036: Update on my $500,000 Flip, Rentals in Florida and Developing Land

On this episode of the InvestFourMore Real Estate Podcast I talk about what my current investing world looks like. I have a lot of things going on and I have made some big changes in 2016. I have 9 flips at the moment, I am headed to Florida in March to check out rentals and I am slowly making progress on a $500,000 flip I bought in November. I also have land under contract that I am thinking of building a subdivision on!

How has 2016 been for my fix and flips?

The end of 2015 could have been much better for me. I had some major problems with contractor and my project manager that slowed me down a lot. I was not able to get properties repaired in a timely manner, which slowed me down getting homes rented and flips completed. In 2016 I have completely rebuilt my rehabbing process and things are going great now. I have a couple of people on my team handling the contractors, repair estimates and check-ups. Things are getting fixed faster and cheaper than ever before.

I have 9 flips now since I sold one last week. I have 2 more that I am selling in the next two weeks and 2 more flips that I am buying the beginning of March. The flips have been working out great even though they are taking way too long to complete. The reason they are working out great is our prices have been increasing, so holding the properties longer has actually made me more money. We joke about this concept on some of the coaching calls I do about how a crazy market can promote negative ways to do business! I would never suggest holding properties hoping the market will increase in value.

I bought a $500,000 plus flip last year that I am still working on getting possession too. The house is occupied and there are some issues I cannot discuss online, but the house was a great deal. I should be able to sell it for $800,000 plus once it I can gain possession. The home is in great shape and I was able to view the interior a couple of weeks ago.

My rental property strategy for 2016

I have not bought any rentals in 2016 or have any immediate plans to do so. Prices have increased so much in my area that it is really hard to find any properties that come close to the returns I am looking for. Even when I see an awesome deal that I could flip, the numbers don’t make sense for a rental. Property values have out paced rentals rates, which makes it tough to cash flow.

I have a trip booked to Florida in March to check out some new locations for rentals! It will also be a nice vacation with the family. In Florida I hope to find some locations that have great cash flow and possible appreciation as well.

How am I becoming a land developer?

I have some land under contract that I may create a subdivision on. I saw some land come up for sale a couple of weeks ago that was too good of a deal to pass up. I got it under contract right away and have been researching creating a subdivision and possibly building a house or two. I have never built a house and I have never created any subdivisions or done any land deals (except buying and selling one lot). There is the potential to make a lot of money creating a subdivision, but there is a lot of risk involved as well! I will keep everyone updated on how the process works and develops as the project progresses.

[00:00:58] MF: Hey everyone, it's Mark Ferguson with InvestFourMore. Welcome to another episode of the InvestFourMore Real Estate Podcast. I have a lot of exciting things to talk about today. Gonna give you an update on my business, what's going on, the early part of 2016, what I'm hoping to accomplish, some good things, some bad things. And yeah, go from there.

So I have a lot going on as far as rental property strategies, fix and flip strategies. I'm even planning, possibly a minor subdivision, probably going to be buying properties in a different location. All kinds of things going on. So hopefully I can catch you up, give you an idea of what's going on in my life, my investing, and yeah hopefully that will help you out in your investing as well.

So the first thing I wanna talk about, many of you are probably family with my Complete Blueprint for Successful Real Estate Investing. I recently raised the price on that just cause there's a lot of time I take on my coaching, on my investing and my real estate team. There's only so much I can do and I still spend as much time as I possibly can with my family. I have four year old twins.

So I had to raise the price on that just because of the sheer amount of emails I get doing coaching calls, different things, which is taking up a lot of time. But, I wanted to let you know, I'm adding some new features to it. So one thing that's going to be really fun is as soon as you sign up for that course, I'm gonna have you fill out an intake form which basically gives me a description of what your current investing, your real estate looks like and what you need help with right away.

So as soon as you fill that out, it goes directly to me, I can review that and email you back an answer within 24 hours of what I think the best thing you can do is right now, the best path you can take, the number one thing that'll help you get started right away. Either buying your first properties, or buying more properties, or changing strategies. I really love problem solving and that's fun for me. That's a new thing we have going for the Blueprint.

And then also, for my podcast listeners, I always like to give you guys a deal because I appreciate your support. So if you use sale25, you get 25% off the Blueprint. Again, it's sale25. All right, moving on. I've had a lot of exciting things going on with my fix and flip business. I have nine flips right now, I sold one last week, and then I am selling two more this month.

So I went kind of through a dry spell with selling my fix and flips because I had some contractor problems, some project manager problems. I will talk about that a little bit, but things are back in the flow, selling properties, things are getting repaired quicker, buying more properties. So I'm really happy with the way things are going in 2016 so far. So I'll just give you a few numbers on some of the properties I sold.

