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Josh: This is the BiggerPockets Podcast, Show 38.
You’re listening to BiggerPockets Radio. Simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the million of others who have benefited from BiggerPockets.com. Your home for real estate investing online.
Josh: Alright everybody, this is Josh Dorkin, your host of the BiggerPockets Podcast. Here with my cohost, Brandon Turner. Hey Brandon.
Brandon: Hey, Josh, what is going on in Josh world?
Josh: Josh World, what? I like to represent the lollipop, the lollipop kids.
Brandon: You’re sing in Josh world, that’s good.
Josh: Was that good?
Brandon: You’re been around your kids too much.
Josh: Yes, apparently.
Josh: Yes, no things are good, man. Things are good. Show continues to do well, we—our last podcast was insane man, Show 37 with Aaron Mazzrillo got just a ton amazing feedback.
Josh: It was awesome.
Brandon: Yes, I think it was our biggest show to date.
Josh: I think it was.
Brandon: If you are listening and you haven’t listened to it, you’re missing out.
Josh: You are. You are, but yes, man, things are good, life is good, work is good, you know. Killing it. How about you?
Brandon: About the same, I’m working on a deal right now and we’ll talk about it on the podcast today, but yes, I’m excited.
Josh: Fantastic, well, lost of luck with that.
Brandon: Thank you.
Josh: Awesome. Listen, we are now at 425 reviews in iTunes.
Josh: Yes. That includes 412 five star reviews and we want to thank everybody so much for doing that.
Josh: If you’re a regular listener and there’s now like 13,000 plus of you and you haven’t yet left us a review, please take a minute and run over to iTunes and leave us an honest review, an honest rating there.
Brandon: Don’t run though, walk over to iTunes and leave a review.
Josh: Can you actually walk to iTunes, Brandon?
Brandon: You can walk to iTunes.
Josh: Yes, you can, so yes, there you go, but yes, so that’s that. Also, listen, our quote contest, last week’s winner was David Moore, Twitter handle is @1CalledDavid. He shared the quote from last week’s show, if you can’t find a buyer. It’s probably not a deal so Dave won a free six month pro membership on BiggerPockets, which means he can now fully use the marketplace, get a snazzy new form signature, you can see who’s checking out his content, see who’s visiting his profile and a whole lot more. You can find more about pro account over at BiggerPockets.com/Pro so big congrats to Dave for that.
Josh: Trial. Yes, yes, yes. Alright, we’re going to do this same contest again this week for your chances to win six month free trial of pro membership, be sure to listen for awesome quotes and simply show your favorite at Twitter, Facebook, or G+. Be sure to include the #BiggerPockets when you leave the quote and we’ll find you and one of you guys will win another free six month trial to BiggerPockets Pro.
Josh: Alright, with that, why don’t we get on to the show. On today’s show, we’re going to sit down with Travis Daggett. Travis is a real estate investor from Eugene, Oregon. Travis has been investing full time for a couple of years and although he focuses primarily on wholesaling, he’s going to actually teach us stuff about buying property no matter what kind of investing you’re in. It’s definitely a higher level podcast today with an overload of really good information so you’re definitely going to want to grab a pen and paper and get ready to sit down and take some notes. With that, why don’t we jump into the interview.
Brandon: Alright, or walk into the interview. Sorry. Travis.
Brandon: You know that’s what comedians do right? They play back on a joke they made earlier in the set.
Brandon: I’m a regular stand up comedian. Look at me.
Josh: Alright Travis, welcome to the show, man. Let’s just ditch this comedian here and get going. What’s going on man? How are you?
Travis: Thanks appreciate it. Thanks guys.
Brandon: Yes. No problem, we’re glad to have you here.
Josh: We are indeed. We are. Who are you man, what do you do?
Travis: Travis Daggett, real estate investor, do wholesalings, fix and flipping, a little bit of several different things, but those are the main things.
Josh: Excellent, nice, nice, how long have you been doing that for?
Travis: Full time, December of 2011 so almost two years.
Josh: Oh nice. Prior to that, what were you doing with yourself?
Travis: Something totally different.
Brandon: Not in real estate at all, huh?
Josh: The interview is clearly going the wrong direction.
Travis: Now, for something completely different. Yes, I was doing sales training for an insurance company.
