education to back that up. So it’s reading books— I’m still an avid reader. I read an hour a day.

I still go to at least three real estate seminars a year. There was a point in time where once a month I was heading off to some other state for a weekend class. I was just obsessed about getting the information, witnessing what it has done for other people. And I would think that I need some of that myself.

So I give it the education, that is what separates people. I get asked questions all of the time, and I smile and think I’m happy to share this because those are good questions. And I too had those same questions at one point in life, and I was constantly trying to put the puzzle together, searching.

And it was a combination of going to classes, reading books, and associating with other real estate investors and hearing their real-world/real-life stories. So as someone who wants to grow, go to the real estate clubs, associate with like-minded people, try and become part of a Master Mind group, and just treat it as life or death.

That if you’re going to survive in this business, there are no shortcuts. You’ve got to be well-rounded, and you’ve got to plan the time.

Doug: That’s fantastic. Great stuff Mike, in fact, speaking of education, you had some courses. Is there still a way people can buy those from you?

Mike: Yes, now I’ll give you a quick conversal on those Doug. As you know, I have “Don’t Get Voted Off Real Estate Island,” which was everything I have done as a real estate entrepreneur— the good, bad, ugly, rentals, wholesaling, retail, philosophy, attitude, game plans, strategies. It’s pretty much my whole life outlook on this business.

It was originally going to be a three-day class, got shrank down to two, and now down to one. I crammed it all into one day. I have never advertised or promoted that course, but a week does not go by that I don’t sell between one and three of “Real Estate Island.” And then I have my rental properties and management course.

That’s the one Bruce Norris talked me into doing and they hosted it. We actually ended up doing it twice because it sold out both times. I didn’t want to do it a third time so we recorded it, but that is my rental program from A-Z. It starts, it’s not all detailed. It’s philosophy, attitude, from the thinking about going in the business to everything to do with it down to the paperwork.

Now the thing about my courses Doug is that they’re both $397. They come with a lifetime money back, no questions asked, guaranteed. I have always put that out there that a fraction of one percent of my income has come from education materials that I’ve sold, and ninety-nine point something is from actually doing what the education that I’ve sold teaches.

And I tell people, “If they’re wheeling you into the convalescent home and you still haven’t figured it out, send the course back, and I’ll give you a 100 percent refund so you have some bingo money.”

But it does come with follow-up, and I encourage people to continue their education, and I jokingly ask people if they’ll sell me the course back. No one’s willing to sell it back, and I’ve never had one returned. So it is packed with life changing stuff if you apply it. It talks a lot about student philosophy, but I personally think it is priceless.

Doug: We are living testimonials of the rental property management course of yours. That is hands-down everything you need, really, when you’re starting in real estate and investment or rental properties. It’s very thorough and a great product.

Mike: And that Doug, that course is my interpretation of Mick Blackwell. I mean he was my big influence. Mick has collected over 100 rents as long as I’ve known him up until the time he sold his apartment, and I went to the “Mick Blackwell School of Management” real world for over 20 years of being business partners with him and seeing it everyday to where it worked for Mick, it worked for me.

And it’s not my favorite thing to do but at the same time, I spend literally less than a couple of hours a week dealing with my rental properties. Not all the vacancies, a little bit more time involved, but Kim answers the calls. I’ve got Justin out showing the houses, and I oversee the maintenance and repairs of them, but we’ve got a system that works now that we’re on pretty well. And we run a really tight ship.

Doug: Yeah and speaking from a landlord’s perspective, that is a fantastic place to be. That is amazing that you can do that with so few hours involved.

Mike: And I can tell you Doug, it has a lot to do with what it is that I’m managing. That has a whole lot to do with it, and we didn’t touch on that one. But over the years, my philosophy has been a John Shaw quote from many years ago. He always said, “Every year, go through your portfolio. Take your worst house out to pasture and shoot it. Replace it with a better house.”

And over the years, I have upgraded, upgraded, and upgraded. I’d get rid of two houses in a “C” neighborhood and trade them for one house in an “A” neighborhood. And then got most of the debt removed from these houses to where a good house in a good neighborhood, well maintained at about 90 percent of market rents.

The odds are that’s going to be a pretty hassle-free, well performing rental house, and I’ve learned all of this the hard way. Early on, I had all of the wrong houses in the wrong neighborhoods. I used to spend 30 days a month attempting to collect rent.

My old job title used to be rent stalker. I stake out a house all day long to wait for the tenants to come home. They’d pull in the driveway; I’d pull in behind them. They’d get out, go in the house. I’d knock on the door, and nobody would answer. And I realized that things have got to change here, and it’s been a constant evolution over the 34 years I’ve been in business trying to create the ultimate for me.

Doug: And you know, but everybody has to start somewhere, and that was your starting point. And you realized that early on— that you needed to upgrade that.

Mike: Oh yeah. I would not have made that 2.2 year mark as a landlord had I not had a vision of some sort.

Doug: Right, right.

Mike: Yeah I’ll never forget the house I had in a bad neighborhood in San Bernardino, one of the first houses I had with Mick. And after beating about the fortieth applicant, I thought, I wonder if I’m going to meet someone who has a whole mouth of teeth.

And it was just, I think the first twenty people combined didn’t have a full set of teeth. And I just thought, I think I’m not in the right neighborhood because these are not people I want to deal with, live next door to, or communicate with. And I learned that lesson over, and over, and over.

One of my big questions for a rental property, if I’m going to keep it, is what’s the draw? What draws people to this house, and what type of people is this house going to draw? Like the Laverne house is a block and a half away from the University of Laverne, that’s where my older sister went to college.

And I thought, no, that’s an A-plus neighborhood. I know what the draw here is.

Doug: Yeah, yeah. Is MikeCantu.com where they can get those courses?

Mike: Oh yes, yes, yes. Back to my courses as I got way off in the commercials. Back on track Doug.

Doug: That’s alright. I want to give people a chance to get this because I mean for $397, it’s about the best $397 you’ll ever spend if you’re wanting good, solid real estate education from someone who is doing it.

Mike: Yeah, and if anyone decides they want both courses, I’ll knock off a hundred bucks. You have to pay full price for both of them, but if they send the course back, I’ll include a check for $100 because it does go through Paypal. It is MikeCantu.com.

The whole purpose of that website is to have my two courses available and like I said, I don’t promote, advertise, or anything else, but I don’t think a week has gone by ever since I’ve done those courses that somebody hasn’t ordered them. It’s all been word of mouth, just like you’re doing right now Doug.

Doug: Well those courses came about because people begged you to put something in that they could buy I think, so we’re grateful for it.

Mike: What I’ll also tell people is that I seriously do some consulting. It’s $200 an hour, and 90 percent of the people that want to consult, I tell them once they find out what they want to talk about, “Oh that’s in Real Estate Highlander” or “that’s in the management course,” and for twice that amount, you get unlimited follow-up. And two hours of consulting, you’re not going to get a fraction of what’s in those courses.

So I encourage people to buy the course first, do all of the follow up and consulting, whatever they need. And then at that point, if we still need to meet one-on-one, we can do that.

Doug: So that’s M-i-k-e-C-a-n-t-u.com

Mike: Exactly, and I’ve been told I win the award for the worst website on the Internet. But like I said, I have not been to my website in years, and years, and years. I have no idea what’s on there. Excuse me, but Kim runs all of that, and he’s constantly taking courses to the post office.

We do send them through priority mail, and I always instruct her to wedge everything she can as free bonuses in there, extra CDs. I’ve got some of my favorite talks I’ve done at real estate clubs. She usually wedges those in.

I’ve written several articles for the Morris Group. We always include those, so anything to make it a good experience we wedge in that two-day priority mail box.

Doug: Well that’s awesome. Thank you Mike for taking the time. We really appreciate it.

Mike: Okay. Doug it was a pleasure, and I look forward to talking again in the near future.

Doug: Sounds good. Take care, have a good one.

Mike: Okay, you too. Buh-bye.

Doug: Buh-bye.

Andrea: So that is it for this episode. Thanks again for listening. We hope that you enjoyed Mike’s wisdom as much as we do. He’s such a great guy, and we’ll talk to you next week.

Doug: Take care

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The post Episode 26: Interview with Mike Cantu – Part 2 appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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In today’s episode of Spouses Flipping Houses, Doug is interviewing Real Estate Legend, Mike Cantu. Mike is a local and well-respected Investor here in Southern California who has really been one of our most influential mentors in this business. If there was ever someone to listen to in Real Estate, Mike is that someone. We tend to quote him A LOT on our Podcast so we thought it would be a great idea to have him on our show to share some of his awesome insights with you. 🙂

This is a great episode…check it out now!

Download Episode 25 Transcript

Doug: Welcome back to the Spouses Flipping Houses podcast. This is the third intro we’ve done today, and that’s kind of how it goes sometimes. Episode 25, we’re glad to be back. We had a couple of weeks off here.

Andrea: Yeah, we took the last two weeks off because our kids had two weeks off for Spring Break, and so we wanted to hang out with them.

Doug: Did you ever get two weeks off for Spring Break growing up?

Andrea: No way!

Doug: Come on! And our kids get three and a half weeks for Christmas. What’s up with that?

Andrea: Well they love it.

Doug: I mean, they love it. I would have loved it yeah, as a kid.

Andrea: And I like it, but it’s a little long.

Doug: Do they ever go to school though? Come on.

Andrea: Sometimes it feels like they don’t go to school very much

Doug: Of course their summer is a lot shorter than ours used to be.

Andrea: Yeah only eight weeks. That’s really short.

Doug: Eight weeks here, so it’s pretty short, but anyway we digress. Glad to be back on the podcast. We’ve got a great interview for you today. We have a guest that we’ve quoted so many times, probably the most-quoted person that we have mentioned on this podcast. Mike Cantu will be joining us today, so he’s got a wealth of wisdom.

Andrea: Yes I think how much we quote him just goes to show how much we respect him and how much he has impacted us and our business.

Doug: Mike is a local investor in Southern California and if any of you who are in Southern California have been around for any period of time, you’ve probably heard that name. He’s a well-respected guy here, does the business right, so we’re really excited to have him.

Andrea: Yeah, he’s basically a legend. I think the thing I like most about Mike Cantu is that he keeps this business very simple, and some people tend to overcomplicate it, and he just boils it down to the basics. And I love that.

Doug: He does, and I think he even says that he keeps it on an eighth grade level or something like that.

Andrea: But really the human mind craves organization and simplicity.

Doug: Simplicity.

Andrea: And so I love his method.

Doug: Yeah, so anyways we’ve been able to do some traveling this past couple of weeks. We got to go to some places we’ve never been before. We got to go to Nashville and a little bit of North Carolina, little bit of South Carolina, Atlanta, beautiful to see that area of the country.

Andrea: Yes it was so fun to drive around some of the neighborhoods in these other states where the architecture and the design style is so different from California.

Doug: Not everything is a stucco box with a tile roof.

Andrea: Yes! So much character, I loved it; it was so fun.

Doug: It was great. And then our legs are still tired from this past weekend when we got to run a relay race called the Ragnar Relay, if any of you have ever heard of that. It’s a, what 200 miles?

