This is episode #344, and my guest today is buddy Paul Lizell. In the last show, we talked all about wholesaling. Paul is also a wholesaler…but does it virtually, all across the country. In fact…he’s a beast that did 25 deals last month!
There’s tremendous interest in investing virtually, and today…Paul shares all, from what virtual wholesaling is, to how to choose markets, to how to get started doing this yourself.
There are some tremendous nuggets in today’s show…please hold on to your hat.
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 344 and my guest today is my buddy, Paul Lizell. Now, in the last show, we talked all about wholesaling. Paul is also a wholesaler but he does it virtually all across the country. In fact, he’s a beast and did about 25 deals last month alone. So there’s tremendous interest in investing virtually and today Paul is going to share it all, from what virtual wholesaling is to how to choose your market to how to get started doing this yourself. There are some tremendous nuggets in today’s show, so please hold on to your hat.
One quick favor before we get started, I almost forget all the time to ever ask for this. I have almost never asked for this. I could really, really use your help with something really fast. I have historically rarely asked for listeners to review this show on iTunes, Google Play, Stitcher Radio, wherever you usually listen to or watch the show at, but I would absolutely love it if you could visit one of those places, iTunes or the others and write us a review or rate us. Of course, I hope you’ll give us a good rating, but please give us an honest review. I really appreciate your help on that.
Please help me welcome Paul Lizell to the show. Paul, welcome to the show.
Paul: Thanks for having me, Mike, I appreciate it.
Mike: Good to see you. Yeah. One thing that I want to say is Paul and I are talking about doing some deals together now and I’ve talked . . . this is episode number 344, by the way, and we talk a lot about networking and hopefully you guys kind of see the value in networking, not that you have to start a podcast or do what I’ve done here, but you never know when you surround yourself with people that are really great that have a lot of experience or even if they don’t have a lot of experience yet, just a common interest of the things that start to come out of that.
So as we kind of evolve here in the show, some of my guests are not just people that I’ve never met before or people that appear to be doing a lot of deals, these are people that a lot of times have become my friends and in some instances we might even be doing some business together.
Paul, so tell us a little bit about your background. Before we kind of dive into virtual wholesaling, I know that you didn’t always do the model that you do right now, but talk to us about where you started and how you got started in real estate investing and maybe a little bit about how that’s evolved.
Paul: Sure. Absolutely. When I first got started real estate investing was the end of 2001-2002. The market was starting to really heat up at that point too. I’m not sure if you were involved in it at that point, Mike, but it was starting to heat up great. I was doing fix and flips at that point, strictly fix and flips, no wholesaling and I was buying all in my local market.
Paul: It was terrific. The first property I picked up, and it was a bank-owned property, I picked that up for $29,500. I partnered with a guy on it. We put in $4,000, sold it on the MLS for $69,000 less than 30 days later. It was a really good first fix and flip. I did about four or five more that same year. I was working full-time at this point too. I was only a part-time investor.
Paul: So I went full-time in 2004, quit my job in 2004. I saved up 18 months’ worth of living expenses, went full-time, did it, was doing real well with the fix and flips. Then the market really tanked. 2007-2008, it had that real big collapse. So I got hit pretty good doing a lot of fix and flips at that point. I decided to change my model to wholesaling still doing some fix and flips.
So 2009, 2010, 2011, I switched to that wholesale model and we were really killing it, doing really, really well. I was partnered with a guy at that point, we were probably doing 40 to 50 bank-owned wholesales per year and then we were also doing some direct mail marketing. We probably did five to ten of those per year.
Paul: We went our separate ways in about 2013. So I’ve been on my own since 2013. He’s still doing his. We occasionally partner on deals. It’s funny. Partnerships never always fully go away. You have different interests. So that’s how I got into this.
Mike: I’ll tell you what. Some of them go away for sure.
Paul: For sure.
Mike: I know some people who hate each other. Yeah. Well, talk about, thank you for sharing all that, talk about . . . by its definition, the fact that you’re wholesaling is what has enabled you to go in a lot more markets and do more volume, right? We both know people that do a lot of virtual rehabbing too, but that’s a whole different animal, right? Share your thoughts on why you wholesale versus rehab.