Travis: Not really related at all.
Josh: Nice and how did you decide to get into the game and how did it all go down?
Travis: Well, one of the best things happened to me in thats February of 2011. The company, I mean it was a big company, a bunch of people, they laid off about a quarter of the staff, me included and it was really—it was good because it forced me to do something different instead of staying in the same job that I didn’t like for 40 years.
Travis: I was travelling. I’m married, three kids, young kids, I was gone two weeks at a time. It was not good.
Josh: Got you so you got laid off, had to figure out what to do and decided real estate was the way to go.
Travis: Yes, I mean I had a little bit of experience. I had a condo that I rented out. You know, we lived in it, moved, rented it out. Had to a duplex, we lived in one side. Rehabbed it, moved in the other side, rehabbed that. Rented out, you know, the other side.
Travis: Little bit that—that was pretty much it before that.
Josh: Got you, got you.
Brandon: It was technically like your first deals, in real estate was accidental just like that.
Travis: Yes and I guess we talk about tips, one of the first tips is, your average real estate agent and I mean nice guy, great guy, meant well, but didn’t really have the investor mind set so he said, “Hey, you know, when you move, just rent this place out and the rent will cover the mortgage payment.” That was the end of the conversation. You know, so, “Oh, great sounds good.” No, no, it wasn’t good.
Josh: You kind of went forward with following that advice so to speak and didn’t know any better of it and ultimately, living there, obviously, you save on, you took a chunk out of some of the cash flow by renting the other side eventually, but as a deal it was not a good one is what you’re telling us.
Travis: Well, I was talking about the condo. Yes, next to the duplex.
Josh: Oh, you’re talking about the condo.
Josh: Oh, goodness.
Brandon: Ignore Josh, he’s drinking as we said.
Josh: By the way, really quickly as you know, you mentioned that and I do want to plug this amazing guide that we put together, which is the, I think it’s called something to the effect of the Agents Guide to—Ultimate Agent’s Guide to Working With Real Estate Investors. We’ll put a link to it in the show notes at BiggerPockets.com/Show38. I believe. It’s all about if you’re real estate agent or you’re an investor, and have agents that you work with, how these agents can better understand investments and so if you know any agents make sure to send this thing to them because we don’t want anymore of that happening. That’s not good.
Brandon: Agreed, agreed.
Travis: Yes, I’ll just piggy back on that. The article, great article, we can talk, maybe more, that’s more up to date on the story, but you know, I use that with agents and it’s great, especially how to really calculate cash flow, I mean that’s what we’re talking about right there, right?
Brandon: Yes, and that’s just it a lot of agents just don’t know so. I had an agent one time, kind of unrelated, but he told me I was the cause, like I was contributing to the cause of the bad economy back when the economy was bad because I wanted to offer low on some property and he told to me I needed to raise my offer because I’m hurting the economy.
Brandon: Like me personally, I’m going to help the economy by paying tens of thousands of dollars more so.
Brandon: Yes, I don’t actually work with him anymore, but.
Travis: You didn’t know that you were buying off the black stone.
Brandon: Yes, I think he wanted me to, yes, single handedly turn the economy around, but you know, anyway, so yes, I definitely I do want to talk more about that, working with real estate agents because that’s actually, Travis, how you and I got connected was we were talking to the private message system about that so. We’ll hit that up cause I know, yes, that comes later in the story so. Duplex, you bought the condo, followed by the duplex. Did the duplex work out better than the condo then in cash flow wise?
Travis: A lot of lessons were in there. We lived in one side, inherited the tenants and you know, big mistake. We just made a ton of mistakes there, but so the tenants there was kind of pay whenever you can.
Travis: With the previous owner.
Travis: We just started head butting with them right away and the—you know, if someone wants to live in one side and rent out the other, great, that’s good for them. For us, boy, we couldn’t use a property manager because we were living on one side, they wouldn’t manage just the other side so you really have no escape right? I mean you’re living right next to them so any problems they’re at your door.
Travis: That was a long drawn out process getting them out and I mean, police were involved.
Josh: Nice, hey man, I’ve been there. I think most of us have. I think, but you know, so you mentioned, living next to your tenants, a lot of our interviews have been with folks who’ve done that.
