House Flipping Case Study with Brant Phillips & John T
Brant: Rolling. All right. Welcome everybody to a house flipping case study. We’re going to show you guys step-by-step how my buddy John found, financed, fixed and flipped the home that you see below. This is what we like to call a bread and butter deal, you got to butter that bread. To be honest, these are the properties that I cut my teeth on. These are the properties that I enjoy the most in terms of lifestyle and just ease of getting into and out of.
I love properties like these because they are very, very safe in terms of, and I use that word lightly, but in terms of comparing these types of deals that are starter homes that are slightly above $100,000 ARV but you can purchase them for less than 100,000. They’re three bedrooms, two bath, two-car garage kind of deals, I love these deals. I love these deals because they have multiple exit strategies. You can rent them. You can flip them. You can owner finance them. Like I said, they’re good, all around properties. These are what we call the bread and butter deals. These are how I once again cut my teeth. In our current market, is that these are the type of properties that I’ve been going back to. I’ve been getting back to the basics in our business and just analyzing where I’ve made the most money at, where I’ve created the most wealth at, and it’s with properties just like this.
I know a lot of you guys who are on know me and know of me and that’s really good, but there’s a lot of people out there who don’t know me. I’m going to introduce myself real quick. I have a company called Invest Home Pro. We specialize in real estate investments. We do investment property construction and of course educating. These are all in the circle of the real estate investment world is what we specialize and what we do. That’s my company and I love it. I love what I do.
Why I do what I do? Mainly because of these guys. That’s my family. Yes, there’s four kids, believe it or not. My lovely wife once more. I’m like, “Oh my God.” I love my kids but I don’t know if I can’t take anymore. I love them. I don’t know if I can take them anymore. It’s like cookies. Love cookies, you eat two or three or four, that’s great but you get to a certain point, it’s like, “Oh my God. I can’t eat anymore. I’m going to get sick.” We’re having that discussion now of whether or not to add number five. If so, I think we’re going to go the adoption route because my wife and I are both plus 40. I’m just going to leave it like that, plus 40. I’m not going to get into too many details but we’re above that 40 mark.
All right. I’ve also written a book, not a very graphic there [inaudible 00:03:22]. I wrote a book specifically on flipping homes because that’s, in the world of real estate that’s the thing I’m most passionate about is actually flipping homes. Yes, I have rental properties, do wholesale deals, all that kind of stuff. We’re actually building new homes now but flipping homes has been my business passion. You may have seen me on the news. I’ve been called on the news several times in the local area just to go and speak about real estate and all that kind of stuff.
I do some crazy stuff too. Recently, I got into a MMA Cage Fight, believe it or not, at the age of 40 and got into a cage fight. I like to do crazy stuff and challenge myself. That’s why even at the age of 40 I am currently training for an Ironman. I ran a half Ironman recently. Now I’m actually training for a complete Ironman. I’ll be flying out to Idaho in just a few weeks to complete a full Ironman. People say you’re nuts, you’re crazy. You had three knee surgeries, ankle surgeries, all that kind of stuff and I’m like, “Yeah. I probably am but I’m doing it anyways. I’m doing it anyways.”
I also have an event called Breakthrough at the Beach. This is something that I’m very, very passionate about, something that I’m extremely passionate about. What Breakthrough at the Beach is, it’s an event where we combine real estate training for men for three and a half day process down at the beach. We train men specifically on real estate investing but we also teach them life skills and principles on how you can intertwine your business to create not only value to your business but the ideal life. Because one thing I’ve learned with real estate is that if you are stressed out or burned out in your job or what you’re doing, it’s just not fun. More importantly if your life’s not structured for long-term success meaning you’re not doing something that you’re passionate about and something that you love, then you’re going to have a hard time sustaining that success.
What we do is we create an environment that allows men to not only create wealth and create cash flow and learn how to do deals in real estate but we help them put it all together. At the same time as they’re building this business, they can also build a lifestyle that is their ideal lifestyle and that’s connected with their ideal business all at the same time. That’s what Breakthrough at the Beach is about. For those of you men who are interested, check it out when you have a chance. Without further ado, I’m about to get my man John on here. However, I’m still having issues. Give me just a second. I’m going to introduce you to John. Whether or not he’s here or not, you’re about to all meet John. Here we go.
Here’s John Thaxton. I’ve known John for several years. He attended some of my events in the past. Most recently, he came to Breakthrough at the Beach and went through that whole training and that whole process but he’s a pilot. He is an Air Force Reserve. He’s a father of, I believe a father of four. Of course, he’s a real estate investor as well. He is a real estate investor who’s actually having some issues with his phone right now. I’m extremely, extremely sorry because I don’t have him on. Hopefully, he will be joining on soon to discuss this with us.
Whether or not John’s here, we’re going to dive into his deal. All right. Anyways, there is a picture of John. I actually threw this on right before we got started down at Breakthrough at the Beach because he mentioned it, not to put it on. He was like, “Will you show the one with my bloody nose?” I’m like, “You know what? I forgot about your bloody nose that you got at Breakthrough at the Beach.” I threw this picture on there. He took a solid right on the nose and there we go. Who have we there? John?
John: Look at that, yes.
Brant: Are you on? John?
John: I think I’m on now, yeah.
Brant: Good, thank goodness. You came at the right time man.
John: I got you.
Brant: Your bloody nose picture there. John all I did is set you up. I will hand the mic over to you just to give a quick introduction of yourself so you can let everyone know a little bit about you and about your life and what’s led us up to today where we’re doing a webinar about you flipping a house and making some money.
