Why Taking Massive Action Pays in your Real Estate Investment Journey

Welcome to the Cedar and Porch Real Estate Investment Podcast. I'm the host, Shona Lepis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience. From how to find off-market deals to creative financing to long-term and midterm rentals, our goal is to educate and inspire others to gain financial freedom and generational wealth through real estate investing. I'm super excited to have John Robinson on from John Buys Houses. He's a true go-giver and a super active member of the Portland real estate community. He started the PDX REI Group, a free monthly meetup that provides a ton of value and inspiration with guest speakers and great networking. I recently had the opportunity to speak about midterm rentals. It was super fun. So if you're in the Portland area, it's definitely worth checking out. So John, I'd love to hear about your entrepreneurial journey from contractor and how you and your wife transformed your family's construction company into a thriving real estate investing business specializing in creative deal structuring.

Awesome. Well, thanks for having me, Shona, and, uh, I, I definitely want to say if anybody has a chance to check out Shona's Midterm Rental course, they absolutely should. I— after Shona came and you actually spoke at our meetup, I went out and I purchased it. And my 17-year-old daughter and I are actually going through the course modules right now. So we're having a blast. In fact, I just told her this morning, I said, hey, you know, I'm going to be talking to Shona today and I want to be able to give her a good report. So you better make sure you're keeping up with those modules. So thank you for providing that, that course and thank you for providing the opportunity to sit down and chat for a few minutes. I I definitely, uh, am like, you know, I think I might have mentioned that kind of a serial entrepreneur. So I've been, you know, whether I didn't even know was I was an entrepreneur for a long time. I guess I was just kind of a handyman construction guy, you know, have truck, have tools, you know, will work. And, um, you know, over the— that's pretty much how I paid my bills most of my life. And, um, kind of over the years realizing that there's you know, there's better ways to do things, you know, learning more about actual business structure and real estate, you know, and just kind of stumbling into the world of real estate has opened my mind up to what it means to be an entrepreneur and what it means to be in real estate, you know. And yeah, so I'm super happy to be here this morning. Thanks for having me on.

Yeah. I, I, I love that. I mean, I feel like, um, yeah, I think entrepreneur sounds like this a little fancy, right? But I think you just, you kind of have the bug, right? Or you don't.

Um, yeah.

Yeah. No, that's awesome. So I, I'd love to hear more about kind of like how you went from the handyman, uh, construction guy to like a full-fledged business and, and that journey and how you got there.

No, thank you. Um, so, you know, I grew up in a construction household, so my, my dad, the built residential homes down in the Eugene-Springfield area when I was growing up. And in 2000, my family, my entire family moved to Alaska. And we, we got to Alaska, and my dad actually began doing some projects. There was a, there was a lady who, her and her husband had developed a bunch of residential lots. They were building out a subdivision in phases, spec homes. And a spec home being a speculative sale, it wasn't a pre-sold house, it was a speculative build. You build it and hope someone will come buy it. Well, they had finished out the phase one and then her husband passed away. So this lady had all these basically developed lots and my dad worked out a deal with her to where he would— we would basically come in and we would buy— she would subordinate the lot to us. So she would take second position ownership or on the deed, we would be in first position, which would allow us to get bank financing to build the house. And so we actually built out, we didn't know it at the time, for a while we were one of the largest builders in the Fairbanks, Alaska area. We just were, you know, local mom-and-pop business. My dad and my brothers and my, but really the whole family was involved. But, so I kind of developed from from just growing up in the construction industry. My wife also comes from a family of builders. They did— her family did kind of higher-end custom home jobs in, um, in the Boise Treasure Valley area of Idaho. And so we, we were just kind of like, that was our thing, that's what we did. And, um, then when 2008 happened, I was down in Florida. I was actually training for ministry and had my own handyman business, you know, again, truck, tools, experience, know-how. And then the market shifted, of course, 2007, 2008, and we were— I was left without work. I couldn't find a job. Then back then in the construction industry, especially down in Florida, Florida got hit exceptionally hard. And construction, you know, there just was no work. There was nothing at all that you could do to get a job. I would literally drive up to job sites and I would tell guys, hey, I got my tools, I'll go to work right now, work for 2 or 3 days for free, you know, just so you can show, show you I can do what I do. I just want, I need, I need work. Nobody was hiring, everything was up in the air. And so we actually ended up getting into a, a situation where we got behind on our mortgage payments. At this time we were in our fourth house. We had been built, we'd built a new house. We'd live in it for 2 years, kind of. My dad had encouraged us to roll that equity over to the next project, you know, so the capital gains, if you live in it for 2 years, you can avoid, you know, the tax whenever you sell. So we had done that and we were in our fourth— I think it was our fourth, might have been our fifth house, only married for, you know, about 8 years at the time. And we basically got behind a whole new world, right? All of a sudden, all that equity that we had was now negative. We had no equity. We went from, I think, about $85,000 of equity, which is a lot for a young couple in those days, to negative equity. I think we're about $30,000 undervalued what we could sell it for. And so I had been doing some work for a realtor, did a lot of punch list stuff for a realtor in the area. And what ended up happening when he heard about what I was in, the situation I was in, he came and said, John, let me help you out. Let me work a short sale for you. And I had no idea what a short sale was, but I just said, hey, if you can help us, you know, from not going into foreclosure, I'll take it, right?

Yeah.

So it was really nice too, because it was a guy that I'd worked for. So I knew that, you know, he was in real estate and I knew that, you know, I trusted him. So he actually negotiated with the bank, worked out a short sale for us. And so, you know, I graduated from school around the same time, you know, it was a a bachelor's degree in divinity and, you know, a bunch of debt. And for the first time since we've been together, we are now in a— we, we didn't have a home because we've been living basically in our own house since we first got married. So we're now, you know, kind of nomadic renters, you know, would-be renters. I didn't even know if we could get a place because our credit was all shot to pieces. Um, you know, we had a bunch of debt, um, and we kind of limped our way up to the Seattle area. I had a buddy who I found out was building houses in the downturn market in the Seattle area. And all I knew is, you know, I didn't know how he was doing it. Wasn't really that savvy on real estate back then. But it was about 2009, we made it into Seattle and started building houses. Basically, my buddy's dad hired me as a superintendent for his construction business.

Wow.

