This is episode #348, and my guest is Gina Michelle. Today we’re going to talk about high end rehabs, which Gina is an expert at….rehabbing houses up to $2M in Los Angeles. We’re going to talk about how high end rehabs are different, the importance of design, picking the right crews, and something near and dear to Gina’s heart…the selling process.
You’re going to love today’s show…please help me welcome Gina Michelle.
Mike: This is the flipnerd.com Expert Real Estate Investing show, the show for real estate investors whether you’re a veteran or brand new. I’m your host, Mike Hambright and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place. This is episode number 348 and my guest today is Gina Michelle.
Today, we’re going to talk a lot about high-end rehabs and Gina is an expert. They regularly rehab houses that add up to $2 million in Los Angeles. We’re going to talk a lot about how high-end rehabs are different than the rest of the country and what you need to take into consideration as you kind of prepare them, the importance of design, picking the right crews because who’s rehabbing these houses is very different than houses at the lower end, and something really near and dear to Gina’s heart which is the selling process.
She’s found a way to create just a tremendous amount of demand for her products. You’re going to love today’s show. Please help me welcome Gina Michelle. Gina, welcome to the show.
Gina: Thank you.
Mike: Great to see you.
Gina: Thank you. You too, Mike.
Mike: Awesome, awesome. Well, hey, we’re going to talk about high-end rehabs, we’re going to talk about staging, a bunch of things that you’re really passionate about, design. I have designed my own rehabs. We had hundreds of houses and the design is, that’s a whole different ball of wax than what you do for sure. But before we get started, why don’t you just tell us a little bit about your background, kind of how you got started and then we’ll kind of dive in and talk about high-end rehabs today.
Gina: Sure, absolutely. So I’m a real estate broker. I have my own boutique brokerage in Los Angeles. I have been in the industry for about 13 years, half of which I wrote loans and then half of which I moved into the luxury sort of real estate market. My husband is a developer and a flipper. So I’m very seasoned in that section of real estate, so a little bit different than a standard real estate broker.
I move a lot of rehab inventory. So my primary, the bulk of my business is moving rehab, already done finished houses which makes really pretty pictures for my website. But also, I think it’s a different spin on understanding that relationship and understanding how to properly represent an investor is a little bit different. I’m a mom of two babies. That’s about it.
Mike: There’s a lot more than that. So let’s talk about how high-end . . . so we’re in a mastermind together, you get to know a lot of us that are buying houses in more entry level markets, not high-end markets. Share your thoughts a little bit on how high-end markets are different. I mean, obviously, you guys are in LA, but the coastal cities a lot of times are a much different animal than the Midwest or Texas, but share your thoughts on that.
Gina: Yeah, absolutely. So I think that, obviously, certain parts of California which is anywhere, pretty much, you know, LA, San Diego, San Francisco, D.C., New York, all those places. It commands a certain level of rehab that I think in the grand scheme of things, I think you’re either doing quantity of these things, or you’re not able to do like a 150 luxury, I mean, maybe, but we can’t do 150.
Mike: Yeah, yeah.
Gina: I would actually go crazy. So in our market at least, because the price per square foot that it commands in certain neighborhoods is so high, the difference between a really good rehab and a really not good rehab can make the difference between like 50 grand over here. So the luxury market, and not even . . . I mean, up here, our hyper luxury is in the multimillions and we’re talking about maybe anywhere between like $700,000 on a resale to $2 million. So anywhere in there. I wouldn’t call it average. It’s still upper end for us but it is where kind of our sweet spot is.
When you go past $2 million, we don’t need to talk about that, but in those markets, in those little price points, things make a big difference. Your tiles choices make a big difference. How you put the colors in together, how it’s been presented makes a huge difference over here. Those little choices can make or break your flip, really.
Mike: Right. Because people buying those houses, they’re not getting FHA loans. You don’t have to worry as much about appraisals and stuff like that. You’re really trying to capture somebody’s emotion that they just fall in love with the house, more so than, “I need a roof over my head,” right?
