Show Summary

Brian Meidam joins us on FlipNerd.com today to discuss his model for maximizing his profit when rehabbing houses, as well his operational approach to be able to execute multiple rehab projects at a time. If you’re new to rehabbing, you may be surprised to know that it’s actually pretty easy. That is, if you find good, honest contractors and build a systematic approach to the rehabbing and sales process. We also discuss the importance of pricing, and how a property that doesn’t sell within a couple weeks is an indication that you’re simply priced too high. Quality and price are the two main levers of success that rehabbers have. Check out this episode of the FlipNerd.com Flip Show to learn more.

Highlights of this show

  • Meet Brian Meidam, Milwaukee based real estate investor and coach.
  • Learn the right and wrong ways to rehab houses to maximize profit.
  • Join the discussion on the importance that pricing plays in selling your houses fast.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Welcome to the flipnerd.com podcast. This is your host, Mike Hambright, and on this show I introduce you to expert real estate investors, awesome entrepreneurs, and super cool vendors that serve our industry. We publish new shows each week, and have hundreds of previous shows and tip videos available to you, all of which you can access by visiting us at flipnerd.com or visiting us in the iTunes store.
By the way, flipnerd.com is the most robust social platform in existence for real estate investors, where you can find off-market wholesale deals in your market, find great local vendors to help you in your business in your market, and socialize, learn and grow with others in our industry. There is truly nothing like it. If you’re not already a member, please visit us at flipnerd.com today, where you can setup a free account in about 30 seconds, everybody is doing it, the cool kids and even the nerdy ones. So get on over to flipnerd.com. And now, let’s get started with today’s show.

Mike: Hey, it’s Mike Hambright with flipnerd.com. Welcome back to another exciting VIP interview, where I interview successful real estate investing experts and entrepreneurs in our industry to help you learn and grow. Today I’m joined by Brian Meidam. He is a Milwaukee based real estate investor that bought his first property over 10 years ago, and has gone on to do a lot of deals. Like many veteran real estate investors, he has multiple exit strategies by wholesaling, rehabbing, keeping rentals, and a number of other things. But Brian has become a pro at rehabbing and reselling, which is important in this market. We’ve kind of converted it to a seller’s market here. So today he is going to share with us how to rehab and price properties to maximize profits. Before we get started with Brian though, let’s take a moment to recognize our featured sponsors.

Advertisement: RealtyMogul.com is an online market place for real estate investing, connecting borrowers and capital from accredited and institutional investors. Get a rehab loan fast and close in as little as 10 days. Rates start as low as 9%.

We’d also like to thank National Real Estate Insurance Group, the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Mike: Hey, Brian. Welcome to the show.

Brian: Thanks for having me. I appreciate it.

Mike: Yeah, yeah. So you’re up in Milwaukee. You’re kind of with hopefully the tail end of your winter, I assume.

Brian: Let’s hope so. We’re hitting 50 degrees today. It’s exciting, the high of the year.

Mike: I grew up in the Midwest. That’s shorts weather, right? You get up to 50 and it’s like, “Get the shorts out.”

Brian: It is, “Get out the flip-flops.”

Mike: Awesome. Hey, thanks for joining us today. So before we get started about talking about rehabbing, a lot of veteran real estate investors have a couple of strategies based on obviously whether it’s a rental or a retail sale. Then usually, pull a couple of levers with price and quality to sell your houses quickly. So it’s going to be a good topic to talk about. But before we get started, why don’t you tell us your background and how you got into real estate investing and a little bit of more about you.

Brian: Sure, thanks. Well, I guess to start out, I got into the business on a part-time basis back in 2004. At that time, I was proud of that. I went back to college and got a finance degree, and was working for an investment firm as bond trader and analyst. Did that from 2001-2007, and then started buying real estate, buying some rentals on the side in 2004. I left the job in, I think, it was July of 2007. Which some people were like, “Oh, you’re crazy.” That timing was awful.
We can get back to the way it ended up being perfect for me with the amount of short sales that I was doing. But I had the support of my wife and basically what we did was we saved up my income, lived off of less than her income, which gave us a lot of room. So I didn’t have to come out of the gates being a motivated buyer and make dumb decisions. So with her support, she kind of gave me that nudge because I kind of had the golden handcuffs where I was working at. But it was a great thing.

