April 7, 2017
Joe Fairless

Friday Facts – Best Real Estate Investing Advice Ever Lightning Round Q&A

Learn this week’s Best Ever guest’s best ever books, personal growth experiences, real estate deals, ways to give back and biggest mistakes.

Brian Elwood from JF944: How to Get to 75 Rehabs a Year and 10 Employees

Best Ever BookFour-Hour Work Week by Tim Ferriss
Best Ever Personal Growth Experience – Overcoming the Shiny Object Syndrome

“One of my biggest personality flaws is that I have shiny objects syndrome really bad, the visionary type, and if I see new ideas coming across my plate, [I’m] all over the place… Every time you scroll Facebook there’s a new piece of software that’s supposed to connect to your business, or something. For the first four years we were in business we changed our direction a lot. ‘Well, let’s focus on this. Oh, you know what? Let’s change. Let’s invest in this other market. That didn’t work out… Let’s try to do new construction. Oh, that didn’t work out.’”

What did Brian Learn? “I learned over time that you never get anywhere if you keep changing direction, so now what we do is we develop a vision for the next year and we stick to it. One year is about all I can commit to, because I still have issues… But once that yearly vision is in place, we don’t sway from it. We can make tweaks to it, but that’s what we do the whole year, even if great ideas come up and try to make us change course, and we get a lot more results from being focused.” 

Best Ever Deal Brian has Done – $35,000 rental sold for $225,000

“We bought a house for $35,000 and it was in an area where new construction and things were maybe 10 to 15 streets away at that point; the area was still pretty rough, but the growth was spreading towards it, and we held it as a rental for about three years, and then sold it not too long ago for $225,000.”

“So we bought it for $35,000, sold it for $225,000. The house was on two lots, and each lot was good for two houses, so four houses total, and it sold for land value.”

“Buying on the fringes of areas that are gentrifying I think is the easiest money you can make.”

Best Ever Way Brian Likes to Give Back – Perfect Day Crew and Charitable Donations Through Kiva

“I’d say two things… One is that inside of our company culture we have … what we call our Perfect Day Crew where we meet quarterly and everyone goes over what their perfect day is and what’s holding them back, and we all give them feedback and advice. In between those quarterly meetings we are assigned an accountability partner. They hold their partner accountable to doing these things that they set out to do, to move them more towards living their ideal life. So I help not only our team members to do that, but friends and family as well.”

“Another thing I’ll say is that I really like to donate to Kiva… It’s a nonprofit. Some guy in San Francisco started it, and it’s micro-loans for people in third world countries that need money for things like water filters and building toilets, and stuff, and they actually pay you back. They have like a 90-something percent repayment rate. An $800 loan can buy a clean water filter for an entire village of people, and they collectively can pay you back in a year or so, and they even pay I think a little bit of an interest.”

“I like to throw a few hundred bucks a week to my Kiva account, and there’s always money coming back when I’m getting repaid, and I just keep pushing it back and it kind of creates a snowball.”

“I really like the idea of the money getting paid back. There’s something about that, because then I can just keep redeploying it. I think Kiva is a great organization, and I tell people about that a lot.”

Biggest Mistake Brian Has Made So Far In Real Estate – Not Doing Thorough Due Diligence

“Probably not doing enough due diligence, not getting a professional home inspection on the deal, and then overlooking major foundation issues that cost us $20,000. Basically, taking the deal from being profitable to just barely breaking even. So not doing thorough due diligence I’d say would be the biggest mistake.”

What safeguards has Brian implemented to avoid making this mistake in the future? 

Well, we do a home inspection every time now. We have a contractor go out there and give us an estimate. We have a member from our team that we call the renovation manager go meet the contractor. Then we get a professional home inspection and a termite inspection on every single deal. We also have photos and videos uploaded to Google Drive that we can check out. That’s about all the due diligence I need to be comfortable. That’s our current system now.”

