Real Estate Game Changers Show
Real Estate Game Changers Show
Flipping Success: 200 Houses and Counting
Jeffrey embarked on his journey at the age of 21, choosing to dive into the world of real estate instead of pursuing a traditional college education. In 2016, he ventured into house flipping and has successfully flipped over 200 houses since then 🔥
All right, everyone. Welcome to the Real Estate Game Changers show. I'm your host, Mike McKay, based in the Jacksonville, Florida market. And each and every week we do this show with people who are changing the game of real estate all over the country. And anyone in the Jacksonville area we are looking at higher acquisitions people right now. So if you have sales experience or you don't need to have real estate experience, but as long as you have sales experience, and this is something you're interested in, send me a DM on Instagram and I can let you know what we have open this week on the show, we have Jeffrey Johnson, Jeffrey, welcome to the show
Jeffrey:Yeah, man. Thanks for having me. I only wish I was there in Florida with you so I could be experiencing your warm weather.
Mike:for sure. Well, for the people who who don't know you, do you want to give a little bit of background about how you got into real estate and how that's led you to where you are today?
Jeffrey:Yeah, for sure. I have been an entrepreneur my entire life ever since I was a little kid. My first thing that I did was I would flip cell phones on Craigslist. Did that for a little while. I was like the top salesman in my whole life going through school. I would sell coupon books, pizzas, all the things right. And sales just always kind of came naturally to me. And then I ended up moving into couches. I flipped couches for a few years and then I went to college and I literally just hated school. School is like the worst thing ever for me. I, I was just so bored with it and I was not really doing super well in school. And I ended up finding a book on my dad's bookcase called flip houses with no money down by fan Merrill. And me and my buddy picked it up. And we were literally just in my dad's office just screwing around, like no idea what real estate was. And we were kind of thumbing through this book and we're just like, man, like we should do this. And he's like, yeah, let's do this. And we're like, all right. So we go literally walk downstairs to my parents and we're like, Hey, mom and dad, like Steph was my buddy. I'm like, we're going to, we're going to get into real estate. We're going to flip houses. And they're like, okay, like sure. And so, basically we ended up going to get our real estate license from there and he ended up not going all the way through, but I ended up getting my license and started as a real retail agent for three to four years. I wanted to flip houses originally when you're 20 and you really ignorant on how a lot of things work. It was hard for me to flip houses at that point. There wasn't as much knowledge and info on YouTube and social media as there is now. Nowadays, a 20, 21 year old absolutely could with the wealth of info, but at the time, like I didn't really have a clue what I was doing. So I spent three to four years kind of just failing, figuring things out, learning what real estate was, how to comp a property, how to look at deals, how to talk to people, how to solve problems, really like built up my base. And then in 2016, I was an agent for a wholesaler. He wholesaled a portfolio to another client and I made like a small 3 percent commission like 10, 000 on the deal and he made 120, 000 on the wholesale fee and I saw the HUD at the end of the deal. And I was like, dude, did you actually make 120, 000 on this one single deal? And he was like, yeah, we did. And I'm like, like, please, whatever I have to do, tell me how to do this because I've got to learn. Like, I've got to learn. And he was kind enough to mentor me just a little bit. Enough to kind of get me going. And then I ended up working as an acquisition rep for a team, probably similar to how you and I have our team set up now, worked as an acquisition rep for about a year, learned a ton, learned how to really comp a property. If you're buying it, learn what hard money was, learn what lending was. Learned how to walk into a home and assess for repairs. And then that really set me up for my first deal where I ended up knocking on the door of a woman who was going into foreclosure. She had no idea she was about to lose the house, and I was able to help her stop it. Ended up buying the home, flipped it. We made 40,000 on it. And from that moment on, it was like. Everything changed for me. It's my eyes were completely open to the whole other side of real estate that I had never even heard or known about. All I knew was 3%, 3%, 3%. And to kind of learn that side of it and see, just the mountain of possibilities that were out there. That was 2016 and 17 and since there I've been able to flip over 200 houses and I've just loved this whole business. I love doing it and it's just been amazing being a part of it. You
Mike:So what made you like a lot of people when they kind of get into it, they kind of wholesale first, and then they kind of move into flipping and renovating what made you decide just to kind of go directly? Well, I guess not directly, but directly from being an agent to flipping the house. Yeah.
Jeffrey:know, honestly, the house, when we got it, it was pretty bad shape. Like the carpet was really bad and the paint was awful and there was junk in the house and it was like, it didn't really occur to me that I could, I knew that the other guy had whole sold that one deal, but it just seemed to me like the most logical thing would be to do some work to it before I sold it because being an agent, you're used to walking into homes that are kind of show ready. And hindsight, we probably could have wholesale wholesaled it for sure. But you know, it just, I was like, Hey, let's put some carpet in, let's paint it. Like now I go into homes and I have like a whole plan, a scope of work. I know exactly what we're going to do. I just walked into that one and was like, well, it looks like the carpet's bad. We should probably do the carpet. Well, we're going to have to probably paint it if we do that. Well, we might as well put granite in the kitchen. Well, this light fixture is ugly. We should probably replace that. And oh, that cabinet's broken. It's just we just kind of did it as we saw needed. It took us about two months to do it. And then we're like, well, let's just put it on the market. And that's, kind of how it all shook out.
Mike:Gotcha. So once you did that first one, did you jump into like flipping full time? Or were you still kind of playing around the space? Gotcha.
Jeffrey:I mean, I had some clients as an agent that were still with me, but like I said, when that final wire came into my account and my balance went from like 5, 000 to 45, 000, I was like, what have I been doing for the last five years? Because this is obviously way more lucrative. And so I finished out my retail business and ended up, just kind of working with a few people from there. But I was really like, like, I was like, Hey, like I've got to figure out how to make this a full time thing and everything that I do. And it's just, so it kind of slowly morphed into it, but, probably within about a year I was completely full time in it.
