How to Flip Homes Like Al Capone

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The other night, I was watching one of my favorite movies of all time, The Untouchables. Great directing (Brian DePalma), mobsters, capos, gangland Chicago, Sean Connery, Robert DeNiro…you just can’t beat it.

One of the most unforgettable and disturbing scenes in that movie was what many people refer to as the “batter up” scene.

The scene begins with Al Capone (played by a beefed up Robert DeNiro) prowling around the table of a large dinner party with a dozen or so of his trusted associates (caporegimes or “capos” for short) lecturing on the importance of team. Prior to the party however, he was informed that one of his hit men named Albert Anselmi was privately hatching a plot to kill him and take over his gang.

Capone catches wind of it and invites him to the group dinner.

After talking on the importance of team, loyalty and baseball…Capone brutally murders Anselmi by bludgeoning him with a baseball bat from behind – to the shock of the other capos gathered at the party.

Even more frightening is that according to several sources, Capone actually did do this very thing to Anselmi as well as his accomplice John Scalise at a dinner party on May 7, 1929…but I digress.

Although you probably don’t run your real estate investing business like Al Capone ran his underworld team…you gotta admit, the guy was a fairly brilliant businessman. Many say that he would have been a billionaire if he had actually run a legitimate business. But unfortunately, the call of high margins and easy profits to be made in bootlegging, racketeering and prostitution was far too much for Al to resist.

As disturbing as the “batter up” scene is – it reminded an important principle in house flipping…namely, like Capone says – the essential importance of team.

Flipping Homes Like Capone

“A man stands alone at the plate…this is the time for individual achievement…but in the field he is a part of a team. He says: ‘I get nowhere unless the team wins’”

I am often asked “what do I really need to do first to start flipping houses?” If you are just getting started house flipping, there is much to learn, no doubt.

Can it be done alone? To an extent. But you can shorten your learning curve and avoid the big pitfalls by being a part of a team – a team which will help you to get through the tough times, lend expertise and also shorten your learning curve.

Many house flippers I talk to get into house flipping thinking that it’s a solitary process, just you against the world, making money hand over fist. But when people ask me how to get good at flipping homes and doing it fast, the first things I tell them that flipping houses is a TEAM sport, not a solitary one.

In fact, the house flipping team you assemble is one of the most important steps when you get started flipping houses. In fact, second to the real estate mindset, it’s the most important. Here are the six essential “capos” you’ll need to start flipping homes.

The 6 Essential House Flipping Capos You Must Have

Although Al Capone had far more than six team members on his gang of criminals, you really only need to start with the essential six. In most cases, there are usually more than just five team members, especially as you grow your business. But the big six are the base number you’ll need – depending on deal flow and scope of your house flipping career.

1. Real Estate Attorney

Even Al Capone had his fair share of lawyers. Although he had a slew of criminal lawyer, he undoubtedly had some real state lawyers on his team as well. The guys did own Chicago after all…

For you, although you hopefully will never need the services of a criminal lawyer, you should at least have one good real estate lawyer on your team who you trust implicitly. Although you won’t need him or her to get you out of  grand jury subpoena (let’s hope), you need one on your house flipping team to make sure you stay within the confines of the real estate laws in your state and country.

Many new house flippers make the fatal mistake of refusing to hire an attorney. They know they need an attorney but decide instead to “go it alone” or hire some second rate Internet based legal service.

The bottom line is when it comes to finding an attorney; you get what you pay for. Don’t skimp here. Hire a qualified expert attorney who knows real estate law. Think of it as a wise investment instead of a cost; like car insurance. You certainly don’t like paying the premium, but when you get into that fender bender, you are sure glad did.

An attorney may appear expensive at first (especially after you get your first bill) – and especially if the attorney charges a retainer to take you on as a client, but in the end it will cost you a lot more if you hire an incompetent attorney or try using one of those other services.