Josh: Many cases, you know, they say, “It’s fantastic. It’s a great way to train. You want to do it because that’s how you learn how to be a landlord.” I’m a little skeptical of it. I think in theory it’s great. It’s a good way to kind of train if you have the right people in there. If you have the wrong people, as you’ve experienced, it can be an absolute nightmare.
Travis: Yes, you got it.
Travis: Made mistake. I mean, we over—that’s one of the things too that in my mind kind of blurs things, is when you’re living there, you’re rehabbing to a different level as a rental so when we ended up doing the numbers, we had over rehabbed the whole place, both side and the cumulative effect was, you know, we had way too much in.
Travis: This was ’07, ’08 so our arm shot up. We had to adjust for rate mortgage.
Travis: Thankfully I mean, it was really a blessing. We got out of it, you know, broke even and got to move on down the road, but a lot of lessons on that one.
Brandon: Nice and that’s what’s cool about that though is that you did something. You know you moved forward. You did it. It didn’t work out necessarily the way that you know, the TV shows make it look out, but yes, you didn’t lose money. You got a ton of lessons that probably helps you out since then. Alright, so after that then, you got rid of that property, you sold it. You know, you broke even like you said. I guess what came next. That was when you still had the job correct?
Travis: Yes, right, so I was working at that company and then February of 2011, laid me off, and I mean I was so excited. I remember calling my wife from the hotel lobby saying that it’s great, they fired me, laid off, whatever you want to call it. I mean I didn’t do anything wrong. It was just cut back and so I was going to school for accounting at the same time online. I remember, you know, I kept going to those classes and studying, but I just didn’t really feel like I wanted to keep going and go work in downtown Portland as an accountant.
Travis: I started going to seminars, every real estate seminar I could find and read books and just kept doing that. Taking people to lunch that had any kind of real estate investing experience.
Travis: Asking them. I mean I stopped a guy that was driving to the apartment complex by our duplex and had nice car. It didn’t belong in the apartment complex and turned out he owned the place.
Travis: Took him out to lunch and just asked questions.
Brandon: That—like if I could jump in there, I mean that is so, that is so cool what you just said there because most people don’t—I mean most people think about I’m going somebody out to lunch? We hear that all the time right? You think of like taking out, like, I don’t know, the big huge investors that are maybe like training or teaching or the coaches or the gurus, whatever, but just yes, find the guy down the street who’s a landlord. I know that’s how I did it. I became friends with my best friend’s landlord and he became my like, biggest mentor, like for the last seven years now.
Brandon: Yes. Quick tip there for people, yes, just find out who the neighbor’s landlord is and get to know them.
Josh: Brandon really wants you to take him to lunch. You know.
Brandon: Yes, come out to Montecino, po-dunk, Washington and we’ll get.
Josh: Two hours from the nearest Apple store.
Brandon: Two hours from the nearest Apple store.
Josh: Really in the middle of nowhere.
Brandon: Anyway, so anyway, moving on, I just had to throw that in there. Alright, let’s keep going with the story here. You started going to these seminars, taking people out to lunch, learning everything you could, books, what next?
Brandon: How did you get into you first actual deal then?
Travis: Yes, so I mean I know we’re not big on gurus and the hype and everything, but for me, it just kind of shortened the learning curve for me.
Travis: You know, I got some coaching, some mentoring. I got a HUD house in Mobile, Alabama. Got an offer accepted.
Brandon: Why there? [Inaudible] [15:14].
Travis: I just started shot gunning offers in some different states and you know, again, I’m not sure if this is what I would do if I was starting today, but it’s what knew how to do. It’s this house, Cresthaven Road, it was listed for $35,000 and I got an offer accepted for $7,000.
Josh: That’s a little reduction there huh?
Travis: Yes, had another real blessing. The agent that was, the put the offer in for me was superstar one in a million agent, family had a property management business. They managed several hundred properties of their own and some for some other people. He’d been buying and selling to the courthouse for years so he knew investing. He said, hey I can find a buyer for you for this deal, you know, today and just a wholesale cash buyer. That first property, I got it for seven, sent in a $500 deposit to HUD and we did a back to back or simultaneous closing and they just sent me the difference. Sold it for 17,000.
Travis: They just sent me the difference so all I had out of pocket was $500.
Josh: Nice and how long did that take to find you the buyer and you guys to do the close?