Mike:And what, what have you kind of put in place over? Over the years to, I mean, obviously flipping 200 homes is quite a few. You must've put like some good, like systems processes, things like that. Like how did you like grow that business from just doing that first one to I'm sure you've got multiple going on at a time now.
Jeffrey:Yeah, we've had, I think the most we had was in 2021. We had 30 going at one time, which was in actually too many, I think. But, to be honest with you, like systems and processes is probably one of my weakest areas as a leader. And it's. I've really learned how to set those things up like completely by necessity. It would have been better if I had a plan from the beginning and set it up because it started just me. Then I hired a guy to run and help me with acquisitions. His name was Kyle. And then we were gosh, we needed an admin help with all this paperwork that we hate doing. So then we brought the assistant in, her name was Patty and we never really like sat down and in the beginning, we never really sat down and really did a great job at setting up systems and processes. And, I wish that we had, because part of my journey is that we really built up really strongly up to through 2021. And then when the market shifted and the interest rates went up, I learned quickly that. My business was, while it was running and it was successful, it wasn't really able to sustain that level of, volume because I hadn't done a good enough job building up those things from the very beginning. And so, I've worked with a guy named Gary Harper, his team came to our office and kind of helped lay some front, some groundwork for us. And we've kind of looked at other systems on and it's just, it's an area that is, it's challenging because you can, when you have a team that's, we had nine people at one point. And when you have that many people, it's you can know what to do, but you really, like, I really wish I had just been super intentional about it from the beginning. And we have much better systems in place now, but I think we would have avoided a lot of the pain and the trial that we went through if we had been more intentional from the very beginning.
Mike:What are some examples of maybe like the one or two biggest things that you wish you had been more intentional about from the beginning?
Jeffrey:Yeah. So if anyone is listening and they would have a desire to own a lot of flips at once, which if you have a bunch of employees, that's really what you need. When you own, I would say, more than three or four houses, you've got to have a airtight system on what happens from the day that house is bought to the day that it's sold because, amazingly, we would have houses where it's sold. The power wouldn't get turned on. The water wouldn't get turned on. The renovation wouldn't start in for three weeks. Things that you would think like, Oh, well you own the house, of course, you're going to remember to go turn the power on and get the locks changed. This is a 300, 000 asset. Like how could you forget? Well, when you've got 20 of them. It's, like if we had that set up from the very beginning, it would have really helped a lot of headaches go away and we just, I guess you don't really know a lot of things like that until you go through them and now that we've gone through it, I can kind of see how helpful that would have been. But definitely would have wished we would have set that up a little bit better. And then the other thing that. We could have done better is in our sales process, we had five acquisition people at one point. And if you don't have a plan and a strategy really airtight for that many people, it's just, it's not going to run as well as you want. And we had deals coming in, but I think a lot of it. It was like the deep, the high volume we did a lot of it was because the market was so good and we were able to sell things so quick and so easy that, the guys, they were getting deals cause it was just kind of easy. But once it became not so easy and we had some adversity, that's where I'm like, gosh, I wish we had done a better job at setting this up to be a really well run machine ahead of time.
Mike:Yeah. So what changes have you put in place to overcome those two things?
Jeffrey:Well, essentially, we, I kind of have come to the realization that, a lot of people think that when they get into flipping that they should do more every year, like they should always be increasing and there should always be this substantial amount of like, like you always need to be growing and we kind of experienced that. And I think what I realized is that I actually is my, career progresses and I kind of move along. I'm actually more interested in doing larger scale. Bigger, impact deals, if you will like land development and new construction. So essentially what we have, what I've learned is that we are going to, we have our system set up now to where we have a really kind of efficient machine where we are going to do about 30 flips this year, and we're actually now focusing a lot of our other efforts onto larger deals like new construction and develop land development. One land development deal and one construction deal happening right now. And what I'm seeing is that the profit that we're projecting from those two deals is essentially about the profit we would get from 10 flips. So we average about 30 to 35 K profit per flip. And we have a really clear path to about 350, 000 on the land development deal. And about 120, 000 on the construction deal. And so, to kind of answer your question, I think I've learned that it's not necessarily about always doing more learning how to do for me, like higher impact, bigger profit deals where I can. Kind of use my mind more and I just, I don't want to have a team that's just massive and there's just so many moving pieces. I'd rather have it be a little more simple but doing like really, big deals, if you will.
Mike:It sounds like you've been a, you've got like to do like 30 a year now, that kind of is pretty easy for you. Like the way you've set it up currently.
Jeffrey:Right. I mean, I don't know if I would say it's very doable without a ton of like overhead and without a ton of like oversight. So it's essentially two to three a month for us. And like I was telling you earlier, most of our deals come from the foreclosure list from people who are going into foreclosure. So we have a really streamlined process where my two acquisition guys now market to them and it doesn't require us to have this major system in place to get all those deals. And it allows me to go focus on these bigger impact deals, which is what I've really wanted to do for the last year or two.
Mike:So, yeah, I remember we were talking offline. You said probably about a hundred or more of the deals that you've done have had been from foreclosure. So you want to talk a little bit about kind of like the process of how you do that and just the nuances that come along with it.
