How To Flip A House In ONE HOUR! Orange County Real Estate Investor Networking

I don't leave anybody out. Welcome, Kelsey. Hopefully you learn a lot tonight because I've got an hour to teach you.

Okay.

There's a famous YouTuber. He's actually a college professor. And he starts out his speeches basically saying, "I've got 60 minutes and 25 slides, and we're ready to go." So I'm copying him. This is this is about me. I grew up here in Orange County, started real estate in 1975. I'm a broker, investor, mentor. I'm regional broker for Pelago. Pelago is A real estate company. Our fees are very, very simple. It's $85 a month. You keep 100% of your commission. We charge a transaction fee of $850, and that's it. That includes your E&O insurance. So for those of you who are looking for a brokerage or want to change brokerages, um, there's new laws that are coming next month. I, I honestly Don't know why real estate agents are going to stay with the big box offices because their commissions are going to get drastically reduced. So why not come someplace that charges you less? So if you're interested, look up Pelago. Founder of H&M Real Estate, which I still run, and I've done over 300 flips since 1955. This is my email, website, phone number. Everybody got that?

Yes, sir.

Okay. What we're going to cover today, and like I said, I've got literally 60 minutes, so I'm going to go through this real quick. If you have any questions on anything, go ahead and stop me and I'll answer your question. I could ask you to wait to the end, but you know, if you're like me, you'll forget. So just ask along the way. Building a team: real estate agents, wholesalers, title, escrow attorneys, contractors, stagers, photographers. Sourcing your deals, analyzing deals, funding your deals. And I'm going to go through some case studies, other type of investment opportunities, BRRRR. And my— I'm gonna go over my marketing outlook, which everybody's on pins and needles to hear what I have to say. I don't, I don't have a crystal ball, okay? It's gonna be my best guess like everybody else. Real estate agents, you can become an agent, find an investor-friendly agent, use Pelago, or through— or go through a listing agent. What, what, what really do I mean about an investor-friendly agent? Not to pick on you, and I'm not picking on any real estate agents. Doesn't matter. You want to find somebody like, if you're going to flip properties, you should find somebody who knows how to flip properties, wouldn't you think? Just because you get your license tomorrow doesn't make you an expert in the field. And going about finding an agent to work with you, really for any reason, you need to really kind of qualify them. What kind of questions are you going to ask? Joe, let's start with a simple question. Do you own a house? Yes? No? You know, we're in California. A lot of people don't own houses, especially if they're agents. So yes, you have a license. Yes, you can sell houses, but how much experience do you have in doing that? So ask those questions. And then if you're going to do any type of investment— Joe, do you do investing? Where do you suggest I invest? What kind of investing do you do? You need to qualify the agent that you're working with and ask them those type of questions to see how much experience they have. Okay. They may be not experienced, but they may be working on a team. Like I have a team that I work with and, you know, any questions that come up, they ask me and then they go back to their clients and answer those questions. So there's ways to get around the inexperience, but make sure that you're asking the right questions along the way. Wholesalers, find a good wholesaler. That's, that's my website. Alex is a perfect example of a good wholesaler. Not to brag because I taught him, you know, it's like Alex, Alex, let me describe Alex to you. Hey, Mr. Homeowner. Yeah. Were you looking to sell your house? Yeah. How much do you want for it?

$1 million.

Oh, I think that's a great idea. Let's do it. He comes back and he goes, I've got this thing titled for $1 million. How much is it worth, Alex?

Oh, $900,000.

Why would you tie up a property like that? I'm exaggerating. Come on, I'm exaggerating. So wholesalers out there, if you're getting any leads from any wholesalers and stuff, you have to do your own due diligence. Okay, you can go onto the Pelago website and it does everything for you. You just put the address in there and it'll go through all the numbers for you. And like right now, if I have a property that I'm looking at in Orange County, it's $1 million. I don't— I, I can't touch it unless they're offering it for $800,000. It's, it's got to be at a low enough price where I can put in $100,000 into the property and hopefully make $100,000 at the end of the day. Because with those numbers and the time that it takes, I need to make a profit. And I don't want to disagree with you. My flips, if I'm not in and out in 3 months, it's a terrible flip. Okay? So I know what you're talking about. And it's honestly, it's not the same. Like, I would never start a new construction type project, which would take me— here in California, it'd take you anywhere between 2 and 3 years to complete. Because of the permitting process is just such a long time. So I, I don't encourage that. Do you get bored already?

No.

Okay. Uh, title and escrow, I use First American, Corner Escrow, and it's not the company that I care about, it's the people. And First American, I've been working with this title guy for, gosh, I want to say close to 20 years now. And it's the type of conversation I have with anybody is, hey Joe, what can I help you with today? And he's, you know, done this for such a long time that anytime I call him, which I very rarely do unless there's a major problem, um, he'll know about it or he's able to check with his company and find out what the answer is. Because we do get into Some tricky situations. Same thing with escrow. I use Corner Escrow and I use a particular escrow person. Her name is Christie De La Torre and she's been doing this for, I think, 25 years, somewhere around there. And it's about the relationship. Okay. Since I flip so many properties a year, I can ask for a discount on my side of the escrow, which she gives me. So So I can do an escrow on my side for $500. And the reason that she lets me do that is because I give her all my regular clients, my regular listings, and she charges the normal rate for them. But for our deals, my deals, she only charges me $500 for that. And that's just relationship building.

Contractors.