And so we were doing ground-up construction from literally from foundation up. We did everything that didn't require a license. So we subbed out the plumbing, subbed out electrical, but we did everything, framing, roofing, you know, cabinetry, flooring, really just everything so that we could have as much work as possible. And what I found out as I was there was that even though the market was still pretty, you know, collapsed, what my buddy's dad had done was he had actually found kind of a niche in buying He was buying repossessed bank-owned lots, developed lots from different banks in the Seattle area. So he was going in and negotiating basically, you know, really, really good deals for, for developed lots. So they were— it wasn't, you know, full land. It was actually individual developed lots. The builders had gone under, the banks had come and taken the property back. So, you know, the street already had the the plumbing and the water and the electrical, everything was piped in right there to the lot. And so with my experience in construction, it's kind of a perfect deal. We were, we were building these houses and typically they were getting sold to people that were working at Microsoft up there. We were selling these properties, they were typically selling before we were even done, you know, with this drywall. And yeah, and that was back, that was back in 2000 2009, 2010. And, uh, even back then I couldn't believe— I was just blown away by the prices that they were getting. They were selling these houses for $475,000, $525,000 for, you know, a 3-bedroom, 2.5-bath, you know, 2,500-square-foot house. And I had just experienced, you know, a total collapse of the market where I was. You know, there's no work, real estate— nobody wanted real estate. And so I came to Seattle. What it made me realize is there's like the different markets that you're in can really affect— like the Seattle area, even though it took a hit, it didn't, you know, have suffered as badly as other areas of the country did because you had so much industry there. You had the tech industry, Microsoft, you know, and just the Amazon and all the different people that were there. So, um, it— that kind of— that was probably one of the first times that I remember, like, kind of my mind kind of leaning toward, oh, so So he's like a real estate investor. Okay. You know, I didn't get it, but I just knew I was working and that he was making money. And so I was happy. It was kind of a crazy time too. I mean, it was really— you just took whatever you could get. But what happened was from there is we ended up down, coming down to Portland because I had trained for ministry and that was— I felt was kind of my calling. And I had really been, you know, just looking into coming back to Oregon. So, uh, came down here and we kind of just started, um, you know, a local Bible study. And, you know, eventually it turned into a church of which I'm still the pastor. But all along the way, I was obviously putting my construction skills to use to pay the bills. And I found myself in the Portland area doing jobs for, uh, what turned out to be investors. So I was doing, you know, remodel jobs for investors. I was doing, you know, kind of a little bit of everything. And the more I was around these, these guys and realized what they were doing, and it also helped that by, by then I was in my, you know, early to mid-30s, so I was actually— my brain was actually starting to develop because, you know, for, for guys it's like we have this, you know, this aha moment, you know, it's like our brains turn on sometime in our mid-30s. So I was, you know, I was kind of realizing like, man, I, you know, I don't want to keep doing just swinging a hammer for the rest of my life, you What are these guys doing? You know, so I started looking around and that led, you know, I'm cutting out a lot of stuff, but that led us to— we were renting out in Skapoose, Oregon, and we were living on an old farm property that, that was owned by a developer. And we were— I had talked to him about, you know, maybe, you know, working out some kind of a deal with him where— because I knew eventually it was going to be split up into city lots. And I was kind of talking to him about maybe I could— I didn't know what I was doing, but I was trying to say, maybe bring a deal, or, hey, I can do some work for you out here in exchange for, you know, uh, you know, give me one of these lots. Because I was remembering back what we did in Fairbanks. Maybe you can give me a lot and I can build a house for my family and we can be homeowners again. Well, that never really went anywhere, but it kind of got my mind thinking about stuff. And, um, I had come across a podcast actually, um, by a guy out of Florida who is a real estate guy. His name is Phil Pustiovsky. He had a thing called the Freedom Mentorship. He's been on, you know, he's kind of like an old school real estate investor, one of the first ones that was actually on the internet, on YouTube, put stuff out there. And, um, he had mentioned how some of the best deals that you can ever come across are when people are in a crisis situation. And And he was talking about it from the point of view of like, you know, if you can provide help to people that are in need, then it's oftentimes beneficial. And so I literally had just seen or watched this podcast or listened to it or something, and the next day I went to, um, uh, Craigslist ad. I was looking at the Craigslist thing because there was an old car that my dad was interested in. He had me go look at it, and while I was there I was talking to this lady that she was crying and she was, you know, probably in her, I don't know, mid to late 60s. And so I was asking her if everything's okay. And she basically told me, you know, that she was there, she was from Astoria, but she was there in Beaverton at this house because she had to meet the sheriff because they had to serve an eviction notice to her brother because her brother who had always lived with mom at the house was refusing to move out of the house after mom had passed away. And mom had left this— only thing she could leave to the 4 kids, you know, all, you know, in their 60s and above, was this piece of property. And so the kids were all wanting to sell it, but the brother wouldn't move out and blah, blah, blah. And it's like my little, you know, all of a sudden I just remember like, this is like a crisis situation, right? Like, this is what that guy was talking about on the show I was listening to. And so I just asked her, I said, well, what are you— what are you wanting to do? You're going to sell the house. Do you— do you— are you going to try to fix it up or, you know, would you sell it, you know, to someone to let them fix it up? And she was like, yeah, we would love to. You know, my husband and I are driving down here every weekend. We, you know, we're having to get my brother out. I would love to just sell it and be done with it. And it turned out that she was like the executor of the estate. She was, you know, stuck with dealing with all that. And so what I did, I had no idea, right? And so this is, you know, kind of if I could give any first lessons or helps here, you know, take massive imperfect action even if you don't know what you're doing. You know, that was, that was basically one of the, how I got propelled into this whole world was at the time all I wanted to do was be a homeowner again. I just wanted to have my own house for my family and I, I didn't like renting. And, and so I was thinking, well, this is my opportunity, right? I don't know how I'm going to do it, but I'm just going to— I'm going to ask her if she would take an offer. And I said, you know, would you— at the time, I think it was probably like the market value. This is what it was. It was about 2013. I think the market was just now starting to come back around this area. And I said, well, would you take, you know, would you take $170,000? I think I said like $150,000. This house needed a lot of work. And it, but it was probably worth, I think it was probably worth every bit of at the time, you know, $250,000. Even in that market, great ideal location, Old Town Beaverton, right downtown by the park and, you know, the library and everything. But I said, would you take this? And she goes, oh, I don't know about that. I have to run that through my realtor. So I was like, okay, you know, well, that's what people do this. So, so I got an email from a realtor a couple days later, said, hey, you know, they talked about it. They would take $170,000 if you could do that. And I was just like, "Whoa, you know, that's a good deal," right? So, 'cause I knew it was worth $250,000, right? I had no concept of like, how much money is it actually gonna take to get this thing up to where we wanna live in it? It was a total wreck, all original, everything. It was just a dump, track everywhere, you know, the typical scene. But in my mind I was like, "I have a deal," right? I have, this is my chance. And so I went, I did what everybody does, right? I went to a lender. I found out if I was prequalified for a loan, I gave them the house. I actually ended up getting a— the realtor sent over an agreement. I signed it that we were now in contract with a closing date pending financing. And so we went about the whole entire process right up to about 2 weeks away from closing. I got a call from the bank saying, hey, this property, we sent somebody out there for an insurance check on the property or whatever. And they said, this property is not insurable. Like, there's no way we're going to finance on this property, is basically what they told me. And I was just blown away. Like, what do you mean you're not going to finance? Like, you know, I got to buy this house. You know, what am I going to do? And so, you know what I mean? Like, we just didn't know anything. We were just trying to do everything the way we'd always done it. Yeah, right. So, so my wife was talking to— and this is, this is kind of how we got into the real estate investing world. My wife is talking to her mother about, you know, just having a conversation. She goes, yeah, it looks like we're not going to be able to buy that house. Why not? Well, it looks like the bank's not going to finance it. And, you know, we're really disappointed. And my wife's mom said, well, I know someone who who could probably help. So like, how long do you think it would take to fix it? And how long do you think before you guys could actually get it like refinanced and pay this person back? And we were just like, my wife's telling me this, I'm like, well, I don't know, I'm a contractor, right? So I said, oh, we could have it done in 3 months, you know. But, uh, but I think to myself, like, how, what was that? Long story short, she, my wife's mother, knew someone who had the capital to be able to basically loan us the money cash to be able to complete the purchase as agreed. And so we went from a bank financing deal to— we did an addendum. We, we came in, we said we're going to close with cash. Um, literally we had money in the bank to make the purchase, um, you know, the day before closing. We purchased it. It's now fully in our name. We now owe this, this lender $170,000 plus, you know, I think at the time they charges, you know, 10% interest, and we had to have it paid back, you know, in 6 months. And I was just like, you're like, oh, okay, well, let's get to work. So I went over there with my, my boys were younger at the time. We were there to start ripping carpets out on the day of closing, you know, just tore into it and, and got into it and basically realized like this house was like ton of work. So long story short, we scraped together some other money, we, we got the thing, you know, fixed up. We're fully intending to refinance it, pay this loan back. And, um, we're there working one night and a lady comes and knocks on the door and she has a story about how her daughter has some special needs and the school there, Beaverton High School, had some programs that would be— that she's been trying to get into that school, but she needed to live in that area. So she asked us basically if we'd sell the house to her, and we were just like, we're not— no, this is for us, you know, this is our house. And And she said, well, I'd be prepared to pay $300,000 for it. And, you know, at the time I just thought to myself, like, that's an incredible amount of money. Like, I just couldn't believe that she was just, you know, so I talked to my wife and we both agreed, like, you know, hey, as much as we would love to have this house, you know, it'd be, that's a, that's a really great payday for the amount of work we put into this and time. And so we said yes, we sold it to her. And that's what I call my, my accidental flip. We didn't mean to flip the house. That's how we got into this. And that's, you know, The rest, as they say, is history. So that's kind of how we started from beginning to where we are now, at least got into the world of real estate investing from there.

I love that on so many levels. I love that you just took the massive action, right? Because I think we get into the analysis paralysis and we don't know how to solve the puzzle or get the funding, but you jumped in. And I love that your first deal was I mean, creative finance, the whole thing is like all the things in one house. Like if you can figure that out, like that's amazing. And you help people along the way too, which is amazing.

Well, knowing what I know now too about that situation, like they would have, they would have really been hard pressed. I probably overpaid from a cash investor's point of view. I probably paid too much. But, but they would have had a really, really difficult time selling the house because even back then the market was still not quite, you know, up to what it's been. So anyway, I feel like I really helped them. It made life easier for them. They got a big chunk of money, $170 grand split 4 ways. So now they were all happy. But that was really kind of what propelled us into— it wasn't until we actually closed on that deal, we had our money back, our lender was paid back, and all of a sudden we're sitting there and I'm looking at— so at the time, kind of a little thing, I had taken a job working out at Intel for one of the contractors. I was doing QAR stuff, quality assurance rep for, with the contractor side of Intel's tool install. And, you know, I had a, you know, it was basically, you know, I think a $60,000, $65,000 a year salary. And I'm looking at this, this check we just made from, you know, 5 months worth of work. And I, you know, I'm looking at this going like, I just, I just made almost twice as much on this one project as I have the entire year's salary working at Intel. And so that's kind of what also is like another little light bulb, like, wait a second, if I did this 2 times a year, I'd be set for life. So that was kind of really what triggered my curiosity into learning more about flipping.

So from there, did you just decide like, hey, this makes sense to start flipping, or where did you go from there after that?