Jeffrey:Yeah, absolutely. So the thing that I love about working with people going into foreclosure is that I've come to learn that there is a absolute genuine need for them to have somebody like us, like a real estate investor, help them. Not all sellers should sell to an investor. I know that we would like to think that we shouldn't ever, people should always accept our cash offer. But the reality is that a lot of people should actually sell their home on the retail market and get more money for it. That's just the reality of the situation. And if you. Like I don't want to go to people's homes to some lady's home who doesn't really know what she's doing and she has all the time in the world to sell and I tell her that her best option is to take 50 percent of market value because I just want to make a bunch of money on the house, but when people are in a foreclosure situation. They're actually like they're days away from losing all the equity in their home potentially and having their credit completely ruined. And the thing is it's obviously not the doing of us or the investor. It's their own doing. They get in that situation and they think that they have other options that they're going to pursue. They think something's going to happen and they end up falling through and they, they honestly need somebody that can like, sometimes we buy a house. We'll contract it on Tuesday and buy it on Friday before the auction, because that's how fast they need somebody to be able to move. And what I've come to learn is that the banks that are, foreclosing on these people, they are extremely difficult to deal with because They've got all this red tape. They've got all these different departments and your average, little old lady who needs to get a payoff for her mortgage statement that's in foreclosure has absolutely no idea how to push the right buttons to get what she needs. so we really kind of market ourselves as someone that comes alongside them. And so the foreclosure process is just what I love about it. Is that it's just really a way for us to provide like a really genuine value to the seller where we end up making a great profit on the deal, but at the end, the seller comes up to us and they're like, Hey, you literally like saved us, like, thank you so much. We're so happy. And we don't know what we would have done. Like, well, what we do know, we would have lost the home. So, there's a lot of different nuances to somebody. Like if you want to go out and get foreclosures, I think in Georgia, at least they're one of the best lead sources because every month. There's a list that comes out and you have basically 30 days before the auction date, right? So there's obviously tons and tons and tons of people that buy that list and start texting it calling it doing all these different things right and our team We like to take a little bit of a different approach because we know that the seller has already gotten 20 pieces of mail, 20 calls, 20 texts, like they're overwhelmed. So we actually have one of our guys, he always goes and he knocks on doors and people typically don't want to talk to him. They are really like, like, Hey, like, I don't want to talk about this, but he, and he says, okay, like totally get that, but he will handwrite all of them a letter. And he will leave it on their doorstep. And then when they are ready to kind of process the fact that someone's just coming to their door, they'll pick up the letter and they'll read it. And we really try to position ourselves as somebody that wants to come alongside them, help them, we can do everything for you. And oftentimes people, after they've come down from there, like, don't knock on my door. I don't want to talk to you. Like, get away from me. They will call us back and say, Hey, I actually would like for you to kind of look at my situation and help me and talk to me. And then that's when we kind of step in, we figure out all the necessary info, and then we really work hard to get on the line with the banks and the attorneys and kind of figure out how we get the information that's needed. And then oftentimes we're able to get a super good deal on the house because. Of all that work that's needed on the front end. And then we will usually give them some time in the home after. And it, it just ends up being a win situation for everybody. And I've just found it to be really effective. That's not to say that there's obviously lots of other ways to get deals, but I, for us and what we're trying to move into, like it's a really effective way to do it.
Mike:So your acquisitions guys, I think you don't do like, you don't do the normal traditional marketing. It's really just like kind of on the ground, going out, knocking on the door, leaving the letter. Or do you guys also do kind of the, the traditional stuff?
Jeffrey:You mean like, texting, calling direct mail kind of
Mike:Yeah, exactly. Yeah.
Jeffrey:We have done a lot of it in the past, so I've definitely kind of looked at the ROI and the KPIs on that marketing and, if we wanted to do a hundred deals, we absolutely would probably add in more of those marketing channels, but because our focus is. A little bit of a lower quantity, but higher quality. And then we also are adding on this layer that I talked to you about where we're developing land and building homes. It's just like necessarily have to add in a bunch of other stuff. Plus, I don't know about you, but I've seen a really diminishing return on texting in the last year. And it's been extremely hard to get texts to go through. The calling is even harder. Most people just don't answer the phone. And, I think the one area that I probably will and need to invest money in is PPC and getting our website to be it's a good website right now where people can go online and really read about us and understand what we do. But I think if we were going to spend money, it would be in that field to really strengthen that even more and then drive people to that website.
Mike:Yeah, I gotcha. So your guys are kind of just doing more of the kind of marketing you were talking about like the on the ground stuff then then one up one off calls or
Jeffrey:Yeah they'll call people. Like they'll research people and call them that are on the list if they didn't get ahold of anybody at the door. So we're still calling, but it's more of like a individual approach versus like a big shotgun dialer approach.
Mike:gotcha.
Jeffrey:Yep.
Mike:And then are you guys Is Georgia, is it a judicial foreclosure state or
Jeffrey:It's nonjudicial.
Mike:it's non judicial? So how quick is the process? Like once they, the foreclosure process starts for a homeowner, how long is it?
Jeffrey:The lender has to give them a 30 day notice to, to basically bring their mortgage current. And then once that's not satisfied, then that's when they put the home on the, like they have to advertise it in the newspaper for 30 days. And then whatever the following first Tuesday of a month is, that's when it goes to the auction. So it's pretty quick.
Mike:Wow. Okay. That is pretty quick.
Jeffrey:Yeah, so I think that it's up to the lender's discretion when they want to start that process. But they like, I think if you miss one payment, they can start the process. And then within 60 days, your home could be up for auction. So most lenders aren't going to do it in one month. They're going to wait a few months to try to rectify it, but it can move pretty quick if the lender wanted it to.
Mike:And do you guys go after any of the like stuff that's in pre foreclosure or you're only kind of focusing on it once it's actually hit that list?
Jeffrey:Well, in Georgia, it's, there's only a handful, like a five to 10 percent that will come out like in advance of 30 days. So, set up where. 90, 95 percent of them all get batched on that. Like one, they come out on one day, like 30 days or so before the auction. And so you, there are some that like, if it's February right now, there are some that are already being advertised for maybe May or April, but the majority of what we're going to see right now is only going to be for March,
Mike:Gotcha.
Jeffrey:right?
Mike:What are the other like roadblocks that people might run into if they're focusing on foreclosures?
