Episode 4 | Building A Real Estate Team For Flipping Properties

Hello and welcome back to the podcast, The New and Experienced Investor. I'm one of your hosts, Alex Barnett.

And my name is Joe Homs.

We're happy to be back with you guys today. We're going to be talking about, talking about building a real estate team, mostly for fix and flips. You can always build a team out, I guess, for any exit strategy. But today, we're going to be focusing on flips.

Yes.

Great. We're still getting our banter back and forth. It works out.

Yes.

Okay. Well, let's maybe do a quick overview. You can break down the components and then we'll break it down into each section and then you can kind of explain. since you've had so much experience with each person, kind of what they do and how they're a part of your flipping business.

Okay, yeah, let's start out with, I guess, from the beginning, lead generation. What is your lead generation plan? That could involve a realtor that you're working with or a wholesaler, you know, could be any of those.

We started doing ours in-house, so we're doing our own texting campaign, which is also a possibility as well.

Yeah, yeah, yeah. You learn how to do that, then, you know, that makes it a little bit easier. Then you have to fund the deal. So you're wanting to look for a lender, whether it's a traditional lender or hard money lender. You probably won't do a lot of traditional lender type stuff when you're flipping. Because you're in and out so quick and the banks don't like you basically getting a loan for a few months and then, you know, paying it off. That's not the business that they're in. So really, if you don't have the funds, then a hard money lender is kind of the way to go.

Is that the same as a construction loan or is that separate?

No, that's different.

Okay.

Yeah. Construction loan is you already have the property, you have the plans to build on there, And then a bank would actually give you a loan to build that piece of property, single-family, multifamily, whatever it is.

Oh, gotcha. From the ground up.

From the ground up.

Copy that.

So it's kind of totally different. After the lender, you want to do either a home inspection on the property or you want to get your contractor out there. And the home inspection is just— That, and we'll talk about that more, but contractor is always a good idea. Number 5, you're going to go into escrow, and then escrow involves getting title insurance as well. You need NHD, which is Natural Hazard Disclosure. We use SnapNHD, and that's just a process of escrow. Again, we'll go into that a little bit more. And then you come out at the other end and you're going to want to take professional photos. You want to stage the property. And then we come full circle back to the real estate agent that you were working with or brought you the deal, and you put it on the MLS and go from there.

You made that sound so easy.

It is. It's super easy. Yeah.

And let's, let's Let's maybe jump really quick into timeline. So you want to be done in under 3 months?

Yeah, 3 to 4 months depending on the project, the size of project, how quick your contractor could finish the project. Ideally, if it's a condo, you hopefully want to have a contractor that can go in and out in 30 days.

Wow.

Yeah. And then it's single family, depending on whether it's a light rehab or heavy rehab, that could take you 3 months, you know, then put it back on the market, that's like a 30-day period from the time that you start advertising it to the time you have a buyer and then close it.

Okay, gotcha. Obviously those timelines can get shifted around depending on— it's usually the, the contractor's the biggest sort of wild card as far as the timeline goes, would you say?

Yeah, um, that and Either you're going to be project managing it or somebody else, preferably you at the beginning. And it's just a learning stage. I mean, you literally have to be there at least once a week making sure that that contractor is doing what they're supposed to be doing. Because if not, they're going to go to somebody else's project and they're just going to leave your project to the side because you're not getting— you know, they're not getting calls from you. There seems to be no urgency. And there should always be urgency when you're flipping properties.

Yep, I've learned that the hard way for sure. Okay, let's go ahead, do a deep dive now into each player and kind of, um, maybe if you're just starting out, how you can find these people to add to your team, or if you are experienced and maybe you're not happy with this person that's on your team, how you can go out and find somebody that, you know, is better suited for, for what you're trying to accomplish. So let's start out with lead generation. And this could also be, maybe you could throw your agent in there, like an investor-friendly agent, or what would you suggest for that?

That I'm not happy with you?

Lead generation?

