There are quite a few real estate brokers who have seen the advantages of being an investor while in the industry. But Joe Evangelisti went about it the other way round. Joe got into real estate investing first, through a flip deal that went bad. He learned the hard way how hard it can be to flip houses and turned that deal around by making it a rental. He didn’t give up after one bad deal and was off and running as a real estate investor. He took those hard learned lessons and turned them into a career as a real estate broker, eventually owning his own office and using that position to feed his own real estate investing business. Hear more of Joe’s story on this episode of the Invest Four More Podcast.
It doesn’t take a special skill set to be a successful real estate investor
Joe was a “C” student in high school and didn’t graduate college. He says that the main thing a potential real estate investor needs is the courage to learn and move forward. There are too many people who consume all the content about real estate investing but never put it into action. Joe says that the ones who are successful in the investing business are the ones who have the guts to try out what they’re learning. Mistakes will be made, but it’s not something that should hold you back. Find out more on this episode of the Invest Four More Podcast.
Do you know what the “replacement recipe” is?
There are other names for this investing strategy, but Joe has dubbed it the “replacement recipe.” It’s where you use private money to purchase a rental property, then refinance the house into long-term financing with a traditional lender for more money after the property is repaired. Then you pay back the private money lender and have an asset that produces positive cash-flow with none of your own money in the game. It’s one of Joe Evangelisti’s favorite ways to add rental properties to his portfolio without risking a dime of his own finances. Hear it explained from Joe on this episode.
How many exit strategies can you have when you buy a property?
Joe Evangelisti has built his business to the point that he has at least 4 exit strategy options for every property he purchases. First, he tries to work it as a wholesale deal, getting out the most money he can without having to invest money of his own. Next, Joe will evaluate the potential for a fix and flip. After that, he’ll see if it can be turned into a rental property, using private money to purchase, refinancing to repay the loan and set up a long-term solution, then renting the property to create immediate cash-flow. And if all else fails, he’ll make it a turn-key deal and try to sell it as a ready-made cash-flow opportunity for another investor. You won’t want to miss Joe’s explanation of how to leverage properties in these four ways – all on this episode of the Invest Four More Podcast.
Financing real estate investments is the trickiest part…
Joe Evangelisti doesn’t believe in seeking out unknown investors to fund his real estate fix and flips or wholesale deals. He has learned to build a relationship, fulfill his end of the bargain, and then go back to the same people again and again to fund other deals. He’s discovered that once you promise a person 10% return in 6 months and actually come through with what you promised, those people will want to do the same thing again and again. There’s no reason they wouldn’t want to because it’s making them money time after time. But it requires you to be able to fulfill your promises every time.
OUTLINE OF THIS POWERFUL EPISODE
- How a real estate investor decided to also become a real estate agent: Joe’s story.
- The benefits Joe sees in owning his own real estate office – how it impacts his investing business.
- What made Joe decide to buy rental properties and how he’s built his portfolio to over 70 rentals.
- How Joe’s first flip became a mistake, and how he turned that mistake into a gem by turning it into a rental.
- Why you should be willing to live in every rental property you own.
- How Joe manages 70 rental properties and what he’s considering to make his system even better.
- The 4 exit strategies Joe likes to have available on every property he buys.
- Joe’s “replacement recipe” that gives him cash-flow properties without putting out any of his own money.
- How Joe finds private money to fund his investments.
- The difference between hard-money lenders and private money lenders – and why you have to know the difference.
- How Joe’s team is purchasing 5 properties per month for flips, wholesale, or rentals.
- Why Joe believes every wholesaler should be prepared to buy every property he puts an offer on.
- How Joe got into new construction projects and how it’s working to date.
LINKS MENTIONED IN THIS GREAT EPISODE
Joe’s podcast and website
Joe’s wholesale site for New Jersey
Here is a link to a company that does direct marketing for you to attract motivated sellers. Use code InvestFourMore to get 10% off!