I even hate to go into contractors. Sorry, I know one of you is a contractor here. So it's like, um, if you're not— if you're not on BiggerPockets— BiggerPockets is a real estate organization online where you can go and ask questions and stuff. I've been on that website close to 10 years now. I answer a lot of questions. I answered 2 this week. My contractor in LA, uh, just moved to Europe and he didn't finish the project. What should I do? You know, and unfortunately that happens. So picking a good contractor that knows what they're doing. So how do you do that? Um, you know, like if you're just starting out a flip, I would invite anywhere between 5 and 6 contractors to come over and give you a bid on the property. It's going to range from, Joe, I can do this for $40,000. I just got my license last year and I'm kind of hungry. To a commercial guy who's going to charge me $120,000 to do this flip because he's got a lot of overhead and he's working for a company. So hopefully settle with somebody in the middle, $60,000 to $70,000 to $80,000, around there. But what I want to hear from a contractor is, hey Joe, I'm here, we're, you know, we're walking through this project. I think if you took this wall down It's not load-bearing. Listen to that. It's not load-bearing, so it's going to be easy to take out. A couple hundred bucks, it'll open up the space, it'll make it look a lot nicer. I know that they know what they're talking about. Okay, so you have to listen to what the contractor has to say. My contractors, um, at the end of the day, I kind of call it like an add-on. What do you call it when somebody You find something that wasn't in the original bid.

Change order.

Change order. My contractors don't do change orders. I tell them upfront, I said, I am sorry, here it is. Okay, give me a bid. There's no change orders allowed in my, on my projects. Now, if I am halfway through and I tell them, could you add a bathroom or do an ADU? Okay, I understand. Okay, that's that's reasonable. You know, give me another bid. But to literally just go in and then you're removing a wall and and you find you know termites or something in there on one piece of wood. Give me a break. Just replace that piece of wood. Keep moving. Okay. So my contractors know that there's really kind of no change orders unless there's something major that comes up, which. It should not come up. Um, licensed versus unlicensed, uh, that, that's really kind of on you. You, you're licensed? Yes?

Yeah.

Okay. Um, that, that's really on you whether you want to use a licensed, uh, person or not. Obviously the unlicensed person is going to be less expensive, but then you have liability as well at the end of the day. So You know, that's something that will be on you at the end of the day. Other parts of your team: stagers and photographers. We have a photographer in the house. Stagers are very important in that we stage all our properties. Home inspectors, appraisers, termite companies. We don't deal with a lot of home inspectors other than when the buyer comes, they bring their own home inspector. Appraisers are you know people that come out to value the house. So here's my sexist comment: We always send the good-looking agents out there to give them the information. Okay, I told you it was sexist. Okay, termite companies. We have our own termite companies. Not that they are employed by us. But these are people that I built a relationship with that I trust. We have a termite guy, an ex-termite guy in the house. And I, what I always used to say about termite guys is they come out and they have termites in their pocket and they're sprinkling them. Okay. Right. Is that true? No, that's not true.

I'm the other side.

You're the other side. Oh, you're doing the— I'm the brakes on the road.

Yeah.

Okay.

Okay.

So, you know, you should have a termite company that you know and trust, like everything else, that's not going to come out and start throwing termites all over the place and, you know, ask you to tent the place and do all that sort of stuff, which is expensive to do. Sourcing deals. We used to source a lot of deals off the MLS. We don't source a lot of deals off the MLS anymore, but And every once in a while, you'll find one on the MLS. And my son-in-law found one a couple of months ago, and it was literally a hoarder house that, you know, Alex and Lauren and my son Andy and I went into. And literally, you couldn't— could hardly breathe in there. It was that bad. It was terrible. I mean, the trash was up to here. There's certain rooms we couldn't walk into. You know, later we found out there was a slab leak, so had the whole thing had to be replumbed. But that was, you know, the biggest issue, uh, was that. So those are places that a flipper is going to buy and not a regular person, because the banks aren't going to loan on a property like that. Okay, they have to have it in what's called livable condition, and if it's not, um, All you agents out there, if you have anything like that, I'd like to see it before you put it on the MLS. But if not, then, you know, go forward, put it on the MLS, and see what you can get at the end of the day. Uh, wholesalers— so you can do, uh, bandit signs. Um, you have online cash buyers meetup groups like this, uh, BiggerPockets, LinkedIn. There's a lot of ways to contact wholesalers. And again, I'm not bashing wholesalers. I'm not bashing wholesalers. But some really don't know what they're doing. It's like, Joe, here's a property, you know, for example, in Palm Springs, it's $800,000 and I've got it under contract for $720,000. You'll make $80,000. Obviously you have no clue. It's like, it's going to cost me about $70,000 or $80,000 to fix it. Then I have to put on the market and I have to pay a real estate agent, at least until next month. I'm still going to offer, okay, a commission. It's like, you're not going to see it on the MLS, but if, if you're going to sell property, you're going to offer a commission to the buyer, buyer agent, because if not, you're not going to sell. Sell it. But that's a whole different story. Um, trustee sales. So trustee sales has changed since I put this together. We used to buy a lot of properties at the trustee sale, you know, foreclosures. But that's, that's even changed. And you buy one now, and you have to literally wait 90 days before you can do anything. Because if an end user wants to buy it from you, For a dollar more, they can. Okay, or a nonprofit is another one. So literally you have to wait 30— I'm sorry, 90 days before you can do anything on that property. So there's not a lot of flippers that are buying at the courthouse steps right now. Plus, there's not a lot of them at the courthouse steps. Most of the time, hopefully, people like Alex are calling pre-foreclosure lists and trying to put them under contract before it gets to the courthouse steps. Okay, any questions on that? No, we're doing good.

Wow. You skipped off-market.