Jeffrey:Well, I mean, you obviously are going to have cash ready pretty quick because if somebody calls you and they want you to do something, you are going to need to be able to perform. However, you could also just reinstate the loan and take it sub two, which is an option that we've done before. But typically it's. Most sellers are going to want to see you pay off that mortgage. So, it is better to have hard money or private money lined up pretty quick. The other thing that is a roadblock is you, when I say you have to move quick, like you, you really have to move quick. So. You don't really have a bunch of time to get all your contractors and your guys in there to go walk the house and like assess all the repairs and all that you've really got to be able to look at those things, either through pictures or have one of your guys like go out and do one walk through and kind of be like, okay, like, here's our worst case. Here's our best case. And you got to be able to make a decision pretty quick. And then I would say one other roadblock is that if you, like, you've really got to learn the right kind of language and the right kind of tone to take with the foreclosure attorneys and the banks, because as an example, if a seller was going to foreclosure this, like the foreclosure auction in Georgia is in three days on Tuesday, if somebody were to have called us yesterday and said, Hey, I'm about to lose my home, can you guys help me? And you, and we said, okay, sure. And we got on the phone with the mortgage company or the foreclosure attorney and said, Hey, we need a payoff and we need a reinstatement so that we can help this seller, rectify the situation. They typically are going to say, okay, sure we can do that, but it's going to be seven to 10 business days until we get that document to you. Because that's what, that's essentially what is required in the law. Like that's the amount of time they have to do it. So. One of the guys that used to work for me, his name was Kyle. He was extremely good at knowing how to push the buttons of the attorneys with, essentially kind of threatening lawsuits and kind of, telling them things like, Hey, like, you really have to make them feel like it's going to be a bigger problem for them to not help you than if they were to help you. And that's kind of the approach we take, like. He would say things like, do you really want to have a wrongful foreclosure suit? Do you really want to, have this woman lose her home and she's trying to pay and we're trying to send you money. And it just can be a little bit of a game. It's a little frustrating to be honest with you, how much of a game it can be. He would sometimes go, he would go on LinkedIn and he would find like the president of banks and he would message them on LinkedIn and say, Hey you're the foreclosure department's not giving us what we need. We need you guys to kind of move this along. And he would actually look up cell phone numbers of executives and banks and he would text them. I mean, he we would go like, when I say we really have to do a lot of work, like we would go way above and beyond what you would think is necessary because for us, like we want to get that deal and we don't want the seller to lose their home. So you, you've really got to be willing to push if you want to get these deals done.
Mike:Wow. Did he ever have success with people messaging him back from LinkedIn texting him back on the
Jeffrey:All the time. Yeah, that's he, that's how he got multiple payoffs within like, like a couple hours. He would just hound them on LinkedIn, social media. He would, we would skip trace them and find their cell phone numbers and just berate them until they gave us what we wanted. And I mean, it worked to be honest with you.
Mike:And like, what type of level of executives are you reaching out to? Like, where was he contacting? Like all the way to the top? Or like,
Jeffrey:I don't know if this guy responded, but he reached out to Jamie Diamond, the CEO of chase ones.
Mike:he reached out to Jamie Dimon.
Jeffrey:I don't think Jamie responded, but I know that he did find his LinkedIn and said, Hey, like I need this document. Yeah, I don't think Jamie checks his LinkedIn inbox, but if he did, he would see that message.
Mike:Only the most famous banker of all time.
Jeffrey:Yeah, I mean, I think he actually did it because he just wanted to say that he like messaged Jamie Dimon's but I mean, CEO isn't typically who he would get the response from. He would typically find like the VP of the foreclosure department. A lot of these banks will have that title like on LinkedIn or they'll have like just a VP of some department and he, that's who he would reach out to. And then he would oftentimes find their cell phone and reach out to him.
Mike:Got it. And then they would kind of, push the process along
Jeffrey:Yeah. When they hear wrongful foreclosure suit, which is a real thing and it could actually be put onto a bank when they hear those words they jump into action a lot quicker than they were prior.
Mike:Got it. So he's kind of pushing that buttons to on the executives of the bank. Like, do you and then they obviously don't want that.
Jeffrey:Yeah. Well, yeah, they definitely don't want that. And he would, he, I mean, we still do that now. So it's just It's just kind of the level you have to take it to. If you, and we've saved homes like the day before and the seller was thrilled and we made, 50, 60, 70 grand profit flipping it. So we're obviously really happy. And it's just kind of the level that it takes sometimes to get these deals done.
Mike:Yeah what other roadblocks outside of, getting, the banks delaying the payoffs? Do you? Run into with these foreclosure deals.
Jeffrey:With the foreclosure specifically, typically I'd say the hardest thing is that the homeowner, Has been contacted by so many people because the list is public, right? They're getting a plethora of people reaching out to them. I mean, they're getting calls and texts and all these people. So it's really about figuring out how to differentiate yourselves from everybody else. So, I talked about the door knocking and that's one thing that most people don't do, but. One of the things that we really love to do was we would send TIF streets and edible arrangements to people's houses and the percentage of response on a TIF streets is a hundred. It never doesn't get a response and they're like a box.
Mike:Okay. Outside
Jeffrey:It's a box of cookies. Yeah. So, you show up from your house and you got a box of cookies on your doorstep, like you're a hundred percent going to open up that package and see who it's from. And. So we really, what we like to do is we like to essentially identify on our list, like the properties that we feel like have the best likelihood of closing. Call it like the top 20, if you will. And those are the ones where we are like, Hey, okay, we got shut down on the door, we got shut down with the calling. Like, what's the next step we can take? What's the next step we can take? We will even. Call the neighbors and say, Hey, like, do you know this person we'll call relatives? We will send, tips, treats and cookies and, balloons and flowers. Like I'm telling you, we will do whatever it takes to get somebody on the phone to tell us, don't call me again. Or, obviously we want them to say, Hey, we won't, we want you to work with us. Especially when we find one, like when we're at, when our knocker goes and there's one that's vacant and it's on the foreclosure list, it's like a no brainer. Like, of course, like why would they not want to sell that? So those are the ones we really like really go deep on.
