Flipping America 182, Listener Questions

podcast 182 Listener Questions

Expected Air Date: 8/30/18


Today we are going to answer some listener questions. Keep the questions coming! We love them and answer them all.

I realized after we concluded Monday’s show that I had promised to make fun of a “news” story about real estate and I had just run out of time. So I’m leading off today by keeping that promise to you. Real estate is not a controversial topic and is largely apolitical. 

We try our best to keep politics out of this show. But I suppose I shouldn’t be surprised when a reporter’s bias sneaks through in subtle ways. That’s my reason for sharing this article with you – not because I deeply care about what she is wrong about, but because I want YOU to pay attention to the way words can reflect bias and shape opinion. So here comes the headline…

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We now have a profile at houzz.com for what it’s worth. 

Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question. 


  • September 12, Chantelle Owens at Flipping Atlanta, Tax Liens
  • Lunch with me every Wednesday.
  • Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
  • Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.  



Questions@flippingamericaradio.com Tell us where you’re from!

  • Madison, Atlanta, GA, “When you are renovating something to rent, how is that different from renovating to sell?”
  • Carl, Charlotte, NC, “I wanted to come to your mentoring classes this week but just couldn’t get away from here for four days. Will you be coming to Charlotte or do you have an online course I can take?”
  • Evan, Lancaster, PA, “What are the numbers I should look for when buying something to flip?”
  • Charlene, Villages of Ocala, FL, “I have half a dozen possibilities here, and none of them fit the MAO formula, but they are all coming in about 80% of ARV. The good news is, I can buy four of them subject to. Do you ever make exceptions on your MAO rule if you can use creative financing to buy them?”
  • Elian, Jacksonville, FL, “Is the ‘no money down’ deal really possible? If so, how does it work?”
  • Rachel, Elizabethtown, KY “How do you decide whether to keep a property to flip or keep it for a rental?”

Motivational Thoughts for the day

  • Act as if what you do makes a difference. It does. William James


[0:00] Music.

[0:28] Time for flipping America the show that teaches you how to make money in real estate wherever you are whatever your situation there is an opportunity for you.

Flipping America is brought to you today by Braswell Capital Solutions commercial lending made easy on the web at Braswell Capital solutions.com.

And now here’s that flipping America guy Rodger Blankenship

I realized that I had made in my opening comments a promise to make fun of his of a quote-unquote new story and I just ran out of time and didn’t get to it so I’m going to start with that today and then I’ve got.

Probably more questions from listeners and I have time to answer so we’re going to devote some time to do your questions today but first don’t keep my promise I told you that I would talk about this and so I will and I will I already sent the link out on social media but I will send it again today this story for realtor.

Come and headline is mortgage rates tumble as housing starts to drag down the economy.

[1:36] All right if the if the headline isn’t hilarious enough let’s just stop and and and break this down for a minute you know.

[1:43] Real estate is not that controversial it just is what it is this is not an area that is political.

And I think that’s so far in our shows a brief year-and-a-half history we’ve done a pretty good job of keeping politics out of it.

And it is amazing to me that even in.

[2:06] A kind of a tame you know non-threatening world like real estate reporters bias.

Comes through just by choice of words and this is really the reason I’m picking on this story because I want you my dear friends and thank you for listening I want you.

To read the news and listen to the news with an ear for the bias.

The bias comes not always in the things that are directly said although these days a certain news

Outlets are not making any bones about it not trying to be subtle there bias is clearly coming through but sometimes bias can come through just in a choice of words.

To give the benefit of the doubt I think that people who have certain political viewpoints.

Unintentionally use words that reflect a bias and don’t have anything to back it up right now

first of all let’s look at the story mortgage rates tumble as housing starts to drag down the economy so I’m course I’m interested in this because I’m paying attention to what’s happening with mortgage rates in the economy and I wasn’t aware that mortgage rates were tumbling.

What does tumble mean and see there is a word that you choose to use and I’m going to read you a line.

From I’m going to read you a paragraph from the story and you tell me whether this constitutes tumble.

[3:33] The 30-year fixed-rate mortgage averaged 4.53% during August 16th week

down 6 basis points according to the weekly data from mortgage provider Freddie Mac

the 15-year rate mortgage average 4.01%

down from 4.05% the 5-year treasury index hybrid adjustable rate mortgage average 3.87% down 3.

Basis points no friends if your listing if you don’t know what a basis point is it’s when it’s one one-hundredth of a point.

[4:12] Alright so my question for you is.

If the mortgage rate is the average mortgage rate goes down 6 basis points or 6 107 point it goes down from.

But she 4.05 to 4.0 one on the 15-year is that a tumble.

[4:34] I mean really it might be a slide it might be a slip it might be moved downward but is it a tumble.