Click here for Brian’s Best Ever advice on how to get to 75 rehabs a year and 10 employees from your couch

Bill Bronchick and Bobby Dahlstrom from JF945: How to Make Real Estate Your Business Instead of a Hobby

Best Ever BookThink and Grow Rich by Napoleon Hill

Best Ever Deal They have Done – $180,000 Half a Duplex sold for $263,000

Bobby – “Bill and I were partners on a duplex in Washington Park which went against the grain of some of our typical deals. It worked our really well, we bought half a duplex.”

Bill – “Right, we bought half a duplex for a 100k, put 80k into it, sold it for 263k in eight days, cash.”

“The buyer was easy, because it’s Washington Park, the most desirable neighborhood in Denver… So that wasn’t hard. We put it on the MLS and we had it sold in a minute.”

“We found the seller’s property was vacant for eight years, and it was a disaster. 1,200 square-foot, half a duplex, we put 80k in it – that’s a lot of work for a little half a duplex.”

Bobby – “That’s right. We purchased it from another investor who… Really, they were new, and it would have been a little too much for them to take on. As I recall, Bill felt bad a little bit that we made so much and he paid for a vacation for her, in addition to the money we had already agreed upon for the purchase.”

Bill – “And just one other thing I just wanted to mention with that deal… This deal in particular – it was a wholesale from another investor to us, and then we sold it retail, so it was kind of back-to-back. It was half a duplex, so there was another side to it, and the other side looked terrible… So we had to actually fix up both sides in front, so it matched, otherwise it would have looked like the monsters with [one half good and one half bad.”

Biggest Mistake They Have Made So Far In Real Estate – Renovated a Property They Didn’t Own and Selling a Property Too Quickly

Bobby – “Well, if I stick with deals with Bill, it might be the time that he verbally told me we had one ready to go, and I got a crew in there over the weekend and then found out that we actually didn’t have the deal signed. We had already done all kinds of demolition and emptied the place out, took out some walls, that kind of thing. But it worked out… We luckily didn’t lose anything too valuable of the owner’s, and we worked it out.”

Bill – “If we’re talking about the one in Baker district, my biggest mistake was selling it to Bobby for a quick 10k cash, and then he fixed it up and made the lion’s share of profit. I was greedy. I was looking for a new car and he flashed cash in my face, so I sold it in two days after I had it, to Bob.”

Click here for Bobby and Bill’s Best Ever advice, which are 5 ways to make real estate your business instead of a hobby.

Sean Conlon from JF946: Learn the Secrets that took CNBC TV Star Sean Conlon From Assistant Janitor to Real Estate Mogul

Best Ever BookCity of Thieves by David Benioff

Best Ever Personal Growth Experience – Death of Father

“It’s my saddest and it’s also the best ever… My father dying at 56 in 2000. He was the reason I did everything I did.”

What did Sean Learn? “It taught me that we’re here for a nanosecond, so try and enjoy your life also.” 

Best Ever Deal Sean has Done – Backing Out of a Multimillion Dollar High-Rise Development Deal

“The best ever deal I’ve done are the two deals I didn’t do in 2007. I was going to build two high-rises. I had everything lined up, the hundred million dollars in financing, and for some reason I didn’t do them. I’m not going to say I saw it coming, because I got dinged in a way, but those two – I’m like “This is too much. It scares me. I’m not smart enough to do it.” They were the best deal I ever didn’t do.”

Best Ever Way Sean Likes to Give Back – Bought Dad a Car, Wildlife Foundation, And Fix-and-Flip Advice Through His TV Show

“I obviously was very good to my father; the first cool thing I ever did was buy him a Mercedes for Christmas, because when we were young he used to bring us up and look in the dealership window and point out that that was for some rich guy… So on Christmas when I was about 25, 26 we went up there and I bought it from the one that was sitting in the window.”

“I have a Wildlife Foundation, and while this might sound slightly self-promotional, I think The Deeds: Chicago – I give back knowledge I’ve learned to people all over the country, which is great. But my Wildlife Foundation is my passion, animals.”