The one I sold last week, I bought for $95,000 and that was from an auction. I bought that - oh I don't have the exact date - about six months ago. I put about $30,000 of work into it. It needed a new roof, new carpet, new flooring, new bathroom, some new siding, lots of work on that one. Of course paint everywhere. I ended up selling it for $185,000. So that was a good deal. I was pretty happy with those numbers.

The other one I'm selling in a couple of weeks I bought for $107,000. We put about $25,000 of work into that one. It needed paint, carpet, kitchen, had to do the sewer line, that was unexpected. Came up during the inspection but we had to re-run a sewer line, which cost about $6,000. That one, I bought for $107,000. We're selling it for $190,000. So those are good numbers on that one too. Happy with that all the time. Found that one on the MLS.

And then another one I'm selling this month I bought for $75,000, put about $60,000 of work into this property. And we're selling it for $220,000. So, on the surface those numbers look awesome, but that was an absolute nightmare of a property. Things may always seem like they go smooth with me, they do not. I run into my fair share of problems, I make my fair share of mistakes.

That one, it was listed for $100,000 in the MLS, I saw it right away. It was totally gutted. No drywall, no bathrooms, no kitchen, no electrical, no plumbing. Someone else had wanted to flip it, they either ran out of money or decided that they didn't wanna take on such a big project. So they sold it. I offered them $50,000, they countered at $75,000, I said, "Great. I will take it."

At that time I thought the house was probably worth $180,000 and I thought I could get fixed for about $40 or $50,000. But my first problem started out with, I didn't get anything started on it for about three to four months until after I bought it. It was such a big project, I had a lot of other houses going on. I waited to get everything started and I was kind of hoping someone might come along and buy it from me for like $100,000 without me doing any work, but that did not happen.

So I found a contractor who said he could do it. Said he had a huge crew, get it done in two and half months. He gave me an estimate for $50 some thousand, which I was pretty happy with. And yeah, got started, I paid him a deposit for materials, things were moving along, I'd check in every few weeks, his whole crew was there working. About two months into it I noticed we weren't anywhere close to that two and a half month time frame he'd given me.

So I asked him about it. Of course, normal things come up. Electrical's tougher than we thought, plumbing's tougher than we thought. But he still promised to be done pretty soon, maybe another month-month and a half. And what happened next was he was due for his third payment, third draw, and I paid him with a check. I turned in my invoice so my accounting person could file it.

She thought I hadn't paid him, she paid him again. So he got a double payment, which basically paid him up for the whole amount of the project. As soon as he got paid everything, he basically vanished. I mean he worked on the house, but I would show up, there would be nobody there. I would call him, he wouldn't return texts, he wouldn't return calls, basically this went on for months.

And he would return a text or a call about a week or two later saying, "Oh my partner is suing me, my life's falling apart. My wife's leaving," an excuse every single time. And basically, he was working there about one day every two weeks. So I should have just fired him right away, but I was tied into the property cause I'd already paid him, and I wanted to get my money's worth. Couple of mistakes on that one.

But basically it took him like six more months to finish the property. And I had a friend threaten to sue him. It was just crazy. So even though the numbers are really good on that property, the whole experience was not that great. And it took me a total of 16 months to get to this point, which is just really horrible. But it was finally to the end, I'm still going to make some money on it thanks to our market going up so much.

We found out after the contractor finally finished everything, he hadn't done a bunch of the stuff right so I left him a lot of really fun and happy reviews on Yelp and Angie's List and that's sarcastic for "I did not leave him good reviews." But what's done is done. I can move on and make things better and yeah, things are going much better now.

So I'm selling those three properties this month, I've got another one on the market that we just finished up. And then all my other properties are being worked on right now, so they should be done in the next month or so. Except for one of my flips, and this is my interesting, very interesting flip. I've talked about it a little bit before, but I bought a $535,000 flip that had a tenant in it.

So I bought the property knowing the tenant was there, knowing I'd have to deal with the tenant. Lots of things happened, but I can't really talk about all of it cause there may or may not be some legal issues going on. But long story short, the tenant's still there, they're paying me rent. They may be there until January of 2017, we'll see. We'll see how it goes, or even maybe a little longer.

But they're paying me rent, so I'm holding the property. That house is probably worth between $800 and $850,000 as is it. So it's really just a waiting game unless we come to some kind of agreement. But risky investment, you never know what you're gonna get exactly when you buy a house that's occupied. Sometimes you can get them out very quickly, sometimes you can't.

Sometimes there's other things going on you don't know about. But I'm still excited for the house. I saw inside the house a couple weeks ago, and it is in great shape. Needs almost no work. So if I can get possession at some point in the next year, I'll be very happy. The house is probably worth, like I said, we're guessing about $840,000. So that'll be a good one once that gets completed.

I also have talked about my project manager experiment in the last week. Did not go as I planned, thought it would be great to have someone managing all my flips, all my rental property repairs, managing contractors, building the system. And things just did not go well. So we parted ways, I no longer have a project manager.