Andrea: They say 200-ish, so I think it was actually 196.

Doug: Eh, we ran all of that. It sounds better.

Andrea: 200-ish miles.

Doug: But you have a team of six to twelve people, and you run  different legs of the race, and it goes about 36 hours or so. This was the second time we’ve don’t that, and what a blessing for you to be able to run with knee surgery just what, six, eight months ago?

Andrea: Six months ago, yeah. Super exciting.

Doug: Yeah, so pretty good stuff. But we’re back here glad to be back doing the podcast. If it’s your first time listening or you’ve never visited our website, you should go check it out: SpousesFlippingHouses.com. We’ve got a free gift for you there.

Andrea: Also, the last couple of weeks we have had a few different people share success stories with us since they’ve been listening to our podcast, some cool things that have been happening in their business. And so we want to give a huge shoutout to Phillip and his wife.

Doug: Yeah Phillip!

Andrea: They just closed a flip deal for a $50,000 profit. They have another one in escrow for a similar profit. We’re so proud of you and so excited for you! Thank you for sharing it with us.

Doug: You’re killing it over there. It’s great.

Andrea: Yeah, so awesome. And a couple of others too, so it’s really fun to share in other people’s journeys as they have success. It’s really exciting, so thanks for sharing that with us.

Doug: Yeah if anybody else out there is doing some stuff and has been inspired at all by things that we’ve talked about, let us know. We’d love to hear that. It keeps us motivated and keeps us excited to keep sharing more good info, so keep it coming!

Andrea: Okay, so let’s get into this interview. We don’t want to keep you waiting any longer. If you are near a pen and piece of paper, I would say grab it because Mike is full of these killer one-liners, and he rattles them off one after another, and you won’t want to forget. It’s good, good stuff.

Doug: Good stuff, so grab your pen and paper. We’re going to get right to this interview, so hope you enjoy it.

Doug: Alright, well you have time to do this?

Mike: Absolutely Doug. I am ready to go sitting at my kitchen table with some notes in front of me that you sent over that I just read through, and I think I have some answers for everything on here.

Doug: Oh good. I’m going to turn your volume up a little bit here so I can hear you better.

Mike: Okay.

Doug: Okay, there you are. I think that’s better. All right, well I’m by no means a professional interviewer, so grace is appreciated.

Mike: I am looking forward to it Doug. I haven’t done an interview in a while, and I thought I’m happy to do this one.

Doug: Well great, great. Andrea couldn’t be here. She would love to, but we got a nice call yesterday afternoon that a drunk driver drove a car through a fence of a house that we are flipping in San Diego, so she’s dealing with that right now.

Mike: Now did he actually drive into the house or just into the yard?

Doug: Well that was our fear that it actually went into the house. We just got a call from our contractor who asked what was going on over at […]. There are police cars; there’s a fence down; there’s a car that looks like drove through the backyard, and so she’s going to go assess it and find out really what happened. But I think it may have missed the house. I think it’s just the fence and some landscaping torn up.

Mike: Good, good, good. That reminded me of a story. A good friend of mine growing up, when he was 14 him and his dad bought an old Chevy Love truck, and they restored it for two years, and the day Kermit got his driver’s license, he went to take it for a spin around the corner, and it had a benched seat in it with no seatbelt.

And as he was going around the corner, he realized you’re not supposed to Armor All your seats, and he slid over into the passenger side up against the door panel and went up the curb and through the bushes into the neighbor’s living room.

Doug: Oh man. That’s a…

Mike: So yeah, the moral of the story there is don’t Armor All your seat and your steering wheel.

Doug: Yeah, maybe buckle in too when you’re driving.

Mike: But anyways, I was going to say that you never know what’s going to happen in the world of real estate Doug, and that’s not the first time I’ve heard of that, but I haven’t heard that one in a while.

Doug: Yeah, well I know we were just talking about this business is if anything, never boring. It’s always changing, something new everyday.

Mike: Yeah, and I’m sure you’ve heard Mick Blackwell say you can’t pay for this kind of entertainment.

Doug: It’s so true. And that house was in escrow supposed to close this week, so who knows what’s going to happen there, but fun stuff.

Mike: It’s not over until the check clears.

Doug: Yeah. Well Mike, thanks for joining us. This is Mike Cantu. A lot of people might not know who Mike Cantu is, but you are one of our mentors and one of the people we really respect and listen to in this business, so Mike if you wouldn’t mind, just give us a little brief history about who you are and how you got started in real estate.

Mike: Okay. So Doug, I turned 55 this past January, so I’m officially 55. I have been in real estate later this month will be the 34th year anniversary full-time real estate. That’s all I do. From 16 to 21 I was a professional skateboarder on the Pepsi Skateboard Team and in the summer of 1978 when I was 18 years old, I got exposed to real estate. That’s when California passed Proposition 13.

Most people know it as property taxes, but I know it as they cut out summer school, and that’s what we did for the Pepsi game was assemblies at elementary and junior high schools. And I went to work for Mick Blackwell that summer, and he was building spec houses and as I got to know him, I realized that he had just created a money machine.

He had rental properties; he had apartments; he was a spec homebuilder, and he was also a licensed general contractor and a plumbing contractor. And that summer working with Mick was such an eye opener, and he shared several of his philosophies with me.

One that has stuck with me forever was when he shared his concept of complete strangers waking up in the morning while it’s still dark and five days a week getting in their car, getting in traffic, working eight hours to earn a living, and then at the end of the month bringing one third of that over to his house and dropping it off for him. And I thought how many of those people can I get into my world and duplicate Mick’s program.

So that was kind of the beginning, my first exposure to real estate. When I actually did work for Mick, a typical day would be to go do a copper re-pipe somewhere. He always had those lined up, and we’d usually finish about one, two o’clock. We never went back a second day, and I know Mick made at least a thousand bucks off each of those jobs.

And from there, we’d go to the spec homes that he was building at two or three in the afternoon. Most of the workers were having it up for the day, and they’re rolling up their cords, and I’m unrolling ours, and we’d usually do plumbing on his spec homes until dark.

Then we’d wrap it up, and we’d get in his truck and go over to his apartments, and we would do plumbing repairs until they were all done. Quite often that was until ten o’clock at night, so I was living the life of a plumber/real estate entrepreneur or witnessing the life of it in Mick Blackwell, and I thought the guy just makes money everyday all day, and then he goes home and sleeps, and the money still keeps coming in.

So it was a big influence on me. I had been planning my retirement since I was in fourth grade Doug. I would just sit in school and visualize all of the wonderful things I wanted to do in this world, and not a single one of those visions involved work.

Doug: It didn’t involve getting in your car everyday and driving 45 minutes to…

Mike: Oh no, no, no. And to this day, I mean that’s why I’ve been an entrepreneur all of my life is because I do not want to go to work everyday and be told what to do. In fact, the term that I still use to this day is, “I don’t want to work. I want to do real estate.”

It’s always been a big game for me to where most of the time it does not seem like work. It’s something that I thoroughly enjoy doing, putting deals together, and I realized it’s the thrill of the score that still does it for me. Every time I put together a good deal it’s just a feeling that I absolutely love.

Doug: Well and how old were you when you met Mick and started working for him?

Mike: I was 17 years old when I met Mick.

Doug: Seventeen, seventeen, wow.

Mike: Yep, it was the summer when I was 18 that I got this great vision, and from that point on I continued to be a skateboarder, but I started going to community college at night, and I did that for eight years. I was taking real estate and business classes, and I was actually learning at night and applying during the daytime what I had learned the night before.

Doug: Now if I remember right, maybe you can tell this story and correct me, there was a seminar you wanted to go to, and you didn’t have the money so you somehow worked out a deal with you and a friend. Can you tell me about that?

Mike: Oh sure. The actual class was April 17th and 18th of 1982.

Doug: Okay, that’s amazing right there that you remember.

Mike: Yeah it was the turning point. April 19th I was on my own. I quit my job, and I thought here we go. It’s sink or swim. And I saw a freebie, it was a late night infomercial, and I was channel surfing so I stopped and watched it. And I could totally relate to the guy that they were interviewing.

He was sitting on a surfboard, and in the background was Mission Beach in San Diego where a very good friend of mine lived, and I recognized that, and the guy said, “Last year I didn’t have any money. I was a broke loser, and this year I’m worth over a million dollars.”

Well of course I believed all of that Doug, and then I went to the freebie seminar. It was a three-hour freebie, and I went with my roommate Chuck. We drove all the way to Long Beach; he drove. And it was $500 for the weekend class, neither of us had any money, but we had to go to this class.

So we waited until everyone had signed up or left, and we approached the people, and we gave them our pitch. We told them that for starters, we were going to do a two-for-one discount because we would only use one manual; we would sit in the back of the room and only use one chair. We were going to timeshare it.

We would stand behind it and read over the shoulder, and we talked them into the two-for-one. Now we needed to come up with $500. Then we asked for a good student discount. We were both going to community college, neither one of us were good students. I think we’re about a C-average, but they knocked off $50 for a good student discount.

Then Chuck asked for a AAA discount, neither one of us had a AAA card, but they immediately granted us that one, and we managed to get one more discount. We got it down to $350, and we sat in the class for two days Doug and learned 101 ways to buy real estate with no money down.

But I remember on the way home, I looked at Chuck real seriously, and I said, “Chuck. Do you have any idea what that mortgage thing they talked about all weekend was?” And Chuck said, “Nope. Nope. I was hoping you knew.” So that was the beginning.

Doug: Yeah it’s funny. In my freshman year of college I got a part-time job as a telemarketer, you know the guy who interrupts you during dinner on the phone. And my whole goal was to get these people to refinance their mortgage and set up an appointment with my boss.

And I can totally relate to that because I really had no idea what a mortgage was, but I was setting up appointments left and right, and that was fun.

Mike: No, and looking back, it was the bubbling optimism that got me into that. I’ve always been a very optimistic person but between witnessing Mick and having somebody lay out a plan of how to actually accomplish that and a bunch of different variations of it, early on I realized that it’s a long road of education and the more you educate yourself, the more you separate yourself from everybody else because most people are lazy.

I remember I read more than once that less than one out of a hundred people read a nonfiction book from cover to cover after graduating from high school, and I thought that was absolutely amazing because personally, I have a huge library. Ninety-nine percent of it is nonfiction, and I have learned so much, and my life has changed so much because of the education part of that.

And I tell people that there’s just absolutely amazing things hidden between the front and back covers of some of the books out there.

Doug: Hmm, yeah I know you’re an avid reader, and you probably have more experience than just about any investor I know arguably. But you mentioned to me on the phone the other day that you learn something new on just about every deal. So can you kind of address that?

We have a lot of people who might listen to the show who have not done a deal or maybe they’ve done one deal, but they really want to ramp it up and go full-time, but maybe they’re afraid of what they don’t know. Can you address education and learning, and at what point do you know enough to really get into this business?

