Brett Rickenbach worked in the biotech field for many years and always wanted to get into real estate. He had a dream of flipping houses, but never took the plunge because he had a solid corporate job. That all changed when he was laid off and forced to find a new career. Brett decided it was time to start his flipping business, so he joined forces with his brother and has flipped 6 houses he first two years in the business. On this episode of The InvestFourMore Real Estate Podcast I interview Brett to see how he was able to start a flipping business, what it is like partnering with family, how he is finding deals, how much money he is making, and his future goals.
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How was Brett able to start flipping houses?
Brett was interested in real estate from a young age, but never bought any investment properties because he was busy with life. He had a great job and little time to pursue flipping houses. That all changed when he was laid off and forced to make a change. It may seem like a horrible thing to lose your job, but in some cases it can be a blessing in disguise. Brett decided it was time he started flipping houses. He received a severance package from his old company that gave him enough money to live on and partnered with his brother, who is a contractor.
Brett lives in Massachusetts, but they have bought most of their flips in New Hampshire. On their first flip Brett and his brother made a $35,000 profit. That is not bad, but they did a lot of the manual labor themselves and had to split that profit.
How does Brett and his brother find deals?
Brett has typically found flips by using real estate agents. They have a great agent who has found them deals, and Brett also searches for deals himself. They did find an off market property they were able to make $80,000 in profit on, that was passed to them by another flipper who was tied up with too many other properties. Brett and his brother have flipped 6 houses so far and have two more houses they are currently rehabbing.
Brett and his brother have used a mix of private financing, savings, and home equity lines of credit to finance their properties up to this point.
What challenges has Brett faced when flipping?
Brett has done awesome flipping 6 houses in his first two years in the business, but we can always do better. Here are a few challenges that Brett has faced and we talked about on the show:
- How to delegate more tasks and manual labor. We talked about how Brett an his brother do much of the work themselves and why his time is much more valuable doing more important tasks.
- How to find more deals. It is tough to find properties cheap enough to flip. Finding deals is a constant issue for many flippers, but if it were easy everyone would do it. Brett is in the process of getting his real estate license in order to help them get more deals.
- How to finance more flips. Brett would love to do 6 to 8 flips every year. It takes a lot of money to flip that many homes and while they have private money, they would need more to do that many deals. I suggested Rick look for local banks who could potentially finance more properties and at lower rates.
- How to find good contractors. One of the reasons Brett and his brother do much of the work on their flips, is they have a hard time finding contractors. That is a problem I can relate too and something we discuss in detail on the show.
We will try to check back in with Brett in another podcast to see how his business has progressed. One thing Brett knows he needs help with is goal setting and motivation. We talk about that on the show as well and I have a new book coming out on mindset and success. It has been a huge part of my success.
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[0:00:58.8]MF: Hey everyone, it’s Mark Ferguson with InvestFourMore. Welcome to another episode of the InvestFourMore Real estate podcast. Today, I have Brett Rickenbach on who has been fix and flipping full time for about two years, he’s another one of my guest who has been an avid reader, listener of the podcast or reader of the podcast as he says. Really happy to have him on the show, he’s been working with his brother, really trying to improve his business, take it to another level.
So I wanted to hear about his story, how he got started, I know he was in the corporate world for a while and then transition or real estate so I know many people will be interested to hear how that happened. Brett, thank you so much for being on the show, how are you doing?
[0:01:38.1] BR: Good, glad to be here.
[0:01:39.2] MF: Yup, thank you. From the very beginning, I know you told me a little bit about how you got started but you were in the corporate world before you got into real estate. I know you thought you wanted to be into real estate but we’re kind of stuck, tell us a little bit about how you got involved in real estate and transferred from the corporate world to flipping?
[0:01:58.2] BR: Sure, I went to college, I got a four year degree in biology, I worked in Bio Tech for 16 years at the same company, they had some changes, I got laid off, it gave me a full year severance and unemployment and health insurance for a year and I said, “Okay, this is my chance now.” I’ve always been wanting to do real estate, get involved in fix and flips, it happened to be my brother was a contractor doing kitchens and bathrooms on his own for about five years.
We said, “Hey, perfect timing, let’s start doing it.” We had some money saved up and took us a while to buy the first house but we finally did it and we’ve been doing it ever since for about two years now. We’re on house number seven and eight right now.
[0:02:37.8] MF: That is awesome. You guys, you’ve been doing great for starting two years ago, did you do any investing or anything on the side while you’re working at your bio tech job?
[0:02:49.2] BR: No, I did not do any major investing, I bought my second house about eight years ago, which is a two family and I rented out one half of that for the last eight years but I had always read all the old Carlton Sheets, you books, your website, and I always wanted to do investing and get more rentals, do fix and flips but I just never had the guts to get out there and do it until I got laid off. So it was actually a blessing in disguise and kind of kicked me in the butt and made me do it. But as for previous experience, no, just the two family house, that’s all.
[0:03:19.1] MF: Okay, yeah, that makes sense and it’s really tough with a corporate job, I know a lot of people who I’ve worked with and talked with, they really want to invest, they really want to buy rentals, flip houses but it takes a lot of time to really buy right and flip houses especially and it’s tough with a full time job, especially we don’t have a very flexible schedule.
But it can be a blessing, like you said, it doesn’t seem like it at the time getting laid off or fired or losing your job in some way but a lot of times it lets you do what you really want to do and it works out in the end. That’s awesome, in a way.
[0:03:55.2] BR: I agree.
