At a very young age Igor has figured out how to build a consistent and profitable house flipping business. Not only has he been exceptional at networking and establishing advantageous business relationships, his business is structured smartly and his team is performing very well. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Igor Mike Kajpust Real Estate Background:
- 22 year old full time investor specializing in SFR
- Purchased $8.5M of flips in 2018 across 35 flip deals, sold 20 of them in 2018 for $1.15m profit and have $1.25m in equity in the remaining 15
- Goal is to do 500 sfr deals in 2019
- Based in LA, CA
- Say hi to him at http://amoove.com/
- Best Ever Book: Principles
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? 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 of that fluffy stuff.
With us today, Igor Kajpust. How are you doing, Igor?
Igor Kajpust: Good, good, Joe. Glad to be on here with you.
Joe Fairless: Yeah, nice to have you on the show. Igor is a 22-year-old full-time investor specializing in flips. He purchased 8.5 million dollars of flips in 2018. That was 35 deals. He sold 20 of them last year for 1.15 million dollar profit, and has 1.25 million in equity in the remaining 15 of them. His goal is to do 500 in 2019. Based in Los Angeles, he invests in other markets – we’re gonna talk all about it. Igor, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
Igor Kajpust: Yeah, totally, Joe. I’m predominantly a fix and flipper. The majority of our business is in Orlando, Florida and Denver, Colorado, both markets that I’m pretty familiar with. I spent about three years in Denver before moving out here to L.A, and built up the business there. My partner is based in Orlando. We’ve got a little bit of a team in both of those markets, so we really just focus on acquiring and flipping as many of those single-families as we can in those two markets, kind of with a systemized approach.
A little bit of background – I’ve been really interested in real estate ever since I can remember, and I was always trying to make money, and buy and sell stuff here and there… I ended up buying my first piece of property when I was 17, when I was in high school; it was a $750 vacant lot somewhere, that I still have… And since then, I’ve been really interested in real estate, and have been learning and learning as much as I can along the way.
I went full-time when I was 19, doing wholesaling at the time and really sharpening my skills on the off-market acquisition side of things during the last couple of years. More recently, all of last year I decided to actually close on and flip most of our deals, rather than wholesaling them. That’s the approach we’re taking on going forward, and just raising more funds and closing on everything that we can and capitalizing on all those opportunities.
Joe Fairless: Where did you get the money to purchase 8.5 million of flips?
Igor Kajpust: So 8.5 million is the retail value. It was about 5-6 million dollars of equity. That was all just private money, essentially, at hard money terms, through networking, introductions from different people to their lenders, and just being able to show my track record of wholesale deals that I’ve done the previous couple of years. They were like, “This guy knows how to find a good deal, we’ll give him a shot”, and it’s really grown. Those are five, six different lenders that I use, that basically supply us with all that capital.
Joe Fairless: Okay, so they’re not private individuals — or if they are private individuals, they do this for a living, they lend hard money out for a living?
Igor Kajpust: Yeah, the majority of them. Two or three of them are basically full-time either retired real estate investors that just lend now, or they have a little hard money side to their business… But I would definitely consider them more as private individuals lending at hard money terms, rather than hard money companies.
Joe Fairless: Okay.
Igor Kajpust: So some of them have a full-time job or a business, and they’re just lending to me on the side.
Joe Fairless: What are the typical terms?
Igor Kajpust: It’s pretty much two points and 12% across the board that I pay, and then they get their first position lien.
Joe Fairless: Okay. And something you said is they look at your track record for when you were wholesaling, and you were able to find a good deal – how do you find good deals?
Igor Kajpust: It changed over the years, but really the strategy that’s worked best for us and that we’ve doubled down on over the last year and a half has been cold calling, and more specifically cold calling on a targeted list… Cold-calling pre-foreclosures, tax defaults, probates, those more targeted lists, as well as — we also have a blanket approach too when we run out of those lists, but the strategy we’ve really seen the most success with has been cold calling. We’ve done some PPC and online stuff in the past, but cold calling has been what’s really been best for us.
Joe Fairless: And where do you get your lists?
Igor Kajpust: The majority of this stuff comes directly from the county. In all of our Colorado stuff it’s really easy; the deed of trust states — so we reach out to the public trustee, or access their portal online, and they’ve got all that information beautifully organized, with how much the people owe, how long they’ve been in default, name, address… Everything you really need, it’s just neatly organized for you online. So a lot of that information – there are different departments for it in different cities and counties, but a lot of it is available just through the local governments.
Joe Fairless: Same with Orlando?
