BiggerPockets Podcast 104 with Todd Whiddon Transcript

Link to show: BP Podcast 104: How to Build a Scalable Real Estate Business and Design an Incredible Lifestyle with Todd Whiddon

Josh: This is the BiggerPockets podcast, show 104.

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Josh: What’s going on everybody? This is Josh Dorkin host of the BiggerPockets podcast here with my co-host Mr. Brandon Turner. What’s up B?

Brandon: What up J? How are you doing?

Josh: I’m good. How are you doing?

Brandon: I’m good. It’s that time of year here in Washington when it’s depressing and sun doesn’t shine but that’s alright.

Josh: So it could be pretty much any day of the year.

Brandon: Pretty much. How about you, how’s Denver treating you?

Josh: It’s good. It’s cold again. I’m all sick so I’m little whiny about that.

Brandon: You whiny? No. Josh Dorkin doesn’t whine.

Josh: Never. Get over yourself dude.

Brandon: Anyway things are good.

Josh: This is our second show of 2015 so hopefully all of you guys listening got the ball moving gotten your goals put together, you guys are motivated and excited and we’ve got a really exciting show so let’s kind of get into this thing. Brandon why don’t you give us todays Quick Tip?

Brandon: Todays Quick Tip is if you’ve not yet checked BiggerPockets File Place you should do it – BiggerPockets.com/files and you can go there and download free files like e-books or forms I think threes spreadsheets in there, analysis things in there, marketing stuff, hundreds of stuff in there and go there and check it out and download some good stuff today.

Josh: Secondary tip is if you’ve got files that had helped you with your business and your processes and things like that that you would like to share go to the File Place and upload them and let other people get access. Obviously share only stuff that’s yours that you own. If you share stuff that’s not obviously we have to pull it down but please help other people out with files out there really, really helpful so big thanks to those people who have gone uploaded their files.

Brandon: Pros can actually download quite a bit more file unlimited actually so if you are a BiggerPockets pro member go download bunch of files and if you’re not upgrade on BiggerPockets.com/pro.

Josh: To clarify anyone can download files it’s the cap per week. Awesome. Today we’ve got Todd Whiddon from the Atlanta area, correct?

Brandon: We do. And he is awesome. He’s got a great story. He was actually a cabinet maker that was making he had 15 million dollars in sales and then that dropped in the economy so he started flipping houses and doing some real estate and now he’s got a really massive operation.

Josh: He’s and adventure traveler and all sorts of cool and exciting things. The thing I like best about today’s show he’s focused on systems, processes, and I think there’s stuff here for pretty much everybody. If you are a wholesaler if you’re flipper if you are a buy and hold guy you are going to get something out of the show so definitely pay attention. Why don’t we jump on this thing and get going?

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Brandon: Like they said yellowletters.com check it out. With that let’s bring in our guest. Josh would you like to introduce our guest?

Josh: Alright Todd welcome to the show man.

Todd: Yo, Yo, what it is what it is gentlemen?

Brandon: Welcome.

Josh: I don’t know what you said but it is what it is my friend.

Todd: You come to Atlanta and you learn how to speak with the natives.

Brandon: Nice.

Josh: Awesome. Good to have you. We heard good things about you and were definitely excited to chat with you and learn more.

Todd: hopefully well have time to fill up five or ten minutes here.

Brandon: Hopefully.

Josh: What’s your story? Tell us quick and dirty.

Todd: The quick and dirty and I guess I kind of have two starts in real estate. The fist start I was literally born into a business. My grandfather was a developer, roads, bridges, gold courses, lakes, dams, all that cool stuff. My dad was a builder and my mom is a landlord single family commercial. When I came home from the hospital my dad and my grandad were actually in process of building some multifamily apartments. They finished one building so I kind of came how into the unit they had finished while they were finishing the rest of other project. That’s kind of the official start.

Brandon: You were literally born into it.

Todd: Literally born into it. This is my destiny. I’ve got to fulfill this things.

Josh: What about the second one? You said this happened multiple times.

Todd: That was the official start then it was a start of hey real estate is a business or whatever. Graduated from college, started my own kitchen and bath business, you know, going strong and then thins thing called real estate crash happened. We went from literally 11 million dollars a year to 2 million dollars a year like that. It wasn’t like a slowdown it was literally a crash. So when you drop eight figures in annual revenue like you got to cut back on some things, one of which was my paycheck. It was what I do to make some ends meet and I’m in my late twenties, I’ve done some live and flips. Just buy a house, do all of the work myself and then sell it not really thinking about it being a business it was just something I enjoyed to do. I was like hey what are we going to do to make some extra cash so it was kind of natural thing that came to mind – let just do what we did. Buy a house, fix it up, sell it and see if we can make a buck or two.

Josh: And the whole live and flip things is just buy and living in it and fixing it and selling it afterwards?

Todd: Yes. Just being a HDTV addict it was just kind of seeing I want to do that and I know how to do that so it was just great excuse to buy tools you don’t have. Like I needed to tile this bathroom, let me go buy a tile saw, I need to do that let me go buy that and it was just really just extra side that I liked fixing up properties and actually selling them when I wanted to move somewhere else. Wow I just made a ton of money but I didn’t think of it long term or anything it was just natural byproduct of what I did.

Josh: Did you make a ton of money on those first live ins or how did you do?

Todd: The crazy thing is that looking back on the unintentionality of was some of the best deals I’ve ever done. Granted that was just the product of the market that was like early 2000s so you really couldn’t not make a profit. Definitely there were some pretty nice returns to be had back in the day for sure.

Brandon: Do you recommend to other people kind of get started that way? Looking back even in today’s market do you recommend new investors get started with a live and flip?