2. CPA (Certified Public Accountant)

Unlike the accountant (the book keeper as they called him) in The Untouchables who eventually sang like a bird to the authorities and led to Capone’s eventual prosecution on tax evasion charges, your accountant will be your best insurance in keeping you out of trouble with the IRS. This is especially true with the more cash you make.

Like an attorney, hiring the right CPA can save you a lot of money whereas hiring the wrong CPA can cost you a lot of money. In the process of finding a top notch CPA, it may be frustrating to hear so many different kinds of answers regarding real estate and house flipping accounting issues. This is not uncommon as the U.S real estate tax code can be interpreted in many different ways.

Finding an accountant who is extremely familiar with U.S. tax laws for house flipping and real estate investing is best. But the bottom line is you want a CPA who meshes with works for you and does all he can to legally apply good accounting strategies both to keep your taxes as low as possible and not have to worry about the IRS.

Your CPA should also be involved with your business structure from a tax advantage standpoint, so consult with your attorney and make sure they talk with each other to pick a business structure that’s best for you.

3. Insurance Agent

It was probably tough for Al to get an insurance company to back his multi-million dollar bootlegging empire, but you should have no problem getting insurance for your flips. How you handle your insurance largely depends on how you set up your business structure. Make sure you hire and insurance agent that understands your business and can give you good advice on how to insure different types of properties.

Different kinds of house flips require different types of insurance, so make sure you ask him or her about homeowners, builder’s risk, and liability and although they won’t be responsible for it at the closing, make sure you get title insurance as well. Your house flipping insurance agent should be a one stop shop for you here.

4. General Contractors

Capone had lots of “trigger men” to do all his dirty work. And although he did brutally murder Albert Anselmi in “batter up” – most times he never pulled the trigger himself. As Ive written here before, there are pros and cons to doing your own rehab work. But mostly, I like to get dirty only in the research phases and let my contractors do the rest.

There are a couple of different ways you can handle how to hire contractors to do the renovations on your properties. This can make or break any deal so it is so important you hire the best ones you can. And the best ones you can really trust.

A general contractor is a singular company who runs the entire project; they are responsible for hiring all subcontractors as well. The subcontractors are tradesman like plumbers, electricians and carpenters. The general contractor is responsible for the entire scope of work, works within your budget and makes sure all the subcontractors perform their jobs well – on time and on budget.

If you can find a general contractor that can work with in your budget you set forth on the project this may be the way to go initially. Having a good contractor will especially help you if you are just learning how to get started flipping houses.

5. Real Estate Agents

Capone had many new business development people looking for new deals to grow his empire. And when it comes to flipping homes, you need people to be on the lookout for you as well, which is why real estate agents are such an integral part of your house flip team.

When it comes to real estate agents, you can search out an agent with experience who already is familiar with house flipping or you can train an agent yourself. You may end up working with a few in different territories that they specialize in.

Also, there are a number of REO (real estate owned) agents. These are agents that specialize in selling bank foreclosures. There are also real estate agents that specialize in short sales. These are agents that work with banks to sell a property for the seller before it goes to foreclosure. No matter which one you choose, this team member is vitally important for your deal flow.

 6. Wholesalers

Capone of course dealt with some pretty shady characters…and with wholesalers there’s no shortage of them. However, there are some extremely good ones as well who can be a tremendous source of house flip deals for you. Like anything in flipping houses, you get the good with the bad.

Although wholesalers have and probably will continue to have an uphill battle with their real estate reputations, I find that wholesalers are a great source for house flips.

You can find wholesalers everywhere. These are the “I buy houses” and “we pay cash for houses” signs you may see around town. Despite any reservations many house flippers might have on wholesalers, if the numbers make sense, then it’s worth it for both of you. They make money and you make money, everyone wins.

You can also meet wholesalers at REIA meetings, through a quick Google search as well as calling the numbers on those signs. Once you contact them, build the relationship and see what happens. You have no obligation to do a house flip with them, but they may be a great source of new house flips for you.