Igor Kajpust: Yeah. Orlando, actually we used to scrape it manually off of there. It’s the same way, but Orlando is judicial — not to get into too complicated kind of stuff, but it’s a judicial foreclosure process, so you’re kind of scraping through court cases, and stuff, and it’s a lot harder to see the information. We use different list providers in Orland that kind of put all that information together, and then we just pay them for that service.
Joe Fairless: And how much do you spend annually on the cold calling tactic? …which includes the team, the list and all that.
Igor Kajpust: Essentially, how we structure it is we basically pay our guys commission-only. It comes out to $3,000 upfront for each deal that they get, and that’s distributed amongst maybe a caller, or someone that went on the appointment; they might each get $1,500 or whatever the case is, and then they get a bonus on the back-end, depending on what our net profit is on the deal; they get a 5% to 10% bonus of the net on that deal. I’ve got 19-year-old guys in the office that got a $15,000 check as their bonus off of that net.
Joe Fairless: That would buy a whole lot of $750 vacant lots.
Igor Kajpust: [laughs] It sure would, but they like to spend it on freakin’ Gucci shoes.
Joe Fairless: Oh, no…! You’ve gotta have a word with them.
Igor Kajpust: [laughs] Oh, they’re learning, slowly but surely.
Joe Fairless: That $750 vacant lot that you bought when you were 17 years old – what is it worth now, if anything?
Igor Kajpust: It’d probably be tough to find a buyer for it. It’s maybe a grand or two. It’s out in the desert in Colorado somewhere, with no roads or anything.
Joe Fairless: How did you come across it if you weren’t living next to it?
Igor Kajpust: It was actually a website I found on my crazy googling and researching I was doing when I was just super-obsessed with the idea of investing in real estate, and I found that website, which I don’t know that I’d recommend using, but it’s called bid4assets.com. Have you ever heard of it?
Joe Fairless: Bid4assets.com?
Igor Kajpust: Yeah.
Joe Fairless: No, I have not heard of it.
Igor Kajpust: I stumbled upon that and I just saw “One dollar, no reserve, vacant land”, and I was like “Oh, wow… Is that like $100? Awesome!” and I ended up winning the bid. I was hanging out with my friends in my room, senior year of high school, and I’m like “Dude, you guys, I’m gonna totally buy this land!” [laughs] That was the first one, and I ended up buying another property off bid4assets.com, which was my second deal a couple months later, with a friend. We threw in a couple thousand bucks each and bought a property in Indianapolis from a bank, for $7,500, through the website.
At the time I didn’t know what a quitclaim deed was, so we ended up buying this property, and we go to sell it and find out there’s $14,000 of liens on the thing. [laughs]
Joe Fairless: Aww….!
Igor Kajpust: Yes. So needless to say, we learned a lot with that experience, and I haven’t been back on bid4assets.com since then.
Joe Fairless: What happened?
Igor Kajpust: We put it back on the market, because we thought we were gonna fix it up. We were like, “Oh, it’s just gonna need some cabinets and some paint”, just based on the pictures; we never looked at it, or anything. And then I ended up taking a drive out there and it needed a lot more than some paint and some cabinets… [laughs] So we put that on Craigslist; it took months, we weren’t getting any action. We listed it with an agent, he got a buyer for $12,900 or something. We were super-excited. We got the settlement statement, and it was like “You guys need to bring 3k to the table”, or something. I was like, “What…!?” [laughs] But then we ended up finding some investor that was willing to take it subject to the liens for $8,000 and we basically got out of it, by the skin of our teeth.
Looking back now, I would have probably been able to — the municipal liens on there, we could have negotiated those liens, [unintelligible [00:10:23].06] and probably done a little better, but you kind of learn as you go.
Joe Fairless: Yes, you do. Thank you for telling that story. So your profit that I read in your bio was 1.15 million – does that factor in the commissions that you’re paying out to your people and whatever expenses you have, overhead for your company?
Igor Kajpust: No, that’s just the gross profit that’s basically what we got back from all the closings, after having paid for whatever expenses we incurred…
Joe Fairless: Sure.
Igor Kajpust: …dialers, or any expenses. So essentially that’s just the gross. The net is a couple hundred thousand dollars less, and then we’ve got that remaining 1.25 million that’s just properties that are getting wrapped up now, or on the market now, or under contract… I actually just had a closing today, so we’re selling off the rest of that stuff. It’s scheduled to close the next month or two here.
Joe Fairless: That’s great. So who’s leading the charge here? Is it you and a business partner? It sounds like you have a business partner.
Igor Kajpust: Yes. Me and my business partner are both 22 years old, and we met at Sean Terry’s Flip2Freedom conference a couple years back, and just started working together at that point. Now he runs pretty much the majority of the day-to-day out of Florida. Now that I moved to L.A, Denver reports to Florida, and he kind of oversees the majority of the day-to-day, and I help with business development strategy and raising money for all of our deals.