Todd: It’s a safe way to kind hedge you bets sort of speak. You obviously have to have a place to live so if you take a place you need to live and you have that expense anyway and you forced appreciation are kind of fix and flip business that’s what we’re doing, we are taking something and we are aiming it to a better product by doing something to it. Even if you total bum out, suck, and don’t make a dime at least you make a palace you live and more enjoyable to live and. Starting now that’s definitely safe way how to get your feet wet or put your feelers out there whether that’s something you like to do or not.

Brandon: That’s one of those house hacking techniques I talk about all the time. I live that strategy. Every house I ever lived in has been either a small multi family or live and flip. Every one that I ever bought including the one I’m right now we are still kind of fixing this one up, we are almost done with tit but we are probably going to get it done and we’ll move to the next one and it will be that same thing. Just because I like that idea of being able to capture that appreciation or in a multifamily side cash flow and combine that with your own home. If you have to live and somewhere anyway you have to pay your bills anyway might as well make some money doing it so I think that’s cool strategy. Live and flips you did that. That worked out really well. You were doing cabinets is that what you said?

Todd: Yes. My dad was builder and had a natural segue from that like you did windows and doors and got into kitchen and bath cabinet. When I went through high school and college I kind of have a weird story there I left to work full time for him in his cabinet business. Graduated college, send out bunch of resumes and nobody replied back. I was like Huh what am I going to do for a living? I knew the cabinet business and both of my parents were entrepreneurs like my mom owned a uniform shop I just kind of grew up in business and I never really saw myself working for somebody else but just figured maybe I should and I was like I know I can make this happen, I had some great ideas from working for him so somehow talked my parents into little bit of money and started my own cabinet company.

Brandon: That’s cool. You worked in cabinets then the market crashed 2007ish your business dropped out, you decided I’m going into flipping. How did you go from I want to get into flipping to actually becoming a real estate investor flipper? Can you kind of walk us thought that journey?

Todd: Sure. First deal kind of thinking hey how can we do this? First I needed some capital so talked my dad out of 50k. Then I was talking to friend of mine who had some interest in kind of getting in to business, he talked his dad out of 50k so we had $100,000 to get out there and make something happen. Talked to couple of agents, nobody has really given us the time of day and we finally found a house we put in an offer and somebody actually accepted it was like who we are actually doing this. Still kind of coming from a background of live and flip we both did most of the work ourselves, got it all fixed up, put it on the market and it sold the first weakened. We were just like that’s fantastic.

Josh: What year was this?

Todd: 2010ish. I think. We were well after crash. Looking back now in hindsight it was hard to screw up in 2009, 2010 stuff was so cheap and the inventory of houses probably somebody could move into. Our strategy always stayed the same we could buy something, fix in nicer than any house in that neighborhood, sell it for less expensive for anybody living in that neighborhood already so if somebody was going to buy that neighborhood it was a no brainer – they were buying our house.

Josh: Your strategy was to have a nicest house at a cheapest price and take just smaller margins on your flips?

Todd: Pretty much, yes. Margin wise just because of the nature of the thing since we are buying stuff so distressed still pretty nice margin. We could come in underneath everybody else who had bought pre-crash and they had zero equity and they just couldn’t sell for what they needed to compete with us.

Josh: That’s great.

Brandon: You did all the work yourself at the beginning?

Todd: Yes. First flip and live and flips it was just kind of natural extension of that’s what we need to do.

Brandon: That’s not very scalable to level you are today at.

Todd: Not at all. Something to talk to people when they started out just needs to be what do you want your business to be? If you just do this because you enjoy it, hey I like working on stuff then by all means do all the work yourself. But to actually build a business or something that scalable or something that you can go on vacation or something that you can pass on or sell to other people you have to be able to build system and build a business around flipping or whatever that real estate is. After we sold that first flip it was kind of intentional let’s do real estate investing as a job and it sold. Kind of lights went off and let’s take everything we learned building a successful cabinet business and apply it to real estate and that’s kind of where real estate business got started.

Brandon: Maybe we can talk on that. What does it mean to run a business like a real estate business like you run a cabinet business?

Todd: It’s with any business its building a team around you of people that can do things better than you can and you as a business owner you are really mapping out what I want this business to be – defining what it is I want it to provide to me. Something that I’m really big in family spending time and I’ve got little kinds and I want to make sure that during this time in their life I’m there for them and if I want to be there for them I can’t be at my job sites since 6AM wondering if the concrete truck shows up if the lumber is delivered – all the stuff I kind of began with that end in mind and I took a look at here’s how I want my life to be, here’s I want my lifestyle to be and then I backed that up with here’s the stuff I delegate and here is the amount of money I want to make. I started hiring people, putting people in place, contractors and systems to make that end game reality.

Josh: The advantage you have is that our came in from a business and you came with probably pretty good salary that you paid yourself and so you had a financial wealth to do a lot of that. For somebody who wants to get started in flipping and they have resources potentially to buy the property to pay for the maintenance do you recommend building up more capital to get into flipping so you can potentially pay staff and have that team or is that just something that worked for you and obviously if you can scale it up and systematize It so that you can start building a team together then great.

Todd: Two things there. On the capital side of things you never want your capital to excide what you have going on at any given time. It’s funny when you talk to so many people and that’s one of the biggest hurdles of getting started is getting capital to get going. Then the opposite problem is that having so much capital coming at you it’s like you hate turning money away but at the same time with everything I have going on now did I take this persons capital and effectively deploy it to get the type of returns I need to pay them what they’re looking for and not just be a burden on my business. Oh my gosh I just accepted a 100 from this guy, 300 from this guy and 400 from this and I’ve got $700,000 that I got to figure out what to do with. That might sound like a good problem but it’s a problem that you have to think about your business. Don’t let your capital going in excide from what you can do with it.

Josh: You are talking about private money there?

