September 23, 2017

JF1117: Becoming an Investor to Avoid Paying a Mortgage with Nick Watkins

Nick moved out of his parents house and didn?t want to pay a mortgage. He found house hacking to be the answer, and took off from there. Now he has done a decent amount of deals and is continuing to grow! If you enjoyed today?s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Nick Watkins Real Estate Background:
-28 years old has 2 duplexes and 3 SFR, with 2 wholesale deals
-Have used Hard money and refinancing for 0 down and self manage
-Hands-on investor with no property management company
-Based in Jenison, Michigan Say hi to him at 616.292.7605
-Best Ever Book: Rich Dad, Poor Dad

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Joe Fairless:  Best Ever listeners welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate investing podcast. We only talk about the best advice ever, we don't get into any fluff. With us today, Nick Watkins. How are you doing, Nick?

Nick Watkins: Good, Joe. And yourself?

Joe Fairless: I am doing well, nice to have you on the show. A little bit about Nick - he's 28 years old and has two duplexes and three single-family homes and he has done two wholesale deals. He's used hard money and refinancing for zero down, and he self-manages. He's a hands-on investor, with no property management company he's working with... He is the property management company. With that being said, Nick, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Nick Watkins: Sure. I currently still have a 9 to 5 job. I work actually 3 AM to 1 PM, driving a hi lo. I started out basically having a mortgage that I wasn't used to paying, because like every young kid, my mom didn't charge me rent... So I wanted to figure out a way to get somebody else to pay that for me. So my wife and I started looking at duplexes when we got married at about 20 years old, we figured out that it actually worked, that somebody else could pay it, and it kind of blew up from there.

Joe Fairless: Wow. You said you have a 9 to 5 job and then you said your hours - I was like "Wait, that's not 9 to 5." You have a 3 AM...

Nick Watkins: Yes, a 3 AM to 1 PM, Monday through Friday, just working to pay out debt.

Joe Fairless: What do you do?

Nick Watkins: Driving a hi lo for a manufacturing company. It's a machine to move heavy things around.

Joe Fairless: Thank you. I was like, "Wait, what does driving Ohio mean...?" Okay, you drive a hi lo, got it. So 3 AM to 1 PM you're doing that... You've acquired some properties since your first deal, and you're also wholesaling deals. One, how are you prioritizing your time in order to get these things done?

Nick Watkins: My job is pretty flexible in the fact that I'm allowed to use my phone while I'm there for emergency uses, so my tenants have all rights to contact me there. After that, most people are 9 to 5, so I'm out at 1 o'clock and I can do four hours worth of work with people that are constantly on the phone, so I can get my deals done that way. All my closings happen after work; it's just a big scheduling thing for everything right after my job.

So wholesaling - truthfully, I try to tell people I'm not a wholesaler, but I just happened to fall into it on my past couple deals.

Joe Fairless: Elaborate please on one specific one; pick whichever of the two you'd like to discuss.

Nick Watkins: Sure. So the first one I ever did - it was located about 20 minutes away from where I normally invest, but due to the fact of talking to people, I had a guy tell me he wanted to get rid of his house, a specific number that he kind of wanted... He knew I invest, because I talk to everybody, I tell them what I do and what my goals are in life. So he told me what he had, I looked into it, I looked at the deal and I said "Yeah, I could probably make it happen."

I talked to my mentor, and I was like "Hey, this isn't a normal area that I'm comfortable with. What do you think?" He's like, "Hey, if you could flip it, get some money out of it, I think you can do it."

Truthfully, I called my hard money lender and I was like "Hey, can you make this deal happen?" He said "Yeah." I told him what I was gonna do and he goes "I actually have a guy who [unintelligible 00:04:11.14] right now." I said "Hey, if you hook me up with a cash buyer, this will be [unintelligible 00:04:16.10]", so instantly he gave me a guy who offered me 15k above what I had for contract, and we went on from there.

Joe Fairless: Did the hard money lender get a referral fee?

Nick Watkins: He didn't, actually. I've done a couple deals with him, so he didn't ask for a fee. The guy that bought it from him was probably just gonna borrow money from him to get the money  anyway, so...

Joe Fairless: Oh, okay.

Nick Watkins: It was just a big team kind of pulling together a person that had something and a person that had money, so...

Joe Fairless: What did you have it under contract for?