John: Okay. I’ve been involved in real estate for a couple of years now. As you can see from that picture, I was an Air Force pilot, still in Reserves. I fly for an airline. In flying for the airlines I get to hang out with some guys who have some extra time on their hands and do a lot of different things. Some guys are astronauts, some guys are attorneys on the side and quite a few guys who are into real estate.
About two years ago, I was hanging out with a guy who had just done a couple of rental properties. I was thinking about wanting to get into something that would enable me to branch out from the stock market a little bit and get some new skills. I fly air planes, I get the FAA to check me out physically every year. If I fail a physical then I’m basically out of a job. I wanted to get something I could do to diversify my portfolio as well as to diversify my skillset. I started looking into real estate. I did some internet looking and got into BiggerPockets forum. I think you’d made a post. I saw that you’re from the Houston area.
John: I started reading your stuff. The long and short of it, I decided to get into it looking for a flip, found a house that worked better as a rental. You guys did my first rehab about a year and a half ago. Since then I’ve been gotten hooked, trying to do a fairly typical of find houses to fix and flip in order to turn off money for buying whole properties. Started off working with trying to find deals from wholesalers. Then last summer, got involved in my own direct marketing. I’m moving in that direction now. That’s where I’m at right now. I’ve done let’s see, one rental property, two flips now and I’ve been involved in some other real estate deals and on helping out with the church, buy some land and set up financing and some stuff like that. Just getting into it right now. Definitely on the beginner side of things.
Brant: All right. Awesome man. Thank you for sharing. I think you came on, you saw your glamorous shot there from Breakthrough at the Beach a couple of months back. Everyone can see you with a busted nose.
John: You should see the other guy, right?
Brant: Yeah. There you go.
John: He was doing just fine.
Brant: Yeah. You took some shots man and you kept coming so that’s a lump in the real estate world now. We got to take our shots but get back in the fight. All right. Let’s talk about your deal. This is the Elmcroft deal. We’re going to go over some basic numbers. I’ll throw those up and I’ll let you talk about these a little bit. These are all I think solid. Your purchase price is 72.5. You purchased this end of February, basically it’s almost the beginning of March we could say.
The two questions here, two things I want to point is the, I guess the two trickiest things to determine whenever analyzing deals. One is the ARV although that’s much easier in my opinion for the novice investors. Then for I know beginning investors are the estimated repair cost, where it gets a little bit even more tricky. Tell me a little bit about the ARV. Was that from your analysis or from wholesalers? Tell me why you came up with that number.
John: The wholesaler was advertising it at I believe 115 ARV. From checking on the MLS and Redfin and some other things like that, looking at recently sold, that was really solid as a very conservative solid ARV for that area at the time and for the size of the house. Things were starting to trend up. There were several on the market that were pending that were in the upper 120s. None of them had had a rehab like your typical rehabs for this level. Most of them were not rehab at all.
I was thinking that I could stretch it a little bit. I was hoping to get 120, 125 for the ARV and somewhere around 25 in repair cost was my estimate. I made a conscious decision knowing that there were a few different things that I could do in this scenario. I think I could have purchased it for 72.5 and then just turned around and put it on the market for somewhere around 90. I think I probably could have gotten a buyer pretty quickly for that. For a combination of different reasons, I made the conscious decision just to rehab it to the top of the neighborhood and accept the risk of being toward the top in the ARV.
Brant: There are some really good teaching points here. One thing like you’re right in this price point. Sometimes you can just close on these things and clean them out, maybe spray some paint inside and you could list it and probably made some pretty decent money on this one. It could have even been comparative of what you did make. Generally, the way we make the most as investors and I say generally is doing a full rehab and that’s how we add the most value.
The other thing that’s pretty interesting on this one is a lot of investors and my students and even myself sometimes, I catch myself complaining about wholesalers sending deals out on their email blast. They’re always overestimating the after repair value, the ARV. There are exceptions to this rule and sometimes people I feel like they don’t believe me but I’m like, “Sometimes wholesalers get it wrong and they undervalue properties.” It doesn’t happen, if it’s the 80/20 rule, it’s definitely in the 20% range if not the 5% to 10% whenever they do underestimate the value but it does happen. One of my, the second flip I ever did I made 60 something thousand on it. It was because a wholesaler grossly underestimated the value on that deal. If he would have accurately estimated it, his assignment fee would have been much much more.
The other thing that stands out to me is that this is, I want to pay you respect because when he put the ARV out there at 115, it most likely, it was all based off of comps in that area, but you had the eye to see that hey, these comps aren’t really comparable and that a lot of them I’m assuming were a little bit outdated, a little bit dirty, lived in, not a fully renovated property or almost fully renovated like you did.
That’s another thing. We’re actually going under contract on one today that we looked at a couple of days ago. It’s a solid $140,000 ARV but I’m looking at the comps. When I was looking at the comps, I noticed that a lot of the comps they’re not rehabs. I feel like we can push that. We could probably go 145, 150 at least because whenever we put ours on the market, it’s like we’re not the same as the $140,000 properties. We’re much much nicer and better. There’s a lot of really good teaching points already right here from the beginning. Tell me a little bit about how you determined the repair cost. Did you use calculators or just get bids? What was your strategy on that?