Mike: Well first of all, the education I’ve always thought gives you an unfair advantage over your competition, and the goal that I tell real estate entrepreneurs is to earn the title of a real estate technician. And to earn that title, you need to have a toolbox of techniques, approaches, and methods for buying real estate that any time an equity situation presents itself in front of you, you need to open the toolbox and find the tools that are best suited for that.

It’s like comparing a professional mechanic that has a big toolbox on wheels to the typical homeowner that’s got a little plastic box hidden somewhere in the corner of the garage. When it comes to fixing something, obviously the person with the better toolbox and the knowledge of how to use those tools is going to do a better job and go a lot farther.

I like the golf analogy, and I tell people that I’ve never met somebody that pulled over at a yard sale, bought a set of used clubs, drove the golf course, and shot par golf. That’s just not how that works. First of all, you’ve got to really want it. You’ve got to stick with it. You’ve got to pay your dues, and over, and over, and over, you go through the motions and eventually, you will get it right.

I don’t say that to discourage people, but I am pass the 1,400 house purchase mark, and I’ve realized looking back that it was an education from the first house to the last house that I did. There’s always something to be learned. I say that everyday is a school day in this business.

And I got sent to school recently on a probate deal. I thought I knew what joint tenancy was, the right of survivorship, and what I didn’t know was that joint tenancy has to be in equal proportions. We had a situation where it was the 75:25 ownership situation as joint tenants, and that joint tenant label meant nothing because they needed to be 50:50 or one-third, one-third, one-third.

It’s got to be an equal distribution, and I thought I’ve been in this business 34 years and did not know that. So everyday I learn something that I go and do real estate. I almost said that I go to work. I don’t go to work; I do real estate.

Doug: And I think you said and it’s important to realize that you’re never going to know everything about it. There’s always going to be learning.

Mike: Oh no. Yes, I make the claim that about the time I finally get all of the details, the last of the last stuff figured out in this business, that’s the day that they’ll be wheeling me into the convalescent’s hall, and I’ll be kicking and screaming saying, “No. I finally figured it out!”

Doug: I know how to do everything now.

Mike: Yes. […] from a convalescent hall.

Doug: Do you remember your first deal at all?

Mike: Oh absolutely, absolutely. I remember my first deal, my second deal, and my third deal. Now the interesting thing Doug is that I still own my fifth deal that I ever did. I got lucky and bought a good 3/2 in […], took an old FHA loan subject-to, and I learned a lot of lessons from that house.

I’ve owned it over 30 years. I learned the power of amortization, and I remember at that class that I went to, they talked about single-digit interest rates being a thing of the past and that we will never see that again in our lifetime. Everything was double-digit, and this was 1982.

And I remember when I took that loan subject-to, it was a nine and seven-eights fixed rate FHA loan, and I remember calling up my friend just ecstatic saying, “I got one. I got one. I got one of those single-digit interest rates.”

Doug: Wow. Nine and seven-eighths. We would freak out if we saw that.

Mike: Right, but […] nothing to celebrate over. I still have that house, and it’s been one my best performers. I learned a lot about that, about school districts, about cul-de-sacs, just the construction of it. It’s a very desirable house, and I actually lived there for about a year.

That didn’t work out. In order to live in that cul-de-sac you needed two and a half kids, a PTA membership, and a station wagon, and at that time I was single and had a skateboard ramp. So I didn’t fit in that neighborhood, but it’s a great house.

Doug: Well you’ve been in the business over 30 years. You’ve obviously done a lot of different types of deals, but what are you doing today. Are your retailing, flipping houses, or are you buying them as rentals? What are you doing today?

Mike: The answer to that is yes. I hadn’t planned on keeping anything this year, but in early February I put together a fantastic deal in the city of Laverne. I’ve never done a deal in Laverne; Claremont and Laverne are the two toughest cities in my marketplace to deal in, and I’ve done three Claremont deals in all of these years.

I still have them as rentals, and they are just golden rental properties, but right now I’m always looking for wholesale deals. That’s been my […] for eternity, so I’ve got most of my houses paid off from wholesaling stuff. But I’ve got a wholesale deal in escrow; I’ve got to take it through to the short probate process. I’ve got two retail deals going, one that’s in escrow that’s finished and the other one is oh, maybe at the halfway point.

And I just closed a couple of weeks ago on the new rental house. I am going to keep the rental house, but I haven’t decided if I’m going to treat it as an upgrade by getting rid of something else. Most likely I’ll just add it to the pile and keep going. So the answer to that Doug is I’m doing all three: retails, wholesale, and keeping. And that’s what I’ve done as long as I’ve been in this business.

Doug: Okay yeah, you have a reputation as one of the better buyers and wholesalers in Southern California. I mean you just talk to anyone, you go to different real estate clubs, and everybody knows about Mike Cantu, and he’s the godfather of wholesaling I guess.

Mike: And the reason behind that Doug is I mentioned Mick Blackwell. He was a plumber; he had a source of income. He was a skilled tradesman, and he was in-demand and hanging around Mick, I went to watch a lot of times with him and his buddies. We’d go to breakfast, and they were all real estate entrepreneurs, but every one of them had a source of income.

If it wasn’t positive rental income, it was from another occupation, and I looked at a lot of people in the real estate world, and I realized that to be an investor, you need an income. To be an entrepreneur, you need some drive, initiative and ideas, and I chose to be a real estate entrepreneur to generate the money so that I could be a real estate investor.

All I really wanted was those people getting off while it’s still dark, going to earn a living, and bringing me a third of it at the end of the year or at the end of the month. That plan has never changed but I thought that in order to get those houses, I’ve got to have some money.

And I did retail and wholesale, and wholesales most of the stuff over the years, the bulk of it has been wholesales, but it’s been a constant source of income over the years. I’ve never had to go get a regular-type job.

Doug: And I knew that, and that’s why I knew you were going to say something about that because I know that rental properties and cash flow is kind of your true passion.

Mike: Yes.

Doug: And so why, can you talk a little bit about rental real estate versus the stock market or you know, mutual funds, or any other typical vehicle for investing? Why rental real estate?

Mike: First of all Doug, if you become a good buyer, going into it you can capture a lot of equity. The Laverne house that I mentioned— that’s a 450, 475 house, and I paid 250 for it. Now it does need a boatload of work, but when all of the dust has settled, there is going to be a six-figure equity cushion sitting there, and nowhere in the stock market or anywhere else that I know of can you buy-in at a huge, huge discount.

And there’s always the upside potential. I know people that are in the lending business and into mortgages, but they lose the upside of appreciation. See, I got into real estate for the cash flow, 100 percent for the monthly cash flow. My vision was to not have to get up in the morning, and go to work, and answer to somebody else.

The original goal was $100 per property times 30 properties, so I would have a $3,000 a month income and at that point, I thought I was home free. When I set that goal, I had a $700 a month monthly rent that I needed to cover, so it was the vision of the rental real estate coming in and through good times and bad Doug, the rentals have kept me going.

And when things really started to change, I started paying them off. And I realized that one house will take better care of you than social security will for most people. And I thought if one will do it, what will ten do? What will twenty do? And what will thirty of these things do, and I just kept raising the bar as far as the income.

And once you get past the basics— food, shelter, clothing, a few upgrades— it’s all scoreboard after that, and I just like playing the game and keeping score.

Doug: Yeah, and don’t you say that sometimes you’ll put a job to a property.

Mike: Oh yes. Every one of my keeper properties has a job description. In fact, everything that I ever buy gets a job description. Sometimes it’s just a post-it note, but on the keeper properties, there’s actually a written description of what that house is doing in my life and why it’s part of my life.

Early on, I realized it was the 30-day cycle of life that keeps people in their job and having to keep going down that road.

Doug: Monthly bills, yeah.

Mike: Most people are too busy earning a living to make any real money, and that’s a very true statement, that they’re consumed with their 9 to 5. Doug, I got off track. What was my question again?

Doug: Oh uh, I forgot as well. I think it had to do with your job description for your properties. Yeah each one, you pick a property for a specific reason.

Mike: Yeah, part of the challenge today Doug is going to be keeping me on track here. The job description for the houses. Early on, I was a single parent, my daughter Jordan and myself, and I realized that the recurring expenses of life come around every 30 days.

And people get trapped in that 30-day cycle of life, so I started giving my houses job descriptions. The first one was obvious, the food house. We needed to make enough money to feed everyone, so 100 percent of the income from the first free and clear house was allocated towards food.

Then we had an insurance house that covered medical insurance, car insurance, all of the other insurances. Then I had a gas house that covered my gas and eventually when Jordan started driving, it covered her gas. But we set up a house for every single on of life’s recurring expenses and once those were taken care of, I thought okay, now I am officially out of the rat race and can do whatever I want to do.

Well I kept adding houses to the pile, and we got to a point where Jordan had eleven horses at one point. She’s thinned that down, but we had a house dedicated solely to hay. We called it the hay house, and I thought this is odd. This is the American Dream. A free and clear house in a main neighborhood, probably worth $400,000-$500,000, and all it does is provide hay for some horses.

But that works out okay. I didn’t have to go out and trade an hour of my life for a bale of hay. And I set up houses for everything including recreation and any unallocated houses— their income went to debt reduction. So I was constantly paying off stuff, and it got to a point somewhere back in 2004-2005 where there was no more doubt, and then the market came when everything crashed.

I took on a whole bunch more new properties, and the last few years I’ve been chipping away at that debt, and it’s almost gone.

Doug: Man, that’s amazing. Yeah one of the things Andrea and I both have always respected about you is that you have such a great perspective on real estate, and what your goal was with it in the first place, and what it can do for you. Not in terms of some kind of number in a bank account, but in terms of your life, lifestyle, and helping you to get out of the rat race as you put it.

Mike: Yes, and Doug I’ve never been afraid of hard work. I just don’t want to do it for someone else. I want to do it my way. That was always my goal: to get up everyday and work until sundown, just don’t tell me what to do and when to do it my way. I’m either going to make it or I’m going to go up in a flaming ball of smoke, but don’t tell me what to do.

I grew up with military discipline in a very crowded house. There were seven kids and two adults in an 1100 square foot house, and I was next to the youngest in that mix, and I realized that’s not how I want to spend the rest of my life. I wake up everyday and feel like it’s the holy grail of entrepreneurship that I am able to spend my entire adult life everyday I wake up doing whatever the heck I want to do.

And I’ve got the day laid out up until about two o’clock. I have a lunch appointment with a very good friend of mine that we’re trying to put a couple of deals together, but every day the freedom I’ve been able to create for myself Doug, I claim to be the most grateful man on this planet that I get up when I want and do whatever I want, and the money part of it is really not an issue.

Now I am not a high lifestyle person. I lead a pretty simple life but at the same time, that’s all I’ve ever wanted is to do whatever I want to do every single day that I wake up.

Andrea: Okay, so this interview ran a little long, so we decided to split it into two because we don’t want to edit out any of Mike’s great content. So come back next week to hear more from Mike Cantu, and we’ll talk to you later.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

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The post Episode 25: Interview with Mike Cantu! Pro Skater Turned Real Estate mogul! appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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Today we’re rolling back the curtain to our business. We want to share with you the “behind the scenes” look of our current business operation. For the first 4 years it was just Andrea and Myself doing everything. Today, we have a team of professionals and experts all helping us run and grow our business. If your curious to see what our business looks like ‘behind the curtain’ this is one episode you won’t want to miss!

