Ragan Mckinney Real Estate Background:
- Full-time real estate investor and broker
- Has been investing for over 20 years
- Portfolio consist of 19 rentals, 1 vacation rental, and has flipped 11 properties a year
- Based in Hamersville, OH
- Say hi to her at www.raganmckinney.com
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Best Ever Tweet:
“Don’t fix them as if you’re going to live in them forever” – Ragan Mckinney
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ragan McKinney. How are you doing, Ragan?
Ragan McKinney: I’m good. How are you?
Joe Fairless: Well, I’m doing well, and I’m glad to hear that you’re good. A little bit about Ragan. She’s a full-time real estate investor and broker. She’s been investing for over 20 years, has a portfolio of 19 rentals, one vacation rental, and has flipped 11 properties, based in Hamersville, Ohio. With that being said, Ragan, you want to give the Best Ever listeners a little bit more about your background and your current focus?
Ragan McKinney: Sure. So I basically started when I was 20. My grandparents, they flipped houses before it was popular on HGTV and everybody was doing it, so I picked up a knack for it from them. I’ve always been self-employed, I come from a self-employed family, so that was a source of my potential retirement… And I just grew to love it. So spending Friday nights at Lowe’s or Home Depot, picking out tile and things like that has turned into a full-time gig over the last 20 years. I flip about 11 a year, and I did many more than that over the last 20 years… But basically got started from – my grandparents who taught me how to do it, and I’ve just grown it from there.
Joe Fairless: So you at first started doing what, and then how has your investing approach evolved since then?
Ragan McKinney: So when I was 20, getting ready to get married, I wanted to go buy the standard house in a subdivision, with the white picket fence, that’s already ready… My grandparents steered me into a different direction, pulled up into a property; it looks like it should be a haunted house. The grass was four feet tall. And basically, they persuaded me to buy that. So we did.
We did all the work ourselves on that one, and lived there two and a half years, and flipped it and made 42,000. Basically that’s where I got my taste, applied that 42,000 to my next property, and I’ve just continued to do that with the home I live in, all the way up through. We’ve lived in six different houses since, and then and then started adding additional properties, doing the same thing. That’s probably one of the better investments I made. It was a nice profit on the very first one to get my feet wet. They’re not all that lucrative, but I’ve done better and worse.
Joe Fairless: Wow. Yeah, right out of the gate. After two years, 42k. What did you learn from that first deal, from a renovations standpoint? …if you can recall; I know it’s been 20 years.
Ragan McKinney: I do remember. So it’s “Don’t fix them all as if you’re going to live in them forever.” I still struggle with that, trying to go in and pick things not the best/highest dollar, versus picking out what I like.
Joe Fairless: What are some specific examples of that? Just to bring it to light a little bit.
Ragan McKinney: Everything from flooring, to adding details. Right now the modern farmhouse is in, so I tend to steer towards shiplap. I like the nicer countertops when we get into courts and things like that, but we can go with a lower grade granite. In the market that I’m in, the buyers don’t necessarily care as much about what type of granite or, whether it’s quartz or solid surface; they just care that it’s new and that it’s not Formica. So for me, I go in and tend to have — my dad would have always said, “Champagne taste on a beer budget.” So I’ve always went in and tried to pick out the nicer things, and things that I think I would like, and that at the end of the day for the bottom dollar isn’t profitable.
Joe Fairless: What’s the next step up from Formica that you can get by with?
Ragan McKinney: Probably a Grade C granite.
Joe Fairless: Grade C granite. And about what’s the price difference?
Ragan McKinney: Now things are starting to change, because some of the Formica is fantastic. Probably a couple of thousand dollars to go from picking the Formica to the granite. Now, where I really see the difference is when I go into the showroom and I start picking out countertops, for example, I’m gravitating to what I like first, which typically tends to be a Grade A. Now you’re talking several thousand dollars difference. And there’s just not a big enough return in selecting the higher grade versus the lower grade. So it’s not necessarily just a difference in Formica to granite, but coming down to what the dollar amount is and knowing how much more return I can get on a specific property based off of the countertops.
Joe Fairless: So what grade do you go with?
Ragan McKinney: Typically it’s C.