Paul: I like wholesale for one, the speed of it, how quick it is. You’re getting a property, getting it under contract, selling it within 30 to 45, maybe 60 days. Whereas fix and flip is generally a three to six-month process from beginning to end getting paid, sometimes longer depending on how the project goes. So it’s taken less, but you’re getting paid more often. So now you’ve got to increase the volume.
Mike: Yeah. There are other folks, obviously there are other folks that run a virtual model. In fact, I’m about to start to go into some additional markets myself. But I know this, though, and I think you would agree with is, most of the people that are doing that and they’re rehabbing, for example, they might go into two markets, three markets.
They’re very specific markets that they go into where your model . . . we had a good laugh in December. We actually went on a ski trip with our group and you said you bought a house in Vernon, Texas. So very few people listening to this are going to know where Vernon, Texas is, but let’s just say it’s the middle of freaking nowhere in West Texas. It’s so funny because I drive . . . my wife and I drive through there every year because we go out to Colorado for our vacation. We always kind of laugh about Vernon. My stepfather’s name is Vernon.
For some reason, we have this connection to Vernon with like, “Oh, we’re almost to Vernon,” it’s almost like a joke. Then you said, “Yeah, I just got a deal in Vernon, Texas,” and I was like, “What in the hell?” There’s hardly even any population there. It’s like population 10,000, I think. Anyway, so that model allows you to essentially go anywhere, right? You’re not rehabbing. You don’t have to deal with all the appraisals and agents and kind of have a boots on the ground-type team to support you, right?
Paul: Absolutely. Yeah. I do some remote rehabbing, but it’s really in specific markets where I have people with boots on the ground. For the most part, I don’t recommend people getting involved in that unless they have somebody they can really trust in that market. The cost savings of wholesaling as opposed to rehabbing, the time, the effort you’re putting into it, to me wholesaling makes a lot more sense.
And like I said, I still do some rehabbing, but to me it makes total sense, especially in a virtual market when you’re going into new markets. I let the deals take me to the market. I don’t necessarily say, “I’m going to go into Columbus, Ohio today.” If there’s a deal in Columbus, Ohio, I’ll go there and then if I find buyers in that market, then I’ll try to find more deals in that particular market, especially if I have a lot of demand for it. But I kind of let the deals take me and the demand take me to different markets as much as possible.
Mike: Yeah. That makes a ton of sense, right? We kind of keep talking about virtual wholesaling here. Without getting into a tremendous amount of detail because this is something we can talk about probably for several days, but what does that mean, virtual wholesaling? Everyone knows virtual, you’re buying other markets, wholesaling, they understand you’re taking them down and selling them generally as is. But just talk about a high level structure of what that means, I guess operationally maybe for a couple minute overview of what that essentially means.
Paul: Sure. So I’m in the Philadelphia market. That’s where I live, Philadelphia, Pennsylvania. Obviously, I’ve bought in this market here. But if I’m looking to buy in the Jacksonville market, that’s a virtual market, Texas. Wherever I’m buying is somewhere else. So the virtual markets being that I’m on my computer. I’m making offers on my computer virtually, getting them under contract, getting the contracts done through the computer through DocuSign, through all those methods.
Another method of the virtual sale is if I need photos, I send a company called WeGoLook.com. They charge $69 for 10 photos. I think it’s $84 for 20 photos and they’ll go out and take pictures of the property. That’s done virtually where I’m not going to the property at all to take a look at it. I can order a BPO if I want on the property, a broker’s price opinion. I can order an appraisal if I wanted to, not that I would. But everything is done virtually sitting here at my desk at home or the office.
Mike: Right. Your office is in your backpack. Wherever your phone and your body and your laptop are could be your office, right?
Paul: Yeah. Next week it will be in Tampa. That’s where my office will be. I’ll be doing some deals probably while I’m down there.