TWEETS TO SHARE THIS POWERFUL EPISODE
[tweetthis]Even when you make a bad deal in #realestateinvesting, there’s a way to make it right – Joe Evangelisti[/tweetthis] [tweetthis]Why you should be willing to live in every #rentalproperty you own. On this episode of #InvestFourMore[/tweetthis] [tweetthis]The “replacement recipe” for #realestateinvesting that cash flows with none of your own money[/tweetthis] [tweetthis]Learn how to fund your #realestateinvestments through the power of relationships, on this episode.[/tweetthis] [tweetthis]How you can have 4 #exitstrategies on every #investmentproperty[/tweetthis]
Transcript of The Episode:
MARK: Hi everyone, it’s Mark Ferguson with The Invest for more podcast. Welcome to another episode on real estate investing, real estate agents. Today I have got an awesome guest, Joe Evangelisti who has his own Remax agency, has a ton of rental properties, does wholesale deals, flips and even does new construction. So, if you thought I had a lot going on, Joe is just going crazy right now. So I’d like to welcome Joe. Thanks a lot for being on the show. How are you doing?
JOE: Awesome man. Awesome. First of all, thanks for having me, I’m really excited to be part of your show. I know we have recorded an interview with you on my show that got a lot of activities so it’s good to be part of your show and I wish you luck with it.
MARK: Great, thanks. It was great doing your show. I know, I just start up my podcast here a few weeks ago and so far it’s been great. It’s great talking to other investors and learning what they are doing. I know you are a real estate agent, is that how you first got started in real estate, was it as an agent or did you start out as an investor.
JOE: Actually, it was the opposite way. I added my first investment property and the way I got into the real estate business, ironically, my first deal that I got into, I was actually showing it to the first group leader that I had joined so I joined a real estate group initially to gather some exposure and I had flipped a property and I was actually showing it to the guy who ran the real estate group. He was in between houses. He actually sold his house and he had nowhere to go so he came to my property and I was showing it to him as a rental property for a short term and after I got done showing it to him he said you know you would make a really good realtor, you showed the property really well and you know you sold it, have you ever thought about getting your licence. And at the time I thought it was a great idea to help me spring board myself in the real estate business and the investment business and then, you know, kind of get some exposure with the brokerage piece so that’s how i got into it. It was after my first flip, after I personally did my first flip.
MARK: Very cool. And so before you did your first flip what were you doing. What was your job? What made you want to get into real estate at all?
JOE: I mean, I always tell people my background was in construction so I was a construction project manager. I was actually running the general contracting department of my dad’s company at that time and I’d always had a bug for real estate. I always wanted to buy stuff. I just liked building stuff and improving stuff and things like that. So my bug came from the construction industry and then I decided I really wanted to be in the real estate investment industry and then I kind of backed my way into the brokerage industry as well.
MARK: When you start out as an agent you don’t just start out as the head broker you start out as an agent with another broker.
MARK: Were you going full time or you just kind of did it part time for your own deals. How did it start out first being an agent?
JOE: Well I was really lucky that my wife had a pretty good job and she supported my ass for a little while and I jumped pretty much head on into it. I probably had my licence for maybe a couple months while I was finishing up working with my dad and then I just decided that I’m going to jump in both feet. At the time one of my partners and I had been flipping homes by hand, literally by herself doing it nights and weekends while I was running the GC company so we flipped a couple houses in the interim between the time I got my licence and started becoming a full time realtor as well. So that is how I kind of made the transition.
MARK: Did you find success right away or did it take you a while to start selling houses and really get the hang of being an agent.
JOE: The agency piece was always kind of secondary to me. I have always considered myself an investor first even though my brokerage and my group sells a lot of real estate, you know, I have always kind of thought that the investment piece was where I wanted to be, you know, buying and holding and then buying and flipping, so we’ve been doing that for about 8 years just around the same time we’ve been building the real estate sale piece. So I guess they kind of grew together. There wasn’t really like one took off before the other, they kind of grew simultaneously.
MARK: What made you want your own office? That’s a big jump from just being an agent and an investor to being the head broker and owning an office.
JOE: Yeah. I mean the thing about the office piece for me has always been …I mean I got really, you know, fairly successful at sales and you get to a point, kind of like, I am sure you are in your… I am sure that’s why you do this podcast – you like to educate people. So I was running a successful group of folks who were selling a lot of real estate and kind of parlayed that to you know what I would love to have a whole office full of folks who I can teach our methods and help them grow their business and you know the by-product of that is just like what happened today, one of my agents brought me a deal we are putting it under contract. So, I have a lot of really successful brokers in the office and now they are also out there and they are my agents, I mean, so I’m their buyer so it kind of builds in for them the ability to either double-end a deal or have a buyer on standby. I mean, they know me as their broker-owner but I am also an investor. So when they come across stuff it’s, like, boom, send it to Joe, you know you are going to get an offer. So, it really became a nice synergy that way that I have an office with really successful folks that are also going out looking for deals and some of them are getting involved in the investment piece too so it’s really got a good synergy there.
