Hey everyone, it’s Mark Ferguson with InvestFourMore real estate podcast. I’m glad you could join me for this show. Today, I’m going to be talking about my fix and flips, what’s going on in my world, how I’ve improved my processes, a few mistakes I’ve made, and what my future looks like. This year has been pretty crazy, 2016, I have sold 13 flips already, I have bought 15 flips this year alone, and I have four more under contract to buy.
In fact I’m probably going to have a fifth under contract to buy by the time that you listen to this episode. I’m going to end up getting at least 20 flips bought in 2016, and I’ll probably end up selling 16 to 18 flips in 2016. Been a fantastic year, have not bought as many rentals as I hoped, but the flips have definitely done great. I’ve improved my processes, I’ve improved the people helping me with the flipping, I really enjoy buying houses. As my wife and Nikki, my assistant, would say, I’m kind of addicted to buying houses. I might have a problem there.
Before we get started into the flips and really delving into what I’m doing, how I’m doing it; I do have my book, “Fix and Flip Your Way to Financial Freedom
”, which goes through most everything I do on the flips. How I find deals, how I finance them, how I repair them, how I sell them, and then I also have some video training on my website. If you go to investfourmore.com, check out my resources page, I put together a really in-depth video training course that goes through how I buy, how I repair, how I finance, how I sell, mistakes that I’ve made, what to watch out for.
It’s really detailed, has a lot of information on exactly what I’m doing, so that is also available. Any questions at all, you guys are always welcome to email me, email@example.com
. Okay, like I said, I’ve sold 13 flips in 2016, which is a new record for me. I’ve never sold that many houses before. On top of that, I also sold two rental properties this year, but I’m not counting those in that 13 that I’ve sold on the flip side. One reason I’ve been able to sell so many flips is I have completely revamped my repair process, changed the way I do things as far as working with contractors, keeping track of contractors, using subs, really worked hard on that. That’s been a huge part of it.
I’ve also been able to buy more properties because I’ve added more lenders. I’ve got a couple of private money lenders that I borrow money from, I’ve been using a lot of the money that I would previously use to buy rentals and just putting that back into the flipping business, trying to build it bigger and bigger, so I’ve had more capital to spend on the flips, and then I’ve also changed some things in my banks.
I’ve add another bank I get loans from, and changed terms with another bank that has really helped me as well. It’s kind of a combination of everything that’s allowed me to sell that many flips. I think the biggest factor by far, the most important thing, has been the repair process. How to repair them, how fast I get them fixed up so that I can sell them quickly. That is always been my biggest roadblock when flipping houses. Last year, I had 10 flips at one time for much of the year, but I feel like half of those flips I was holding for over six months, or even a couple of them over a year, because I was waiting so long to get them fixed, or I had problems with contractors, or contractors were just disappearing.
This year right now, I have 12 flips currently going, and I only have one that I’ve held close to a year. I’ve held it about 11 months, and that’s the high-end flip that I discussed in a previous podcast. I bought it for $535,000, we had it listed for $879,000. I’m going to talk about that here in a little bit; we pulled it off for the market a little bit, we’re going to put it back on. That house was occupied for about six or seven months after I bought it, I couldn’t sell it earlier than that, that’s one reason we’ve held it so long. Then I’ve got one other property I’ve held seven months, and that one’s currently on the market It’s a country property, had a huge rehab, we spent $72,000 in the rehab, that took about four, five months to get that all done. All my other flips I’ve held less than six months. I’ve really improved my time to get them sold, get them repaired and move on to the next properties.
With that country property that we put $72,000 of work into, we had to re-stucco the exterior, put on a brand new metal roof, new kitchen, new bathroom, new trim, took out a wall, had to put in all new heating, air conditioning system, fixed the electrical, fixed the plumbing, had to do some outbuilding work, fixed up the garage, a lot of cleanup, landscaping work, propane tank work, on and on, just kept going and going, but we finally got that done, and that one is on the market, I think we’re getting an offer on it today. We listed it last week, so that will be great to get that one sold. I bought it for $110,000, like I said, put about $72,000 of work into it, and we have it listed at $264,900. Even with all that work, we still should have a decent profit there.
As far as getting the repairs done, if you’ve paid attention to me, if you’ve listened to me over the years, I hired a project manager in 2015 who I thought would kind of be my right-hand man, help me with the repairs, manage contractors, hire people, possibly even hire employees, I could almost maybe even build my own contracting business at some point. That did not work out as planned.