Mike: So talk about maybe . . . you’ve been doing this for a while, maybe over the last few years. My guess is that more and more technology enables this, whether it’s just access to certain tools that you need or even stuff like the service WeGoLook, a lot of those things didn’t exist. I don’t know how long they’ve been around, but even four or five years ago, you had to probably do things differently. It’s probably a little more cumbersome than it is today. Would you agree with that?
Are you looking to change your life through real estate investing? If you’re interested in either getting started or taking your business to the next level, please check out FlipNerd’s private program at theinvestormachine.com. This is the most robust real estate investor coaching, networking, and mastermind on the planet and designed for your success.
If you’re ready to roll up your sleeves, ready to take personal responsibility for your own success and ready to dive into a world class instructional coaching program that provides you step-by-step instruction to help you achieve financial freedom, then you should apply today. Spaces are limited and candidates are only considered after an application and interview process. Our 12-month investor program is unparalleled. Think you might be a fit? Learn more today at theinvestormachine.com.
. . . Probably do things differently. It’s probably a little more cumbersome than it is today. Would you agree with that?
Paul: Oh, totally agree. A decade ago, this would have been a much, much more difficult thing to do. Go back into the ’80s, right? Remember the old MLS books that people used to get? You’d have to have a book. There was literally a book in the ’80s and even into the early ’90s. So if I’m going to a different market, I would have to have a realtor from that different market mail me a book, look at the properties that way because there was no online to look at them.
So the process would have been totally different. I would never have been able to do the volume or anything to this level. Everything is right at your fingertips now in the information age that we’re in, which is great. This really has helped. Without the internet, without the technology . . . and the technology keeps improving. It keeps getting better and it enables me to do my job better and better. There are so many different CRMs out there we can use. Ten years ago, it would have been much more difficult to know what I’m doing.
Mike: Right. What that means, even if you’re not going to do this model that Paul’s talking about here, if you are in your market and your head’s down and you’re operating there, you probably always have a competitive advantage over somebody that’s virtual, but for a lot of us that feel like it’s more competitive in our market, it’s this technology and folks that are buying virtually that are kind of putting pressure on our markets. So ultimately if you’re not adapting with technology and some of these tools, then you eventually kind of get left behind, right?
Mike: Paul, talk a little bit about . . . you mentioned it a minute ago, but how to enter a new market. First off, let’s clarify this. Your source for leads is what? Talk a little bit about that.
Paul: Okay. A lot of different ones. There are obviously the online auctions starting with Auction.com. You’ve got Hubzu. You’ve got RealtyBid, Hudson and Marshall, Xome is a big one. And there are quite a few more smaller guys that are out there that I utilize.
I also utilize the MLS, especially locally for me because there are a lot of bank REOs in my market. I can look at Pennsylvania, New Jersey, and Delaware and even Maryland on my MLS that I have access to. So I can make bids and offers that way as well. Traditionally that’s a little bit different because you literally do have to write up those offers when you’re doing that or have an agent doing them for you, which I totally recommend doing.
Those are the ways I pick up most of my properties. Directly from asset managers I get some. There are a couple of asset managers I do work with through Wells Fargo, Bank of America, and JP Morgan that I get deals directly to. I don’t have them send me the new stuff. The new things that go on the market you’re not going to get a discount on. It’s the stuff that’s got to be aged, more difficult to sell, those are the ones that I target or that has an issue to it.
Mike: Yeah. It’s that produce that’s starting to get a little stinky.
Paul: Yeah. So I love that produce.
Mike: Yeah. So if we were to go back like a year ago, I think everybody would say generally speaking more people would feel comfortable with the statement that REOs are dead. There’s not this market out there anymore. Now, I think there’s been a lot of discussion lately as to the shadow inventory, all the stuff that a lot of people are saying it’s piling up and there’s some stuff coming.
Now of course, the way that your model works is if you were in any one market, you may say, “Hey, REOs are not a big deal,” but if you’re like, “I don’t really care what my deals are. Collectively I’ll take onesies and twosies here and there all over the place,” that’s how I think you probably made that work. But what’s your feeling now on REO and foreclosure type inventory, where we’ve been over the last couple of years and where things might be going here over the next couple of years.