Nick Watkins: $60,000.

Joe Fairless: And he bought it for 75k, you said?

Nick Watkins: Correct. And then the ARV of it was -- we guessed about 135k-139k, and it needed about $20,000 worth of work.

Joe Fairless: Okay, cool. What market was this in?

Nick Watkins: Grand Rapids, Michigan area.

Joe Fairless: Okay. Is that near Jenison?

Nick Watkins: Yeah. I'm just South-West of Grand Rapids, so that was just about 20 minutes away from Jenison itself.

Joe Fairless: Okay. Alright, you've got that wholesale deal done; your buyer was someone your hard money lender referred you to. How did you find that property?

Nick Watkins: Word of mouth. Actually, it's a person I met from my daily job. He's a truck driver who came in, who worked local, and because I see him quite often and we talk -- as I said, I tell everybody that I'm into real estate, it's what I love to do, it's my passion, just finding houses and renting them out. He knew that that's what I really do; I don't wanna be in my 9 to 5 forever, so...

Joe Fairless: When you say 9 to 5, you really should say "My 3 AM to 1 PM." That would be a good conversation starter. You should always say that, that's a good one.

Nick Watkins: Sure. It's a job I have to wake up for no matter what, so...

Joe Fairless: Yeah... [laughs] Let's see, just to be clear though, about how you found it - it was a truck driver friend, but was it his property, or did he drive by and just see it?

Nick Watkins: No, it was his property. He was actually gonna go buy his tenant's property because they had passed on, so he wanted to move out of his current house and just go over to the other house that he was given. So yeah, just word of mouth...

Joe Fairless: What about the other wholesale deal?

Nick Watkins: Actually, that was a friend of mine - him and his wife were splitting up and they were behind about two months on their mortgage payment, so they came to me because they knew I have a couple houses, they knew I closed on some deals... They were like "Hey, take a look at it, tell us what you can do. We'll just give it to you for what we hope." The numbers added up perfectly for me, so I took it and closed on it with the hard money lender.

Joe Fairless: Okay. Well, you closed on it, so how was that a wholesale deal?

Nick Watkins: Oh, sorry, so then I turned around and sold that property within a month, because I let the next buyer financing for it. So I put it under contract, actually closed on it physically, and then sold it off.

Joe Fairless: Okay. What are the numbers on that one?

Nick Watkins: I acquired that one for 71k, and actually sold it for 125k.

Joe Fairless: Did you have to do anything to it?

Nick Watkins: I did not. All I did was a closing document twice.

Joe Fairless: How did you find your buyer?

Nick Watkins: That buyer came from Facebook. A couple of my friends were looking for places to buy, and somebody was like "Hey, here... This is a lead on a house, and he wants to pay realtor commissions, so buy it this way."

Joe Fairless: Now, you bought it from a friend and you posted on Facebook about the house... Did you second-guess yourself since you bought it from them for 71k but you were selling it for 125k and you didn't do anything to it?

Nick Watkins: No, I always offer to everybody. I say "Hey, I have a chance for a buyer... That could take some time", because nothing is guaranteed for a sale. I tell them right away, "I'm gonna market it right away." It's something that if I hold on to, I'll take the risk and have the tenants; if I can get rid of it right away, I'm gonna do that." Both people that I've dealt with are very fine with it. All they want to do is just get rid of their headache, and their headache is the house, or something they have. So to them, I'm doing them a favor; to me, it's the benefit that I get for helping them out.

Joe Fairless: Let's switch gears now, let's go to your two duplexes and three single-family homes. I assume one of the duplexes is the first one that you mentioned. What about the second one? When did you buy it? What are the numbers?

Nick Watkins: I bought that in 2016, I paid 103k; the value is actually about 142k right now. I've put $2,500 into it and it's bringing in $850/unit.

Joe Fairless: Outstanding. Let's do some math - 850 x 2 = 1,700. All in price, we'll call it 105k. It's pretty good, 1.6% rent to overall all-in price. That's pretty darn good. Any lessons learned on that particular deal?

Nick Watkins: Yes, on my second duplex the lesson I learned - do a little bit better of inspections; the inspector that went through didn't notice that we had a drain issue that was happening in the bathroom itself... That's about where the $2,500 came from.