MARK: It sounds like being an agent and actually selling the houses yourself wasn’t the key to your business. It was hiring other people, hiring other agents, building up staff to let them do it and basically make you money while you managed everybody.
JOE: Yeah, I mean my team, so to this day, I mean, I am at the point now where I still interact with every file, I still talk to all my stars and my clients. I do the buyers’ interviews and stuff like that. Am I on the street showing houses? Not generally. Am I going on listing appointments? Not generally. I mean we started to build a really good team that I can trust that is going to take care of, you know, my past clients, referral sources the way I did. I still have my hands in it, I am just not 100% doing everything, awarding contracts or those things. The whole idea is that every really successful realtor has to graduate at some point to where they have a team that’s doing the day-to-day work.
MARK: Yeah, that’s exactly how I have my team set up too. I used to be the one doing all the showings, the listings, all the tasks and at some point you will drive yourself ragged, you hit a ceiling and that’s when you start hiring assistants, then you hire an agent, then you hire another agent, all of a sudden, you know, you’ve taught them how to do your job and you kind of oversee everything but yeah, you are still…it hard to ever get completely out of it, you’ve got to be in touch a little bit. So, no, that’s very cool.
JOE: Yeah, definitely.
MARK: So, how many rental units do you have right now?
JOE: We are somewhere around 70, hovering around 70. I have a bunch of different partnerships but, I mean, altogether we have about 70 doors that we manage and that we own.
MARK: Nice, nice. When did you buy your first rental property and what made you want to get into rentals.
JOE: Well, first of all, the first question. I bought my first one in 2007. We bought it as a flip and I always tell people, that was my flop. To this day it was a bad deal. But the thing I love about real estate is, even when you make a bad deal, there is always a way to make it right. So, like at the time, it was 2007, we bought it right before the market crashed. You know, we paid 225 for it, which nowadays 8 years later I probably wouldn’t pay 150 grand for it but we did; we paid 2 1/4. We put about 40 grand into it thinking it was going to be worth 315 and to this day the property is probably worth, I don’t know, maybe 250. You know at one point in time it was probably worth under 200 but the point is we took what we had, we refinanced out, even in kind of a bad market because it rents really well. It rents for like 22.50 a month or something like that and the taxes are high. So, I mean, you guys can do the math, whoever is listening to this can put a pen to paper. I mean, it doesn’t cash flow very much. But let’s say it makes 200 bucks a month. I mean, here is a property that I’ve owned that’s been paying itself down. You know, we probably only owe about 170 on there, 180, who knows, depending on what we put down on it. It’s been paying itself down for 8 years. It’s been putting little bits of money in the bank account every month for 8 years and when I wake up in 10 or 15 years or however we situate it and however we refinance it, eventually I’ll own it outright and in 10 years maybe it’s worth $300,000. But most people would look at that, oh that’s a terrible deal, like, you got crucified, you know, you have no equity in the property, oh, whatever, and I always look at it as it was a great learning experience. I flipped the whole thing by hand so I learned a lot about doing actually trades. You know, I had some background in construction before that as far as…I mean I was always a carpenter and a builder and that kind of thing but I mean I learned some plumbing and electrics stuff from my partner in the process. I learned a lot of things about it and the bottom line is, even today, you look at it, you might consider we are upside down, you know, as far as what we are into it for versus what we can sell it for but it is a cash flowing asset that’s appreciating in value over time and paying itself down with the tenants in place. So I look at it as a win even though on paper it’s not a great win, it’s not our best win, probably the worst deal I ever did, kind of thinking about it but, you know what, we still own it. So, you know, that’s the beauty of rental properties. The beauty of real estate to me is even when you do a quote-on-quote bad deal, as long as you structure it appropriately it is still going to pay off in the long run. You know, when I wake up in 20 years, all these properties that we are talking about will be paid off. So whether I bought them good, bad or indifferent, as long as they are cash flowing and substantiating themselves in the interim, it’s going to be worth something one day, right? I am sure you look at it the same way.
MARK: Yeah. Well I think what’s super important is what your plan is and what your long-term goal is. I mean, your plan is not to get as much cash flow right now from them as you can. Your plan is to create a retirement basically 15/20 years down the road, right?