Paul: Okay. I had pretty good access to numbers on this, which is great because all the auction companies and the asset managers give me the number of assets that are on their books, officially on their books. This doesn’t include the shadow inventory, which there is still a lot of shadow inventory. I’ve seen properties that haven’t been foreclosed on and people have been there for five years and haven’t paid.
So there’s definitely a shadow inventory in different markets, right? There are markets where it’s hotter and they put them on their quicker. In Texas it’s easier to get people out than it is in Pennsylvania or New Jersey, they’re nightmares. So where the lagging inventory is is in my area, the Northeast, Pennsylvania and New Jersey and Florida as well because Florida is a difficult foreclosure market and Michigan. There are these states where you just have a glut because it’s taken so long, so the inventory is still good.
But as far as the total inventory, I get a tracking per month on that and it’s generally anywhere from each asset manager, say from Xome. Their properties, the amount that they have each week is anywhere from 2,400 to 4,000 properties or assets that they have. And it generally varies, but it stays in within that 3,000-3,400 per week that they have consistently. And most of them have been pretty fluid and pretty much the same over the past two-year period. There was a slight dip I want to say in the first half of last year, but it came back up a little bit again towards the end of the year.
Paul: This year, from auction.com, they had a little webinar for us, they’re going to have increased inventory too, especially here in the Northeast that they’re going to be releasing over this year. So there’s definitely inventory out there.
Mike: Yeah. Awesome. So what makes you decide to pick a market? There are probably some markets that you just say stay away from. I’m sure you have some reasons as to why, but if folks are listening to this, ultimately before we end the show we’re going to get started and how to do some of these things, but if folks are like, “What are the markets would I go to?”
That’s always a thought, like, “Where would I go if I go somewhere else?” How do you decide that? I know sometimes you let the deal dictate it, but then I think when you’re there you’re like, “Is this a market I should concentrate more on?” How should people decide what markets to go into or even stay away from?
Paul: So a part of what drives me besides just the deals taking me there, I’ll look and monitor what are the hot markets, like St. Louis is typically a hot market. Dallas a very, very hot market, Denver, Colorado, California generally always is and Florida generally is as well. So I’ll look at those, try to follow those. If I have a lot of buyers in that particular market, I’m going to try to get inventory for them there, but I’ve got to do it smartly. I can’t overpay. I don’t want to be overpaying and just getting deals just to get deals that aren’t necessarily deals. So you’ve got to be smart about it.
But definitely as far as due diligence in markets going to a different market, I started when I was in Pennsylvania out of the Philadelphia area and I moved to Pittsburgh and then Ohio, to enter those markets, I contacted a lot of wholesalers and rehabbers in those markets to learn a bit. What are the good zip codes? What are the ones to avoid? I literally have a list of what zip codes I don’t buy in Dayton, Ohio and which ones I will buy in Dayton, Ohio or Columbus or Cincinnati or Cleveland. So as far as the markets are concerned, I try to let the deal dictate it, but as well the amount of buyers I have there in that market.
I have people that are constantly looking for . . . Shreveport, Louisiana, for instance, I think we have a group that buys a bit in Shreveport. I’ve bought probably three or four in the past year and a half there. It’s just hard to find a good deal there that makes sense. I can find deals, but they’re not . . . they’re deals that would be good for me as a buy and hold for rent or to fix and flip, but not the wholesale to somebody else. There’s no margin in them. It’s just a hotter market. There are markets that I want to buy in but simply can’t. I can’t find enough inventory in them.
Mike: Right. I know some people . . . like I said, I’m going into some additional markets, one of the things I look at as criteria, this may seem a little silly but my approach would be more to actually send direct mail and really kind of farm a market than necessarily buying the way that you do, although I definitely want to learn more about it, for sure, and I’m glad we’re talking about it.
But it’s like, “Where does Southwest fly from Dallas?” I want to get to places that I could jump on Southwest and be there in like two hours. That kind of access to a market, depending on a model, if you’re saying, “I’m going to go everywhere,” or like, “Hey, there are like five different markets I want to operate in or two. How accessible are they?” That’s probably an important factor for some folks, right?