Joe Fairless: Oh, that was a big drain issue! [laughs]

Nick Watkins: Yeah, we [unintelligible 00:09:48.23] through the pipes down underneath the house, and it wasn't the city's problem, it was my problem.

Joe Fairless: Okay. So you just gotta get it scoped next time...?

Nick Watkins: Yeah, so basically right when I bought it, the new tenant was like "Hey, [unintelligible 00:10:03.10]"? So just talking to the tenants a little bit more... And my issue - I bought it from the owner, because it was for sale by owner - I was a little bit hesitant to ask the tenants questions right then, in fear of getting anybody in trouble. I have to learn to [unintelligible 00:10:20.15]

Joe Fairless: That's funny... After you close on it, "So, you got that drain fixed yet?" It's like, "Wait, what...? What's the problem?!" [laughs] Okay, let's see... With your hands-on approach - you don't have a property management company; what's a lesson that you learned being a hands-on manager of three single-family homes and one duplex, plus -- are you still living in the duplex?

Nick Watkins: No, I live in one of my single-families now.

Joe Fairless: Oh, okay, so you're renting out both duplexes. So you've got six residents? Lessons learned on managing six different families or people...?

Nick Watkins: Don't hire the cheapest people. When you find a contractor to do work, definitely just make sure that the work they're gonna gets done. I used to get lots of quotes, and when I started out I took the cheapest quote just to make the job get done, but with the cheapest quote came the cheapest quality.

Joe Fairless: Tell us about that job, please.

Nick Watkins: I had a roof done on one of my properties, and the guy was supposed to take two days to do the one half; it ended up taking four days to even get half of it done. He left nails all over the yard, there's still singles all over the yard... It took way too long, and the cleanup job was just horrible.

Joe Fairless: What about the actual roof itself?

Nick Watkins: It finally turned out well, for now, let's hope... So the job finally got done, it just took forever. My tenants were pretty upset, because I told them it was only gonna be a couple days; there was a lot of pounding for multiple days... It was one of the duplexes. I ended up buying both tenants gift cards to pizza, and I said "Hey, go out to eat on me." So it cost me more money to get them to be happy again...

Joe Fairless: How would you screen a roofer, knowing what you know now? What would you do differently?

Nick Watkins: I would probably [unintelligible 00:12:14.09] I would call more references, get more pitchers... Just do more background research on those jobs.

Joe Fairless: That's a nice way of approaching it, screen you contractors as you would a tenant.

Nick Watkins: I would suggest all the Best Ever listeners do that. It's one of the biggest suggestions I can give all of them.

Joe Fairless: Interesting. Okay, well I hope you've got one more in your back pocket, because here's the question - what is your best real estate investing advice ever?

Nick Watkins: Best advice ever - get a mentor that knows what he's doing in your area, because he/she will be able to give you all the knowledge that you're missing and he will teach you along the way.

Joe Fairless: How did you find yours?

Nick Watkins: Through a family relation. My wife's grandfather went to church with him; I come to find out he owns 250 properties and just knows way more than I'll ever know.

Joe Fairless: Every deal you've talked about so far - the two wholesale deals, and now this mentor, it's all come through friendships or people who you've already known. It hasn't been through Craigslist or direct mail; are you doing any of that?

Nick Watkins: I tried Craigslist. I think the second duplex came from Craigslist. I found it for sale by owner on there. It was also listed on the MLS; it was listed for 140-something and I talked him down to the 103 mark. I find talking to people and letting them know exactly what I do helps me, because somebody always knows somebody, so I wanna be that person to talk to them.

Joe Fairless: Do you go to meetups or any local REIAs?

Nick Watkins: I do go to meetups. Here in the Grand Rapids area we have a Monday meetup, the second Monday of every month; I try to attend every one of those. I found a couple wholesalers there.

Joe Fairless: When you attend and you meet someone, what do you say to them?

Nick Watkins: I tell them I'm a local real estate investor here in this area. If they're just starting out, "If you have any questions, feel free to ask. If I don't know it, I can guide you to find somebody that does." If they're another investor, "If you find something that's too small for you, too big for you, please let me know; I'm willing to team up and do anything, let's make a deal happen."

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Nick Watkins: Of course, let's go.

Joe Fairless: First, a quick word from our Best Ever partner, and we shall go! I can hear the excitement in your voice.

Break: [00:14:34.05] to [00:15:33.08]

Joe Fairless: Alright, best ever book you've read?