[4:44] You see what I mean alright

that’s one thing it’s an overly dramatic word for a slight shift in mortgage rates and the mortgage rates are shifting simply because sales are not up now the article goes on to talk about that too

the fact that the housing market is slow down we’ve talked about that on the show I predicted it would happen and with the lack of inventory is keeping the market kind of hot but we reached a point where

prices have gotten to the point where

you know people just can’t afford to price right out of the market and so sales are beginning to slow the market is beginning to slow prices are starting to cool off a little bit the market is softening it starting at the highest in and it’s working its way down.

It’s still pretty much a high-end soften but

in time over the next several months we’re going to see it move on and probably within the next six to eight months we will have something like a balanced real estate market that’s not a disaster balances

you know kind of normal now how often do which Eve normal usually normal is achieved for a brief period of time while the pendulum is swinging from one extreme to the other so,

the market is beginning to turn just as we have talked about and foreseen but I don’t think that the interest rates have tumbled.

[6:03] And that’s not even the most egregious fault for this headline drag down the economy.

I have you been listening to the economic news just yesterday the report came out that the economy is predicted to grow it at 4.2% annual rate.

[6:21] 4.2%

I remember not so long ago just a couple of years ago when we were being told by the federal government that a one to one and a half two at the most 2% rate is all we will ever be able to expect again and the idea that some people were running for office

promising we could get back to a 3% rate was laughed at it was Ludacris,

and then president of the United States said referring to the current president of the United States what’s he going to do wave a magic wand and make jobs magically reappear

well I’m not sure everything the way I am sure I don’t have time to really fully.

Get into everything that’s happened because again I don’t want to make this political but whoever you want to credit and whatever you want to say.

The market is not dragging that she says in this article analysts now believe housing will drag down overall economic growth in the near-term really what analysts.

[7:26] I haven’t heard those analyst and she goes on and begins to

a quote others she does quote a couple of people Doug Duncan the chief Economist of Fannie Mae says housing continues to drag on growth

do the lackluster home building activity home sales and Brokers commissions I don’t know what Brokers commissions have to do with it but housing is

stagnating it it is and there’s no question about it but it doesn’t seem to be having an impact on the economy in fact she tries to quote there and Bloomquist who is a friend of mine at

Adam Data Solutions we had him on the show and he says higher home sales activity bodes well for local real estate agents home improvement stores moving companies and others

and that’s how the story ends where’s the drag on the economy.

[8:14] No link is established so you can say whatever you want to in the headline and then you don’t have to bother backing it up and somebody will print it as news what a world we live in a.

Will get to your questions when we come back.

[8:25] Music.

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[10:27] Music.

[10:46] We’re back on Rodger Blankenship and I just had to start out the show with that little rant about that news article because.

I guess the other thing I want to do is sit back and just

I laugh at it you know I don’t get too worked up about this stuff I don’t really care. You know I do care about real estate I care about you I care about what’s going on I want you to be successful and

I want to help as much as I can but I don’t really care that somebody with an agenda of gets an article printed in realtor.com I don’t really care it doesn’t matter because in the end

it doesn’t have that much of an impact even if 5 million people read that article it doesn’t have that much of an impact and.

Although we pay attention to what’s going on in the news in the market in the economy for my part

it’s motivated out of a Shear desire not to let the market condition sneak up on me again back in 2006 I wasn’t really paying attention

since I’ve been in this business all I have done is gone up and up and up and I assume that what was happening was normal I didn’t really even think about it very much I ain’t got a rude awakening in 2007 8.

[11:58] But we also figured out that we can make money even in that economy and so here’s the thing folks we’re going to stay on top of the market and we’re going to let you know good news or bad news we don’t have an agenda here we’re just going to tell you what it is

we’re going to take a look at the trends,

the interesting thing about real estate is it move slow enough it does have a little warp and woof there’s a little up and down but the market is not volatile like the stock market it doesn’t,

with one notable lifetime exception in 2006 and 7 the bottom doesn’t fall out of the market suddenly in real estate and so we’re able to track what’s going on and see the trends and we don’t get overly dramatic about it we just understand which direction the market is heading and we adjust accordingly

if the market is looking like it’s cooling off in and going into a downturn then we get ready to buy more product because it’s going to get easier to buy and we get more aggressive in our evaluations and in our sales.

Techniques right now the market is still hot and so we were buying everything that we can so that we can sell it because it will sell

what is the market begins to cool,

we get a lot more conservative with our evaluations and we get a lot more aggressive in the way we put houses out there for sale it’s just a matter of adjusting your techniques and your.

[13:21] To current market conditions and the way to do that is to understand the market conditions and if you want to understand the market conditions my friend that’s what flipping America is here for we’re going to help you do that,

alright so it’s all good and.

[13:35] Andrea I’m sorry I’m not sure how to say last name Rick where is welcome to.