Yeah. So I was literally, I was working at the Aloha Intel campus at the time, and my mind is now like, fully racing into trying to figure out how to find another property like this. And so I was walking around the campus at lunchtime and I looked across the street and there's a real estate broker's office and they had something on the sign about foreclosure properties. So I literally walked across TV Highway, went into their front office and said, I want to talk to somebody about foreclosures. So again, taking massive action. I had no idea what I was even asking, but I just thought, well, foreclosures, that's, you know, there's a crisis situation, right? I know what that was like because I almost went into foreclosure. And so, you know, they brought me out an agent and sat down and started talking. I'm really, really thankful today. I still do business and deals with that agent. His name is Eddie Chanez, but he's, you know, he's turned out to be somebody that I've done a lot of deals with. The thing about that, talking to an investor, I didn't know it at the time, but I was sitting with and talking to an investor-friendly real estate agent. So someone who understands the mindset of an investor, what they're looking for. And so he literally immediately told me about a deal that was out in Cornelius. I mean, looking back on it now as I'm thinking about it, it's like some of the stuff that I did is so crazy. It's like I can't believe I did it. So I had this chunk the money, I had like $180,000 in the bank, right, from, from this, this sale. And of course, that, that was recovering what we had spent on the house too. It wasn't all profit, but I still had this chunk of money. And I'm sitting at this, you know, $180 grand in the bank, something like that. And I'm looking now, I'm looking for all these properties and I find this one and it's, you know, it's— we're coming up on the end of the year, about this time of year, December, mid to late December. And it was a bank-owned property. It was, um, it was a manufactured home, but it was on a foundation, had a garage addition, and it was on its own lot. And so he just kind of shows me the numbers and says, hey, you know, well, how much did you spend on that other project? Well, look at this. We went and looked at it. It needs paint, it needs basically like switch, swap out the cabinet hardware, put in new flooring, and it's back on the market. And so I'm looking at this, and I— and so I told him to make an offer and I said, make this offer. And it was a total lowball offer, like, like he was embarrassed to do it even though he was investing. So, so he makes this lowball offer to the bank. And my thought is, you know, that's how much money I have. I think I offered like $160,000 and they were asking like $230,000 or something like that. I offered $160,000 because I knew I had $180,000 in the bank, right? And he's thinking like, he's like, John, there's no way they're going to take that. Well, at the same time, I'm like cruising around the internet. And so I'm looking and I'm on Hubzu.com. I don't know if you ever check that out, but Hubzu.com, H-U-B-Z-U.com, it's kind of like almost like an auction.com site. So they auction off properties like it's like a broker site for bank-owned properties. So I'm on Hubdu.com and I'm looking at this little duplex that is really bad shape, but it's just right down the street from, from the office of Intel. And so I go there and look at it one day and, you know, you know, walk around, look in the windows. I'm like, I can fix this, you know? And so I like, I go back to my office at Intel and I click on the little thing and I make a bid on the, the duplex on their auction. You know, it's like it's got 2 days left. And so lo and behold, I went— I'm the winning bidder for that property. And the bank-owned property in Cornelius accepts my offer at the same time. So, and I'm proving that I have the funds to close for both by sending them screenshots of my bank account. But I'm like, I only have enough money to buy one of these. So I'm just like, okay, well, what do I do? And I'm just, you know, again, these kind of problems have always just, you know, my mindset is like, let's figure it out, right? So I'm now looking at this. I'm the winning bidder on this auction. I got to close like in, you know, 10 days or something. And I'm also the, the, this other bank takes my bid for a property, takes my offer. So, and both of them are good deals. So that was kind of what propelled me into finding a hard money lender. And I basically just started looking, you know, cash lenders, you know, Googled it and talked to a guy named Randy Witherspoon. If— and I know there's a lot of— I know a lot more now that I've done several deals with Randy Witherspoon. The thing I like about Randy is every single deal I've ever worked with him on, he's always closed. It's not— sometimes with hard money lenders, they they commit to closing, but then, you know, right before closing, they either change the terms— and this is not everybody— but they'll change the terms or they'll say, hey, you know, we're, we're not— we're actually not comfortable loaning on this property at this price, or we'll only loan, you know, 60% of the purchase price, not, not 75% like we had thought. So Randy Witherspoon helped me get the financing together to close on the Cornelius property. I used my own cash to purchase the duplex. And then I used the little bit of cash I had left to, first of all, finish the Cornelius property. Got it, got it flipped and back on the market, made about $60,000 from that profit and then took that profit and put it back into the duplex, got the duplex fixed up, then got a loan to refinance and pull my cash back out, put renters in that. And this— by now I'm just like, I'm eating up everything I can about real estate. I'm just, you know, I'm just like consuming it because it's just— I'm realizing not only is this really intriguing and fascinating, but I'm making, you know, way more money than I've ever made in my life. Now, I will say this. I didn't— I'm not like a big spender type of person. Like, I didn't go— we basically just took every bit of profit. We put it into another property. We just constantly were putting— so our lifestyle didn't change. You know, we didn't buy Ferraris or, you know, you know, start going on lavish vacations or anything. Really nothing about our lifestyle changed. We just got really busy working. And we just were taking every single bit of money we made and putting it back into other properties. Or the other thing that I did was I invested in education. So that was one thing I really— I spent a pretty decent amount of money learning, but I felt like that was my cost of tuition, so to speak. You know, you don't go to college to learn about real estate investing, you know, but, but you, you can rack up a college-like bill by investing in education, but I think most, most of my educational purchases have been well worth it.

So I agree. I mean, I, I have never done so many courses in my life before I got into real estate. Right. Like I didn't, I was fairly self-taught. Like I can figure things out. Like, but real estate, it's so creative and there's so many strategies and I think to do it well, it's well worth it. And the ROI on it is Undisputable, right? And just having a mentor because, yeah, no, 100%. Like, I did not know I was such a course junkie until I got into this.

Yeah.

That's so cool. I mean, I love that you just kind of jumped in and learned as you went. And I think I also, you know, I think for newer investors, like, if you find— and people would tell me that if you find the right deal, you'll figure out the funding if you jump into it. And I think that's it's, you just have to take that. I mean, you have to be smart and run your numbers, right? But I think that it's very intimidating if you haven't done any deals. Um, yes, I'm trying, right? Um, so like a couple things to unpack. One thing I feel like, again, kind of thinking I'm a newer full-time investor and what I've struggled with that I know other people struggle with is like running your numbers and knowing how to do a rehab budget. And I, you know, I think ideally you can bring a contractor over, but sometimes you don't have one. Is there any tips on like how to evaluate property for rehab budget.