I skipped what? Oh, off-market. Yeah, direct-to-seller opportunities, uh, where the best deals can be found. So literally cold Calling, texting, um, pay-per-click, those type of sources you're going to use. Those are the best deals. Those are the ones where Alex is on the phone for an hour trying to build rapport, you know. Yeah, young man, I was in World War II, you know. It's like, oh, that's nice, you know. And I'm listening to the conversation, you know, it's like Yeah, I did this in World War II, and I need— I'm going like, you know, cut it short. No, Alex likes to build rapport. Yeah, an hour later he's still talking to this guy. Have you made a deal yet? No, but I've, you know, I got the rapport up there really good. Um, direct mail, cold calling, PPC, Facebook, all that stuff, if you're interested in doing a lot of that stuff. Um, I don't know which— what's, what's working the most right now? Yeah, probably inbound, like PPC, PPL. Inbound leads, pay-per-click. Okay, that's what seems to be working now. We've gone away mostly from texting, correct? Yeah, because the phone companies are like, they're really clamping down on texting and stuff. So we've kind of gone away from that. So now we're looking for more inbound leads than, you know, try to do the, the pay, the, uh, the calling. Multiple Listing Service, again, you know, access to the MLS. I think we talked about a lot of this. Investor-friendly agent. Um, I've got my app up there if you're a buyer and you're interested. Just let me know, we can connect. Defining your market, working the high end or low end, and that's really important. Like, if you're just starting out and you want to learn how to flip, then I would suggest you start at the low end. Even mobile homes are fine. You can do mobile homes on land, which is what we do because it's a lot easier. If you do mobile homes in a park, It's a lot more difficult, but then you're getting the mobile homes for honestly practically nothing. They're just literally just giving them away. Then you go in and, you know, put a few thousand dollars in there and try to sell it as quick as possible because you are paying a space rent for those, and it can be $700, $800, $900 a month. So, you know, timing's a big issue. If you're interested in any of that, you can contact my son. He's doing that with some investor friends of his. And what's the average price they're buying them for?

Like $20,000.

$20,000. Yeah. So that's an opportunity and a great way to learn, you know, without thinking that you're going to spend $900,000 or $1 million. On one property. Um, that's my website. And yeah, uh, definition of a wholesaler, uh, what makes a good wholesaler. Do your own comps and due diligence. Understand the contracts. I'm going through this quick. Where to find them, uh, calling Bandit Signs, networking, BiggerPockets, LinkedIn. Online cash buyer website, Handyman Deals. Like Alex said, we put together a wholesaling startup club, and if you're interested, there's no charge. Everything's free. I have all the paperwork that you need in there. Plus, if you have any questions, you just reach out to Alex or myself, and we're happy to answer your questions. So does everybody know what a wholesaler does? Yes, no. Anybody doesn't know what a wholesaler does? Okay, a wholesaler is calling an end use—I mean, a seller—and basically saying, "I'd love to buy your house. I'm an investor." Let's say their house is worth a million dollars, but it looks terrible inside. I mean, so terrible that they're embarrassed to even call a real estate agent and list it. So you offer them a cash price. Let's say you offer them $700,000, okay, and they accept it. So now you have a contract, a piece of paper that says you have the right to sell that house. So then you call me or any other flipper and say, I have this contract, and you make up a number as what you want in between there. So you can get $10,000, $20,000, $50,000, whatever, whatever you, you think is right. You call me, you say, Joe, I want $50,000 for this deal. I have it under contract for $700,000, but I'll sell it to you for $750,000. And then I run my numbers and I go, that's good enough. Yeah. So we go in, we close a transaction, you make $50,000 on a piece of paper that passed from one person to the other. That's called wholesaling.

Okay.