Todd: Yes. Private lenders and now our business is kind of expanded we have private money we’ve got bank money and we use both for different things. Going back to somebody just stating off building flipping as a business we really shoestring it from the beginning. It wasn’t like we kind of said go we have starter fund $200,000 we can use as operating capital to hire these people it was really just building organically so the first piece of the puzzle that we got was our project manager.

That was elected form the lifestyle perspective I don’t want to be on job site all the time, I don’t want to be running crews so that was the first thing that I want to delegate was construction side. Friend of a friend, I knew somebody, he lived in Georgia during the crash, he had to move out to Mississippi and would have to see his family it was a really bad situation so I was like hey I’ve got this opportunity you can move back to Georgia here I’ve got going on this flipping business and a win for him and a win for us and it was just a kind of in depended contractor arrangement. I was couple hundred dollars a week, here is what we need you to do and at the time it worked well because we had couple flip projects going and he was able to build into the project and then self-sustain.

Then as we grew bigger had more funds coming in we had branched out started delegating more stuff but even now just from a business overhead standpoint we are super mean and lean just from lesion learned from the crash – gong from cabinet company that had 60 plus people down to less than ten so it was our biggest lesson learned on the way down it was its say when business are successful to be fat and happy and you can just throw money and throw people and it’s like business relax and this is fantastic and when something adjust or something doesn’t go right its hard letting people go because it’s not just impacting a bottom line that’s impacting a family that’s impacting so many other life’s outside of yourself so we really want to be careful to we add people or places or whatever that we are really intentional about that.

Josh: You talk about project manager being a core first guy that allowed you to step out a little bit even though you haven’t really got started but he let you be in the in business without getting to the sites first thing in the morning and doing all the stuff that you didn’t want to do and that’s awesome. First off how big is your team today and can you tell us who you brought next and so on until you were where you are now?

Todd: Sure. Same project manager he’s still with us and he’s really core backbone of the construction side of the business. Next I brought in an assistant was handing quick books and luckily she had a real estate license so it was kind of like double plus. Here is somebody who can do the books and I’ve got my license to but then can take all the calls and licensed person is supposed to take so that took a lot of paperwork and busy work off of my plate. Then as we kind of grown into more projects a lot of times we would bring partners for projects and every time we do a partnership deal it’s kind of look at what am I bringing to the table what are you bringing of the table and we kind of divvy up responsibilities and stuff along those points. Now it’s really just me, I’ve got two operational partners, my dad and another guy that used to be in a construction while back and project manager and we are out there doing what we do.

Brandon: You mentioned partnerships. How do you use partners like that? Are you talking about just financing partners, equity partners, or are you talking actually doing the deal together?

Todd: Both. We’ve got some financing partners who will basically just be just that. They are just providing financing on certain deal and then we have there partners that will actually take a look at a deal and it will be not only like an equity partnership but providing some other aspect expertise or just kind of coming in on bigger projects or different projects we haven’t done before we’ll do those types of arrangements too.

Brandon: You did one with our mutual friend J. Scott. Can you tell us a little bit about what that was?

Todd: We did actually several projects. First one was the Diary of new construction project J did a fantastic thread on BiggerPockets detailing the whole thing out and it was just at the time I never did a new construction project, he never had done one. We both kind of knew we wanted to do it. Couple of deals came along and he was Hey you want to look at these and funny thing was the house we did a new construction project on and there was another one not too far from there that I bought almost simultaneously. I showed both to J, we talked about it, and he was like I want to do this house. Literally three days later a three falls smashes and destroys the other house. I was like J you choose wisely.

Josh: That’s crazy. For those people listening we’ll point a link to the diary on the show nots at BiggerPockets.com/show104 and sits awesome. It is literally this thread that walks you through the purchase all the way through tear down and construction and the sale of this new constructions project and it doesn’t leave a detail out. If you ever consider doing a new builder or even flipper of even as a landlord you’ve got to check this thread out its fantastic and it’s got hundreds and hundreds of process in it so definitely worthy. What did you do with the property that three fell on?

Todd: That wasn’t the only problem with this house. If I kind of compile all of the horror stories of my real estate career probably 70% can tie back to this other house. Not only that the tree fall and obliterated the house so that kind of took it off my burner for a couple of months as I was having to deal with insurance and all that and I was just out of sight out of mind. Then I go to get the insurance settlement, get to start a rehab I go to pull the permit and I’m like The description is not matching up. Turns out I actually I go through a house and if you can imagine this huge fine stone yard it was fine stone street all the way back but apparently I bought only half the land this house was sitting on.

There were some less than honest sellers and a less intelligent buyer, that would be me, that didn’t really do my due diligence and they acquired a property through a tax sale and way back in 20s or 30s whenever this house was built the person bought three lots, they built their house almost In the middle of the thee but the city of Atlanta split that into two tax parcels. So when the homeowner died there’s nobody so it of course it was sold at the tax auction and they bought the parcel that had house primarily on it not the other one. Long story short the closing attorney we closed with, he kind of new about this and it tuned into this big mess and I was like what do I do? I had to learn what is a tax sale, how does one acquire something that could possibly be sold at a tax sale. Ended up going to the tax sale, luckily nobody bid against me, I pushes the tax deed to the property and talked to another investor - needed up selling him the deal that was one of those I could have hold on to it and I would have been fantastic lot that I didn’t want to see on my blackboard. You know that project is just cursed.

Josh: How would somebody avoid that? What can we as investors do to make sure we don’t end up buying a house on third of the lot the house actually sits on?

Todd: Mini lessons learned. Part of our due diligence process now we always make sure number one your contracts make sure they reference true legal description of the property, never have your contract down my 123 Maple Street. 123 Maple Street might have an Oak and Elm that you don’t know about on there. Always make sure the actual true legal description meets and bounds these property goes 50 feet that way, 100 ft. that way, blah, blah, blah, make sure that is referenced in your contract. Especially if you are going to do new construction or any type of addition something that you’re not just improving inside of the house. I need to know my setbacks. It’s really critical where I can go on this property.