Travis: Well, he had a buyer within a few days, but HUD takes 30 to 45 days to close regardless.
Josh: Okay and I wonder if that’s going to change now that the government is closed for business.
Travis: They already closed?
Josh: Today wasn’t it?
Brandon: Yes, I think today they’re officially so I heard they’re laying off a bunch of their and I mean this is going to be old news probably when they listen to this podcast.
Brandon: I heard they laid off a bunch of their staff and everything is going to get slow, which is another reason I wanted to talk to you today, Travis because I’m working through a HUD deal right now too so I know you have some HUD experience and we’ll get into that but.
Brandon: What do you think I guess, how did that actually happen? I mean, you put an offer into HUD and this again with my experience of working right now, HUD is being very strict on what I have. For example, how did you get proof of funds, like HUD wants us to get proof of funds, I would assume.
Brandon: Or they asked me anyway. Like, how did you show them proof of funds did you just give them a bank account or.
Travis: Yes, I was starting with my own money, which is again, another reason I was offering in Mobile because they’ve got cheap houses.
Travis: I figured even if I have to close on the place, it’s seven grand, okay. Yes, just a copy of my bank statement.
Travis: That was it. Yes.
Brandon: I just think it’s weird. I mean like, it’s cool, but weird just to think about like a place you’ve never been. I don’t know if you’ve been there, but you don’t live there, you just shot gunned an offer at this random place. Like you said, you don’t know if you recommend that, but I don’t know if I see any major downsides other than wasting, you know, an agent’s time if you’re not prepared to close, if you didn’t have that money. I can see that being an issue, but yes, that’s cool.
Josh: I worry about that. I mean I think, I don’t know where you heard to do that. I think you know just blindly making offers on property on you know, po-dunk anywhere because it’s cheap is probably something that I’d strongly advice against. You know, not having infrastructure, potentially not having buyers, I mean, if your agent didn’t come through for you. You might have been holding the bag on this thing and who knows what would have happened right? I mean you probably would have been stuck.
Travis: That’s right, the only thing I would say that mitigated the risk for me was the, you know, 7,000
Josh: The cost down.
Travis: 30% of the price.
Travis: I agree with everything that you said. Right now, you know, it would be no big deal for me because I’ve done it a dozen times, but yes, the first one, I probably would have been just throwing my hands up saying, “What am I going to do now?”
Josh: Yes, and since we’re talking about HUD, why don’t you, you know fill folks in here. What is HUD? You know, why are people searching for HUD deals? Why are there opportunities with these HUD homes?
Travis: Well, HUD, Housing Urban and Development is just a loan, an FHA loan that they took back so you know, if you go to the courthouse, most of the bids, an incredi-bid, meaning lender just takes them back and then they’re HUD. They’re a HUD house and just like most things, the federal government does, they don’t do it well. It never just like. I mean marketing, everything.
Brandon: That’s going to be a tweetable topic for this show. Most things the government does, they don’t do well, anyway.
Travis: Yes, so which works to our advantage because they don’t do a good job marketing it. They generally hire the lowest performing agent in the area who just expects to get paid for doing nothing so the property—the nice thing about them. I mean there’s a lot things about them that lend themselves to a—be in good for investors. They do kind of an inspection. It’s only as good as the guy that looks at them of course.
Travis: Or the lady, but they give you more than just what you have, usually, which is nothing. They’ll check out, you know the roof, the maybe electrical plumbing, stuff like that depending on whether the utilities are on. They make up a little report for you. They take pictures. They tell you how much they think everything is going to cost to fix. I mean, again, really basic, not final number type of stuff, but they give you more than you’d get normally.
Travis: Each place, you can bid on it daily. It opens and ends at midnight.
Josh: Where would you bid on a HUD home? Where does that happen?
Brandon: Does an agent have to do that or can you, as an investor, without a license do it?
Travis: Yes, agent.
Brandon: Do you have your license?
Brandon: I meant to ask you that earlier. Okay.
Brandon: You’re agent goes on, bids for the house and if you win it, great, you get to close on the property. Now, I know there’s something. Can you explain a little bit about like they don’t always open it up for investors right away right?
Travis: That’s right. It’s like Fanny, you know Home Path, First Look, or something they call it, but yes, it’s 30 days usually.