[0:03:57.4] MF: Very cool. So how did you find and buy your first flip?
[0:04:01.8] BR: We went to a realtor that we knew, he was recommended to us and we just told him our story like I just told you and I said, “Hey, let’s find us a house,” and we looked at probably three or four, we found — the first one we found that we liked and put an offer on, it was pretty low from what they’re asking and we ended up getting it and we were both all kind of shocked and he said, “You know, sometimes the banks, a new manager comes in or the end of the month and things changed and I just take the first offer that comes in after the change and I think that’s what happened with you guys because this house should have sold for a lot more.” We got lucky on that and that was probably — we did okay on that one, we made about $38,000 total on that one after everything.
[0:04:42.6] MF: Nice, if you don’t mind me asking, what were they asking for it and what price did they accept?
[0:04:47.1] BR: Let’s see, I think it was around, it was a foreclosure, it was vacant, it was around $135 and we got it for $110 and we ended up selling it for $199. We first put it up for $219, we got a little too ambitious, there was a problem with the floor had sloped a little bit in the kitchen and people got turned off by that, so we ended up dropping the price and we end up selling it at $199.
[0:05:10.6] MF: Nice, that’s not a bad profit for your first flip.
[0:05:14.0] BR: No, no. We’re happy with that. I have to split it with my brother 50/50, it’s not as big as it sounds if I’m doing it on my own but I couldn’t do it alone without him.
[0:05:22.1] MF: Right, that’s great. How did you finance that flip? Did you guys save up money or did you get a loan?
[0:05:27.7] BR: That one, I had a lot of money from my severance package, and we had money saved up and he has the money so we combined that and that’s how we were able to buy, that was all our own money, no loans.
[0:05:38.1] MF: Okay, very cool. How long do you think it took you to complete that flip from start to finish?
[0:05:45.0] BR: Oh yeah, that the big thing, it always takes longer than you think. I say, from the time we bought it to selling it was about six months as you say in your books, that’s kind of what it takes. We sold it December 29th, so it was on the market in early November, kind of a bad time, the holiday is coming up. Yeah, probably about working on it was probably three and a half months maybe of actually physically working on it every day.
[0:06:11.8] MF: Okay, all right. It sounds like a long time but it’s really not. When it’s your first flip, you’re doing a lot of the work yourself, that really isn’t too bad and as long as you plan for it in the beginning, you’ll usually be okay but a lot of people just kind of, they don’t realize how long it’s going to take. They say, “Oh, it will take three months, it will be in and out,” and then when it takes twice as long and the cost are twice as much. It can be a surprise.
[0:06:35.7] BR: The big things are easy, it’s all the little stuff at the end that you just kind of… the punch list stuff, and this and that, and going to Home Depot to buy one thing and one thing, and one thing. That just kind of get to be a drag at the end. We’re trying to limit that as much as we can and plan ahead and get everything ahead of time, so we’re getting better as we go.
[0:06:52.7] MF: That’s true, even when I’m hiring contractors and they’re doing all the work, the same thing happens with them where we’ve got to go through punch list, all the stuff that wasn’t done quite right, get all the little stuff done because just about every time, there’s something that they don’t get right, they don’t finish all the way and we’ve got to go back and make sure it’s done. Very cool.
So you bought that one, made a decent profit, obviously you guys kept going. How did you buy your next properties? Was it the same way with an agent or did you find other ways to buy properties?
[0:07:23.2] BR: Let’s see; so we’ve bought, I think three of them we bought on online auctions, we won the auction and we, after we won the auction, we still use our agent to facilitate buying it so it’s three of those and the other three was just off the MLS and one of them, our biggest score was a friend of mine who was flipping houses and he knows I was flipping houses, he said, “Hey, I’m too busy, I got four houses going on now. I got this deal I’ve been working on for a year, the guy’s finally ready to sell, can’t do it, do you want it?” I said, “Sure, I’ll go talk to him,” and it was just like you’re reading the book, you sit down in the kitchen with the old guy in the house and hadn’t been updated in 50 years and the paint was peeling off the walls, refrigerator was 35 years old and we did deal on paper and it worked out great, that was our best profit to date about $80,000.
[0:08:13.7] MF: Oh wow, nice. That’s awesome.
[0:08:17.3] BR: To answer your question though, we have been using a realtor pretty much for everyone except for that deal. When I sold that house, we used the realtor. Just buying it was on my own.
[0:08:26.1] MF: Okay, that makes sense. Very cool. Right now, I think you mentioned a little bit earlier, but you and your brother are pretty much doing all the manual labor on these, right?
[0:08:35.9] BR: Yes, they’re on site every day, it’s sort of our full time job. My brother used to do kitchens and bathrooms for people but now he doesn’t, he turns all that work down, I don’t go anywhere else, I just go to the houses. We have our electricians, plasterers, guys who are used to the big stuff like that that you need a license and we don’t mess with that stuff.
But we’re there every day, we do most of the painting I would say. We hired out the outside painting on a couple of houses but we do all the inside painting, we put in hardwood floors, we do the cabinets, bathrooms, I kind of like it, it’s better than being — I used to work in the bio tech lab and corporate world like you said it it’s kind of a nice change. So I don’t mind it. Hopefully we can transition and start hiring more things out.
[0:09:17.0] MF: I’m curious, when you’re doing this, are you guys paying yourselves for that work or is it kind of free labor and then you split the profit.