Yeah. I think more of the lead generation side is something that maybe you can talk about because you do most of that stuff anyway. So yeah, go ahead and talk about that and then we'll go into the, To the realtor portion of it.

Sure. And yeah, the, the pretty much the way that I got started was by wholesaling, and that's essentially generating leads, talking to sellers, and then reselling that to a flipper, you know, like Joe or myself now. So I found that, and I've kind of done most of the different types of lead generation that you can do, there's outbound lead generation, meaning You're texting people, you're cold calling people. Maybe you're you're you're calling out to agents as well. Now there's a lot of agent outreach now with the way that the market is. But essentially, you're going out there and trying to find distressed or motivated sellers that need a problem solved, and then you're negotiating the price based on how much repairs are needed and then how much. Profit that an end buyer might need, locking that up and then selling it, um, you know, to a flipper. Um, other ways is like inbound. You can do Facebook marketing, you can do pay-per-click, Google Ads, all that kind of stuff. That's just really, um, I guess capital intensive, so you need a lot of money to dedicate to that. But it is, it is a good source. So whatever you choose, I would say as far as lead generation, start with one. It's really easy to have the shiny object syndrome and jump around But start with one, kind of become a master at that, and then move on from there. And then you should really know about what the industry standard is as far as how many texts you're sending versus how many contracts you're getting, or how many calls your cold caller's making versus how many leads you're getting, and just be on top of all those numbers. I say maybe if you're just starting out, if you're a brand new flipper, you could also find an investor-friendly agent. And, you know, maybe right now because a lot of stuff is sitting, you might be able to find some properties that are as-is condition that need a lot of repairs and, you know, put in an offer that way. What's a good way to determine if an agent is an investor-friendly agent versus just a regular traditional buy and sell agent?

Let me ask you a quick question before I go into that.

Sure.

Is wholesaling— and I forgot what I was going to ask you, but is wholesaling for the faint of heart?

No, no, definitely. It takes a lot of consistency. It takes a lot of being able to take the word no. But obviously, just like anything else, the more you do it, the easier it is.

So kind of a numbers game.

A numbers game. And then even with door knocking, which is something I forgot, I was kind of like scared at the beginning, but then by the end of even one day, it was, it was actually a lot of fun. So it's just talking to people and now I can pretty much go up to anyone, ask them if they thought about selling their house. So it's a good skill to have for sure if you're getting into real estate.

So looking for that investor-friendly real estate agent, I, you know, when people ask me about that, I used to pretty much tell them the same thing is First, start out with interviewing this person. How long have you been in real estate? How long have you had your license? Simple questions like that will get you the answers that you may or may not lead you to working with this person. If you start diving into it a little bit more, I usually ask the question, you know, when's the last time you bought an investment property for yourself? Do you have investment properties that you own? Do you even own your own home? Those are all types of questions that I would ask any real estate agent. Remember, it's, it's pretty easy to get a real estate license. And once you have that license, it gives you a lot of opportunities. But that doesn't mean that somebody who got their license yesterday is the expert that you want to work with. So, you know, as you're asking these questions of these agents, they're pretty much going to answer themselves. You know, I've been in meetups where real estate agents get up and say, hi, I'm a real estate agent. I'm looking at them and they look like 12 years old, but I'm a real estate agent and I want to work with investors. And, you know, the questions again I would ask is, do you own any investments yourself? Do you even have your own home? I mean, do you have to go through all that process to be able to say that, yes, I'm a real estate agent-friendly person that, you know, you can work with and you can trust? And I— and also I can find you some deals. If an agent puts you on what we have as agents, a drip system basically, and it's send— they send you properties in a particular area that you're looking for at a particular price, immediately unsubscribe and don't use that agent anymore. more because they have no clue what they're doing. When I work with somebody that's an investor, I send them pretty much specific information about the property, and I work out all the numbers for them, and I tell them, this is the bottom line, this is how much money you're going to make if you flip this property. So those are the things that you should be looking for, is some sort of expertise from that real estate agent that you're working with.