Gina: Right, everything. And that’s why everything on how that house is presented from the design choices to the pricing, to the pictures, to how you present that to the public, it’s like a show. It’s a complete, smoke and mirrors type of experience. It’s not that the rehab isn’t good, but like they’re all for the presentation in general.
Mike: Yeah. That sounds very kind of LA.
Mike: Smoke and mirrors.
Gina: Smoke and mirrors.
Mike: So before we kind of . . . we’re going to be talking about design, we’re going to talk about picking materials. All those things. Before we dive into that, let’s talk about finding them. Like, finding the deal because none of this matters unless you find deals, right? So how do you . . . I know that you guys don’t do a lot of direct marketing. You have a unique model that you can talk about, the PriceLift model. But how do you find deals that you want to do? Because your projects out there, I mean, because you’re doing so much work, they could take . . . here in Texas, we rehab houses and we’re in and out in three or four weeks. Like, I know it’s a whole different normal there.
But talk about how you . . . you have to be very selective when you’re going to put that much time and effort because you don’t do as many deals as, like you said, a lot of areas, we do volume. Out there you’re doing, lower volume but much bigger deals. So talk about how you kind of find those deals.
Gina: Sure. So when you take on a deal here, we’re married to that deal for at least a six-month period, generally. And so the play in like a luxury market or at least our market right now is the . . . it is very hard to go direct to seller over here. The LA people are jaded. They do not want our yellow letters. They do not want for us to pick up direct. They don’t want to talk to you really. If you call them, they’re not nice. Like, that’s just how it works.
So door knocking works really well here, surprisingly. So if you really have it in you and you want to get somebody really, you have to go face to face, door knock over here, and that does work really well, still. And people will kind of, I think, you wear them down at that. But how we generally are getting them is through the brokerage. So usually, they’re approaching and saying, “Hey, I want to sell,” and we’re saying, “Okay, so you could sell it this. We could price lift,” which I will touch on really briefly which is basically a company that I introduce them to that can fund their rehab.
So rather than homeowner choosing the materials, designing, and paying for it themselves, I introduce them to a company that will do the construction, pay for the construction, manage the construction. I actually do the design and the staging for them and then all that money gets taken off the sale. I charge a little more to do that so I make a little more commission when I approach it that way. And then obviously, Price Lift, they make their money when the sale closes. So that is true, like a win-win-win.
Mike: Yeah, because you basically told the seller, like when I’ve bought hundreds of houses to rehab, like hundreds of houses in, your model is instead of me paying cash for it, which part of the reason you do this is because you’re in a high-end market. The transaction cost and the holding cost are substantial. So you essentially, the way they do it is they kind of partner with the seller and say, “You throw in the house, we will take care of the rehab and get it all done and then we’ll have some predefined profit split afterwards to where you’re actually going to get more money if you allow us to do this than you would if you just kind of sell it as it is right now,” right?
Gina: Right. And I think, the reason it works really well here, and I think it would work in most markets it works. But the reason it works really well here is in order for us to do a flip here right now, we need to add square footage. Adding square footage requires permitting time. So we take a really high dollar per square foot neighborhood and we add . . . our stock recipe is that we add like 500 square feet to that house and then that is how we’re creating the margin that we need to. But that’s a six to eight month lead time.
So if we don’t have to do that and we don’t have to carry, and we just have to come in and that they put lipstick on a house that already has good bones and a great neighborhood but it’s got old kitchens, old bathrooms, needs new flooring, I can almost always put at least 50 to 100 grand in the seller pocket without PriceLift already having taken their cut. So they get 50 to 100 grand just for waiting like four weeks. That’s a [inaudible 00:08:34] lead. Plus they get another staging with it.
Mike: Yeah. And just so I get some perspective, let’s talk about, I know it’s all over the board but, so talk about your typical dollar per square foot on your projects out there.