Joe Fairless: And the price difference is – you said a couple of thousand?
Ragan McKinney: No, that would be from Formica to granite. From maybe C to A you’re talking anywhere from eight to 12,000, depending on how many feet you need.
Joe Fairless: Yeah, how much you’re buying. Got it. Significant difference.
Ragan McKinney: Yeah, it’s a big difference especially when it’s coming out of your net dollar.
Joe Fairless: Approximately how many deals does it take to really settle in on “Okay, this is what the market will bear. And that I shouldn’t go over; this is right at where I need to be. So I need to be at grade C granite, versus something nicer, or something worse.”
Ragan McKinney: So you’re asking how many deals you need to do to figure that out?
Joe Fairless: Yeah.
Ragan McKinney: An honest answer to that is I think there are lots of people out there that are willing to help and lend advice. So if you’re working with a realtor, take that advice. That would lower your number. I’m a slow learner when it comes to that, because it’s been my way, but I would say it took me four or five years to figure out, “Okay, I’m not going to live in this property. This is just as nice, and it’s going to put more money in my pocket at the end of the deal if I choose this.” So I don’t know that for me it’s the number of deals, but more surrounding yourself with good contractors and with a good GC, or general contractor that’s going to help guide you and kind of… I always say he checks me on, “Hey, Ragan, you don’t really need to do this.” Because we know when we buy a property and then we go in and walk through, we know what it’s going to take. And we do allow for some areas, and if you get into something unexpected, we kind of pad it for that. They always say I tend to spend my budget in the tile shop and on the flooring store. [laughter]
Joe Fairless: So the first deal you mentioned, you killed it. And then you said, “Oh, but some have been better and some of them worse.” So let’s talk about those extremes. Let’s talk about the deal that you’ve lost the most amount of money on; tell us about it.
Ragan McKinney: Buying sight unseen. I eat, sleep, and breathe real estate, so if I’m not selling it professionally, then I’m looking online for a deal or an auction, or I’m going to the Sheriff’s Sales. So the one that I would say I got burnt on or lesson learned would be one that I purchased unseen. The first time we walked through, it didn’t look terrible, but when we started pulling away the drywall, lots of molds and rotten [unintelligible [00:09:44].17] It was basically a rebuild and I joke that I paid the people to buy that house. So it was definitely a loss – probably $18,000 in the red, without having that file right in front of me.
Joe Fairless: You paid people to tear down…
Ragan McKinney: No, it was — basically, that was my loss.
Joe Fairless: Okay. $18,000, you said?
Ragan McKinney: Mm-hmm.
Joe Fairless: In the grand scheme of things, in two decades, an $18,000 loss… Bravo to you. That’s pretty good, right?
Ragan McKinney: I don’t know. Like I said, my grandparents and then even my parents — I just feel like I’ve been super fortunate in being guided in the right direction… Whether it’s been houses or it’s been cars, my dad owns a salvage yard… And this kind of goes back a little bit off of real estate, but it kind of will give you a background of the way I think – we don’t go buy brand new cars; we would buy them, he would fix them up. So I’ve never paid full price for anything. And I’ve always been able — even with a car, I’ve been able to drive it, and then still make money on it. So the same thing with my houses – it was a really hard pill to swallow to come in and say, not only are you going to not make money, you’re going to lose money. That’s a lot. It’s more of mental for me and a blow to my ego than the dollar amount.
Joe Fairless: Mm-hm. You bought it sight unseen. How many properties, if you know, have you purchased sight unseen before?
Ragan McKinney: More than I should admit. In the 20 years, probably eight to 10.
Joe Fairless: Eight to 10. And about what number was this, on the eight to 10 range?
Ragan McKinney: This would have been right out of the gate probably the second one.
Joe Fairless: Okay. What were the circumstances where you bought it sight unseen?
Ragan McKinney: It was an auction, and there was people bidding against me, and I was younger, and I thought, “Well, if all these other investors want it, it has to be a great property. Somebody has to know something.” It’s really important, probably the biggest lesson I’ve learned, is to do my own due diligence. Yes, I have a big support system that I can bounce things off of, but I know how to make a deal and how to set it up to where I look like a fantastic buyer. But there’s a lot of mistakes I’ve made that have cost me, and that would be A, sight unseen, B, waiving inspections, not using my due diligence, period, things like that.