Yeah, that's great because it, it does come down to the numbers. I know I've reached out to some agents regarding some mobile homes in an area that we like, and they'll, they'll say, oh yeah, it's just going to take about $10,000 to repair this.

Yeah.

And you're looking and you know it's going to take $40,000. So you just know that they've, you know, they just don't have the experience. And that's okay.

You just want somebody that has the experience as another pair of eyes going out there and, and farming Yeah, you got to remember, I mean, not to fault a real estate agent, you have to remember that their end goal is to get a commission. So if they can talk you into buying something like he just said, $10,000 rehab, and you have no idea how much the rehab is going to be, which, you know, we've done several mobile homes and we know it's going to be at least $40,000. You know, you're going to get yourself into a world of hurt. So make sure that you verify everything that you get from somebody and make sure that you have professionals coming out, which is what we're going to talk about next. Before that, you're going to need to get some money if you don't have any money, and that's with a hard money lender. So hard money lenders are out there. They're honestly, they're a dime a dozen. And what you have to be careful of with them is if you're a novice, they're going to charge you probably around— right now they could charge you around 10% interest. Maybe if you're lucky, maybe a point. Most of them want to charge 2. If, if you're talking to a hard money lender and they're charging you 12% and 4 to 6 points, because I've seen it run the other way, again, they're a dime a dozen. There's plenty of them out there. As you get more experience, and experience comes by deals. So if you do 10 or more deals, flips, then you're going to go down into the 7% and 8% interest rate and either no points or half a point. Right around there. So that's kind of the difference with working with a hard money lender. And then, and then you go into the contractor. So you can line that up with the home inspector or the contractor. If you're a novice, I recommend that you get a home inspector to begin with. And the home inspector looks around, gives you an actual report. It's about $300, $400 to do that. It's kind of what I call peace of mind. So, you know, you'll be able to sleep at night knowing that the house is not going to fall around you. You can get the same thing accomplished with a contractor, but with a contractor, I need to caution you that you don't want to be dragging a contractor out there to every deal you look at because, you know, they've got better things to do. I usually drag them out when the, when the property I'm looking at is in contract, getting ready to close. Then I'll call the contractor out to give me the numbers that I need to finish up that transaction. So, you know, real important, either use a home inspector or if you have a contractor that wants to go out there that you can drag out there, that's fine.

And you've gotten to the point where you can just do the inspection yourself?

Yeah, you know, after a while I know by looking at things that, you know, this thing's going to cost me $70,000, $80,000 to rehab. I don't need to have a contractor, you know, come out there and tell me what I already know.

Mm-hmm.

And then the home inspector, about the only time I get a home inspector now is if it's a property that's on a raised foundation and I don't want to go underneath. And, you know, which I've done in the past, I just don't want to go underneath and look at all the plumbing and electrical and everything that's down there. If there's a, you know, big giant post that's holding up the floor, if that's falling apart or termite damage or whatever, which is another company we didn't talk about, but that's going to kind of towards the end. So, you know, those are things that you kind of have to watch out for and look at as you're, you know, flipping this property.

And why don't you go underneath anymore? Spiders?

No, no, I'm just honestly, I'm just too old. It's dirty down there. I put, you know, one of those paint suits that you get at Home Depot and a hat on and glasses. And it's just, I don't want to, I just don't want to Yeah, the bugs, the spiders. Again, if you really need to go down there, home inspection is not that, you know, expensive. You know, like I said, $300, $400 and they do all that.

They'll find everything too.

Oh yeah, they're good. They're good. They're really good. They find a lot of stuff that you didn't even think about, you know?

Yeah.

And it's a good way to, you know, depending on where you got the property, well, anywhere really, if you got it off the MLS or you've got through a wholesaler, I mean, if there's something major, that's a great way to, you know, Get a better price on the home, you know, say that, oh, hey, I've got to pay $10,000 to fix this. I'd like you to reduce it by $10,000 and go from there.