Brandon: Yes, they give it to homeowner first.
Josh: Got it. Anybody can go on, I just pulled it up while we’re sitting here and pulled up Colorado. There’s a list of all these, you know, exclusive, extended, there’s five pages of properties available in the state of Colorado and essentially I would just find one that I like and call an agent and say, “Hey, this looks like a deal. You know, let’s put some offers in.” Now, what do you typically offer at? Are you getting significant discounts below what you pay for say an REO or other types of properties or is it pretty much similar?
Travis: It’s a good question. You know, one of the books I—probably the best book I’ve ever read real estate investing is Flip, one of the.
Travis: Taylor Williams series.
Josh: Rick Villani is that who it is?
Travis: Yes. Yes, and Millionare Real Estate Investor and they talk about, you know, the funnel so I was doing the strategy of making a ton of offers and then seeing what comes back as opposed to doing a lot of due diligence up front and then you know, making fewer offers. A lot of offers means low offers, right?
Travis: That’s what I’ve done with the HUD, just make low offers, see what comes back and then conduct a due diligence. If that comes back, I mean it counters, which get a counter on.
Brandon: Do you know, are there any requirements for HUD Homes? Like the reason, I ask this, a guy that HUD home I’m working on right now, which I’m sure we’ll talk about it, but they said that if I don’t fulfill like if I don’t buy, even though I have a, I think I even put a financing contingency in there. They said it doesn’t matter. I lose my earnest money. Have you seen that before? Is that normal? Or is that just with me? They said they won’t—like they’re going to keep my earnest money no matter what cause I’m an investor. Have you heard that?
Travis: They just don’t like you.
Brandon: That’s what.
Travis: It’s just the beard.
Josh: They clearly know [Inaudible][23:44].
Brandon: It is the beard.
Brandon: That’s funny.
Travis: Yes, that’s it. Investors, you’re not getting it back.
Travis: Just forget about it.
Brandon: That’s what I was thinking.
Travis: Forget about it.
Brandon: Does definitely, you can’t just on normal wholesale you just put in all these clauses like, “Oh, I’m going to.” You know, weasel clause as they say so with the HUD home you kind of have to know you’re going to get it right?
Travis: Yes, you’re not going to sign it.
Brandon: Yes, no signing.
Travis: You’re going to close on it, you’re not going to close on it and a close on it could be simultaneous which is basically an assignment right?
Brandon: Real quick, for those who don’t know, why don’t you just kind of explain the real basic? What is the difference I guess, between an assignment and a simultaneous close or a double close? I guess, why don’t you tell us.
Travis: Yes, sure. I mean, in full disclosure, I’ve never done an assignment, but I know—of course I understand it. That’s where you just get a property under a contract and you just put, you know, in my case, Travis Daggett and or assigns and I tie it up for 7,000. I go out and find a buyer for 17 and then I just assign the contract to them. Probably, I wouldn’t give the seller $500. You know, I’d probably give him, you know, less.
Travis: You know $70.
Josh: When do you get paid when you do that?
Travis: Well, you paid when you assign the contract to then so you get paid from the buyer—from the end buyer. They’re just paying you a fee.
Josh: You’re not doing that title of anything? You’re just like, hey, you’re at a coffee shop, here’s the assignment, put your name in, give me a check, cashier’s check.
Travis: Again, I mean, I honestly haven’t done it. I’d probably if I was the buyer, I’d probably want to do it at a.
Brandon: A title.
Travis: A title company. It’s [Inaudible][25:29].
Brandon: I’ve heard people doing them both ways. Yes.
Brandon: I’ve heard both ways.
Brandon: It’s just to—I think a lot of that is a relationship. If you have a good relationship with your buyer, they’re probably fine giving you the check, but they’re going to want to make sure it closes. If things go wrong.
Josh: Absolutely. Yes. Absolutely.
Brandon: Yes, so on the other hand, they double close or a simultaneous close is. What would that be?
Travis: If you use the same title company or closing attorney then really and if they’ve done them before, then it’s no big deal so they’re just saying, “Hey, look. I can see that Travis is buying it at seven and I can see that we have a buyer here. They’re already—I have everything from them and they’re buying it at 17.” Clearly, Travis doesn’t need to send in $7,000. He can, you know, we can send him the difference between the 17 and the seven. That’s an ideal simultaneous closing. They’re just sending you the difference. You close on one and then you close on the other.