[0:09:23.7] BR: We have one bank account where we have all our money, goes in to that we buy the houses, do the repairs with and every so often we’ll just write a check to ourselves for $20,000, put in our personal bank account and just live off that. Then we keep track of it on a spreadsheet. So we don’t pay ourselves by the hour, by the job, it’s sort of just a running tally.
[0:09:44.2] MF: Okay, that makes sense. So when you’re making 80,000 on a flip, you’re kind of getting free labor in that number?
[0:09:52.0] BR: Right, that includes our free labor, yes.
[0:09:56.4] MF: Okay, just trying to make sure I make a clear picture, no problem with that, just trying to figure out. Very cool. You got two you’re working on now and then you said you just got another one under contract. When you’re working on multiple properties at the same time, you’re kind of doing one first and then moving on to the next one or are you doing both at the same time? How are you handling the work on multiple properties?
[0:10:17.0] BR: Yeah, that’s a good question. We usually, we have a trailer with tools in it and we unload all our stuff and we stay at that one house, pretty much until it’s 90% done. Then on the other house, if we have one or two going, other one’s going, we try to hire, we have a carpenter that we use that he’s available sometimes, sometimes he’s not.
He’ll go over there for a week or two, get things going, do some framing and then we can hire some demo guys to go do some stuff ahead of time and then we try to try to time it so we can get in there after they’re done. It doesn’t always work, sometimes it sits there unchanged for a while. That’s kind of a downside, we do lose some time and money there.
[0:10:52.7] MF: Okay. That makes sense. So you’ve done six in two years about. What are your goals? You have a goal for how many you want to do per year or you just kind of slowly improving, what’s your thought about the future?
[0:11:05.4] BR: Good question too. We’d like to do a minimum of four a year, I think we could live on and be okay. Of course we’d like to do more. So I’m thinking, if we could do somewhere between six and eight a year and have a good carpenter or good contracting that we can hire to do a house, while we’re doing a house at the same time simultaneously, that would be ideal basically. Say we can do three on our own, four on our own, maybe we could do eight with a crew. That’s kind of a goal to have and make more money and do less work ourselves.
Also, I’m getting my real estate license on New Hampshire which is state we do most of our work in. I’d like to transition into doing some more home sales, maybe getting selling houses on the side with friends and also doing houses that we’re flipping. So I’m kind of looking to that avenue. Long term we’d also like to do some rentals. Almost exactly what you talk about in all your blogs and books, have the rentals as one part, the flips is one part, your realtor has one part. Diversify, that’s our long term goal.
[0:12:05.5] MF: Okay, that makes sense. What do you think your biggest roadblock is right now? Is it doing all the work yourselves, is it finding deals? What’s keeping you from doing more flips?
[0:12:16.6] BR: I’d say, it’s probably finding the deals is number one, getting a good margin on the deals, okay, say we do all the work and we’re only making say 35 to $40,000 on a house. If we start hiring a crew to do that, 15, $20,000 with the labor, who knows? That’s the part I’m kind of struggling with. The other part I would say is finding the good contractor to do the work. We can get the skilled people to do the plumbing, electric, drywall, that’s easy. It’s that day to day person that’s there, just doing the trim work and putting up walls and cabinets, that’s the hard part to find.
[0:12:53.1] MF: Okay. Yeah, no that’s the things I struggle with as well. So I understand that part of it. Have you gotten your financing worked out? Or are you just kind of pulling all your money together? How are you financing the properties?
[0:13:06.0] BR: We’ve definitely branched out with financing too. We’re doing pretty well where we have that pool of money or we can fund one health ourselves at all times. My mother has been generous, I should say my parents are generous and they loaned us about $200,000 which we just keep out the whole year at 5% now. That’s a great deal.
Then our realtor who we work with, he loans us money house to house when he has it up to $200,000 or so. I think he’s charging us 8% now, no points but he gets the sale on both ends. He’s happy with that. That’s working great, that’s about as much work as we can handle doing it ourselves, we can have three houses going at once, we have those finances to pay for them and then we use our own money usually too for the repair cost.
[0:13:51.4] MF: Okay, is your realtor going to keep lending you money when you get your license and stop using him?
[0:13:57.7] BR: Yes, he will. What we’ll probably end up doing is, the ones that he funds, he’ll get the full commission and then ones that we found out in our own, we pay our own money then, we’re ready to do a split 70% to me, 30% to him.
[0:14:10.4] MF: Okay, just making sure. Very cool, Have you ever talked to any local banks or anyone about getting a bank loan on this flips?
[0:14:18.6] BR: So I have not because I didn’t have a full time job, I don’t have two years of tax returns which they always want for self-employed people. I haven’t gone to a bank.
[0:14:27.9] MF: Okay, it might be something you try just probably not a big bank like Chase or US bank or anything but like a local bank, a community bank, I’ve got multiple banks here who will finance my flips and the really nice thing about them is, I do have to do down payment, I’ve got to put 25% down but they charge me four to five percent interest and one point on those loans and they do it because they see I’m an experienced flipper, they had seen the work I’ve done before.
It’s not like a regular mortgage where they’re looking at your history or your debt to income ratio all that stuff. They’re more looking at the business and if you know how to flip and can do it and withy our experience, I would guess that you might be able to find some banks that might finance some properties as well.
[0:15:10.1] BR: Yeah, that’s good advice, yeah, I was reading about that in your book with the portfolio lenders is what you’re looking for correct?
[0:15:15.5] MF: Yup, exactly. I would look into that because if you can do a couple of loans and you might be able to buy one more property at a time which might make a big difference in the business.