Mm-hmm. Okay. Yeah. And I mean, we could— we're probably going to end up having to do a separate podcast on the contractor. But what are some tips maybe just to find somebody? Because this is always like the biggest thing. People are like, I don't have a contractor, I don't have a crew. What's, what's the biggest, the easiest way?

Contractors are very difficult and very difficult to find. And what we did when we first started out, we actually went to Craigslist, which it has good and bad in there, like everything else has good and bad. And then I invited 10 people that were advertising on Craigslist to come over to my flip and give me an idea of how much it's going to cost. So I had inexperienced $40,000 And I had a company that does flips, $120,000. We ended up going with a contractor around $65,000, right in the middle. I didn't trust, uh, you know, the, the low guy because he had just gotten his license.

Mm-hmm.

And I definitely was not going to pay $125,000. The $65,000 guy came in and he started telling us what he would do, which is awesome. Because now I know that he knows what he's talking about. And this was about close to 10 years ago, and he's still working with us. But that doesn't mean that we've had other contractors that we've hired and gone through because, you know, they just didn't perform.

Right.

It's a nice way to say it. They didn't perform.

They didn't perform.

Perform. Yeah.

And you kind of— I mean, and there's even times where maybe they, they start performing and then they fall off or they perform on 1 or 2 flips and then, you know, you They, they ghost you or whatever. So, you know, just like anybody else, they go through their ups and downs. And yeah, um, that's going to be maybe one of your biggest struggles because they're not like a company that you're going to necessarily. It's just going to be like a person. So yeah, um, but yeah, we'll talk about that in depth another time. So where, where do we go next on our team members?

Escrow and title and, uh, NHD. Escrow, and in all these, all these things I'm talking about, you have to have a relationship with all these entities and companies and folks. Escrow is very important. I have a relationship with my escrow officer, which I've used for over 10 years. And, you know, you also have to be loyal to these people and bring back your deals. Title's the same way. Title, you, you know, You're pretty much going to get the same from any title company that you work with. But like all these people, the relationship's important because when I call, they're going to answer, hey Joe, how can I help you today? It's not like, who are you? What escrow are you talking about? How are you involved in this escrow? You know, I don't want the third degree. I want them to say, okay, yeah, we're talking about this deal because it's Joe calling and And this is the deals that he has. So, um, so anyways, that's, uh— go ahead. That's what, um, that's what you need to do is, uh, have those relationships with the escrow and the title. Um, sorry, somebody's coming in delivering some coffee. Um, and then, uh, the, the next thing that you go into after all that's done and you've You know, you've rehabbed the house, then you're going to fall into, okay, now I need to put it back on the market. So you're going to bring it back to the real estate agent that you've been dealing with, and you're going to need to do some staging on the property. Staging is really important because people have a hard time going into a house that's been rehabbed and it's vacant. They want to see that there's staging there and how you know, you staged all the furniture or how your professional company staged all the furniture. And then professional photographs are super, super important.

Oh yeah.

Super important. I know Alex takes photos and he has a, um, a business partner that works with him that takes photos as well. We've hired companies and individuals that have gone out there that said they were professional and took photos, and it was like, did you just use your iPhone or something. Like, these, these photos are terrible. So photos are one of the first impressions that people look at when they're looking at property. Yeah. And if they're not professionally done, you're in trouble from the beginning.

It's your digital curb appeal.

Yeah.

So I mean, because most people are just shopping on Zillow or Redfin nowadays, so you want the, the photos to really stand out, you know, look nice and bright and appealing because then they're going to go out and do a showing and then that leads to the sale.

Yeah. So after that, you're going to start getting offers and, you know, don't get so excited that, you know, let's say you put it on the market and the first day you get an offer. That's, that's kind of an old realtor trick. If I like to list properties on Thursdays, which gives it plenty of time for the weekend for people to look at the properties. If I get an offer on a you know, same day or Friday and you have an agent that's kind of pressuring you and saying, you know, can I get an offer? I mean, can I get a response right away and stuff? I don't respond, you know, as quickly as they may because I like to let it go through the weekend because I may end up getting 10 more offers.