Josh: Now, that’s the ideal. What about the non-ideal?
Travis: Well, there’s one where the buyer didn’t—they wanted to use their own closing attorney. It really would have been a simultaneous closing, but they said, “Hey, we want to use our own.” I mean it took a day or something.
Brandon: Got you.
Josh: Now do you have to pony up the cash and how do you do that if you don’t it on hand?
Travis: Yes, you do have to pony up the cash. Boy, I haven’t had to do that, but you know, I guess you’d use a transactional funder.
Travis: You could find somebody
Travis: Pay him $2,500 to do that.
Josh: Yes, so there are transactional funders that, that’s kind of job. That’s their role. You know, you need that super short-term cash and it comes at a very high price.
Josh: Right on, very cool so now so you’re wholesaling these HUD homes, obviously, which is very cool. Do you have any, I guess tips for dealing with HUD as an investor. You know, what would you say, you know, are there headaches that come with putting offers on these HUD homes. Anything that people need to look out for or, you know. Jump in a little bit here.
Travis: Yes, I mean, well, there’s all kind of stuff. I mean there’s books on it, there’s gurus that train me on it.
Josh: Well, I’m asking you this, somebody—I’m not asking the guys who aren’t doing it. I’m asking the guy who’s actually doing it.
Travis: Right. Yes, I mean, there’s one the other day that’s, I guess, thing to watch out for. We’ve seen the inspections go down in quality, the BPOs so you’ll look at an amount of repairs needed and maybe it says a few thousand bucks and you’re thinking, “Oh, alright, it’s just paint and carpet.” This place had a hole in the ceiling in the kitchen. I mean it looked like aliens, when they go in there to recue the people and it’s just, you know. I mean, it was stuff hanging out all over so somebody went in there, said, “Yes, just, you know, it needs this and that.” They didn’t even mention the hole in the ceiling.
Josh: Nice, nice.
Brandon: Yes, so that is a concern if you’re wholesaling a house, you know, like virtually, like from a distance, like you were doing. How do you deal with that?
Travis: Well, so, I mean first of all, you’re making a little offers see what you get a counter on and then you get a counter, just like you do in time, you’re first offer shouldn’t get accepted or it’s too high right?
Travis: You get a counter and then you start checking the house out. Then you run comps. Then maybe if you got a contract or two or three that you know they’re, maybe get them to check it out say ballpark what they think. You know, get an agent to give you comps. Then you say, “Okay, now how much can you pay for it?” Then you go back with a counter or a new offer.
Josh: Of course, you can’t do that if you’re making an offer at, let me throw a dart at the wall. Oh yes, there’s a property.
Josh: It’s cheap so you know, in that case, you’re I mean, you know, even though, you potentially are putting a lowball offer, and I mean there’s that risk level is really high.
Travis: Yes, I just use it. I kind of built my team as I went so when I got that offer accepted, then I built everything around that. As a result, most of deals I’ve done have been in Mobile.
Josh: You basically decided, “Hey, I got this first deal. I’m going to stick around.”
Travis: Yes, and that agent just turned out to be a great partner.
Josh: Right on, that’s great, so Brandon had said you had mentioned to him something you’re “HUD Strategy,” you know, can you talk about? What’s your “HUD Strategy?”
Travis: The “HUD Strategy” is just making those low offers, a lot of them. You can make them everyday if you want because it begins and ends—the bidding period begins and ends at midnight. You can make an offer, the next day make a little bit higher offer and a little bit higher so you see what they counter at and they’ll tell you, hey, this is the minimum we’ll take. Well, it’s really not the minimum they’ll take because we’ve seen them say, the minimum we’ll take is x and then next day, they take an offer of ours lower.
Josh: Interesting, so are you saying, let’s say I see a property listed, I’m going to pull it up, in Detroit, you know, we like Detroit.
Travis: I wouldn’t bid there.
Josh: Many people wouldn’t, but you know, Detroit.
Josh: Say it’s $10,000, there’s a property in Detroit and you know, you think it’s worth, say $2,500 and you put an offer at $2,500 today and they say no, they’ll come back in and say, “Our minimum is say 9,500, right, and the next day, you go in at 2,550, you know. I mean you can keep beating them on the head. Now, your agent is continuing to put in offers for you at these lowball prices, yes?