Paul: Oh, it’s definitely a huge factor. There are a lot of people that just like to visit certain markets. There are people I know that are investors that just want to buy in Florida because they go to Florida a lot. So they are actively looking for things in Florida. That’s part of what can lead you to picking certain markets, you enjoy the area. And if there’s inventory there, why not go for that? You asked a little bit ago about what markets not to go into or do I avoid markets.
Paul: There definitely are. I kind of want to get into that because not everybody knows every state and what the different . . . there are states I avoid because they’re attorney closing states. Attorney closing states can be more pricey is one thing. There are other factors too.
Paul: So let’s go to Vermont. I’ve bought quite a few properties in Vermont and actually I avoid it like the plague now. We have Bernie Sanders, the socialist senator up there, right?
Mike: That’s the first thing that came to mind. I wasn’t going to say it.
Paul: He likes to take money out of your pocket. There are a couple of really good deals I had. These were $15,000, $20,000 wholesale deals that got eaten down to about $12,000 because there’s a 15% land gains tax. There’s another 12.5% tax because you’re an out of state buyers. They hit taxes on everything they possibly could, so your profit keeps dwindling further and further and further.
So as far as I’m concerned, they’re just not markets I want to get into as much. If there’s a great deal, I’ll still do it. It’s just you have to go . . . there are more things to deal with than, say, New York, Vermont, New Hampshire, Maine, and Connecticut, and Massachusetts than I want to deal with, necessarily.
Mike: Right. Yeah.
Paul: I do a lot in Pennsylvania and New Jersey, which they have their own . . . more New Jersey has more its own issues, but New Jersey does have an out of state tax. They do have an out of state one that Corzine put in before he left as governor, but Pennsylvania is a little bit easier, thank goodness because I do a lot of deals here.
Mike: If you happen to be a buy and hold investor, like if you’re planning to hold in another market, you need to kind of consider the eviction laws and things like that, like how hard is it to get somebody out if you have to. There are other things, depending on your exit strategy, you need to consider those things, right?
Paul: They’re hugely important. It is really difficult to get to evict people in New Jersey. New Jersey judges are generally really liberal and make it hard on the landlord. There are other states that are nice and easy. Obviously, in Texas, it’s much easier to get rid of people. Every state should model itself after Texas as far as I’m concerned. They do it better than anybody.
But there are states to avoid. Like Cook County, Illinois, there are mortgage companies that won’t even lend in Cook County because of how difficult the foreclosure process is. But Illinois itself or Chicago is a red hot market right now and there are a lot of deals, people buying there and there are a lot of big fees, wholesale fees you can make in that market. That’s for sure.
Paul: But I still avoid it.
Mike: Yeah. Well, talk about like the way that you buy, you’re buying from asset managers, REOs, off auction sites and things like that. You didn’t always do that. I think it’s important as real estate investors. There are things that I do now that I didn’t always do. You have to kind of adapt and evolve.
Would you say this model you’re doing that you’re having great success with is kind of here to stay or does it feel like it’s just an opportunity right now so you’re going to lean into it for as long as you can? Is it kind of a fad that at some point will go away, kind of like a lot of people like short sales and REOs did, necessarily? Or do you feel like it’s a model that’s here to stay?
Paul: I personally feel like it’s a model that’s here to stay, but it will always vary in different markets as how much REO inventory there is if you’re in specific markets. For me, virtually, to me I think it will always be here to stay. I’m opening myself up to the whole country.
So there are always going to be some assets I can get. My deals per year may go down in certain years and may go up in other years depending on how the market is. I do personally feel it’s here to stay. But you mentioned something that’s so vital. You need to be able to adjust in this business. There’s a time where I may have to do way more direct mail marketing and switch back to direct mail marketing.