Any questions on that? My flipping website, FlipHomesOC, if you're interested in signing up there. This is my son-in-law's website. Off-market, where the best deals can be found if you're willing to put in the work. Direct marketing, not something I recommend, and that's sending out letters. Sending out letters is pretty expensive to do, and you're in competition with big companies— New Western, Fairtrade— those kind of companies send out 10,000 to 15,000 letters a month, and it's, it's a numbers game for them. They, they get leads, but it costs them that much money a month. And let's say the letter to send it out is a dollar, so I don't know if you want to spend $10,000 or $15,000 a month just to get 4 or 5 leads. So it just, it just doesn't pencil out. Driving for dollars, and that's literally just driving around in a neighborhood identifying those houses that you look like it needs some work. You write the addresses down, you come back, you skip trace it, which means you get the owner's information. Phone number, email, whatever it is, and then you call them and it's just a cold call. Those are leads that are nowhere. They're not on the internet because nobody's driving around. Those are really good leads to go after. I mean, the conversation— let's say you're driving in their neighborhood. I don't encourage you— do I have door knocking up there? I don't encourage you to door knock those because what is the conversation at the door? Hi, my name is Joe Homs. I'm a real estate investor, and I'm here to know if you're interested in selling your crappy house. Yeah, that's not gonna work. Okay, so it's, it's a phone conversation with that, just literally a cold call. Hi, my name is Joe. I'm a real estate investor. I've been buying homes in your neighborhood, just stopping by— I mean, just calling you to find out if you're interested in selling. Just that simple, and go from there. Yes, no, well, you know, let's talk about it for an hour. I was a World War II veteran. And go from there. Um, cold calling, again, we're getting away from that. Mojo Dialer— if you're serious about calling people, then you need to use a dialer. You do not want to use your own personal phone number, okay? Because the minute you start calling people, the phone company is going to shut your phone number down. So there are companies— Mojo Dialer is one of them— that'll give you a phone number, and you load a list and press go, and it starts calling 3 phone numbers at a time. And then the first one that picks up, you go, hey, my name is Joe. I'm, you know, interested if, uh, You're looking to sell your home. Simple as that. You can have VAs do this, virtual assistants do the same thing. Google Ads, pay-per-click, Facebook Ads, same thing. I'm not going to go a lot into the trustee sale. If you're a real estate agent, you know what the process is. 3 months and 21 days, 3 months pre-foreclosure, 21 days You're just about getting ready to be foreclosed on. So urgency—I have people calling day one, and I have a whole group of people calling day one. And it really doesn't matter; it's when they're ready to say yes, I'm interested in talking to you. That could be day one; that could be day ninety. So it doesn't really matter. You just need. to be consistent and just start calling people. Obviously, when they get down, you know, to the auction stage, which is the 21 days, there's some more urgency there. And people who are in pre-foreclosure honestly are pretty much the same. I call them ostriches. Ostriches because they have their head in the sand, and it's your job to get it out of the sand. Like, hello, you're gonna get foreclosed on in 2 weeks. You have like $200,000 worth of equity in this house that you're going to lose. What are you waiting for? I don't know, interventions, something. I don't know. You know, I like your voice, so I'm going to talk to you a little bit longer today than I would normally talk to somebody. But literally, there are times where Alex and I would go out to somebody's house. They're passed out on the couch. We're knocking on the door. This is the last day. If you don't sign up, you're going to lose $250,000. Okay. Thank God he signed. This is where we've been sourcing our deals, mostly off market. Again, there's nothing at the trustee sale. Wholesalers a little bit off the MLS. Estimating rehab costs, I use 10% of the after-repair value. You can use $25, $35, $45, $55 per square foot. The— honestly, the easiest way is to go on the Pelago website, put the address in, and it'll run all the numbers for you. It does use 10% of the after-repair value, and that seems to be what we end up spending at the end of the day. So it's— if it's a million-dollar property, we're going to have to put at least $100,000 into that to make it saleable at the end of the day. And saleable for real estate agents is I put it on the market, I get an offer that weekend, and then we're closed in 30 days or less. Okay. It's not a regular sale where, you know, You talk to the seller and, how much do you want for this property? Um, $1 million. Well, I ran the comps and the comps say it's only worth $800,000. Where'd you get the million dollars? Oh, Joe, I think we can move, but we need to get $1 million. You know, I go, I don't, I don't know. I mean, again, I'm, I'm trying to be realistic here with you. Here, I'm showing you in black and white that in your neighborhood the biggest value was $800,000 and it looked like this. It was a flip property. Yours is not even close. Sorry. I try to be as honest as I can. Um, you know, if you want to list it and sit on the market, that's up to you. You know, um, rehab costs can vary depending on the scope of the work. Finding a contractor, we spoke about that. Budget for the unknown. I usually budget around 10% for the unknown because there are some unknowns that come up, but I try to minimize those as, as much as possible. Termite repairs, staging, landscaping. Landscaping is so expensive nowadays. You know, I landscape the front of the house. I do very little in the backyard. That's on the person who it to figure out what they want to do in the backyard. I'm not going to put a pool. I'm not going to put an ADU, you know, even though that's what agents say. Look at this house, it's so big, it's got room for a pool and an ADU. I go, it's just there? No, it's not there, but you can build one. Yeah, no. As a flipper, no, I don't build any of that stuff. It's just going to cost me, you know, that much more money and that much more time. I flip Okay. And move on. Financing costs. We were talking at that table earlier about financing costs. You can finance it yourself if you have the money. If not, private money, hard money lenders do that. I think we have a hard money lender here as well. You can talk to them how to finance this property. So when you finance a property, just think of it as this is your business partner. So if I'm financing a million-dollar flip and they're lending me 80%, I know at the end of the day about 30% of that profit is going to be paid to that hard money lender. So they're, they're your partner in the deal. So just make sure that you have enough room in that deal for everybody, mostly yourself, but everybody. And when you're working with the hard money lender, you really, really need to know what you're doing. You don't want to get caught into the trap that, you know, you borrow hard money, you have to pay it every month, and 7 or 8 months down the road you're still fixing the place. You're gonna lose. You need to be in and out of these properties in 3 to 4 months at the most, because if not, the hard money is going to be very expensive to do. Holding costs, utilities, HOA, property taxes. Supplemental taxes. Does everybody know what supplemental taxes are? Anybody not know? Okay, so when you— let's say I buy a flip for $800,000. This person bought it like 30, 40 years ago and he bought it for $20,000. Their taxes here in California are based on when they bought the house, so their tax base could be like $2,000 a year. Well, when I buy it for $800,000 or whatever I said, now the taxes are 1% of the purchase price. So now they just jumped up to $8,000. That spread in between the $2,000 and the $8,000 are what's called supplemental taxes, because California loves taxes and they're not gonna let you get away with anything. So At the end of the day, we sell the property. A few months later, we get this bill from the tax assessor that says you owe supplemental taxes in the amount of $6,000. Okay, now it's for the period of time that you've owned it. So if I, if I own that property for a year, it's going to be $6,000. If not, then it's going to obviously be prorated. So you need to know all these things. When you're flipping. Here's a little example. And again, this is about 3 years old, and everybody knows everything's gone up in price. So this, this was a normal flip, you know, 3 or 4 years ago, $75,000. And we pretty much do everything, you know, new cabinets, counters, fixtures, tile work, garage door, Flooring, painting inside and out, landscaping. This one we put a new HVAC system, which it says there is $6,500. Actually, now that's our price, me as a flipper. If you go out in the market and try to get, uh, somebody to put AC at your house, they're going to be up in the $14,000 to $15,000 range. Uh, so you have—

$21,000.

How much? $21,000? Sorry, we, we should have talked before that. Okay, so you have to build these relationships over the years with people who can do a lot of this stuff for a lot less expensive, because as a flipper, we have, you know, so many projects going on, we keep them busy, you know, so they're willing to discount their rates and everything for us.

Uh, demo $2,000.

We're doing a flip in, in LA. I think we're on our 4th. Yeah, 4th. What are they, 60?

40-yard.

40-yard bins. Those are the giant ones. Okay, and that was $1,200 apiece. Yeah, we're on our 4th one. So make sure you, you account for all that stuff. Estimating costs, we use 3.5 to 4.5 of the ARV to estimate closing costs, um, for escrow and title. So we're licensed, so, you know, our numbers are a lot less because we're licensed. We're not going to charge ourselves to list properties and stuff like that. Um, 1% usually in closing costs, so that's escrow and title, 5% to commission 2.5% to buyers, 2.5% to sellers. So if we're listing our own properties, we're not even paying 2.5% to ourselves. Why? Okay. I mean, at the end of the day, if I wanted to charge myself 2.5%, if you know anything about taxes, then I have to declare that money under my income. We have a CPA here, by the way. I have to declare that money under my income.

Okay.

It's just as easy for me not to take that income, but take that income in the profit for the flips. It's all the same. You know, it's just different ways of being paid. Um, so example, $600,000 purchase price, uh, 3.5%, you're gonna pay $21,000. 4.5%, $27,000. 6%, $36,000 to flip a property. Don't do that. That's a lot of money at the end of the day.

Yeah. You roll the profit into another flip?