Right.

You know, that are going to be better. So that comes with, you know, working with an experienced real estate agent and a flipper that's done this for, you know, I've been doing this for over 40 years. So somebody that has experience and knows all this stuff. I mean, if you list it with a, you know, brand new agent, again, their goal is to get a commission at the end of the day. Hey, we have an offer, Alex, accept that offer. Okay? Because they want to earn their commission. So accept it and let's pull it off the market. But what they don't understand, if they wait a few days, they may get an offer that's a lot higher, a lot better. You know, just because— and, you know, let me talk real quickly about this. So the property's $500,000. I get an offer for $500,000 for financing. Okay.

Okay.

And then the next day I get an offer for $490,000 cash. Which one would you accept? Okay. $490,000, close in 10 days. We've removed all the contingencies. There's no appraisal. We don't care about inspection because we see the property and it's beautiful. So, you know, we trust you that everything was done correctly. You know, yes, I can get $500,000 if I wait 30 days, if there's an appraisal done at the property, If the appraisal comes in at $500,000, it doesn't come in low. And then, you know, the lender approves this buyer that's buying the property. So I'm really kind of waiting around for 30 days, pins and needles, that everything works out. For me, you know, that $10,000 less for being cash and closing in a quick period of time is What I would take, you know. And so those are the, you know, advice that you give somebody who is flipping a property. Hey, take, take the money and run at this point. And if that doesn't work out, I mean, you're going to close in 10 to 15 days. That's not a lot of time to pull your property off the market and then, you know, go to this offer that was at $500,000 and say, hey, things didn't work out with that cash deal. Are you still interested? Oh yeah, we're still interested. Then you go back and accept something like that. But, you know, just because somebody submits a full price offer doesn't mean that that's the one you're going to accept. You're going to accept the one that's best for your business. And in flipping, you want to go in and out as quick as possible. So in and out as quick as possible.

Wow. Words to live by. Are you still taking on people as an agent? If someone's flipping and they want you to list their property, can they come to you?

Yeah.

Oh, great. Yeah, that's good to know. Well, there you go. You guys have the power of all of Joe's experience there. So definitely, if you're getting ready to list, then, you know, they can hit you up.

Yeah.

What about looking for properties on the MLS? Are you doing that for people anymore?

Oh, actually, actually, that's opening up a little bit. We're, you know, looking to tie up properties. That have been on the market for at least 60 days. And a lot of times that these properties are on the market for such a long period of time is because the seller thinks that his property, his or her property is worth millions of dollars when it's really not. So they're stubborn. They don't want to reduce the price. So we are— what we're targeting now is properties that have been on the market for at least 60 days and that are probate properties. And I like probates because at the end of the day, the beneficiaries of that property— so probate means that the owner passed away. It doesn't mean that they passed away in the property, but that's a good question. If they passed away, then they had it under a living trust, or if they didn't, then it actually went through the probate court, came out the other end 9 months to a year later. They gave it to a real estate agent and they're selling it. And the beneficiaries are looking to get You know, whatever money is there, and then they split it amongst the beneficiaries. There could be 1, there could be 10 kids. And again, their motivation is to get money as quick as possible. Obviously, they haven't received it in 60 days. So you come in and you put in a lowball offer, they're apt to look at it and say, you know what, let's just take that and— And move on. Get out of this thing. And, you know, I want to take that money and, and go on a cruise to Hawaii or, you know, I want to use it for college or I want to open up a business or most of the time they just spend it on junk.

Yeah.

They just spend it on junk. And, you know, as I'm dealing with a probate, if I'm dealing directly with the beneficiaries, it's just like, you know, what do you do with the money? Oh, yeah. I'm just going to take my vacation of a lifetime. You know, not that that's junk. But it's not like, you know, generating any future income or producing assets or anything like that. You know, you would think that I have this extra money, maybe I ought to go buy an investment property. You know, maybe I ought to lend my money out and get 10% interest from, you know, a flipper like myself. You know, just depends.