Joe Fairless: But one out of eight to 10, your batting pretty good there.
Ragan McKinney: Don’t jinx me.
Joe Fairless: Right. [laughs] So the sight unseen actually has been successful for…
Ragan McKinney: It is, and I’m not scared of it.
Joe Fairless: How do you mitigate that risk?
Ragan McKinney: Well, I don’t believe — and I know this is cliché, but no risk, no reward. I actually have one under contract right now. I’m steering kind of away from the residential, single-family, and getting into multi-family, and also into the vacation rentals. I just bought my second vacation rental on Norris Lake Tennessee, sight unseen. How to mitigate that risk is my contract allowed the due diligence period. I am getting the inspections and following it through top to bottom, just so I know what I’m getting into… Because I tend to operate on a deal based off of the purchase price and knowing what I can do… But I always like to forget that middle part of what it cost to get it there. It’s not enough to scare me, but I am being smarter about how I get there.
Joe Fairless: I want to spend a little bit of time talking about where you’re headed and why that shift in your focus. But before we do, I mentioned earlier, let’s talk about the extremes. Most you’ve lost, 18k. What deal have you made the most money on?
Ragan McKinney: Well, the most money I’ve made is — I buy and sell real estate all the time, so I have bought them and I have other investors that I work with that decide that they want to go ahead and flip it. So instead of me taking the time, I have to weigh my options of “Can I fix this?” And I now pay contractors to do all the work, wherein the very beginning, I was doing a lot of the work myself with my family. So to offset the cost, the best deal – and I don’t just weigh the net dollar, it’s how much work was invested, as you know, being able to buy something and then turn around and flip and sell it… And that was for $52,000.
Joe Fairless: $52,000. So you found the deal, and then you sold it to a client of yours who fix and flipped it?
Ragan McKinney: Correct. I actually bought it, and I was going to flip it. So I–
Joe Fairless: You bought it.
Ragan McKinney: Yeah, I bought it. Super sweet deal. I had bought a lot of the material for it… And then how that worked is they came to me, they were looking for one… I don’t have the time, now that I am where I am in real estate, so basically, the market had shifted. It did sit for a period of time, and then I sold it to them.
Joe Fairless: Got it. Okay, that was a sweet deal.
Ragan McKinney: It was a sweet deal.
Joe Fairless: If you got a $52,000 profit before they even touched it, and then they fixed it up, flipped it, and then my assumption is they made money…
Ragan McKinney: Oh, yeah, they made money. And then I get to list it as well.
Joe Fairless: Oh, bravo!
Ragan McKinney: Mm-hm, yeah.
Joe Fairless: Wow.
Ragan McKinney: So… Keep your investors happy.
Joe Fairless: Yes, it reminds me of the lease with an option to purchase, where people make money in many ways with those types of deals – on the front end, on the back end, and during the middle. Alright, so let’s talk about your shift in focus. You said vacation rentals and multifamily. I believe I heard that correctly. Did I hear that right?
Ragan McKinney: That’s right.
Joe Fairless: Okay. Why? You’ve got a good thing going, with flipping about 11 properties a year. You’ve got some rentals. You’re a broker, you’ve just opened the brokerage about a year ago. Why are you shifting?
Ragan McKinney: I just think the market is changing, and also, it’s for my own personal… The flips – everybody’s getting into flipping. When you turn on HGTV or TLC and everybody has a home renovation show… So there’s a lot of people out there that are just getting their feet wet. So the competition to buy the property at a price that you can go in and do the work to make the profit worthwhile – that’s the first issue.
The second issue is I have to look at, “Okay, if I’m going to take a smaller profit on a flip, can I make more money doing something else?” And right now I can’t selling real estate, because the profit margin for the flips just aren’t what they used to be.