Publishes many of these stories as you want try to scare us all into thinking that the economy is in the toilet and go ahead it’s all right.

I don’t see any drag on the economy and I would hardly call 6 basis points a tumble now.

Under your questions because I have promised you a notary but first couple of announcements I do need to do this September 12th.

[14:07] Second Thursday of every month if you’re in the Atlanta area Shantel Owens is coming to flipping Atlanta and.

Man what a coup this is Shantel Owens is the queen of tax liens and she’s going to be at flipping Atlanta teaching us about texting she’s been on this show and I know that that many of you, and how much you enjoyed her and

I enjoyed just talking to her we’ve had some conversations since then and she is coming to flipping Atlanta,

in Atlanta Georgia on September 12th and she’s going to be talking about tax liens and that you can find out about this on their website and also had meetup.com flipping Atlanta.

I want to remind you you can do lunch with us every Wednesday

and here in Atlanta at Huey luey’s Mexican restaurant at the corner of Abernathy and Roswell Road in Sandy Springs not that hard to find just look up Huey luey’s and join us from 11:30 to 1 every Wednesday the agenda is very simple.

Whatever questions issues concerns or deals you bring to the table that’s what we’re going to talk about.

[15:14] If you just want to sit there and shoot the breeze that’s fine there’s no speaker there’s no preset agenda it’s just let’s

get together have lunch talk real estate okay couple of the announcements so well first of all how you can contact us you can find us all over the web

and look up flipping America network.com and if you have questions about real estate you can send them the questions at flipping America network.com you can find us on Facebook

Twitter and Instagram at flipping America we’ve got a YouTube channel please go and subscribe and and please let us know what you think about what we’re doing it’s it’s always good if you know what’s good for the ego when people say,

they appreciate what we’re doing and what we had to save it also if there’s a way that we can improve what we’re doing to help you we sure want you to let us know

and we’ve got a profile on house.com I didn’t know you could even do a profile on house.com but now we have one and we’re on Pinterest and Google Plus and just about anywhere you look you can find flipping America if you want to but if you don’t want to do all of that stuff,

you just want to talk to somebody then you got a couple of options number one.

You can call if you just want to leave a message or comment you can call our comment line anytime day or night for 04.

369-1018 extension 1.

[16:33] 404-369-1018 extension 1 and that’s a way to leave a message for us and we do appreciate the messages that we’re getting if you want to actually speak with someone.

Then you need to go to the website and not the top of every page is a blue button that says click here to scratch it schedule a strategy called and then you’ll be able to access a scheduler and set up a 30-minute call with somebody and

it could be me I still get on the phone and take some of these strategy calls and during this call we’re going to ask you about your goals your aspirations your dreams and just suggest some things for you to think about.

For your best fit was real estate you see on the show.

Even those shows called flipping America we don’t encourage everyone to drop what you’re doing and start flipping houses like you see on TV but we do encourage everyone

to consider real estate as a part of a balanced Investment Portfolio and do that end we want to give you the best information Insight strategies tactics methods and

maybe just share with you the opportunities that are available to you because he flipping houses isn’t for everybody but real estate is.

[17:45] Music.

[18:00] Do you want to learn how to flip houses I want to show you how to flip houses and there’s probably no one in the country better qualified than me to show you I flipped hundreds and hundreds of them.

And I also have some training and degree and experience and education so I could show you how to do exactly what I’ve done hundreds of times don’t believe me.

Head on over to put starter event.com but in the meantime Give a listen to Pat caywood.

[18:26] Cleveland Tennessee and I’ve been.

Doing some flipping since about March of this year and had started with a Nationals program that was very expensive I spent today with Roger Blankenship.

Learning about his program and boy do I wish I’d met Rodger first.

He has a clear concise program and many tools that are going to be very hot.

[18:54] And starting and managing a program and the mentorship and Leadership and coaching that he saw frame are in value.

[19:04] Music.

[19:58] Now on to your questions Madison from Atlanta Georgia says when you are renovating something to rent how is that different from renovating to sell.

Good question Madison preciate you asking and I’m going to give you the answer about what I do not necessarily what everyone does okay.


Belief in philosophy is whether I’m on my end result is renters or someone is going to buy the house I’m going to take care of them even though they don’t know it.

[20:29] I am the professional I am the expert with my cruise and my contractors we are able to understand and diagnose the problems that arise with the structure and problems do arise in the structure our commitment.

In our company and our family of companies our commitment is to do the right thing and I I say in the courses that I teach we fix it like mama’s going to move in and we’re taking care of Mama

and that’s just our way of applying the Golden Rule to what we do do unto others as you would have them do unto you.

