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BP Podcast 058: Flipping and Wholesaling Homes While Working Full Time with Justin Silverio

by Brandon Turner on February 20, 2014 · 46 comments

  
Post image for BP Podcast 058: Flipping and Wholesaling Homes While Working Full Time with Justin Silverio

For anyone who’s flipped a house before, you understand how much work it can take. However, today’s guest is not only flipping one house – but three all at the same time while still working a full time day job. Today Justin Silverio, an investor out of the Boston Massachusetts area, shares with us a ton of tips about getting started, building systems to manage your business, working with partners, wholesaling, and a whole lot more.

Listen to The Show on iTunes

Click here to listen on iTunes.

Listen to the Podcast Here

In This Show, We Cover:

  • Why it took Justin three attempts to get into real estateBiggerPockets Podcast _ Real Estate Investing and Wealth Building 9.42.11 AM
  • How Justin overcame “Analysis Paralysis
  • Making less than minimum wage on the first flip
  • The 5 documents you need to get from your contractors
  • How a contractor stole from Justin and his business
  • When it’s okay to make nothing on a flip
  • Building a business plan to help you succeed
  • Direct mail marketing to motivated sellers
  • Partnering with others when flipping houses
  • How Justin can flip three houses, at the same time, while working a full time job
  • Tackling HUGE rehabs as a newbie
  • And LOTS more!

Links from the Show

Today’s QuickTip: Diary of a New Construction Project

Books Mentioned in the Show

Tweetable Topics

  • “The school of hard knocks sometimes teaches better than a $60,000 bootcamp.” (Tweet This!)

  • “A business plan shows you are serious about your business.” (Tweet This!)

  • “You never know when the next deal is going to happen – so never quit!” (Tweet This!)

Connect with Justin

Email *
  



{ 46 comments… read them below or add one }

Gerald K. February 20, 2014 at 5:06 am

Justin,
Great Podcast! Really impressive how you took on such challenging projects so early on in your investing. It definitely helps having the right people to partner with. Lots of great tips. Thanks or sharing your experiences with us!

Reply

Justin Silverio February 20, 2014 at 9:06 am

Thanks Gerald. I appreciate that. Yes, I wouldn’t have been able to get to this point without the guidance and help from others. That’s one of the reasons why I am such a big advocate about networking and learning from others.

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R Jenkins February 20, 2014 at 9:06 am

Just quick note
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Header of podcast biggerpockets nice image
” BP Podcast 058 ” ” BP Podcast 059 ”

Regardless, nice podcasts

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Brandon Turner February 20, 2014 at 9:09 am

Just noticed that myself! Thanks – fixed now! And I’m glad you enjoyed the show!

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Elizabeth Blazina February 20, 2014 at 11:00 am

Great Podcast Justin, I was wondering if you might shed some light onto the financing aspect of your flipping business. What type of funding are getting from the banks and what sort of obstacles/limitations have you had to deal with regarding banks.
Thanks again
Liz Blazina

Reply

Justin Silverio February 20, 2014 at 12:33 pm

Hi Elizabeth – Currently we are funding our deals with a line of credit that we have secured against some rental properties, recycled cash, some private lender funds and rehab loans from banks.

The terms we are getting on our rehab loans are 1/2 point down and 5% annualized interest. The banks are lending 75% of the purchase price and 100% of the rehab costs. This type of loan is a commercial product so I believe you’ll need to have a business entity to obtain this funding. The banks that we use are local and/or regional banks. They have been great to work with and have made the rehab reimbursement process very easy.

The drawbacks of using rehab loans is that the bank reimburses you for the rehab expenses, so you’ll need to come out of pocket for several weeks throughout the rehab. The other is timing. It generally takes about 3-4 weeks to close so I can’t use a bank when the seller needs a quick sale.

I hope this helps.

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Elizabeth Blazina February 20, 2014 at 1:08 pm

Yes it does! I did have one other question. When you set up your LLC what process did you use. Did you go to your local Department of Licensing or use a lawyer? Any other insights you would like to add would be great. I have heard so many ways that people do this and really am not sure where the ” fine detailing” of this process is needed.
Thanks again

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Justin Silverio February 20, 2014 at 1:57 pm

I used an attorney to set up my LLC. This included writing the organizational documents, registering with the state and paying the filing fee. I think the total cost was about $1,300, which included the $500 state fee.

My feeling is that I would rather pay more money to set this up correctly than try to save money, only to find out later that not all the documents were filed. This could be especially harmful if someone was suing your entity and they are able to pierce the corporate veil due to a incorrect filing.