Make sure you get a survey done and make that exhibit to your contract. Then as an investor do your due diligence make sure they meet up. I look at my deed it says I’m going AB and C make sure survey have highlighter in your hand and literally go through the survey making sure that everything lines up and you know exactly what you’re purchasing.

Josh: There is no simple way to automate that or when you get a title policy does that cover you? To me its I would like to buy tis property, on a purchase contract you really want to make sure you’re reading that purchase contract thoroughly but the question is what did the purchase contract had on it hey we are selling 123 Main Street and it dint have parcel identification on the contract? What should somebody do at that point?

Todd: You end up in my situation where I bought something that wasn’t what I expected it to be, then you have to go through how do I fix this problem. Luckily I was able to fix the problem by purchasing the tax deed and put it together and that wasn’t the end of it. You have to wait a year and this legal mumble jumble to actually perfect the title and make it happen. I was fortunate and I talked to a lot of people who ended up in similar situations of you didn’t quite purchase what you think you were purchasing and then it’s just the sky is the limit to the horrible bad things that can happen to you – the pocketbook. If you just got to roll with the punches and do what you can to pick yourself up and limit the damages on that type of transaction.

Josh: Sounds horrible. Thank you for sharing. I think it’s helpful for those people who didn’t know that this was possible.

Todd: You can definitely lose a dollar or two out there for sure.

Brandon: Going back to the whole business idea you were talking about – flipping as business not every business transaction is going to work out. If you are kind of person who flips one house a year and you rely entirely on that income to survive and that one deal goes bad you looks all your income but if you have business that works multiple flips and you have systems and processes and people and you’re doing things if one goes bad the other ones kind of cover for you. Same thing is happened one rental property versus a dozen if something goes vacant you can still survive. Let me shift gears a little bit and ask you about experiences about today. How many deals have you done now and what did they look like typically?

Todd: I’m well over 50 now it’s been pretty good mix of fix and flip kind of evolved over the years. This year is just we are doing a lot more luxury new construction. We just started our first pop top project where we have taken the roof of the house and are building second story on it. We have couple of those going on now so we’ve done wholesale deals, buy and holds, my philosophy is more types of deals I learn how to do in the more tricks we have in our tool bag the more deals when they come across my desk I can take advantage of some way or another. Not just limiting ourselves with fix and flip cosmetic rehabs or we are only going to do this just trying to expand our experience and expand our deal base to take advantage of whatever type of opportunities we see.

Josh: You keep saying we. We is that you and your company? Do you have partner also? I know we talked earlier about partners but is there like a partner in the business itself? In a core business?

Todd: Pretty much everything is a we. I try not take credit for anything because I would not be worth what I am today without the we. The we is everything from transactional partners on individual flips to business as a whole. This year we transitioned to more new construction type entity. We brought in a new partner that had a ton of experience in new construction and it’s kind of like just taking a business in bigger and bolder directions than I ever would. Definitely I’m a big proponent in going further faster by brining on team members, partners, anybody that I could get into my inner circle to get me where I want to go.

Josh: Makes sense. You talked about pop tops and that happens a ton in my neighborhood here in Denver and we get these 1950 houses that people are just taking the roof off and throwing another story on top and cleaning it up. Tell us a little bit about that as a strategy – what kind of property would be ideal for something like that, if you can potential talk about the numbers of the deals you’ve done of pop top on and just fill us in a little more on that.

Todd: This first pop top deal acquisition I think we paid 225 and the homeowners it was an off market deal they wanted to live and the same area but the area was so hot any time the house would come up it was just instantly gone. To them idea they wanted it sold but they wanted to sit back relax and be able to purchase where they wanted to go. Agents we worked with she brought us a deal and it was one of her friends they had been talking. We purchased from them, they rented it back from us for two or three months and then they moved.

Our outprice we actually had two or three projects on the same side of town new construction comps in the high fives to seven hundreds and we kind of looked if we can put semi new product in to that same market range that we could probably hit low fives without too much of a stretch. Our outprice is 525 and our rehab was going to be something like 150 to 175 range, depending on if we are building a attached garage that wasn’t part of our original plans so that kind of added to our rehab cost. Hopefully would be at least six figure payback at the end.

Brandon: That’s cool. That’s more profitable than I thought. Do you think that is because you got an incredible good deal on that or are those fairly typical for pop tops?

Todd: Whether if it’s pop top or rehab or teardown it’s all about what is that end game. This part of town is in town Atlanta but its incredible public school system. It’s so in demand for somebody to be here hey I’m not going to spend 15-$20,000 a year on private school for each of my kids. I’m willing to pay a premium for a house in this area. People want that new house, they wanted energy efficiency they want high ceilings but they can’t get that with existing product in that area. Then it’s the question to we tear It down from scratch or do we look at doing a pop top and this one could have gone either way. Honestly we bought it with intention to just bulldoze it down and just do a build back but we just really wanted to try and do a pop top so it’s like number wise it looks like it work and lets just give it a shot and that’s how this one turned in to a pop top.

Josh: Nice. You go into this with the experience of having rehab houses, you went into new construction project diary project with the same experience. Do you think it would be foolish or wise of new investor to pull together a project like pop top or a new construction or should they wait until they have a little more experience?

Todd: I think it all depends on team you have around you. Any new investor I talk to what’s your background, what do you feel comfortable with or what are the holes in your team you ended to feel to do what you want to do in real estate? Depending on who they have, for us I’ve got my GC license, I’ve got little bit of experience building stuff back but one of our framing crews just this guy that’s all he does is pop tops. That’s just he wakes up, he pops a top he goes to back, and he does it again tomorrow. We used him on some smaller flips just for framing and deck builds and we kind of talked to him about that and if I didn’t have that piece of the puzzle in place I probably would not have attempted that until I knew more about it or had that. Having that guy on our tem I said well I think we can pull this off let go do it. But for anybody that’s just hey I want to pop a top or I want to tear something down if you don’t have the resources and contacts in your inner circle you might bite more than you can chew.