We want to treat people well we want to treat people with dignity yes their tenants yes for some reason or another they they don’t want to or can’t afford to buy a house right now

that’s fine none of my business I don’t care we’re going to treat them with dignity maybe somebody comes to us and they’ve got terrible credit because they’ve got a poor payment

history and so forth all right well that may reflect some bad habits and other things like that but we’re still not going to sit in judgment on those people and we’re not going to give them a terrible place to live just because that’s their life situation

now with that.

Kind of guiding philosophy in mind I will say that we will fix everything that’s wrong with the property and we’ll make sure it’s right but there are some differences when we are renovating to rent versus renovating to sell.

[21:52] When we renovate to sell we want to put some pop in the house we’ve we put some things in there that catch the eye or a make the potential buyers go

wow okay.

With renters not so much we don’t go for Unique light fixtures for example that’s one we.

We don’t always feel like we have to put granite.

Countertops in a rental house now some houses and some price ranges and areas they just need granite but I don’t typically buy those for rentals.

And we got another question coming up on rentals in a few minutes so I’ll hold off on that what I was about to say but just switch back to.

[22:38] Things like floor coverings when I am renovating something to rent my objective is to put something in there that is durable and Lasting.

I’m not going to put really plush white carpet.

In a bedroom because I know that as soon as those tenants move out I’ll have to replace it so I look forward a durable floor coverings I like hard surfaces I like you know.

I’m kind of liking luxury vinyl plank right now for floors because it has the look of a wood floor but it has the water resistance of vinyl the color goes all the way through it can stand up to a variety of different types of

unintentional abuse not that people are sitting there taking a hammer to it or.

There are some like that but if you drop dishes on it or roll chairs across it you know it it’s durable if you get the luxury vinyl plank you got to pay a little bit more than you would for carpet that it’s going to last you a lot longer and it lasts longer than the laminate for stew

as well so I do those types of things I use low maintenance windows

everything that we do is designed to be easily replaced if and when it breaks I still want quality and I still want to be able to look my tenants in the eye and they know that I’ve done the best I can buy them while also protecting the bottom line.

[23:58] I hope that helps there are some differences but it’s not in that we take shortcuts and become a slumlord and you know Madison

you probably know just by asking the question that there are a number of people out there that will just take all kinds of shortcuts in.

Renovating to rent and renovating to sell.

And I’ve been criticized by some of my friends for maybe spending a little bit more on every renovation and I guess going back over the years you know if you spend

500 extra dollars on a house and you do a hundred houses a year that starts adding up to real money.

But I tell you what else it adds up to,

if it’s money well-spent and it’s not because you failed to get your best price or do you know that sort of thing but if it’s money well spent because you did the right thing then I consider it an investment and a clean conscience.

[24:58] Carl.

From Charlotte North Carolina says I wanted to come to your mentoring classes this week but just couldn’t get away from here for 4 days will you be coming to Charlotte or do you have an online course I can take, thanks for the question and the answer is

yes maybe and yes probably.

Yes maybe coming to Charlotte do you know we’re working on that and looking for the the right time to be there

but we’re working on some things here in in headquarters flipping Atlanta and it’s I mean flipping America it’s way too soon for me to say anything about it on the air but some things are in the world.

[25:36] I’ll be very excited to talk to you about and in the meantime the answer to your question about the online cord it’s courses yes we are already working to

to find a very good way to deliver our information online now

just a word about what we do with our mentoring in our teaching we take a different approach.

We are not the infomercial gurus that one is Dino send you a bunch of books and tapes that you pay hundreds of dollars for stick on yourself and never do anything with I don’t have any interest in doing because that is not my goal,

my goal is not to sell courses to make me a millionaire my goal is to.

Train and raise up a thousand millionaires among our listeners and friends that we meet over the years and the only way that can happen is if you really get involved in this so when we put together our mentoring program

we structured it so that there’s a lot of personal involvement and there’s a little bit of accountability involved now if you pay your money to take the course and never do anything with it we’re not going to send you down guilt trip plane however.

[26:45] We want to know that you’re serious before we even invite you into the program for the online course if we think that,

perhaps the entry point there we’re not going to be as rigorous with the interviews about who takes the online course

but what we’re doing there is we’re providing a lot of good information for people who are curious they want to know more or maybe all they need is he online course because they have plenty of motivation on their own then

to fill that need we’re going to be bringing our unique.

Twist and some of the things that we do that that in this industry there aren’t a lot of surprises and new things but we do some things that are little bit different than what anybody else does so

we’re working on transferring all of that as more as much of that as we can into an online course so Carl yes just stay tuned because it is coming and maybe just a few months from now we’ll have another now spent about that,

we’ll be right back.

[27:44] Music.

[27:51] Are you one of the 70% of Americans living paycheck to paycheck and tired of the stress if so I understand that used to be in that 70.

I start investing 2003 with my net worth with -80 thousand since then I’ve built a business that generates over $500,000 a month in income and allows me the freedom to do what I want I’m Brad Chandler and I tease people just like.