So what I was doing at my job at the time is I would take vacations, and I would go home and take a week’s vacation, and I’d do real estate full-time for that week to see if I liked it and if it fit my personality. So I worked on a trading desk and I was like, “Am I going to like this, being self-employed on my own?” It ended up working out great, ended up buying some properties, getting some good deals and eventually in ’07 I made the leap to unemployable.

Mike: I came in in ’08, so a little bit after you, but it’s the same thing. People are like, “Why are you doing this? Why are you leaving your job?” It just didn’t make sense to a lot of people and now some of those people are like, “Well, how do I do that?” Maybe you can take a minute and talk about . . . a lot of people are in that situation. You and I left corporate America behind, and a lot of people do. But I’d say the majority of people fear that kind of jump of jumping off, and it sounds like you kind of eased into it. Aside from kind of easing into it like that and trying it a little bit, what kind of advice would you give to people to make that leap to not necessarily work for the man anymore?

Brian: Sure. That’s a great question, and I would say my biggest piece of advice would be if you can’t do this business on a part-time basis you will never, ever be able to do it on full-time basis. So there’s no reason why you have to quit cold turkey the job, and then go out and do real estate. For some people, maybe their personalities, that’s what they have to do because they have that [Inaudible 00:06:29] paycheck every day. It’s not enough of an incentive to motivate them.
But if you’ve got some discipline, and you’ve got to have discipline when you’re self-employed because if you want to sleep in till noon and no one is telling you can’t, your bills are going to add up pretty quick if you do that. But this business can be done on part-time basis. It does not need to be done on a full-time basis. So the other part is, if you’ve got a spouse or significant other, I think you want that support of that other person otherwise . . . for me, it would have been stressful if my wife [Shanna] wasn’t on board. Thankfully she was, and it just worked out great.

Mike: Yeah, not everybody is in that situation, and I wasn’t necessarily in that situation when I started. But in the corporate world, somebody that I looked up to told me one time, “Save a year of your income as fast as you can.” And basically, the thought was you’ll take more risks. You’re not worried about eating tomorrow necessarily or paying the bills next week. It’s like you just become a different person. If you have that entrepreneurial spirit, or even if you’re in corporate America, you’re more likely to stick your head up, and go for the gold because I’ve got a safety net if I need it.

Brian: In the reality, in the corporate world there is no much of a safety net anymore . . .

Mike: Right, right. Absolutely

Brian: I’ve got more of a safety net being self-employed than someone does working in the corporate world, and a lot of people don’t understand that. But being self-employed isn’t easy either. If some people are like, “Oh, it’s all rosy,” well, they’re lying to you. There are days where in this business everything’s going wrong-contractor issues, tenant issues. But you take the good with the bad, and there’s definitely more good with being self-employed. There is no top. You can just keep going.

Mike: That’s right, absolutely. Well, awesome. So tell us your background. I know you wholesale, and you keep some houses as rentals. You have a number of different exit strategies you follow, and I know we are going to talk a little more about rehabbing. But kind of talk about your transition. Did you start off by primarily wholesaling, or did you keep a couple of rentals while you had your job? Or kind of talk about how you got to a point where you had multiple exit strategies.

Brian: Sure. Well I started building up a small rental portfolio while I still had a job. So I wanted to be able to be financeable and not have any issues there. Hindsight being 20-20, I wish I didn’t have those rentals because obviously we all know what happened to the market after that. But it’s just a good thing I bought them where the cash flowed, and it wasn’t an equity speculation play because that all evaporated very, very quickly after the market turned down.
So I was building up a small rental portfolio. I also had a whole bunch of short sales in the pipeline. That really helped the business a lot because in ’07 when I quit, December of ’07 I had a six-figure month just wholesaling the short sales. That was just a big confidence booster and a shot in the arm to keep going. So we still do short sales today. We do a lot of them; we’re pretty good at them. But for people starting out, is going into a short sale niche the right business decision? Probably not, because we really have to build a big pipeline of short sales. You have to really know what you’re doing effective at it. Otherwise, you’re just going to spin your wheels, and you’re going to pull your hair out.