No, no. You're talking about a 1031 exchange, and you can only do that on investment properties that are rented out. Okay, that's a great question, but no, you can't. But there's other ways to reduce that. CPA will be able to answer those questions, or look at, uh, last week's YouTube where I interviewed her and you'll get a lot of those answers. And then you can reach out to her and ask her those questions. We did talk about that, um, buying a new car over $6,000. and pounds is a good way to write off, you know, and then now you're riding around in a brand new car. You know, sounds, sounds like a deal to me. And there's, there's a lot of other different ways to reduce that, you know, but that's something that you should talk to a CPA about. Breaking down a deal, establishing the after-repair value is the most important thing you can do in a flip. If you don't buy it at the right price, you've lost. You have to buy it at the right price. Don't feel bad that if you find something, you think it's the best deal in the world, and they're not going to come down to your price, you just walk away and move on to the next deal. Don't, don't be compelled to buy something that you're not going to make any money on. I have people They come up to me and they ask me, they go, Joe, I want to learn how to flip and let's buy something. And even if we don't make any money, you know, at least you'll teach me how to flip. I go, no, I don't do things like that. If, if I'm buying a flip, it's because we're making money at the end of the day. Why would I go through all that? If you want to learn how to flip, I've got plenty of projects. You just follow along. That's fine. That's easy to do. Just follow along. I'll give you the address. You can go out there and take a look and, you know, talk to my contractors. Don't, don't steal them. I've actually taught them not to work with anybody else but me, uh, because it does happen. But anyways, um, yeah, just like if you want to shadow one of my projects, that's fine. I've got them all over. Um, establish rehab costs, closing costs, holding costs. How much money do you want to make? Great question. My average is 10%, so $1 million, I'm looking to make $100,000 on the deal. That may not be what he wants to make. He's just starting out and he's happy with $50 grand, half of that, 5%. You happy with $50 grand?

No.

No, he's not. Okay, but maybe you're happy with $50 grand to start out with. So it really depends on you, because if we're bidding on the same property, if you're happy with $50,000, you're going to get the property. I'm not going to get it because I want $100,000 at the end of the day, because I know how much work there is to do in a project. And, you know, you have to build in that buffer in case something does happen. Um, establish offer amount and Offer amount is really kind of, you know, doing your comps, doing them correctly, working with an agent that knows how to send an offer to another agent and negotiate. Everything's negotiable. I bought a property once for my flip business, and I get the disclosures Like three or four days later, and in the disclosures it says there is a death in the property. I said, "Wait a second! I didn't see that on the MLS." So I look back. I go, "It's not on the MLS. It was in an area. It was in Mission Viejo, in an area that I'm not concerned that there was a death in the property. Now, if it was Irvine, totally different. Okay, and that's culturally." What happens? Did you think I let it go? I called the agent. I said, hey, there's a death in the property. I'm just like very superstitious. I, I don't know if I can buy this property. Okay, every agent knows that there's a solution to everything— money.

Okay.

So I go, hey, I think you should reduce the price by $30,000. Let me check with my seller. She comes back, she goes, Joe, we'll do $15,000. Are you good with that? And I said, yeah, I'm good with that. I got $15,000 off the price. Hell yeah, just for asking. So work with a good agent, knows how to negotiate with people. Okay, I keep harping on that, sorry. Uh, rehab closing costs. So here's an example, $675,000 At the end of the day, you, you know, you want 10%, so that's $60,000. Your offer amount can't be over $506,000. And I know that's a big spread, but unfortunately, that's, you know, being a professional flipper, you need that big spread. Yeah, I just like— if somebody wanted to buy this to live in it, I can't compete because they're gonna, you know, offer way more than that. They'll move in and they'll do a live and flip, they call it. I can't compete with them. Okay, these are distressed properties. That's what flippers do— distressed properties. Comping properties. And anybody not know what a comp is for a property? Everybody knows? Yes? Oh wow, we're gonna move on real quick then. Um, let me talk about pools.

There Different pools.