That actually worked out horribly. The person I hired did not hire any new contractors hardly at all, because he kept saying he didn’t think I had enough work for them, even though I had houses lined up, waiting to be worked on. We did not hire any employees to work for us, stuff was getting done slower and more expensive than when I was managing the rehabs, which is crazy, because I was not spending a lot of time managing them because I didn’t have the time to drive by the houses all the time. It just was a snowball effect where things got worse and worse.
That really hurt my business, hurt getting the flips sold, hurt getting my rentals repaired, I had one rental sitting around for about six months before it got fixed up under his watch, and it was not a major rehab. I had six months of holding cost where I wasn’t receiving rent on that property. I hate to think how much money he probably cost me, but as far as the holding cost, mistakes he made on remodels, he put in stairs wrong, he tore down things I didn’t know if they really needed torn down or not after looking back at everything.
I would guess he cost me $100,000 as far as me hiring him, not aside from the money I paid him because I hired him as an employee. Aside from that, he probably cost me $100,000 as far as the time, the budgets, the mistakes he made, and different things going on. I can’t look at that and get mad, or complain, or feel sorry for myself. It was a great learning lesson; it taught me how to do things differently, I didn’t give up on it, I didn’t just throw in the towel and say I’ve got to do all this myself, if I can’t do it, nobody can do it.
I had to try something different and so what I did is I had my team — a couple of them worked together to start managing contractors. I got much more involved, one person in my team really came through doing a great job, visiting properties, talking to contractors, getting repair estimates, designing rehabs, and that was Nikki True, who has worked with me for five years. I did a podcast with her as well a couple of months ago if you want to listen to that one, she did a great job on that, but she has been awesome, helping me out, and getting these properties done faster, finding more contractors, she’s called numerous contractors, checked on thumb tack, checked on Craigslist, Angie’s list, reached out to other agents we know, done so many different things to find new contractors and improve our processes.
She has kind of become my project manager at this point, and along with that, we have tried to hire as many subs as we can. I’ve got a giant white board in my office that I’m looking at right now, it’s got a list of subs for a lot of different things we’re doing. If I look at it here, roof, flooring, HVAC, plumbing, electrician, foundation, landscaping, paint, stereo, audio systems, dry wall, windows, cleaning, kitchens, baths, tile, handyman, sidings, stucco, trash out, dumpster, septic, well.
We have a name for a sub on just about every single one of those, except for dry wall, and we have — a couple of our contractors can do dry wall work. When we get a house, what we’ll do is we’ll see does it need electrical, does it need foundation work, does it need plumbing, and we’ll send those guys out right away. We’ll get the plumbing done, we’ll get the electrical done, if the house has foundation issues, we’ll send an engineer out to look at it right away, tell us how bad it is, then we can get the foundation company out to fix it. Get all of that stuff done as soon as we can. Get the roof done.
Then we’re not waiting on a contractor to do all that stuff himself, or for him to schedule that stuff, gets things done way faster, and it’s a little cheaper too, because we’ve kind of taken out the middle man. The contractors that are hiring people; we’re hiring them directly.
Another thing we’ve done is I’ve hired a full time employee handyman person on our team, we did that a couple of weeks ago, so he can install light fixtures, do trim, do clean outs, do demo, paint; a lot of things he can do. Can’t do everything, he’s not the best drywaller, there’s some things that he’s not great at, but he’s so helpful, because I have complete control of it. I hired him as a full-time employee. I’m not waiting on a contractor a week or two weeks to send some guys out to do some easy fixes we need.
If I need something done at one of my houses, I can say, “Hey, stop what you’re doing, go over there right now, fix this stuff, then you can work on this other job”. I have complete control over him, it’s so nice, it makes things go so faster, and I think my goal with that is to hire at least another employee. We’re going to have two people working together; it think that’s a lot easier to get things done fast if you got two people rather than one, trying to do everything, and then have them do work, demo, handyman type of jobs, everything they can. Have all the subs do all their specialized specific work, and then still work with contractors to come in and do the dry wall, install kitchens, install baths, any carpentry work, that type of thing that will make my process work so much better if I can get it all worked out.
My goal is to have every house ready to sell three months after I buy it. That sounds like not such a huge goal if you’ve got one or two houses, but when you’ve got 12 or 13 going at once like I have, that makes it a little trickier to get them done that quickly, get them all finished that fast, but we’ve been pretty close to it. We’re not quite there yet, but we’ve been pretty close to it this year. Changing the way we hire people has really helped out and gotten properties done quicker.