Rich Dad Poor Dad – Robert Kiyosaki

Download Episode 24 Transcript

Andrea: Welcome back for Episode 24. Today we are going to take you behind the scenes of our business and kind of show you the breakdown of how we do things, and who works for us, and just sort of how all of that looks in our operation. Doug just made me laugh so hard that the soda I was drinking came out of my nose and my sinuses, and they’re still burning. So hopefully we can get through this.

Doug: We need to wipe off the mic still. So yeah, we’re going to go behind the scenes of our business today, and yes we do sit around in our pajamas and work from the couch, sometimes but not all of the time.

Andrea: Sometimes, but not all of the time. But it does sometimes happen.

Doug: But it is nice on a rainy day with a cup of coffee. But anyway, yeah we’ll get into that later. But I just got off the phone with my best friend from college; actually he was the best man at our wedding. His name is Eric, just a really, really good friend of ours, and it reminded me of way back Andrea, of our beginnings of entrepreneurship if you will.

We were actually engaged, and Eric gave us this book. We’ve mentioned it before on the show so a lot of you know of it: Rich Dad Poor Dad, by Robert Kiyosaki. He gave us this book, inspiring us to think differently. It kind of blew his mind, so he told us we had to read it.

We read that book, blew our mind, just completely opened up possibilities of future, investing, retirement, real estate, just things that we had never really thought about. And here we are, early twenties, just kind of not thinking so much about the future.

We were just working our jobs, living in the present, which was all fine. But this book really opened up the way we think and kind of directed us in the path of starting our own business and eventually getting into real estate. And you know, it all comes down to when Eric gave us that book. Right?

Andrea: Pretty much.

Doug: Yeah, and Eric actually has terminal cancer. And so he’s had it for a while, and it’s getting closer to that point where they’re having to make hard decisions and do things, and it just was so good to talk to him. In a lot of ways this podcast came from being inspired by Eric.

We actually got to take a trip with him and his wife and some other friends to Hawaii last year, and on our way back just after spending some more time together with Eric and our friends, it just inspired us to do more with life while we are here. You know, cause you just never know what can happen, what’s going to happen, what’s going to be going on next week with your family health-wise or anything.

And the podcast was one of those ideas that came out of that, that inspiration on the way home.

Andrea: Eric himself is really such an inspirational person. He’s one of those people that lives life to the fullest every day.

Doug: Full of energy.

Andrea: Yeah, and even though he’s facing death. Really, that’s what it is and to know that he has this time frame, and he doesn’t even really know how long he has, but yet he’s so positive and upbeat every time you talk to him. He’s not concerned about himself; he’s concerned about everybody else.

I think he just has impacted us in a way that our lives will never be the same, and we’re super appreciative.

Doug: We are. We get to go see him next week, so we’re really excited about that too but not to get too serious in the podcast.

Andrea: That was a little serious. Let’s cheer it up a little.

Doug: This is about flipping houses, and that should be fun, and it is. And also, not just flipping houses, but we talk a lot about rental properties and things involved in the investing world around real estate. And speaking of owning rental properties, there are good days, and there are bad days.

And this week we had a bad day. There seems to be this trend, and I’m not going to get off on a political rant here, but there’s this trend amongst cities in Southern California at least where, let’s face it, a lot of the cities are broke. The financial downturn hit them really hard; their taxes are way lower; they overspent. They have all of these problems.

So they’re looking for avenues of income in any way they can get it and unfortunately, landlords are an easy target. So what cities are doing these days is they’re requiring people who own rental properties to jump through all sorts of hoops and pay all sorts of fees and fines.

Well fees and go through these programs, these rental programs, where you have to register your property and pay ‘this much,’ and you have to have an inspection on your property, just because it’s a rental property. And they’ll come in and say, “Oh yeah, by the way, this is not to code. That’s not to code. You have to get this permit, and you have to get that permit. You have to redo this. You have to fix your roof because it doesn’t look good.” I mean just endless.

Andrea: It feels so unfair because they would never do that to a regular homeowner. They could never go by and say, “You know what. We don’t really like your roof, or we don’t really like that thing on the side of your house. You need to change that.” Unless you’re in an HOA-type of an area, that’s never going to happen to you.

But landlords, they’re kind of really picking on us.

Doug: Right, so you know they demand to come inside your property once a year, disturb your tenant, disturb this house that has just been sitting there for years, and years, and years not causing anybody any problems. And ultimately, it ends up in a lot of repairs, a lot of costs, and just a lot of hassle.

And so this week we got a letter from another city that we happen to own several rentals in that they’re beginning this program, and they have tracked us down, and called out our properties by name. And they will be requiring us to join their program.

Andrea: I think they’re going into the public records and finding all of the properties that have a tax address that’s different from the property address, and then that’s how they know. So that’s how they’re finding everybody.

But trying to look at it from the bright side you know, I guess this will force our hand to maintain properties better. Not that we don’t maintain them well, but it’s going to require us to do things that we might not even have done otherwise.

Doug: Yeah that’s the bright side. That’s the way to look at it. No that is true, and that is their angle that they’re improving communities, and neighborhoods, and that’s how they sell it to the general public maybe. But I don’t know; it kind of seems unfair sometimes.

Andrea: Yeah, just another reason why you have to buy your properties right from the get-go because you have to have some room in there. You have to have some flexibility because you never know what is going to happen.

Doug: Very good point. Yeah, we could have bought this property on a really thin margin for cash flow, banking on nothing changing, and then something like this totally out of your control can come in and all of the sudden wipe out several hundred dollars a year in cash flow. And that could have changed the decision you made to potentially buy that property. So yeah, good point. Buy it right.

So now that we’ve thoroughly inspired everybody to go out there and buy rental real estate.

Andrea: Just keeping it real, just got to keep it real because like you said, there are great days in this business where it is a lot of fun. But then there are hard days too. There’s stuff that happens that just plain stinks.

Doug: The realities you have to deal with. So let’s go into the main topic. Let’s talk about our business and what we look like today. Let’s go back to the past. So when we first started flipping houses, it was in 2008, and of course it was just Andrea and myself. It was just us.

And we literally did everything, which is not a bad thing. I mean that’s how most people start, and that’s how you should start, but we stayed that way though. We flipped houses until 2008 all the way up to 2012 just you and I.

Andrea: Yeah, and we’re big fans of keeping it simple, so I wouldn’t say to go hire anybody right away. Keep it just you for as long as you can really, until it comes to the point where you are ready to scale and you just cannot do it anymore by yourself.

Doug: Yeah. I think there comes a point in everybody’s business when you’re trying to grow that you are sort of getting in your own way if you’re not hiring some help or expanding. And we’ll go into a little bit of that later here, but it was just us doing everything.

And we worked out of our house the first four years or five years actually that we were flipping houses. But today it looks very different, so we’ll get into how that happened. People ask us a lot about our team and what our operation looks like, so we’re going to roll back the curtain.

I always picture the Wizard of Oz and like there’s this little guy kind of running the whole thing. But we’ll just share what our business looks like today. It didn’t look this way six months ago; it didn’t look this way a year ago. It may not look this way in six months or a year from now.

But currently today, this is kind of how it looks and what we do. So let’s get into it.

Andrea: So about two and a half or three years ago we decided it was time to hire an assistant that would help us out full-time. And because we worked from home, we really didn’t want to bring somebody into our home because that’s just weird.

I mean, maybe it’s not weird for other people but for us, that didn’t feel comfortable. So we started looking for office space, and we found a great little place not too far, like two miles from our house, and it was a newer office building type of a setup that was kind of cool, and our neighbor actually was renting another suite in that building.

And so it was kind of fun to know somebody that was already there, and so we decided to go ahead and rent that office space. We got our assistant in there. Did we just have one at that time?

Doug: Yeah, we hired one assistant. She was full-time, administrative, kind of helping us out with a lot of paperwork and things, so it was just one at that time. We had one room in this little suite.

Andrea: So to make a long story a little bit shorter, that office space ended up coming up for auction. And we knew immediately that we wanted to try to buy it because if we had our choice, we would actually move our working space into a different suite within there that had some different rooms, and a little kitchen area.

Doug: That was a little bigger.

Andrea: A little bit bigger, and then we could rent out all of the other suites within there, and it would cover our whole payment. So we got super excited about it, and Doug went to the auction. About 10 or 12 people showed up so we thought for sure we weren’t going to get it, and sure enough we got it for less than we had even hoped to.

Me and our assistant were like on the other side of the wall because they performed the auction right there in the office building in the suite that we wanted. Me and our assistant were listening through the wall like, “What number are they at?”

“Did we get it. Was that us? Was that Doug?” It was really exciting.

Doug: Yeah, it all happened so fast, and we got the property for much lower than we had hoped, so that was really exciting. And then we’ve been in there now a total of about two and a half years. We’ve owned it for about a year, and we’re still there. And it gives us a little bit of room to grow if we want to.

So it’s kind of a cool thing, and we rent out the rest of the suites just like we had planned.

Andrea: So the cool thing is that now we have a working space at work, and we have a working space still at home, and so we have our choice. Some days we’re more productive at the office; some days we’re more productive at home, but it’s nice to have that option.

Doug: So let’s be real. I mean we have three young kids. We have kids from junior high down to kindergarten, and we love working from home because we can be here with the family, and we love being those kind of parents. But in the summertime when the kids are all home, let’s face it. I’m down at the office.

We are down at the office as much as possible in order to be productive, just because it gets a little loud around here sometimes. So it’s nice to have the option. All right, so enough about our office space. Let’s talk about our team, our staff, and who they are, and what are there roles.

So there’s me. Initially, again it was Andrea and I. We were everything. So today it’s kind of been segmented off. So there’s me, and what my main role is right now is managing the acquisitions side of the business. My entire role is to get deals.

There’s a lot involved with that, so I manage our sales team, our marketing that goes out. I’m responsible for sending all of the marketing out and finding new avenues, anything I can do to generate leads to potentially get deals. That’s my role. I also take on training the sales people that we have.

I will train them on how to analyze a property, how to properly value it based on the comps, and I’ll teach them a little bit about what I know about negotiating with people, and just sort of the ins-and-outs of dealing with people and acquiring property. I handle that training.

I’ve also developed our Podio system. We’ve mentioned Podio in the past, and it’s our software that our entire business runs through. And so I’ve developed some systems and some things in there that will make life easier and help automate a lot of the processes that we have in sending out offers, and tracking leads, and things of that nature.

And then my other big role is what I call ‘dispositions’ or selling the properties. When we wholesale houses, which we do a lot of, I’m responsible for selling them and marketing those properties to our potential buyers, getting them interested and coordinating them to take a look at the houses, and inspect them, qualifying them, and getting the properties sold. So that’s kind of my role today.

Andrea: Man, you’re busy.

Doug: I am busy, but it’s better than being bored. I like what we do. It’s fun.

Andrea: I’ve got to say that I was joking. You really keep it in check really well, so I appreciate that.