Yeah, yeah, I think that, that holds up a lot of people. And, uh, frankly, I, I know it sounds crazy, but it's not nearly as, um, as complicated as it may seem. Do I have an advantage because I've been in, you know, construction? Of course. Like, you know, it'd be like me, you know, like you, you can look at a room or a design or, you know, interior decor type of stuff, and you're gonna automatically know more about it than I will just because you've been around it and that's just kind of been more of your passion. So like every one of us has our thing that we're, you know, probably better at or more proficient than other people. But for, for me, I have found that my numbers, uh, I am relying more and more on just this, the quick, easy calculation, at least initially, than I am on, you know, running through all of my, you know, my repertoire of, you know, project and experience like it's crazy how close these numbers can come out. So if you have— I got my little— my phone calculator here. I'll just show you, you know, what's something that I did really recently on a property that hopefully today I'll be signing a contract with the seller. But we, we went up and looked at a property. I took someone from the PDX REI group and we met at a property on a lead that I had come in and I looked at the property. The property was 980 square feet. So if you have a calculator and you're watching, at home or whatever, just type in 980 square feet. And then I, I used a multiplier of $55— no, I'm sorry, $60 a square foot. So I said 980 square feet times $60 per square foot, and that came out to a total of $58,000. Rounded up, call it $60,000. Okay. But the point is, at that $60 a square foot, price, that, that's what I figured is my— for, for the total upstairs on that property, which is— it's, it is sitting on a cellar. So in this case, I actually did another multiplier for some work downstairs. But, um, but I, I use that multiplier to figure out what, what I think total from the upstairs, you know, from the floor. So that's new flooring, that's replacing the old windows, that's, you know, painting, that's new appliances, that's new kitchen. I figured my cost as a contractor is going to be about $60 a square foot. And that was for a— it wasn't like a total teardown house. It was what I would call is kind of like your medium grade. So if you're taking notes, I think if you use a multiplier of what I call your A, B, and C grade multiplier. So A grade would be probably, you know, it needs paint, interior paint. You know, it might have, you know, a couple like a little hole in the wall or the doorknob, you know, punched a hole through the sheetrock. You know, if you take some of those little tiny things, just the basics, right, you could probably count on spending about $30 a square foot, $30 to $35. Again, this is not science, right? But $30 to $35 a square foot is what the contractor's cost is going to be. Okay. If you, if you have like more of a B-grade where it's kind of medium-grade property, it really needs, you know, you know, more work needs new flooring, it needs, you know, probably new appliances. You know, it's questionable whether or not we're going to be able to, you know, re-keep— are we going to put in new vanities in the bathroom, right? So if you just take, like, it's not like a full roof tear-off, you know, siding replacement, but it just, you know, it's more than just a little light lipstick on the pig, so to speak, type of renovation. But it's not like a a full, like, we're going to go in and just gut this entire thing and start, you know, we're not replacing plumbing pipes and electrical wiring and everything. If you go, if you go about $60 a square foot, that's, that's a pretty safe number to look at from a contractor's perspective. And I'll tell you in a minute why I say from a contractor's perspective, if you have like a full gut and you were literally just going to leave the shell and start over again, you want to figure on spending about $85 to $90 a square foot. Profit. So if I took that same house, 980 square feet, let's just say we were totally gutting it and starting over again, and we go $85, that's an $83,000 renovation from, from my point of view as a contractor. So the, the reason I say from a contractor's point of view is because remember, depending on which contractor you hire, they're going to have different ways of, of charging or making a profit. So in other words, if, if I'm doing this, then I just know those are my costs right now. If I somehow or another am able to come in under budget, well then good for me. Maybe I'm able to, as a contractor, maybe I'm able to reuse some paint from another project that I've been keeping in storage. And so I'm not going to have to spend that X amount of money. So I can start whittling down that budget and trying to make, make more money as a contractor on that bid. But the point is, from a homeowner or from an investor's point of view, from kind of the person who's going to pay the contractor, if you figure, you know, 35, $55,000 to $60,000, $85,000 to $90,000. Those 3 price points are going to be really, really close to what you would expect a contractor is going to have to charge. So like if I'm doing this as a contractor and I'm going to charge $83,000, or I know it's going to cost $83,000, most contractors are going to want to try to make at least 15% to 20% profit from a general contractor's point of view. So if you figure on the high side, 20% profit. There's a $16,600 profit on that $83,000 bid. So we added that $83,000. There's, you know, total cost is coming in $99,000, right? So that contractor might charge $100,000 for the remodel, but he's going to make $16,000 of profit. It's going to cost him about $83,000 to do it. And, you know, that, that's how, that's how a lot of these numbers work. Now, I, I completely understand there's people that will argue with you know, you know, that's not the way we do it, blah, blah, blah. I get it. I'm just saying I like to be able to walk into that house and with my phone in hand and knowing these— those 3 numbers, I like to be able to look at this house and say, I'm going to— I'm going to spend $83,000 getting this property up to snuff, okay? Or I'm going to spend $60,000. And where did I get that number? I got it based off of just those 3 multipliers. 35, you can say 55, you know, just keep it easy. 35, 55, 85, right? But, but those are numbers that I use, and I, I have done this enough times now where I can say this. I have seen my actual numbers after the project is complete, see my numbers come in, and I'm usually within $5,000 to $10,000, you know, give or take. So those numbers are very, very close. And if you keep that in mind and just use that as your multiplier, you can walk into any project or any property, or even you don't have to walk into right? Just, you know, you're talking to the seller. Hey, what's the condition of the home? Would you say it's an A, B, or C grade? You know, A grade meaning it needs some paint. B grade means it needs to be pretty much fully updated, needs new flooring, needs new paint, probably new cabinets in the bathrooms. Or is it C grade? Is it like, like this place really needs to be kind of gutted? Most people will be pretty, pretty honest. You know, they're You know, I mean, whatever they say, you can figure it's a little worse than that. You know, buyers are liars and sellers are worse, right? Is the saying. But, but you can go on the phone. If I'm looking at Zillow and I've got this property pulled in front of me and I know it's, you know, it's 1,200 square feet and it's a 1,200 square foot house. And I know that they're telling me it basically needs paint. And maybe I even have some Zillow pictures from, you know, a previous listing or from a rental. And I can see, yes, you know, it's not in bad shape, it needs to be painted. Well, I just plug in that $35 a square foot. I know that's a $42,000, you know, bill to get that thing up to snuff. And so those, those are what I— that's what— those are the numbers that I use. And then if I'm going to actually put together a, like an actual written offer and we're really going to, to close on this thing, we built up the rapport, they want to work with me. Now I'll give myself that 10-day inspection period to bring in my subcontractors, to bring in, you know, anybody that I need. I need to get an actual precise dollar amount. And I might find out that, you know, boy, you know, after I had everybody look at it and they pointed this out, or I went in there and did the inspection and we found out that, you know, we've got the, the, all the, the floor joists around the toilet are all rotted out because it's been leaking for 5 years. Right. That's gonna be an additional cost. So now I wanna start getting specific numbers based on, you know, and adding it to my $35 square foot multiplier. Does that make sense?

That, that simplified a pain point that it's, it's so, because I think the way I was approaching is like, okay, you know, a kitchen is this, and then I'm getting into like how much countertops and it just gets, that's so great. It's so simple.

You'll find, I mean, if you do, I don't even know if you have some projects that you've kept track on it, which, you know, we're all like, some people are really, really good at that stuff, other people not so much. I'm probably one of the not so much people. But if you have, if you go, if you can go through a project and actually really keep tight records on everything you spent on it renovation-wise, and then you go back and actually compare it to just using the multiplier, you'll find that the numbers are really close. I mean, they're within they're definitely close enough to be able to figure out what you should kind of be counting on as a budget. And if you're worried about it, then just add, you know, add another 10-15% on top of that because, you know, you're always going to go over budget, right? That's the, that's the number one rule. Yeah, but you know, I, I've done enough, you know, staging. We've only staged a couple of short-term rental houses, but I know, like, if I'm my— and my wife is kind of helping with this— but if we know we're going to be staging a 3-bedroom, 2-bath, you know, 1,500-square-foot house, we know, like, you know, if we're going to Costco and we're trying to— but we're using, like, you know, we're buying everything brand new, right? We know we're going to spend probably $15,000 to $20,000. You know what I mean? That's, that's just— that's the— that's again, for the way we like to stage it. But we've, we've, we've done enough of these to know, like, it's going to— if it's this size house, it's going to cost anywhere from $15,000 to $20,000. And, and so, you know, someone else will come in. I know whenever you gave your presentation, like, you're, you're finding a little stuff here and kind of you got, you know, you're kind of piecemealing all together. We're more like, let's just go in and we're gonna spend 2 days at shop at Costco and IKEA, and we're gonna get everything in one shot, put it all on the credit card, right? So that's how we approach it. But in other words, after you do enough of these, you realize there's kind of there's kind of a dollar amount, there's a figure that kind of keeps resurfacing, or is at least in that range. And that's how it is with these numbers, $35,000, $55,000 to $60,000, $85,000 to $90,000. You're going to be really close based on what kind of condition it's in. And then use your inspection period when they accept your offer to really, if you have like some questions about some very specific part of it, like I need to, I know it needs a new roof. We'll get, you know, 2 or 3 bids from roofers. You'd be amazed at how much that can vary. You know, as you know, But I've had roofers that have, I've roof bids that have come in because I don't do my own roofs anymore, but I've had roof bids come in anywhere from $20,000 down to $8,000 for the same roof, same house, same product. And depending on how hungry a contractor is out there, you know, and maybe he's just got trying to fill a gap to keep his crews busy. I think that's something that people forget about construction is, You know, a contractor has, you know, 5 to 10 guys working for him and they're doing a good job. He wants to keep them busy. So sometimes they'll take the lowest bid. Doesn't always mean that it's going to be poor quality work. It might just be that they're trying to plug a gap or fill something in. They just want to— they're just going to take this job just to keep their crews busy so that they can, you know, bridge the gap from this good paying job to the next good paying job. We're going to use this one in between as a filler we'll bid it low just to keep everybody busy, you know, that kind of thing. So, but that's kind of getting into some of the weeds of, you know, the contractor stuff. From an investor point of view or from somebody who's new starting out, or even someone who's got a lot of experience, I think those 3 price points, A, B, and C grade price points, will get you at least close enough to where you can feel comfortable knowing what your budget should be. And then add a little extra on there if you're, you know, if you feel like it needs more.

So that's really helpful. I think it's something that especially when you're new, you get really caught up because that really affects your margin, right? If you underestimate, you could not make any— it's a profitless flip or it's negative, right? So that really segues into my next, what I think pain point is like when you're making an offer, right? You're looking at the after repair value and your budget. So do you have like a formula similar to that when you're making offers on a house that you're, you know, you're going to flip or wholesale?