JOE: Well, first of all, every investor should have their own business model; their own goals that they are trying to achieve. I think it is really difficult in my particular area unless you want to buy rental properties in the hood, in rough areas. Like, I think if you want to buy them in good areas, that’s the one thing about all of our rental properties, I would personally live…I say this to my investors and I say this to the people we talk to all the time, I would personally live in almost every single property that I own. I feel that safe in their locations that I think they are good places. So to me that means a) that they are probably good properties and b) they are probably going to appreciate better than most properties. There are really good cash flowing assets that you can buy close to me. For those of you who ever heard of the Camden New Jersey, I mean it’s like 3 miles that way. You can buy really cash flowing assets but are they ever going to appreciate. Are they ever going to be worth more than you paid for them? You know, I look at it for more the long term. Yeah, you can look at the cash flow now, I think the aggravation level of the higher cash flowing properties, especially in my area, I am not saying you can’t buy really good cash flowing assets in decent areas but the more cash flow you have in my area, generally the bigger headache you are going to deal with, maybe the lower rental price point you are going to be dealing with, really just tougher tenant, you know what I mean. People who are, you know, pay check to pay check, trying to get by, they are going to call you with excuses on the first of the month. I am really lucky in the fact that we don’t have that. We, knock on wood, find some, probably in the last 8 years we probably evicted less than 3 or 4 people and I think that’s really hard to say with that many rental properties. Maybe your cash flow is a little lower but your stress level is a lot less and long term appreciation is going to be there.
MARK: That’s awesome. Now do you have a management company or a separate property manager that manages all those? Do you have someone on your team that manage them? How do you handle the management of those properties?
JOE: Yes, so that’s actually something we are talking about now between me and my business partner. He’s always been the backend manager and I am always the front end, construction, maintenance problems, that kind of thing and because we generally rehab our stuff when we buy it, we generally don’t have a ton of maintenance so it’s not a lot to deal with from that end but the paperwork piece is starting to get really arduous for him so we’ve been talking to a couple of different management companies trying to determine what is the cost versus reward of outsourcing the lease piece and all that. My office, naturally, still does the marketing for all the rental properties and around us and I am sure around you is the same thing. I mean, you put a rental property up for the right price and it shows well, it only there for a couple days. I mean it not like you are lagging on the market so the marketing piece is kind of easy but we have been thinking about outsourcing the paperwork end of it because once you get to a certain number of units it’s hard to keep up with all the leases and when they are expiring and when they are renewing and all that kind of stuff, sending out notices.
MARK: That’s fantastic percentage – only doing 3 evictions and you are doing most of the work yourself.
JOE: No, don’t get me wrong, that doesn’t mean we haven’t had to threaten eviction a few times. Generally we have good enough tenants that once you put an eviction notice out there they are reaching out to us and saying ok, let’s work this out, so and so and so forth. So we have been lucky in that regard.
MARK: You are still buying rentals now, right, or are you kind of holding off for the moment.
JOE: Absolutely. Yeah. No, almost every time we buy a flip property…I just did a periscope video about this today actually. When we buy something…I have more than one exit strategy for the most part. I either know I can wholesale it, take it down and rehab it for a flip or I can take it down and put a tenant in there. And then the fourth one which very rarely happens in our neighbourhood, but a lot of times we can actually sell them as turnkey if we put a tenant in there and they are in place and the property is in good shape. So, really it’s always, we have a minimum 2 sometimes 3 or 4 or 5 exit strategies when we take something down because, you know, depending on market shifts, like I don’t want to get stuck with a portfolio of properties we can’t do anything with. So we are always thinking of multiple ways out.
MARK: You have a unique way you are financing your properties, right? Are you still using private money and then refinancing those rentals.