Gina: So right now, in most of our end markets, we’re at 500 plus per square foot. So 500 to 800, 500 to 700 is perfect.
Mike: And so I talk to people about this all the time. So I’ve never operated in a market where . . . because I don’t know where . . . In LA, things are more . . . costs are more expensive too, right? But maybe your build prices may be 150 a square foot or?
Gina: Our cost for construction is more. I think maybe our materials is more. But I have properties myself in Dallas and Arlington.
Mike: That’s right, yeah.
Gina: They give me pricing for like what we get over here, it’s always really expensive. So I think our labor costs are lower in Los Angeles so maybe we make up for it there. So the lower labor costs but obviously the materials we’re using, are going to [inaudible 00:09:35].
Mike: Sure, sure. Well, let’s just say one of the problems with Texas here, it’s not uncommon for us to be buying houses that are in the $70 to $100 per square foot range which is below the build price. So you can’t really arbitrage, “I’m going to sell it for $500 per square foot and it’s going to cost me 100 or 150 per square foot to build.” But out there, it’s a whole different story. That’s why you add on square footage, right?
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So talk about a typical dollar per square foot on your projects out there.
Gina: So right now in most of our end markets, we’re at 500 plus per square foot. So 500, 800, 500 to 700 per square foot.
Mike: And so I talk to people about this all the time. So I’ve never operated in a market where . . . because I don’t know . . . in LA, things are more . . . costs are more expensive too, right? But maybe your build prices maybe 150 square foot or?
Gina: Our cost for construction is more. I think maybe our materials is more? But I have properties myself in Dallas and Arlington.
Mike: That’s right, yeah.
Gina: They give me pricing for like what we get over here, it’s always really expensive. So I think our labor costs are lower in Los Angeles so maybe we make up for it there. So the lower labor costs but obviously the materials we’re using, are going to [inaudible 00:11:40].
Mike: Sure, sure. Well, let’s just say one of the problems with Texas here, it’s not uncommon for us to be buying houses that are in the $70 to $100 per square foot range which is below the build price. So you can’t really arbitrage, “I’m going to sell it for $500 a square foot and it’s going to cost me 100 or 150 per square foot to build.” But out there, it’s a whole different story. That’s why you add on square footage, right?
Gina: That’s really the only play right now. Whereas in like, let’s say Dallas, you guys have the luxury of being able to go direct to seller and actually purchasing something that make sense and flipping it that is played out over here. So we have very, very low inventory. Everybody knows a real estate agent. Everybody thinks their house is worth $2 million. So it’s hard anyone to cooperate with that model. Really, you have to buy something add square footage to it and then flip it. So that’s why the PriceLift model makes a lot of sense, actually, not only just for us, but it makes a lot of sense for the home owners.
Mike: Right, right. So let’s talk a little bit about what rehabbers should do differently at the high end. And I was going to give you a little perspective on mine. We’ve done the same thing on almost every rehab we’ve ever done. It was just totally a cookie cutter approach. They’re usually entry-level houses. Sometimes, we’re like, let’s do travertine instead of basic tile or we’ll do some wood floors once in a while. But we’ll do like oil rub bronze and nicer fixtures, nicer mirrors. But that was kind of the extent of it. It’s not what you do out there but just talk about it at the high-end how that’s different.
Gina: So in the high-end market, what we call a Home Depot flip won’t work over here. So if they can find it themselves typically like in an open like commercial type store, they don’t want to see it. And anything to do with travertine, brown tones at all, we can’t use right now. So anything is in the gray-white category and there’s a lot of black that’s come back in. So we’re using a lot of like, I don’t know if you guys have seen like the East Coast traditional homes. They’ve got the East Coast like Cape Cod looking white paneling and then they’ve got black like trim, finishes, shutters. Doors are black. Gold has made a huge comeback over here. We’re using . . . all the gold we used to take out of the houses, now we put back in, like all the brass door handles.