Yeah, I, I'm probably not a formula guy as much as, as some people are. And, and that is because probably because after several years of doing this, I've realized that, you know, your, your numbers very rarely work out as far as the overall. It's kind of like, you know, ARV is, is speculative. I just finished one, you know, I should have finished it in August. I mean, in July. but I actually didn't end up getting it really finished until September. Well, the difference of the ARV from July or, you know, June, July to September, at one point I was at $600,000. I ended up selling for $530,000. So we had a $70,000 difference and that was for a finished product on the market, you know, with a realtor. I mean, that, so it just goes to show you some of these things can be really speculative. I think for me, when I'm looking at a flip, project, I have— first of all, I've changed my personal— I've done enough flips and projects out away from home that I've kind of this beginning of this year. So I finished up a project out in Cascade Locks right at the end of last year for another investor. Actually, I wholesaled it to him and then he hired me to basically do the construction part of the project. I vowed a vow that I would not do any more flips, you know, past 15 minutes from my office. So we just got so sick of that drive. But I think so for me, I'm looking at close to home, right? That's what I'm really— so again, my, my formula would be totally different than someone else's because I'm, I'm all about proximity these days. Like, I just want to know how far is it from my office, from my house? How far am I going to have to drive? And then with gas prices doing what they did, you know, I'm really glad I kind of put that into action because at the same time I had the one going in Cascade Locks, I had another one going on up in Klatskanai. So I was literally, you know, an hour and 15 minutes, you know, south or east on to Cascade Locks. And then at the same time, going an hour and 15 minutes the opposite direction up north. And it just, you know, it burned me out bad. So But I look at it and say, if I can make— if I can personally, after I'm all said and done, if I can make 15%, I'm going to be pretty happy. And I say 15%, I mean 15% of the ARV. So after repair value. So if it's a $360,000 house when it's all said and done and we're going to put it out there for that, I want to be able to make that 15%. And I just— that's— so that's one number I kind of I want to try to plug in upfront. I want to try to make, you know, $54,000. Now, would I do this job and, and do the, the deal even if I knew I wasn't going to make $54,000, I'm only going to make $48,000? Probably. You see what I'm saying? But that's just my— that's— I have a number in mind that I use, 15%. A lot of people will go higher than that depending on if they're doing like 1 or 2 projects a year or if they're doing 15 projects a right? So you have your— the reason I say it's hard with formulas is because depending on your volume, that number can vary greatly. You know, um, there's guys that will— they'll go for, you know, 8 to 10%, you know, minimal margins, uh, but they also know they're going to do 20 projects in a year. And there's people out there even in the Portland market that are doing that kind of stuff. So Their margin's going to be different than mine. My margin is basically, I just want to see, I want to make sure that when I'm all said and done with this, after I've paid my lenders, after I've paid my contract, recouped all my costs of construction, after I've paid my realtor fees, my closing costs, after I'm done with everything, I want to see myself sitting on top of $50,000 if I'm going to be selling it at 360. So that number kind of helps me start figuring out how to basically reverse engineer what my offer needs to be. So I'm sure that's, that's probably pretty typical for most investors, but, um, I, I didn't come up with that number early on. I just, over the years, I've kind of realized like that's, that seems to be the price point that I'm comfortable with. But, but like I said, I mean, I know some people, they'll go into a flip and they'll, they'll do it and they won't make anything, or maybe they'll make $5,000, $10,000. And I'm not saying that's advisable. But if you're getting started in this business and you can actually get a flip done and make $5,000 to $10,000 and have all the experience of having done a project yourself from A to Z, that's a win to me. You know what I mean? That's huge. Especially people coming at it without the construction background that I have or without, you know, a lot of real estate experience. To me, that's a win all day long, you know? And I think people kind of get discouraged by not having this huge chunk of money. Well, don't forget, you might not have a huge chunk of money, but you might have a huge chunk of experience and knowledge now about something that you could use to go out and make money or even be an asset to someone else's business. So it kind of all depends on what you're trying to get out of it, right?

Yeah, for sure. And I know that like hard money lenders, they want you to have that experience under your belt. They're going to— the interest rates are going to be higher because you're way riskier, right? If you've never done a flip, you can't really could screw it up or who knows, right?

Well, you think about it too. Sometimes you'll see these posts from, from some of the, you know, the new investors. I see them sometimes in the PDX REI group and they're like, hey, you know, it's, you know, our first flip, right? We're going to market and it's— and they have the before and after picture and it's like, man, that's, that's awesome. You know, you guys did it. You know, look at— here's, here's what it was before. I now have proof. This is what it was like when I bought it. This is what I'm selling. And so, you know, it's, it gives you credibility. It gives you the, you know, hey, I did this, you know? And so there's, there's more to this than just the money in the bank. And I, and I really wanna encourage people, if you're getting into this and starting out, you know, it's not always about the big payday. It, it, it might really be a lot about the experience and the cost of the experience and what it, you know, if you can break even or make a little bit of money. And you were able to do it. I mean, most people, they're never even going to get past HGTV, right? And now here you're like, I flipped a house, you know what I mean? Look at this. And we even made enough money to go out and buy a nice steak dinner and have Christmas money. So you know what I mean? It's all depends on what you're trying to get out of it.

True. There's so many intangibles and there is a magic when you can take a house and you're improving the neighborhood, you help someone out and it is, I mean, it is not for the faint of heart. Like, I love it. Oh man, sometimes I'm like, what am I doing? It's just like when you find out there's actually no sewer line, you need to put a sewer in, and the, you know, the septic didn't work. You know, those things. There's no option for that.

And it's, it's, it's like, those are the kind of things that just make you go, like, either your reaction is either I'm never doing this again, which I have certainly felt that way on some projects. But if you can get past that, then the reaction eventually is like, I'm never going to buy a house again without doing a sewer scope inspection. You know what I mean? You just kind of— it's the cost of learning, right? It's just one of those things that, you know, it depends on what you're into it for. If you're just like, well, I'm going to dabble, I want to dip my toe in it. I mean, I would tell people, if you're going to dip your toe in real estate investing, don't get into flipping. You know, flipping is, is like you said, not for the faint of heart. It's, it's— you got to be committed to it. It's going to be a minimum 6-month job, you know, commitment. That's if everything goes well. You know, again, it can be— there's exceptions to that. But I just figure, figure 6 months of your life, you're going to be basically waking, eating, sleeping, dreaming about this project. And there was a young guy who was actually from our church that was really kind of entrepreneurial. And he, he was in his early 20s and he was just like begging me, like, hey, I want to get into this. And so I actually wholesale the deal to him and I walked him through it. But man, you got about 2, 3 months into it after the demo work was done and after you're just out there every day, it's like, this is not fun anymore. Yeah. You can get burned out on this stuff really easily, especially if you're doing everything yourself. So it's hard.

Yeah. And I think also my experience, I've done a couple flips at this point and finding the right contractor and their sense of urgency and my sense of urgency don't always match up.

Yep.

The last one I kind of played a little bit of the GC hat. I brought my own subs in and I could kind of play cat herder.

Yeah.

And that was very satisfying to like move things along. Good.

Well, and that's, you know, that's another thing, you know, again, talking about taking massive action or being uncomfortable, you know, you don't, most people don't realize that they can actually GC, general contractor, they can be the overall general contractor on the project. And just find those different subs. And I, you know, as a, as a tip to folks, you know, that might be thinking about doing that, you know, always try to get at least 3 different price points, 3 different bids, even if it's just a text message bid, but at least get some kind of an idea of what the price point's gonna be from 3 different contractors. And then also, you know, have, have those conversations that you may not feel comfortable having, have them up front. Right. It's better to have an upfront conversation than it is to have it after you're disappointed with the, with the schedule or the timeline or the product, the quality product. I just had one, you know, I've been in this for my entire life and I just had a project I'm working on setting up as a short-term rental. And, you know, I had the painters come in and they gave me a really good price and it was for 3 projects. And I got through the first one that they did. And I'm like, I'm not using these guys again. They're just, they're horrible. There's overspray on everything. They didn't mask off well, you know, so, but at the same time, I'm now, I'm sitting there going, you know, I can't be upset at them. I did not tip or I did not qualify what kind of product that I was really hoping to get out of this, you know, their work. Like they basically came in, they blasted, they moved on to the next one. I was the one who didn't set the expectation up front, you know. And so you learn after a while, like the upfront expectations are super important. And so I'm not gonna go chasing after this guy and, and get him to scrape up every little drop of paint whenever I didn't, you know, no. Should he do a better job? Yes. Will I use him again? No. But I'm not gonna be mad at anybody because it's like, well, I, I didn't set an upfront expectation. So, and, and really think about this, when you don't set upfront expectations, You are setting up upfront expectations. You're setting up an expectation of, you know, whatever, you know, just get it done. Yeah. Some projects that works, other projects that doesn't work. So you just have to kind of learn, you know, how to, how to do that upfront.

No, for sure. And I found too that when you are flipping, at least in my experience, there's a, the, um, there's a much higher standard held to flippers versus a home seller. Like if you're flipping a property, you've You cannot have anything amiss.

Nope.

Anything.