[0:15:25.4] BR: Okay, we’ll do that.
[0:15:27.5] MF: Cool. So if your biggest problem is finding deals, are you relying on your realtor to find you deals or are you guys looking, how are you guys finding deals right now?
[0:15:37.2] BR: We find the deals, we find the houses and then have him show it to us, he hasn’t brought us anything and said, “Hey, I got this great deal, it’s not on the market yet, why don’t you guys come take a look at it?” No, I take that back, that has happened with the last house he has brought to us. Sorry Mo if he’s listening to this. Yeah, I don’t want him running around showing us 25 houses and we don’t buy any and make all these offers and nothing happened.
We only have him show it to us if we were definitely interested, we’re going to make an offer but we get the daily updates from him emailed to us. We’ll look through house and we’ll say, “It looks good, can go see it today?” I know we’ve got to get there quick and that’s a good deal. We’ve gotten a few that way and it’s been okay.
[0:16:13.6] MF: Okay, you said you have bought a few through auction, was like home search or auction.com, one of those sites?
[0:16:20.2] BR: One was Hubzu, Auction.com might have been two of them.
[0:16:24.5] MF: Okay, yup, I was going to suggest hub zoo too, that’s usually a good one. Okay, have you ever researched or looked for wholesalers in your area?
[0:16:32.7] BR: No, we haven’t looked for them but we did go to an auction, someone else won the house and we got a call from a realtor we know and said, “Hey, I know who won the house, do you guys want it? $5,000 finder fee,” and we actually ended up buying it that way but we haven’t sought out wholesalers just constantly to see what they have. That’s something you would suggest? Is that a good route to go?
[0:16:54.7] MF: I would, the tricky part is about nine out of 10 wholesalers, probably won’t ever give you a deal but if you can find one or two good wholesalers, they might send you 10 deals in a year, or more. I would definitely at least keep your eyes open, look around do a quick search for wholesalers in your area and one way I found a couple of wholesalers is they sent me letters on my properties because I have rental properties, they sent me letters seeing if I want to sell them.
I just reached out to them and said hey, I don’t want to sell my properties but I do want to buy some if you have any available. I don’t know if you’ve ever gotten mailings or postcards or anything like that but don’t just throw them away. I always keep those and contact them to see if they have any deals. Another wholesaler I met, because they were — they sent notifications to all the agents in the area, they said they have wholesale properties, they’ll pay commission to agents on some of this deals and that’s how I found them.
I would definitely keep your eyes open, maybe even ask your agent if he’s ever gotten emails from wholesalers or anything. I bought one this year from a wholesaler that I bought for $124 and we have it under contract for $210 right now and it needed — we spent about $25,000 on the rehab. That was a good one. I actually just got an email today on another property in my area that they had come up. I’m going to go check out that one probably Monday, I don’t have access to it yet. I would definitely look into wholesalers too.
[0:18:20.0] BR: Okay, yeah this is stuff I’ve read about in books over the years and haven’t pursued that one yet but I think that’s a good idea.
[0:18:26.9] MF: Yup, cool. There’s always the direct marketing aspect too but that takes a lot of work, a lot of setup and a lot of time to get that started. That’s always something you keep in the back of your mind but I don’t’ know if you have to go do everything at once right now. Sounds like you guys are doing pretty well with what you’re doing.
[0:18:44.0] BR: Yeah, the direct marketing, I’ve read mixed reviews on that and I do see the signs in my area on a telephone poles, I know they’re out there doing it. They must work for somebody.
[0:18:53.8] MF: Yeah, I’ve seen so many signs pop up in my area lately, it’s crazy, I’ve never seen so many so I don’t know if there’s been a big push lately for direct marketing or what but yeah, it’s pretty big in my area too but I don’t do much of it myself right now but I have done it in the past and it has worked but it takes a lot of time to get it setup right.
All right, so we talked about the flipping, what are your goals for rentals? You said you’ve got the house you live in now and you rent out the other unit, are you looking to buy more and more rentals? How many rentals do you want to get?
[0:19:21.3] BR: I don’t have a number in mind, our immediate goal is to buy a single family house so I can move in to with my wife and my six month old baby and then keep this one and rent both units out and start there. From there, I would say, I would love to have between five and 10 rentals that would be a pretty good number to start with or end with.
[0:19:41.7] MF: Yes. You have pretty good rent to value ratios in your area? Can you make money with rentals there?
[0:19:47.4] BR: Yes you can, I live in a little bit north of Boston and in Massachusetts and yeah it’s very tight market, rents are going up but prices of rentals are going up too. A decent two family house in my town is over $400,000. I t’s tough, we might move the New Hampshire so things are a little bit different up there, a little bit cheaper. We’ll see. We got to figure out where our home base is going to be first and then look around where we’re going to live. I don’t want to have 50 mile away of rentals and have to travel to get on them.
[0:20:16.4] MF: Right, you said, most of your flips are in New Hampshire now right?
[0:20:20.7] BR: Yeah, one of our difficulties is our location, I work with my brother. My brother is in New Hampshire, I’m in Massachusetts. Most of the house will be found in Southern New Hampshire where they’re cheaper and we grew up there, we just kind of know that area better and I just kind of happened, that’s where our realtor was and I just feel like I’m gravitating more towards that area, I don’t need to be where I am close to Boston where all the corporate jobs that I used to be in.