Mike: Maybe Trump’s bringing all the gold back.
Gina: Maybe. But I think really, and like I was saying, I don’t think it necessarily has to be more expensive, the material itself. So I don’t think that we spend a whole lot more on the flooring, tile. But we do spend a lot of time hunting the material. So it means like we’re going to go to different shops where they have wholesale relationships or they’ve got freights that are coming overseas, that they’ve got a new kind of edgy looking tile. So we’re going to spend time sourcing the material and that is a lot more legwork. But I don’t think it’s necessarily a ton more money than like what we would buy it for this level.
Mike: Right. And people want to feel like they’re special, like they found something special, like there were special touches put on things, right?
Gina: Yeah. They want to see something different. So you want to set yourself, especially in that price point, you definitely want to set yourself apart from like somebody else. Some websites I use for a lot of design cues, I spend a lot of time on Houzz, I spend a lot of time on Pinterest. So those are easy kind of just depending on the style of house you’re doing. In LA, we’re very hodgepodge. So you can go in one neighborhood and it’s Spanish and the next one is Cape Cod and the next one is modern and like we’re all in LA.
So you also have to do for the type of house you’re flipping. Whereas I think, somewhere like Boston, they have more of a stock style that they’re selling. We have a kind of . . . depends on what neighborhood you decide to drive into.
Mike: Right, yep. So let’s talk a little bit about kind of the design process. I know that you do design on all your projects. I mean, I watched the pictures when you put them across. Like, these are incredible. I also want to move into myself.
Gina: Thank you.
Mike: But talk about that process because, talk about it from how you do it but also share some tips for people that are watching that are like me. They don’t have a design bone in their body. How you can kind of get that without kind of breaking the bank, I guess.
Gina: Yeah, and I’d say go on to, let’s say, a good example, go on to Houzz. For something that’s really interesting over here and that’s, obviously all the subway tile is making a huge comeback. Subway tile, different color. It’s blue, it’s white, it’s black. Black subway tiles are making a huge comeback. So on Houzz, if you find that sort of like style obviously, and then just try to mimic it with the tile that works for you and then maybe, not exactly the most expensive tile that they used in Houzz, but it’ll work. It’ll work for especially if you’re doing just a standard budget than mimicking that style is very, very easy to do.
And little things like sconces to go on the wall in the bathroom, like things that are not necessarily expensive but just add a little bit of, “Hey, I spent a little time putting something that look a little different in here than just a standard light fixture and ceiling.” Fixtures are huge for us, above the stairs and the ceiling. I mean, in the kitchen, it’s like we really have to do a lot with like those interesting looking light fixtures.
Mike: Right, yeah. So talk about, so you can get ideas there and then . . . so let’s talk about crews a little bit because actually doing this work is a whole other story. Have you ever seen those like spoofs where somebody saw a picture of something on Pinterest and then they like try to replicate it themselves or something like that how terrible they are. So that’s what my rehab would be like. If I looked on Pinterest, I looked on Houzz and I saw something and I, like, try to do that myself, it would not turn out well. So talk about like . . .
Gina: The biggest thing in the luxury rehab is the tile work. It cannot be shoddy tile work. If you’ve got a good tile guy, they can generally mimic. Like, “Hey, I want the subway tiles and bricks example. I don’t want them lined up like in lines.” So mimicking that style, I’d say that in the luxury market, you have to have a sufficient group. Like, you have to have somebody that can do those things well and that knows how you want them laid obviously.
But I would think that you wouldn’t necessarily need a design bone to say like, “Hey, here’s my picture. Make it look this way and make sure you know how to lay tiles in that way.” But I think in that luxury market you’re going to find contractors that are more seasoned in that type of work.
Mike: Okay. So let’s talk about, just crews overall, just finding people to . . . because I’ve done some higher end in my market, not like yours, rehabs, and I can see the difference between like the same guys that I’ve got doing the $80,000 rehab are now doing the $400,000 rehab, like, that didn’t translate as well as I thought. But talk about the importance of having kind of good people that have experience with high-end, higher end.