Mike:20 list for you guys?
Jeffrey:Obviously equity is a good one. You can run these lists to see if there is a deceased indicator, maybe a, an, a past, an owner has died recently. That's
Mike:you? Where are you running that?
Jeffrey:we run that in lead Sherpa. Yep. So lead Sherpa will tell us if somebody like one of the owners has died. And then to us, that's a really good indicator that, Hey, like, like I said, my very first deal, the woman's husband had passed away. And he was the one that handled all of the money stuff. So she had no idea because she had this giant stack of mail sitting on her kitchen counter. She had no idea that the home was even going into foreclosure. And so, cause she wasn't opening anything cause she just was like in denial and she didn't want to deal with the fact that her husband had passed away. And so obviously that's a sad situation, but the reality is she needed us to come in and kind of help her in there. So, I think other than that there's not really like, I mean, I, yeah, I would say probably vacant equity, the cease flag, and we can also run, you probably use prop stream before. You probably know in PropStream, you can see if there's an open code violation on it or a lien. So we'll cross check it on PropStream to see if it has liens. And if it has liens, it kind of gets kicked up our priority list. But a lot of it's just the hardest part is finding the right person to talk to on the phone, finding a decision maker. Cause there's, so many people are reaching out. Like a lot of times they just shut off their phone. They're like, we don't want to hear from anybody.
Mike:Yeah, interesting. So got it. So you guys like, look at all those things. And then in Georgia, is there like, do they post like when they post the auction, what the judgment amount was? So is that how you're figuring out equity? Or you're kind of taking your best guess or
Jeffrey:Well, PropStream will give you a relatively close guess. Right. So that's how we start. And then when we want to add one to like our very top, like top 20 because I'm an agent, I can go into the back end and look at the tax record on it, and then you can kind of see the mortgage history. And then obviously you can look at something like Zillow or whatever to ballpark the value. so that's how we, we get a range and, for us, if it's got 50 percent or more equity, like that's a pretty good start. It's not always accurate, but you can't really get super accurate until you run a title search and kind of get into the nuances of the house.
Mike:Gotcha. Okay. and then you kind of, we were kind of talking offline a little bit, you've obviously done a lot of renovations over the years, and you said that there's a couple things that you do to properties that kind of separate yourself from the average flipper. You want to talk about a little bit about that?
Jeffrey:Yeah, so I don't know have you've probably been in your fair share of houses that have been flipped by not yourself, but just the average person flipping a house, right? and I've noticed that almost every house flip I walk into uses like the same kind of LVP uses the same kind of kitchen cabinets, the same standard granite, obviously not always, but when you look at like that entry level price point, a lot of it's just the same kind of basic stuff. And we've really, we've done that before. And we've also found a few things that are really impactful for making a buyer. Like, I've walked through many homes with buyers and really what you want to create when you renovate a house is for them to have some kind of wow factor when they walk in to where they're like really become emotionally attached to the house. And. One of the ways we do that is we have we'd like to use really nice kitchen hoods. So a lot of people just put like a basic stainless steel or like a microwave thing above the stove. And we will spend like an extra thousand dollars to get a really eye catching hood and kind of leave. Some space between the hood and the other cabinets. So we're going to kind of run the backsplash up and it just creates a really nice visual, even in like entry level homes, right? We always bring the cabinets all the way up to the ceiling. A lot of people don't really think about that, but leave a gap there. And in my opinion, getting them flush, when it's like an eight, nine foot ceiling has a much nicer visual effect than when. There's that gap there. Your typical LVP in our market is probably runs like 2 a square foot, give or take, and we go for a 3 and 25 cent engineered wood product that looks in my opinion, substantially better. And we put that in the living area and the kitchen typically, and it, on an average, thousand, 2000 square foot house, it's obviously going to cost us a couple thousand extra when we choose a really high quality flooring and the kitchen really pops to me, like I've seen a much like those homes typically are the ones that sell for over asking and they go quicker. Now, obviously when the market was really hot, I mean, you could basically do nothing to a house and just put it on and it would sell. But what I've seen 20%, in the past year, cause the market was kind of slower last year. It's picking up now, but I've seen that the homes that have that really bare minimum amount of work are the ones that are kind of sitting on the market. And so we're really trying to be intentional about making our flips just a little bit nicer than the other flips on the market. And so we'll always like a lot of flippers will go and they'll get the same bathroom vanities, like the kitchen guy will do the bathroom vanities so they match, right? Well, we like to go on like Wayfair or we'll go to an outlet supply store and we'll find like a custom vanity that is going to cost us a couple of hundred dollars extra, but it looks way nicer than if you just put that standard box vanity in there. And we will. We typically don't tear out the showers and retile them. We sometimes do, but we like to just, glaze over the existing shower pan, which, I'm sure a lot of people already do that, but we've noticed that really helps us a lot. And we like to really be intentional about adding wood accents into the home. So a lot of our flips, they kind of had the same design palette and there'll be a lot of neutral colors and then it'll have wood tones throughout. So we will. Typically put a really nice wood front door like a farmhouse style front door in and that really adds a nice visual when people pull up to the house and then we'll incorporate wood tones like in the kitchen hood and then obviously seeing the flooring or we'll do a shiplap wall. And just little things that people don't necessarily think about, but it's just, it's that whole package that really makes a flip pop. And I've just noticed it's really helped us over the years.