Doug: Oh, thanks. Well let’s talk about your role. You’ve evolved a lot over the time of our being in business, so what is your current role today?

Andrea: So I have three main roles within our business, and I always say that I’m a full-time real estate investor between 9 and 3 because getting the kids off to school in the morning is kind of my first priority. I want to make sure that they get sent off joyfully, and that we’ve had a great morning together, and then I pick them up at 3 o’clock and try my best to give them my attention until they go to bed.

So I will take some calls here and there during that time frame, and I’ll check emails again after they go to bed, but I’m pretty much working from 9 to 3 for the most part on most days. And so you mentioned that my role has evolved, and it most definitely has, and I think I’m loving what I’m doing now more than I ever have since we’ve been in this business.

Doug: Yeah, I think you’ve found your genius-zone.

Andrea: I don’t know about that. But it’s been so fun.

Doug: No you have. You’ve settled into this role. I think it’s really good. Go ahead.

Andrea: Yeah, so probably about in November I would say, I took over in the project management role with our rehabs. It just made sense because I had done interior design school, had learned a lot about design and the psychology behind it, and working with contractors, reading plans. I’ve done a lot of drafting myself and that sort of thing.

So it just made sense if I was the one creating the design plan for the house, and I was also the one there making sure it was being implemented correctly. And so I’m loving that so, so much.

My second role is I’m doing all of the design, which we already kind of mentioned in the last one, and sometimes this is more involved. Sometimes it’s less involved. We have a lot of projects that we do that is like “clean it up, same old paint, same old bathroom, same old kitchen” that we always do.

But then sometimes we get those really fun ones that take more time, but I really love those projects where we get to be more creative. So that falls under my role, and then I’m also a licensed agent, so I list all of the properties that we sell after they’re fixed up.

Doug: Yeah, which can be a lot of time in itself depending on how many properties we have listed and in escrow at any given time. That can take a lot of time as well.

Andrea: But we’ll talk about our other employees here too in a minute, but our assistant helps out a ton with that so it doesn’t all fall on my shoulders, which is really nice.

Doug: So the third member of our team, and this is the first person we hired on a full-time basis, is our assistant. And to just say that she’s an administrative assistant is really doing her a disservice because she handles a lot of the administrative processes and things that go on.

She does all of our transaction coordinating, so all of the paperwork and phone calls that need to take place when we get a purchase and also when we’re selling a property. She takes on that role, so essentially our acquisition team will get something under contract, and then we hand it over to her.

Andrea: She wears many, many hats.

Doug: She does wear many hats. Kind of the heart of keeping things running in the business and this person also does property management for us. She does a lot of the rent collection; she’ll take phone calls and deal with tenants.

We do have another part-time assistant that helps with some of the leasing of properties and taking some of the phone calls as well, but our administrative assistant here is the main point of contact for all of our tenants and handles 90 percent of all of the property management roles.

Andrea: So then the fourth member of our time is our inside sales person, and so why do we call her ‘inside sales.’

Doug: That’s a term for on the phone. It doesn’t go outside of the office, if you will.

Andrea: Okay, so this person actually was our very first hire. She was not full-time at first. We hired her on HireMyMom.com. We had heard on another podcast that it was a place to find virtual assistants, and so we hired her just to scrub lists, and I think she built our original website and just to do a little bit of things like that.

But the more work that she did for us and the more we got to know her, we realized wow, she’s really good on the phone and she’s a really hard worker. It would be great if we could give her a larger role, and I wonder what that could be. And one of the things we were really looking into taking off our plate at the time was returning phone calls.

So we were having all of the leads come in to a recording service and having to call everybody back, and comp out those properties. It was taking a long time, and Doug also discovered that she had had previous real estate experience, so she knew her way around comping up properties and things like that.

So Doug asked her one day, “Hey, would you want to try out doing some phone calls for us, calling people back?” Sure enough, it turned into a really great situation, and she is our full-time inside salesperson.

Doug: Yeah, so she literally screens all of the calls. Any calls that come in from any of our marketing pieces, she gets through those. She listens to the messages, calls people back, answers them, calls live, kind of filters and determines motivation, does some negotiating, and sends offers to people who might be out of the area or properties we aren’t actually able to access and meet in person with the owner or seller.

She takes on that role, does the negotiating, sends offers, and locks up deals that way. So she’s our inside salesperson, and she’s great.

Andrea: Then our fifth? team member is our outside salesperson.

Doug: Yeah, outside sales meaning leave the office, at least that’s my understanding of it on why it’s called that.

Andrea: At least that’s what it means in our office.

Doug: So this is another role, again, that I used to do, and it was just taking up a lot of time. It’s a necessary and important part of what we do in acquiring property, but I was getting in my own way because you can only spend so much time doing that. And then when you’re doing that, you’re not doing other things that need to get done.

So we’ve got an outside sales guy that we hired about six weeks ago, and it has just been working out phenomenal. So what he does is go on appointments to meet with owners and sellers of the property that get scheduled from our inside sales rep, so she will schedule him appointments.

He’ll go meet at the property, negotiate the purchase, and get the agreement signed, and then he’s onto the next one. And that is his sole role. So he’s driving all over Southern California everyday and seeing all kinds of houses, and just meeting with people constantly.

Andrea: I think that a lot of ‘mom and pop-type’ investors could really benefit from hiring this type of person, but they’re very reluctant to do it because they’ve always been in control of that role. And it can be really challenging to give up… Doug’s raising his hand…

For a lot of reasons, maybe you’re really good at it, and so you’re afraid that whoever you hire might not be as good at it. And I think that actually, that is what most people’s hang-up is. And I know Doug would never say that about himself, but really it was true because he would build such great rapport with people.

And you don’t know if you can duplicate that, and sometimes you don’t know how to train someone else to do that, that thing that you just naturally have in your personality. And so we’ve been lucky with this person that he’s been able to do that kind of in a similar way that Doug does it, in a way that represents our team and our company the way that we want to be represented. So it’s been a good fit.

Doug: It’s been a great fit, and the reality is he may go about it differently than I do, and that’s always going to be the case. But he’s really good, and he’s probably better at it than I am. So I’m so glad we took that step to get this role filled because it has relieved such time from me and has been a great thing to allow our business to grow. So that’s been a huge acquisition for us.

Andrea: And then last but most certainly not least, is our sixth team member, and that is our tech guy. Not a very fancy title, maybe we should consider giving him a better title, but this person is very valuable to us for a lot of reasons. But first and foremost, he produces this podcast.

Doug: Yeah, we just get to push ‘record,’ and play and stop, and then pass it on to him. And the rest kind of just happens.

Andrea: Our random giggling and when we pause because we don’t know what to say, and he makes us sound much better than we really are.

Doug: Well we need all of the help that we can get.

Andrea: Yes, we most definitely do.

Doug: And he’s listening to us right now, so be careful what you say.

Andrea: And then he also does a lot of website stuff and just really all of the tech stuff for us. Our brains don’t function in that capacity.

Doug: Yeah, and that is his forte, that’s his skill, and it’s been a huge benefit to us and our team. So he’s a valuable member at this point, and that’s really our staff. We have a lot of other parties and people that we work with on a part-time basis that aren’t necessarily ‘employees.’

We don’t pay them directly, but we use their services, and they really are a part of our team as well, honorable mention to our title and escrow companies. We’ve been very loyal to our title people and our escrow officers and in turn, they take care of us. They go above and beyond in working for us.

They understand our process and the transactions that we have, and they will go the extra mile to help us out when needed, and that’s just been a great relationship there.

Andrea: So that’s pretty much it. You don’t have to start with this many people. It was a couple years’ process of getting our team in place and like we said, it was just the two of us for a very long time. And we functioned great that way, but there does come a point where you need to get out of your own way, like Doug said.

Doug: Yeah if you want to grow.

Andrea: So in our next episode we’re actually going to talk about when to grow, how to grow, who to hire, and I think that’ll be really good and helpful, so stay tuned for that one.

Doug: Stay tuned for that one.

Andrea: I’m going to put some pictures of our office up on Instagram, so if you don’t follow us on Instagram you can check us out over there. Also check out our website for a free gift.

Doug: SpousesFlippingHouses.com

Andrea: We will be gone next week for Easter. We’re headed out to Nashville and South Caroline to visit my sister and some friends.

Doug: We get to see Eric out there. It’s going to be great. So we will catch up with you in a couple of weeks.

Andrea: Buh-bye.

Doug: Bye.

If you would like to learn more information from our Podcasts, check us out on iTunes & Subscribe. Also consider leaving us a rating (5 stars would be great) and a review would also be helpful so others can learn more about us and get in on our upcoming episodes.

For questions or comments please fill out the comments area below and we’ll answer them. Thanks!

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The post Episode 24: Behind the Curtain of Our Business! appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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Download Episode 23 Transcript

Doug: Welcome back to the Spouses Flipping Houses podcast. We are on Episode 23. Michael Jordan was number 23, and he was something special, so this is going to be a special episode. I can feel it. I know it.

Andrea: Okay, that’s a lot to live up to.

Doug: It is a lot to live up to.

Andrea: Michael Jordan.

Doug: Air Jordan man. You know. Today we’re going to be talking about something we actually mentioned on the show last week that we thought might be a good podcast episode someday. So today is that day, working with real estate agents. We are going to talk about that.

What’s the best way to do it. How do you do it.

Andrea: How do you not do it.

Doug: How do you not do it. What the benefits are and all of that kind of stuff. So we’re going to get into that, and that’s going to be a great topic. Before that, we’ve had a busy week here with a lot of stuff going on. Andrea, I have hardly seen you because you’ve been out and about. So what have you been doing?

Andrea: Yes, I have been up to my eyeballs in building permits and working with inspectors and contractors.

Doug: You’re getting very familiar with the city and county buildings I think.

Andrea: I am, and you know in some cities and counties, that’s actually a great thing. They’ve got a little café; well this is Riverside anyways. You can get a Starbucks and then while you’re sitting there waiting for your number to be called, they’ve got HDTV up on the big screen while you wait and these nice comfy chairs. Not a bad gig.

Doug: Well they ought to. Our taxes are high enough out here in California. Glad to know it’s going towards Starbucks machines.

Andrea: It is, it is. It’s a nice little benefit while you’re waiting to pull your permits.

Doug: Cool, cool. So what’s the latest that’s happened with some of the properties with the permits?

Andrea: Nothing too major, just one when we originally pulled the permit, we didn’t include HVAC for whatever reason, and so we’re having to add that before the inspector comes back out on Thursday for the next inspection. And then on another one in Riverside, just kind of dealing with the historical society a little bit and figuring out exactly what they want and don’t want.

Doug: They have some interesting requirements.

Andrea: Yeah, we have to use as much of the original wood as we can, but we’re doing an addition. So we’ll have to mill some new wood to look like the original siding, and then a huge percentage of our demo, they want a receipt showing that it was actually recycled. I think 80 or 90 percent, which is pretty cool they do that.

Doug: Yeah it’s a cool thing, just nothing that we were aware of before.

Andrea: Yeah, so just learning all of these things as we go. It’s kind of fun.