Gina: So I’d say, it’s again that thing we always talk about in our mastermind, right people, right seats. So you have to make sure that you’ve got . . . I think, obviously, the right people and I think you need people to check on your people. That’s what we have. So we have a project manager that oversees rehab as it’s going. If big important things are happening like the counter tops are being cut for the kitchen, there’s somebody there making sure from our office making sure it’s cut the way that we said we wanted it cut, that there’s no scratches on it before it’s laid. Those are things, I think, extra quality control measures you have to do in the higher end.
On top of that, we’ve got an inspector who’s been in the business for like, I don’t know, 40 years. And every time they finish their phase, he comes and he checks on their stuff so that we don’t get caught in an inspection. So he says, “Hey, this plumbing is backwards.” Because I don’t know plumbing. I don’t know electrical. We don’t do that but there are people out there that do that. So I think double-checking even the project manager on that quality control works.
So just make sure as you’re going through in phases, that it’s getting done as it should get done and you have people double checking those things. Because in a luxury inspection, if you didn’t find it, they’re sure as you know what going to find it in an inspection.
Gina: It’s cut throat as far as inspection and things are concerned, they expect if they are paying that much for a house, they expect it to be right.
Mike: Well, hey, I’ve got another question about the design. So how do you, when you look on Pinterest, you look on Houzz, you see these things that are really awesome. But how do you know, because you have a very, a particular buyer ultimately. So there’s going to, truthfully, a lot of times that when we’ve done so many kind of cookie cutter homes, it’s because they’re so neutral that nobody is going to be like offended by it. They’re just going to be like, well, they might say, “Oh, I want different colors in here,” but we try to target the mass.
And yours, you’re targeting potentially just a couple of people that would like really fall in love with that. You’re ultimately looking for one person. But how do you not alienate people with being kind of on the bleeding edge of design, I guess?
Gina: Yeah, and I think that that’s sort of . . . we don’t do that. We sell, especially let’s say below $2 million, we sell it to pretty much anybody in the neighborhood would buy it. That is, we do stay neutral at that level.
Mike: Right, right.
Gina: So we use all gray tones. We use engineered wood flooring unless it gets up to the 2 million point and then we don’t put like . . . we then start putting in real wood. But we use a certain type of flooring, a certain type of fixture that we know as a general rule are cost effective for us so we’re not overdoing it but it’s neutral enough to the neighborhood that it’s not so outlandish. And that’s about knowing on your end who that is.
I think a seasoned real estate agent, if you’re not paired with one as a flipper, I think you need to get paired with someone who sells and sells again, and again in that neighborhood who can say, “This works well here, this doesn’t work here.” We have certain pockets, if you put something up, it’s too modern, it will not sell here. They want a Cape Cod traditional, more traditional looking bathrooms. They will not sell. So you have to know what pocket you’re in and again, what the audience looks like.
Mike: Yeah, okay. Well, let’s talk about . . . I know we’re going to talk about staging. Let’s talk about the selling process first and staging really is a part of that, right? So let’s talk about just the selling process. Because here, again in my market like historically, the MLS, we just don’t put on the MLS and they usually sell themselves based on price. In this market, they’re so low inventory it’s just like, you just have to kind of be on the street. You don’t have to be the nicest house on the street anymore.
But I know your process because you have a very particular buyer, they want to learn more probably about the history of the home maybe, or why you did certain things in the design. It’s a different buyer. Let’s talk about the selling process.
Gina: So here’s, I think, in a nutshell, and I think this works in any market but I think it obviously works very, very well here. So I can speak to how we’re doing it over here. We have very low inventory. But we have the lowest inventory of good fully rehab properties. A lot of LA is old. So the first thing you’re putting up is a product that’s scarce. If there’s a lot of rehab inventory on the market in your specific market, then I’d say you are going to have to do something that sets your flip apart. So it’s either going to be price or design. Those are the only two things that you have as a flip.