Josh: I think a lot of people stop and say “I can’t do that, I’ve never done a deal. I don’t have the capacity to go ahead and do that.” But by teaming up with right people and just building that knowledge base you can pretty much do anything is what you’re saying. Obviously you are probably going to get a smaller piece of the pie due to lack of knowledge unless you bring in maybe lots of capital but if I said today I want to build something or pop something and I know nothing if I can grab you and J and some other guys or whatever it is who have done this before – why not.

Todd: Exactly. It comes back one of my favorite quotes are things to think about is – in real estate business or life it’s the question of how. How do I answer that question I don’t know how to build new construction. How do I do that? Do I need contractor? Do I need money? Do I need time? What are the things that I don’t have and how do I get those things. People who can successfully answer those questions and plug in those pieces to what they’re lacking themselves you can do anything whether new construction, pop top or start some internet business.

Brandon: Let me ask you go back. You kind of touched on this a minute ago but how do you decide on a project if you are going to rehab it or pop top or tear it down? You’ve got a house in front of you – is it just numbers and math? I know on the pop top you just wanted to go with it but typically how do you look at the three?

Todd: Even today its numbers and math and time. Time is such a great cost to business whether it’s my own capital that’s invested in the project or investors project carry cost on this project are especially huge number of the equation that time really comes into play. Especially inner-city Atlanta where we have permitting offices if we require something today it might be nine months before we have something to sell and that’s a huge piece of equation. If it’s just simple rehab we could be in and out couple of weeks couple of months like that we are not going to get much on the back end and pop top is sort of quasi of the two we don’t have near like the time in permitting and planning as we do for construction but because we are changing more than just panting the parquet, raising the ceiling to nine or ten feet or opening up the floor plan we are creating a product that’s more close to new construction product but we are able to do it on a much faster timeline. It’s really between time and dollars -what’s our shortest path to the most dollars.

Josh: A lot of people, especially the new guys, don’t really consider time. It’s one of those things on a rehab on a build on a teardown that’s a factor that you’ve got to figure out. It’s kind of like on the buy and hold side a lot of people want to say I’m not going to account for property management because I’m going to manage it myself. Well that’s a cost. It’s your time and there is a cost and you should factor that in whenever you are purchasing a buy and hold property. Same goes into play on these other types of properties – on flips and builds. Time factor is huge. What advice you have on factoring time because I think that’s one of the places where people often get it wrong?

Todd: The biggest think is they don’t realize is that there is a cost and that cost is an opportunity cost to be at your capital or your time. Some people are oh I use my own money on this deal so should I hold onto it for another six months and see if it sells and whatever. No, sell now, get out, lose money on this deal whatever you need to do to move on because when your capital is tied up in point A not making you any money you are not making any return on projects BC and D that you could be making it happen right now. Same thing goes with time. Whether I’m doing my work in this project or whether I’m going to lick all these letters and stamps and do this myself – that’s not your highest and best use. You are not making yourself all that you can be you are losing money by not employing your physical and metal self and its highest and best use.

Josh: Preach it brother.

Todd: Amen.

Brandon: Let me go into one more topic – finding deals. How do you get them and is that changing in your market today?

Todd: It pretty much changes every day. Over the years I’ve build a pretty good network or agents of wholesalers and just putting the word out there hey we do real estate here’s stuff we do and I’ve got my real estate license so occasionally ill find a deal so we’ve got pretty good network and pretty good diversification of deal flow. Now honestly the biggest challenge we have is prioritization of deal flow its literally every day stuff coming down the pipe. Hey look at this, look at this, look at that and I could spend all my time every day just looking at deals people calling me that day but it’s just sense of overwhelmed. Putting that deal filters in place knowing here is the stuff I’m looking for and being real disciplined about that because otherwise it’s just oh my gosh I could not do any deals because there are so many deals flying at you.

Josh: Nice. I guess I want to ask do you have any other, you told us some interesting stories, outside of that property that was just nightmare with tax liens do you have any other horror stories, anything interesting, fun that you want to share.

Todd: A lot of horror stories go back to also how do you want to be successful in real estate or how do you want your reputation to be taken. Are you in this for a short term, I just want to make a buck on this deal or are you in this for a long term. I want to be somebody that known in the city from agents and somebody that stands behind their product and does the right thing. Looking it dollar lost or oh my gosh I can’t believe that happened it’s all kind of all comes back to being In this game for a long haul. We’ve learned with that in mind if we are going to provide a work to stand behind our work we need to use contractors that have been in business for a long time but also had that same philosophy.

We need to use products from national manufactures that have a warranty. Pretty close to when we first started investing we had done three or four deals we found this discontinued flooring which looked amazing, it was so cheap, it was oh my gosh this is god’s gift for flooring and we are buying all of it. We literally bought four or five pallets of this stuff. They shipped in to our warehouse and we were putting it everywhere we could. Only problem was six seven months after we installed all these houses with these floorings the top layer of the floor started peeling up. It wasn’t one house it was all these houses. It’s like what do we do? We replaced a lot of flooring and it was just it’s not like we were required to do that or anything else but If this was what we’re going to do were going to have to eat it to be successful.

Brandon: Did you say you warrantee your flips as well?