JOE: Yeah. I would say most of the time, unless they are already turnkey rentals where we are buying them with tenants in place, we are generally taking them down with private money, depending on what we do with them again, and if it is a rental property. See I will do the math on my way in. I am looking for tax and I can rent it for tax then the bank will refinance me at ‘x’. As long as my investor money payoff is less than what I know the bank will refinance on, then I am going to take a chance and rent it out. So at that point, let’s say we owe our investor, at the end of the day we owe him 100 grand, I might know that based on renting that property for $1,500 a month, my bank will refinance this at 120 grand, well now I know I just went into a property, I put a tenant in place, I am able to pay off my investment of 100 grand after closing costs and all that is said and done, the bank might actually write me a cheque for 15 grand. Now I look at that as, Mark calls it, our mentor calls it, the trifecta profits or something like that, I call it the replacement recipe because basically, I am replacing the investor with a long term solution with bank financing and I am getting paid to do so. So for me, if I could flip that property and let’s say I could make 30 grand, I might prefer to keep it because I am making 15,000 in cash, which is a refinance, which is, as you guys know, tax-free and you can call your CPA and ask them about that but, you know, I’m making 15 grand to hold on to a property that I don’t have any of my own money out of pocket on, so me that’s like, that’s the grand slam. If I can make cash to keep an asset that’s going to cash flow that I never have money out of my own pocket, I think your return on investment is something like infinite. None of your money invested, so to me that’s like the best thing that can happen because you solid make 30 grand or something like that. I still love, that’s my favourite type of investment. When I can keep a rental property and get paid to keep it, I can’t think of anything better than that.
MARK: And when you are paying taxes on those flips you are probably not making a whole lot more than what you are making on the rental property anyway.
JOE: Absolutely. If you make $30,000, do the math.
MARK: Yeah, that great. Now, one thing I want to touch on, you’ve been obviously in the business for a while, you made a lot of connections, is that how you found your private money. Was people you met in the business or how did you find private money.
JOE: So for me private money is really a very personal thing, it is very much a people game. I know there are a lot of gurus out there that preach their systems on how to raise private money and we have probable 10 or 15 investors at any given time that are loaning us money. I know every one of them personally, like I have either had a phone call with them at least explained our business or I have been doing business with them for a long time or I am related to them. To me a good track record and a really good history of borrowing money, I mean, I am sure like I said there are a lot of systems out there where maybe you could send out postcard and raise 50 grand, I have no idea but to me it’s always been a one-on-one, face-to-face, you know, project-to-project and then once they are invested in one or two projects I don’t think…I was just having this conversation the other day, I have never had anyone give us money and want it back. You know, they do a deal, they get paid their return on investment and they are so happy, they are like, do another deal. You have to build it up though. I mean, I have started out with one or two guys and built it to about multiple streams of different private investors. It is very personal for me.
MARK: No, I completely agree. I know there are a lot of sites out there that say you can get private money on line or even places that advertise they are a private money lender and pretty much they are hard money lenders charging 15%, 14% on their money, calling themself a private money lender. Yeah, all my private money is relatives, pretty much, maybe close friends, people I have known in the business and who know me. Face it, someone is not just going to give you $100,000 because you say you are a real estate investor on line. How do they know you? You know, there is no way.
JOE: Dude, I think you hit a really good point right there and I think it is important. Your listeners will probably want to know the difference here but they really need to Google the difference between hard money and private money because those two terms are too mixed up. You know, like you said, hard money is hard money. That’s not a guy who is writing a cheque out of his chequing account and trusting you to use the money and on a long term by the way. Most hard money is not long term, right.
MARK: Right. It’s 12 months at the most usually.
JOE: Yeah. I don’t use hard money so I don’t know, but I know you pay points and fees and all kinds of crazy stuff. I mean, with us, with our investors it’s a flat rate; they get paid their interest at the end. So if I borrowed 100 grand and I paid 10%, for example, I owe him 110 grand in 12 months. No BS, no monthly payments, no points. But don’t get me wrong, there are some private money guys who want all this stuff that I am naming, but the really, really good private money guys and girls, in my experience, they are usually writing a cheque or it’s part of their 401K and they are doing a self-directed IRA or something like that but it is flat interest over the course of the project.
MARK: The hard money guys will do appraisals, they’ll want inspections done, they’ll want all types of things going on and some of these private money companies they do the exact same stuff; they just pretend to be private money, which they are not, they are pretty much hard money.
JOE: Correct. Yep.
MARK: So, you flipping business, how many flips do you think you are doing at one time right now?
JOE: You know, we try to buy 5 a month. We are pretty much on track for that this year to buy 5 a month. I don’t really pay attention to how we disperse of them, whether we keep them or flip them. I don’t really track that because it’s unique to every month. So if I buy 5, 3 of them might be back on the market to sell, 2 of them might be rental properties one month and then it’s the exact opposite the next month. So, I don’t really look at how they are leaving us but I look at how we acquire them, so I try to buy 5 a month.