Dolf Allesch February 23, 2014 at 4:04 am

Regarding your LLC, are you filing taxes as an LLC Partnership? Or LLC-C Corp or S-Corp? What is your tax strategy?

Fyi…BP needs podcast on this!

Justin Silverio February 23, 2014 at 3:21 pm

Dolf – I created an LLC and elected to file as an S-Corp. This enables me to take advantage of the limited liability of an LLC and the tax advantages of an S-Corp. What you choose to do should depend on your investment strategy, your state laws surrounding asset protection and your own tax strategy. If you’re interested in learning more about this, I highly recommend the book – “The Real Estate Investor’s Guide to Corporations, LLCs, and Asset Protection Entities” by Richard T. Williamson.

Cory Dean February 20, 2014 at 3:07 pm

Justin,

A lot of great info on this podcast (I’ve got 3 pages of notes), so thanks a lot. If you don’t mind clarifying something for me, I would greatly appreciate it. When you were discussing your partnerships you mentioned that your partners did the management side of the business seeing that you work full time. Is that to say that you just to the marketing and investment side of it? If not, do you mind elaborating a little more on how the partnerships are divided?

Thanks!
Cory Dean

Reply

Justin Silverio February 20, 2014 at 9:06 pm

Cory – The two partnerships that I’m involved with are structured a bit differently, however, both are 50/50 profit splits.

One of my partners brings a lot of capital to the deal and manages the rehab, while I find the deal, create the budget, decide on the rehab and finishes, deal with the back office tasks and manage the sale end.

My other partner will bring some of the deals, he manages the rehab, and will manage the sale end, while I bring the capital, deal with the back office work, and create the budget. We both decide on the rehab and finishes.

Over the last year, I’ve been getting much more involved on the rehab side so one of my partners may step into more of a project manager role rather than an equity partner.

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Elizabeth Blazina February 20, 2014 at 3:10 pm

Justin,
Very sage advice.
Thanks again,
Liz

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John Elmenhe February 20, 2014 at 6:50 pm

Hey Justin! I haven’t finished the podcast yet, but I’m a huge fan. I’m 15 and I lived in Malden, Mass up until last summer. It’s nice to know that you’re doing great up there.

Quick Question… Do you use a land trust/ what are the laws relating those up in Mass?

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Justin Silverio February 21, 2014 at 6:09 am

John – That’s awesome that your interested in real estate at such a young age. I use my LLC’s to purchase my properties and haven’t used a land trust before.

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Matt K March 6, 2014 at 8:58 am

Hi John,

In MA we don’t use land trusts, we use something similar called a Massachusetts Nominee Trust.

The paperwork is different so I would work with a MA attorney who is experienced in drawing these up, rather than using some canned Land Trust form that you get out of a national course.

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Henry Roberts February 21, 2014 at 7:26 am

Hi Justin,

That was a great show lots of information! I take it you are not using a bank when by properties with your LLC? My bank told me I could not do that. How are you able to buy in the LLC?

Thanks

Reply

Justin Silverio February 21, 2014 at 9:06 am

Henry – Yes, you can definitely use bank financing through an LLC but you’ll have to use a commercial product. If your talking to someone who says this can’t be done, then you’re likely speaking with someone who works on the consumer side. Ask them to speak to a commercial lending officer at the bank. Also, if you’re speaking with a large, national bank, then I would seek out a smaller, regional or local bank. I’ve had the best luck with smaller banks who offer portfolio loans. These are loans that the bank keeps on their books instead of packaging them up and selling them as a security. Due to this, the banks are usually more lenient on how they qualify someone for a loan. Good luck.

Reply

Gianni Laverde February 23, 2014 at 9:32 am

Hello Justin, thanks sharing lots of information in the podcast. One question: when requesting loans using your LLC, what criteria does the bank use to process the loan application? The LLC member(s) assets, income or some sort of operating statement. I’m curious, especially when the LLC is new.
Thank You

Reply

Justin Silverio February 23, 2014 at 3:26 pm

Gianni – Good question! Yes, the bank uses all of that information. They still want to see my personal assets and proof of income (one of the advantages of having a day job) but they also look at the quality of the deal, the relationship I’ve built with the bank and my track record. In the end, they still have a personal guarantee from me if anything should go wrong.

Henry Roberts February 21, 2014 at 9:14 am

Ok Justin,

Thanks and yes it was a National Bank, good call.