How to find Freedom through real estate investing using a tactic that doesn’t require credit or tons of cash for a free training on how you too can do this please visit Brad channel.com for freedom.

Hey flipping America listeners have you ever walked into a property and said I have no idea what it will cost to repair this home those days.

[28:33] Music.

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[28:53] Music.

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[29:23] Music.

[29:59] And we’re back I’m Rodger Blankenship and I teach people how to make money in real estate.

[30:05] I’m dealing with listener questions today because if I if I.

Don’t take them from time to time they’ll just get away from 07 from Lancaster PA what are the numbers I should look for when buying something to flip.

Now we get this question a lot but I don’t mind answering it a lot because we have new listeners coming on board.

Just about every week and so welcome everyone we’re glad to have you here and I will answer this question as many times as I get asked and a lot of times people.

When I ask a question we just direct them to a frequently Asked question you know he’s like you think of the stock answer but it was time for us to take this one again when you’re looking for something to flip.

Here are the numbers that you need to look for

you need to go in my opinion Evan you want to be all in on a property at No More than 70% of your final selling price now that final selling price is called

after repair value are a RV this is real estate investor lingo your realtor

if they unless they have worked with an investor before your realtor may not be familiar with the term arv or after repair value no way I did find it and describe it is what we’re going to sell the house for when it’s all fixed up

like new.

[31:21] And maybe even updated to be better than new in some ways so that’s your arv and you want to have all of your

immediate cost in at 70% when I say immediate cause I’m talking about your purchasing your repairs I’m not talking about other things like holding cost and selling cost

if you buy it at 70% well

let’s backup do the numbers okay let’s just take something where the math is simple you can visualize this you don’t have to pull over if you’re listening while going down the road and write this down imagine a house that would sell for $100,000.

I don’t imagine what it would look like a word in the world that would have to be because you know there aren’t many hundred-thousand-dollar houses left but let’s just do this because the math is easy alright imagine $200,000 house

with this formula that means that you want to be all in at $70,000 No More than 70% of a RV.

[32:17] Let’s say that this house needs just your basic paint and carpet and little bit up carpet repair a little bit cover replaced and a little bit of cabinets and countertop and new appliances and all that’s going to cost you $15,000.

Okay so you would subtract that $15,000 from the 70,000 to be at 55,000.

Okay and so then if you’re at $55,000 for your purchase price if you what I would suggest is that smoke you want to give so maybe offer 50.

And if you can get it for 50 and all those numbers actually work then you could shop that contract around while you have it under contract if you want to and

any investor that listens to and follows this advice would be willing to give 55,000 for that house so you could sell that contract for

for $5,000 you see you can make a quick 5.

If you follow this formula what are you going to make on the other side that’s a good question see the cost of the money kind of dips into.

[33:25] You’re 30% margin that we built into this so let’s take a look at that.

And will do this kind of quickly but when you go to sell this house let’s say you sell it for $100,000 and let’s say that you pay full commission to your realtor so you’re out six.

$6,000 there now you down to 94 94,000 and then you’ve got.

To pay a little bit of property taxes during the time that you own it this was a relatively small flip it went fast the markets hot you held it for 4 months and let’s say that you were out another $600 in.

Property taxes for the time that you held it and then.

Let’s say that you got a little bit of a hard money loan on there and you got some interest payments and maybe your total loan cost on this project or about.

$10,000 or 10% of the arv I’m just kind of making up these numbers so now you’re about.

84 $83,000 net and you’re in it at 70,000 so you made $13,000 is.

Is that okay.

Well that’s kind of how it ends up working usually probably proportionally speaking the cost of the funds were a little bit hi there but.

[34:43] People ask me why do you insist on this 30% margin

and I tell them because we’re first of all because we can find it if you look hard enough you can find it but secondly you have to know that in this business do you have other expenses you have holding cost and selling costs that are going to eat into that margin and.

You also have to prepare for the unexpected because you may think that you’re going to spend $15,000 but what if you.

Find another extra $5,000 repairs and you know that you have to do to the house that you

couldn’t have seen it was behind a wall and when you open it up to do one thing or is this more and more and more and you end up spending more money that’s why we build a little bit of margin in there.

[35:26] Because we want to end up that even if things go wrong a little bit or if the house gets just a little sideways we’re still going to make a little bit of money all right.

That’s why we do it Evan I hope that helps people ask me all the time even people that are experiencing this business they say I can’t find a house that meets that criteria I think I’m just going to start buying with a 20% margin.

And I say well you’re a grown adult you can do what you want to but I’m not going to because I am allowing for all of these other expenses and in the end.

I never want to lose money on another deal.

No I’ve done this more than 800 times as far as just fixing and flipping and in that time I’ve lost money.