Here, we’re selling a desired product, desirable product, first of all. Second of all, everything from how that house is positioned will make a difference on that flip. So we stage it, we stage it well. Invest in some, like, modern looking furniture, does not have to be expensive. Our furniture is actually kind of cheap. But it looks really good in almost any house they put it in. So I have, like, three sets of furniture that I rotate through different houses and it works in almost every house that we use and that’s probably like up to a million and a half. It’ll work fine.
So the staging, the photos. I spend a good amount on photos. Like, for us, what makes or breaks it. We do night shots. We do day shots, we do drone shots. We do like all kinds of shots to make it look like you kind of got a commercial looking . . . but the second thing is we never, ever price on target. We always price slightly below. And that is because we know we’re in a low inventory market, so we’re knowing we’re going to attract a lot of offers that way. I would rather price my house and say, “Hey, it’s for sale. Who wants to buy it and what do you want to pay for it,” then automatically [inaudible 00:24:09] with a price.
So when we put it out, we first put it out on the MLS and we don’t show it for a week. So we say like, everyone calls, our first showing is this Sunday 2:00 to 4:00. It’s a two-hour window. That is all. That’s all they’re going to get. They’ll call and say, “I’m working, my client’s working. We can’t make it. My client’s out of town.” “I’m sorry. I hope you can make it. But we’re really only having the show in the time and I highly doubt we’re going to show it again after that.”
Mike: So you build up all this pent up demand.
Gina: So much pent up demand for that. Then we flyer the entire neighborhood to like 3,000 people and say, “Hey, we rehabbed this house.” Everybody comes to see what it looks like. They heard the noise already for like a few months so they are interested in coming to see what it looks like because neighbors inevitably want to see like what the end product looks like. I’m using them as kind of like extras. I only need them to . . .
Mike: You tell them to come look at it during the open house period.
Gina: Exactly, exactly. I just only want them to [inaudible 00:25:03]. So like movie extras, to be walking around. So they walk and they go, “Oh, we’re only neighbors.” And I go, “Perfect. We love you guys, come on in. Walk through and see what we did.” After that, I’m hoping that the buyer is going to be in the room that day, hoping, with their agent, 90% of the time they are. I only want one but I always get multiple.
I only need one and I need them to be in the room to say, “Hey, I saw the activity at that open.” There’s no way they’re getting even close to their list price. They’re getting much higher. So I’m going to come with my highest invest. I already have like knocked down a lot of my negotiating. They’re going to come higher, they’re going to come closer to the highest, I think, basically on that offer.
Mike: Yeah, that’s awesome.
Gina: Once I’ve got multiples, it’s just a matter of bidding them up against each other. So I only say, “This is about what you’re looking at, do your best.” And I either tag it with a really high number that I usually get exceeded. So I’ll put a number that I don’t think they’re going to hit or I put highest and best if I don’t want to scare them all away. I think [inaudible 00:2:58] type of buyers.
Mike: Right, yeah.
Gina: And 95% of the time, they’ll come over what I think they should come over. And we don’t really have appraisal issues. I mean, we do sometimes. Sometimes they just waive their appraisal out the gate. They’ll say, “We don’t care. We don’t care what it appraises for. We’ll buy it for 1.5, done, all day long.” But everything started from how that was positioned and that scarcity mentality, people will pay more for something if they think they’re going to lose it rather than me tagging it at a million and a half, sitting on the market for three months and saying like, “Please somebody give me a million and a half.” I got that sold in seven days.
Mike: Yeah, that’s awesome. So when you kind of ask the neighborhood to come, do you send out postcards, what are you doing to kind of drive the neighborhood in?