I'm having my team manage our contractors, and things are going fantastic the last month and half so far, doing that system. We've got new contractors on board, we're getting a system created where we have subs who we can hire to do jobs, we're not relying on one contractor to do the entire job. So we'll have a sub for electric, plumbing, roof, HVAC, flooring, plumbing.

And then we're also trying to make it so that we have subs for drywall, subs for painting, maybe a kitchen and bath sub, windows. So we're trying to really separate out the jobs and do them individually so that we can get things done faster. We can have multiple people working on different jobs at the same time. And if you're hiring out individual jobs, a lot of times you can get it done cheaper than having one person manage the whole flip themselves, doing all of the work themselves.

That's kind of where I've run into the biggest problems. The house I sold, or I'm going to be selling, that had the contractor issue, he was doing everything himself; plumbing, electrical, HVAC, all of it. And he said he had a big crew who could handle it, but it just did not work out well. So we're really working on building a sub system. I think that'll be a much better way to handle the repairs going into the future.

Alright, for my rental properties, I have not bought a rental in a long time. I think it's been almost six months and that does not help me get any closer to my goal to buy 100 rentals. I'm stuck on 16, but that doesn't bother me too much because I have a lot of opportunities coming up. I've got some new strategies I'm working on. One of the reasons I have not bought properties here is because our prices are so high in Colorado.

I've said this a number of times, we have one of the highest appreciating markets in the country and our median price has gone from the low $100,000-$120,000, now it's up over $240,000 in my area. So our prices have doubled and it's really, really hard to find properties that cash flow now. Even when I'm buying below market value, even though I'm getting really good deals, the cash flow still is just really tight.

I find myself buying properties that aren't that great, need more work than I want, or they're not in locations that I like to buy in. So I have made the decision, I'm almost certainly gonna buy in another market. And I have a trip booked to Florida in March. So, we will see what I find down there. I had been looking in the Pensacola area, Orlando, Tampa, all over the place. Fort Myers, Jacksonville.

I'm going with my family, so we decided we'd make it a beach fun vacation while we're there. And then I could check out some properties too. So we're gonna end up going to the Vero Beach area, staying in Orlando for a bit too and mostly hanging out at the beach, having fun. But also I'll be checking out some properties, checking out some areas for rentals as well while I'm down there.

I know I have a few connections in the area, and we'll see what I can find. So in order to buy properties doing there, I could do it how I have been doing using my income from flips, from the real estate team to put money down, make repairs on properties, which I think I will do. But I'm also looking at ways to use my equity, I talked about this before on other podcasts. So I have a couple options.

I could sell some of my properties, 1031 exchange them into properties in Florida. Or I could refinance some of my properties here and use that money to buy some more properties in Florida. So I'm currently exploring both options, I have applied with Jordan Capital Finance to refinance quite a few of my rentals into 30 year fixed rate loans. So I'm waiting for them to get back to me on what they can do.

I think my whole package is with their underwriters right now, and then I've also checked into selling some of my properties. So my properties that maybe have tenants moving out soon, or aren't in the best areas for where I like to invest. And I'm looking to exchange those. So when I exchange a property, do a 1031 exchange, there's a few things you have to be careful of.

One, I have to make sure any cash I take out of the property is put into the new properties. So if I make $100,000 selling a property, I have to make sure all that $100,000 is spent on the new property, or properties. Likewise, I have to make sure the new property or properties are just as expensive as the property I sold. Because in a 1031 exchange, the debt is considered a liability.

So if you're reducing your debt, if I took that $100,000 in cash and I bought $100,000 property with that cash I made from the 1031 exchange, I would be wiping out $100,000 of debt if I sold that house for $200,000. So even though my cash is invested, I was wiping out $100,000 in debt, and that IRS would consider that a gain and I could be taxed on the debt I was wiping out.

So I have to make sure I buy - you know, if I sell a $200,000 house, I have to buy another $200,000 house or I could buy two $100,000 properties, three $75,000 properties, whatever it works out to be. So I think my plan is gonna be, sell one here, use that money to probably buy two or three at a time if I can, down in Florida. So I'll be exchanging one property here for multiple properties down there.

I'll have to find a really good lender, that'll be probably the biggest challenge. And obviously I want to find some great cash flowing properties that I can get a great deal on as well down there. So that's the plan so far on my rental properties, we'll see how that goes. My rental's have been doing great up here, but it's just too hard to cash flow right now and I know a lot of people across the country run into that. So we'll see how my adventure down in Florida goes.

I'm also looking for other areas of the country too still. I've seen some decent properties numbers all over the place, but really if I'm gonna be buying properties at another location like this, I wanna be able to go down there and see them a couple times a year if I can. And so if I can buy at a place like Florida where it can be a vacation, we can have fun at the same time, that makes it so much easier than if I'm just going there to look at properties in Cleveland or somewhere where there's not a whole lot else going on.