Doug: That is really cool. We’ll have an update on the Fontana property that I mentioned on last week’s show, going out to this guy where we had one issue after another after another on trying to close his out, because he’s trying to move out.

Anyways, I went out and met with him, and we had a meal together, and it was actually a really good meeting. And we were able to talk through some of the questions he had about the process and really what it boiled down to was that we needed to give him a little more time than what we had originally talked about.

Because originally, he had indicated that he only needed two days to be out. Well, that’s just not enough time to really get all of your stuff in order and move.

Andrea: Not for anyone.

Doug: Not for anyone. We’d given a week originally, but that wasn’t going to be enough really. So we just extended it to three weeks, and I was able to help him get some things lined up and in place so that as soon as this closes, he’s ready to get his truck and trailer and get stuff packed up to move on his way.

So that closed Friday, so that was good. That has happened, and now we’re in that three-week period, so we’ll follow up again and see how it’s going. But it’s been good. It’s been a good, busy week.

Andrea: So before we get started, I just wanted to remind everybody to head over to our website, SpousesFlippingHouses.com. We have a free gift for you and then also, we’re trying to be more active on Instagram actually.

Doug: Come check us out on Insta.

Andrea: I think we just dated ourselves a little bit there, but I really like Instagram. I think I even like it better than Facebook because it’s just very visual. You can quickly share a photo of what’s going on in your day, and you don’t have to read someone’s long diatribe like you do on Facebook.

Doug: Someone’s novel.

Andrea: I don’t know; I just like it. It’s kind of fun. Yeah, you can quickly scroll through fun photos, so it’s just a good place for us to post before-and-after pictures and kind of what we’ve got going on. So follow us on Instagram.

Doug: Yeah, and you post a lot of good, cool stuff on there that’s happening throughout our days. So check us out!

Andrea: Well, recently. Last week I did, so we’ll see.

Doug: All right, so let’s get into the main topic today, which is working with real estate agents. So, working with agents can be a great source of leads for you. It can be a great relationship altogether.

We love real estate agents and a lot of times, you’ll hear other investors who maybe have a podcast or platform talk bad— I don’t know if I want to say bad— but kind of put a negative connotation towards working with agents, and how they’re frustrating, and. “Oh, those real estate agents,” or whatever. Well I’ve got an agent sitting across the table from me, so I can’t do that.

Andrea: I’ll kick you under the table.

Doug: The truth is we love real estate, and we love working with them, and they can make your life easy in a lot of ways. They can help you find deals; they can help you sell deals; they can do a lot of stuff for you.

Andrea: And it’s free. It’s a free source.

Doug: It’s free, yeah. So you know, one thing we’ve mentioned many times before and is even obviously more so true with working with agents just in this business in general is that this is a people business. It really is. It’s about relationships. It’s about the relationships you make along the way and dealing with people to help each other accomplish each other’s goals. And agents are some of those people.

So there are two different types of real estate agents, and most agents do wear both of these hats, but some agents really focus on one side or the other of their industry. And that is there’s buyer’s agents and there’s listing agents.

So let’s talk about buyer’s agents real quick. Buyer’s agents are obviously those agents who work with folks or investors, whoever, that are looking to buy. Well first of all, having a buyer’s agent costs you nothing. The commissions that are paid are paid on the selling side, so if you have a buyer’s agent working for you, it’s free to you.

All it is is a benefit. It’s somebody helping you to locate a property, and helping you with paperwork, and all of that kind of stuff. So it’s free. It costs you nothing. Another benefit of working with a buyer’s agent is that there’s a potential for multiple transactions, multiple deals.

You don’t have to do it just once with an agent. They can help you again, and again, and again to find more properties. Another advantage to say, working with a buyer’s agent, is that they typically work in real estate offices among other agents, and they may have a heads-up on a listing that is coming up. Or you might get a priority on your offer based on their relationship with somebody else in their office who has a home that might fit the bill of what you’re looking for. So that can definitely be a benefit.

And then there are also agents that work specific niches. That’s their expertise. Some might be like a probate; their expertise is in going after probates. Or historic homes, like maybe they just focus on certain neighborhoods, and if it’s a neighborhood you like, you want to get in with an agent like that.

So for the fixer homes that come up in that area, you know, they’re going to call you. Condos might be another one, somebody who just focuses strictly on condos, if you’re a condo buyer. So there are agents that will focus on particular niches that can be a benefit.

And then there’s the listing side, listing agents. Now these are the agents that already have a listing. They have deals; they have homes that they are listing for sale. So again, another benefit to working with a listing agent is they typically get more and more listings all of the time.

Whatever their source is, whatever their farm or network, they’re continually getting listings, and that’s more potential properties you can make offers on and potentially purchase. Another benefit to working with a listing agent is once you buy from them, if you buy one home and it goes well, you do everything right, do what you say you’re going to do and close on time, agents remember that.

And they like an easy transaction, so they might call you again, and again, and again hopefully. And you move up their list of priorities as a good buyer. This was a great strategy during the downturn, the big financial crisis when all of the foreclosures hit.

Certain agents, lots of agents, would work with these banks and get many, many, many bank-owned home listings, and if you showed that you’re a buyer that can close and you’re easy to work with, guess what? You become a priority buyer for them.

Andrea: Okay, so how do you find great agents to work with? Well, there are really two schools of thought on this. The first one is that you would want to go after new hungry agents that will hustle for you that haven’t necessarily been burned by other investors yet.

Doug: Yeah, they’re not tainted by the “investor bad name” that can typically be out there.

Andrea: Right, and this might be a better option for you if you’re wanting to go out there and make lots and lots of offers to get flip deals. Seasoned agents are not going to probably want to make hundreds of offers for you. They’ve already got business coming in. They don’t need to do that. They don’t need to work that hard.

But a new agent that’s got hustle, they might be willing to do that for you. The other school of thought on how to find agents to work with is to actually work with one of those seasoned vets who understands what it means to work with an investor.

So this would probably be better if you are wanting to maybe make wholesale deals that you are finding on your own. Some of these seasoned agents that have been around for a long time have big money landlord clients that you don’t even know exist. So if you can figure out who those agents are that work with those people, that could be huge for you.

So I’ll give you a couple of different ideas on how you can go about locating both of these types of agents. So if you’re looking for one of those young, hustling type newer agents, a great idea is to put an ad out there on Craigslist. Because who’s out scouring Craigslist but the people that are hustling and the new agents that don’t have deals yet.

So that’s a great way to find somebody that might be willing to really work hard for you. Another thing you can do is create some kind of a presentation on the benefits of working with investors, and go into your local Keller-Williams or local Century 21 and say, “Can I present this to your agents and let them know about the benefits of working with me and why they might want to do that?”

If you have lots of agents that know who you are and know that you’re the go-to person if they get a listing or know of somebody who wants to sell a house that is in need of repair or for whatever reason it’s not going to do great on the MLS, you can have that opportunity to go and present yourself in front of a room full of people that might then call you if they have a great property.

And then the third idea that I would give you is just to network, because agents love to network. And if you just get on the Internet and search for real estate agent meet-ups, you will find tons of opportunities for you to go and meet some of these people, talk to them, and let them know what you’re about, and find out what they’re about, and how you guys can work together.

Doug: Yeah, there’s probably like a meet-up.com I would guess where you can find them, right?

Andrea: Mm hm.

Doug: So let’s talk about how to find these agents. How do you approach them? Let’s talk about what not to do first of all. So what you don’t want to do is call up an agent, let’s say you just call someone off the Internet or call up one of these offices, you don’t want to say, “Hi. I’m an investor. Can you find me a deal to flip? I want to flip houses.”

Typically, that’s not going to go well for you. They hear that word “investor,” and they probably hear that a lot from a lot of people first of all. And what they’re hearing you say is actually, “I’m going to make low-ball offers and make you work super hard for me with very little chance of ever earning commission,” because that’s just what they hear. That’s how that is interpreted.

So don’t do that. In fact, I wouldn’t even call yourself an investor. It’s fine calling up to say, “Hey, listen. I’ve got some cash, and I’m looking for a property I can put a little money into and turn around to sell. Would you be interested in helping me?” That’s much better than, “I’m an investor. I want to find a deal.” So try that route.

Also, another thing you don’t want to do is be rude, or arrogant, or demanding. Sometimes people can just have that approach because they feel like, Well I’m the guy wanting to do this, and you’re going to help me, and you know… because you’re an agent and you make a commission.

That’s just a bad way to go about working with anyone, so don’t be rude. Don’t be arrogant. Be likeable.

Andrea: That goes back to the whole people business thing. It’s really important.

Doug: Exactly.

Andrea: Unfortunately a lot of agents have a bad taste in their mouth towards real estate investors, and so our goal in what we’re trying to share with you here is let’s all change that together.

Doug: Yeah, yeah, you need to work around that. Let’s be a likeable person. Don’t be one of those “investors” that gets thrown in that category of someone they don’t want to work with.

Andrea: So how should you approach an agent relationship? Well, real estate agents are typically not educated on the type of creative deals that real estate investors do, like wholesaling, assignment of contract, different things like that. They really don’t understand it. It might even make them nervous or they think that that’s against the rules when it’s not.

So you want to find an agent that is either experienced with these different types of transactions or somebody that is trainable, that you can educate and make them feel comfortable with your process.

Doug: Right, someone who is open to it and can see the opportunity there.

Andrea: Right. Another great way to form a relationship with an agent is to actually call on one of their listings to inquire about it. And if it’s pending, maybe you ask them to call you if for some reason the buyer backs out. This is actually a great strategy.

Doug: It’s a great way to do it.

Andrea: And it’s a great way to just keep yourself at the forefront of their mind and eventually, you’re going to be the one that they call.

Doug: Yeah, and then you’re offering them a service like, “Hey, listen. If this guy backs out, call me. We’ll buy it.”

Andrea: Right. And then you want to make it a win-win situation. So you want to give them referrals of people that maybe you come across through your other means of marketing that have a house that they want to sell, but yet what you can offer them is just not quite enough for whatever reason.

You’re not their best option, so give that person as a referral to those agents that you’re working with. They will appreciate it so much. Also, if you work with an agent that does help you to buy a deal, be sure to give them the relist when it’s finished because two commissions equals a happy agent. They will love you.

Doug: Absolutely. They’re not out there for free. They want to make a living too, so help them do that.

Andrea: Yeah, and then another way to make it successful for both of you is just to regularly sit down and brainstorm with your agent for creative ways that you guys can find deals together through the MLS, like using expired listings, cancelled listings, listings maybe that have just fallen out.

If you are continually sitting down with them and going over these things, you’ll make them feel like an important part of your team, like they’re valued. And not only that, I mean great things come out of creative strategizing sessions. That’s a good way to go.

Doug: Absolutely, absolutely. And it helps solidify your relationship with them so they know you’re a real player. A couple more tips on that, just like dealing with say seller leads that come in that call you from a marketing piece or something, an important thing to do with any agent that you touch bases with, or maybe you’ve worked with in the past, or that you got their business card when you met them, is to follow up with these agents.