Mike:Yeah. Awesome. And I guess it's like, go, like how are you running everything now? Like, I mean, at one point you're running like 20 at a time and obviously that was a bit much, but like, what's I know people have different processes for running flips. Like some people have a project manager in house. Other people have a couple of GCs they work with. Like, what's your kind of process to,
Jeffrey:so I have a full time project manager when I first started, I didn't have one. I did it all myself. And I think that. It's probably necessary to at least manage a few of them on your own so that you get an understanding of how it's done. And I would say that I probably managed about 30 to 40 of them until I decided, Hey, like I definitely need a full time project manager. So ended up hiring a full time project manager with, and one of the things I would tell people is find somebody that's really good and pay them more than you probably think you need to, because they can save you so much money during the process that you may feel like. If you find some guy and your goal is to pay them 40 to 50K, like, and that's it for the year, like, I think you're really doing yourself a disservice as opposed to going out and finding a really good one for, 80, 90, 100K per year. Who can save you way more money throughout the year because they're really competent and they know what they're doing. And so my project manager is awesome at that. He does a really good job at finding the best price on everything. And he knows construction really well. So when a contractor gives him a bid and he knows that it's full of fluff, he will call him out and he'll say, Hey, this all needs to come down. And he'll routinely get bids down 5, 10%, just like that, because he knows the process so well. And so, he goes out when, anytime we buy a house, he goes out, he immediately like creates a scope of work. And, we have obviously like a bunch of contractors that we work with and he'll bring them in. We've got our kitchen guy or granite guy and those kinds of things, they take time to build up. You're not just going to have this big long list of people right away, but the more, the more houses you do and the more work you can give people obviously it kind of becomes easier to build that up. And. Yeah, so he kind of runs the whole thing from start to finish. I make the high level decisions on, hey, we're gonna do this amount of rehab or rehab. We kind of have like a full rehab. A lipstick rehab, if you will. And then we have like a basically just clean it out and put it on the market kind of idea. And like I mentioned, we have not really been doing as much of a lipstick rehab and the just throw it on the market approach than the last year. Cause the buyers have kind of been able to, command the nicer product. So that makes his role even more valuable where he's able to kind of help us. Manage that whole renovation. So, I don't know if you guys have one on your team, but it's super helpful having one. And it's really like, I mean, if you're going to scale you, like you absolutely have to have one.
Mike:And like, how did you find this? No, we don't have one and that's why I'm asking the question. how'd you find
Jeffrey:Really?
Mike:this guy?
Jeffrey:So I was fortunate in the fact that he is actually my brother in law. And he, yeah, he is a, he's an engineer by trade, so I got fortunate with that. However, I did have a job like application out and I interviewed a lot of different people and what I found was. Interview, I interviewed probably seven people, right? And all the people that were, that I had a good feeling about besides him, were all people that I had a prior relationship with versus people just kind of coming in that I didn't know. So if I were to start over and try to find one, what I would personally do is I would look on social media for people who were somehow connected to me or, maybe one connection apart. Who had some kind of track record of kind of like maybe find like a contractor who is just like not quite, savvy enough to do it all on their own, but really knows the construction process well, and, kind of have somebody like that come in. But obviously knowing him and having that connection was super helpful because they are. Essentially managing thousands and thousands of dollars for you. And so if you don't feel really comfortable with that relationship, like it's going to be, it's going to be tough. So I admit that it's definitely a hard role to hire for sure.
Mike:Yeah, and so he's, did he come in with, like, a lot of the subcontractor relationships? So you already had a lot of those.
Jeffrey:I had a lot and he essentially fired all of them very quickly. Yeah, because he was like looking at our bids and he's like these are terrible bids. You're overpaying for everything and so he would end up like he went to Home Depot and he like just found guys. And the way that he would vet contractors initially is we would have houses that hadn't been renovated yet. And so he would, we would put a lockbox on it, just a coded lockbox, and he would find them and say, Hey, we have this house. Here's the address. I need you to go give me a quote for this. And he would basically see who would actually go and who would get him a quote within like 24, 48 hours. And you would be shocked at how few actually could do that. I mean, it was unbelievable. Like 80 percent of the contractors just didn't go. They'd never sent a quote. They didn't have an email. I mean. So he was able to filter through a lot of them just by doing something like that. And then obviously once we started working with somebody that kind of helped us see like kind of their work ethic and all that, as we went and he's just over the last three years, he's just really kind of whittled it down to like a really good group of guys that we give all of our business to and they, they like working with us.
Mike:Gotcha, but he's still kind of separating out by kind of trades, right? He's not handing off a job tool to like kind of one GC and just manage him. He's kind of subbing it out to a few different people or.
Jeffrey:More, more or less, we actually just did a renovation where we did kind of follow that model where we had him and then we had like a main guy underneath him. My project manager, his name is David. So David had a guy underneath him who was subcontracting everything and it actually went pretty well. The renovation came in under budget and it went, went quickly. So we're actually probably going to try the same guy again on our next project and see if it continues like that. But in the past we have just kind of hired out the trades and it is more work doing it like that. But, it's typically you're gonna save money by obviously not paying another guy. But if you're gonna have a whole bunch of flips, it does become tough to do it like that.
Mike:Sure. Yeah. And, is there like a, do you structure compensation for your project manager with like some kind of incentives or how does it, how does that all work?
Jeffrey:Yeah, the way that we have it set up is essentially the company's profitability. He is given a bonus based on how it shakes out for the year.
Mike:Gotcha.
Jeffrey:So, obviously we've tried to tie it to the project or like say, Hey if we stay on budget, you get a bonus, or if we finish quicker than timeline, you get a bonus. And it just became really hard because so much stuff was out of his control and it didn't seem fair to penalize him if, one of the contractors ran behind and so. We just didn't work for us to do it like that. But obviously it could work for somebody else, but we just tie it to our company's profitability,
Mike:Gotcha. Are you guys targeting like a certain like renovation timeline for, let's say like your standard full rehab, like not like the crazy ones, but like just a standard.
Jeffrey:Yep. A standard full rehab for us has got to happen in two months or less, assuming we're not like pulling major permits. If we can't do it that quick, then something's wrong.