So I would say for people that are getting short sale leads, if it’s not something that you’re going to focus on and build a business on, refer those leads to out to other people. I’m not just saying that because I do short sales. But refer them out to people where that’s their business model. It’s a dead lead for you. Work out an arrangement where you can get paid on that referral if they close on it and move on to the next deal.

Mike: Yeah, I can say that. That’s what we’ve done. My wife, for the majority of the time we’ve been in business, was an agent, and we never worked a single short sale. We just knew it was a beating and it wasn’t our area of our expertise, and not the best use of our time. So we always just referred those out to somebody else that could try to work them on our behalf. Very rarely did we ever end up buying them, but maybe got a referral for the listing agent that sold it or something like that.

Brian: Sure, yep. As I was in the process of leaving the job, the short sales were really hitting. I was doing some direct mail that was hitting, I was getting leads, and I was selling stuff fast just as fast as I could get it. So that was kind of as the market was starting to come down a bit. So I would just basically watch and see what those people were doing with those properties. Were they keeping them as rentals? How are they rehabbing them? The stuff that was more retail, what were they doing with them, how were they selling them, what were they doing to them, what would I do differently? What would I copy that they did? And just kind of followed along behind the scenes to see what they did.

Mike: See what they did.

Brian: Exactly, exactly.

Mike: It’s funny that you say that. Most people don’t do that. They kind of try to figure out on their own. They think they know. They saw something on HGTV, and whatever it might be, right? I mean a lot of people get into . . .

Brian: Well, that’s reality TV. Come on, Mike!

Mike: Yeah, surreal. But it’s funny that you say that because I’m not saying that I was that different. I just kind of figured it out, and we got better as time went by. But now that I have done a lot of deals, know a lot of people, there aren’t very many real estate investors that I know that if somebody asks them, “Do you mind if I just watch you while you rehab this house and ask you a couple of questions?” There aren’t very many that would say no, unless you were a schmuck and they just didn’t really want to be around you. But I think most people, especially rehabbers, they get some pride in showing people how successful they are at doing things right?

Brian: Right, yep. Exactly.

Mike: More people should ask other people that they know are in the business. I’ve had people like, “Can I just get the lock-box code to your house, and go in a couple of times? I’ll call you before I go.” And I’m like, “Yeah, I’m cool with that. Don’t step on any nails or anything.” You always have to worry about that part. But that’s interesting. The whole thing about short sales being a bit of a beatdown for a new person, you can really say that for rehabs as well.

Brian: Yeah. If we back up, the problem where a lot of new people get beat up doing rehabs, is they don’t do their own due diligence. They trust the realtor on the comps. Nothing against realtors, but they’re in the sales role. So they trust the realtors for the comps. That’s as far as purchasing and reselling.
So they run their formula. I generally buy at 65% of ARV less repair cost. So a new person may come in and say, “Okay. This is a 150 ARV debt 65% less repairs of 40”. And now where that number comes out at isn’t exactly where they need to buy it at. So now I’ll say, “Well, the ARV is not really 150. Its 160, and I’ve never done this before, but I can fix it cheaper than 35. I can fix it for 20.”

So they’re trying to sell themself their own deal and it doesn’t end up well. So now it’s the realtor’s fault, and the contractor ripped them off. You can’t go into rehab and loosey-goosey. You’ve got to do your own due diligence, and really know your repair cost. Otherwise, you’re setting yourself up to fail.

Mike: And a lot of that, like you said, it just comes down to experience. I know the first few houses I rehabbed, I went there all the time. I’m personally going to pick out fixtures and stuff like that. I don’t do any of that now, nor would I. But you just tend to let it soak up all your time, and as a real estate investor your time’s better spent finding that next deal.