Joe Fairless: And you mentioned the net profit was a couple hundred thousand dollars less than the 1.15, which is still relatively speaking a whole lot of money… So what is that – like 850k, 900k. Is that just money that you and your business partner split 50/50 and you go buy some Gucci shoes, or what do you do with that 900k?
Igor Kajpust: [laughs] No, we’re reinvesting the majority of all that into the business. We basically had it structured in a way while I was running the Denver office and he was running the Orlando office, where we were getting a larger or smaller share of the profits based on our office’s performance. So it wasn’t an exact 50/50 split.
But we’re basically reinvesting the majority of that money. We’re looking to do some rental portfolios right now, and just testing some strategies, keep buying deals and keep growing the business. So no more Gucci shoes for me.
Joe Fairless: And the 1.25 million in equity that you have remaining in the 15 homes – those are homes that you’re selling, you just have that spread based on what you put into it and what it’s valued at currently… Is that correct?
Igor Kajpust: Exactly. That will come out to another 800k-900k in net profit after commissions and expenses once all that stuff is sold.
Joe Fairless: And with your fix and flip business – why did you choose to go from wholesaling to fix and flips?
Igor Kajpust: We just really wanted to get more into the ownership side of the business, not just assigning the paper and getting a small fee, basically. My long-term goal is turning hundreds (if not thousands) of single-family homes, large portfolios, and wheeling and dealing with the hedge funds, and that’s kind of just what I’m working towards. I feel like that was a step in that direction, and being able to secure our own financing, get the deals funded, close on them… We have to improve the properties… So we see them as just getting us ready for the next steps that we wanna take, and teaching us the necessary skills to get there.
Joe Fairless: And what’s the long-term vision with the hedge funds and the portfolios of single-family homes?
Igor Kajpust: We just wanna keep growing our acquisition systems and growing the business to be able to acquire hundreds and hundreds and thousands of single-family homes, creating rental portofolios, doing huge volumes of fix and flips, and just dealing in much larger volume with single-families.
Joe Fairless: So in that example, let’s say you came across a 500 single-family home portfolio, and they are distressed properties; your vision is to be able to buy those 500 single-family homes, fix them all up, and then sell them to someone, or a group…?
Igor Kajpust: Yeah, or acquiring 30-40 a month for a year, just through our call center, putting tenants in place, and then selling that portfolio to a fund for 25 million, or whatever the case may be, as like a performing package.
Joe Fairless: Okay. And with your deals that you sold last year – you sold 20 of them – I’ve heard some fix and flippers say that their approach is for every 2-3 homes that they sell, they keep one in their portfolio… That way, they’re not just constantly having to churn our deal after deal; they’re actually making some residual income, so they’re not chasing the next deal. What’s your thought process on that?
Igor Kajpust: I think that that’s a great approach. Personally, the market has just been too tempting to sell the last few months, the last year or two… I mean, when you’re getting 15 offers over the weekend and they’re all 20k-30k over ask, it’s hard to keep them. So my strategy is the next downward cycle that we have, as the market is slowing down here, and we expect the market to cool down – it’s already cooling down in certain areas, but it’s expected to cool down more over the next couple years… At that point, I wanna just raise a bunch of money and create rental portfolios then, rather than buying all this stuff at the top of the market. Just buying a couple for my personal portfolio and keeping them.
I’m still a young guy, so I’m kind of out there, willing to take the risk and go bigger, rather than thinking in the long-term… Although I know it’s beneficial to think in the long-term, but I’m a little more hungry for risk right now.
Joe Fairless: Yeah, the market has been very favorable to what you’re doing, but people have lost money even during favorable times, and you have made money… Certainly, the market helps, but you have to have a system in order to actually make money, otherwise you could lose money in a good market. You mentioned that getting 15 offers over asking during the weekend – how can you really turn that down, and I totally get that… So my question is “What is your approach when you’re fixing up a property? Actually, I’ll be more specific. When you’re pricing a property, prior to listing it, what is your approach to get the maximum price?
Igor Kajpust: Honestly, we didn’t even have too much of an approach, especially in Denver, which has just been an insane market. We hardly staged any of the properties. It would literally be like asking our agent what they think we should list it for, do a little bit of our own research, looking at comps on the MLS, put it within 5k-10k or the same of what other stuff is selling for in the area. Then we’d put it on the market, and then we’d end up still selling it for 20k more than we listed it for.
Denver over the summer was like a month’s supply of single-family, the price range that we were in, so everything would sell so quickly. It was crazy.