What I’m trying to say is, some of the things I struggle with are the different rules for each state, the realtors can’t work in both states that we use so we have to have two realtors, two electricians, in Massachusetts you need to have contractor’s license to do work on a house that you’re not living in so that’s an extra expense we have to hire a contractor if we want to do any major work. I’d like to migrate up to New Hampshire and just keep it all in one state. That’s the eventual long term plan too.
[0:21:10.5] MF: Okay. Are you actually driving 50 miles to some of this houses every day?
[0:21:16.5] BR: Yeah, sometimes I do, probably five out of seven of them that we’re doing, I have to drive 45 minutes to an hour sometimes, which I don’t mind, it’s not the worst thing in the world, everyone around me commutes, whether they commute into Boston, you sit in traffic or you drive north instead and you go against the traffic. But we have done two houses that are close to me in Massachusetts and those were pretty successful. Like I said, I’m just kind of gravitating towards New Hampshire, I’d like to move my family up there and just work up there exclusively.
[0:21:45.1] MF: Okay, your license would be in New Hampshire right?
[0:21:49.0] BR: I’m taking my realtor’s exam shortly and it will be in New Hampshire.
[0:21:52.6] MF: Okay, that sounds like your base — yeah, would probably be well served in that area with your license there and your properties there. Okay, you mentioned that you want to sell houses too, not just use your license for investing. Do you have a plan for that on how you’re going to start selling, how you’re going to drum up some business that way?
[0:22:10.3] BR: Yeah, I would start out with just advertising myself to friends and acquaintances and put it out there on Facebook and everywhere and say, “Hey, I’m a realtor now, I’m going to start selling houses,” hopefully just get a couple a year, I’m not looking to make my living off that right now and just see how it goes.
[0:22:24.8] MF: Now, if you start selling houses, you’re helping the flip business with listing houses, selling them, you obviously going to have less time on here working on the houses yourself and I know you guys want to get to a point where maybe you’re not doing as much work, does your brother want to keep working on them as a contractor or does he want to have less time working on them too?
[0:22:45.8] BR: He would like to hire out more stuff, he does like the physical work day to day but if we could be working on say four houses at once instead of one house at once and we’re hiring out three other crews to do the other ones and he could supervise and work on one at the same time, I think he’d be pretty happy with something like that.
[0:23:01.1] MF: Okay, yeah, it makes sense, it seems like maybe one of your road blocks right now is just time and if you’re doing the physical labor on the houses, that takes up so much time to get them done and yeah, even though if you could find a crew, they’ll cost a little more in labor but it might free you up time wise to make more money as an agent, find more deals, spend more money on the business instead of actually working on the houses would be my thoughts.
[0:23:27.4] BR: Yeah, I hear what you’re saying and time is an issue. It’s been worse since we had our first baby six months ago so now it’s really, I got to get home, I can’t just stay till 9 o’clock at night and finish painting the house, like no, my wife wants me home, that’s a constraint there too. I’m going to try and figure it out and just following stuff I read online, the new post, that other people post and we’re just figuring it out as we go.
[0:23:50.2] MF: You said you’ve got plumbers, electricians, the specialty trades, you have subs for most of those?
[0:23:55.5] BR: Yes, that’s the easy part, I love working with electricians and the plumbers because they just do that only and they’re an expert in the field and it’s finding the general contractor, a carpenter and stuff that’s the hard part.
[0:24:06.7] MF: Right, okay, have you tried out any or been looking harder for those guys lately to lighten your load?
[0:24:12.2] BR: Yes we have, we just picked up — we haven’t actually closed on it, we were closing on a house in a few weeks and we even had a few contractors there to give us some business on the job. This one house where we’re trying to hire out as much as we can and do a little experiment and see how that goes, we can find a great guy that works out and then we’re going to keep them on. We did have a great carpenter and then his mother died and he had to move back to Vermont so we’re really bummed about that. Sometimes they come in and then they go. You got to find another one.
[0:24:42.7] MF: Yup, in my business, it’s a constant turnover it seems like with contractors. Do well for a couple of years and then not so well, some don’t do well at all from the very beginning but yeah, it would be nice to have one that worked forever and did an awesome job but that never seems to happen. So I know what you’re talking about.
[0:24:59.3] BR: When I read your stuff when you’re saying that you have the same problems we have, it makes me feel, “Okay, we’re not alone, this isn’t an isolated problem. Even professionals are having a hard time getting people to do the work too.” It’s good to see.
[0:25:12.3] MF: I would consider you guys professionals too if you’re doing that many flips.
[0:25:16.8] BR: Oh well thank you.
[0:25:17.9] MF: You’ve done a great job. You got your license going, you got the flipping business going well. I think time obviously is something where if you could hire out more work, even if it cost you a little bit more money, in the long run you’re going to make more money using your time for other activities like selling houses, finding deals. Because I imagine if you get your license, you’re going to be able to find more deals if you’ve got MLS access, if you’re looking yourself and you have time to really focus on finding deals.
[0:25:48.8] BR: Yes, that’s one of my main purposes for getting my licenses because I had MLS access to have that instant update on every hour or whatever it is, I can go on and check and I think that’s going to help us a lot, I can write the offers, they don’t have to call my realtor and say, “Hey, can you put this offer in and there might be a way for a couple of hours and who knows, you could lose it in that time.”
[0:26:09.9] MF: Right, exactly. On the houses you’ve bought recently, have they been foreclosures or estate sales, just regular listings? What are they mostly been?
[0:26:19.2] BR: I think everyone has been foreclosure, two of them are occupied and the rest are all unoccupied and in pretty bad condition. We actually did do keys for cash on two of the occupied ones and that actually worked out pretty well better than I thought. Cash for keys.