John: I’ve done that. I’ve put up together spreadsheets. I’ve used your rehab calculator in the past. I’ve taken estimates from the full service wholesale outfits. Those were outgoing in the back of my mind. Really what I did on this was compare it to a bunch of actual bids, several bids from you guys, several from other contractors on very similar houses. It was almost like a combination of, I feel like it was a fairly typical $70,000 deal in the $120,000 repair range that didn’t need foundation and might need roof. It just fit in there with some rehabs that I’d already priced out. I didn’t go line-by-line looking at every single light socket, switch plate cover and what not to price the whole thing up. It was a [inaudible 00:18:35], that looks about right type estimate. I was pretty confident in it based on very similar houses. I was pretty confident that within $5,000 or so I was pretty close.
Brant: Yeah. Even after just doing a few, with me, you just get, I estimate most jobs in my head. That’s all that I do to make a decision on whether or not I’m going to purchase it. Then after I’ve actually made the decision to purchase it, that’s when I’m like, “Okay, let me verify these things.” We use a little, what I call blind formulas, blind offer formulas and just have little cost per square foot on most things and then take into account the roof, foundation, AC. That’s just something that comes over time. I don’t recommend people doing that in the beginning. It does just come to you and it’s like, “Yeah, that passes the smell test, common sense and good judgement. It should be about there. Let’s roll with it.” Then you always make sure that there is enough meat on the bone if some things go wrong. You can at least dump it or maybe you don’t make 15 or 25,000, you make like 5 or something.
Brant: Let’s talk about … I’m sorry, do you want to say something?
John: It’s a product too of looking at thousands of these and then running numbers probably on hundreds of them over the past couple of years. Just doing it over and over again and getting familiar so that by the time a deal came over the email, I was like, “Yeah. I can tell that’s a deal right now. I don’t have to really think about it. I don’t have to start from square one of taking four or five hours to decide if that’s a real deal or not.” I’ve looked at so many that were so similar. I could pretty much tell that, “Hey, I think this is pretty much a deal here,” so I can act fairly quickly.
Brant: Let’s talk about, you’ve mentioned a little bit about finding the deal. What was your strategy on this one? I know it came from a wholesaler but I do want to talk about what led to, was there a previous relationship there with the wholesaler? Meaning was it just an email blast or had you been like talking to this particular wholesaler? Because I know sometimes you have to cultivate relationships with wholesalers. Tell me just a little bit about this one.
John: This wholesaler works for another guy who is, I heard him on a national podcast a year and a half ago or so. Then I reached out to him just through that platform. He went to the same school I went to a few years after I did in the same area. We just touched base with him through email and then got on his list. I hadn’t really truly seen anything that was super appealing from them. I was getting emails from like probably 20 or 30 different wholesalers. Somehow you just get on these lists. I don’t know exactly how that happens but they were coming to us. That’s how it happened.
It just happened to come across my desk and it turned out that this guy, they were definitely a breath of fresh air to work with in the wholesale realm because they have a very similar mindset to you in the real estate business and they mostly do their own rehabs. They just started to do some wholesaling deals that maybe are outside of their normal area. Just very professional guys, very easy to work with and yeah, that’s just, and I got the email and I just happened to see it and see that that was a deal and was able to be the first people to call them and first guy to go see the property.
Brant: I prefer working with wholesalers that also do investing themselves. Sometimes investors will say, “Well, if it’s such a good deal why didn’t they just do it? Why didn’t the wholesaler do it?” Sometimes you’ll get a deal from an agent and they’ll say, “If it’s such a deal why isn’t the agent doing it?” The fact of the matter is one, for a lot of wholesalers, even other investors and real estate agents for sure, they still need to put food on the table. If they can make a quick 3 to 5,000 or 10,000 on an assignment fee, that’s money they get right now versus waiting two to three months to make 15, 20 or 30,000 or 40,000 what have you.
Then sometimes with investors is who also wholesale because we do the same thing. Sometimes it’s just we’ve got a lot of capital tied up, maybe we have five, 10 projects going on, maybe they’re big projects. We might have a couple of million dollars in construction going on so we can’t do every deal and we make a little assignment fee. That’s what we do sometimes. The theory that oh, it’s not a good deal because they don’t want to do it, to me it doesn’t apply at all because sometimes it’s just they don’t have the capital or the resources or the bandwidth to do those deals at that particular time.
Of course, if you can work with honest, ethical people who, helping creating win-win relationships, it makes it all the better. I’m not going to call anybody out but we know that there are some wholesalers out there that don’t always adhere to that code of honest and ethical. We got to look over our shoulders with each of these guys and do the Ronald Reagan trust but verify thing because I know someone asked a question about is if we can ask a wholesaler for the rehab estimate. The answer is absolutely yes. A good wholesaler will help provide a general analysis of the rehab cost but we’re not going to take that as the gospel. It’s up to us to do our own due diligence.
Let’s talk about your funding, how you finance the deal. I don’t know if you set the record but you’ve at least tied the record for combining finances to get a deal done. I commend you for that. I love this. You used a little bit of cash, you used home equity line of credit as well as a credit card. I love it man. I love it. Here it is all laid out. You might want to verify these numbers but I think I have them correct.
John: Yeah. That’s I assumed it was about 4% for the credit card because there was a convenience fee so to speak for using that. I think it was like 18 months zero in interest but I think it was like 3 or $400 to use it so yeah.
Brant: That’s awesome man.
John: I didn’t really need to throw that credit card in the mix there but I was sitting at home one afternoon and I know it could be dangerous so I don’t necessarily recommend it. I was like, I hadn’t really done anything on offense that day and I wanted to do something on offense just about every day is how I put it. I figured I’d sit down for an hour and see what I could do about lining up some zero interest credit cards. Just within an hour or so, I came up with about $37,000 for zero interest credit cards that at least I had available. I don’t know if I’ll use them all but I wanted to tap into some of that for now in a conservative way but hope it sums that up. It’s cash and the HELOC and a little bit of credit card in there just for the heck of it.