Mike:Gotcha.
Jeffrey:Yeah,
Mike:What other lessons did you kind of learn along the way? I mean, from all that volume you were doing in flips. What other takeaways?
Jeffrey:It's a good question. I think I think that one of the biggest things I've learned and people talk about this in real estate a lot is that shiny object syndrome is a very real thing. And the more success you have, the more shiny objects get put in front of you. And it's something that I definitely fell for, and it cost me some time and some money. And that's not to say that you can't obviously adapt and evolve and move into new things. But if you got something that's going well and you feel like, your mood, like it's a good process. Like, like for example, while we were in the process of doing a lot of flips, I started to move into multifamily and I ended up taking my eye off the ball, if you will, on all our flips and did a 60 unit apartment deal a couple of years ago. And the deal went okay. Like we, we ended up making money on the deal and it went fine. But I just don't think it was the right thing to do at the time because it ended up costing us on some of our flips and our people, like I told you from the beginning, our operating systems were not as airtight as they should have been. So I should have focused on that first and got that to be excellent before I tried to move into this new thing. I tried to essentially move into a new thing while this was like not fully solidified, like it was solidified, but it. It wasn't solidified enough to run 20, 30 flips at one time. So, one of the guys that I really look up to is Ryan Panetta, I'm not sure if you're familiar with him, the reason why I respect him so much is because he's got like eight businesses that he's running right now. At one time that he's the head of, and they all. And I've talked to him about how he's able to do that. And he's really adamant that he, when he goes and sets up a new business or goes into a new venture, he is hiring from the top down and he immediately gets like a COO or director of operations in place that handles all the day to day stuff and handles all the decisions. And he sets the whole thing up with the systems and the processes, is And so when he goes to scale and the business starts really flowing in he's ready for it and he's able to shift his focus on to business number two, three, and four, and that's something that I'm trying to become better at and it takes time but, that's kind of why I talked about We're not trying to do so many flips right now because I'm kind of focusing a little bit also on construction and land development. So in a way I'm kind of breaking my own advice by doing two things at the same time, to be honest with you. But it, gosh, it's so hard to not like you get a deal put in front of you. It's so hard to not like go like, Oh man, we could make 50, a hundred grand on this deal. Like, how could I not go do that thing? So it's funny to like sit here and give advice and realize that I seriously, I'm probably breaking my own advice at this very moment.
Mike:Sure. Is that how you kind of got started in like the land development home building is you just came across like a deal that was so good or.
Jeffrey:Yeah, the way we got started or the way I got started, it was, I bought a property that is actually where I'm at this moment. It's, this is an Airbnb that I'm in right now. And my office is on this property too. And we bought it for 400, 000 and it's got, it's on three total acres. And there's two acres that are kind of like by, by themselves, right? Like they're separated from the, from these two properties. And as we were working here and like, kind of looking at it, I'm like, gosh, like, I feel like if I were to subdivide this land, like I would really have a really valuable piece of two acres over there that's in this neighborhood. So essentially two years ago I started on that process and I had to bring sewer into the lot. I had to get a variance, I had to get, like five surveys done. I had to work with a, like an architectural firm. And so I'm actually at the very end of the process. Funny enough today, I actually got the email that the split is actually complete. And so the land that has the two homes, we were probably into it for 600. Like after we've renovated them and I think they appraised for like six 5, 700, but the land now is worth about 300 on its own. So I essentially was able to create a 300, 000 piece of land just out of, thin air, if you will. So, sorry, go ahead.
Mike:Oh, no, I was gonna say. So are you selling that off? Are you building on that? Or what's the.
Jeffrey:We we are kind of deciding if we want to build on it for ourselves. My wife and I actually build a house on it. Part of me though, is like, gosh, It would be really awesome to sell that land and, take that money and move it into another project. But kind of like the first flip that I did where it really opened my eyes up to the whole process. That's exactly what this has done for me is made me realize this land and this house, this deal was sitting here. For over 20 years, just sitting here, anybody could have come in and done what I have now done that whole time, but nobody did it. And what I've realized is that land, what the kind of like a lot of it is just waiting for somebody to come in and use their creativity and their skills to make it more valuable. And they're like the deals are out there, but it's just, it's so much more complicated than just. Doing a kitchen and a bathroom and putting it back on the market. I mean, like I said, I've been working on this for two years, but the return, obviously is great and it's required very little of my actual time and presence. It's just all been like emails and communication on the phone. So in theory, you could do a, a few of these at a time. If you kind of understood the process and this is just a small one, I only created one lot. If I had gone and created 10 lots out of one piece of land. Just, I mean, there's so many more things you could do with it. It's just a totally different deal and it just takes way longer, but I think it's so interesting the way that it works.
Mike:So, are you chasing more of them?
Jeffrey:I, so I am, and the way that we're doing that is by, by the way that I'm breaking my own advice, like I said earlier, I actually have a. A second business that we started, it's a, it's called Harmony Home Builders and I brought a partner in that I'm 50 50 on and he has a lot of construction experience and we're actually just closed on a project and started it last week where we're doing like, we're doubling the size of a house and then we're going to, obviously put it on the market and sell it and. Him and I are very much actively looking for deals where we can either build a house, subdivide the land and sell it, or, just different ways to kind of do it than just flipping a house. So, the thing that I'm glad I did is partner with him because he's kind of got some of that experience and he knows what he's doing, but I have a lot more skill in finding deals than he does. So he's like more of an operations guy and I'm really good on the sales and deal finding side. So like I can find, like once I understand what it is that we're looking for, I can go out and find it because I'm really good at finding off market deals when he's not. And so that's where we're able to kind of marry our skills together. And so he's kind of helping me understand like, Hey, this is what we're looking for. This is not what we're looking for. Cause I don't know about you, but up until like a couple of years ago, I could have looked at a hundred pieces of land and would have had no idea how to underwrite or evaluate any of them. I mean, I'm like, what is, what is our 20 zoning mean? Like, like how, what is a sewer easement? What is a floodplain? Like, I have no idea about any of this stuff.