Todd: Yes. With that there is warrant the whole entire thing. On our flips we always even those if there is no home warrantee included we always make that point of negotiation to make the other party think they want something even though we are pretty much going to force you to buy a home warranty just from a fact it takes so many little headaches off of HVAC isn’t working stuff like I’d rather you call them than burden our staff. In past that’s always just a judgement call. Its granted our philosophy what are we going to do – we are going to get in there, we are going to take care of all of the issues we know about all the issues that we see and do the best job that we can but as anybody in this business knows you are not going to find everything, you are not going to know about everything. A house even if you build it from scratch is far from perfect. When issues arise it’s just a judgement call hey I just myself in a buyer shoes. I bought this house from this guy is it right for me to do this? Sometimes it is and sometimes it isn’t.

Josh: How far would you go? I take both sides on this one. Having not flipped a house but having purchased the house that had issues I know that my job was to hire inspector and inspector is supposed to go through hand look through everything but I never bought a property where inspectors found everything and I always curse and yell at the inspector in my own head this sob, how did he miss that and I’m typically left holding the bag and have to deal with that. I think it’s awesome that you do warrant it to some extent but how far would you take it? Would you go six months, a year? I mean if I call you in three years and hey this thing that we all missed that’s major problem now are you going to come in then or is it kind of like …?

Todd: Take our new construction or instance. In our market as a whole there is just an understood and kind of market standards like one year warranty and that’s on a complete new build. Even on flip stuff I use that as a barometer but it goes back to is it a material defect is this something else that nobody would have known and you just never know. Good example flip we did a couple years ago this is where we hired outside different contractor to do this renovation for us. We are literally shown up, doing a final punch up, touching up the pain and we finished the basement on this house and the GC superintendent is like Hey you know this basement has been leaking the whole time you’ve been doing this rehab?

I was like I actually did not know that basement has been leaking the whole time we have been doing this rehab and I’m just finding about this now and the basement is finished and there’s walls and floors. He’s like Yep. Homeowner is standing right there and what do you mean the basement is leaking? Me as the investor and the homeowner person buying is what are you talking about? Home inspector he was one of perfect storm type of things. Homeowner was I’m concerned there is a leak in the basement so what does he do? During the course of home inspection he turns on the hose and lets it run entire two hours that he’s there. It’s not like there is little bit of rain fall and leaks a little bit.

This guy put like ten years of rain fall into our basement in the span of two hours and it just way flooded here we are at the last minute you got a home inspection we’ve got a contract like they actually put a contract on this house early on the process so this house is customized to them, their tile, their wallpaper. This is their house and what are we going to do? We sign letter in closing, we close the house and actually we come in after the fact, rip out the entire wall, we put in really expensive internal drainage system and make it so the basement doesn’t leak anymore but that was I think nine grand out of our pocket after closing for something. It was just like ops.

Josh: that’s crazy and that sucks. That’s unfortunate. My last question on this line of discussion is what did you do with the contractors? I would be livid and frankly I would be livid at my project manager for not having caught that either.

Todd: We obviously did not use them again and it’s a shame because it was kind of friend of a friend and it looked like it could have been like something a great relationship going forward. It didn’t work out like that, it wasn’t only major issue we had with these guys on several different projects. It was something we couldn’t really fault our project manager because at the time the whole reason we hired this other contractor we had so much going in different parts of town he was covered up on his own stuff this was sold to us like a full service GC. They were basically quarterbacking it, they were doing their own subs, doing the whole thing. Even now our project manager will hire contractors or GC’s to do bits and pieces of jobs that we’re quarterbacking. We are pulling the permits, we are kind of coordinating the whole thing. This one they were basically just shooting inspectors now and then and the idea was they hand us the keys when they’re done renovating it and we sell the house but it didn’t work out that way.

Brandon: We are going to move on to the fire round but before we do I want to ask one more question. Your BiggerPockets profile said you were a world adventurer. What does that mean?

Todd: Kind of like a hobby or passion of mine is travel but you can only spend so many weeks of year just lying on the beach sipping fruity cocktails.

Josh: That’s not true. There is no limit to how long I can do that.

Brandon: My limit is like a week.

Todd: It’s traveling to places and experiencing things you don’t normally do. Like I prefer third world countries so be it Equator, the Galapagos islands, something that it’s not just a vacation but it’s a challenge. I don’t really speak the language I don’t really know the culture and I want to do something. I’ve actually been fortunate enough to do a really cool coupling vacations with something bigger and better. Produced a rock concert in Eastern Europe, I’ve gotten to go to Ukraine and teach small business skills to aspiring entrepreneurs so it’s like best of both worlds. Take a vacation but I’m actually getting to apply myself and better other people and all those things kind of come together.

Josh: That’s really cool.

Todd: The Ukraine thing if there is anybody out there that has heart for business or heart for helping people I found this organization it’s called Global Leadership. What they do basically take business people here from United States and its usually CEOs, sales managers, people that have great story to tell or tremendous business experience and you kind of go over there as a team, five to six people, and put on a business symposium. Everybody will take the their area of expertise, you come up with workshops and the thirst for knowledge or just the things we take for granted here in America of transacting business. I hand you a contract and I don’t necessarily need a lawyer read it word for word, well over there it’s not the same so its eye opening experience for an American entrepreneurs like taking things like trust and legal judicial system for granted and teaching them skills but also hearing that might work over there but that’s not the way it goes over here kind of thing. Definitely anybody who wants to help people out check out that organization and its really awesome experience.

Josh: Nice.

Brandon: Alright, we are moving on.

It’s time for the Fire Round.

Brandon: First question I have in the fire round is going to be…

Josh: Where is all the enthusiasm? Flat.

Brandon: Alright it’s time for the fire round. Let’s get it on. My first question of the fire round – this comes from the forums and I just grabbed it just now. The question is do you have any good gift ideas or things to thank your contractors? Any way to thank a contractor.