Short sales I didn’t realize was going to be a fad. As it got more and more difficult for people to do them . . . I did a couple of shorts myself from the acquisition side and sales side helping people out, it just made it so difficult that it became a fad. So it’s a possibility that the bank makes things difficult. Like Fannie Mae already makes things difficult for investors. They have that 90-day deed restriction. I’m sure you’re aware of that. They make it a little more difficult. You can’t sell for more than 20% of what you paid for 90 days after the deed is recorded, not from the purchase date but from the time the deed is recorded.
Paul: So there are things these banks could do to make it more difficult. HUD makes it a little more difficult because they got rid of that 90-day . . . or they didn’t get rid of it, they reenacted that 90-day anti-flipping law, which is so asininely dumb. I don’t understand it. They need to get rid of that again. Hopefully, Ben Carson will get rid of that now that he’s at HUD.
Paul: There are things like that which make it more difficult. I’m hoping overall that it’s here to stay . . . or direct mail. I still could do direct mail virtually. It’s just much more difficult because I need boots on the ground in every market I’m in.
Mike: Yeah. I guess one of the benefits of your model right now is once you’ve done a couple deals in a market and you like that market, it’s easy to access or whatever, you can always make the decision to kind of double down on that market, right? And do more direct response or pay-per-click or any other sort of advertising that might help you get more deals on that market, right?
Paul: Absolutely. Yeah. That’s where it’s key. Once you build some relationships in that market, then it becomes easier to do or now it’s easier to do the direct mailing side. You have somebody you can lean on or refer you to people you can potentially hire on your team. I definitely think that helps. At some point I’m thinking if the REO market dries up a little bit more and more, I’m going to end up getting back in that direct mail in some fashion or other or the pay-per-click.
Mike: Right. Yeah. So let’s talk about kind of maybe we’ll spend a few minutes talking about how to get started. People are hearing this and they’re like, “It makes sense to be virtual.” A lot of folks . . . I know that what you do by buying in auctions. You’ve built relationships over time that are not easy to replicate. You’ve got processes that took you probably years to develop and you’re constantly fine-tuning. That shouldn’t turn people off, right?
I always tell people that I actually said this somewhere else recently. Maybe on the last show I did. You and I know a lot of successful real estate investors, but I’ve never met one that came out of the womb as a successful real estate investor, right? We all kind of learned this one way or another. So hopefully, my purpose in saying that is anybody who’s listening to this, even if you have no experience, it doesn’t mean like, “These guys are doing it and I could never do that.”
Well, Paul wasn’t doing that all that long ago and he’s been doing it longer than me. I wasn’t doing anything even ten years ago. So just maybe share your thoughts on how people can get started, like maybe share the first four or five points of things you really need to consider as you’re getting started.
Paul: That’s a really, really good question and it’s really hard to answer too. I remember when I first started and I’m sure you remember when you first started, you feel like you’ve got that deer in headlights and you’re trying to ask everybody who’s already been there and done that every question. Some people are good at giving information and a lot of people are really guarded and don’t want to give you any information, so you end up kind of on your own there.
Mentors are obviously huge. I know you have students that you teach there and I think that’s huge for people getting started so they can have that handholding and understand and learn from people that have not . . . that have done deals before and been through trials and tribulations because this business will put you through trials and tribulations as you well know.
Paul: But you can’t . . . I have seen a lot of people get analysis paralysis. I think we’ve talked about that in the past where they’re looking at numbers and it’s got to be certain numbers and if it doesn’t meet their criteria, and the criteria gets a little crazy, you can over-analyze, which I see a lot of people do and you can under-analyze, which means you won’t be in this business very long. You’ve got to get . . .
Mike: Fine line, right?
Paul: It absolutely is. I recommend when people first start out to learn in their market that they’re in now, they know their market where they can learn their market pretty quickly. They can be on the ground, see what certain neighborhoods are like, see what certain zip codes are like and know where the hot areas are, the areas to avoid are. So I definitely recommend people start that way and then kind of get a comfort level because once you’ve conquered your market, then going into other markets is relatively easy, in my opinion.
I remember going from Philadelphia to Pittsburgh and New Jersey and Virginia and Delaware and then Indiana and building out and then I went to the Carolinas and just continued to build out from there and you can learn the markets pretty quickly, learn where the good locations are, the hot locations are. But definitely, I think for people first starting out, getting somebody to teach them or mentor definitely will help them, for sure.