Biggest Mistake Sean Has Made So Far In Real Estate – Taking a Sociopath at His Word

“A mistake I made on a particular deal is — there’s an expression I use quite regularly, “Trust, but verify.” I was told the zoning was such, and the guy told me it with such a sense of belief, I forgot the fact [that he] might have been a sociopath, so I bought something that was not zoned appropriately. Yikes! I thought I could put 25 units on it, and they could put four or five.”

John Hyre from JF947: You’ll Lose MILLIONS If You Don’t Understand These Tax Principals

Best Ever BookGrit by Angela Duckworth

Best Ever Deal John has Done – Low-Income, Cash Flowing Rental Property in Columbus, OH

“A wholesaler brought me a low-income rental here in Columbus… It’s not a war zone, but it’s not a beautiful area either… But this was a great deal.”

“It was 15k. I think he made 5k on it. The lady had been in there for 12 years, the rent is 620/month; it needs about 10k to rehab, but not today. I’ve had this thing now for almost a year, and we’re now getting ready to replace the roof with about how half of my net cash flow.”

“It’s been a great property. The only real quirk with the property is the tenant has been there so long, she’s hard to train. I have a property manager, because when you have something in an IRA or 401k you don’t want to run it yourself; there are tax problems with that. You really need to have an outside manager.”

“For her, the manager needs to show up on the third Thursday of the month, and text her on the third Wednesday of the month. She gets her government check the third Wednesday. You have 24 hours, and she will pay you in cash. If you wait 48 hours, that money will be gone. So you have to show up and pick it up from her. She’s incapable of writing a check. That’s the only real quirk. But if you do the numbers, it’s a sweet deal, and it’s perfect in my 401k. I don’t pay tax on it, I’ll continue to reinvest the money.”

“This is a cash flow property. I could sell it right now in this market for probably 30-35. Maybe if I had a California or a foreign investor maybe 40. It’s funny, I tell my California investors “Be careful, don’t tell people you’re from California, because if they hear that, they charge you more, and you pay.” But no, I’m going to hold that for the cash flow. I am cash flowing about 5k/year on that property, which if you figure I had 15 in it, that’s great.”

“For the first four years I’m going to reinvest about 2,500/year into updating the property. For example, the roof really needs [to be] replaced. It’s still functional, it’s not leaking, but I can tell it’s going to go, and I’d rather just deal with it now. Plus, keep her in there. If she’s been in there 12 years, le’s make the place a little nicer. It’s a swell return.”

Best Ever Way John Likes to Give Back – Coaching Debate Skills to Kids and Charitable Donations

“Two things: volunteering as a debate coach. I coach kids debate; I teach verbal violence, and it’s just fun to see the light come on and the confidence in their eyes.”

“Second, there’s a school here in Columbus, St. Charles School For Boys that we like to give to. I plan ultimately on funding a scholarship; they’re a wonderful school, they change lives.”

Biggest Mistake John Has Made So Far In Real Estate – Bad Partnership due to Lack of Due Diligence

“Partners. I’ve almost never bought a bad deal, but I’ve gotten involved with bad partners, I didn’t do my due diligence. In one case I didn’t do the due diligence on the spouse, and it turns out that she was two scoops full of crazy, and it caused a lot of problems, big time. It cost me way more money than they property ever could have.”

How does John Qualify Partners now? “I don’t partner anymore. I don’t have the need to do so, and for now I don’t.”

“If I were to qualify them, I suppose I would do more due diligence, asking around, looking at history, ask for credit record… This one would have been pretty hard to spot. In hindsight, the only way I could have spotted her condition was talk to enough people who dealt with her, because what’s funny is after the feces hit the rotating blade device, a number of people came up and said, “Oh yeah, she’s nuts!” I just wish I would have talked to those people, but it’s the only way I think I could have discovered it, because she was kind of like high-functional crazy. It’s not like I came home and there’s a rabbit’s head boiling on a pot of water on the stove… You really had to dig to figure her out.”

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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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