On a 8 properties and I broke even several times but I’ve lost money on a property

I don’t like that feeling that’s not a bad percentage really in the in the larger scope of things but I don’t like it and every time every time it’s happened I can look back and see decisions that we made that kind of led to it

I am very couple that we just found disastrous things in the property once we bought it but for the most part we can avoid it if we just build safety into our estimates and and what we’re doing so that’s why we want to get that.

Big margin and why should I Anchorage you to do it as well.

[36:47] What do you do when there’s less maybe we’ll talk about that a little later.

[36:52] Music.

[37:00] Not too long ago we did a one-day flip starter in Chattanooga Tennessee and low and behold one of my old College friends came out to the event his name is Peter Faulkner and here’s what he had to say about the event.

[37:13] Peter Falkner here I tended a one-day flip starter training session led by Roger Blankenship and I was amazed to see what has happened in Rogers life in the last 15 plus years.

Flipping over 800 houses and then this one day training he told how he did it and what.

Falls the blessings the benefits and how to do it and I was so impressed with how well organized and how smooth the training winners today.

You’re tempted are encouraged to go so it was not a bad price and if you get a chance to do it even just to consider in Basque.

But I just want to thank Rodger for a great day today and appreciate what he’s doing.

[37:58] Music.

[38:13] Okay do you all know that this show is pre-recorded in so we have the opportunity to kind of group your questions together and it’s no accident that the next question is following the previous one Evan just ask.

All about the numbers to look for when buying something to flip the next question is from Charlene from Villages of Ocala Florida I have half a dozen possibilities here and none of them fit the male formula but they are all coming in about 80% of arv.

The good news is I can buy four of them subject to do you ever make exceptions on your mail rule if you use creative financing to buy them all right.

I have to unpack this a little bit because Charlene using real estate investor jargon honest and that’s all right.

Just in case you’re new to this and then or maybe don’t understand the jargon I want I want to make sure when she says they re she’s talking about after repair value we’ve already discussed that just a few minutes ago.

But when we say the male formula that’s Mao and

that’s maximum allowable offer I’m not sure who invented that prays but everybody uses it now.

[39:19] And so I’m back that was speaking last Monday night and somebody raised her hand said what’s the male formula and I really wanted to say I’m not sure if it has something to do with egg whites and

sugar and oil I didn’t do that I just said that’s a question I’ve got to answer after the talk because that talk was already long enough without taking questions off the topic all right

so she’s got Charlene you got a half dozen deals and four of them they’re all about 80% of arv which course,

it is higher than we would want to pay but you can buy them subject to and you ask do you ever make exceptions on the rule if you can use creative financing to buy them and the answer is yes and I’m really glad you asked this because

I wanted to explain to folks that we do sometimes make exceptions to this Rule and one.

[40:12] Instance is if we are putting together a syndication to buy a higher-end home

no I don’t like borrowing money to buy the high-end flips because first of all they’re going to take longer to sell

so if I got something that I’m going to buy for a million dollars and I think that maybe we put a hundred thousand into it and we’re going to sell it for 1.5 that what those numbers sound great.

But it goes away really quickly if your.

Loose steering at paying Pino $9,000 a month in interest that’s not fun that’s that’s hard on the cash flow and hard on the heart so in a deal like that.

I’ll put together a syndication meaning will get,

five or six how many people it takes to put their money together in a joint venture and will do the project and in there are no monthly payments to make and we won’t necessarily hit that Nail Formula but.

[41:10] The prophet number will be large enough that all these people who have put in amino

$300,000 or going to walk away with the $30,000 and 8 months or something like that and if they’re getting something like 10% on their money in a passive investment secured by real estate.

People are thrilled to do that let me tell you so that’s one exception the other exception is your exception Charlene when you’re talking about.

Buying properties with creative financing now.

[41:41] Sometimes people think creative financing is a buzz word that means something illegal or immoral not true.

I guess it could be because there are scam artists out there.

Better figure it out a way to explain just about everything including real estate but I’m not talking about that I’m talking about when you do a subject to purchase your doing nothing that is.

Your do nothing wrong it is legal it is moral there’s even a provision for it on the Federal Form,

for settling real estate the settlement document we just call it the HUD-1 but it’s not called that anymore there is a bad line on there in a provision for.

I’ll just purchased being subject to existing financing and that’s what we’re doing we are basically taking over the loan for the seller.

And not assuming the loan because the loan is not assumable there are no assumable loans we’re not asking their bank for permission

all we are doing is we are just going to start making the payment for this person and in exchange for that that person is going to transfer the title into a

land trust and they are the beneficiary and at closing they’re going to change the beneficiary to us.

[42:57] I just got quiet because I wondered if I should put that little secret on the show but I did cat’s out the bag okay anyway.

