003: Flipping Houses Like Hotcakes with J. Scott

House flipping is all the rage – with popular Toronto home renovations T.V. shows and other avenues of exposure, more and more people are eager to try their hand at property renovations for profit. The truth is, T.V. may make it seem a bit more glamorous and easy than it really is, but you CAN still make a good amount of income from doing the old fix N flip.

In this episode of InvestFourMore, Mark Ferguson chats with J. Scott, a serial house flipper who got into the business of real estate fix and flips without any previous real estate experience. He learned his lessons the hard way and cataloged his successes and failures (the first 50 houses he did) on his website www.123flip.com. You can find step by step details there of what he did, how he did it, the pros and cons of each approach, and much, much more. Find out more about J. Scott’s story on this episode of the InvestFourMore podcast.

One of the topics discussed at length in this episode is also one of the biggest hurdles of house flipping: management of the project. It becomes increasingly difficult the more properties you have working at one time. J. Scott is no stranger to those issues and has learned the importance of having full time project managers who help him find and enlist the right contractors and subcontractors as well as to keep an eye on the financial end of things to make sure that projects complete within budget and on time.

Have you ever considered flipping or managing properties in different cities? J. Scott has done it – and continues to do it regularly. The key to keeping those property flips going without pulling your hair out is the establishment of a trustworthy team that knows the local market and is able to keep things rolling without being there every second. Listen in to find out how J. Scott went about building that team and the benefits it brings to his property flipping business.

Do you know what is mean by “wholetailing?” It’s a term J. Scott uses to describe the kinds of “big issue” wholesale deals he’ll buy at times, just for the sake of fixing the one big issue that is keeping normal wholesalers from buying the property. Within a few days of closing on the property he’ll have the big issues fixed, turn around and list it on MLS, and have wholesalers or private buyers vying for the property in a short amount of time because the major issues are taken care of. It’s an amazing perspective you’ll learn more about on this episode of InvestFourMore Podcast with Mark Ferguson.

All that on this episode of the podcast and much more.


Jay’s two books…

The Book on Flipping Houses

The Book on Estimating Rehab Costs

Contact J. Scott

Facebook: https://www.facebook.com/123FlipRealEstate?fref=ts

Twitter: @123flip – https://twitter.com/123Flip


 Mark:   Hi everyone welcome to the Invest for More Podcast. This is Mark Ferguson. I write and created Invest For More and on our Podcast we like to talk about all things real estate related, investing in rental properties, making flips, being a real estate agent and today, I have an awesome guest, Jay Scott, who takes part in just about every aspect of real estate, it seems like, so I am excited to have Jay. Should I call you Jay, or do you want to be called J. Scott?

 Jay:   Oh no, please call me Jay.

 Mark:   Alright.  Sounds good.   Jay , if you don't know him, he is a huge presence on Bigger Pockets; has his own website at 123Flip.com; has written two great books; the books on flipping houses which was an amazon's best seller and the book on estimating rehab cost, and these aren't free e-books that you download.  These are real physical books.  I have bought both of the books, great reads.  I suggest you read them if you have any interest in flipping at all.  So I want to welcome Jay.  How are you doing?

 Jay:  I am doing great. Glad to be her thanks for having me, Mark.

 Mark:   Oh Yeah.  Thanks for coming.  So first I would like to hear some history on how you got started flipping.  I know it is your main business in real estate, and what did you do before you started flipping houses?