Different pools, in my definition. My definition of a pool— if there's a pool, I call it a hole in the ground, it's worth nothing. Okay, if I come to a house and I see what's called a resort pool, which is, you know, like nice landscaping around, a slide that goes, you know, around like that and into the pool, that's worth something. But just a hole in the ground, sorry, it's, it's not worth anything. In fact, I've had some of my clients say, Joe, I think we're just gonna fill it in. Okay, fill it in, because it really, it's not worth that, that much. Um, pay attention to negative factors: road noise, proximity to freeway, airports. If you have a house that's on a major roadway You know, 2 lanes, 4 lanes going, you know, each way, and your driveway, you know, just goes out onto that street. That's not gonna be a great buy. It may be a great buy with price, but at the end of the day, remember, you're looking to get rid of this as soon as possible. You're gonna have to lower that price because nobody wants it. You know, if you have a lot of road noise, um, We were looking for a house for my dad, who was elderly. He was in his 80s at the time. And my sister found this place and she says, oh, this is a good place. And we went over there and there was major road noise in the back. I said, he's not gonna like it, you know. She goes, he can't hear anyway. We ended up buying it, believe it or not. We ended up buying it. He did complain, he could hear it, but it was a good price and it was someplace to put them close to us so that she could take care of my mom at the time. So it was great. And then, you know, obviously this is Orange County. We bought it down here and the market went up, you know, so it was okay of a buy, but not something that you want to do as a flipper. Um, let me get back to the school districts matter. It depends on the buyer that you're working with, and I honestly, I don't want to pick on Irvine, but Irvine's a good example. Buyers that I work with in Irvine, which I don't work with a lot, they are very picky on school districts. Okay, sometimes it really doesn't matter. I can flip anything anywhere. It could be the worst. neighborhood, as long as there's 3 houses that have sold in the last 3 months in that neighborhood, which establishes the after-repair value, I'm good flipping there, even if it's a bad neighborhood. Okay, my son-in-law has some properties in San Bernardino, and if you've lived around here for a while, you know there's parts of San Bernardino that aren't very well. He literally has a house sitter while they're doing the flip. And they come at night and stay in the house because if not, people break in and they move in. So you have to account for that on your budget. This is the Pelago website you can go to and just go through the numbers like that. I won't be here too long, but If you've never been to the Pelago website, it's a fantastic website. It's free to use. Okay. Sources of capital, how to fund your deals. If you have a good deal, money's going to flow to that deal. Like if you got a fantastic deal tomorrow, hopefully you're on the phone calling me and saying, Joe, I've got a fantastic deal. And my response is, okay, what do you want to do? Do you want to wholesale it to me? You want to partner with me? You want to flip it yourself and have me hold your hand? What is it you want to do? When you have a good deal, money will flow to that deal. That's not a problem. Buyers are out there. They're always looking for good deals. Okay, it just has to be a good deal. Learn how to find distressed properties, which we talked about. There will always be a buyer or partner if you, if If your numbers are good, there is more money available than deals. Hard money sources of capital, 75%, 85%, 100% loan-to-value, 1 to 2 points, 10 to 12% interest, longer times will Greatly increased finance costs. So for example, purchase price $500,000, 85% loan-to-value, they'll loan you $425,000. 10% of that, $42,500. Monthly payments are $3,550. Cash needed, $75,000 down payment plus rehab costs. But you're going to be paying $3,500 until you actually sell that property. So make sure it's not 10 months down the road and you're at $30,000. Try to get that done in 3 to 4 months. Hard money is good, but you really, really have to be careful with it and know what you're doing, uh, because you can get caught in a deal where for some reason you didn't do the ARV correctly. You know, your agent puts it on the market at what you want, and it's just sitting there. And that's the worst thing to do. You know, as a flipper, we're listing properties, and if we don't get an offer within the first week or 2, we're lowering the price already. We're not waiting. We're not— you know, typical sellers out there, they're going to wait months. We don't wait months. It's dropping the price. That's, you know, we've already got the flip done. It looks gorgeous. So that's not the problem. The problem is nobody's looking at it because it's priced too high. So you have to, you have to drop the price to get the attention. If you don't drop the price, you're just kind of being foolish. Joint venture with people, define responsibilities clearly, create a joint venture agreement. Usually there's a financial partner and a partner that handles the rehab, or you can do 50/50. Whatever. There's, there's money out there. You just have to figure out how to get it. I'm going to go through these real quick. Case study. This is, this is a flip that my son-in-law and I did about 10 years ago when he wanted to get into the business. And the way I taught him was the way, the way that my dad taught me. He says, you know, go get your hammer and tool belt and we're going to go in and flip this property. Okay? Because I have the expertise to do that. And so I taught him. He was working a 9-to-5 job, and so he stopped that. We went in and flipped this property. Before and after there. That was, that was a bathroom. And we ended up making about $80,000 on the flip. And he was making $60,000 at his job, so he quit. Okay. And 10 years ago. And yeah, now he's, he's, I think he's got like 20 projects that he's doing right now at a time. And that's normal for him. He's, we kind of call him big time, right? We call him big time because, yeah. Um, that was off the MLS. Uh, we represented ourselves and earned a commission. property is vacant. It was in a senior community. Don't be afraid to do senior communities except Laguna Woods. Laguna Woods changed over COVID, and they're very— we were flipping in there, but it's very, very difficult to flip in there right now. So I don't encourage you to do that. But if there's other senior communities you want to do, um, I know the purchase price, $390,000, that, that same place is probably $800,000, $850,000 right now. So we ended up making $82,000. I thought it was a little bit more than that, and that was a 19% return. Um, and again, these are just flips that we've done and the numbers. I don't think there's much of anything else. Oh, sorry. Uh, yeah, market outlook. New president, we don't know who that's gonna be, okay? Because one of them just dropped out. If you're not aware, I'm sure everybody knows. I don't know if he knows. That's a great question. I don't know. I don't know what's gonna happen. Again, I don't have a crystal ball. These are my concerns: trade war with China, war with Iran during the Assassination attempt. Somebody actually said that they were concerned with Iran. You know, they thought it might be Iran that was going to assassinate him. So who knows? Jobs report—we're looking good right now. Foreclosure rate—we're still looking good. As long as—as long as everybody has a job, we are good. We are good to go. So so far, we're good to go. We'll see what happens at the end of the year with. whoever gets elected and, and go from there. Any questions? Yes. Is AI coming into any kind of the models that you're doing as far as helping you hold the market? The question is, is AI coming into what I do for a living? And really, it's only as a real estate agent. I literally go on AI, uh, ChatGPT, whatever, And I say, let me have a property description for such and such a street, and it comes back with the property description because it's so easy to let it do it. And like, as a listing agent, it's always been kind of hard to come up with something that, you know, is going to be really, really eye-catching and look good. Um, one of my agents made fun of me a few— no, about About a year ago, 2 years ago, I listed a property in San Juan Capistrano. It's in an area that I invest. The best way I could describe it is it's a D property. Okay? It's right across from the Mission. If you've ever been down to San Juan Capistrano, the Mission, there's about 1,000 condos down there and they're like 2-bedroom, 3-bedrooms, they're $500,000. Where normally you can't even touch anything like that. And I did my description through ChatGPT, and they came up with this description like this was the best property in the world. And I put it on there, and they're, you know, they're making fun of me. It's like, you know, this doesn't describe the property. I go, that's not the purpose. The purpose is to get somebody to look at it, read it, and then get interested to go take a look at it. The same thing with pictures. I always do professional photos because, I mean, you can take a picture of something that's ugly and the picture was going to look really good at the end of the day. So professional photos, a great description, and I get people down there to look at the place. If they don't like it when they get there, that's a different story. Okay? But marketing is marketing, and that's what I use AI for. ChatGPT to do a description. I use AI to do pretty much all my marketing right now through social media. So it is literally posting on LinkedIn, Instagram, Facebook. I get— I have a blog that I did years ago. It finds that blog where I tell it where it's at. Then it goes to ChatGPT and I tell it to make a synopsis of what that blog is, okay, and make it sound really good. Okay, then I go to this next program where I say, make a picture of what you just described. So it makes a picture for me, and then from there it sends it out to all my Facebook, Instagram, Uh, all my social medias automatically every day, twice a day, and I don't do anything. So I use it for that. Okay. Um, I never really, really got a lot of direct contact or information when I used to do that by myself because they tell you, you know, go out to the house and stand in front of it and go, yeah, this is the best looking house in the world. And, you know, by the way, we're just down the street from the park. And, you know, that doesn't help. You know, I don't know, maybe it's because it's me. If you have a young lady doing it, maybe it's different. I don't know. But I'm actually starting to get a lot of people looking at that stuff because I can see— you can track them, you know, how many people are looking at a particular post. And it's honestly, it's gone way up. Have I gotten any leads off of it? No, not yet. But that's, to me, that's social media. It's like you just like need to have a presence out there, you know, unless you're like a social media influencer, which I'm not. It's just putting your, your, you know, face out there and the things that you do, something that real estate agents need to do. Okay. So that's what I use AI for. That's it. Any— Chris?