[0:26:35.8] MF: Yup. That’s nice, for those who don’t know it, if you got a tenant in the property, a lot of banks will do that with foreclosures, it’s just basically you pay the previous owner or the tenant, whoever is living there to move out. Maybe you pay him a thousand, $2,000 and say, “Hey, move out in 15 days, 30 days and you can have your money and I get my house.”
[0:26:55.8] BR: Yeah, it worked out well. The first guy was trying to get more and more out of us, we settled on about $2,200 and then the next woman that we had the same thing with, we told her we give her money to move out and she was so happy, we gave her a thousand dollars and she was almost crying, she’s like, “I didn’t expect this, this is so great.” So we made her happy and she made us a good deal too. Everybody was happy.
[0:27:17.8] MF: That’s great. I don’t know if you’ve ever seen the movie 99 Homes, but it’s about foreclosure crisis and an REO agent, which I’m an REO agent myself, and it made us out to look really bad and evil but I would say that when we did cash for keys, almost everybody was happy and they weren’t expecting the bank to actually pay them to move out and leave.
Now I think some people have gotten more savvy as times gone on and learned to milk the system a little more but yeah, it’s not always a bad thing when you’re helping people move out and take possession of the house. All right, cool. I’m trying to think, do you think there’s any other major road blocks or anything else holding you back right now that I could help with or that need help with any ideas or anything going on?
[0:28:03.3] BR: I would say, it’s more of a — maybe like my motivation or my internal drive sometimes I think is lacking, I get a little complacent. 16 years in my corporate world in the same company, I didn’t really have to expend myself too much. Now, it’s all on me and I realize, I got to get out there and make things happen, it’s not just going to roll in every week, the pay check’s not going to come in every week.
So I don’t know if you can help me with that but maybe setting goals, making lists, saying, “Okay, in one year I’m going to have this many rent flips done and three years I’m go into have this many rentals and here’s how I’m going to do it.” I think I need help maybe setting up plans and actions to get those plans accomplished.
[0:28:42.8] MF: Yeah, the first thing I was going to say before you said it was ask if you had any goals set, any specific, whether it’s buying rentals or how many flips you want to do or even a monetary figure like I want to make this much money that year. Those really help and I think it helps too if you have a fun goal like something, even if it seems completely self-serving and not useful at all.
When I had my goal to buy the Lamborghini, it sounded kind of crazy to a lot of people but it motivated me like none other when I had that goal. Because I thought about it all the time and thought, how awesome it would be. It doesn’t have to be that but an awesome vacation, like you said, you want to buy a new house for your family, maybe it’s buying an awesome house for you guys, something like that.
I think if you have a really fun goal for yourself and then kind of build a plan around it of how to get there without sacrificing your financial situation or making bad choices, that can be really motivating and helpful.
[0:29:37.4] BR: Okay, Yeah, I do like that idea. I think one of our main goals is to get a nice single family house that everyone will like and my wife will be happy with a big kitchen and a big dining room and everybody can come over and that’s what she wants. So if she’s happy then I’ll be happy.
[0:29:51.8] MF: Yeah, I mean, one thing you might do too is just go look at houses, even if you know you can’t afford them right now or maybe just go see them anyway and see what kind of houses are out there and just being in them and being around them and seeing what you want just helps put it in your mind and it will help motivate you too once you’re like, “Wow, this is really nice, I can’t wait to get to that point where I can afford this,” then that will help you get out there and do things and really motivate yourself.
[0:30:17.9] BR: Yeah, one of the things that I think maybe a struggle or holding me back is not thinking big enough. Sometimes I’m just thinking, “Okay, if we just do four houses this year and we made $85,000 profit, that’s good enough.” I need to think like, “Hey, why don’t we try to do eight houses, why don’t we make $160,000 profit?” I need to think a little bit bigger. You said have that fun goal, buy that Lamborghini, buy that big boat or something and yeah, try just to expand my wants and goals and aspirations a little more.
[0:30:46.0] MF: Yeah, one thing I think, how many houses did you flip last year?
[0:30:50.3] BR: In the calendar year. It’s hard, because the first year we sold two, the next year we sold three and we sold one or two this year so yeah, they’re all kind of scattered about. I would say, I think we sold three last year.
[0:31:02.7] MF: Okay, so you know you can do four and you’ve already sold two this year so obviously you know you can do four. I would always make your goals a little higher than what you know you can do at least if not — so if you know you can do four, you need to have your goal at least six or maybe even eight and if you think you can do six and you think you can comfortably do six, it doesn’t hurt to make your goal seven or eight to push yourself.
If you don’t reach it, it’s not the end of the world, you’ll probably still be farther ahead of where you were if you had a goal of four. You can just adjust your goals and adjust what you’re doing but yeah, I would always make your goals just a little bit bigger, a little bit more out there than what you think you can do and that helps push you a little further.
[0:31:44.9] BR: Good advice.
[0:31:45.5] MF: All right, so now you’ve got a list of things to work on.
[0:31:49.4] BR: No, I’m putting little stars next to them. I wrote them all down, yes.
[0:31:53.6] MF: Very cool. No, I think you’re in a great path, I mean, doing that many flips, that soon without having done any before is pretty impressive. Most people do not do that many, a lot of people lose money the first flip they do too. So that’s great that you made money on that one, that you made $80,000 on the other one, that’s an awesome spread.