 Jay:  Unfortunately, I don't have a very exciting story; but I will give you a little bit of background.  My wife and I met back in 2005/2006.  We were both in the Tech Industry in California and when we decided to get married in 2008, we figure, hey we were both working $80/$90/$100 per week.  We were going to start a family, so we decided we were going to quit our jobs, move back to the East Coast a little bit closer to both our families and we are going to find something else to do.  We were thinking about starting our business.  We were thinking about doing some passive real estate business, maybe buying apartment buildings or something like that.  We hadn't really decided what we were going to do yet.  In May of 2008 we moved back to the East Coast, settled in Atlanta, Georgia and one day that summer when we were trying to figure out what we were going to do with our lives, my wife was sitting on the couch and she was watching HGTV s she did a lot back then; and she was watching a flipping show, and she looked up at e and she said, "hey let's flip house," and I thought she was joking, but she was serious.  It's like we are not doing anything else this summer, we are trying to figure out what we want to do; we are getting married in a couple of months.  In the meantime, let's undertake a new fun project of 'flip house.' Now, the interesting thing is, I am probably the least handy person you have ever met in your life.  I can barely change a lightbulb, and she knew this, but we both had going for us, neither of us had even purchased a house before.  We had no real estate experience.  I had no construction experience.  She had very little knowledge about construction and renovation; but what we both had was, we had a lot of business experience.  So i said to her, “Okay we can give it a try,” and I am not going to be able to work on the house; I am not going to be able to do any of the rehab stuff; but I figured flipping houses can be treated like a business, so i am going to approach it from  business standpoint and hire everything out and put together a good team, and about six months later we bought our first property and we bought three more within two months after that and we just kept going from there.

 Mark:   If you ask me I'd say that's a pretty exciting story considering that you had no history and you just jumped right into it.  I didn’t realize that you had done so much, so quickly.

 Jay:  Just a new challenge and it was just something to do in the moment.  I don't think that when we first started that we ever considered that this could be a long term business for us.  It was, this could be a fun project for the summer and after we purchased the first one, we happened to stumble across a couple more, and it was okay, we will just do a couple more projects; but it wasn’t until many months later that we came to the realization that this could be a long term business venture for us.

 Mark:    I don't do any of the work on my flips or rental properties now.  One summer I decided I was going to do an entire flip myself.  It was an older house; it needed a ton of work; new kitchen, new doors, new windows, new flooring, new paint, and it was the worst mistake I had made in my entire career.  It took me six months, and even from the discounts I got from my friends at Greater Toronto Painters and the contractors they referred me to, I lost money on the flip, because it just took so long and I had to bring other contractors into make sure I did everything right and I learned a lot.  But man, when you do things yourself, and you are not a professional, it is usually not a good idea, so I think you started out the right way, just hiring people from the get-go.  I have looked on your website, and you have details on the first fifty flips you did. That takes a lot of work to do that.  So how may flips have you done in total now?

 Jay:  I don't know exactly how many we have done now, because the last couple years we have done lots of partnerships, I have done group deals; I have done deals where I have lent money, I have done deals where I have participated in different passions so I don't really know what to count as my flip versus participating in somebody else's flip; but i estimate we are in the 150 - 200 deals total all said and done.

 Mark:   Well, that's awesome, that's very cool. Anyway it sounds like you are going to talk about your website there before I ask you another question, so how much work was it ot put together the numbers on fifty6:55 to flip?

 Jay:   Actually I started the website a few month before we even decided to flip the house. Like I said we were talking about moving to Atlanta and we were considering investing in apartment  buildings just for some passive income and so I started my website probably right around the time we move - May of 2008,  and the goal was to  basically give myself something to keep us accountable for our progress. So I stated posting tried to post every....Initially the goal was to create a website that would detail every last gory aspect of the stuff we were doing.  It followed process where we were building our business plan as we are picking the name of our company, as we are registering our business, as we are putting our team together, and when we bought our first deal which ended up in the flip deal opposed to an apartment deal, I decided I am going to use the venue basically to just capture every detail of the project.  So every day I would post pictures, I would post videos, I would post basically all the mistakes we made, the few successes we had at that point and basically use it as a way to document everything we were doing; but also just to hold us accountable and make us continue to keep moving forward; not make the same mistake twice and what I found was, people were reading it and they loved the fact` that I was happy to put out, like all the gory financial details; every penny we were spending and every penny we were making, all the mistakes we were making, because I guess it was helping people not make the same mistakes and there are a lot of people that want to get into the business and I think this was just an opportunity to live vicariously through our projects, and at the start, I was probably spending a couple hours a day at het website.  At some point it kind of got easier  and a little bit more automated, but yeah, for the first fifty flips that we did I tracked basically every last detail, every financial detail down to the penny, pictures, videos, schedules, budgets for very projects.  I would post my estimated budget and after every project, I would post my final budget and I could analyze where we were wrong, where we were right.  So it just became a great tool for us to analyze our deals, but it also became a great learning  tool for other people to read about what we were doing, hopefully  not making the same mistakes we were making.