As far as going from residential single-family into multifamily and the vacation homes, as far as single-family goes, I’m just really struggling getting really good renters. I feel like the turnover is starting to be more than I would like, and I can get more of a return on a multi-family. And the vacation rentals so far have been fantastic. And I don’t know if it’s due to COVID; more people were camping… And like I said, both of them are on North Lake, booked completely out. And not just for the summer months. People are doing this at Thanksgiving, they’re going just for a weekend getaway, something different than maybe the Gatlinburg or the Pigeon Forge. And it’s somewhere you don’t have to fly, because a lot of people are from Norris, or are coming from the [unintelligible [00:16:25].02] area, so a lot of locals. And the profits have been way better than my single-family, with less headache.
Joe Fairless: Let’s talk about the profit. So what’s the last vacation rental that you purchased, or are about to purchase?
Ragan McKinney: So the first one I purchased was two years ago, with no intentions to rent. It was going to be just our place to get away. To kind of recap I went in, bought it through an estate, got a really good deal.
Joe Fairless: How’d you find it? MLS?
Ragan McKinney: No… It doesn’t matter where I’m at, I’m always shopping real estate. So we were on vacation at Norris… And I want to know what’s for sale, and I go and I talk to people, and ask, and I ended up meeting with a realtor. He said he had this come in, it wasn’t yet listed, it was an estate. There were four kids that were split four different ways, so it worked to my benefit.
It did need work, but we’ve put a year and a half worth of just our sweat equity into it, and we started running it this year. It was a pretty decent experience, with the exception of one… But as far as what the return is, we started in March and we ran it through Labor Day… And it was kind of a test run, because like I said, this was designed to be my family lake home, so something where we could go when we want… And I didn’t like that it cramped my schedule, but as far as money goes, it was about 28,000.
Joe Fairless: 28,000 that you got in for rental income?
Ragan McKinney: Mm-hmm.
Joe Fairless: And what did you buy it for?
Ragan McKinney: I bought the property for 430k.
Joe Fairless: 430,000? And about how much did you put into it, knowing that it was you doing the work… But what about supplies and stuff?
Ragan McKinney: I would say 50k.
Joe Fairless: 50k, got it. So if you had hired a contractor, what – double that? 100k?
Ragan McKinney: 100k, yeah.
Joe Fairless: Okay. Two follow-up questions. You said something like it worked out except for one. Was there something that didn’t…
Ragan McKinney: Well, rentals can go either way. People are on vacation with their families, and they can go in and treat it like their own, or they can go in there and it can be like a frat party. So that’s kind of what the last one was. Luckily, we did get deposits and things like that. But you have to think about your time to go in. And that income – we didn’t fully rent it, because I did leave it open for myself. The one I’m purchasing is going to be strictly a rental. And right now as it sets with the current owner, it’s $52,000. That’s what their gross rental income is.
Joe Fairless: Oh, really? Over the course of 12 months?
Ragan McKinney: She doesn’t rent in the winter, because they go down. So that was from February through October.
Joe Fairless: Dang. And how much are you buying that for?
Ragan McKinney: 285k.
Joe Fairless: Wow. Yeah, that’s a killer.
Ragan McKinney: I found that one on my morning run. Yeah. So…
Joe Fairless: Okay, that’s what I want to dig into. We’re going to come back to the morning run in a moment. On the first deal, you said when you go places, you want to know what’s for sale, so you talk to people… You met a realtor, and then the realtor told you that he had this off-market thing that was coming up. Who did you go to? When you say you talk to people, did you just randomly come across someone, or did you look at the brokerages, and you make it a point to call them? What did you do exactly?
Ragan McKinney: So exactly what happens is we were down there, the people that we were renting the property from… Like I said, I always am talking about real estate just by default… So let them know that I’m a realtor. We were looking to book another weekend; everything was completely full, so when the kids were out at the lake and we were just kind of chilling, I was on my phone and looking for rentals so we could come back in a few weeks… And everything was booked. I come across an email, reached out to the guy, and just said, “Hey, do you have anything?” And he said, “Everything’s completely booked. But I have one I’ll sell you.” And I thought, “Okay.”
