At the start of this year, I had a goal to buy 30 fix and flips, which I did not quite get to. I ended up buying 26, but I may still buy a couple more before the end of the year. I will not reach my flip-purchasing goal, but I also bought 4 rental properties, which I was not expecting this year. I stopped buying rentals in 2015 when the market went crazy with price appreciation. If you count all my rental and fix-and-flip properties, I have already bought 30 and may get up to 31 or 32 by the time the year is over. Or, I may go on a buying spree and still hit that 30 number if I find a bunch of deals. I have never come close to buying 30 properties in one year before, so how was I able to do it?
Goals and attitude play a huge part in my ability to flip a lot of houses
At the beginning of the year, I set a number of goals that I published on this site. I struggled in real estate for many years before I started to set goals and make plans for myself. Things do not magically happen to successful people. It takes a lot of hard work, planning, and sacrifice. Most people will make a few New Years Resolutions every year and quickly forget about them by the time February rolls around. I used to be one of those people, but once I took the goal-setting process seriously, things began to happen. Here is what I do with my goals:
- I set goals that are attainable yet very challenging. I do not want to hit my goal halfway through the year. In fact, the perfect goal is one that you don’t quite reach. It keeps you working hard all year long to reach it, and with the right attitude, it should not bother you if you do not reach it.
- I don’t mind not reaching my goals because I realize what the point of goals is. The point of a goal is not to achieve it but to help me achieve as much as I possibly can. I could have set a goal to flip 20 houses in 2017, and I would have achieved that and felt happy for myself, but because I set a bigger goal, I may have only flipped 22 houses up to this point instead of the 26 I have flipped.
- I set goals that are clear, specific, and measurable. A goal to become a real estate investor is not a real goal. What does that even mean? You could be a wholesaler, a flipper, a landlord, or even a partner with someone else. You need a specific goal, like “I will buy one rental property by the end of 2018.” With goals, you also need to have a date set for when you will accomplish it. It does no good to say that at some point in your life, you’ll buy a house.
- I think about my goals constantly. This is the hardest part of goal setting for me. Remembering to review my goals and my progress and make changes along the way if something is not working is not easy. I have whiteboards all over my office with my goals on them. I review my goals at home, and I write my goals on this blog for thousands to see. If you set goals but never think about them, they do not do much good.
Over the last few years, I have bought more and more houses because I set goals. In 2013, I set a goal to buy 100 rental properties. Because of our market and a number of other things, I am way behind on that goal. However, I am flipping more houses than I ever thought I would. It is okay to change goals or move in different directions from them, but you still need to create them and pay attention to them.
How was I able to buy 26 fix-and-flip properties this year?
I started out the year with a goal to flip 30 houses, buy 30 flips,and sell 30 flips. With a few weeks to go in the year, I have bought 26 and sold 26. I will most likely fall short of my flip-purchasing and flip-selling goal, but I still did way better than last year. Last year, I set a goal to flip 20 houses, and I ended up flipping 18 (sold flips). The year before that, I think I flipped 12 houses, and I thought that was a lot at that point! One reason I have been able to flip more houses is I have not been buying as many rental properties. I usually put at least 20% down on the rentals I buy. Plus, I spend money on repairs. It takes a lot of cash to buy those properties, although I have gotten almost all of it back through refinances. Since I have not been buying as many rentals, it leaves me more money to flip with. I have also improved my business every year by:
- Finding more ways to get deals. I have bought houses from direct marketing, Facebook, Craigslist, wholesalers, the MLS, networking, and auctions, all in the last year. Here are the details on how I am finding my deals.
- Finding more financing options. This year, I used hard money for the first time. I have also found more private money lenders (also a goal I made), and I have found more local banks.
- Improving my repair process. One of the biggest challenges of flipping this many houses is getting them all fixed. I did work on every single house I bought this year. I am not a wholesaler. It takes a lot of crews and employees to get everything fixed.
- Building a great team. Nikki, who used to help me primarily with my REO business, is my fix-and-flip project manager. She helps manage the contractors, expenses, and our Home Depot account, and she keeps me from buying properties that are a little too dilapidated. I also have other people who help me sell the houses, write contracts, do bookkeeping, and other tasks.
- Investing a lot of my own money back into the business. I finance my flips, but I also use a lot of my own money to cover repairs, carrying costs, and down payments. If I took all the profits out of the business, there is no way I could flip this many properties.
My book Fix and Flip Your Way to Financail Freedom goes over everything I do when flipping houses. It also teaches people how to start from scratch and build their business. Fix and Flip Your Way to Financial Freedom Finding, Financing, Repairing and Selling Investment Properties.
I remember when I thought it was crazy to have 8 flips going at one time a couple of years ago. A couple of weeks ago, I had 22 flips going at once! With that much volume, it is not easy to keep everything working right or to pay for all the mortgage payments and repairs, but it is possible with the right systems and people in place. We also tallied the numbers on the flips we have sold this year, and my average profit was over $30,000 on each property. That does not count the money I have to pay my staff, but Nikki almost pays for herself from the houses she sells as a real estate agent. I also have four other agents on my team actively selling houses, and my staff helps them as well. I will write a new goal article soon for next year, but expect bigger and better things.
Why did I end up buying four rental properties this year?
If you read my goals from last year, I did not have a specific amount of rentals I wanted to buy this year. However, I wanted to find a new market to buy in or find a new way to buy rentals in my market. I also wanted to buy a 50,000-square-foot or larger commercial building in my market as well. I did not end up buying a giant commercial property, but I did have one under contract that I will write about soon, and I have a 70,000-square-foot building under contract to buy at the start of next year! While pursuing this goal to buy a large commercial building, I stumbled upon smaller commercial spaces. Here is how I ended up buying four more rentals:
- A friend of mine wanted to sell his small shop, which worked great for storing my building materials and my cars. Rental Property Number 17.
- I found a 7,000-square-foot building that I thought was super cheap on the MLS. I bought that property, have been renovating it, and should have a lease signed on it soon! Rental Property Number 18.
- I bought a commercial shop on Facebook that was severely under priced. I paid more than $20,000 over the asking price, which was just over $100,000. I just had a five-year lease signed on it at $1,5000 per month. Rental Property number 19.
- I found another property on the MLS that I had under contract for 10 months. I bought this property for $110,000, and the previous owner is renting it back from me for $1,500 per month. Rental Property Number 20.
I stopped buying residential rentals because prices have almost tripled in northern Colorado in the last 7 years. I used to buy houses for $100,000, make some repairs, and rent them out for $1,200 to $1,300 per month. Now, I would have to buy those same houses for $230,000, make repairs, and rent them out for $1,600 per month. The numbers do not make sense anymore with residential, but they do with commercial. These commercial deals are not easy to find, but they are out there.
It has not been easy to buy 30 properties this year. The market is constantly changing, and there are fewer and fewer deals on the MLS. While I am still getting deals from the MLS, I am buying more and more from my own direct-marketing campaigns. Another investor has been a huge help with my direct marketing, and we put together a Facebook group that is going strong. If you are interested in joining, send me an email, but there is a cost for it as we only let one investor in each market into the group. [email protected]