Gina: Yeah, flyers and we do like before-and-afters and like a couple, like a kitchen and thing and saying, “Come and see what we did.” And we use that as an opportunity, talking back to lead generation, I use my opens as a huge opportunity to talk to other sellers.
Mike: Oh, yeah, I bet.
Gina: Yeah, if they can see, “Hey, this is what I did for this seller, imagine what I can do for you,” that’s a perfect opportunity. I always sit it with a partner because there are usually like 100 people that will come through that day, so I want to make sure that, like, we have enough time to talk to everybody. So there’s always at least two people at our opens talking. And that’s probably one of my biggest [inaudible 00:27:16].
Mike: Awesome. So what do you do at the open house? Do you have food and drinks there? It sounds like it’s a big party.
Gina: No, I’ve thought about before like putting like a Starbucks coffee cart outside and I never do it.
Mike: A margarita machine?
Gina: Yeah. I’ve done champagne at the higher end opens and like, sometimes we do it catered, by like a local, cute mini sandwiches and stuff like that. But that’s about it. I don’t go crazy. I also don’t want them spending too much time because I kind of need them to move in and move out. So I don’t want them hanging out drinking champagne and staying forever, but I do on some of the luxury.
Mike: Yeah, that’s awesome. And then in terms of bringing in potential buyers through agents, are you just counting on the MLS to kind of bring them in or do you have like some preferred agents in town, like that do a lot of . . . or you find agents in that area that are real active and kind of reaching out to them directly or you just kind of letting the MLS do its thing.
Gina: Yeah, I usually let the MLS do its thing but in certain pockets, I’ll know who the bigger players are and will reach out to them ahead of time and say, “Hey, this is coming. I’ll give your clients a preview if you want to see it.” But the thing is, I’m not very interested in selling it ahead of time, so I actually want to go through this process so I’m not really wanting to like pocket it or sell it off the MLS. I want to go through [inaudible 00:28:22] as much exposure.
Mike: Hey, and you guys, I’ve seen pictures for you and videos. You guys even are . . . I mean, it’s real clear that something is coming soon in the neighborhood. You guys have signs up all over the house like a circus. I mean, you’re in there for so long that it’s, why try to hide what you’re doing in there, right?
Gina: No, tell the neighborhood. And I think that actually, in talking to you, I’m realizing telling the neighbors and having the neighbors in there, are probably your biggest . . . it’s a huge lead generation. If you’ve done a flip and you’ve done it well, they’re usually impressed with that. People love transformations. It’s like live reality TV shows do well. Like, show them the before video like these little, flipping, like, flip gram things that flip like the before-and-afters, show them [inaudible 00:29:08] ads on Facebook, like, here’s our before-and-after. Here’s a new listing, come see it. And I think that’s huge for generating that much traffic.
Mike: Yeah, yeah. So in every market, even in Dallas, I mean, there are multimillion-dollar houses here. I don’t typically focus on those areas and typically, those people that own those houses are less responsive to traditional direct mail postcard. In fact, most real estate investors, like they cap . . . I mean I cap mine at $300,000 on houses to $300,000 or something just because those are a different animal for us. But if folks are in any market across the country or not any market but a lot of markets across the country, there are high-end houses. What kind of tips would you give for them if they’re used to doing more of an entry-level or kind of move up type house to more of a luxury house.
Gina: I hate to say if you have the desire to try to get your feet wet in let’s say something that’s a little bit more, a little bit more expensive, and you can really . . . I mean, your profit margins can be huge in those up upper end. I actually I’m looking at some of these ones that now we’re looking at building new construction at like two and a half and the resale being like five mil. So when you’re looking at, that’s a lot more money than what I’m used to on even one of my flips. And that’s scary to me. If their margin is so insane. Like, they’re making these builders who are really seasoned builders.
So I say if you have the appetite to try it, you’re obviously generating a lot more per flip and it’s not that much more work. It’s simply a different kind of work. So you’ve got to source the material, you’ve got to check the work. You might have to spend a little time on Houzz and Pinterest and designing those things but I think it’s a good thing to kind of get into your portfolio and you might find that, that is a better margin.