So the next weekend, we drove down just to look at that property. That one wasn’t a fit for us. However, we drove four and a half hours to look at one property that I had intended to write a contract on and turn around and leave… So we ended up getting a hotel and reached out to a few agents. It was a Saturday, and they said, “We’re booked.” And finally, I just called agents until somebody that could meet me an hour. “Hey, we have X amount of dollars to spend, and we’re here to spend it this weekend. What do you have?” And he was fantastic, “I’ll meet you in an hour.” He showed us two properties.
Then after meeting with him, he said, “Well, I have this one, but it’s not active yet. But we might be able to get you in.” So he did, and I knew it was a perfect fit. Wrote a contract, and then just maintained that relationship.
The one I just bought, now that I’ve owned that property down there for two years – you start to meet people in the community and you start to look for life changes. Some people are finished down there, or some people have outgrown, or need to downsize… So I’m always looking for life changes, as I like to call them. And I go for a morning run every day, and happened to notice a house that was needing a little love, so we started looking on the county websites, and who owns it, and I send a letter, or I Facebook message, and reach out, “Have you thought about selling?” And eventually, you get a hit. And then you look at it.
This one I haven’t looked at. I’ve seen the outside, because I have ran by it several times… But we are under contract. I am during due diligence period, and we do have home inspections. So hopefully everything checks out. But what I have found is people that have bought the vacation rentals, most of them have owned them for several years, and a lot of them don’t understand what the market’s doing… Or they’re just done. They don’t want to rent anymore. They don’t want to deal with the headache of that. Or there’s some kind of life circumstances to where they just want to get out of it.
North Lake is a place that real estate is just booming. It’s booming everywhere, but people that bought lots for 30,000 ten years ago are selling them for 300 today. So like I said, I don’t know if it’s COVID, or if it’s just the market, a combination of everything, but there’s a lot of activity. And not just North Lake, any of the ones you can get lakefront homes on.
Joe Fairless: Did you send this person a Facebook message, or did you send them a note?
Ragan McKinney: Both. I sent a note and…
Joe Fairless: Which one did they respond to?
Ragan McKinney: Ragan Mckinney Real Estate Facebook.
Joe Fairless: They responded to the Facebook message. Got it. Thank you for those stories. That is beneficial for people looking for deals in hot markets. Taking a step back, what is your best real estate investing advice ever?
Ragan McKinney: Don’t ever be afraid to go after what you want, or to ask for something. The worst that anybody’s going to tell you is no, and I feel like the best deals have always come from the most unexpected situations. And if you’re looking to do it per a playbook or how you think it’s supposed to be – yes, realtors (because I’m a realtor) can get you fantastic deals. But most of them are going to come from homework or just paying attention to your surroundings. A lot of times the best deals are right in your own neighborhood, and that’s where I really like to focus… And like I said, the vacation house is two doors down from my other one. Most of my deals are right here in the middle of my hometown… Because you know people’s life changes, and it just presents an opportunity.
Joe Fairless: We’re going to do lightning round. Are you ready for the Best Ever lightning round?
Ragan McKinney: I’m ready.
Joe Fairless: Alright. First, a quick word from our best ever partners.
Joe Fairless: What’s the Best Ever deal you’ve gotten in the most unexpected way?
Ragan McKinney: Best Ever deal in the most unexpected way? I would probably say the lake house. I went down there expecting to get something, I immediately felt disappointed, and ended up with something better.
Joe Fairless: What’s the Best Ever way you like to give back to the community?
Ragan McKinney: I’m big, big into my local community. Big, big advocate for giving to the people that take care of me. I like to turn back and give it back. So police, fire or paramedics. I’m big on that, and then all of our military.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Ragan McKinney: They can check me out on my website at raganmckinney.com, or they can go to any of my social media, Instagram or Facebook.
Joe Fairless: Ragan, thanks for being on the show. I enjoyed our conversation. Thank goodness for your grandparents, and that conversation they had with you 20 years ago, when you were going to buy that white picket fence house, and look at the path that they helped you get on, and then you’ve blazed the trail from there.
I love hearing about the resourcefulness and just the tenacity for how you’re uncovering deals, and that will be helpful for a lot of people. And also the shift in focus, and why you’re shifting with your focus. So thanks for being on the show. I hope you have a Best Ever day and talk to you again soon.
Ragan McKinney: Thanks so much for having me.
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