Nope. Yeah. And we really shouldn't do— I mean, we're trying to offer, you know, we're trying to offer something out there that's going to be a finished product for somebody and we're going to, you know, potentially, hopefully make, you know, a decent amount of money on it. I don't advocate and I don't like the fact that there are flippers who just try to cut every corner they can and just to make— to maximize their profit and minimize their expense. I don't think that's a good reflection on what kind of service we can and value we can provide. But I do know that that's actually fairly predominant in this industry. And so we're trying to do things differently, trying to be things, you know, be the different type of person that's doing this work. But again, if you're gonna be that, then you have to set those expectations up front, you know, or we have to be willing to go back and pay to have a job done twice if it, to meet our expectations. So I think again, all that is part of the learning, right? It's as you do more of these projects, you kind of learn what to say upfront and, you know, how to talk to my subcontractors, what kind of questions to ask them. So you say you can get this thing done in 2 weeks. Now, does that mean 2 weeks from today it'll be done? Or does that mean the total amount of time that you will spend working on this project is 2 weeks spread out over the next month and a half? You see what I mean?

Yeah. Right. Very good point. Right.

So that's, you know, we just— you learn those things by just being in this and realizing he said it was going to be 2 weeks, but it's been a month and a half. And the guy's like, well, I didn't say I was going to be done in 2 weeks. I just said it would take me 2 weeks to get it done. You know, I got other projects to do too, don't you know that? You know, so that, you know, and he's thinking one thing, and I understand this because as a contractor, as a subcontractor, you know, I, I learned we're all seeing things from our perspective, right? And so try to think about like, how is he going to look at this? Or how is this subcontractor going to be looking at this? And when they say this, do they mean what I think it means? And it's totally fine to ask those questions. And if you find a subcontractor or someone, a carpenter or somebody that doesn't like you asking questions, well again, now you probably know this isn't something I really want to work with, you know?

Yeah, that's a flag. So I have to ask, you know, if you're working with someone new, I've come across this before, deposit, right? Like, I'd rather go kind of as the work is completed, but how do you structure if you've never worked with a contract? I usually want a pretty hefty amount up front, but then to me it's like I'd rather pay as I go, kind of in a draw style. I'm curious how you approach that.

Yeah, I would say it probably depends on the scope of work that they're doing, and then also what level of experience or references that they bring with them. Like if they're referred to me by somebody else who I know is using them and I, and I like, they're actively involved in business with them and this person asks for a deposit, you know, well, it's pretty typical for a contractor to ask for a deposit, especially it has been the last several, the last several years. And part of the reason that's been the case has been because of everyone's so busy. Right? So it's like, if you want to actually ask me to commit to your project, then I'm really going to need you to put down a deposit because I know I could get work for somebody else. So if you put down a deposit, now I know you're serious. But, but as far as just generally speaking, like, if it's a couple thousand bucks, you know, and they, and they want a 50% deposit, you know, I might look at it and say, well, you know, if it's for painting this bathroom or doing this simple thing, you You get in there and I see what you've got going by the end of the day, you know, I'll, I'll bring you the half the money, right?

Mm-hmm.

I, I would say, you know, if, if you have a contractor who needs to have 50% or 30%, if they need to have that in order to start the project, that probably means that they don't have their own funds or resources. They don't have a credit line with, you know, with the, uh, Sherwin-Williams, or they don't have a business, you know, professional account at Home Depot or whatever. And so they're literally going like cash in hand to go do the project. Well, this is if you're dealing with someone who's in that kind of category, it's probably because the reason you're even dealing with them is probably because they were one of the cheaper contractors or bids that you got, right? In other words, if you're getting a price point on a project that's more, you know, a little bit medium or higher end, Most of those contractors aren't going to require, they don't need that money to go out and buy the material. They just need that money to secure their place and to secure your job and their schedule. And for them it's like, you know, it's 10%, 15% deposit. It just says, okay, you're serious, we're serious. And there's a whole contract that's involved and there's signatures signed and there's references given, you know, and that kind of, there's usually like an office. If it's just kind of a, you know, one man and a truck and tools like I was for a number of years. Mm-hmm. And he's asking for 50% upfront, well that probably means he doesn't really have much of an operation going on. And so what I used to do is I used to say, hey listen, I know you're not comfortable, you know, from the contractor's point of view, I say, I know you're not comfortable, you don't know me and you're not comfortable just giving me money and I wouldn't want you to do that. But I also know that you don't expect me to just buy all the materials for your job without any way of knowing if you're gonna pay me. So here's what we'll do. You, I'll go down to Home Depot or I'll go down to Sherwin-Williams. I'll get everything on what they call will call. I'll get it all, you know, the right products picked out with a total. And then I'm gonna have them call you and you pay over the phone for the material. Then I'm gonna come and I'm gonna install it or I'm gonna apply it. I'm gonna do the work with it. But that way I'm not dipping into my pocket as a contractor. If I'm just, if it's a small job and I'm just kind of a one-man show, You know, it's, it's hard to expect a guy to, to pay for your, basically your materials with his money and then hope that he gets paid. So I know that's kind of a long way of answering the question, but I'd say each, each situation probably varies. And the more familiar you are with somebody, obviously the more you might feel comfortable giving them some money up front. But, um, if they're— if it's like a big full-blown remodel, you know, and it's a GC that's doing it or a contractor's doing a lot of different phases, they will probably have a deposit of some sort required, but it won't be just to cover their expenses. It'll be more just kind of just to say, okay, we've got this, this project locked in. We've received the deposit. We know that they're serious about getting this job done. We can now commit our schedule and our resources to this project, partly because we have this deposit in hand.

So that makes a ton of sense. I've actually done it both ways where I get the call from Home Depot to pay for supplies, which got a little old. I was like, all right, let me pull out my credit card. And, but I, I'd never worked with the guy, so was—

and so, and so to that point, you know, you kind of go, well, maybe I'll try that for the first couple of times, but then after a while it's like, well, the guy's proved himself. You know, I look at the receipt, he didn't buy himself a new chop saw while he was there. Right. You know, always ask for the receipt, by the way. Yeah. And, and so what I, What I found is it's really annoying to get those calls. So you can, you can actually do a couple of different things and most people don't realize this, but you can actually get like a basically a project credit card. So you can get it if you already have a credit card, you have a Home Depot account or something like that. You can actually get a card that has like a, just a general user and you can maybe give that to them and preload it. So it has a set limit of like $200 or $300. So if you have a lot of that kind of stuff going on, you sometimes it helps to have that. Or you can even get like a, have a bookkeeper set up kind of a separate account that's only accessible through that one card. And all the receipts come in. You know, a lot of that gets into your bookkeeping, the way you keep track of records. But for me personally, like I got to the point, I'm with you, like I got, I'm so busy, I don't wanna stop, take out my wallet, get out a card number. What job is this for? And did they get the PO? So I'd rather just give a certain amount of trust to somebody and risk that and save myself some time and headache doing that. You know, and most people are gonna be, you know, pretty reputable. There's always gonna be somebody that's gonna rip you off. Even as a contractor, I've been this for years. I got ripped off by a guy on a glass shower door. He wanted the deposit. I paid him, you know, it was $1,500 door. I paid him $750 upfront to purchase the glass. And never heard from him again, you know? So that happens, you know, you, you get burned and you realize, okay, I don't want to do it that way anymore. But there's, there's either find a solution or you settle on something uncomfortable with this.

Yeah, that's super helpful. Yeah. I, I ever, I had never worked with this guy and he was kind of new to being on his own, so it worked out, but it was a lot of receipts.

Yes.

So I have to just kind of circle back to, you know, flipping, um, in this market and it feels super risky, right? Because that ARV is like, again, like if you bought, you know, you went to market in August versus October, it's right. So what are your thoughts on like flipping right now?

Again, for me personally, I'm flipping close to home. I will still flip a house if it fits my buy box, you know, my criteria for what I'm looking for. You know, I'm looking for that 15% profit margin. Again, that's based on what I think the ARV is going to be, but still 15% profit I'm looking for. It's in my proximity zone. But I still think flipping is, in this particular area, and I say this area, I mean literally geographically specifically, I'm talking about Hillsboro, Beaverton is where I'm at. I can't say the same about Southeast Portland or whatever because I'm not super familiar with those kind of micro markets, but for me personally, I think the Hillsborough-Beaverton corridor, Highway 26, is going to be continued to be built out because of the tech industry. There's a lot of stuff that a lot of folks even here locally don't know about that's going on. It goes all the way up to the federal government level, has to do with national security and microchips needing to be made in the US. And Oregon, Western Oregon being one of the few places in the country that can support that type of industry. So point being, like, I personally still feel very comfortable flipping and in, in the, in this particular, in my area, right? I get all kinds of leads from all kinds of different properties in Portland. And to me, a property in Portland, it could be a screaming deal. It's just not appealing to me. The rent regulations, uh, make it, you know, unappealing. Uh, some of the political stuff makes it unappealing, just for a multiplicity of reasons. I personally— now, it may be fantastic for someone else, just for me personally, I'm not, you know, I don't care if it's a $100,000 property, I'm not going to flip it just because I don't, I don't want to drive down there. I don't want to deal with it. Coming back to here locally and the market here, I think kind of like Seattle was years ago and I was building those houses I think certain areas are going to still continue to be profitable. I just think that we really— we have to be very, very careful on our upfront offer and make sure that we're, we're adjusting our prices as much as possible. I think the typical model of, you know, ARV minus 70% minus the cost of construction minus the wholesale fee minus the realtor costs, minus the lending, I think that 70% probably needs to come down.