Brant: For me, it makes total sense. I always go back to the very first deal that I ever did, I used a credit card to buy my first investment property because I didn’t have any money. We’re broke living in that apartment and wanted to do real estate. The first deal I bought required a down payment of about 7,000. I borrowed about 14,000, 0% interest kind of deal. Fortunately, I realized like, “Oh, at this rate, I can buy two houses and I’m done.” I got real creative and figured out a way to buy number two with no money down and kept buying no money down after that point.
I’m always careful. I’m like, “I don’t recommend that you buy houses, use your credit card to buy houses,” but I got to say if you’ve got good credit and you can get 0% interest on credit cards, I still use mine to this day. We have a line of credit. We have a business line of credit. Every now and then, we’ll tap into that. We got a pretty substantial amount at 0% interest credit cards. When we get real heavy and in the thick of things with all kinds of projects going around, I’d rather borrow 50 to $100,000 of 0% interest credit cards and pay that little 2 to $400 fee whatever it is and have 0% interest even when I would work with my private lenders paying 7% to 10%. To me it does make sense. It just makes sense.
John: Some things I wasn’t sure of when I opened up some of those was maybe if I was doing a different deal, the threat I was seeing was, “Hey, how is this going to affect my ability to refinance out of the house if I needed to?” I wasn’t really worry about that in this particular situation so I just accepted that.
Brant: Yeah, that’s something you have to take in mind. Like say for example, if you were looking to purchase a new home or a different home for your personal home or you’re going through refinance process with investment properties or anything like where you know that your credit’s going to be scrutinized then you got to be careful. I’m not. We’re planning it here and I do real estate and love my business and plan it in our home. I don’t use my credit for anything.
For me, it makes sense but yeah that’s a good point. Just make sure that there’s no other little issues that it may affect on down the road because whenever you do open up a whole bunch of lines and things like that, it will affect your credit score there for a while. The funny thing is I found out is that over time, and don’t quote me on this, go to Credit Council or whatever but when you have lines of credit open and credit cards, the longer that they’re there the more your score goes up. Anyways, I don’t even want to get into that conversation so I’ll hush. No, I love the structure man. I love the structure. Like I said, if you could have thrown just one more in there though, you could have set the record for a webinar financing, like have four different financing options but you tie the right-
John: I will next time because my son wants to invest his lawn mowing money to the tune of about 1,000 to $1,500 on the next project that we do.
Brant: There you go.
John: He’ll be one of my private investors on the next one.
Brant: I love it man. That’s what I do with my kids all the time. I’m like, I ask them like so if they made some money, they get like birthday money. I’m like, “Do you want to use it and spend it or do you want to invest it?” My kids usually just want to spend it though. I haven’t figured it out. All right. All right. We’re going to talk about the rehab now. I’m sure everyone’s, I’m just going through a slide show of pictures. If you want me to stop any of these to point out anything just let me know but we’ll let this run through a few times.
I don’t know if you could hear at the beginning but I told everybody that this was a bread and butter kind of deal. It was the old proverbial beige, paint everything beige and that’s one of our mottos when we do construction on our own flips. This price point and this style of home is we always like to say that you can have any color you want as long as it’s beige because we know that beige works. It works for the walls. It works for the countertops. It works for the flooring, like the carpet. We’re going to keep on using beige just because it works. We even painted on the ceilings beige. Give everyone your perspective on the rehab, fears, worries, concerns and just what actually happened in the process.
John: The bones of the house were really good. The roof, I was slightly concerned about. The air conditioner was fine. It seemed to be the foundation, which was one of the biggest things I was expecting would need to be done, seemed fine. I didn’t get an evaluation or anything like that. I just pursued it as if it was good to go and went for it. Yeah, I just wanted to do the basic rehab, you’d shown one in Southeast Houston, just South of 45, inside the Sam Houston that I saw right before I pulled the trigger on this one. I’m like, “Okay, that’s what I want to do. That looks good.”
Brant: We’ve been doing this for years as well. We’ve been doing it for years as well. Let it play again. I know you ended up using Invest Home Pro but did you get other bids on the property?
John: No. I didn’t get any other bids on this one. I had other bids on some similar houses a year ago or so. For the level of service and you guys having your stuff together and just my trust for you and Chris, it seemed reasonable. I know I could have gotten it done for quite a bit less or more but I’m sure that I would have had some other issues that I would have had to take care of. I just didn’t want to deal with that paying maybe a little bit more for you guys or a comparable outfit meant that at least for this project I got to have Chris Atkins as my project manager without having to really have him on my payroll.
John: It was worth it for me.
Brant: Free education and mentoring right there.
John: Exactly yeah. Yeah.
Brant: Yeah. One, if I were your coach, I would say still get some bids especially in the beginning just to educate yourself. You learn things. You know the old adage like, “You learn something new every day,” You learn something new every rehab, that’s for sure. Then you learn something just talking to other rehabbers and contractors and seeing other bids and things like that, get different perspectives. I appreciate of course the trust and the business of course.
My thing is what I always tell people is because there’s a couple of other companies in our market that’s similar to us in terms of service and product and quality and even pricing in which pretty much those are the three main things you’re looking for from a contractor is you want to make sure that it falls in line with your budget, the time frame and the quality. That being said, I said that you could have gotten it done a little bit cheaper with some other investors. I want to talk about the roof in just a second. You could have gotten it cheaper with other contractors I should say.