Reply

Elizabeth Blazina February 21, 2014 at 11:08 am

Justin,
Just checked out your website and I think the “contractor” tab is a great idea. How have you screened these applicants? Also did you have your 2 contracts( “contract to purchase”, and “Assignment Contract”) drawn up by your lawyer.
Regarding your response to the 50/50 partnership setup, I think it’s great that you are utilizing all of your resources in that way… management on one end and capital on the other. Sometimes I think having limited time can be an asset in that having more limitiations you are forced to focus on finding the most productive and efficient way of doing things.. Great Job again.

Reply

Justin Silverio February 21, 2014 at 12:59 pm

Elizabeth – Thanks. I actually haven’t received many organic submissions through my website but I do direct contractors who I meet at networking events there.

I have a 3 step screening process for contractors. Step 1 – I initially talk to them to ensure they are properly licensed, have worked with investors before, can work with my budgets, have the crew to fulfill my needs, can work with deadlines, etc. Step 2 – I’ll invite them to bid on a project and have them provide references and copies of licenses. Step 3 – If the pricing seems reasonable, I’ll ask them to have their insurance company send me a copy of their policy with my company as an additional insured. Once I have all this information, I’ll call references, try to go out to see one of their projects and I now call the insurance companies directly to make sure the policy is active. I’ll also google them and check the BBB and my state’s company directory to make sure their company is in good standing. If all that checks out, I’ll hire them and have them sign an independent contractor agreement, scope of work and complete a W-9.

Yes, the two contracts were reviewed by my attorney. I actually offer both for free on my blog under the resources tab. Always have your attorney review though. What works in my state may not work in yours.

Thanks. When forming partnerships I always look for someone who has different skills or resources than I do so we can leverage off each other.

Reply

Elizabeth Blazina February 21, 2014 at 1:20 pm

I couldn’t agree more regarding leverage.

Great 3 step process too. I will use this system as this is often the “halting” factor in my projects.

Thanks again

Reply

John Snow February 21, 2014 at 8:32 pm

Hey Justin, I just listened to my first podcast and it was yours! Thoroughly enjoyed it. I realize there are lot’s of quality people to learn from on BP, but I think I will pay particular attention to you, especially since you’re close to home. I plan on meeting you at your March meeting.

By the way Justin, including Brandon and Joshua, I’m sure your father has already told you, not all contractors are beer drinking thieves, lol. I’ve been a remodeling contractor for the better part of 30 years and I was cringing at that point of the podcast.

Thanks for the wisdom!
John

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Brandon Turner February 21, 2014 at 8:43 pm

Ha John – If only you were in my neck of the woods! I could use a good contractor :) Definitely listen to more shows and let us know what you think!

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Justin Silverio February 21, 2014 at 9:11 pm

Thanks John. I’m glad you enjoyed the podcast and I look forward to meeting you at the March event.

I completely agree with you on the contractor front. I grew up around the construction business so I know there are great people who do amazing work. It’s unfortunate that there are a good number of people out there who portray themselves as contractors only to take advantage of the unsuspecting. It’s not only terrible for the victims but also terrible for the good, honest contractors who get a bad wrap from these crooks.

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Dolf Allesch February 23, 2014 at 3:36 am

Justin you mention a “web scraper”tool that you used to create your lists. Can you share that with us? Thx..great session.

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Justin Silverio February 23, 2014 at 5:27 pm

Dolf – I’ll preface my answer by saying that web scraping is illegal on some websites and that you should always check the website. A web scraping tool is a program that will automatically pull any information off a website/webpage instead of having to do it manually. So, for instance, if your public records has a page that lists all their probates, the program will go through all the records and pull the information that you specify (ie., deceased name, address, etc.). As you can imagine, this is very helpful when you have a lot of records to go through. It will cut your time down from hours to seconds.

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John Carr February 23, 2014 at 11:07 pm

Justin,
Great podcast. I’m also in the Boston area (Quincy) and just recently joined BP. I’d love to find out more about your local BP discussion. I also work full time but looking to return to my roots in Real Estate (former agent & appraiser) this time as an investor. Would love to pick the brains of your group and perhaps serve as another set of eyes & ears. Please send any info you might have. I’ll check out your blog as well. Thanks again!

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Justin Silverio February 24, 2014 at 9:09 am

John – I responded to your email and have added you to my mailing list so you’ll get updates on my networking events. In the meantime, here are the details for the next event – http://www.biggerpockets.com/forums/86/topics/116769-march-12th—the-unofficial-biggerpockets-boston-networking-event-ubbne

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Ben Grise February 25, 2014 at 3:01 pm

Amazing content from the podcast Justin. I keep coming back to it. I sent out letters and have had success with them. My list was around 1,000 absentee homeowners. How are you able to mail 5,000 a month. I’m targeting the entire Indianapolis area and surrounding counties. I do have equity requirements in my list. Did you leave equity out of your list criteria resulting in a higher number of prospects to mail to? Thanks for shedding some light. I’d love to have a higher list of prospects to market to, but just not sure how to go about doing it.