 Mark:   That is awesome  I think, if everybody not just post it online, but the just wrote out their plan and their budget in worst detail as that, thy would be so much more successful at whatever they did; if it is flipping or running a business; just having that detail just has to be a huge benefit to you.  Not only that, but if you are ever had to look back and see something it is right there online, easy to get to - just stored; that's great. I know I have my goal to purchase 100 rental properties, and by posting that online and putting it out there in the public, it motivates me so much more to get it done, and then it's been a great tool, and I imaging having a blog has been the same thing for you as well.
 Jay:   Yes.  And I am sure you have seen that in a couple days without posting or if you don't have any new deals for a couple months, people start writing you and saying, what's going on? Why aren't you doing deals? And it really make you thing, I am not just doing this for me

anymore. I have people that actually own my stories and they are going to push..10:38 ..Yes it is a great motivator and a great way to hold yourself accountable.
 Mark:   Yes.  That is just fantastic.  So you have been in Atlanta and then I know you are doing deals in Milwaukee as well and you are doing things in Baltimore; but my first question is, you started doing deal 10:58 how did you keep things going in  Atlanta without everything falling apart?
 Jay:   So, actually we moved to Maryland about a year ago, so I am no longer physically locate in Atlanta, even though we still do a bunch of deals there.  But like I was saying earlier, I am really bad at the construction side of this business.  My wife is great at the design side, but she is not good at the construction side of the business, but could handle the business, and one of the first11:28

[audio low]

employee that we hired and to this day the only employee we  hired was a full time project manager in Atlanta, and his job was basically do all the day-to-day work on the flips, so he could put together the scopes of work you would put  together the budget, you would interview the contractors, you would hire the contractors, manage the contractors, he was the one that was ensuring things were getting done properly on schedule, on budget.  He was basically buying [11:57 inaudible] and having him in place, my wife and I could focus on the bigger stuff.  We could focus on strategy, we could focus on raising money.  We could focus on  finding deals and so when we decided to  branch out and  start investing other places so, we went from Atlanta; we invested - we did about twenty properties in Milwaukee and then we decided to move to Maryland and so that we are doing stuff in Maryland as well.  The reason we have been able to do that is because we kind of remove ourselves from the day-to-day aspects of the flips and we are still always available that's when there are isssues12:36 aspects of the flips and we focus on the larger pieces; find new deals, the strategies, the raising money, so it is made easier by having people on the ground in the locations where we are doing the work that are focused on handling everything day-to-day.

 Mark:   That's great. I know when I first started in real estate, I tried to do a lot of it. I tried to help with flipping, I tried to sell houses and I was just kind of overwhelmed, but once I focused on one thing I focused on selling real estate and I let everything go by the wayside through all that, and stayed on that track, then I build that business up; it became successful and then I hired help to help that business keep going and then I moved on to focus on some different aspects, like flipping, like rental properties, and yes, taking one step at a time build it up then maybe move on to something else; but you didn't just start this all at once, it's been kind of an ongoing progression, I imagine.

 Jay:   Exactly, exactly, one step at a time and as we scale we have to add more infrastructure and you are not starting off with twenty houses at once so when you first start you don't 13:53 as you go from one house at a time to two houses at a time to five houses at a time, you  just slowly add that  infrastructure and you kind of grow naturally and organically and at some point you realize, okay, I am getting overwhelmed, so I have to do something different or add another person to help of more people to help and every step of the way it is just reassessing the business and figuring out what do I need to get to the next level, or maybe you are perfectly happy and we come to the point a couple times where we've been happy at the level we've been and we hadn't wanted to scale any further, so we just keep doing what we are doing, so a constant reassessment and figuring out what's working and what's not working and what needs to be changed.

 Mark:   Now I have a question.  I don't know if you know this; do you know how many contractor crew that you've worked in different areas; you have five, you have ten, or do you have in-house crews that you hire and manage yourself?