Todd: I think that would depend on the contractor and how can I use this gift as something to help them in their business. Do they need tape measure, maybe they miss cut some things, maybe they haven’t done what they need so I’m going to buy this guy a laser tape measure to further his career. We actually had this pop top I got a call hey inspector here and we have to rip out entire roof again because the house it built two feet too high. I’m like what do you mean the how is build two feet to right? Well I just watched it measure he said house is 37 ft. high and it can only be 35ft. I was like did you measure it? No I saw him do it. I said you measure it anyways. Sure enough inspector miss measured the roof line of our house and we took laser tape and shot it and we were five ft. under what we needed to be so that inspector will definitely be getting a laser tape measure in his Christmas goody bag.

Josh: That’s awesome. What should a flipper do if they run out of money on a half-finished flip?

Todd: Obviously you have to take it to the finish line so you have to look at how do I get this done and it can be something as simple as hey I’m out of money its half-finished, is the as is value something that I could make a buck or is it under water? Is it something I could find another investor to bring into a deal and bring in his capital to take it off you are going to get smaller portion of the pie but something may be better than nothing.

Brandon: Should I fix and flip a house to pay for my upcoming wedding? I’ve never flipped a house before, I need money to pay for a weeding – should I fix and flip to pay for my wedding?

Todd: I actually have real world experience with this. My wife and I right before we got married needed some money to pay for our wedding. She had a house and I had house and I was like hey I can come in here and I can fix this place up and sell it and we are going to pay for our wedding with the profits we make from flipping your house. This was in 2007 so we put bunch of money into her house to sell it, put for sale sigh in her yard and crash happened. I actually still own that property today as a buy and hold so the answer would be no. Do not flip a house to pay for a wedding. You just never know – whether it’s market correction or deal gone south you never want to base your future or anything else on a transaction.

Josh: That is good advice.

Brandon: I didn’t think of it when I wrote the question but I actually had same situation when we were getting married we didn’t have money for the wedding so I did my first live and flip and I used all the money and I paid for the wedding so it worked out in my case. I sold mine in 2007 but I sold mine as we were looking over the pit I guess of where we were about to go. I just got out on the right time.

Josh: Way to put a salt on the wound for Todd.

Brandon: Yeah, it worked pretty good for me. I don’t know if you are a good contractor and good flipper you might do alright.

Todd: Moral of the story for anybody out there is whether you have a wedding to pay for or anything else just business is so unpredictable you never want to stake your family future, your business future or anything else on single or multiple you just never know so you have to take calculated risks and you don’t want to put all of your eggs in the basket last minute and have them crashing down.

Josh: Last question from me in this section of the fire round. I want to flip a project that has six foot basement ceilings. Any ideas?

Todd: Are you wanting to have a basement in this house you are flipping with six foot basement ceilings.

Josh: I don’t know, it’s not my question. I’m just regurgitating, I’m just a talking dummy here they put in front of me and I have to say it. I don’t know the intent here.

Brandon: Let me read the entire question. This is from Brandon Sturgeon from the forum. He says “I have a potential property for rehab that has good potential in the main living area but the basement ceiling is six foot high. The space is not realistically usable. Anyone have any success at rehabbing similar properties, seems the cost to make it presentable outweighs any potential increase in REV” that was the actual question.

Todd: We’ve got couple of project we are working on right now similar both our pop top project have basement that you would not convert into living space but it is great storage space. We are packaging it, marketing it as look at all this extra storage space you get that you would have if it was a slab house or a crawl space house. Same kind of thing our cost to dig the basement lower and or raise the house of foundation and make it livable number doesn’t workout to make that livable space. Take what you have, put some real estate speak on it and turn it into a positive and let it be an enhancer not a profit attractor.

Brandon: How do you use BiggerPockets or what value has it brought to you?

Todd: It’s been such a great resource just starting out it was sounding board for just I want someone who knows that they’re doing to tell me what I’m about to do is a good or bad idea. And just the relationships that it has brought like meeting J. Scott to here recently just countless other people, sources of money - its jut been incredible tool to further our business in every way imaginable for sure.

Brandon: Let’s move to the world famous Famous Four.

What is your favorite real estate related book?

Todd: That would have to be J. Scott The Book on Flipping Houses.

Josh: Which can be picked up at BiggerPockets.com/flippingbook.

Brandon: That it can.

Josh: What is your favorite business book?

Todd: I think this question needs to be changed to what is your favorite business book other than The Four Hour Workweek.

Josh: Whatever man. The book is sold. I read it. I continue to get grief over this book even thought I finished it months ago. Whatever. Next question. Interview over. Drops mike.

Brandon: Four Hour Workweek – is that your answer? Why?

Todd: Its fantastic book like it just gives you a mindset of setting out the business outside yourself and everything else but just kind of get outside of box and do something different. I was thinking E-Myth but a lot of people say that one too. I’m going to give a shootout to David Allan and his book Getting Things Done.

Josh: Are you successful GTD user? It’s hard.

Todd: Absolutely not.

Josh: Because I tried and I failed by the way.

Todd: I get my Evernote setup and I’ve got all these shorthand’s and action symbols and it worked great for a week and then it just gets overwhelming but something that eventually ill figure out and get things done.

Brandon: What I found about getting things done system we should probably just get David Alan on the podcast that actually would be very fascinating podcast. My theory is this if you only do 20% of what the GTD system really is that alone will do a tone more for your business and your life in organizing than if you do nothing. I feel I do maybe 10 or 15% of what I wish I did but still the mindset shift I had when I read that book and some of the little organization skills I have today. Even in my Evernote I have my actionable step and I have my someday maybe folder in Evernote because I organize things in my head that way right now and just the concept of next actionable step I think was huge for me when I read that book. Anyway I like that chose, good job.

Todd: Evernote itself is a tool so great or real estate investors you can capture pictures of your strolling through Home Depot or you’re strolling through another house one of your competitors is doing oh I like that backsplash just being able to capture that information, filter it and find it later is incredible tool.