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Justin Silverio February 25, 2014 at 8:01 pm

Ben – Absentees only make up a percentage of my total list. There are many other types of lists out there that you can incorporate into your mailings. Here’s a good thread on finding motivated sellers – http://www.biggerpockets.com/forums/93/topics/76751-finding-motivated-sellers-my-list

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Ben February 26, 2014 at 3:31 am

Thank you for replying Justin. That looks like a great post that you linked. I will take the time to read through it. By far one of my favorite podcast episodes, and I’ve listened to them all so that is saying a lot. Best of luck to you in your future REIs

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Justin Silverio February 26, 2014 at 6:39 am

That’s awesome! Thanks Ben.

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Will M. March 1, 2014 at 10:59 am

Justin,

Great podcast! I’m impressed how much you are doing while still having a FT job. I had a few questions:

I am likewise wanting to hire a VA for my next marketing campaign.

Q) Where did you hire yours?
Q) What duties do you have them performing?
Q) What qualifications did you look for?

Another question related to your farm area:
Q) How far away are you mailing?

I appreciate the insight
-W

Reply

Justin Silverio March 1, 2014 at 3:54 pm

Will – Thanks. I ended up hiring the VA off onlinejobs.ph but I posted on odesk and elance as well. I actually wrote about all the information you’re asking about on a blog post here – http://www.thebostoninvestor.com/hiring-a-virtual-assistant/ Feel free to let me know if you have any additional questions.

Regarding my farm area, I market to about 32 towns in 2 counties. All towns are within a 45 minute drive from my house.

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Shaun March 3, 2014 at 9:27 pm

Good job Justin.
Lots of good info and interesting points.
I obviously had heard a lot of the back story before but didn’t know all those points so pretty interesting having you tie it all together into how you have gotten to where you are today.

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Justin Silverio March 4, 2014 at 6:41 am

Thanks Shaun

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Matt K March 6, 2014 at 9:06 am

Way to represent MA Justin!!!! Nice interview!

What bank are you using for your commercial lending? Is it a local savings bank? or a Credit Union?

Thanks

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Justin Silverio March 6, 2014 at 10:06 am

Thanks Matt. I’m using local banks – MountainOne & Enterprise Bank. Some other banks that I’ve been taking to are Georgetown Savings and Salem 5.

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Kim Farrell April 27, 2014 at 10:40 am

Hi Justin,

I realize your podcast was a while back. My husband and I just finished listening on the LONG way to FL over spring break. We have 2 buy and hold properties in Memphis. We are looking into flipping homes in our local area: Baltimore/College Park, MD. We’ve been to several REIAs and find many of them cheesy and not really for the investor with a little more experience. We were impressed by your podcast and the networking group you established in your area. We’d like to start something like that here, but need a little more guidance. Would you mind sharing how you formed this group (I was thinking Meet Up) and how to get serious investors, contractors, etc to show up? Also, what type of format do you follow at these meetings?

Reply

Justin Silverio April 27, 2014 at 7:23 pm

Kim – Congrats on the 2 rentals.

I didn’t really have too much of a plan at first. I just remember Brandon Turner recommending BP’ers start holding local networking events and I thought it would be a great idea to start one. Once I found a good venue, I started announcing it at local networking events that I’ve been going to and collecting people’s email address to put them on a mailing list. From there, word started spreading and I started refining the structure of the event. I only hold the events once a quarter due to time constraints on my end but I think it’s actually worked out as a positive.

Take a look at your local events and provide something that’s different. This might mean you set up the venue in a location where there aren’t any events or you offer something different. Whatever you decide, just make sure you add value to everyone that comes to the event. That will keep them coming back.

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Justin Silverio April 27, 2014 at 7:25 pm

If you’re interested, take a look at this post on my blog. It summarizes the format and what we talked about – http://www.thebostoninvestor.com/march-2014-boston-investor-group-notes-pics/

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Kim Farrell April 28, 2014 at 8:51 am

Thank you so much Justin! This is exactly the info. I was searching for. I really like the way you followed up the meeting with notes, photos and additional information. This is very professional and classy. :) Exactly what I am looking for. I wish I lived in the Boston area. :)

Reply

Justin Silverio April 28, 2014 at 9:12 am

Thanks very much Kim.

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