What was the effect of the recession of 2008 on your business? I'm worried about upcoming recession. Does that hurt or is that good? Is that good or bad?

2008, I had been through, uh, 2 other recessions by that time, so I was pretty knowledgeable. I knew what was going on. I knew, uh, so much so that I was not representing buyers. I said, sorry, um, I know we're going to have a downturn. I don't want you to call me a year or 2 later saying, Joe, you sold me this house for $500,000 back then. $500,000, it's worth $200,000. I didn't want those calls, but I was representing sellers. Joe, you can get me $500,000 for this 2-bedroom house in Rancho Santa Margarita? Yeah. Okay, let's do it. Okay, so it for me it didn't affect me at all. It was very positive in that it happened. The downturn happened. I took advantage. I bought each of my kids a condo. It was like $125,000 for a condo in Orange County. So I put I bought each one of them a condo. Obama was the president. And if you remember back then, Obama was basically saying, if you buy a house, we'll give you $10,000. So my kids would call me after I bought the place for them and, I got my $10,000 check. I go, okay, you're giving it to me?

No, no.

So your question is, like, where are we at today? I don't see that happening. I could be totally wrong. I was pretty on last time. So the signs that you have to look out for are interest rates being high. Check. They are high. Lenders getting crazy. And the reason I say lenders getting crazy is that the lenders back then were doing what I call warm body loans. If you had a warm body, we would give you a loan. Okay. And you know what, Joe, you're a nice guy. We're going to give you like 110%. Well, what does that mean? You're going to give me 10% back at the end of the day after I buy this house? Yeah. So it was crazy. It really was. It was crazy. And then the other thing is employment. If you don't have a job, you're not going to be able to make a mortgage payment. So our employment situation is pretty good. The banks have learned their lesson. They're not being super crazy. I'm sure you'll find some banks out there doing some crazy stuff, but for the most part, the, you know, the big boys aren't doing any crazy things right now. So I don't see that. But, you know, again, I don't have a crystal ball. I wish I did. I can't predict, but I don't see the same signs that I saw back then. If it happens, hopefully you have a lot of cash and you have good income coming in, provable income, and just start buying everything. Buy everything. And I would say hold on to it because if you can cash flow, which you should be able to— 2008, I was cash flowing On the properties that I bought for a good five years, and then it got to the point because the prices are obviously going up. Got to the point where I wasn't cash flowing anymore, so I started flipping again. When the downturn came again, my market that I invest heavily in and have over forty years, San Juan Capistrano. The condos, first one I bought was 40 years ago. I paid $50,000 for it. I still own that property today. It's been through the ups and downs. It got up to $125,000. It went back down to $50,000. It got back up to $250,000 and then went back down to $100,000. I'm thinking, oh cool, it didn't go back down to $50,000. And then this last time, 2008, it went up to $500,000.

Wow.

For a 2-bedroom, 1-bath condo. And then the bubble burst, it came back down to $100,000. So what do you think I did?

Bought 10 more.

I bought 10 more. Okay, I bought 10 more. And here we are, that property's worth $500,000 again. Okay, buying at the right time. Yes, it's a long time. In between. But if we have a downturn or whatever, uh, Warren Buffett said when, when you're investing, when people are running out the door, you should be running in. Please, if that happens again, run. Buy as much as you can. Okay? When I was buying properties before that, the banks would let me put 5 or 10% down as an Now they require 25 to 30% down, and it's still like that. The banks would let me have loans up to 10 properties. When 2008 came around, they cut me back down to 3, so I couldn't buy any properties and finance them. Because remember, you— when it gets down to that, you want to put in as least money as possible on a purchase. Because you want to have— let's say you have $1 million to purchase. Why not buy 10 properties at $100,000 and finance those instead of 1 property at $1 million? You're going to make more money if you have 10 properties, correct? As the market goes up and you can cash flow. So buy as many as you can down at the bottom. If you have a good job, the lenders are still going to lend. That's what they do for a living. They They lend money. Just depends, you know, what their rules are. They've, they've since changed it. I can have 10 loans, um, that I can have under my name. Okay, but that's all subject to change. Um, kind of off topic here, but if you have a HELOC— does everybody know what a HELOC— everybody, somebody know, not know what a HELOC is? Everybody knows.

Okay.

2008, I had a HELOC on my house for half a million dollars. When it started to go down, I could see that it's going down. I took out all that money and I just put it in a regular bank account. Why? Because the bank started sending out letters saying, oh, by the way, that HELOC that you have for half a million dollars, we just reduced it to $250,000. Well, they can't do that if I have the money, right? So same thing that's happening right now. If you have a HELOC on your property and you see the market like turn down, please take that money out, put it in some, you know, cash account that's earning you a little bit of interest, and have that money available to invest in properties when they go down. I'm not telling you they're going down. I don't Have any idea? Any other questions?

Yes.