 Jay:   No.  So we basically sub everything out.  We don't generally use general contractors; because like I said, we have our project managers on the ground who basically play the role of general contractors. In some cases we have contractors; for example, in Atlanta, we have our paint crew, our electrician, plumber, our [15:11] guy.  He will do every deal that we do down there. Every project we have down there, they will do; but then we have other people so I do that [15:19] some days or better for smaller trim type work; some that do anything from finish trim to framing, large scale framing so we have a couple different guys there; depending on the type of project, we will bring in the right person there.  We have some contractors that can do small sheetrock jobs and we have contractors that can do larger sheetrock jobs, so it really depends on the trade and I can't say we have five crews or ten crews or one crew.  It's more like we have basically one plumber that we tend to use in Atlanta; we have one electrician, we have one Hback company, but then we have three or four [15:59]  and then we have two or three sheetrock companies, and then we have two [16:05] suppliers; so it is kind of a matrix set of contractors that we will pick and choose on each particular project, depending on the logistics of that project; the location of the project, the scale of the project and what our budget might be.

Mark:  Very cool. And on your first flip you did, how did you find the contractors, or did you use a general contractor on that one?
 Jay:   Well we made a lot of mistakes on the first one.  We had no idea what we were doing. What I ended up doing was I hired somebody that I thought was a general contractor.  He was actually just a contractor who offered to do everything himself and what I later learned was there is a big difference between a real general contractor, somebody who is going to bring in subcontractors to work under him and sub out the various pieces to experts, and what I call the lower case GC; the guy who comes in and he does everything, but he does it himself, or he might bringing one or two helpers but he is going to be the guy on the roof, fixing the roof, and he is going to be the guy doing the  electrical work, and then he is going to be the guy doing the plumbing work, and while that can save you  money, it will generally increase the schedule tremendously, because you have one, or two, or three people trying to do the entire project, as opposed to bringing in six or eight or ten different contractors to do different pieces, and it is also going to impact the quality of the project.  Generally speaking, one person isn't going to be great at everything they do, so he might be really good at carpentry, but if he is really good at carpentry, he may not be good at plumbing, or electrical, or sheetrock; so what I found is, and what happened on the first project was we tried bringing in the generalist - the guy that could do everything and bring in help, but what we found was that the project took a couple months longer than we expected, and we were over budget, and the quality was lower than we expected.  Basically we made very mistake in the book on the first protect and we, like I said, from there you just have to reassess and figure out where the mistakes are and try not to make them again in the future.

 Mark:   Right.  I think it worked out okay in the end, making those mistakes.  One thing I found interesting, when you moved into Baltimore, or I am not sure it's Baltimore, but Maryland, you bought a house, completely tore it down and built a new one.  Is that right?
 Jay:   We did. We did.

 Mark:   What was that process like?  How did you manage that; building a brand new house.

 Jay:   One of the things that we realized about three years ago was that the market was getting a lot tougher for flips.  Back in 2008/09/10, we had more houses than we knew what to do with.  If you went on the MLS you could find twenty houses that could be purchased and flipped for a good price; so we could pick and choose the types of projects we wanted to do, the locations of those projects, the scale of those projects. Then around 2012, what we found was that the market was starting to improve.  a Lot of hedge funds were moving into Atlanta and buying yup the cheap properties as rentals and we were finding it a lot harder to find good flip deals, so at that point I had another investor that I work with down there who said, "hey let's try a new construction project." While everybody and their brother was getting into flipping and flipping deals were hard to find, there were a lot of good, either tear down possibilities or vacant land that could be built up from scratch, and back in 2012, we decided, hey let's try doing some new construction building a stack house. And he brought a good deal of the construction knowledge; again I brought knowledge and between us we would figure out how to build a new construction.  So by the time we got to Maryland last year, and we had decided to build our personal residence, we had already built a couple stack houses, so we knew the process.  There were certainly some difficulties.  Anytime you move to a new location you are going to have new building codes, you have different laws, finding new contractors is going to be really tough, how much things cost is going to be really tough, so I don't want to say building our own personal residence was easy, but by the time we got here and started that project we already had a couple new construction projects, so it wasn't that tough. It was actually really nice, because we knew exactly the type f house we wanted to buy but my wife had always had this dream of basically designing a house on her own, and basically being the designer for a new construction project that we could live in so ultimately she sketched out the house on the back of a napkin and it 21:07 gone about 700 times and handed it to an engineer and an architect to actually draw it up and ultimately we built` the house that my wife designed from scratch, so it's great and we are thrilled and we finished it just last Thanksgiving and we have been here couple months now.21:27

 Mark:   Wow. That's awesome.  When I was a kid I would beg my parents buy me graph paper, and I would always draw floor plans on houses and design houses.  I still have a bunch of them, but that was one thing I always liked to do.  At some point my life view is design my own house from scratch, but haven't gotten to that point yet.  But that's really cool.  That's just a fantastic house to live in now, knowing you guys designed. Very successful flipping; you've done great with partnering, you are doing new construction and then now sounds like you are trying to get into rental properties.  So how is that been going?