Don’t be annoying or anything like that, but send an email like, “Hey, just checking in. Do you have anything that you think I might be interested in?” Then the next week, send them a text message: “Hey, it’s Doug. Just wanting to know if you have anything coming up.” Guess what, the squeaky wheel gets the grease.

Andrea: It’s so true because even with us, if we have a wholesale deal, whoever has called us that week to say, “Hey Doug, you got a wholesale deal?” They’re the one we’re going to tell about it just because they called.

Doug: They just happened to call right when we got one, and yes, be the squeaky wheel. Don’t be afraid to do that. It’ll pay off big time for you. So that is working with agents in a nutshell. We hope you got a lot out of that episode. I think agents are an incredible strategy, really no matter what market cycle you’re in.

Andrea: Yeah, there’s always a way that you can successfully work with realtors.

Doug: Yeah, so go out there and find your agents to work with. And also, keep sending us questions at [email protected]. We’re collecting some more questions so we can do another Q & A episode down the road.

Andrea: Yep, have a good week!

Doug: All right, take care.

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The post Episode 23: Working with Agents! How to get deals that come to YOU!! appeared first on Spouses Flipping Houses.

by Doug & Andrea Van Soest | Spouses Flipping Houses

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In today’s episode, we’re taking a break from the norm and doing something a bit different today. We’ve received some really great questions last month and while answering them, we realized it would be helpful if we shared some of them with everyone listening in. If you have any questions for us, feel free to send them to [email protected] or leave a comment below & we will answer each of your questions!

Download Episode 22 Transcript

Andrea: Welcome back. So today is Episode 22, and we are going to answer some of your questions today, just a few.

Doug: Yes, question and answer episode. We’ve been soliciting questions from you guys over the past month or so, and we’ve had a lot of great questions come in, usually via email. And we’ve been trying to answer those personally to those people, but we’re going to actually go through a few of those questions on the air today because I think they’ll be beneficial to most people.

Andrea: Yeah, because most of them I thought, Man, I wish other people could see this question that has come in. I wish they could see the answer because I’m sure they’re not the only person that is wondering about this.

Doug: Right. But before we get into that, we’ve had a real busy week here, and the weeks just never go exactly how you think they’re going to go.

Andrea: No they don’t. I don’t know why I always do this, but I sit down on Sunday night and write out everything I have to do and by Tuesday, it has totally changed around.

Doug: I know. You can just throw that out the window because things or opportunities will show up all of the sudden that you need to take advantage of right now, or you need to meet with someone, and something else gets pushed back. And that’s fine. It’s good to be a little bit flexible because things change.

Andrea: That’s also what I love about this business. I like the unpredictability of it.

Doug: True. It’s never boring. You can definitely say that; it’s always exciting. There’s always something. But last week we mentioned how we’re really not focused on getting more rehabs right now because we’re dealing with some other ones and trying to get those finished up, and we’re just focused on wholesaling.

That was until last night. So what happened yesterday?

Andrea: Yesterday we had a great deal in Palm Springs come across our desk, and that’s just an area that we love. We have a contractor that we really like working with out there, and that plays a huge part of it I think, when we know that this will be easy because our guy out there will take care of it really fast. It’s going to be really good, so we have to do this one.

Doug: And it would be one we would enjoy doing because it’s just a fun rehab out there in the desert.

Andrea: Yeah, they’re typically more modern, and it’s just really fun. You don’t get to do a lot of that out here where we live. People aren’t as interested in that mid-century modern style, and they love it out in Palm Springs. So it’s really fun.

Doug: So that’ll be fun, so Andrea after this is hopping in the car and jetting out to Palm Springs to check out this property and make sure it’s you know, what the person says it is.

Andrea: And I’ll meet the contractor out there, and we’re going to try to make our plan really quick. Figure out what we’re going to do to it.

Doug: And then I’m headed out to Fontana today for another property that we’re in escrow on, and this deal in particular just goes to show how this business is really about people and really about relationships, most of the time. It’s not always about just buying a house for a certain number, and pushing the paperwork through, and closing on it.

It may have been the case back in the foreclosure short-sale days, but today, 90 percent of the properties we buy are directly from an owner or a real person who sometimes has real problems, either with the property or just personally in their life. And we are problem-solvers in this business above everything, and if you can solve that person’s problem and still buy the house at numbers that work for you, then that’s a win-win. And we love doing that, and it kind of makes us happy when that situation happens.

So this particular property, the owner was pretty savvy, and he had called several investors to come take a look at his house and make an offer, and we were one of a few. And when I got there, I think I was the last one to come in. He had said: “Here’s where my offers are at. Nobody has given me the $190k that I want on this property. The first person who can give me that number, I’ll sell them the house.”

Andrea: And he had inherited this house, right?

Doug: Yeah, he was living there, but he had inherited the house years ago, and his sister is part-owner, and she lives out of state. So he’s the other part-owner. But the guy has health problems, and he’s just really down on his luck and is just in a bad spot. So he’s gotten to the point where he needs to sell this house in order to get money to live.

He literally is about of money, completely. But one of the issues, other than that, was that in order to just move out of the house and get some of his belongings out, you need money to do that, or you need family and friends around to help you. Those he doesn’t have around, so he needs money.

And nobody else was willing to work with him on that. They just wanted him to close on the house, and for it to be vacant. So just through talking with him, we discovered that we could solve this problem by closing on the house and giving him time afterwards to get your things and move out.

So that was solving his problem for him, and we were able to come to that agreement to do it. So we opened escrow on the property, and then one after another, little problems just start happening that keep causing delays, things that would normally not be a problem for just about anybody else. But for example, the notary goes out to his property to have him sign paperwork and notarize the grant deed.

And well, he doesn’t have any I.D. He doesn’t have a driver’s license, so he has to order one of those, and that takes a couple of weeks, so it kind of delays the process.

Andrea: And the problem with delaying the process was that when we signed the contract originally, he was already out of money at that point. So here and now, we’re a couple of weeks into it, and he literally has nothing. Doug actually even drove over there to check up on him one day because he was just kind of worried about the guy. He had been slower in responding to escrow, and we just weren’t sure what was going on with him.

And Doug pulls up to his house, and the guy is literally sitting in his house with no food, and he’s got an injury to his leg that prevents him from walking to the grocery store. He had a bike that he was able to ride and go get groceries, but his bike was broken, and he’s out of money.

Doug: He has no one to call.

Andrea: Yeah, and I’m so glad that Doug showed up on that day because Doug drove to the store, bought him a bike, went to the grocery store, got him groceries and a grocery store gift card. Brought all of that back to him, hoping that would help him to sustain himself until this house closes and he actually gets the money that he needs to keep going.

Doug: Yeah, so it’s been kind of one thing after another, and the latest issue is that we’re going to close. Great, we’re right here at the closing time, but he doesn’t have a bank account. So the check will be so large that if he goes to cash the check, it’s going to put a five to ten day hold on the check, which pushes him over the limit of the time we gave him to move his stuff out.

So now we’re reworking that. We’re going to give him longer or go help him get a bank account set up so that the money can just be wired directly to his account, something like that. So we’re still solving problems, working through it, but I want to check up on him and make sure he’s doing well.

And we’re going to follow through, make sure he’s taking care of after escrow closes and has a place, has food, is back to comfort living a little bit.

Andrea: Yeah, this was a tricky one and just one of those things that really pulls at your heartstrings. You sort of can get invested in these people as you’re going through the process and buying their house, you genuinely do care about them. We want to make sure that he’s okay. I don’t want to just buy his house; I want to make sure he’s okay.

Doug: Yeah, yeah. Most people have someone around that can help them out, but sometimes you’re that person, and we’ve kind of realized that in this situation.

Andrea: Sometimes you’re all they’ve got.

Doug: We’re the ones who can help him out, so you know, we’re doing what we can to take care of him. But that’s what I’m going to be dealing with today, which is kind of cool.

Andrea: Okay, so onto our listener questions. I just want to say that I have really enjoyed receiving these emails of questions over the last couple of weeks. It has been really fun to get to know some of the people that are listening to this podcast in a more personal way, and some people have even included pictures of themselves, which is so fun just to say, “Hey, this is me and my wife. This is us, and we’re doing what you’re doing.”

Or, “Hey, this is our family. This is who we are.” And it’s been really, really cool, so thank you very much for your emails and your questions. We’re going to answer a couple of them right now.

Okay, so question number one: We want to get started in real estate investing, but our market is very expensive. It’s a very high-end market, so should we move to a more affordable market to get started? And I first want to say that this question was asked by several people.

Doug: All right, so first of all, I would ask a couple of questions back. Number one, are you sure this is the career you want to have? I mean absolutely sure because uprooting your family, and your life, and moving to a new location to take on a venture that you haven’t done yet or haven’t even started, aren’t even sure you’re going to like it, is that something you’re willing to do or want to do?

It’s one thing if you were planning to move out of the area anyway. But if this is the sole reason, because you think you can’t invest in real estate where you live, then I think you should rethink that because I believe you can’t.

Andrea: Yeah, I think that every market has some kind of a niche that will work. If that means driving an hour away to the suburbs of your market, that might be a better option for you to get started. In fact, we don’t buy a whole lot of deals right around where we live. Most of the things that we buy are bought an hour away.

Doug: Yeah, Palm Springs is an hour and a half drive from us. And most people, I would say depending on where you live in the country, but the majority of people are going to live within an hour, hour and a half, of all kinds of markets— typically. High-end, low-end, rural, urban, most people. That’s not that bad of a drive.

So I would definitely want to say, okay, we live in a high-end market. Where is the closest market that is more affordable that we’re more comfortable starting in and how far of a drive is that. Get to know that area. You can go there two/three times a week. You don’t have to go everyday.

Andrea: Or maybe you develop some kind of an equity split partnership for your first deal if you decide that you do want to go ahead and go for it in your high-end market, but you can’t afford it, you’re a little bit nervous maybe you partner up with somebody else that’s done this before with experience. Where you bring the deal, they bring the funds, and you can learn the process as you go.

Doug: Yeah, and I mean ultimately flipping houses in a high-end market, you’re probably going to be happier that you did that versus going into a low-end market.

Andrea: Oftentimes spreads are going to be bigger.

Doug: Yeah, spreads are going to be bigger. It really is essentially the same process. You’re going to be dealing with different things than you would in a lower end market, but typically the reward path is going to be much greater. There’s a saying out there: “Live where you want; invest where it makes sense.” So I think you can apply that to wherever you live.

You don’t have to flip houses right in your backyard. Locate a market you want to work in, and the important thing is get to know that market. And it doesn’t have to be five minutes away, like we said. We’re going an hour, hour and a half, sometimes two hours away. So just make it work.

Andrea: Okay, question number two: how easy is it to get started with a hard money lender? And also, when using a hard money lender, how much are you required to spend out-of-pocket or are you able to use the equity that you have created there in the ARV to reduce or eliminate this issue?

Doug: If you don’t know what ARV is, it’s the after-repaired-value. So okay, good question, the first thing I would say here is that all hard money lenders are not created equal. There are definitely different kinds of lenders out there. Hard money is kind of a loose term. It could be anything from a huge brokerage company that lends to investors, or it could be a single guy next door who is called a hard money lender because he has some money that he lends out himself.