The other side of that coin and this is where we get a lot of calls from is from a lot of investors who will go the cheap route. They will go with the cheapest contractor they can find or one of the lower quotes trying to save money. I get that but a lot of times they end up costing themselves money because either one of those things. Most likely the quality of the work is subpar or the time, the timing, instead of doing something in a month or two months, they double or triple that time and that ends up costing them.
Then in the budget part, is not usually their quote is a quote but a lot of the less professional shade tree contractors if you will, they’re usually not thorough on the bid and so they end up having more change orders or like, “Oh, that wasn’t included.” There’s all this misunderstanding, etcetera, etcetera. One thing I want to point out on this rehab though is that was the roof when we started. We ended up just, we leave this roof and cleaned it, correct?
John: Yeah. I think we replaced the ridge shingles.
Brant: Yeah. I really want to show this to them. This is where inexperienced investors may end up costing themselves a lot more money. We try to act as not only as contractors but really just consultants to help navigate all the decisions that have to be made. This is a big one. A lot of investors, they would see a roof like this and they’re like, “Oh my gosh, the roof’s got to be replaced.” What we did is, at any point like the Apex up here at the top like these are ridge shingles at the top. Those are generally the most warm and they’ll show up on inspection reports as having the most damage.
What we do a lot of times if the roof is acceptable, and for us acceptable is if it has at least like three to five more years left on the shingles, we’ll send a roofer over there to assess it. He’s been with us a long time. Always gives us an honest opinion like, “No, this roof’s got to go.” A lot of times he’s like, “No, it’s fine. It doesn’t look so good, just clean it.” We hire a professional roof cleaning company to come over and chemical wash it. We replaced all the ridge shingles. That is the same roof after. You can see something like that, that there alone is several thousand dollars in savings without compromising the product, without compromising the product whatsoever. That’s a big savings and a big lesson for everyone out there watching is that sometimes the roof is just a little bit dirty. With a good cleaning, you can do some transformation.
John: I think that really set at ease the people who came to look at it. If you can see the house to the right, dark and the before picture and same with the house on the other side and all the others in the neighborhood. This really stood out in the neighborhood.
Brant: Some investors would just not, even if the roof was in its previous condition, we’re not going to change it. They wouldn’t even go to the extent to clean it. You can see what a big impact that is. We try to look at every dollar that we’re spending like what is the return on the investment for this dollar? I think that’s big return on that. Let’s talk about the strategy of listing it and marketing it. I can’t recall. I believe you have your license?
John: I do. Yeah, as I was doing this I was telling myself this is my real estate agent boot camp house too because the first one I listed as an agent. I just got my license back in the fall. Yeah, put it on the MLS and that was pretty much the extent of the marketing. I think what helped me is that about a week before we put this on the market, an investor put another one that was slightly bigger a few streets south in the neighborhood with a comparable rehab on it. They put that on the market for 162,000 which was way overboard for that neighborhood.
Then this comes in looking better on the inside, slightly smaller but at 134 is what I listed it at. It got a lot of action right away. Just within 12 hours, I think I had five or six offers all those were full price on it. I’m sorry 24 hours, yeah, six full price offers and then one slightly over full price for cash. That was just within that first week. That first offer was, I didn’t have a super good feeling about the agent they brought to me. Sure enough I guess three days later, they ended up backing out of it. I told myself beforehand that, “Hang on to that loosely. We’ll see what happens here.” It wasn’t a super big deal when that happened. Yeah, they backed out.
It turns out I think she had just been locking up probably a couple of three houses to give her clients time to figure out what they’re doing. Finally, some other agent brought a client to the house anyway. The very next day, I just called some of the agents who’d showed interest initially. One of them said he had a cash buyer. That afternoon, we had that offer for 132. Once again, that was our cash deal. Slightly under my asking price but I think you say, “Fast nickels over slow dimes and cash.”
Brant: That’s it.
John: I was fine with that. My profit target when I enter deal at least for now has been about $15,000 that I like to see before I pull the trigger on a deal. $15,000 or 10% of the ARV. This was going to be a little bit above that so we went with it. They did the inspection. The inspection of course inspectors are going to find quite a few issues. Then the agent was pretty good at embellishing those too. They wanted to reduce it by a couple of thousand dollars and it’d be okay. I went ahead and if we can move the close up to yesterday, I just went ahead and said I’m fine with that.
Brant: That’s okay. Close enough.
John: Yeah, yeah.
Brant: It was just a little over three months, I think less than 100 days, 97, 98 days.
John: Yeah, 97 days. Just internally some of the things, you have a little fear every now and then. What if this and what if that? That was probably the first reaction when I saw this long laundry list of items they came up with on the inspection. Maybe they’re going to back out, maybe they’re not. You drop the price two grand we’ll stay in. It was just natural to take a deep breath and then just keep moving forward.
Brant: Yeah. No, inspection reports, we don’t have time to go into it today but I’ve got a whole strategy on how we handle those. There’s really a psychology that goes into inspection reports from the buyer’s side and our side, the seller’s side on how we handle those. A couple of thousands not great but it’s not too bad. One thing I want to talk about is, you touched on it. I want to make sure everyone got it because what you mentioned just a second ago to me is why flipping houses is really the perfect business model when it’s executed properly. You mentioned there was a house listed for 160 something. It was not only overpriced but you had a better product.