We’re taking over the loan if you just put the

the property in the name of your LLC and title has changed there’s a decent chance although it’s rare there is a decent chance particularly in light of the low interest rates that

may have been used when the property was purchased that the bank will invoke what is known as to do upon sale Clause if they do that that means that the entire note is due and payable we have to pay it off and then the numbers don’t really work but if you’re doing a subject to.

[43:35] A lot of times these are people who are behind on their loan a little bit or a lot and maybe you’re going to pay six or eight $10,000 to reinstate their loan

okay and then you’re going to spend another 8 or $10,000 or 15 making repairs to the property and,

typically we do this in view of a long term rental but let’s say that we were going to flip it because I have done subject ooze that we flipped and so we were in basically looking at.

Deals were we might at at the end of the thing when we flip the property we might make just a $10,000 now I know that if you’re up

a contestant on Chopped.

$10,000 is the grand prize and everybody’s excited about that $10,000 now it’s going to change your life every time I watch that show I thought man I wouldn’t cross the street to do a real estate deal where I only made $10,000 and

all these skilled chefs are out there just busting their rear ends try to make 10,000. Really.

You know do what you love I guess but if you just got in the real estate you would have a different view of $10,000 but.

[44:44] Having said that I would do

a subject to flip where I was going to make $10,000 if my if my cash into it was $20,000 why is that because it’s a return on cash idea not necessarily the return-on-investment the return on cash.

Just think about this folks if you could put $20,000 into something and 6 months later you get your $20,000 back plus an additional $10,000 would you do it I know in most cases you would think.

That’s that can’t be legal well sometimes the returns in this business or so good you think how can it possibly be legal are permissible and I try not to overhype this.

Because if I start really throwing out the returns and the percentages on this show I think that people would probably just blow it off as that’s impossible.

[45:39] But now you think about this and here’s a real scenario and Charlene is on to the she’s obviously inexperienced investor and.

She knows let’s say that you put $20,000 into this property and you’re taking over alone and you’re making the payments in

part of that 20,000 is the payments that you’re going to make over the next 6 months but you sell that property and when it’s all done you net out $10,000 this is a very real possibility happens all the time

could happen in a neighborhood very near you what is your return well you made

$10,000 profit on a $20,000 investment that’s 50% but you did it in 6 months and if you annualize that that’s a 100% return on your cat.

[46:27] Yeah.

[46:31] Or you could just go put it in a CD at the bank and you know if you buy a 5-year CD I think you can get one and a half percent now.

1 1/2 versus 100 what are you going to do well the.

100% thing involves work first of all Charlene had to find a deal then she had to structure the deal then she had to do the paperwork then she had to talk to the seller and she had to convince them to sell the property and you have to find the people that are desperate enough to sell the property like that anyway and

that’s so there’s some work involved but if you do that work.

You can really get a return on your cash speaking of return on cash our next question is from.

I don’t know if it’s eleonore Elian from Jacksonville Jacksonville Florida and if I I hope one of those pronunciation is right because we try our best to be respectful of everyone and your name.

I’m just going to go with Ellie and Ellie and from Jacksonville Florida has question coming up about the no-money-down deal is it possible and if so how does it work and we’re going to get in that right after this work.

[47:38] Music.

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[49:25] Music.

[49:38] Italian from Jacksonville Florida says is the no money down deal really possible if so how does it work.

Alright certain individuals have made a fortune.

With late night television infomercials selling their course on the no-money-down deal and really the only people getting rich from that is the individual selling the course.

[50:05] I will say it in answer to your question yes it is possible but I will also say.

If that’s the only thing you’re looking for you’re going to pass by 100 good deals to find the no-money-down deal I no money down deal is really a subject to like we were just talking about with Charlene.

And it’s possible to get into one of those with no money down and walk into a house that’s completely livable doesn’t really really need any work maybe just put a little bit of money into catching up their loan,

those kind of things are possible but they are rare more likely.

[50:46] Is the possibility of getting into a none of your own money kind of a deal and that’s a separate question but.

I’ll go ahead and answer it because this is really kind of what you want to know is it possible to do real estate with none of your own money involved yes it is.

[51:06] There are a number ways to do this but I borrowed of a concept from commercial real estate years ago called.

The fund stack a fund stack is a way of visualizing using a combination of other people’s money and the most common way I’ve done this is to.

Put together a private loan or a hard money loan.

There is still a requirement for some up-front money like down payment and that sort of thing or the most common thing that I had I had a line of credit that would

give me 90% of the purchase price of anything I wanted to buy but no rehab money so I had to find other rehab money so I would bring in a different partner

on the rehab side when I started in the business.

I had partners that put up money they put up 100% of the money in exchange for 50% of the profit so when I started coming up with a way to.

[52:06] Combine the line of credit with a partner I would use the line to buy the property and then I would have that 10% Gap

I am on the purchase plus all of the repair money I would bring in an equity partner and we would do a joint venture agreement and they would be signed up for a share of the profit what is that share the profit.