 Jay:   Yes right around the time we realized there weren't a lot of flip deals out here anymore, not as many as we wanted, and we got into new construction, I just kind of had this revelation and I had to give my partner, his name is Todd Widdon, in Atlanta, a bunch of credit for this because he has always been really, really good at this.  I had spent many years kind of just looking for flip houses, and that's all we wanted to do.  They are more than we knew what to do with so basically every deal was a flip.  But once the flip deal started to dry up, what I quickly came to realize with help from Todd, was that in this business, there is a lot of value in being opportunistic, so deals come around every day and you have to learn to start looking for them.  So if you are only looking for flip deals,  you are not going to see the other great deals that come across your desk; And a couple years ago we started building new construction.  I also started to think about the other types of deals we could potentially be doing and once I started looking for other different types of deals, what I found was, there are still plenty of deals out there.  I talk to a lot of people who say, 'I just can't find a deal,' and what I'll tell them is you are probably looking too hard for one type of deal, keep your minds open and just see what is out there and turn things that typically wouldn't be a deal for you because of what you typically do into something that can be a deal.  So to get back to your question, rental properties is a great example of that.  Couple years ago we weren't even considering buying rental properties, because it just wasn't what we were doing, but now I'm seeing some good rental deals come across my desk and instead of ruling it like I would have a couple years ago, I'm saying, well I have the resources and we have the time, maybe these are the best deals out there right now.  Maybe this is what we should be doing instead of flipping houses.  So in addition to doing the flips we are doing rentals, we are doing wholesale deals, we are doing hotel deals, we are looking for apartment buildings, still doing the flips, we are still doing some new constructions, but basically instead of saying we just flip houses now, we kind of take the attitude that we are more opportunistic and we are going to do whatever deals that are out there at the time where we are looking.  I wouldn't say that we are focused on rentals right now, but we are not opposed to rentals.  We are opened to doing rentals, we are open to doing apartment buildings, we are open to doing multifamily; we are open to doing commercial; so these days we are doing a lot of different stuff.  In some cases, we are partnering with people who 24:52 we do, in some cases we are trying to learn those niches ourselves.  So yes, we kind of open our minds a little bit and we are opened to doing a lot of different things these days.
 Mark:   Cool.  So now when you are considering rentals are you just looking in the Maryland area or are you looking at different areas too or you are just focusing on the ones that are close to you?
 Jay:   So I am a big believer of economies of scale and owning one or two rental properties in a place far away from where I live just doesn't seem very enticing to me.  I think having a property manager to manage one or two properties far away that I can't be there myself to deal with the rehabs, and to deal with tenant placement, that doesn't really interest me.  So I will certainly consider long distance investing in rental.  We haven't done it yet, but it will have to be something on a larger scale than one or two.  So we are definitely looking at apartment buildings. Right now, we are negotiating a twenty unit in Atlanta which is great because it's twenty nits, it's not just one or two; so I am more comfortable being long distance for that. So we are not really on a small scale looking at long distance rental; but if anything comes up that gives us the opportunity to kinds of scale up and get the economies of scale in a long distance location, we are certainly not opposed to that.

 Mark:   What's your plan with the rental? Are you planning to hold on to them for retirement money or are you trying to take a multi-unit property, maybe raise the `rent, increase the value and turn that or is it just kind of a short middle term hold and see what happens in five or ten years?