What really gets my juices going with flipping houses if you can look at it, look at it when the business model is executed properly like you did, it’s like one is we go in when we buy our home, we’re buying it cheaper most likely than any other home in the property. We’re buying them super cheap. Then we go in and we do the rehab which adds all the value. Then even after we’ve purchased it and done all the rehab, we can still sell our homes cheaper if we choose than all of our competition. That’s something that I want everyone to understand is that you can’t do that in most businesses and most markets. You can’t have a better product and sell it cheaper.
It’s such a huge aha moment. It’s such a big light bulb moment when you get that. It’s like, “Oh my gosh.” If you execute properly, you’re patient enough to pass on some of the bad deals and you wait for the right ones, a deal like this in Elmcroft, really it’s a no brainer. It’s like why would anyone not do this deal when you can buy it cheaper than all the other houses, fix it up and then still sell it and make 17, $18,000? Who knows? In hindsight, I’d like to say yeah you probably could have pushed it and gotten a little bit more. Sometimes you may have just priced it exactly right. You may have hit the sweet spot.
John: I think so. Actually I ran my numbers a little bit better last night. I hit right at 18,000. That was cool on the profit. I was a little bit concerned about the-
Brant: [inaudible 00:46:48] sound a lot better if I could have said 18k but that’s okay.
John: That’s all right. I was a little bit concerned about the appraisal. That’s an area that I want to learn more about in the future. Most of my offers were either FHA or low down payment conventional. I just didn’t want to press the test too far in that direction but yeah.
Brant: Here is the deal with appraisals and that’s a legitimate concern but guess what? Let’s say for example, if you wanted to price it at 145 and there’s no comps. There’s no comps in there to justify that price. Appraisal comes back at 135. You’d still be happy at 135. You’re only at 132. One or two things can happen, is one, is your buyer, hopefully they have enough money to put down to cover that spread. If not, you can drop your price. You can be like, “Oh, I took my shot.” You can lower the price. You could give them a concession and just lower it to 132 or 135 or whatever the appraisal is.
What we’ve done recently because we’ve been pushing price points in these areas and we’ve been setting comps but you’re right, the appraisals don’t always come back. We had that happen recently. I think it was about $8,000 higher than the appraisal came back and so we split the difference. We dropped the price 4,000 but they came up 4,000. To me, that’s something, if I feel it’s pushing the price like that, I don’t want to extend the days on the market like super long, we love to have contracts in the first couple of weeks on deals like these. If I feel it’s reasonable, we got a good pulse from the market then we’ll go ahead and we’ll toss it out there and see what happens. Nothing wrong with your strategy man. I think you executed like a champ and results are all that matter. Results are all that matter. It ended up being 18,000 so that’s even better.
Everyone, I want you all to pay, I want to share something with you about everything that you’ve seen in this video. There’s a few things that I believe that John has experienced that are, we call them X factors to creating success in the business world. There’s several things. The four things that really help to create success other than just like A, B, C, 1, 2, 3, step-by-step, that’s great. All this, what you just saw with John’s case study came about because he got his mindset determined. He’s like, “Look, here’s where I’m at and if I fail a physical at work I may be out of a job. I’m tired of the stock market, don’t trust the stock market. I’ve got to do something else.” He just became determined like, “I’m going to learn real estate. I’m going to hop into that and give that a shot.” That’s exactly what he did was he went into it with a determined mindset. That’s one of the keys.
If everyone’s if you’ve got a notepad and pen, you might want to write this down. I’m going to give you the four X factors of success. It starts with the mindset. Yes, you do have to have skillsets also. What are the skillsets necessary to succeed in the real estate game, in business in general? You need those skillsets. You also need to know how to leverage the skillsets of others. You saw in this like John leveraged the skillsets of Invest Home Pro to help with his rehab. He leveraged the skillsets of a good wholesaler bringing a good deal. It doesn’t mean that you need to know all the ins and outs and all the details of every single skillset there is to know with real estate but you do need to know a general overview knowledge of what is needed to be done to create success.
After mindset and skillset, those are fairly common like wow, like nothing big there. What I think a lot of people lose perspective of is the importance of being involved and being in the right environment to help create your success. What I’m talking about now is associations. Who are you associated with and affiliated with that you can call to? Who is on your team that can help you when you get stuck? Is there someone there pushing you? Is there someone there to encourage you? Where is it that you go to? If you have a problem and if you’re really, really committed to creating something, like what is the environment that you’re around that’s going to help you get to that place? It’s like the old adage iron sharpens iron.
Then also, success requires accountability. Putting out your goals there to a group or to some other people to say, “Hey, this is what I want to do and this is what I’m pushing for so other people can see that and hold you accountable. Then something just happens different when we put our goals out to the world and say, “I declare this is what I’m going to do.” When you put it out there and you take action on it, especially when others are holding you accountable. Those are what I call the four X factors of success: mindset, skillset and environment and accountability.
Of course when we’re talking about skillsets, there are seven fundamentals. Now just like in my book that talked about the seven fundamentals of a successful real estate deal. This is where you get into the nuts and bolts. The graphic that you see there is basically what John executed upon. He started with a determined mindset. He created deal flow from some of his own marketing and wholesalers getting emails. He was able to evaluate and analyze the deal to determine like, “Yup, this is a good deal. I’m going to move forward on that.”
He was able to estimate the repairs, to estimate them actually, very, very accurately. He was able to put together his financing, structured financing, moved into the rehab phase with a turn-key general contractor versus managing the deal himself. Then ultimately, he ended up in the income generation phase. This particular property he flipped, he could have rented it. He could have sold it owner finance. There’s a lot of things he could have done but that was his strategy and he executed it properly by following the seven fundamentals.