Brian: Exactly. Negotiating, not doing the clean out or dealing with that stuff. That’s negotiating deals and marketing.

Mike: Yeah, yeah. So do you remember your first rehab?

Brian: I do.

Mike: Yeah? Any drama with that one or?

Brian: Knock on wood here, I’ve not lost money on a deal yet. However, this first deal, if we had to account for my time, I lost money. So I did pretty much everything wrong. I bought this duplex from a guy that I worked with. He was relocating to New York City and needed to sell it. So I paid way too much for it. I did all the work myself. I’m not a contractor type person, so you know what that means, right? It didn’t look very good and it took five times as long as it should have.
And I think on the closing statement, you know I ended up making about $1,000. But if you account for my time, I lost my shirt. But I learned a lot, I learned what not to do, what to do different next time. For a lot of people starting out, if you break even on your first deal it’s a win because a lot of people lose their shirt. I’m not saying I’m proud I made $1,000, but that was the first deal.

Mike: You appreciate the lesson, though.

Brian: Right, it was a relatively cheap lesson to learn.

Mike: Yeah, yeah.

Brian: The key is learning from it.

Mike: So how did you evolve into like rehabbing more over time? I mean, you learned from that experience and you said, “Here is what I’m going to do differently next time.” How did you kind of evolve to where you’re confident and comfortable doing rehabs, just probably as comfortable as anything else you do?

Brian: I just immersed myself in education, but there’s a fine line between getting educated and staying educated and not doing anything, like a lot of people do, and getting educated and go out there and taking action. And for me, I left my job. Failure was not an option. I needed to figure this business out and do it, and so I educated myself, immersed myself. I wish I had a mentor when I started out. I did not because I think my learning curve would have been drastically faster than it was. Even though I did excel fairly quickly, it could have been faster and I could’ve learned from their mistakes instead of my own.
But it was just going out there and doing it, and part of it was a lot of stuff I was wholesaling started filling up my buyers. So these deals that came through that were retail-type deals, I started filling these guys up. “Well, okay. I’ll just take this one and rehab it myself.” And I figured it out eventually.

Mike: Yeah, or you see somebody you wholesale to, and somehow you hear that they did better than you thought they would do on it and you’re like, “Huh, I left some money on the table,” right?

Brian: Right. Exactly. I would say at that point my wholesale margins have come down a little bit. But at that point, I think I was probably averaging around $15,000 a wholesale deal, which is pretty good. But I was seeing what they were making rehabbing them and I was like, “What? I’ve got to figure this out.” So I just jumped in, education wise, and then figured it out from there.

Mike: Especially when you start to realize that it’s not necessarily . . . I don’t know if this is the case for you, that I’m going to do just as many deals, and I’m going to make twice as much money necessarily. Which doesn’t always work out that way.

Brian: Barely ever.

Mike: Yeah, but when you start to realize that, wow, maybe I can do half as many deals and make the same amount of money, there is something to be said for not having to chase . . . because usually the hardest part of this business is generally finding the deals, right? So when you kind of start to put that math together and you’re like, “Well, there’s a way for me to kind of squeeze more juice out of this fruit.”

Brian: Right. Exactly.

Mike: Yeah.

Brian: And I think you made a good point about a lot of people, like, “Oh, I want to do 100 deals this year.” For me, I don’t want to do 100 deals. I want to have a life and I don’t want to be stressed out. I’ve got 3 little kids, and I want to be able to do stuff with them and be around. So to me, I think last year on my own, I think I did right about 25 deals. But they were 25 pretty good deals.
And then I’ve got joint ventures, and I do some hard money lending and things on the side as well. So I’m just trying to leverage myself. But doing the high volume stuff, it’s just not what I want to do. Because I think it’s just hard to be sustainable, plus I don’t have cruise on payroll. I’ve just got everyone subbed out. I think a lot of the guys that do, they always have to be chasing deals because they’ve got to keep feeding the machine. So, “I’ve got to keep my guys busy,” so instead of making $30,000 on this deal I’ll take $15,000.” Well, if you have a couple of things that happen on your deal, your $15,000 evaporates fairly, fairly quickly.