 Jay:   So for the single family houses, definitely long term.  So basically whether that be, we have two young kids now, so whether that be holding hem for fifteen years until they are n college or holding them through twenty five years until were retired, I don't know; but definitely at least ten, fifteen, twenty years’ time horizon.  In terms of the larger multis, like the twenty units we are looking at in Atlanta; that is more of a midterm play for us so we love the idea of buying something distressed.  We know how to rehab stuff, and we know the business side, so we know how to put good management place so being able to buy a really distressed apartment building and fix it up, putting in better management, raise the rents to market and then resell it in three, five, or seven years, that's kind of the play that I am interested in.  At some point we might be interested in holding one of those for long term cash flow; but I still kind of like the flipping aspect of real estate, so with the larger apartment buildings over a couple of years is actually real interesting to me.
 Mark:   I own one duplex; and up-down duplex, but never owned a multi-family besides that, and there's one that came up for sale about a month ago that I was very interested in.  It was a really good price and then we got inside the property which is a complete dump and that really did it for me and then I saw that they had sold for like a $100,000 over asking price, and I was actually like, "Oh my". I couldn't believe it.  Yea. Our top rates in Colorado are usually 5-7% and that is one reason why I invest in single family rentals; because it is so hard to make any money with those cap rates.  It must be a lot of cash in the area or something that push those up.
 Jay:   That's crazy.
 Mark:   Yes; and it's selling for $925K and I think it rented for about $7,000/8,000 per month and it was not in good shape at all; it was in really bad shape.  There were squirrels looking at me through the 29:02 in the roof.  One of the biggest hurdles people have when they want to get start flipping or buying rental properties is coming up with the money, coming up with the financing; not just buy one; many people can get into their first one, but then buying the second one, the third one, or like you've done having multi properties going at one time.  So how have you financed your first one and developed a strategy to finance multi properties?

 Jay:   Yes. That's a great question and let me start with, I am a really big proponent of recommending that people figure out their financing strategy before they start looking for deals.  I know a lot of people who take the attitude, 'I find a great deal, but money will come.' While that is often the case, there is a lot of stress with having a deal under contract and not knowing how you are going to pay for it; and especially when you are new in this business.  When you are new in this business, there is a whole lot of stuff you need to be doing once you get a deal on your contract.  The last thing you need to be worried about is where the money is coming from.  So quick thought for everybody is just get your financing in order before you start looking for new deals.  Yeah; that's it.  Whether some financing options, how did I start?  I have used pretty much every type of financing there is out there.  On my first several deals, the first one, I paid cash.  I was lucky enough to be in a position where I had some extra cash, and I could pay for the first one, purchase and rehab just using our own funds.  The second deal we ever purchased, I went and I got a conventional bank loan, so just like if I were buying a rental property. I think in retrospect, the banker that I worked with, I think she thought this was a rental property.  I don't think she realized that this was a flip and I know that when I paid the loan off about three months later, and I called her to get another one, she wasn't really happy.  So what I found is you can use conventional lending for flips, but banks generally don't like it very much.  When they make an investment loan they typically expect the loan is going to be out there for several years.  So just talking to you banker before you try and use a conventional loan for a rehab.  The other issue that we found was with the conventional loan the bank is going to expect the house to be in pretty pristine shape; at least move-in-ready.  I remember with that first deal we did with the conventional bank loan, the water heater didn't work and we actually couldn't get the loan approved until the water heater was fixed. So the problem there, obviously is the seller who in this case was a bank, they didn't want to fix the water heater, and me as the buyer, I didn't want to go and fix the water heater before I own the property, because if for some reason the deal didn't go through, I just fixed the water heater for a property I didn't own.  So with the typical flip property, they are giving a lot of problems where banks are not going to be happy about lending money.  So I've gotten away with using conventional loans for flips - I don't recommend them anymore.  My third deal I used what's called a portfolio loan.  Real small local bank; generally they have two or three branches in the area, and they are small enough that they give loans they don't necessarily don't have to conform to Government standards.  They are not FHA loans, they are not Fannie Mae, Freddy Mac conventional loans.  They basically give loans they get to make their own rules.  If they want o lend to real estate investors they can.  If they want to lend to flippers they can, and if you can find a bank in your area that does portfolio loans, and there is a custom to working with flippers, that to me is the best financing out there.  Generally you will pay a little bt higher rates than conventional loans.  These days probably 5/5.5%.  The loans are generally 6 -12 months interest only.  You have to put 20-30% down. Portfolio loans are kind of my preferred lending suggestions to anybody getting into this business.  Now if you can't qualify; if you don't have the cash, and can't qualify for any type of loan, there are other options.  So I think my fourth deal, I borrowed money from a private lender.  It was a friend of a friend's father who had a whole bunch of one sitting in his retirement account, and I basically said to him, "I'll give you 12% interest on the money," and I think this was that point when the stock market was like you get around six or seven thousand and he was basically losing money every day on his retirement funds.  I offered him 12% and he was thrilled; so that was my first foray into private money and since then I have used a lot of private money; people lending their personal fund, lending from their retirement accounts and then the other thing that I highly recommend to new investors is find a partner.  So it can be strictly financial partner; somebody that doesn't want to actually be involved in the deal, but has cash, or it could be another investor that has the cash, but doesn't have as many deals as he is looking for; you bring the deal, he brings the cash and then you rehab it together.  So I think that is what I did on my fifth deal, so basically my first five deals - five different types of financing; cash, conventional loans, portfolio loan, private lender and partner. And since those first five, I have kind of used all those strategies over, and over, and over again.  There is also hard money lenders so for those that basically, they don't have the great credit and they don't have great income, but they have a great deal, hard money is a great way to go.  You are going to pay higher rates, so certainly it is going to eat into your profit a little bit, but the nice thing about hard money  is generally you are borrowing money from somebody who knows real estate and cannot often lend you the  money if they don't think it is a good enough deal.  So it is just another set of eyes on your deal but basically telling you, 'hey this is good enough for you.  You should be doing it,' or if it is not good enough, then maybe you should be too 35:03 . So I think that is six good choices when you are financing and everybody just