Mike: Yeah. And I think you’re right. If you start in your market and then you get your systems down, your processes, your comfort level. Truthfully the biggest thing to overcome in my experience in this business is your own self-confidence, right?
After you do deals, it’s like, “Okay, I know this now. I can parachute into any market in the country and build a successful business. There will be some challenges to overcome, but I know I can overcome them because I have that level of confidence now and you’re obviously the same way because you’re doing it now. I think for new people, you’re almost like . . . we kind of defeat ourselves sometimes, right?
We find excuses as to why I can’t be successful there. I don’t do that in my real estate business, but I do it in other parts of my life, like I know I need to work out more, but man, I’ve got to drop my son off in the morning. I’ve got excuses. We all do it in certain parts of our life and if you want to be successful in real estate, you just have to make sure that’s not the area where you make excuses anymore.
Paul: Isn’t that truth? It is hard and it’s easy to find excuses. I find excuses not to go to the gym and workout too. It’s pretty easy to find those.
Paul: It’s difficult to do it. But real estate is [inaudible 00:30:12] to learn when you first get started, dedicating a certain amount of time in the morning or in the evening, if you’re working full-time obviously you’ve got more limited time, but dedicating a certain amount of time to learn markets, go on Craigslist, see what’s for sale, see what wholesale deals are out there, see what wholesale deals look like, see what the pricing is. If you’re trying to learn a specific area, get sold comps from realtors if you can, that kind of thing. I think people need to get comfortable.
Once they’re comfortable and they know, “Hey, this zip code 19046 is worth such and such and if I get a deal it has to be here for me to make any money on it,” once you get that comfort level . . . and everything in life is all about comfort. Once you’ve done a deal and you get a little bit more confident and then you do another one and you repeat the process over and over again, then that’s how build systems, repeating it over and over again.
Paul: The comfort level is good, then you get more confident and then you feel like you can’t be stopped and you need to make sure you hit that line that you’re not over-confident that you feel like you just go anywhere and do anything. You’ve got to be smart about it.
Mike: There’s always a safe level of fear to have, right?
Paul: Yes. Always.
Mike: I always encourage people to go look at other wholesaler’s deals. If you’re in a major market, Dallas, I probably get like at least 20 deals a day into my inbox just from other wholesalers that are here and it’s not hard to get on those lists. If you start to get other peoples’ deals, even if you’re not ready to buy . . . I’m not even saying . . . first off I’m saying don’t always trust their numbers, for sure, but just pretend like that’s a deal you’re going to look at. By the way, you should make an offer on it. There’s no reason you can’t.
Depending on what market you’re in, they may be negotiable or they may not. But just say once you’re comfortable evaluating repairs, just say, “They said it was this, but I came up with this,” just to kind of go through the motions of doing that, it’s almost like if you’re an athlete, right? They spend ten times more time training than they do actually in games. So just treat yourself like an athlete and train often, every day, you know?
Paul: Yeah. Practice hard and learn your market and you mentioned a really important one, trying to figure out a lot of people really struggle with this . . . repairs. Repairs can be difficult because a lot of times you don’t see maybe there’s a crack in the foundation. How much does that cost?
You can go to three different contractors, get three different prices on a repair of a foundation, price per win, price per roof, how much per square of the roof? Price per flooring, carpeting, laminate. Depending on what you do . . . it depends on what market you’re in as to what level of rehab the rehabber is going to do. If it’s a market where you have to have granite countertops, you have to have hardwood floors, you’ve got to price it accordingly.
But if it’s in a market where you only need paint and carpet, you can go Formica countertops, more basic Home Depot or Lowes off the shelf cabinets, then you can price those things differently. A lot of it is market dependent with those. Once you’re comfortable with pricing repairs, it definitely makes it a lot easier. Then you know where to price your wholesale fee when you’re going to wholesale the property.