Wow.

That's what usually happens.

Yeah. Incredible. Circling back to The team. Now we've built out our team, how do we keep everybody happy? You kind of mentioned it earlier, loyalty. Um, but you know, let's say somebody stops performing on the team. When do you know when to let somebody go versus when to be loyal to them? How do you, how do you gauge that?

Mostly I'm gonna talk about contractors to begin with. Contractors, you're gonna find out pretty quickly that they're not doing what they're supposed to be doing. They're doing shoddy work. And those are easy to say, I'm sorry, you're done, I'm replacing you with somebody else because you haven't done this. Or, you know, I'll give you a chance to perform correctly, but most of the time they don't, you know. So that, that's pretty easy. Escrow, you really need to find an experienced escrow officer that knows what they're doing. I can't tell you how many deals I've gone through where my escrow Officer has saved me, you know, because of different things that she knows how to do to get the job accomplished.

So good.

Title's another example. We went through a deal that we ended up getting title insurance, and there is a— we bought the property from a husband, and the wife was not on title to the property, so he had the right to sell it. The problem is that recorded on title was a divorce decree that said that she could live in the property until her minor son, which was 16 at the time, turned 18.

Mm-hmm.

And we didn't catch it because I read the prelim that comes out from the title. And obviously title didn't catch it either. And so the relationship we had built up there, was that we turned in a claim and, you know, they knew it was coming from us and we give them a lot of business. And, you know, they generated a check to the wife who wanted $40,000. Yeah, $40,000 to get out because there's always a price for everything.

Of course.

And she hired an attorney. And, you know, the attorney has to make money as well. But we, you know, kind of gave a cash-for-keys situation.

Okay.

But it was $40,000. But the title company picked up the whole thing. It was nothing that we had to, you know, participate in because we had that title insurance. And I think a lot of it too because we had that relationship with the title rep that I use. So yeah, relationships are really important, very important.

Yeah. So, um, you know, start getting out there, reaching out to people, because it may take you a little bit of time to find, you know, the right person, but If you take that little bit of time, vet them, you guys end up working together, it could be a relationship that can last, you know, over, you know, 10, 20 years.

Yeah. And, you know, back to escrow, I get, you know, as you can expect, I get emails from everybody every day. You know, escrow, we'll do your escrow on the seller side for free. And, you know, what you have to caution yourself with that is, well, what are they doing with the money from the seller? They're putting it on the buyer's side. And so then you get a call from the buyer's agent. You know, I'm paying this much for escrow. Why? You know, it's like, what do you want to tell them? Oh, because my seller's getting it for free. Well, nothing's for free.

Yeah.

You know, they're going to put it on one side or the other. So, you know, don't believe everything that you see or you get. And again, find an experienced and competent escrow officer, title officer, contractor, all of them that know what they're doing. And it's going to really, you know, mitigate all the headache that comes with all Amazing.

You heard it here, folks. Um, I think that was, uh, an excellent breakdown. And maybe, you know, in the future we can go into even more in-depth review of each person because they can all be their own separate episodes. But this is your team as a whole to get you started flipping. So go out there, start making relationships, and we appreciate you watching. And please hit Do us a favor, share, like, thumbs up, subscribe, share this with a friend, new or experienced investors, and we'll see you on the next one.

Yeah, and don't remember, I do a live meetup group every month. You can find that on meetup.com. Last month I think I had about 95 people actually signed up, about 60 people showed up. So if you're interested in any live events, Please come by. It's in Lake Forest, and again, you can find it on Meetup, and it's very friendly. There's no sales pitch. There's nothing in that I'm selling. So come by and, and get some firsthand knowledge and learn about real estate.

See you in the next one.

Bye. If you want some more advice on real estate investing, reach out to us one-on-one.