You can go to PropStream and pull a list of pre-foreclosures. Skip trace those. And get on the phone. And those are people that are raising their hand going, I have a problem with my house, I can't make the mortgage payment anymore. Why would you not pick on those people? Hi, my name is Joe, I'm a real estate investor. You don't have to tell them that you know they're in foreclosure. I'm buying houses in your neighborhood. I bought a house down the street. Not really, but that's my line. I bought a house down the Yeah, just calling to see if you're interested in selling and, you know, get them to start thinking. Okay, and then during the conversation, if they bring it up or if they don't, if you want to say, okay, well, I noticed that you're in pre-foreclosure, I'd love to help you out of that mess. Okay, they're going to tell you, well, can you help me? I want to stay. Sorry, it doesn't work that way. Okay, and then you have to kind of give them reality. This is what I can do for you. I can buy it at this price, okay, which will get you out. And I've done deals closed in 3 days. Or if you need 30 days to move out, then fine, we'll do 30 days. Or if there's plenty of time there and you're a real estate agent, we can list the property and try to get you a lot more than I can offer you. Because remember, I'm, I'm offering you a convenience and a quick solution. And that means it's going to be a lower price. Okay, so for me, that's where I would concentrate. Pick an area around you. I mean, Orange County is kind of small, so if you want to just do all of Orange County, the pre-foreclosures, and get on the phone and start calling these people, uh, reach out to Alex. We have scripts if you want. In fact, he's skip tracing all of Orange County, right? Yeah, he's skip tracing, so you don't even have to pay for that. Just reach out to him and he'll set you up and get on the phone. Okay, and then have any questions, just call. That's where I would start. And if you're a real estate agent, if you're not calling leads, sorry to say you're not a real estate agent. You can't wait for these people to come to you. Hi, my name's Joe and I've got this awesome website and I'm on Instagram and all that. You haven't found me yet? No, they're not gonna find you. You have to call. You have to call people. You have to call. We used to pull lists, 10,000 absentee owners, and we used to literally just call them. They're out of state, wherever. And it's just simply, you know, it's just Really simple conversation. My name is Joe, I'm a real estate investor. Are you interested in selling your home? No? Okay, we're on to the next one. It's a numbers game. We'll find somebody that wants to sell their house or wasn't thinking about it, but now they are. Okay, so as real estate agents, you should be, uh, the next best option as real estate agents is to do open houses. So the agents are coming to you. At that point— I'm sorry, the, the buyers are coming to you. But here we are next month, the 17th of August, things are going to be changing in that you can't even show a buyer a house, even at an open house, unless they're under contract. So now as an agent, we have to go through all that stuff. Whatever, you know, it's It's the same. Ten percent of the agents that are licensed do ninety percent of the work, and that's because they actually work. It's it's not something you get your license. Sorry to burst your bubble, but it's not something you get your license. You become a millionaire the next day. Not at all. Find a niche. One of my agents is from China. She was born in China. She's very well connected, let's say, to the Chinese people. All she does is get money from China. They come over here to Irvine. They buy in the brand new neighborhoods from the builders. Okay, they're basically parking their money over here, buy it, and then she manages the property for them. She just closed 2 deals this week. They were $50,000 in commission each. She made $100,000 this week. That's her niche. So if you have a niche, you know, it could be a language niche, you know, um, just find, find what that niche is and, and run with that as, you know, far as you can. Uh, any other questions? Yes. So if you're doing a What is my argument for using a wholesaler or not using a wholesaler? A wholesaler that knows what they're doing is going to leave me enough room to make money at the end of the day. A greedy wholesaler or wholesaling company is going to take the majority of that profit away from me, and I'm not going to. Do a deal with them. And there's, you know, I'm not blaming them. We're all human. Um, you know, we all want to earn as much money as possible. But when you get to the point where you're earning more on a deal than I am and I'm doing all the work, I'm, I'm walking away. Sorry. Somebody else might want to do it, but that's fine. That's, that's on them. Any other questions? Am I good on my hour? Oh no, I ran over. That's because of the questions. Yeah, thank you. He wants to know how many calls I make a day, and I really don't make much anymore. I just listen to Alex. How many calls What do you end up making a day? We got Chad calling now. He's doing like $190 to $300. Okay. And is he using a speed dialer to do that or? Yeah, it's a power dialer. Yeah, a power dialer. Okay. It's a numbers game. The more, the more calls you can make, the, the more chances somebody's going to say yes. Okay. And it may not be yes right away. It may be, ah, let me think about it. Call me back, or I'll call you back in a week or so. Then you call them back in two days. Okay, because I tell them to cut the time in half, right? Yeah, if it's a month, you're calling back in two weeks. You know, don't don't let them give time to think about it because you may be calling right after that. They may like your voice a lot better than Alex. I don't know why, but maybe they do. And then maybe you're going to say, "Let's put a deal together," and they say yes. Then Alex calls the next day. Hey, remember we had this? Conversation. I just sold it yesterday, right? It happens. So try to be on top of it. You need to follow up. You need to have systems in place to follow up. You know, put a little tickler that says, "Hey, it's time to follow up with this person." Give them a call, send them a text, an email, whatever it is you're doing, and follow up. Follow up is very important. Okay. Any other questions? Yes.

Sales question. You mentioned earlier that we could go into business with you, partner up with you. I guess I would be the wholesaler. I find a house and say, hey, there's a good profit margin here. What's your magic number? You didn't go over the numbers. You mentioned $100,000 is what you usually want to make, but—

10%. 10% of the ARV is what I'm looking for.

Okay.

Yeah. And so, you know, like if you found a deal at $1 million and we were to partner up, you know, I'm okay with making half of that, $50,000, and you the other half. That's fine. If it, you know, if the numbers are like you find a deal for $20,000 and we're splitting that, probably not. Okay. But, you know, as the numbers get bigger, then I'm Any other questions? Questions? Questions going once. Questions? Tori, you have any questions? You sure? Did you learn a lot? Oh my gosh. She's a hard critic, isn't she?

I am.

Did you want a ride home? Because you and your mom rode up here with me. I don't know. I don't know if that was the right answer. Tori, did you learn a lot? Yes. Thank you. You have a ride home now. Any other questions? Okay. We're here to network. Got another hour here, so please go find somebody.

Thank you.

Somebody to talk to. And we'll be back next month. I don't know who's speaking next month, but I'll let you know through the Meetup app. Thank you for coming. Appreciate your time.