Mike: Right. For most folks, I always teach people . . . in fact, maybe I’ll build this as a resource and share it because we have a one-page property analysis sheet where you can figure out the ARV and the repairs all on one page, but I actually generally only give that to my students, so maybe we’ll give that to everybody at some point. I don’t have it right now so I feel bad saying I can’t share it.
The most important thing, you probably know this virtually, is like I’m going to assume it needs paint and carpet because I’ve bought hundreds of houses and there might have been one that we said didn’t need paint, but once I take the pictures off the wall and stuff like that, it needed painting. It’s almost never the case that it doesn’t need paint and new flooring at a minimum.
You can start to make estimates on those things. Your bigger question is kind of the big things. Does it need a new roof? Is the plumbing all okay? Are there any problems with the electrical? Do they need a new panel? It’s really more of the big issues, the big mechanical issues or structural. Does it have foundation issues? And by the way, if it needs a new HVAC system, you kind of calculate it based off the size of the house, ultimately. But it’s like, “Hey, it’s going to be $4,000, $5,000, $6,000,” some number you can get it done for. You don’t have to spend much time dwelling on it. It’s like does it need a new system? Probably. Okay. That’s $5,000.
Just move fast. You don’t really have to like, “Let me have somebody come out and look at it.” and just assume it needs it if it looks like it needs it or if you know it needs it and move on. A lot of people dwell on that stuff forever like a traditional homeowner would, but as investors, we just have to move fast and make assumptions, right?
Paul: Absolutely because otherwise, you’re going to get analysis paralysis, you’re going to take too long on a deal and someone else is going to get it from you before you’re ready to do anything with it.
Paul: You go in and see that hot water heater looks like it’s over 10 years old, assume it needs to be replaced, that furnace looks like it’s 20, 30 years old, it definitely is going to be something you need to figure is going to need to be replaced. If you see two layers of shingles on the roof and you’ve got some curling, figure it’s going to be a tear off and total redo of the roof. If you’ve got one layer, you can potentially do a roof over if it’s not the architectural shingles.
There are things you look at and you can figure out once you have a roofer that will give you a price per square for a tear off, price per square for just a roof over, it becomes real easy to price things and then your buyers can’t beat you up as much when you’re going to come up. They can’t say, “My repairs are this.” You can point them to how you came up with your repair estimates and when you do that, you win that battle, it makes it a lot harder for them to beat you up on pricing, that’s for sure.
Mike: Right. Well, Paul, I know you recently started working with people kind of showing them your model. If they want to learn more about you or some of the things you’re working on, where should they go?
Paul: They can reach me via email or they can take a look at my website, which is housedealsamerica.com. You can just see some of the deals I’ve got there and where they are, give you kind of idea of my inventory of properties we’ve sold, properties we have under contract now. My email is my first name [email protected] We’ve taken on a few students. We’re looking to expand. There’s been a lot of demand. So I’m probably going to be adding some more students. I’ve got to figure out exactly how I’m going to do this platform. It’s a work in progress right now.
Mike: Yeah. Awesome. Well, we’ll add some links down below the video here for those that are interested. Definitely appreciate you and great to see you. I’m actually going to see you in person next week, looking forward to that and catching up a little bit more.
Paul: Absolutely. Thanks for having me on too, Mike, I appreciate it.
Mike: Absolutely. Everybody, thanks for joining us today. Show number 344 is in the can, as they say. So thanks, guys. Everybody have a great day.
Thanks for joining us for this episode of the flipnerd.com Investing Show. If you’re not yet an elite member of FlipNerd, you’re missing out. We have tons of great training including a new detailed master class published each month and live training webinars with experts twice a month. Plus you’ll get access to all of our archives where we already have a growing library of master classes and other training videos.
Elite members also get membership in our incredible online mastermind group, where many of the top real estate investors from across the country, including many of the hundreds of guests I’ve had on the show in the past, are already members. Whether you’re brand new, looking to get started, or a veteran, you simply must join today. I promise you won’t be disappointed. To learn more or join today, please visit flipnerd.com/lab. That’s flipnerd.com/lab. See you on the next show.