One road block we are running into, I think someone had mentioned this on Facebook, or somewhere on one of my social media accounts as well, is that if we do hire a bunch of subs, some of the cities around here will want us to be general contractors, they won’t let the subs pull permits. We’re also looking into that aspect of one of us getting a general contractor’s license to be able to do that work. Hire everybody out and build a nice little business that way.
The repair process has been great, really probably the biggest improvement in my flipping business, and really excited to see where that goes here in the next year. Awesome to see it.
Aside from selling 13 flips so far this year, I should also mention I have two flips under contract to close, so that will bring me up to 15 sold. I’ve got two more listed, so hopefully those will sell this year, that will bring me up to 17 sold, and then a couple more should be listed here in the next two weeks. Maybe one of those will sell before the end of the year; that’s where I kind of get my 16 to 18 number for how many flips I will sell this year.
Like I said, I have bought 15 flips already in 2016. I have four more under contract to buy, and like I said, another fifth one that should be on a contract soon, so I will have bought at least 20 flips in 2016.
To give you an idea of where I find my properties, all of those I’ve bought already, all 15, all of them but two, were MLS deals. Two were from a wholesaler. Almost every property I buy is still on the MLS. It’s an MLS deal, I’m not doing a ton of direct marketing, although we are starting to do some direct marketing. I don’t buy everything from wholesalers, I get a few here and there, MLS is still the easiest way for me to find deals.
Being a real estate agent is such a huge advantage to finding deals as well, because I can act so fast. This morning, it’s a Friday when I’m doing this recording, I went to my kid’s preschool night, they’re five, my twins are five now, and it was helper day, I went and helped my wife with them all morning, and I came back to the office around 12:30 and I checked the MLS for the first time that day at 12:30. It felt like I hadn’t checked it for like two weeks, because usually I’m checking the MLS. First thing in the morning, like five to six times throughout the day.
There were a lot of properties on there because usually I check it so much that from the time I check it, there aren’t that many new listings or status changes, so it’s easy for me to go through the properties real fast. When I wait a while, more properties go through, and some deals can fall through the cracks. But just to let you know, I am checking the MLS all the time. I’m looking for new listings, price drop listings, back on the market listings, and houses that need work, houses that have been aged on the market.
Houses that come up at really good prices as brand new listings. The primary way I buy houses from the MLS are new listings that are priced well. I am not out there making 100 offers a week. I’m not making 10 offers a day on every property. I’m very targeted, very specific on what properties I offer on. I want to see houses that I can tell the seller’s motivated, either by price, condition, MLS comments to say the house needs work, or they want a quick close, and I will make my offers. Maybe one to three a week I’ll make, maybe.
Sometimes I won’t make any offers in a week if there aren’t any decent properties out there. I don’t’ like wasting time making a hundred offers, and I think that can really hurt you as well. You hurt your reputation with other agents, you hurt your reputation with sellers. If they think you’re just trying to throw out a hundred offers and hope one sticks, people aren’t going to take you serious. I am very targeted, very specific on what I offer on. What I do offer, it’s rare that I come in super low on price, and when I mean super low, I will offer 20% less than list price. I may offer 30% less than list price in some cases if I think the seller’s super motivated, the home needs a lot of work, or if there are other issues.
I’m not coming in making 50% offers or 30% of list price offers. That I think is a waste of time as well, and can hurt your credibility too, if you’re trying to low ball people all the time. I also have no problem offering more than list price, if it’s an awesome deal, if there’s still profit to be made, I will offer more than list price all the time. If I’m getting in there really fast and it’s a really good deal, I have no problem offering full price right away with my first offer, hoping I can get in there before someone else makes an offer.
My strategy for making offers for how I buy properties from the MLS changes all the time, but very specific, very targeted, and it’s not just throwing out a thousand darts and hoping one hits your target; its throwing five very specific targeted darts and hoping two or three of them hit your target. That’s been my philosophy and it’s worked very well. Another thing that is done, it has really helped my reputation when I make offers on the MLS. I have no inspection, no appraisal, no financing contingencies, even though sometimes I do use financing, which I’ll talk about a little bit later, and I always close on something. I always do what I’m going to say; I don’t play games.
I don’t think I have backed out of a contract in probably — four years ago or longer was the last time I backed out of a contract. The last time I asked for anything to be done on an inspection report was probably four years or longer ago. The reason I do that is because it lets other agents know when I’m say I’m going to do something, or write a contract, I do it. I’m going to follow through, I’m not going to try and beat people up on inspection, and ask for lower price reduction, I’m not going to back out because I’ve got too many deals, or I can’t find a buyer for our wholesaling properties, which I don’t do. I know that happens a lot.