So they’re definitely not all the same. But most of them I would say, most hard money lenders, are going to want you to have some kind of skin in the game no matter how much of a discount you’ve got on the property. They want to know that you’re financially invested in the property as well as all of your time and efforts.

But that being said, it is far easier than a traditional home loan. The application process is typically pretty simple. They may run a credit check or want to verify your funds and ask questions about your experience and things like that. They might do an appraisal; they may not.

Some of them just have an in-house appraisal type system that they do. They don’t even send an appraiser out. You’re typically going to pay two to four points at anywhere from 9 to 15 percent is pretty typical. And I’ve seen or heard at least from different areas across the country that this varies. But here locally in Southern California, you’re closer to that two or three point range, and you’re closer to the 9 to 12 percent probably.

Andrea: Right, and most of them will lend around 60 to 70 percent of the ARV, which is the after-repaired-value, or 70 to 80 percent of your purchase price, so keep that in mind. And then sometimes they will hold back money for repairs.

Doug: Right, so lenders have different programs. As far as the hold-back, sometimes they’ll fund say 70 percent of the purchase price, so they’ll want you to come in with the remaining balance. So there’s your money out-of-pocket, but yet they will fund part of your rehab.

But they’ll want to do it on a draw basis, like after you’ve completed say a third of it, they’ll come out and take a look, release some of that money back to you, sort-of reimbursing you. So that can be a way to go where you’re getting your money back a little bit quicker.

Andrea: And sometimes you can establish relationships with these hard money lenders. So after you’ve completed one or two deals with them and you’ve sort of proved yourself, the process will probably get a little easier for you. Sometimes you can borrow at a higher percentage or a lower interest rate.

Doug: Yeah, they get more flexible once you’ve proven yourself and typically, you don’t have to go through the whole long application process every time. It might just be much simpler— here’s the address, here’s the property. They already have all of your information. They don’t have to rerun your credit. They’re kind of more comfortable working with you now.

Far, far easier than a home loan, if you’ve been through that process recently, like from big banks out there. Much, much, much easier.

Andrea: Yeah, we do love hard money lenders. We’ve used them a lot. They’re a great way to get started, but you will want to eventually start finding private money sources, because that can be even easier.

Doug: Yeah, that’s the way to go. It’s better for the people lending you money because they’re getting a great return. It’s easier for you, and the terms are all negotiable and flexible, so private is what you want to migrate to.

So if you’re looking for hard money sources, I would go to some real estate clubs, get some referrals, talk to other investors in the area, see who they use, get online, start searching around, and definitely get quotes just like you would from a contractor. Ask the lenders their terms. Ask how they do their process and interview two, or three, or four of them before you choose one.

Andrea: Right, okay so question number three: I am having difficulty finding properties to buy low. I have been previously buying through auctions, but I cannot increase my volume by more than six deals per year. I want to increase my volume, but I have to buy low in order to make a profit, and I live in South Orange County. Currently, I’ve been buying properties in LA County, so what can I do about this?

Doug: Okay, very good question, and first I would say that you are not alone. This is probably the number one struggle that most “mom and pop” investors and big bank investors as well have, finding those deals, finding more below-market properties. So you’re not alone.

And I would say this is probably the number one most important, valuable skill you can develop in this business— how to get your hands on below-market deals.

Andrea: Yeah, it’s so true. Because really, anybody can fix it up and do a decent job. I’ve seen a lot of ugly rehabs that sell just fine. This is where it’s at.

Doug: This is where the money’s made, on the purchase and locating these deals. This is what everybody wants, all of the investors, so it can be done. So a couple things here, first of all, you mentioned in the question that you’ve been doing auctions. That’s been your source of deals for the past few years.

I would say this, strategies have different seasons where they work, and there are seasons where they don’t. And in my opinion right now, and we’re talking about foreclosure auctions I would assume, this is not the season for foreclosure auctions.

Andrea: And the “seasons” that you’re referring to really are based on the market cycle.

Doug: Yeah based on the market cycle, so currently in the cycle we’re in, we’re not experiencing a huge amount, in Southern California where this question came from, of foreclosures. Yes, there are still some out there but not like it was in 2009/10/11, which is when you’ve been purchasing properties.

Andrea: And which is when you would typically be buying great auction properties, when there are a ton of foreclosures.

Doug: Yeah. Again, sort of a supply-and-demand, there’s a lot less supply of these foreclosures at the auction steps, and now you have a lot of people you’re competing with down there because that’s their only source as well. And you know what, it has its advantages. It’s quick; it’s easy; you buy a property that day.

It’s highly competitive right now, and if you’re looking for really below-market deals, it’s going to be a struggle as you’ve noticed to get a consistent amount of deals at the courthouse steps right now. So I would say that season has passed for that.

Andrea: Yeah, I think it’s really important to pay attention to the market cycles as it goes along because throughout every cycle, you’re going to change and shift your strategy as you move through that cycle. There’s going to be different ways that you’re going to go about acquiring properties.

Doug: Right, and so Bruce Norris has this thing called a Deal Wheel, which is this very topic we’re talking about right here. There are certain strategies that tend to work in certain cycles within the market that tend to be where you want to be trying to acquire properties during that particular time.

So in the cycle we’re in now, it is direct to owner. I mean, that is the way to go for the most part as far as hard-to-acquire deals.

Andrea: And we’re in California, so we’re mostly speaking to where we are. There might be other areas of the country where auctions are great, but this person asking this question is also in California.

Doug: Exactly. It goes back to our point of your market. Your cycle may be different; your market may be different where you are. Auctions may be a great source for you, and you’re getting plenty of below-market deals. Great! If it’s working for you, keep going.

But for this particular investor, we know Orange County and LA very well, so I would say a couple of things. You need to get serious about your acquisition strategies and really put your effort into marketing. Just like in any business, if you don’t have leads, if you’re not marketing or advertising in some way to generate leads and deals, you don’t have a business. You’re going to die.

So I would say that you need to put a few fishing lines out in the water. The more lines you have, the more chance you might have of catching some fish.

Andrea: And discovering what works and what doesn’t.

Doug: Exactly. So in my opinion, for this guy who asked this question, you know it depends on your budget. If you have a high budget, and you’re ready to spend some money to try to get some deals quickly, there are lots of things you can do.

You can do direct mail on a higher scale. You can do some pay-per-click on the Internet; you can do a radio ad; you can do a TV ad; you can do billboards. This is pretty big stuff. Most “mom and pop” investors maybe don’t have that high of a budget to try and find deals, which is understandable, so if you don’t, there are some other strategies that are very low budget.

They might require some more time and effort, but I think they can be great, great strategies for finding some deals for you. And some of those would be like door knocking. We’ve mentioned this before, but either just drive through neighborhoods you’d like to invest in or you think would be good areas to buy properties in.

Look for the ones that look vacant, that look rundown, that might have a for-sale-by-owner sign, anything that has a hint that maybe that property is causing a problem for somebody because it’s looking rundown or might be vacant, then that person might be interested in selling. Knock on the door!

Andrea: I think a lot of people ignore this one because it’s uncomfortable, but it really is so effective. I was just talking to a mom at my son’s school a couple days ago, and she was telling me how her husband really wanted to buy a rental property in this one town near where his mother lived, and he saw a house a few doors down that was rundown. He had never done this before.

He went and knocked on the door, bought the house. The first door he’d ever knocked on, bought the house.

Doug: There you go. Yeah, and it works so good because so few people do this because it’s uncomfortable. It takes time. Nobody likes to, I don’t know maybe some people do, but I don’t like to door knock. I just don’t. But it can be a great way, and it doesn’t cost you anything except time.

So do that! Drive around, knock on doors. If nobody is home, knock on the neighbor’s door. Ask them about their neighbors, if they know anything about the house, and if they can get in touch with them. That’s a good way to go. Or, form some relationships with some agents out there.

Go into some offices and find out who the real players are there, the agents that get a lot of listings, and just let them know who you are/what you do, and that you’re looking for some of their properties that maybe need an all-cash offer Some of the fixer ones or some of the properties that their other investors aren’t interested, to call you and give you a shot.

And there’s a whole other podcast episode probably just in this topic here but you know, get to know some agents and try to build that relationship. Maybe they can send you leads— that’s free. Go onto some for-sale-by-owner sites on the Internet like Craigslist, FSOB.com, and there’s probably a million others.

Look for the ones that are for-sale-by-owner and start calling them up or just work the MLS. I think that’s probably better than going to the auctions these days. Even though it’s competitive, it’s free and you can do that. Get on the MLS everyday and start calling up agents, making some offers.

Andrea: You can even call expired listings. You can call cancelled listings.

Doug: Right, yeah. Get a little creative. Look outside the box on the MLS, things that aren’t just active listings. Good point. Also, wholesalers, the Internet is full of wholesalers. Just start Googling in your area and reach out to these wholesalers. Try to get on their lists; see if they have anything that day they could send you.

Go to some investment clubs and start asking who are the people who have deals here. I’m looking for deals.

Andrea: You know what’s a great way to find wholesalers is actually to put an ad out on Craigslist because I’ve noticed that when we have tried to sell a property on Craigslist…

Doug: So you mean like listing a house on Craiglist for sale?

Andrea: Yeah, so okay maybe you don’t want to lie. I guess you need a deal to actually list on there, but I feel like every time that we have listed something on there, the majority of the calls that we get are from wholesalers and bird-dogs. And it’s been a great way to fill up our list. We get their contact info; we can call them on future deals.

It was actually a great unintended strategy for finding wholesalers.

Doug: That is. That’s a good one. And you know the last comment I would say about finding deals is, especially in Orange County and LA, it’s a highly competitive market, and maybe you need to take a look at your margins. Are you really trying to buy too low, I guess is my question.

And I want to be careful to say pay more for a house because that’s maybe not good advice for a lot of people, but listen, if you want to do volume in LA or Orange County, you have to tighten up your margins a little bit. What can you do to save money on selling the house, or on your rehabs, or on your holding time, or your hard money costs and private money? Can you get those down?

How can you get your costs down so that you can be a little more competitive and pay a little bit more to do deals? Because sometimes, again, if you’re looking to do volume, that may just be the reality of your market. You’re just trying to get too much of a good deal in that area, so take a look at that. Maybe you’re just offering too low.

Andrea: So thank you so much for sending in your questions. This has been awesome. We would like to do more question and answer episodes like this, maybe once a month. So if you have additional questions, please feel free to email me at [email protected] , and I will get back to you, and we might read your question on the air.

Doug: Yeah, so reach out to us. Also, please give us a rating and review on iTunes. It really helps us out. We love it when we get some of those.

Andrea: And if you’re new here, head over to our website, SpousesFlippingHouses.com. We have a free gift for you.

Doug: So that’s it for the day. We have to hit the road, get out of here.

Andrea: Have a great week!

Doug: Bye.

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The post Episode 22: Listener Q & A; Expensive Markets; Hard Money; How to Buy Low! appeared first on Spouses Flipping Houses.