So I think you’re doing well. I think like we talked about, some of the biggest things would be goal setting, getting that motivation and then structuring it so you’ve got more time to work on the business and not working in it. Because your biggest value is going to be finding deals, really making the business grow bigger by doing more flips, not by saving some money by doing the work yourself I think.
[0:32:39.6] BR: Okay yeah, that’s where we want to be headed, you’re right.
[0:32:42.7] MF: Awesome. Well, I would ask you about what your future goals are some more but it sounds like you’re going to need on that one first but yeah, I would get some definite numbers on how many rentals you want, how many flips you want to do each year, personal stuff like how much money you want to make, all that, if you want to buy a boat, like you said, I would write all that down, kind of get a plan in place and just once you write that plan too, you’ve got to look at it every day if you can. Every morning or every evening and just make sure you’re on track and doing the things that will help you reach those goals.
[0:33:12.6] BR: Okay, we can do that for sure.
[0:33:14.3] MF: It’s hard to do, it’s hard for me to do it still but if you can get in that habit of doing it then it really makes a difference.
[0:33:21.0] BR: You’ve said to me, I’ve probably heard it 20 times and read it 20 times, it’s definitely a common theme so it must work.
[0:33:27.3] MF: It seems to. I’ll notice too when I get off track and I thought, paying attention to my goals, take some time off from really kind of doing my routines about looking at my business and I start struggling with stuff too and then I realize, well I’m not thinking about it, I’m not working on it. It’s natural that I’m not going to do as well with it if I’m not paying attention to those things. The more I pay attention to them, the better I do. Well, we’re getting close here on time, are there any questions for me, anything else you want to talk about?
[0:33:56.8] BR: You know one thing I don’t really see discussed much is, how do you keep track of your expenses and accounting for the end of the year with taxes and all that. We hired an accountant this past two years to do our taxes, right now we’re using a spreadsheet and it’s getting to be too many houses, too many expenses and we are going into QuickBooks, I just bought the software and we’re going to start using that. So I just was curious and how do you track of the expenses, that’s my big question.
[0:34:24.9] MF: One of my biggest pet peeves and things I hate to do is accounting and expenses. I have actually it’s my cousin enters everything into QuickBooks and manages all of that for me. Then, kind of my team manager Justin oversees that a little bit, sends me reports to make sure. I’ll review those reports every month to see what things look like if there’s any oddities, things that don’t make sense. But I have someone else enter all of that stuff because it drives me crazy.
Doing taxes, when I used to do, keep track of — I wouldn’t do the taxes myself, I always send it to an accountant. But preparing my taxes, that would drive me crazy, it would stress me out for however long I had to do it. One of the best things I ever did was when I found someone else to do that for me. I have someone else enter all expenses, keep track of all that, she works with my accountant to make sure she has it entered right and then I’ll just review the reports basically every month.
[0:35:22.2] BR: Okay, yeah I was thinking my wife wants to help out, so I can make her the manager and she can enter all that stuff for me, that might be a good idea.
[0:35:29.3] MF: Yeah, as long as it doesn’t drive her crazy. Some people love doing that kind of work and others just hate it. So if she likes doing that kind of stuff, that would be perfect.
[0:35:39.2] BR: My brother and I, we love doing the physical work and I think we kind of let the paperwork and the accounting kind of slide a little bit, in the back of my mind, I’m thinking, “We probably could have made $5,000 more if we had just moved a couple of numbers around on the spreadsheet and did some tax deductions, we probably missed a few things.” So that’s what — I don’t want to mess any of that stuff. I want to get better at that.
[0:36:01.3] MF: Yeah, for sure. There’s a lot of deductions with flipping and real estate and you guys have it setup as an entity now or?
[0:36:08.7] BR: Well, we are setup as an LLC, we’re equal partners.
[0:36:11.8] MF: Okay, I would talk to your accountant too, about if that’s — have you talked to them if that’s the best way to do it or if?
[0:36:17.7] BR: Yes, he has told us that it’s the best way to do it.
[0:36:20.0] MF: Okay, mine is setup as an S. Corp. right now, that’s how mine told me to do it. I always leave that to the accountants too. Whatever they say, I go with. Yeah, as long as you’re talking to your accountant and he says that’s a good way to go, I would go that route. All right, very cool. Nice. Well one other thing I just thought of I was going to mention before is, if you do end up being — well you’re going to get your license, if you end up listing the houses, saving money. One thing you might consider with the partnership is paying each other separate for the services you do, that’s just one thought. If he’s still doing work as a contractor and you stopped doing work as a contractor, there might be some hard feelings if you’re still getting 50/50 but he feels like he’s doing more work.
Or if you’re using your license to get lots of good deals and saving all this money on commissions but then he’s not doing any contracting work, he’s not doing any work on the, you know, as many hours, maybe there’s hard feelings on your side. “Oh I’m finding all this deals, I’m saving us all this money on commissions but you’re not really doing anything.” One thought would be maybe, think about it if you have any concerns about, “Hey, you get paid a commission on everything you do,” he gets paid for any contracting work on anything he does. Sometimes that makes the partnership run smoother in the future.
[0:37:35.7] BR: Yes, I’ve heard horror stories with working with family and it can get ugly. So far we’ve been great and we’re just splitting everything and we’ll have to consider that in the future for sure.