That built such a good rapport, and gives me such a good reputation, that I actually have agents in the area coming to me asking me if I will buy their hard-to-sell listings. It’s happened for properties that are already listed, they kind of get offers, need a lot of work. I had an agent this week who asked me if I want to buy one of his listings before it was even listed. He knew it was a good deal, the sellers just wanted out of it, they don’t want to spend a lot of time listing it, had tenants in the property, and I went and looked at it. Looked great to me, I’m probably going to buy that house before it’s listed because of my reputation. Because that agent knows I follow through on what I say. I’m not going to play games and I’ll get the deal done if I say I’m going to do it.
In fact, I’m probably going to reach out to as many agents as I can, letting them know I can buy hard-to-sell listings from them. That’s another way I’m going to work on getting more deals. All right. Like I said, there are a couple of wholesalers I’ve bought properties from in the area. Wholesalers can be tough, I say one of 10 people who call themselves a wholesaler will actually get you a good deal. It takes some work, some sifting through, some really due diligence to make sure the wholesalers you’re working with are legitimate, and they have good deals.
Even the wholesalers that I do buy from, not every property they send me is a good enough deal for me to buy. They’ll send me some stuff where they just assume I’m going to buy it because it’s in the area I buy in, but if there’s not enough profit margin in there I’m not going to buy it. I’m not going to take that chance. You’ve always got to verify your own information with wholesalers. Don’t believe their ARV, don’t believe their repair estimates, don’t believe their repair estimates, don’t believe their rent estimates. Verify all that yourself. If you can’t verify those things yourself, you need to spend more time researching your market, learning how to do those things, because that’s probably the most important part of flipping, buying rentals, is knowing your market, knowing rents, knowing repairs.
If you don’t know that stuff, that should be what you work on right now is figuring out how to fix properties with cost, what they’re going to be worth, what they’re going to rent for, it’s one of the most important things you can do.
All right, besides the wholesaling, the MLS, other agents setting the deals, I had a friend of one of the people on my team send us a deal the other day, say “hey, I know some people who want to sell their house, they don’t want to list it, they just want to get rid of it, I know your boss buys houses, would he be interested?”
That’s another thing, let people know. Network, tell everybody what you do. If you’re looking to buy houses, you never know when a deal’s going to come along. You never know who someone else might know, who wants to sell their house and wants to get rid of it, and it’s crazy when you do things the right way, when you network, when people know what you're doing. They see what you’re doing is actually adding value. We’re fixing up houses, we’re making them nice, we’re making neighborhoods nicer. They get motivated to try and help you, and help you find deals, and it just becomes a lot of fun.
Okay, like I said, bought those properties, 15 bought so far, should have 20 by the end of the year. Hopefully we’ll have 16, 18 sold the end of the year. I have 12 flips at the moment going at one time, it’s a lot to have. How am I paying for this properties? How am I being able to buy that many? One thing I added this year was a private money lender, actually the end of last year, and so that lender will lend me 100% of deals, not the repair cost but the 100% of the purchase price. The private money is a lot more expensive, they just charge me — 10 to 12% are the rates I get on my private money. It’s so easy.
You can call them up and say, “Hey, I’m buying a house tomorrow, can you give me the money?”, and they can usually do it. I try not to surprise them like that, but very flexible, very easy to get it done. That allows me to get more deals, because I can finance 100% of the deal, bring a down payment, and I don’t have to worry about reaching my limit I have with the banks. Besides private money, I also borrow money from local portfolio lenders. Have one lender I’ve worked with in Colorado for years and years, they were lending me 75% of the purchase price on my flips at about five and a quarter to five and a half percent interest rate, awesome rates.
Then I have to come up with 25% down payment, the repairs — basically, I need about $50,000 of my own cash on each flip I buy, once you consider the down payments, the repairs. Even after averaging out some of the deals I do with private money, I still need about that much money per deal I do. It takes a lot of cash to do this many properties, that’s for sure.
With that lender, I ran into some issues this year where they’re taking longer to get deals done, it was taking 40 days, 45 days to close on some of these flips, which is really difficult if you’re trying to get a good deal. Sellers don’t want to wait 45 days to close. So I reached out and found a different lender. There’s another lender in town who would work with me. Similar thing, 75% loan to value, they’re a little lower interest rate, and they’re able to close in a couple of weeks. I started doing some deals with them, and then kind of each bank found out about each other, and all of the sudden, they’re both competing for my deals.