Josh: Hobbies other than travel?

Todd: Travel is a main thing and recently it’s just been kids, kids, kids. Be it little league games just making sure I’m spending time with then because that’s something I think critical for entrepreneurial is what’s really important in life. You can go out there and you can kill it and make a bazillion dollars but you can never buy back the early years with your kids. Really another games in mind an if you’ve got a small family or thinking about having a family you really need to take a look at your business plan, your life plan and organize it in a way that you’re never going to get those early years back so how do I make sure that I spend most time with them that money can never buy.

Josh: Do you travel with your kids?

Todd: Yes. People look at us like were silly but we load up the swagger wagon with all three kids and head out to the beach or up to the mountains. We like to go camping.

Josh: I was thinking about adventure travel.

Todd: I haven’t quite taken them to any third world yet but that’s definitely on the map. Our youngest we just had four months ago and we are not quite ready to venture to West Africa.

Josh: Well congratulations on that.

Brandon: Yes, congratulations, that’s cool. I don’t have kids yet but I always swear someday I will be the parent that’s got the kid on my back hiking through Great Wall of China. I want to be that guy someday.

Josh: Until you try to carry your kid on your back for half mile and say that’s not going to happen.

Brandon: That’s why I work out today. I’m preparing for them.

Todd: Here is another quick tip for bringing your kids camping. I like camping and I bring my kids camping. Camping is great because it takes you outside of your element. You are not in your day to day routine but there is a drawback to that. In our house there is bath time, there is bed time, here is jammies, all these things. Camping there is camp fire and there is beer and more beer and you don’t get your routine. First time I took my son camping, bring a buddy we had a good time alright son lets go to bed, we are sharing a sleeping bag. I forget the put his pull-up on and let’s just say woke up with excess moisture in the sleeping bag.

Josh: Awesome. Great story.

Brandon: What do you believe sets apart successful real estate investors from those who give up, fail or never get started?

Todd: It goes back to that question of how and also just having a plan. So many people they might a dreamer here is my goal but they don’t have a plan to accomplish those goals. Whatever it is you are looking to do whether its getting stated in wholesaling, fixing, flipping, number one write your goals down but number two work backwards – what is the plan, who are the people I need to meet, what are the appointments I need to make, what are the investments in education, all these other things I need to do to prepare myself to actually make that dream a reality.

Josh: That’s great. Todd this has been really fantastic show, lots of good information. Before I ask you how people can find more about you I need you to just say cool whip.

Todd: Cool whip.

Josh: There was no cool whip. I was waiting for a cool whip.

Brandon: Is that like Atlanta thing?

Todd: Is this that draw and drawl?

Josh: Its one of those southern things you always hear. I thought I’d hear but I didn’t. Where can people found out more about you?

Todd: On BiggerPockets that’s probably the preferred place and I don’t have enough time for the friends I have now so probably just hit me up on LinkedIn or keep it on professional level.

Josh: Thank you so much and we definitely appreciate your time and it’s been a lot of fun hearing your story and anybody who wants to ask question to Todd about this interview or anything else you can also post on the show notes at BiggerPockets.com/show104. Alright, Todd, thanks a lot man.

Todd: Actually I’ve got a quick question that I want to ask for greater good of BiggerPockets community. I know I have this question and hopefully there is an answer to that and if not oh well this is always going to be the way it’s going to be. Way back when I first made my BiggerPockets profile I had to make username and I probably just make like my name but I didn’t. I was stuck in video game mode and my video game was The Duke of Death. That’s probably not a good to be The Duke of Death on this real estate site so I just shorted it to The Duke. If I want to change it now to something different is that possible and how do I do it?

Josh: That is possible. You contact our support team at support@BiggerPockets.com and they will take care of you and they will ensure that The Duke becomes Todd Whiddon. We’ll get you taken care of. Anyone listening if you guys ever have question on using the site or any needs that you want just hit us up at support@BiggerPockets.com and the team will take care of you. We’ve got couple of people doing support for us and they are fantastic and they can help you up with anting you need.

Todd: Appreciate it guys.

Brandon: Todd it’s been fun, thank you so much.

Josh: Take care man.

Alright guys that was show 104 with Todd Whiddon. Again big thanks to Todd for coming on board I really enjoyed that show and I hope you guys did as well.

Brandon: I know that in my business I feel that is the area I struggle the most is turn it into a business versus how I’ve always done things. I love those show that I’m like oh man there are so many things that I should be doing thighs differently and better and it’s kind of inspiring. I definitely got a lot out of it.

Josh: And listen it’s so easy to get overwhelmed and say there is millions of things I want to do and since I didn’t do all million I’m a big fat failure and that’s not true. If you listen to these shows and learn one thing implement one thing to improve your business it’s worth listening to and it’s worth the time. Definitely stop to think about some of this stuff and ill challenge you on that Brandon. Don’t go and make a list of 20 things because you’re going to pull your hair out – pick one thing or two and go with it.

Brandon: There you go. I pull my hair out anyway. I got a haircut today did you see that?

Josh: I did not notice. It still looks like rats nest.

Brandon: Don’t tell my wife that – she cut it.

Josh: Oh it looks really good Heather if you’re listening this is well done.

Brandon: Thank you.

Josh: Time for me to go. Guys thanks for listening to the show, thanks for being a part of BiggerPockets. If you are not already active member of our community jump in, create account at BiggerPockets.com otherwise we will see you around on social media and we’ll see you around next week for the show 105 of the BiggerPockets podcast.

Brandon: You know what you forgot to say?

Josh: No.

Brandon: If you haven’t got us a rating or review yet.

Josh: If you haven’t given us rating and review please jump on iTunes and leave us one - It does help us a lot and we definitely appreciate all the feedback and take it all to heart. Thank you so much. I’m out of here.

Brandon: This is Brandon, signing off.

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