Mike: Right. Yeah. I can relate to that. I understand. It’s interesting how we’re going into this market now. I don’t know if you feel the same way in Milwaukee. I didn’t start until 2008, but from what I know of the market just before I got in 2005-6, it feels like we might be kind of getting back to that point a little bit. So it’s interesting how I’ve learned a lot from people that were investing for several years before me because it’s almost like they live through the depression, and if they survive then they’re scarred. They’ve learned some lessons about, keep it lean and mean, don’t get bloated with a bunch of overhead and stuff like that.
So I think from your standpoint, it’s wise to not do that, and it’s something that my overhead’s probably higher than it should be or has been for a while. But I think about it a lot, how do we balance between not sacrificing more opportunity, but staying lean and mean so that when the market shifts, because it will, we’re kind of prepared to deal with that.

Brian: Yeah, that’s a great point. I think I worked out of my basement for two years before I had an office. And now I’ve moved offices once since then. But I mean, our overhead’s still really low. I have one assistant that works for me about 35 hours a week and my overhead is very, very low.

Mike: Yeah, yeah. So with rehabbing, talk about how most real estaters, and that’s how I was, you kind of just think, “Hey, I’m going to create the blueprint for every rehab.” Initially for me, it was like they’re all going to kind of be the same. What ended up happening was I’m under-rehabbing higher dollar houses, I’m over-rehabbing rentals or lower grade houses, and you learn pretty quickly that that doesn’t work, doesn’t make sense. And so talk about how you went through that process of learning different levels of rehab, and maybe even talk specifically about what your criteria are.

Brian: Sure. Well, I guess we’ll start with what my criteria is. Three bedroom or larger, single-family houses with a basement. So basements are common in my market. If you don’t have it, it’s not normal, and they’re hard to sell if you don’t have a basement. Or a two-bedroom where you can pop the top and go up. You’ve got to have a garage, or room to build one, and a decent floor plan or if it’s a goofy floor plan, one that you can change, and make it work.
So that’s the criteria. No busy streets, not next to commercial, and my market is not a sexy market. It’s a first-time homebuyer market. So in my market, that means from 120 to 250. And people are like, “Why don’t you do high end? You can do high end”. Well, I can, but the thing that was in the back of my mind is those buyers are a lot pickier. If you don’t give them exactly what they want, they’ll just go build it.
So the first-time homebuyer market, those people are always coming into the market, and we give them a really nice product. Whether we’re doing $120,000 house or a $200,000 dollar house, it’s getting granite countertops, stainless steel appliance package. Stainless steel appliances package cost me $1800 to $2200.00, so that versus going to all white or all black appliances. The cost premium for that is not much, and there’s a big perceived value for that. Same thing with granite. Yeah, it cost me more but it doesn’t cost me a lot more.

Mike: Right, yeah. Do you have different levels, almost packages of what you do based on price point, if you’re at the lower end of your range versus the higher end? Or is it pretty much identical?

Brian: It’s pretty much identical. Maybe I’ll do more some different color schemes in the house. I’ll add some crown molding, some chair rails in the master bedroom. But as far as fixtures, we’re buying the two-pack from Lowes for $20, the brushed nickel. So there isn’t a ton of variation, just because it really doesn’t need to be. The people at $120,000, I’m providing them with a better house than my competition is and at a slightly cheaper price, and same thing on the higher end. Sometimes on the higher end, depending on the neighborhood, I can push that depending on the inventory available.

Mike: Yeah. You mentioned that yours are nicer than the competition. Talk a little about evaluating the competition and how you look at it. I know you and I are both big believers that all that matters is as local as you can get. So if the house across the street is for sale, that’s probably your biggest competitor. Just talk about how you kind of evaluate that and how you kind of stay fresh over time.