What I want you guys to consider is just think for a second about being coached by myself and my team. We mentioned Chris as a member of my team. Being coached by us on a daily basis with all the real estate investing information you ever need to know around these seven fundamentals. Being taught every day about mindset, deal flow, evaluating deals, estimating repairs, financing, rehab and actually making money, income generation at the end of the day.
What I’ve done is I’ve created a training experience that’s conducive to your success by combining with the most ideal format, the content, the right environment and the right pace, and the right pace because there is a lot to learn when it comes to real estate. John mentioned he’s been doing this for several years so it doesn’t happen overnight. The pace of the content and as well as the format, watching a video versus reading a book. The video format is so effective in teaching because we can demonstrate with words, verbal spoken words and show you pictures and graphs of actual properties.
Once again, I just want you to imagine being guided along in this path of creating your real estate success without being overwhelmed. I talked about the right pace. Just doing one lesson per day. Anyone can do that. Some lessons are 10 minutes, some are 20 minutes long, not a lot of time but every single day, every single day you’re getting this information. There’s a myth out there that talks about that it is only like 21 days to create a habit but the truth is if you dive into the science, it takes about 60 to 70 days to create a habit. Imagine taking 10 to 20 minutes a day learning a new real estate lesson where you’ll be in a few months from now. You’ll be so ingrained, like daily learning and that knowledge is just going to be there.
A training that we’ve provided has over 100 real estate lessons. We have private interviews. We got dozens of forms of everything that you’ll ever need along with some other things I want to share with you. These lessons what they do is they systematically dive deep into all the seven fundamentals. We do this with the program I’ve created that’s called FlipFundamentals.com. The F7XFactor, it’s the seven fundamentals included with the X factors that help create your success. This is an online training program but we’ve included some things that will help you out in the environment and the accountability side.
This is actually a screenshot of what the members’ area looks like. You can see on the left how we have all the video training. All these trainings that you see on the left are actual videos of myself and some of my team members but mostly me teaching on different things, all the fundamentals that you need to know about.
We actually have video training where we’re at properties walking through homes, estimating repairs, just talking about rehabs. Live video trainings showing you exactly what it is that’s required as a real estate investor. Not just talking about it, not just giving you a book but actually out there doing it. You can do this like I said just watching it from your home.
We have forms that you’ll need. To me, the forms that you need in real estate is sometimes people get overwhelmed, they think they need all these forms. There’s really only a handful of forms that you need but we give you everything that you can possible need in terms of forms, especially the really, really, really good ones and the really important ones. We have some forms in here that no one else has. We don’t release this to the general public but you guys in the F7XFactor are the only ones that gets access to these. You guys are my private coaching students.
We do interviews with other successful investors. These are interviews that we don’t put out everywhere. You can see what’s working not only in our business and what we’re doing but I’m always networking, I’m masterminding with other successful investors. I’ll bring them in to the F7XFactor to share some of their success and what they’re doing.
I’ve talked about the environment and the accountability as well. One of the things that we’ve done is we’ve created a private Facebook group so that you guys can interact with everybody. Everyone’s in there posting. We get posts probably every single day of people just sharing things. Like, “Hey, I found this deal. I’ve got this deal to sell. Hey, what are you all doing for private money? What kind of success are you having?” Just cultivating an environment that’s conducive to help you succeed by sharing with others, learning from others, getting motivated by others.
Sometimes you’re just frustrated like, “Hey, I’m stuck here. Someone help me out.” Then you get boom, someone will post something. Just a couple of days ago, you see this post. It says, “After about two months of taking action I finally received my first check of the wholesale deal. I’m halfway to meeting the goal that I set for myself since starting the program. I just want to encourage everyone in the group to keep pushing forward and never give up. Good things will happen. Thanks Brant Phillips for your teachings.” This is a member that joined just a couple of months ago and is already cashing check for $8,000.
I want you to understand and realize how important an environment like that is. People will actually go into the group and post some of their personal goals for accountability purposes, to share with others, to be motivated and inspired and encouraged by others. I can’t tell you the importance of having this environment because a lot of online programs just have training. They only help you improve your skillset. That’s it. When you combine these other X Factors as I like to call them, that’s what you need to create a profitable and sustainable business over the long-term and that’s what we’ve put together in the F7XFactor.
Something else we do, we do monthly webinar training. You can ask all the questions that you want to ask. We spend time, everybody gets on the webinar and we go over all the questions. We do different training, outside the box training. Whatever it is that you need, wherever you’re stuck, you send us your questions in and we go over all those questions to answer them. To make sure that you’re not stuck because what you begin to see is whenever you have the determined mindset and the right skillsets and then you combine that with environment and accountability, the real estate’s not so difficult. It’s not. It’s not. Anyone can create success in real estate.
I believe that real estate is, it’s set up for people who are willing to do the work and just stay committed that success is available to everyone. I believe that you guys not only like whether you are to come into the F7XFactor or not, we live in the information age. There’s tons of information, books, webinars, training where you can go out and get all the information that you’ll ever need to learn how to do real estate. You don’t need the F7XFactor in terms of learning the information. I have to be honest with that because some people try to sell programs like, “You have to have this secret pill, this little ingredient, the magic red pill and everything’s quick, fast and easy.” Truth it’s not. Truth it’s not.
What I’ve found is that when you’re involved in a program like the F7XFactor, what this can do is speed up your success rapidly. You saw the post in Facebook just after a couple of months he made $8,000. Understand that whenever you invest into a coaching program or a training program, the most important thing is, is that program going to speed up your success and help you to avoid some of the pitfalls that you may have went through? Because I’ve went through all the pitfalls.