Alright, for my real estate team we've been going really well. We had another agent coming on at the start of the year, but he ended up running into some issues. He's going back to Florida, so that's actually one of my connections in Florida. We're looking for new agents all the time, so right now we're really looking for a Spanish speaking agent who can help fulfill that need in our area.

We have a lot of people who contact us who speak Spanish, who we can't really help, we have to refer to other agents. So we're looking for an agent on our team who can speak Spanish and English. Our foreclosures, HUD Homes, way down with the rising prices. You know we just have very few foreclosures in our area, very few HUD Homes, and that's been my primary business as a real estate agent the last eight-nine years.

So for me personally, I am not doing much as an agent, which is okay with me because I can concentrate on the blog, I can concentrate on the flipping, on the rental properties. And then my team, the other agents on the team, they're doing really well. They're selling more houses, they're doing a lot of retail sales, really learning a lot. So I'm really proud of my team, they're doing a great job.

Like I said, I've mentioned it before, one agent on our team made over $100,000 his first year. Actually two agents did, and then we got a new agent this year who is - we'll see. He's doing really well. I don't know if he'll get quite there, but he's doing really well on his first year as well. So I do have a real estate training program too if people are interested, The Six Figure Real Estate Agent Success System.

So yeah, but it's really fun seeing the team sell houses and do work without me having to be personally involved in it. Another thing we really have had success with lately is we are Zillow premier agents, so we've used Zillow to give us leads and different sources of people buying or selling houses. Which has been okay. It hasn't been awesome, it hasn't been horrible either.

But we use Zillow's website kind of as an easy way to have our own site hosted by Zillow. They have their own IDX, which means a program that shows MLS listing in your website. Well we made the decision about a month ago - maybe it was two months ago - to move everything to our own website. So we moved it to FergusonGreeley.com, we have some articles we've been writing for the blog, did a lot of cool different things really focused on our team.

And ever since we moved from Zillow to our own website, our lead generation has gone through the roof. It's crazy. We haven't been gaining that much more traffic, we haven't been doing anything really different, but we focused on advertising our team. We're not advertising listings, we're not trying to become a Zillow that shows every house for sale, well almost every house for sale.

But we just focused on our team; who we are, what we do, what we're about, our experience. And we've been having people fill out our forms, call us, email us just saying, "You know, we really like your website. We're looking for a real estate team, a real estate agent to help us, and you really stood out because you focused on who you are, what you're about. It wasn't a website just showing real estate listings."

Which I think is what so many real estate websites have turned into, is just kind of like another source to find them on, just listing. And we wanna differentiate ourselves away from that, and so that has really helped our real estate team as well. Alright so, that is pretty much everything that's going on in the business right now. Oh, I forgot one thing. I am going into a new real estate investing "technique" we'll say.

I have 34 acres under contract out in the country. So it's about 15 miles north of me or so. Came on the market, was super cheap. I couldn't believe out cheap it was. I made an offer right away, got it accepted, but I have a couple options. One, I could probably flip the 34 acres, sell it, make a good profit. Or two, I can create my own minor subdivision. So I think I might try this and see how it works.

What happens is I have to apply with the county, this property is not in the city, it's in the county which is nice. I have to apply with the county, get some plans drawn up, make sure public water is available. So public water doesn't mean it has to be city water, but there's county water right by the property, so I'd have to buy water taps for the lots, make a little dirt road.

And then I could probably divide it into six or seven lots and then sell those for close to - well sell each lot for close to what I bought the property for in total. So there's gonna be a lot of expenses paying for the water. Water taps are about $30,000 a piece, getting a little road built, surveying of course, applying with the county. So there will be a lot of work involved, but I think it will be fun, and I think it will be really cool to kind of create my own little subdivision.

Another thing, it takes about six to seven months they said, to go through the approval process with the county. I have to have some hearings, let the neighbors chime in, see if they're okay with the subdivision. I have to go through all the planning, all the applications, and then the county commissioners decide if they'll approve the subdivision or not.

So it's a little risky. You know, you could go through that whole process and not get anything approved. But I think the risk-reward is there, and there is just a huge demand for lots, for land in our area. So we'll see how that goes. Alright, that's all I've got for today. A little shorter podcast, but full of great information I hope. As always, if you guys wanna shoot me an email, [email protected] All my coaching, all of the systems I do, those are all done with me.

When you email me, when you have questions, that's me answering questions. So love to see some more people joining up. We have a lot of really great conference calls. We had a couple yesterday with a ton of people participating, it was a lot of fun. And yeah, that new intake form should be really fun to if you're looking to really get started right away and get started on the right path towards increasing or starting your real estate investments.

Alright, thanks a lot. Have a great week.


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