MARK: Are you buying within 10 miles, 5 miles? How far out do you go when you are buying those flips?
JOE: You got to expand a little bit and again this is so area specific. I mean I am not trying to give advice here to people that are living in different areas but like for me, I was stuck in my own county for a long time and I started to realise that when I kind of spread out a little bit there is a ton more opportunity out there for me so then I went to 3 counties about a year ago and now we are at the point where we are in like 6 counties and I am buying one that is down the shore next Tuesday or Wednesday. Down the shore for me is like an hour and a half away so, you know, it just really depends, if they are good deals and they are in areas that I like to drive to, I know it sounds crazy but that’s kind of my criteria, like there are some good deals in certain counties in New Jersey that I don’t feel like driving to, they are not in my driving circle, radius, whatever. So if they are in places that I like to drive to and somewhere I like to grab lunch, then maybe I’ll buy a property there.
MARK: That makes sense and you are wholesaling properties too, right, so you will quick flip, get rid of some of these right away.
JOE: Yeah, I know. I think it is important that…and I know a lot of guys I talk to have different game plans with how this works, but the things that we are going to wholesale are things that I’m going to buy anyway. So, like what happens is if we have 10 things in the pipeline and I only really want to buy like 5 things that month, then we will put 8 out of 10 of them up on wholesale and just see if they can wholesale, right and then if we can’t, we are prepared to buy them anyway, and I think that’s really important because I think there’s a lot of wholesalers out there, in fact I just got a call yesterday from a guy who is, you know, trying to wholesale a deal who has no intentions of buying it and that’s really, really tough because I think you put yourself out there and you tell a seller you are going to follow through and you have no plans on following through. So if you put it under contract for too much money and you can’t get a guy like me to buy it then you are going to back out of the contract. Knock on wood, I have never had to back out of a contract. So we are putting things under contract with the intention of, I’ll buy every one of them if I have to, I just don’t really want to. So if I can make 5 or 10 or 15 grand to sell something on wholesale, then that’s what were are going to do, and then in the same token sometimes we buy stuff that we are planning on reselling anyway. So, for example, I bought one a couple weeks ago that we are wholesaling but we are reselling, basically. We didn’t put any money into it, we bought it, we had a couple investors come through it, they gave us a higher number the more we paid so the downside is, yeah, I’m going to pay holding cost and insurance and closing cost twice but it should be a $20,000 profit to resell it, it’s actually an end-user, he is an investor but he is going to buy it for himself. Again, there is always that exit strategy. But most of my deals, unless they are really cherry deals that I know I want to buy or if they are new construction, I don’t usually wholesale on new construction. They are all going to make it to the wholesale site at one time and just kind of see what happens.
MARK: Great. You made a great point you know, I interviewed Mark Skyron last week and he talked about the intent to buy these properties and actually do a deal for wholesalers and there are so many wholesalers out there who are kind of guessing. They get to make an offer to a seller, they hope somebody will buy it from them, they have no idea if they are doing and it gives so many people in the investing business a bad name.
JOE: Those guys absolutely kill me, they kill me. You know, there are times when you put a deal and you are 90% positive and maybe you are wrong and you have to go back to the seller and renegotiate. I’m not going to say it’s never happened to us but when you make an offer to a seller, in my opinion, you should damn well know what you are going to sell it for or you should be ready to buy it. You know, the thing about it is if you put it under contract for 50 and I go in there and tell you it’s only worth 40, you should be prepared to buy it for 50. Like you already told the seller 50, right? So, like it gives us all such a bad rap when you don’t have the backing to know that you want to buy it and I know there’s a ton of gurus out there that are doing it and they are telling people to put under contract. My advice is worst case scenario, you should have a couple cash buyers on your roster and you should get their opinion before you put it under a contract because any really good investor/buyer like myself is not going to begrudge you making 5 or 10 grand, you know what I mean. So if my wholesalers call me up and they say, hey what would you pay for this address? I think the fear out there is a lot of wholesalers think they are going to call me and I am going to somehow get a hold of the seller and I am going to beat him to the punch and I am going to negotiate it and I am going to kick him out of the deal. I mean, no good buyer is going to do that, it’s pretty simple, if I am buying deal off of you and I screw you over on a deal you are not going to call me anymore for deals. So, like, I want my wholesalers, the guys who are selling us stuff, I want them to make money and any good buyer should want them to make money because that’s why they are going to keep bringing you deals, right? So like I feel like if you are a wholesale and you are that kind of guy who has no intention of buying you should at least set up a good rapport with a couple cash buyers to where you can give them an address and say ‘yo, Joe, what would you pay for this’ and get an honest response for them, and if I say I’ll pay 40 then you should go back to the seller and say 35 before you put it under contract. That’s just my personal opinion on how the business should operate but I know that’s a perfect world and it’s not always going to be like that.