Travis: Yes, but when we get a counter, there’s no need to keep making offers because we know what the minimum they’ll take is.
Josh: You just said that minimum is not legit. Right? I mean, you’re still under.
Josh: Okay, so you came in at 25, they say, well, they say, 95. What’s your response at that point?
Travis: Well, we know we’re not even close because we know they’ll about another 15%, 12%, 9% off, somewhere in there.
Travis: We know, hey, we’re not even close, we won’t bid on that until they drop the price.
Josh: Got it.
Josh: You’ll watch for them to drop on that property and hopefully you get it within range of that 2,500 that you think it’s worth.
Travis: You got it. Yes
Josh: Got it. Cool.
Travis: I wouldn’t bid on Detroit.
Josh: There’s nothing wrong with Detroit and they have a cool Robocop statue that they’re putting up so for all the Detroit listeners, well actually, you guys are all gone because I bagged on you so much, but yes, Detroit.
Travis: Yes, I heard about the Robocop statue that’s a big attraction.
Josh: It’s kind of cool.
Brandon: Well, I’m wondering, can you kind of walk me through the process. I mean real basic, like, if I wanted to wholesale it a long distance like you’re doing. If I wanted to pick a ran—you know, a market. I do my studying, I realize where there’s low price houses and people are paying more for them. I guess, how does your typical day look? I mean, what do you do as long distance wholesaler? I mean, you just start making offers or are you getting on the phone with people? Are you flying out there? How does that—what can you tell me about your day?
Travis: Well, my typical day is changing a lot because I’m just finishing up the Four Hour Work Week.
Travis: I mean, talk about, just a game changer as far as the way you think about your business.
Travis: Yes, I mean, back when I started I was just making a ton of offers everyday on HUD properties, finding the listing agent, making them directly to the listing agent.
Travis: They’re going to know about the property. If anybody is going to know, they’re going to know. They may tell you, “Hey, you know, I showed this to this person. They said they’d pay this.” You know, they’re going to have an idea, maybe of what you can sell it for, at least to a retail buyer.
Travis: If not, an investor buyer and out of those dozens and dozens of agents, you will find, eventually, you’ll find that superstar that has his finger on the pulse of the investor market and could bring you, cash wholesale buyer too.
Brandon: Yes, that’s true. I mean that’s a really good idea. I mean, like you find that good agent. They can work both sides of that for you. Now, do they get a commission then off of the—because you’re doing a double close. You’re reselling it. Are they getting a commission on both though? Sales? Or how do you work that?
Travis: Yes, that’s a good question and a good agent will ask to be paid well, right?
Travis: For that?
Travis: This guy’s a good agent so he said, “Hey, look. I want a minimum on the front and I want this on the back.” Hey, that was fine. He said, “I want to make sure I get a thousand on the front, 2,000 on the back.”
Travis: That’s fine.
Brandon: That’s all up to—all up to negotiation, I mean, it’s between you and the person.
Brandon: You want to make them happy. You want to keep them working hard for you and you working hard for them.
Brandon: Again, like last week with Aaron Mazzrillo, he said, “You know, real estate is a relationship game.” I mean this whole thing is relationships right?
Brandon: That’s key so what about other than HUD homes are you only doing HUD homes or have I just been—what we’ve been focusing on in this conversation.
Travis: Yes, so then, 2012, I mean, it was—it got to be more regular, predictable, you know, there’s a HUD deal in there where I netted about 80% of my previous year’s salary with my job.
Josh: In a single deal?
Travis: Yes so that was—disclaimer, I mean I wasn’t making a lot.
Josh: I was going to say, what’s your salary because [Inaudible][25:29] this is like a rich program or anything like that. I don’t know, engineer or anything you know, that’s pretty sexy.
Brandon: I made 200 grand in that whole sale.
Josh: He was an accountant.
Travis: Yes, right, but that’s good. You know, keep your expenses low, especially when you’re starting.
Travis: Really helps that my wife’s not going out to buy Gucci stuff. That was the one that gave me the belief. I thought wow, this, you know, I could do this. It wasn’t beginner’s luck. I can do this and I can live off of this. We’re getting them accepted about once every three weeks. It’s pretty predictable.