Mike:then. You seem to have been able to get yourself like fully, like, or maybe not, but it seems like it fully out of the acquisitions with your two acquisitions guys that you have. At least on the flipping side, I should say, at least on that side,
Jeffrey:So fully is probably not the right word, but mostly it's probably a better word.
Mike:mostly.
Jeffrey:Yeah. Yep. Yeah.
Mike:about, sorry, go ahead.
Jeffrey:No. So how do we go about kind of setting it up or what we're going to say?
Mike:Hi, hiring the right acquisitions people and getting that
Jeffrey:Right. The acquisitions people I hired kind of funny, both actually all of the ones that I've had that have been successful have been people that I was in contact with and just in my network. That were, I could just see based on the way that I talked to them, like you're going to be a really good salesman and I want you to come work with me. One of them was a guy who I would always go to my favorite restaurant and he was always my waiter and he was just like so persuasive and so good at communicating. I was like, dude, you've got to come like, talk to me about real estate. Like I'd love to share with you, like how you could work with me. And he did. And then another guy actually came to my house to like a party. He was a ballet guy. And he was our valet for the night, but he was super personable, really good relationally, younger guys in college. And I'm like, dude, I don't know where you're working right now, but you're coming to work with me from now on. And, I've obviously trained them and given them direction, but I don't like, I don't think you can take somebody that's like, they, a lot of people, like, do you just got to kind of have that like ability to sell and kind of persuade people naturally. And then we kind of crafted it for what we want to do. And then, but it's hard to take somebody that doesn't really have that and then make them a great salesperson. Yep. So, so, yeah they kind of know what to do. They run our system, they know exactly what we're looking for. And then I kind of come in for the final underwrite once we're like ready to lock one up and buy it, then I bring in our private money guys and just kind of give it a green light, if you will.
Mike:Nice. That's awesome, man.
Jeffrey:Yeah, so it works pretty well.
Mike:we're getting close to the end here, but there's always two questions I like to ask at the end. So the first one is what is the craziest or most uncomfortable situation that you have ever experienced in a real estate deal?
Jeffrey:Yeah, so there's two that I thought about and wanted to share. The first one Was when we were trying to get a guy who was in foreclosure to sign a contract with us And this guy was adamant that he wanted to go have dinner with us at Cracker Barrel to talk about the deal Had to be Cracker Barrel and we're like, all right, whatever we'll go to Cracker Barrel. So We're at Cracker Barrel and this guy Pulls out a gigantic magnet and he proceeds like to pull all these weird contraptions out of his bag, proceeds to tell us how gravity isn't real. And like the earth is a giant magnet and he's got all these inventions on the table in the middle of Cracker Barrel, all these people around us and we're just sitting there like, Oh my gosh, like this is the most. I have ever heard. And this guy just goes on and on. And he ends up signing the contract and we bought his house, but we had to sit there and just get, I mean, it was just a really weird situation. And he like brought us down in his basement and was showing us all these like weird toys that he had. And I was like, man, I don't know what's happening down here, but I really want to just get out of here. It was strange. And then we had another guy who. With I wish I could show you a picture on this podcast because I have one on my phone, but we walked into his house and this will sound like an exaggeration, but it's really not. The entire home was up to your knees in beer cans, like you waiting through a sea of beer cans everywhere. I mean, there must have been a hundred thousand beer cans in this house, empty and just thrown everywhere. There was pizza boxes, like the couch was covered fully in beer cans and I'm trying to walk through this home and like evaluate the repairs. And I'm like, what am I supposed to do right now? It was absolutely like, and the most sad thing is that this guy who lived there, he was a Lyft driver.
Mike:Oh, my God,
Jeffrey:I know, man. So this guy. Was probably hammering about 10 beers and then going and doing lift rides. And I don't know how lift vets their guys, but they missed on that guy big time. Yeah, it was wild. And I mean, I've seen so many wild things walking through homes. Like you, you kind of just learn to like, just shut your mind down when you walk through a house and just don't ask questions, don't say anything, just. Just walk through get your pictures and get out.
Mike:Yeah. Wow. Well, the second question I always have is if you could go back in time and give yourself one piece of advice when you were looking for that first deal, knowing what you know now, what would you tell yourself?
Jeffrey:Well, that's a great question, too. And My answer is different now than it would have been in 2016 when I was looking but if I were to answer that question today It would hundred percent without a doubt be to utilize social media to its fullest extent because social media is Unbelievably powerful for people in real estate. And if you were somebody who is just getting started looking for that first deal and you start posting about how you're looking for deals, you start documenting your journey. You will be amazed at how deals will start to be sent to you and people will start to say, Hey, I heard you're looking for a deal or, Hey, I heard you do investing. And once you obviously get a deal and you start documenting it and talking about it, I've had so many deals sent to me through Facebook. Like it's unbelievable how powerful social media is and I didn't utilize it until like up to a few years ago and I wish that I had much more earlier because I have no doubt it would have really accelerated my growth even quicker.
Mike:Yeah, that's a good piece of advice. So if people want to reach out to you after the show, or maybe they wanted to send you a deal,
Jeffrey:Yeah, that'd be great.
Mike:that?
Jeffrey:Probably the best way is my Instagram is jeffreyjohnson22. I'm pretty, I've been getting a lot more intentional putting stuff of value on there and being on there. So that's a really good way. I'm on Facebook too. So both of those are, pretty good ways.
Mike:Cool. Awesome. Well, this is great, man. Thanks for being on the show.
Jeffrey:Yep. Thanks for having me. I appreciate you guys and talk soon.