Down.

You know, I think that, you know, for a cash offer, I think it needs to come down substantially to be a safe bet. Now, if you're in it for a long-term buy and hold situation, you know, obviously that's a different story. You, you might be able to spread out that difference, you know, um, on what you thought the ARV was going to be compared to what it actually was when you finish it or refinance it. You might be able to spread that out over 30 years. It's a lot different, you know, model. But for flipping, I flips are going to do well, especially if they're done well. Right. Flips that are done well tend to do well. So if you do a house really, really well and it's, you know, just, you know, it just has that curb appeal, it has the landscaping, it has everything that everybody wants. There's still a massive demand for housing in our area. And I mean the entire Northwest, really, in metro areas. So I'm not worried about the market in that sense. I think if it's done well and it stands out, it's going to get sold. I just think we need to be really careful about what we're doing upfront on our negotiation. And that, what that means is we're gonna probably be getting, you know, as many nos as we always have to our offers. Mm-hmm. You know, you make an offer and it's, you know, no way. I just made an offer, uh, last week and I just told them, uh, and I like to spell everything out. I like to be very clear with how I got to my price point. And I'm, I'm getting to the point now where I don't make offers, I make proposals. So I have a kind of a walkthrough over the phone or I'll do like a, have you, have you seen Loom or like Screencast-O-Matic?

Yeah, I love. Oh, you do a video of that?

Yeah. Oh, so I do a screen recording video walking my seller through my screen and I use a calculator and I have the Zillow listing and then I just kind of spell everything out and, you know, and it's personable because it's, you know, there's a little bubble with my face on it, but I like to be as clear and upfront as possible. And it takes 5 minutes to run through your— just running through how you got to your offer. Now you have to kind of talk fast, but you know, you get 5 to 10 minutes, you can put together a little screen recording video. You shoot that out to your seller. You know, first of all, it looks professional. It's, you know, it kind of, you know, it's like it's— there's a connection there. It's not just somebody texts them, I'll give you this this much money to you. But, but you also, you might save yourself a ton of time putting together this full, you know, written-up contract, DocuSigning it, sending it over. If, if they look at my proposal and they're not interested, and they're definitely not going to be present interested in the legal ease of, you know, legalese of my, of my contract, right? So the proposals are a lot easier to send out, and they're basically somewhat risk-free. You know, it's not a commitment. Yeah, but at least it tells me what the response is going to be and I spell it out as clearly as possible. So I'm totally fine with sending out proposals even with— and it's a little bit easier to do that honestly on a kind of a video recording. It's easier to kind of pitch your number to your seller than it is to actually do it in person with them, you know, asking questions back. Not that I'm afraid of having those conversations, it's just that I want to kind of move on to the next thing as quickly as possible. So I've been putting those Loom videos out and, you know, some people are coming back and saying, okay, well, what can I ask you about this? Okay, now we're continuing the conversation. But other people are texting me, say, hey, I watched the video, that's not going to work for me. Completely understand. No obligation, no pressure. And then I'll just put them on my follow-up list. I'm going to come back out to them in, you know, 2 weeks, a month, because 2 weeks, a month from now, it might— their situation might, might have changed. But, um, I am adjusting my numbers downward, but I'm not worried about it selling on the back end.

Mm-hmm. That's, that's really original. I think that really allows someone to digest it. They're not on the spot and they're really being that transparent. Just because it sounds like there's this misconception that we make all this money. Yeah, we do make— it has, there has to be profit, but there's a lot of expense that—

there's a ton of expense and a ton of risk, you know, and, and we're You know, I heard someone say years ago, it was actually an old World War II— he was a World War II veteran and he was actually a minister too. I trained— he gave me some training. But I remember him saying one time, there's two people, two of the biggest gamblers in the world are farmers and contractors. You know, you know, because you're spending all this money farming and you put the seed in the ground, you hope to get a crop and hope it doesn't get wiped out by whatever. And then contractors, you know, especially speculative. And you know, that, that fits the model of flipper too. You're, you're you're doing all this work and spending all this money and taking all these huge risks in hopes of it selling at a certain price point in a certain timeframe. And, you know, so there has to be some real consideration given to that. So, it's like I said, like unless you're really, really comfortable with what you're doing, I don't think flipping is a good place to start. But I do think that it's, you know, it's still a good way to make money. I just think you have to be very, very careful. On your, on your numbers and you have to just get through that project as quickly as possible, get it back on the market as quick as you can.

That makes total sense. Really quick, I'm curious, when you're doing these LIMAs, is that for a cash offer? Are you saying, hey, like if they're free and clear, I mean, how creative are you getting when you're doing those proposals?

I mean, I'm going to give away a secret, but, um, you know, to your audience, but I, I have what I call my 3C offer. So every offer that I put out has a cash price point, a conventional listing price point, and a creative price point. So I typically will go through all 3 of those price points on my screen with the document open, and I kind of show them how I came to each of those price points. And the reason I like doing that is because I I'm giving a seller options. And if they don't like my cash price, well, maybe they'll like my creative price. If they don't like going creative terms, well, maybe they'll like just listing it conventionally, but using one of these flat fee listing services with me kind of making a fee for managing it for them. So I have to be really careful. I can't represent the seller's interest in a listing option. But I can represent my, my equitable interest in the property. So a lot of people don't know that you can actually list any property as long as you have equitable interest in it, and meaning you don't have to own it. You can list it on the MLS using flat fee listing service, but you have to make it very, very clear that you're representing your equitable interest. You're not representing the owner or the seller. So that's, you know, that might be a topic for— because we can get into that, you know. And I guarantee you, I know there's realtors out there that will cringe when they hear me say that, but I literally done it multiple times, you know, over the last several years, and, and it works. So you just have to make sure you have your, your fee structure, uh, done correctly and to where it meets all the requirements of the MLS, you know, servicing company. But, but the point is, if I, if I put 3 different price points and, and I cover the 3 major ways for a seller to sell a house, then, then they're gonna— they're probably going to settle on one of those, right? Now, I might not make nearly as much money doing, you know, a conventional listing option, um, but I'll at least make enough money to pay for, you know, the, the cost of getting that lead and then maybe a little extra for marketing, right? It's not like every single one for me has to be huge win. If I'm doing a flip, you know, kind of creative cash creative option, then yeah, I want to shoot for a 15% margin. But if I'm going to do creative, I'm going to hold on to it or turn it into a short-term or a midterm rental, or if I'm going to, um, you know, just do a wraparound mortgage or something like that, lease option, then I don't have to have the same price point. So now I can raise my— I don't have to make the same money, rather I can raise my offer price to, to accommodate, you know, not necessarily having to get that low cash price point that factors in all the lender's fees and the cost of construction and everything else. So that's, that's kind of where I like to have 3 different options for them, at least 3 different options. Some people, they don't like any of the options. That's fine, you know, but at least I'm giving them 3 separate price points based on 3 separate ways to sell the house to me.

And I love that. And I think above all, you're being a resource, right? You're saying, here's your options. It's not just like, I mean, if you call a realtor, they're going to give you like your list price, right? And they might give you a price that's maybe not realistic, right?

Because they want to get a lot of realtors. They just want to get that listing. And I know, and listen, that's— they've got their thing they're doing, and I'm not against them. I'm not opposed to them. You know, I wish they wouldn't be opposed to us, but, but, you know, but I just, I just look at it and go, You know, if, if you're going to list it with an agent and then I always ask them, is that agent guaranteeing you you're going to get that price? You know, because, because pretty much every one of my options is going to be a guaranteed price point. And, you know, I— with the conventional where we're going to actually list it, I'm really careful to define what I mean by guarantee. I guarantee they're going to get X amount if it sells at the price that we listed at. That. So, um, but there's a caveat with that one. But otherwise, you know, it's, it's, you know, my cash offer is guaranteed, my conventional offer or my, uh, creative option is guaranteed, my, my conventional offer is guaranteed with the caveat of if it sells. The thing I like about going to conventional, uh, that's one of the ones I'm hoping to get signed today, is, is that I don't, I don't have any really risk or obligation other than my time invested in it and taking you know, doing some photography and handling showings. You know, other than that, I'm just looking to make a flat fee for the— basically for a servicing fee. So, and I price it when I do something like that, I price it with a discount already built in. So I go on the market with a discount built in, and I, and I explain that to the seller. This is why I think if we list it at this price, I think we can still just about guarantee you're going to make at least this much after all the fees and realtors and everything else comes So, but yeah, I like giving people options.

Yeah. No. And I sometimes I'll even spell out if you were to owner carry the amount of interest that you make. I mean, when you actually run those numbers, it's like, it's like you're, you're the bank, right? You make that much. Why give that to the bank? You could.

Yep, exactly. Like I tell the same thing. I said, I'm going to pay this much money to a lender or to a bank. I'd actually rather pay that to you. To you. So, you know, would you rather make this money or would you rather me pay it to my lender?