We started at lower end, but we found a sweet spot that’s, like I said, anywhere from 700 to 2 million. Past 2 million, it’s a little harder, so that’s not our preferred price point. It’s not that they don’t exist here. I just don’t like doing it. So finding that sweet spot for you. It obviously increases the profit margin quite a bit.
Mike: Yeah. And what are your thoughts on the market. I mean, any fear. Because a lot of people believe that when the market starts to turn down, the higher end stuff is what starts to get hit first. I mean, any concerns there?
Gina: Two, three years ago, all my clients that were buying were like, “Hey, how long do I have?” And I would say, then, I was saying, “Okay. As long as you’re going to hold for the next five to seven years, you’re good.” My crystal ball is broken. I have no idea. We have this . . .
Mike: Who knows.
Gina: Over here, we keep going up. Our inventory is still really low. Rates are still really low. So unless something happens that’s a drastic change, and that I think would have to be something global for at least Los Angeles to feel that sort of downturn. Because right now, our inventory is so low. Rates are so low and everybody that got these loans the last 10 years, they can afford their houses and they can still afford their houses unless they’re not employed anymore. They can still afford their payments.
So it’ll be interesting to see how and when that happens and I don’t foresee that happening unless our inventory starts to actually increase. But we are having such a huge inventory problem over here that it’s like unlikely in the near future. I’d say not this year, for sure.
Mike: Awesome, awesome. Well, Gina, give us a . . . I want you to give us your website and then just tell us how folks can learn more about you. I know you do a lot of stuff on social media. You share a lot of the projects you’re working on. You share the before-and-after pictures. And like you said, everybody loves to see that stuff. I always love to see the work you guys are doing. But share how folks can learn more about you and where they’ll find you.
Gina: Sure. You can go to www.theginamichelleproject.com and I have links in there for learning about PriceLift, learning about before-and-after, staging, design, introduction to my team, all of our old design projects. There’s a lot on there. And the Gina Michelle Project Facebook page is also kind of interesting too.
Mike: Okay. I’ll find links for all that stuff and add it on here. Is there anything that we didn’t cover today that you want to share with people in terms of like higher end rehabs, what they should kind of prepare for. Tell me a little bit about lenders. I know you do a lot of stuff with your PriceLift model where the seller actually still owns the home, but how about . . . that’s one other thing. Like, I know a lot of hard lenders in Dallas, for example, don’t go above like 250 just because it’s a risk issue for them. But talk about what kind of lending is typically available at higher end stuff.
Gina: So I mean, I would say that we have . . . and it’s difficult because what you are referencing as higher end is sort of like, it’s a little bit more normal over here. So there are [inaudible 00:33:40] that will do that. But I’d say that if you have got a relationship, we do a lot of privates. So we have a lot of private guys that we know year after year. It didn’t start that way. So we certainly like started building relationships over time and they watch you doing what you do and then suddenly you have multiple people hunting that out.
So I would say, approaching them with, “Hey, I’ve done all this like $150,000 to $250,000 rehab. I’m looking to get into one that’s this. My profit margin is X.” I’d say if they’ve done a fair amount of work with you in the lower price point, they may want to venture into at least one to see how you’re going to do there.
Mike: Yeah. So ease into it.
Gina: Ease into it. Don’t say I’m taking on [inaudible 00:34:22].
Mike: No, no. Awesome. Well, Gina, thanks for spending time with us today.
Gina: Absolutely. Thanks, Mike.
Mike: It’s great to see you. And for those of you that watched today, we definitely appreciate you. This was episode 348 by the way. So we got a lot of great episodes out there. In fact, your husband Koko was on a long time ago now, but he’s been on the show before. I always appreciate you guys. Everybody, thanks for joining us today.
Gina: Thank you, take care.
Mike: All right.
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