Well since I started people were putting up 100% of the money for 50% of the profit I went to a tutu one kind of thing another words if you put up 25% of the.

[52:41] A money that was regard to the deal I would offer 12 and a half percent of the profit but before I offered it I would take a look at what the projected returns were they difference

between these two type of structures is when somebody’s putting up 100% of the money there,

you know in first and only position on that property when someone’s putting up money on the backside of a loan then there

in second position and their money is a little bit more at risk

and so they probably it’s probably worth the higher percentage of the profit whatever it is I wanted my investors to I wanted to give them something that would project out to at least a 20% annualized return on their money. Why,

because I wanted them to be thrilled that they were investing with me now I just elaborated on a two possible ways do a no-money-down deal

and the first one is how I did probably the first 500 houses that I did.

And that is other people put up the money and do you know if you listen to the show you’ve heard my story.

[53:42] My dad wanted to get out of the stock market and I wanted to get into real estate and so it was two things that just happened to come together he knew that I knew had to do quite a few things in the house

because I had learned over many years of just basically.

You know I chosen a career that didn’t pay a lot of money and so when something broke in my house had to fix it and I’d go down to the hardware store to The Big Box store and take a seminar and learn how to fix it myself,

and so when it came time to do this my dad put up the money I did all the work and we split the profit.

[54:17] It was great he went back home told his friends his friends called me and said I got some money I’d like to put up some money you do the work and we’ll split the profit and the next thing you know I’ve got a business going with over a million dollars of capital and.

It is on and so you see Ellen and in those first hundreds of deals I didn’t have any money in any of them.

[54:40] That is a very good way to do it now as time when I went on I realized you know.

I am giving away a lot of the Prophet by giving up half of it on every deal and I might make more money

if I started using it and some lawn products that were out there so I started looking around and doing the math and thinking about and a lot of that thinking or,

that I did McNeil 10-12 years ago that thinking has come into What We Now teach and in our

flipping America mentoring program about how to structure and fund deals.

[55:18] I think we have time for at least one more question Rachel from Elizabethtown Kentucky how do you decide whether to keep a property to flip or keep it for a rental.

That’s a good question and it’s a fair question and.

The answer is going to differ depending from one person to another but for me.

[55:39] When I am looking at a property I make my decision whether I’m going to flip it or rent it before I buy it and I start

really zeroing in on the numbers now in our analysis in our analytical models that we use here in the office and and we training our our interns and then turns and the people in our program

you’re looking at both possibilities right from the get-go but I can pretty much tell you Rachel if it’s a

a big fine kind of a nice house that is.

More than a starter home anything more than a starter home I’m not keeping it for a rental unless I absolutely have to I don’t want.

Large homes in my rental inventory for me the ideal rental home is a small home that has a really hard service like brick on the outside that I don’t have to paint

you know you’re after year and.

It’s designed to be low maintenance and the lower the maintenance the better because that’s going to keep my costs down and my cash flow up

now at the same time I I want this to be a small home but I wanted to be in a solid area good working class neighborhood and I really want to create

a nice place that someone would want to move into and live for several years I want him to stay there I want him to be happy

I will let them live for less than the highest market share in but also it has to be a really a steal of a deal.

[57:09] My bias Rachel is to.

Flip the property most of the time when I get a steal of a deal like for example I was able to pick up a three-bedroom two-bath house in Hampton years ago and in Georgia

I was able to buy the house for $19,000 and I.

[57:29] Maybe five or six thousand into making your rent ready and started getting 800 a month and did that for years until I sold it

got a house in Barnesville Georgia for $5,000 and there was a tenant in it already paying 650 a month then I just let her stay and you know I could have gotten more money I let her stay at 6:50 I own that house for 7 years

never raised her rent and never set foot inside that house until the day I sold it.

So that’s the kind of things that I look for in rentals I like small.

Low maintenance and really good numbers on the return otherwise I’m flipping it.

[58:09] Okay that music coming up means we’re out of time for today folks I still got some more questions Buster Andy I’ll get to you guys just as soon as we can thank you all for listening so much and.

Be sure to follow us on social media and checks out on the web and get some of our events we really appreciate you.

We’ll talk again soon.

[58:30] Music.

[58:57] I thought for today is from William James he says act as if what you do makes a difference it does.

[59:05] I just thought is brought to you by the foundation for Renewal working together with communities across this great country of ours.

To provide lasting life change and impact find them on the web at renewal fund. Net and is always your gift in any amount is book tax deductible and welcome.

[59:23] Music.

[59:32] This has been flipping America real estate investing for everyone.

If you have questions about real estate Investments send them to questions at flipping America radio.com listen every Monday at 11 Thursdays and Saturdays at 10 on stations across the country or on iheartradio.com,

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