Nick Watkins: The only book I've read, because everybody suggested it  - Rich Dad, Poor Dad.

Joe Fairless: Wow, the only book in the history of reading in your lifetime you've read?

Nick Watkins: I guess for real estate. I think I read one book back in middle school for the school, but that's about it. [laughter]

Joe Fairless: What school did you go to where you didn't have to read more than one book?

Nick Watkins: I went to a local Greenville School here in Grand Rapids.

Joe Fairless: [laughs] A ringing endorsement for that school district.

Nick Watkins: Right, that's why I [unintelligible 00:16:00.20] bunch of money, so...

Joe Fairless: [laughs] Best ever deal you've done?

Nick Watkins: My current house that I have now. Again, family was going through some hard time; I had the opportunity to buy it for $86,000, so I found hard money, they gave me the money, I got to refinance it right away after all the fees and everything; I paid 101k and it's currently valued at about 195k, and that's about a year later. So just under $100,000 profit, and it cost me nothing out of pocket.

Joe Fairless: Wow. Elaborate on that, please; I should have asked you about that before. That was like one of the sexy parts of the intro and I forgot to ask about it.

Nick Watkins: Sure. This family was behind on payments, getting ready for foreclosure. This is how I met my hard money lender, and I found out what it was. Because I was gonna owner-occupy it, and he knew that it had been purchased for about 212k back in the day, he was willing to give me that 86k that I needed no problem. So I was almost planning with my lender that I'd gone through my first duplex and my first single-family -- he goes, "Well, since you're gonna occupy it, you can do a refi right away, especially loan-to-value..." So instantly, I borrowed hard money, and within a month before I had to pay my hard money lender back anything (the first month of interest) we closed the deal on this house, and rolled all the fees into it because I was occupying it.

Joe Fairless: What's a mistake you've made on a transaction that you haven't mentioned already?

Nick Watkins: Not necessarily a transaction, but the process of getting tenants in. When I first started out I didn't have a lease in place, I didn't have exactly knowledge of what to do with tenants, so that was a huge transaction failure.

Joe Fairless: And what specifically do you put in there that you didn't have before?

Nick Watkins: Everything. So my first lease was a lined piece of paper that just said "This person will occupy this address for one full year and pay money on the first of the month", and it had two signatures - hers and mine.

Joe Fairless: Oh, my...

Nick Watkins: Yeah. Seven months later, eight months later she moved out, and pretty much no questions asked, of course... In that time I had met my mentor and he put a lease in front of me that was five pages; it had everything - t's crossed, i's dotted, everything. I've learned a lot and I'm so glad that I learned quickly.

Joe Fairless: What's the best ever way that you like to give back?

Nick Watkins: I love to coach. I have a daughter now, but I used to be a softball coach, a varsity bowling coach. [unintelligible 00:18:30.27] teach people how to do something; I still give back when it comes to really any lesson I can teach anybody.

Joe Fairless: And what would you tell someone who also has a full-time job and they want to do what you're doing but haven't got started yet.

Nick Watkins: I would tell all of the Best Ever listeners that I am just an average person; if you want something bad enough in life, you're gonna do what it takes to make it happen, whether it's staying up till midnight and getting back up at 3 o'clock to go to work. You get three hours of sleep; you should work and hustle that whole entire time to get to where you wanna be in life.

Joe Fairless: How can the Best Ever listeners get in touch with you?

Nick Watkins: I've listened to a couple of your podcasts, and I'm gonna give my phone number. They can reach me at 616-292-7605, or e-mail

Joe Fairless: Outstanding. There you go, Nick, and Best Ever listeners, there is his digits, there is his e-mail. Nick, thank you for being on the show; thanks for just being an inspiration for someone who's working hard and getting it done. You've got that 3 AM to 1 PM job, you've got the wholesaling, the property management, and you're learning along the way and growing as you go.

A couple things that stood out... 1) Just your work ethic. 2) Screening the contractors as you would a resident - that's a takeaway for every Best Ever listeners. 3) When you find an opportunity that doesn't fit what you're looking for, find a way to make money from it, or add value to other people's lives; in your case, it was the wholesale deal.

Thanks for being on the show, Nick. I hope you have a best ever day, and we'll talk to you soon.

Nick Watkins: Joe, I truly appreciate your time. Thank you so much.

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