MARK: You are so right about people worrying about, you know, the real buyers, the real fix and flippers, the rental property guys who are buying a lot of properties, they are not going to try and screw someone over for $5,000. It’s like you say, it’s going to ruin their relationships, ruin their reputation and it’s just not worth it.
JOE: And guess what? The real buyers don’t have time. You think you are going to give me an address and I am going to skip trace the guy and try to locate. I don’t have time for that. That’s why I am paying the wholesaler. Go out there and give them the contract for the right number and make your money.
MARK: I know what you mean. Alright. So you got your rentals, you got your flips, you are doing the wholesale properties and you are doing something I have never done myself personally, is new construction. So walk me through how you got into construction, how that’s going for you.
JOE: New construction for me is very limited, it’s not like I build anywhere. We only really build in a couple zipcodes in New Jersey and they are like the best zip codes in New Jersey. I live in a town called Haddenfield, which, I don’t want to say it’s easy to build there, but it’s a place where there is a good enough spread where it can afford you to buy something almost at retail and renovate it and make a profit after you sell it. We buy in a place called Ocean City, New Jersey LBI, Long Beach Island. There’s just a couple really specific zip codes that we’ll do it in. So that’s where the new construction piece came from. It actually came from the fact that I lived in a town that I wanted to build my own house in and then, you know, somebody offered me enough money to build my own house that I was living in so I ended up ripping the roof off the house I was living in and building it for somebody else and then it just kind of became a domino effect from there because buyers kept coming to us from the house that was already presold and say what you got next. So I said, wow, there’s got to be a demand here, let me go buy some more stuff. So any given time we are probably doing, like right now we are doing, 4 new construction houses. That’s about as many as I probably want to handle at one time. I mean, that might change if the market changes and the availability for these house comes up but that’s kind of a good average for us because they take a lot longer. You know, it’s not a flip. It’s a 6-7 month process to buy something, get the permit approved, make it new, the whole thing.
MARK: Now, are you buying vacant lots, are you buying tear-downs. How are you finding the properties?
JOE: Yes, so believe it or not what we are doing for the most part are not considered new construction even though like the house I am sitting at right now, if you walked into it you wouldn’t know it was old but we are buying ranchers. We are actually saving the foundations, sometimes we rip to reinforce the foundation but for the most part we are saving the foundation and we are putting second stories on, so what’s happening is it’s considered an addition, again, even though they sell for new construction prices, it considered an addition and we save a little bit of money with the foundation. Believe it or not it cost me almost as much money that if I was to knock the whole thing down but it helps us avoid variances and things like that. So it’s a little bit easier process.
MARK: Right. A lot quicker, I am sure, with permits and everything, getting it all approved.
JOE: Yeah, I won’t deal with anything that needs the variance, it’s just too expensive and too time consuming.
MARK: So, where would you like to be in 2 or 3 years? I mean do you just want to be juggling along, plugging away at what you are doing or do you have certain goals that you are moving towards. What’s the future looking like?
JOE: Somewhere in the Caribbean. My goals have changed so dramatically in the last 18 months. We went from me being the flipper site manager guy who is picking out everything. You know, my new goal, my new vision is to start to systematize it and, as Mark says, work on my business and not in my business. So we have gotten a lot better. Like the rehabs, for example, they are pretty turnkey for me as far as… My guys know when I buy something exactly what’s gonna go into it, what colours, what paint, what flooring, what granite, what cabinets. We pretty much, it’s an assembly line. So the rehab piece is pretty easy, so what we have now is, we are starting to build like an A, B and C list of finishes. So, like, the A finish will be everything up to $200,000, B will be like 200-600 and then C, which is really harder to do, is the more custom stuff, the 700, $800,000 custom homes, what the finishes go into those. Those are going to change, whatever we get over 700 is kind of a one-off thing but for me to build out like the A and B finishes is really interesting and it’s really cool process for me because once we decide what goes into them once, now I can kind of push the button and say alright guys, it’s an A finish house, you know what to do with it. We are building out Cedar Croft Avenue right now, right and my guys know it is going to be exactly like Maple Avenue we just sold last month. So I don’t really have to step foot on a project anymore, I go because I enjoy it. I know a lot of the virtual guys like don’t even want to step foot on it, which is fine. I don’t really have to if I don’t want to, I just kind of do it because I like it, to the point where in a couple of years my idea will be that we are doing 6-10 of these a month – rehab, resell, rental, whatever you want to call it – and that we are doing it in a system where I don’t have to be involved. That’s my ultimate vision in 2 years.