Yeah, no. And it's just like, I also, I swipe to just the equitable interest. Is that some kind of a contract, the equitable interest thing, or is that, what is that exactly?

So equitable interest, just to, you know, from my point of view, and again, someone else could define it differently, but my point of view, equitable interest is any money or any interest that I have in the property that is, that is mine. So for instance, this one that we're going to, you know, hopefully getting the contract signed today, the seller is— I think they're signing at— they're signing a contract that allows me to list the property at $265,000 on the market. I have a guarantee that if it sells at $265,000, the seller will make no less than $235,000.

Okay.

And so $235,000 is what in the seller's mind they're going to take home. And he's actually— he's had this all reviewed with his attorney and his attorney signed off on it. And, you know, he had a couple of questions, but he's like, yeah, I could see how this is legitimate. So, but, but so then what that means is equitable interest is any money that I have involved in that difference between the $235,000 and the $265,000. Back. So if it's listing at $265,000 and there's going to be essentially fees for to pay the realtors, um, you know, the flat fee listing service, then the buyer's agent is going to want to make at least 3%. Um, we got closing costs involved, right? There's probably a— I always figure on there's going to be some kind of a buyer's concession. So the buyer is going to make, you know, a seller's concession rather. You're going to have to concede something to the buyer And I factor in a percentage there based on what kind of condition the property's in. All those things basically mean that there's a difference between $235,000 and $265,000 that, that the seller understands is going to get paid, you know, out, you know, through escrow and through closing to different people, different parties. Well, my equitable interest is built into there somewhere. So it's either as, you know, as a, a listing fee or my, my position, sometimes I'll come in as a contractor, I'll charge like kind of like a, you know, property preparation fee to get the property, you know, get the front porch swept up or get some little trash and stuff picked up. So I can actually show I did something that I cannot invoice for. Okay. So there's a lot of different ways to do that, actually. And I'm, I'm of the mindset that as long as we're doing it in a way that the, you know, that the seller is open to and understands, and as long as the title company is, you know, understands what's going on Then it's, you know, it's, we have contracts signed, we have everything in agreement. Then, you know, there's, there's a way to make money on listing someone else's property. As long as I'm very clear that I'm not representing the seller, I'm representing my equitable interests. I'm going to make money in here somewhere, and that's why I'm putting it out there on the market this way.

I think I've learned all the strategies and I hear something else.

Across.

It's like, I— the toolbox is so big in this industry. That is—

and there's— and there's— the thing is, there's still more to learn. Like, there's no way that anybody's learned it all, right?

That's why I love it. It's so creative. Well, this has been so much fun, John. I feel like we could talk another couple hours.

I'm sure we could.

I'll have to have you back. Um, so a couple questions just to kind of like— I like to ask guests what's your top business or life advice you would give someone?

Yeah, I say top life advice, you know, I think those are two separate categories, although they are connected. So, you know, as I mentioned, I'm, I'm a, you know, I'm an ordained pastor, I pastor church, so I obviously have a perspective that's probably unique to me. But, um, there's a scripture, it's in the Book of Revelation chapter 4, verse 11, that essentially says what your— what all of our purpose is. And so I'm, I'm a really big advocate of finding your life's purpose, you know. And I say that because without having your life's purpose really clearly defined, then you can be wildly successful in business or in all kinds of different things and still never feel satisfied. And so for me, you know, that's obviously really, really critical. It's kind of my priority is, you know, fulfilling my purpose according to what the Bible says I was created for. And we could spend hours talking about that. But from a business point of view, I would say probably my top advice would be pick a thing that you're going to do, whatever that thing is that you're going to do, and really try to ratchet down and figure out how to do that well. I have been scattered in so many different directions. And once I got into real estate, I mean, I've done land flips, flipping, house flipping, you know, I've flipped an apartment complex. I mean, I've done buy and hold, I've done short-term rental, you know, I'm now dabbling with midterm rental, right? But I've, I've kind of come full circle around. I kind of now realize what I want to do, and I want to do it, and I want to start doing it really well. And I think with real estate, there's so many different things that you could do that sometimes you get— you're, you're either pulled off in many different directions at the time, or do you go to one direction, then you bounce to another thing, good at any one particular thing? I personally think it would be better to be good at one thing that you don't really, you know, enjoy as much, because I think you'll probably always have a way of making money in that thing. So, and then learn something new, but, but get good at one thing first. Like you're kind of, you know, really ratcheting down the midterm rental thing, right?

Mm-hmm.

It doesn't mean it's the only thing you do, but it means that you're probably gonna be an expert or really good in that thing, right? They get good at one thing. And I, and my other thing is don't go at it alone. You know, get, get in with some other people that can help you. So join a group, join a mentorship. Really commit to it. Even if you're not like a— maybe I don't have money for a mentorship. That's totally fine. There's at least 1 or 2 people in your area, whether it's somebody in a network, you know, event or someone in one of these Facebook groups or someone like in our PDX REI group. Guarantee you there's at least 1 or 2 people that you can connect with and you can be valuable to them in some way, shape, or form. And you're going to learn from them. Don't try to do everything yourself. It's just— it's not worth it. It. You'll, you'll shave so much time off your experience, your journey, if you get connected to somebody or get connected to a group and really just kind of like make that your thing, right? Because it's— I know for me, for a long time, like, I did it myself on everything. Number one, because I wanted the experience. Number two, because I, I didn't really feel like I could trust people to, to have my interests at heart. And I realized, like, I don't— they don't have to have my interests at for me to still be able to learn something from them, right? I can come alongside you and we can benefit each other's business. It's not that it's like completely altruistic. Oh, I just want to, I want to help Shona so much. But you know, here we are, we're having this podcast, we're having this conversation today, and I'm giving you stuff and you've been giving me stuff. And, and the point is like, if I was just like, no way, I don't want anybody else to know about my 3C offer, that's something that's mine. I, you know, I've, I've mastered that, you know, I'm not going to give that away. Well, you know, how— what if I, what if I get every— somebody say yes to one of those options every single time? Well, eventually I'm going to run out of resources. I can't close every single deal. So I've got to figure out a way to work with other people. And the best way to figure out who those people are is to start connecting with people and, and learning from them and contributing to what they're doing and having them help you on stuff. And so in business, I think it's really, really important to get in with other people like kind of help you get to where you need to be.

So no, I love that. So true. It's, it's a people business. Next question, what's your superpower?

Probably just being stubborn enough to not give up. Persistence, maybe, is, you know, I, I hate giving up on anything, so I just, I just don't give up.

I, I share that. And then a resource or a podcast or a book. I know I know there's a lot out there, but what would you recommend for someone?

Boy, I mean, just for me personally, when it comes to real estate, obviously BiggerPockets is one. I really enjoy Sunday Service that Pace Morby and Jamil Damji and Brent Daniels do on Sunday evenings. I'm not actually able to watch that all the time, but I think that that's a great podcast. You have 3 real powerhouses in wholesaling, flipping, creative, you know, business. And they all kind of come together on that podcast on Sunday nights. And I think Sunday Service is a really, really good one for whether you're a beginner or an expert. You're going to get value out of that podcast every single time. And then just like as far as generally, I like The Way I Heard It with Mike Rowe. I don't know if you ever heard that one, but Mike Rowe is the Dirty Jobs guy and he has a podcast on um, called The Way I Heard It, and he just tells really cool different stories. It's usually pretty short. So those are probably my, my top 2 favorites is Sunday Service and The Way I Heard It. And then I just like BiggerPockets cuz they got so many different, um, guests and, and broad-reaching stuff on there. But for sure Sunday Service, every time I listen to it, I'm, I'm really glad I did.

I love that. I haven't heard of that. I'm gonna check it out. Awesome.

Yeah.

Also, how, how can people find you and work with you and learn more about Yeah, probably the easiest. Thank you so much for listening. I hope you found it valuable. Please take a minute to hit the subscribe or follow button. It really helps find us.

Different dealers out there in the market.

We also appreciate 5-star reviews.

Also, please take a second to like, hang out on your favorite social platform. Right. pdxreigroup.com. The show is brought to you by Mutual Mortgage. We have a great Facebook group that you can join.

Um, there's—

you're a part of it. You actually spoke at our meetups. We do workshops, meetups, consultations. And just, you know, generally speaking, for the Portland area at least, it's a great resource for people who are looking to do real estate or looking to get into real estate. I think it's a great place. And so if you're on there, you'll definitely be able to find me, um, or, you know, just reach out on my, my John Buys Houses phone number is 503-436-6525. That's kind of my intake number for seller leads, but I know it always connects to me. So, but yeah, PDX REI Group's probably the best place. So you can, we're gonna, I'm gonna be on there all the time.

So no, it's, it's, I can attest it's a really supportive community and it's, it's great. I, it's definitely worth checking out. Well, thank you so much, John. Um, this has been, this has been fun. I'm sorry we went so long, No, me too.

Thank you for having me on.

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