Conclusion

When you’re first flipping homes, you aren’t likely trying to create your own prohibition style underworld crime syndicate…but even so, you do need a team to be successful just like Al Capone…or any legitimate business person will. This doesn’t mean that you won’t get it right the first time either.

Just like Capone, he had to weed out a few of the bad seeds to ultimately form his crime dream team. And the more experience you get flipping, the more you’ll be able to discern which team members stay for good and which ones you may want to ultimately replace.

When you’re first learning how to get started flipping houses, experience will ultimately help you make the right decisions. But unlike Al Capone, if you do decide to replace any members of your house flip team…it’s probably a good idea to leave the baseball bat at home.

If you’ve made it this far please leave a comment below! What’s your favorite movie?? Do you have any other essential capos you need on your team? Leave a comment below and let me know!
Photo: Wikipedia, US Public Domain

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About Author

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

18 Comments

  1. Great article!
    One question: how do you assemble a team of plumbers, contractors, carpenters, masons, roofers, electricians etc while beginning a flip? If you buy a house, who knows when the actual closing date may be due to red tape etc so are contractors going to sit and wait on you to give them the green light? Most contractors are busy and won’t put your priorities before their own, especially if you are a newbie starting out.

    My understanding (Ihave never flipped so correct me please) a flipper has to buy and rehab as fast as possible to reduce holding costs for max profit. How do you get contractors on board to accept you’re plan while putting their own agendas aside?

    Thank you in advance.

    Koel

    • Great Question Koel – It is all about relationship building & getting your contractor’s to understand how your business works. This was a challenge in the beginning because you are right. If a closing date is set and the contractor’s are ready to go then the closing date gets moved a week then a week again. Oh boy your contractor starts losing patience. Let them know ahead of time of the possible situations that can happen so they are not surprised when you make that call.
      Just like you said they are not standing around waiting for your house but once you develop a team and start treating them right and paying on time and being the best investor they work for they will adapt and most cases accommodate when things get delayed. You should create a scope of work and a time frame of completion in your contract so they know the deadlines to complete & you need to hold them responsible for that so you are not put on the back burner.
      It can be challenging but gets a lot easier the more deals you do and as you perfect your team.

    • Find a contractor that understands what you’re doing. Most should and if they don’t run away from them. You should know well in advance if your closing date is going to change so as long as you let them know ahead of time you should be able to set up your schedule. Contractors can work at night, weekends to keep you on schedule and if you keep giving them work they will bend over backwards to help you.

      Some things that have delayed or stopped my projects in the past have been a short sale(6 months), tenant who refused to leave property(never closed), title issue(estate not settled and waiting for seller as I write this), and also one more title issue(probate never filed took a couple weeks to get family members together).

      There are other issues you may run into but I have a great attorney who can sort these issues out for me, and I keep my contractor pretty busy so he deals with the delays.

  2. Melodee Lucido on

    Fun article Mike! Great idea and analogies.

    Ok, now do one for The Emperors New Groove, Miss Congeniality or Legally Blonde. LOL~

    I enjoyed your article and it got my brain going. Thanks!

  3. Hi Mike,
    Great article, I enjoyed reading it. I am just starting out and need to assemble my team. I am such a procrastinator because I am so scared, so reading articles like yours helps to ease some of the fear. I promised myself that this year I will “Just Do It!”.

    Thanks!
    Karolynn.

  4. Chris Clothier

    Mike –

    Good stuff! That was a very interesting article and kept my attention – very creative as well. I think your breakdown of the team is a good one too. How you operate your business including the people you surrond yourself with and their capabilities is so important. I really enjoyed reading this article.

    All the best – Chris

  5. Jeff Brown

    Man, Chris took my thunder. The teams I have are key to my success. Gettin’ to an all-star team? Just as Michael says, Like Capone. Learning to let inferior teammates go, while hiring superior replacements is what gets the job done. Once they figure out, as Michael point out, that you operate your business in a particular manner — i.e., your way, NOT theirs — things go a lot more smoothly. Other team members tend to notice when the so-called ‘squeaky wheel’ disappears without a trace. :)

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