has to decide what's right for them, what htey have access to, but from what I found, if you really want to get into this business there is a way to get financing for your properties, and it may involve  hard work, it may involve building relationships, but it is certainly possible.

 Mark:   I have used a partner - my dad.  I have worked with him in the beginning and as a partner with him.  I have used private money. My sister has actually lent me some money and then my main financing myself is a portfolio lender.  It is just so nice to have a bank that will not sell your loans, so like you've said, they have better guidelines.  They will lend on flips, like you said, you can probably get conventional loan on a flip once. They are going to realize - we are not going to give you any more loans if you are just going to sell it in three months, so yeah; no. Finding a way to financing and a lender is so important in the beginning, if you can't qualify, if you can't find the money there is usually a partner out there if you look hard enough to find one.  Great information.  Very cool.  Do you have any specific goals or anything you that you are really looking to accomplish in the next couple of years, or are you just kind of going with the flow, looking at different opportunities and whatever comes your way?

 Jay:   Yes.  So we don't have any specific long term goals right now.  Like I said, we moved to Maryland about a year ago.  That was specifically just a family decision.  The kids were getting ready to go into school, so Maryland is where I grew up; getting a little bit closer to my family, get closer to the better schools.  They have some really good schools in the area; so we decided to move up here; kind of on a whim and when we got up here we realized that the market could be different up here than it is in Atlanta or Milwaukee where we have done some deals, and so instead of moving up here and taking the attitude, 'this is where we expect to be in the next few years', we decide we just again, be opportunistic and just see kind of where things took us, and what we have found since we have gotten up here is, we are not doing a lot of flip deals up here, we are still doing a bunch of flip deals in Atlanta.  But up here were are doing a whole bunch of wholesale deals; we are doing some rental properties, and we see some opportunities where we are negotiating some land for new construction and hopefully building a sub-division pretty soon.  So I don't know where the market will be going in the next year or two or five years; so it is really hard, and what we found is if we say this is where we want to be in five years, and the  market doesn't let us get there, sometimes we find ourselves being a little too rigid on what we want to do, so we are  just going to take the attitude we are going o sit back and we are going to  see what opportunities come our way and go with the flow as you said, and see where we end up; and we are still doing a lot of deals but we are not focused on any particular kind of deal.  We are just seeing what comes along and what falls into our lap.

 Mark:   And you mentioned wholesaling.  I did my very first wholesale deal this year. I had never done it before, but I had a flip that was 45 miles away from me.  My contractors didn't want to go there; I stuck a For Sale by Owner sign up and someone came along and bought it for $15,000 more than I paid for it.  I was ecstatic. So when you are wholesaling, are you wholesaling up and the last, are you doing direct marketing; how are you finding those deals?