MARK: Nice, and one thing I forgot to ask you too is how are you finding your properties. Are they MLS deals, I know you do some direct marketing. Where do the majority of your deals come from?
JOE: Yeah, mostly direct to the sellers. We have a lot of wholesalers bring us deals, which is cool. As you can imagine, I have very few brokers that bring me deals because they always think I am the competition so it’s the hardest thing to drill in their heads that, like, listen … I did a post on it last month. Like in the last 30 days I paid like 8 commissions out to competing brokers and I don’t care, I want them to make money because I want them to bring me deals again but it is so hard because they think, oh Joe is the competition, he owns a Remax, he can’t buy our stuff and so it’s funny, like a lot of my buddies who are in the business who aren’t brokers, they work with a lot of realtors, they have all these staff of realtors they call them, I don’t have that luxury because they think I am a competition but we do find a lot of MLS stuff direct to sellers, we are doing direct marketing, we are doing… I have a lot of burr dogs who are out there, who are really kind of quasi co-host sellers but for the most part they are really kind of employees of mine, not employees but they are 1099s, they are independent contractors out there finding deals. So that’s like the culmination, you know, we have ads up, we have trucks on the road, you know, wherever we can pull a seller lead out of but mostly I am off MLS, there’s just too much competition. Every time I buy something on the MLS I am paying top dollar, you know, so I try to avoid that when I can.
MARK: Do you have any advice, anything else that you want to add to the listeners.
JOE: No, do I have any advice. No just get out there. I like the ready fire aim mentality. You know, Mark says you don’t have to get it right, you just have to get it going. You know, with all the people that we communicate with, with the podcast and on the website and the blog, I mean I find a lot of … I hate to say it but they are tire kickers. There are so many people that want to get in this business and they feel like they need some kind of special skill set and I am here to tell you guys, I never graduated college, I am a C student in high school, I am nothing special. Most of the people that I know in this business are really nothing special and I think that people think that they need to have some sort of special magic powers to go out there and invest in real estate. You really don’t, you just have to get going. I mean, I wouldn’t be here if it wasn’t for the first deal that I talked about at the very beginning of this podcast, which was just a quote-on-quote failure. I wouldn’t be doing 5, 6, 10 deals a month if I didn’t screw up on the first one, you know. So a guy would say get out there and do something, like get it going, get involved. If you are new, call wholesalers, call investors, call cash-buyers, call people on Craig’s list, just ask a lot of questions and then once you have enough or you think you can get involved, then get involved, you know, stop thinking about it and do it.
MARK: Right, exactly. Just go it. Great. So Joe, if people want to get in touch with you, I know you have your own podcast, what’s the best way for people to contact you, I mean, if they are looking for an agent, if they are buyers in the area, how can people talk to you?
JOE: I mean, really the best way is just go on my website, it’s theflipking,com and there is a contact us tab at the top. That email literally goes to my email address. People don’t think it’s really me but it’s Joe@theflipking.com, that’s my email address. Just shoot me an email and they can find our wholesale deal locally, they can find them at southjerseycashdeals.com, that’s where you will find our wholesale inventory and yeah, we are always looking for people to connect with, nationwide or locally, you know, whoever is doing deals and would like to get involved. Yeah, I am sure they will be able to find us on your website too, right.
MARK: Yeah, we will have contacts, everything and yeah, if people are asking me for an agent in the area, I sent them up to you, they probably won’t work with you directly but someone on your team who works with investors and people looking to buy or sell too, you know, for sure.
MARK: Well Joe, I appreciate you taking the time out to do the show.
JOE: Thanks Mark
MARK: Thank you Joe, take care