Brian: Sure. When I go to evaluate a house, I’m looking, ideally, three months at a three-block radius of the house. If I can’t get the comps I need there, I’ll expand out. But what I want to do is I’m looking at solds because that’s where the market recently was, and I’m not just looking at solds. I’m also looking at actives because that’s what my current competition is.

Mike: I do the same thing, but very few people say that. We’re cut from the same cloth, my friend. It’s important because I was thinking if somebody is looking at houses right now, whom are you competing with right now?

Brian: Right. And that also determines, in my market, whether we have to put a rec room in the basement. Does my competition have it? If most of the actives and solds have it, and they’re at this price point, and I need to be at this price point and that rec room with the full bathroom is going to cost me X, well does it make sense to do it or do I price it cheaper? Then if I do that, will it stay in the market longer because they don’t have that extra bathroom? So it’s all those things I’m paying attention to, and that’s looking at the comps on MLS. Not on Zillow or Trulia or any of the other sites. I just look at the MLS because that’s kind of the premier source, at least in my mind.

Mike: Yeah.

Brian: No, absolutely yeah.

Mike: And how about different grades for rentals and things like that? That kind of set standard kind of package of how you . . . just for the folks listening, I mean maybe you can talk a little about something you and I kind of take for granted is that, operationally you need to be as consistent as possible from house to house to house. Otherwise, you’re the one who is out picking out fixtures and stuff yet again, right?

Brian: Right. So all of my rentals are all painted the same color on the inside. So I can call the supply house and tell them I need two 5-gallons of this and the contractor goes and picks it up and paints the place. As far as the fixtures go, I’m not buying the plastic, cheap faucets. I’m buying the decent, $80 fixtures because they’re going to last because I know the tenants are going to be using them. So I don’t want that phone call. The other thing I’m looking at is what can I take out of the house to avoid those tenant phone calls. So a lot of times if I buy it and it has ceiling fans in it, we don’t have a crazy hot climate. So I’m pulling those things out and putting light fixtures in because they’re going to break, and I don’t want to deal with it.

Mike: Yeah. What else do you take out?

Brian: This has backfired a little bit. So our water bills have gotten outrageous, and on a duplex the owner pays the water bill. And if the tenant doesn’t pay it that goes on my tax bill. So it does not attach to the tenant. So sometimes when I was finding the duplexes are running a laundromat out of the basement. Which sometimes can take a little bit of time to catch, and it costs money. So what I was doing is in the basement set, at the bin, basically disconnecting that and not allowing hookups. I still have some of them that work but . . .

Mike: Just put coin laundry in there.

Brian: Yeah, I could do that. I could do that. So some of the tenants raise a stink about that. I didn’t do it to any existing but just to the new ones moving in. Some of them were like, “We’re not going to rent it unless we can put the washer and dryer in.” So fine, we’ll hook it back up. So I didn’t stand firm on that so that backfired a little bit on me. When we’re buying a place, we’re always generally changing out wax rings and toilets.
As far as I don’t put carpeting in any more of my rental properties. What I like putting in is a product called Allure. A-L-L-U-R-E. It’s at Home Depot, and it seems to be very tenant proof. It’s basically a floating vinyl floor, but it looks like hardwood. So I think Lowes carries something similar but Allures work very well. And if there’s hardwood, we always refinish the hardwood floors and keep those. I was spending way too much money on carpet for tenants because it would get destroyed.

Mike: Yeah, we found that in some instances, when we rehab rentals, we spend more money on the materials than we would in a rehab. It’s not that we were trying to put something out that wasn’t durable in our rehab. We try to put out a good product. But it’s like something that’s extra durable. Like we’re going to go and take it a step above in the long-term. We used this carpet that was called Houdini or something. I literally I saw this demo, people like dumped blue ink on it and you just couldn’t see it. I still don’t know how it worked, but it had something to do with the reflection of the light. So it was more expensive but it was like, “Wow, that’s going to last probably twice as much as regular carpet.” So it was worth a little bit more.
In terms of your contractors and how you work, from a rehab standpoint, do you have kind of a . . . not necessarily a SKU list, but do your contractors know, do you give them the flexibility to say, “You know the types of light we use, or the types of fans that we use, or the types of appliances”? I mean, are you ordering each of those things yourself or do you have kind of a set list, and people just know what your expectations are?