 Jay:   It is probably not accurate to say that I am doing wholesaling.  I am actually doing more what I would call 'wholetailing' and that is not a phrase that I came up with. Somebody else coined that phrase; but it basically means, buying a distressed property, doing a very minimal amount of work and then selling it to another investor who will then rehab it and flip it or rehab it and rent it; and so what we have found, we see several opportunities in the past year of houses that we've gotten, that had a single major problem, so we bought three hoarder houses, literally the people that live there were hoarders and just stacked up floor to ceiling.  We found a house that had a major sewer problem and we looked at another house that had a major basement problem, and for each of those fie deals, basically what we did is, we went in, we solved the big problems, in the case of the hoarder houses we basically just cleaned the houses out and wiped them down.  The house with the sewer issue; we fixed the sewer issue, and the house with the basement issue, we just did some basement work and we basically got the houses in good enough condition that a lot of investors would be very interested.  So when you see a hoarder house, it turns a lot of people off.  When you see a house with basement issues, it turns a lot of investors off.  But if you can fix that big in your face issue suddenly you have a house that lots of investors will clamor over and pay for, so what we have done on several deals now, we'll buy those houses; we'll do literally one to three days’ worth of work, then we will turn around and we will list it on the MLS and find another investor, and in a couple cases, homeowners who are willing to pay to take on that project.  So we have done a lot of that.  Most of the deals we've found here in Maryland to actually come from other wholesalers, so there are wholesalers who find these houses and are not scared to take them on, whereas other investors may be scared to take on the sewer issues, or the basement issues and so they come to us first and so we again give it a little bit of fix-up and we turn around and we remarket them to other investors.

 Mark:    So are you doing just enough work for them to get to qualify for financing, or are you just fixing one major issue, and they still might not qualify for financing but they look a lot better?

 Jay:   41:21 These houses still typically won’t qualify for financing, so we are still looking for an investor to come in with cash so in the case of the hoarder houses, they'll still need a full cosmetic renovation, they still need appliances to be in place; they might have some plumbing and some electrical issues, but at least you have all of the stuff out of there so you can see the walls and you can see the floors, and somebody can  go in and evaluate the issue and like I've said, we have had a couple of homeowners that have come in and bought houses and they pay cash, so they won't be able to get financing; but we got the houses in a good enough shape where they weren't scared to buy them at that point so the house with the basement issues was the perfect example.  There was a homeowner who came in and he had cash; he was looking to buy something.  He never would take on a project which had severe basement water issues; but we had already fixed that issue, so at that point it became just a major cosmetic renovation.  That wasn't something he was scared of; so he was happy to pay cash and he moved in and I assume he is fixing it up as he is living there.

 Mark:   This has been a great talk full of information.  I really appreciate all your insight on financing, on flipping, on your plans for rental properties and "wholetailing", which I had heard that term one other time before, but I had never researched it to see exactly what it means, and that makes sense now.  I like that.  So if people want to get in touch with you, if they want to make contact with you is your website the best place to go?

 Jay:  So, www.123flip.com, is a great way to get in touch with me; and my email is on there and so I can be contacted that way.  You can look me up on Facebook 123fliprealestate, or Twitter 123flip, and I am always on Bigger Pockets so feel free to hit me up there as well.

 Mark:   Yes, I see you on Bigger Pockets all the time.  I know you are never shy to share information and help other people.  Really you are a great resource on Bigger Pocket and with your website.  I know you tell a lot of people over the years to how to avoid these mistakes you've made, which is a great resource.  Well great.  I want to thank you a ton for taking your time out, do the podcast and share your information.  Great luck to you in the future.  Any new books coming out or are you just sticking to those two first ones for now.

 Jay:  I do have one that is hopefully coming out in the next few months.  I don't have a title yet and I am not ready yet to disclose the topic, but I think it will appeal to a lot of investors in a lot of different areas.  I am looking forward to that so` give me a couple more months on that one.

 Mark:   Very cool.  Excited to see what that one is going to be about.  Alright; very cool. J. Scott, thank you very much; good luck in the future and have a great weekend.

 Jay:  I appreciate that Mark, and his was a lot of fun.  Thanks.

 Mark:   Alright; yeah. Thank you.

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