So basically we’d just look at the comparables, talk with our agents and see what they think, and just go with that.
Joe Fairless: And how do you determine what type of renovations you do at a property?
Igor Kajpust: Again, looking at the comparables. In some of the properties on the lower end we would be putting just cheap Home Depot countertops, cabinets, not even granite, and stuff would sell really well. On the slightly more expensive ones, if everything else in the neighborhood is at 350k and it’s demanding granite countertops and [unintelligible [00:17:46].23] shower, then we would put that, what it was selling for in the area.
Joe Fairless: How do you determine what your comparables are?
Igor Kajpust: Just the basic rundown of comparable single-family homes, looking at whether it’s the same style of home, if it’s a ranch home, split-level, bedroom/bathroom count, square footage, look at the street view, or look at the street in real life to make sure that it’s a similar neighborhood, similar vibe. Then the finishes – like I said, if the kitchen’s got granite, if it’s got hardwood floors, if it’s got [unintelligible [00:18:16].02] we would just try to mimic the other stuff in the neighborhood that it’s comparable to, so it’d look similar.
Joe Fairless: You did 35 flip deals last year… Which one made you the least money or lost you money?
Igor Kajpust: Okay, good question. There’s actually one that lost me about $10,000, on which my lender made like $25,000… [laughter] Basically, just the quick story of the deal – we ended up buying it, it was already a little bit slim; we bought it at probably 80%, expecting it to be a quick flip. The guy ended up not moving out. We didn’t do a holdback, so he stayed for an extra three months; we had to pay him an extra $2,5000 to get him out. My interest payment on that — it was a 275k purchase, so it was a $2,700 interest payment, and I had to pay that for 3-4 months.
We ended up doing a six-month hold all-in, costing us a bunch of holding costs, some fix-up, and then we sold it for 340k and lost 10k.
Joe Fairless: Having the circumstances presented to you in a similar deal in the future, what would you do differently to mitigate that risk?
Igor Kajpust: Oh man, the holdback. The biggest thing is if there’s a tenant or a homeowner that’s living in the house and they wanna stay after closing, that’s fine, but hold back some of their money. So if they’re getting 30k in proceeds or 50k in proceeds, holding back 5k or 10k of that for when they move out, so you ensure that they move out. It goes off without a hitch, and then you just pay them that 5k or 10k. It’s held in escrow by the title company, so as soon as they move out, they can get that money. That would have saved us on that deal and we would have ended up making some money, rather than losing a little bit.
Joe Fairless: What’s your best real estate investing advice ever?
Igor Kajpust: Staying consistent, especially for a lot of the newer people out there. I didn’t get my first deal for 6-7 months. I know a lot of people that are now successful in the business that didn’t get their first deal, they didn’t get any traction for a long time, and it could be very discouraging to keep running into a wall, and not being able to find a solution… But if you stick with it, put in the work, 9 times out of 10 you’ll be able to punch through and succeed.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Igor Kajpust: I’m ready.
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Break: [00:20:40].11] to [00:21:38].24]
Joe Fairless: Best ever book you’ve recently read?
Igor Kajpust: Best ever book I’ve recently read… Ray Dalio, Principles is a great book. It’s really long, but it’s awesome.
Joe Fairless: Best ever deal you did last year?
Igor Kajpust: I made $140,000 profit in about four months, on a single-family flip.
Joe Fairless: Was that flip through the calling?
Igor Kajpust: Yeah, that was a pre-foreclosure lead. We got it for 160k-165k, put a little bit of money into it and sold it for 355k. And I actually had no money — I’ve had probably like 5k into that deal. Because it was so cheap, my lender lent 100% of the money that we needed.
Joe Fairless: Best ever way you like to give back?
Igor Kajpust: Honestly, I like giving back to homeless people. Whenever I’m driving by, and they’ve got their sign out, and I give them $50, and $20, and they get so happy that it actually makes me feel good inside, and I give them a hug… I like to do that.
Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?
Igor Kajpust: Just follow me on Instagram, @whoiskaj, and check out my website, evolvepj.com, or amoove.com.
Joe Fairless: And we have that in the show notes. Igor, thank you so much for being on the show, talking about how your business does deals across a couple markets that you don’t live in, so how you structure that with your business partner, how you get the deals, and that was the challenge, I imagine, last year – finding the deals; because once you found the deal, you have the operations in place, but then you’ve also got a pretty friendly market, too… So it’s really just about finding the deals. And how you do that? Cold calling a targeted list of pre-foreclosures and tax probates… And deals that didn’t work out, as well as deals that did work out.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Igor Kajpust: Awesome. Thanks, Joe!