Brian: The way I do it on the rehabs is that I’ll have them give me a count list. Say they’ll say, “I need X number of 3-bulb light fixtures, X number of 2-bulb light fixtures. Here are the dimensions for the pre-hung doors.” Kind of the full material list, this is how much DUROCK, drywall, whatever.” And then I’ll call the box store with the SKUs and order it through the contractor desk and they’ll deliver it. And that way, the contractor doesn’t have to worry about paying for it, and I know exactly what I’m getting. They sign off on it and basically do a check that it’s all there when it gets delivered.

And then from that point forward, I give the contractor gift cards. My role with the contractors is they’re only allowed to bill me for stuff that’s staying in the property. So I tell them that up front in the contract, because I’ve got to draw the line somewhere. Otherwise, I get charged for a spray gun and Fritos and 5-Hour Energy and everything else. On its own, it doesn’t sound like a lot but it can add up a lot. So finish nails, for example, that stays in the house. That stays in the property and they’re using it, so I’d pay for that. Plastic to cover the windows when they’re spraying texture and paint, I don’t pay for that because it doesn’t stay in the house. So that just where I kind of decide to draw the line. So if they’ve got to increase their bid to cover that stuff, then they do that. But that’s kind of how I work it.

Mike: Yeah. So tell me the importance that pricing plays in selling your properties and maximizing profit.

Brian: Sure. Pricing, I think, is a very important part, and if you get greedy on the list pricing it could backfire on you because your listing can get stale fairly quickly. The way I look at it when I’m pricing property, if I don’t have a contract on that in three weeks, I’m overpriced, plain and simple. Also, the other thing to consider is the market will dictate your price. So if you’re priced too low, the market is going to drive that up. So sometimes I will purposely price a product a little bit cheaper and I’ll see the market drive that up. So but if you’re greedy on the top end of it and that gets stale out there, it just doesn’t look good. Because now people are like, “Okay. What’s wrong with it? Why hasn’t it sold?” And I’m okay with pushing the top end if the market is justifying it.
That being said, when I buy the property and figure out my after repair value, I’m using a conservative number I know I can sell that house at. Now, if I know I can sell it at 145 but maybe I can get 160 for it, I’m not using 160 on the front end. I’m using that 145. But if I can push on the back end, great. But I think, again, you’ve got to look at your competition, what’s out there, what do buyers have to choose from.

Mike: A lot of people don’t really realize it. Even in that three month period or so that you’re holding a house or a couple of months, you need to run your comps again because things change quickly.

Brian: Exactly. Another thing that you can do fairly easy is look at actives relative to solds, and are solds higher or lower than actives? That will tell you what’s going on in that neighborhood, and that can give you some . . .

Mike: Days on market as well is to see kind of how fast are things turning. Awesome. Well, we’re about out of time here. Any kind of last minutes tips you would give to folks, if there’s anybody listening that hasn’t rehabbed or has done a couple of deals, but they want to take it to another level? Just kind of general advice, you would give them on how to ease into that and make sure they’re doing it the right way.

Brian: Sure. Do your own homework. If you’re putting your money up on the line or someone else’s, you’ve got to do your own homework. Don’t trust anyone else, especially if they’re in a sales position. Not to bash agents, but you’ve got to do your own homework. And I would say get a mentor. It will help bring you up on your learning curve so much quicker.

Mike: Yep, awesome. Great advice. Hey, Brian, thanks so much for your time today. I appreciate you joining us.

Brian: Thanks for having me. It was a lot of fun.

Mike: And for folks that want to learn more about you, we’ll add some links down below the video here, and please stay in touch, my friend.

Brian: All right. Sounds great. Thanks for having me.

Mike: All right. Have a good day.
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