[0:37:45.0] MF: Yeah. I think if you’re both working at it all the time, you’re both kind of splitting the money equally then that works fine but if you start doing different stuff or one of you decides he wants to pursue some other career part time, I think that’s when you see the problems and one person feels like, “Well, I’m working all this time and he’s not doing anything, why am I getting the same amount of money?” But yeah, it’s something to think about and maybe in the future pursue a different way to handle things if you see that coming.
[0:38:14.5] BR: Okay.
[0:38:14.9] MF: Cool. All right, I think we covered quite a bit. Anything else? Any questions, anything else going on you want to talk about?
[0:38:22.4] BR: No, I don’t, that’s pretty much everything I think. You got to it all.
[0:38:26.5] MF: Cool. Yeah, this is kind of the first one I had a podcast last week with Dennys Passeto who is one of my coaching programs but he’s been doing real well, this was kind of cool doing it this way, it’s kind of a coaching podcast type of thing. So I hope it helped and I hope maybe you learn some and some other people learn from it. Yeah, it sounds like you’re on the right track and doing great for how quickly you got in to it.
[0:38:48.9] BR: Thank you, we’re doing the best we can right now and I do sometimes get down to myself and think we’re not doing enough, so that’s one of my faults but then when I step back and look at it and talk to you about it, I’m like, “Okay, it’s not so bad actually.”
[0:39:00.9] MF: Yeah, I think you’re doing great. It can take some time to get going in the business and doing that many deals in the first couple of years. Of course we’d all like to do better and do more but at the same time, you kind of have to look at what you’re doing and say, “Okay, I’m doing pretty good, I can improve on things obviously but I’m doing pretty good right now.”
[0:39:18.7] BR: I do have one question for you. How many hours a day are you actually working? I know you have a ton of different avenues going at it at once. What’s your weekly hour is like?
[0:39:29.5] MF: It’s hard to say because sometimes blogs stuff and writing meshes into sort of not work or is it work? On average, I’ll come in to the office usually about eight to 8 to 8:30 I’ll leave my house and I’ll usually be home by five at the latest and I live like five minutes away, that’s an easy drive. Twice a week, I usually play golf during the day, Tuesday’s I’ll play nine holes and Thursday’s I’ll play 18 holes and then on the weekends, I usually don’t work at all. I never do anything on the weekends. Once in a while I might — I’ll be answering emails or maybe writing an article in the evening but for the most part, I probably work about 35 hours at the most, most weeks.
[0:40:19.5] BR: Impressive, yeah. So that gives me something to shoot for. Hopefully model myself after how you do it and so you’re not really killing yourself working 80 hours a week? If I could do half of what you’re doing, I think I’d be more than happy.
[0:40:34.9] MF: Yeah, once you start hiring the right people and getting the right people on your team and then things really start to go well. It makes life so much easier. Because yeah, I used to work 80 hours a week when I had, at one point I had 80 HUD listings as an agent and I was pretty much doing all that myself and it was driving me crazy. Once I start hiring, hired an assistant and hired some help, it made my life so much easier and I just kept building on that and teaching them more and delegating more and yeah, once you get to that point of trusting other people, it makes things a lot easier.
[0:41:07.0] BR: Oh I have one more question for you about, you talked about being a HUD listing agent. Since I’m getting my realtor’s license soon, should I try to specialize and find niche like that or what’s your suggestion for going into it?
[0:41:21.3] MF: When you’re first starting out, I would do what you said, friends, families, sphere of influence, really work that to start with. But then I would think about a niche as well, it’s going to be really hard to get in to REO and HUD listings as a new agent. Most banks want to see at least two years of experience but you can start doing BPO’s, which are broker price opinions right away for some companies.
[0:41:44.9] BR: I read about that. It’s like $80 a shot for those.
[0:41:48.8] MF: Yup, so that’s one way to get started but yeah, I would really focus on your influence, meeting clients, kind of building a database that you can market to. Then yeah, look out for different niches, different ways that you — different parts of the real estate you like as well. Try a few different things and see what you really enjoy doing and then I would focus on those. You’re going to be more successful if you like doing it no matter what you’re doing.
[0:42:12.0] BR: Yeah, it’s kind of what I had in mind, I’ll just start out doing the general stuff and then see where it takes me.
[0:42:17.7] MF: Yeah, and it helps too if whatever broker you’re working with has a time to really help you and mentor you and teach you. That really helps as well, it will help you get started quick.
[0:42:26.8] BR: Good, yeah, he’s independent and he has no one else working for him and he’s been doing it for 30 years or so. So he definitely knows his stuff.
[0:42:33.6] MF: Cool, great. All right, well, I think we covered just about everything we could.
[0:42:40.5] BR: I hope you can edit this out and make it sound good and someone will listen to it.
[0:42:45.7] MF: Oh yeah, nope, I’m sure a lot of people will get a lot out of it. No, Brett, thank you so much for being on the show and I appreciate you reaching out to me. Like I said before, Brett just sent me an email, he reviewed one of my books, gave me a short bio and we got him on the show and so, thank you for doing that. It was fun for me to hear your story and hear what you’re doing and how you’ve built your business. Thank you for being on the show and I’m sure we’ll, well hopefully we’ll keep in touch as well.
[0:43:10.3] BR: Okay, awesome, I will update you when things happen.
[0:43:14.1] MF: All right, sounds good and maybe we’ll have you on the show again in a few months or who knows, down the road and see how your business has improved.
[0:43:20.8] BR: Okay, I’d be up for that.
[0:43:22.1] MF: All right, thank you so much Brett and yeah, have a great day.
[0:43:24.7] BR: You too, thank you.
[0:43:25.6] MF: All right, bye.