Pitfalls aren’t fun because I didn’t always invest in coaching and mentoring like I do now. I invest a lot in my personal and business coaching and mentoring. That’s what I want you to understand is a program like this, whether you join this program or another program, it’s that when you’re in the right program with the right coaching, the right environment, the right accountability, that you can tremendously speed up your success and your results and that’s what good coaching should do.
By the end, for those of you who joined the F7XFactor, by the end of the experience and the training, it’s so formulaic and simplified that not only are you going to be able to create results, you’ll be able to actually go out and train and coach others if that’s something you feel called to do. The most important thing, the way that we teach, I want to equip you that you know everything that I do, I just know that I can’t do that over a week and at a seminar, or a boot camp or even at a book but after three or four months, over 100 lessons of me just talking to you and sharing with you, my intent is to teach you everything that I know. I just know I can’t do it in over a day or two or in a webinar. I can only teach you like a little tip of the iceberg kind of stuff like we covered in this webinar.
I know a lot of you want to know about this. The cost is $97. It’s $97 for you to join and $97 a month after that. Dirt cheap, dirt cheap is the way that I feel about this pricing right now. You have to understand like we just created this program a few months ago so it’s in the beta phase. We’re building it out. It’s pretty much built out at this point. We’re making a few tweaks. I’m going to make it even better. We’re making this a better deal than most likely we’re ever going to be offered again because after we make these few tweaks and with the training and some things that we’re doing and we’re still adding, we’re going to increase the activation fee and the monthly subscription fee.
For those of you who are part of this training right now, if you want to get in for $97 you can do that. For those of you who are interested, how can you apply? You can go to the website that you see there. Once you sign up and once you join, you make your payment, you are going to get instant access. The training starts right away, not a week from now, like right away the training will start.
I want to tell you and I want to talk to you about something is, just begin to imagine what your life and your real estate business would look like if you join, if you join this program and you just start to follow the daily steps. Like I said, “We’re not going to throw a lot at you. It’s just daily steps and not only that for 97 bucks, first off, it’s 97 bucks. John just made 18,000. John’s a member of F7XFactor. Montell just made $8,000. He’s a member of the F7XFactor.
With your investment of $97 a month, I want you to know that your satisfaction is guaranteed. You can take the entire class, you can put it to work, you can download everything. If you decide it’s not right for you, I’ll issue you a full refund. If you don’t think that you’ve gotten the value and everything that I’ve told you that you would get, just let me know and I will refund you. No questioned asked. We’re not going to be knocking on your door or setting up a call like that’s it. I get it man. I didn’t produce and that’s fair enough. You can keep everything. You can download all the forms and all that kind of stuff from the training and keep it if that’s what you choose to do.
Just to recap, what you’re going to get when you join today is you’re going to get in-depth training video training on the seven fundamentals. You’re going to get all the training, the videos, forms, spreadsheets. I have live event replays, live events from me talking all about raising private money. We’ve got templates. We’ve got things that you can use to present to private lenders. We’ve got other live event replays in there that you can watch at your own pace.
Once again, we have monthly live training webinars. You can send all your questions into and I’ll answer them personally. We have the private Facebook group access. You’re getting beta phase pricing now. That fee will not change. We won’t raise it on you. It will stay that for as long as you’re a member. We’re offering the full money-back guarantee. Just remember take the whole class download everything, put it to work, takes an extra month if you want to test it. If you aren’t satisfied, you keep it and you get your money back, no questions asked.
One last thing. This is very, very important. I created this program with your success in mind. This is what I did. I went to the drawing board to think about what is a way that I can honestly and truly create a program where we could get 100% success of everyone who is a part of that program and is taking action and doing the work? I knew that just cramming you with a bunch of information, just information overload, that’s not conducive to learning. That being said, for the first 90 days, we don’t want to overwhelm anyone. We don’t want anyone going too fast.
With this beta pricing, and even after the beta pricing, we’re most likely going to keep the structure. We provide access to one new lesson per day. That’s it. You get emailed a lesson. After each lessons or leads, you’ll have access to it from there on as long as you’re a member of the group. I want to make sure that makes sense to everybody is you get one lesson a day.
With each lesson, here’s the thing, if I were to give you hours of training every day, guess what? You’re just able to sit and listen to the training and listen to me talk but you may not necessarily have the time to take action. The way we’ve structured it is you get a one lesson a day, usually 10 to 30 minutes long. Then that should provide you enough time to go out and take some action. Meaning you watch the lesson, there’s a lot of follow up that’s involved sometimes. You may need to send out some emails or make some phone calls or go download one of the reports that we have or spreadsheets and you can begin to get familiar with it and actually build your business because if you’re just taking in information you’re not building a business, you’re taking in information. That’s not what we want. We do want everyone who is a part of our group to have 100% success.
Here’s what you got to do next, just go to www.F7XFactor.com/Join. Just click on the, “Add to Cart” button, make your payment and get ready. As soon as your payment’s made, you will be given instant access to begin the training. We’ve got some lessons that are going to be fired up in the queue. Then you’ll be able to dive into the mindset training and we’re going to go through the whole process of the seven fundamentals.
Once again, I just want to thank everyone for joining us on this webinar. I want to thank John for sharing his deal with us and his case study, showing you exactly the action that he took as well as the results. Once again, if you have any questions about the F7XFactor, feel free to message me when you get a chance. I just want to say thank you for everyone that attended. I hope that you have received tremendous value from this event. If you did, let me know. Let me know your thoughts and your comments. I hope you all got a lot out of this. I hope to talk to all of you very soon. Take care.