The first bank who was taking that long, my loan contact went to her president and said, “Hey, we’re losing business because we can’t do these loans fast enough”, well all of the sudden, they’re doing my loans in under 30 days again. They also increased the loan amount to 80% of the purchase price. The terms have improved greatly this year because I got some competition, they know there’s some other banks out there that I can work with, they want to keep giving me loans.
Getting in with those banks is not always easy, especially if you don’t have much experience, but once you start flipping houses, once they see and know what you're doing, there should be multiple local banks in your market who are willing to lend money on flips. Especially if you have your own cash, have a pretty good financial history. It can be a great resource for financing your flips.
The banks have been great, finding the deals has been great, reinvesting money that I may have spent on rentals has allowed me to buy more properties, really increase the flips, and hopefully when I’m ready to buy rentals again, I’ll have quite a bit of cash saved up and a lot of money to be able to invest.
If you heard my podcast from a couple of weeks ago, I am looking, you know, I still want to buy in Florida at some point. That just is really tricky, especially when they get hit by hurricanes, kind of in some of the areas I was looking at. I’ve also started looking at commercial properties local to me. I’ve reached out to some commercial brokers, really tried to learn as much as I can about the commercial side of things, and so I might be doing that soon as well. Give me some shop space for myself, which should be nice, and then also make some money renting out space to other people.
Alright. What are my goals for the next coming year? I think I’m going to make some super aggressive goals for 2017. I’ve talked with Nikki about this, and I think we can do it if we get our contractor situation really shored up like I think we can. My goal is to buy three flips every month and sell three flips every month. That would be 36 flips bought and 36 flips sold in 2017. We’ll see if I can do it. I really think there’s enough deals out there I can do it, I think I should have my financial situation set up well so that can do it. The biggest challenge, again, is going to be repairing that many properties fast enough, and if we can get past that hurdle, I think that’s an achievable goal. We’ll see how we do, how that works; I’ve always averaged right around $30,000 in profit on each flip I did. That would be fantastic if we could flip over 30 properties in one year.
Even with the properties I bought this year, as many as I’ve bought and sold, I should still be right around that profit number, maybe a little higher, we’ll see with the current deals I’m doing. Alright, one last thing, before I head out of here. I talked about the high-end flip that I bought, we went through that property, painted it, put in some new carpet, fixed refrigerator, put in some appliances, fixed the surround system, I thought we did a pretty good job of making the property look nice, and it should sell fairly quickly.
We priced a property at $879,900 which is by far the most expensive flip I’ve ever done by like three times. I’ve had a few showings and the showing feedback was not good. People thought the house wasn’t in as good of shape, and we learned that the buyers in that price range are super picky. Absolutely just crazy picky. We’re used to doing properties in a much lower range. I’ve learned a lot, made a few mistakes in that one, what we ended up doing is pulling it off the market and we’re going to have our guy go in, refinish a bunch of the wood stain, we’re replacing some windows where the seals broke, we’re painting the garage doors; just doing everything we possibly can to make that house perfect.
That was a mistake, I should have done that stuff in the beginning, but I’m used to selling properties where they don’t have perfect to sell in the price ranges. The personal house I bought was not in the greatest shape when I bought it, and that’s just what I’m used to. I really need to look at the buyers, what they would want, how picky they would be in that price range, not go based of our other properties or my personal feelings for buying those houses.
Hopefully we’re going to put that property back on in a week at the same price, and with the new repairs we’ve done, finishing touches, hopefully that will get it sold. That will be great, that will free up a lot of money, and give us a lot of financial influx into the business to do more deals.
That is all I’ve got for this episode, it’s been a very exciting year, flipping properties, a lot of fun, I love getting flips under contract, I love selling them, seeing the contractors finally finish them, and yeah, once again if you guys want to learn more about how I’m doing this, what I’m doing, check out my Fix and Flip Your Way to Financial Freedom
book, it’s on Amazon as a Kindle book, which can be downloaded on your laptop, on your phone, you don’t have to have a Kindle to read it, or it’s also on paper back. Be sure to check out the paperback version.
I’m still running the offer where if you guys leave a review for me on Amazon for any of my paperback books, I will send you a free autograph copy of any of the books, any four books I have on paperback. I’ll mail it to you for free, I’ll pay all the shipping and everything. All you have to do is leave a review on Amazon, send me an email to firstname.lastname@example.org
and tell me your address, what book you want, and I will autograph it, put a nice little note in there for you and mail it off to you for free.
Alright everyone, thank you for listening, really appreciate all the support and everything you guys have helped me out with the blog and yeah, until next week, it’s Mark Ferguson and have a great one.