Brandon: Do you have a ratio on how many you are offering? Like, were you getting one out of a hundred or one out of 20?
Travis: Yes, I probably won’t have a hundred.
Travis: Yes. Then we started buying them at the courthouse before HUD got them. We’d see deals coming up and again, this in Mobile with the superstar agent who already had the team in place to do everything that you need to do for a courthouse deal.
Brandon: Okay, let’s actually talk about that. Courthouse deals, we haven’t really focused much on the podcast with that.
Josh: Yes. We haven’t.
Brandon: What is that? I mean let’s go real basic. How do you buy at courthouse?
Josh: Okay, so it’s like where you probably spent a lot of time as a kid, Brandon.
Brandon: Thank you, Josh. I don’t think you’re being interviewed though. Thanks. His sarcasm.
Josh: Have they expunged those records or what?
Brandon: No, not yet, we’re working on that.
Josh: Alright, so courthouse deals, yes, tell us about it.
Travis: Yes, courthouse, yes, so the borrower, they’re in default so they haven’t paid for three or payments. Alright, so they’re in default and there’s penance and so then the lender says, “Hey, we’re going to foreclose on you and in 30 days.” They put a notice out in the local paper and then depending on whether it’s judicial or non-judicial foreclosure.
Josh: The state of course is going to be judicial or non-judicial right?
Travis: Yes. Just means the process and how long it takes. Judicial takes way longer. Then that sale is going to happen at the courthouse. They say on the courthouse steps, but it’s going to be wherever, you know. It has it’s regular place. I mean there could be hundreds of them depending on the area, but the opening bid will usually just be announced right before the sale so maybe the day before the sale. That’s the game changer. Alright, what’s the opening bid? Because that’s going to eliminate most of them, in other words the opening will not be, I mean, there’s not enough equity, right?
Josh: Where do you find out about the opening bid?
Travis: The—whoever the trustee is for the sale. They hire an attorney to conduct the sale. We’ve seen Auction.com, they’ve been hiring Auction.com to conduct the sale. Whoever it is, they will release the opening bid or not. It’s up to them.
Josh: Got you.
Travis: Sometimes they won’t even tell anybody.
Brandon: You call them up?
Josh: Okay so you.
Brandon: I mean, like do you call the trustee up and say, “Hey, what’s the opening bid?” Or do they put it online?
Travis: Yes, they release, list. You can pay for services that will go out and gather all of that stuff and you know, send it to you.
Travis: Opening bid and then you go there and you bid just like what it sounds like, an auction, only it’s just—it’s some guys out there with flip flops and tank tops, just you know, and someone just reading a bunch of stuff and then they’ll just say the property, price, and you know. Again, most of them get canceled or postponed or just go back to the lender because it wasn’t a deal, but the ones that are a deal, you know, you can get some great deals on them. Great buys.
Josh: Go ahead, Brandon.
Brandon: Well, I was just going to say the down side is, you can’t go and look at the properties ahead of time correct? I mean, like, you can’t get inside the properties ahead of time, usually, right?
Travis: Right. If they’re vacant, I mean, you know, realistically, if they’re vacant, you know door’s open or window’s broken or whatever, then you go and you get in, but if they’re occupied, now you’re maximum offer goes down.
Travis: Yes, because you don’t know what the inside of that place looks like. All you know.
Josh: I will say, you know, we definitely don’t encourage people to walk into open door of a vacant property or trespass on properties that are not theirs and we strongly warn against doing that because you can actually get yourself in trouble.
Brandon: You’ll end up on the other side of that courthouse.
Josh: Yes, exactly. Anyway, so alright, you’ve got these properties, they’re vacant or not vacant and you may not be able to see the inside.
Travis: That’s right.
Josh: That’s the bottom line. That makes doing due diligence a little bit more difficult so obviously you have to bid down assuming that there are problems.
Travis: Yes. Haven’t you guys found that the outside of a house, the yard, etcetera can give you a good indication of the inside?
Travis: Yes, so there’s some of the due diligence.
Travis: Yes, and the rest of it, you’re just going to have to build into what you’re comfortable with paying, what you think it’s worth, what you think the repairs are going to be.
Josh: Let’s talk about like, I’m staying in there. Say it on the courthouse steps, wherever the hell it is, right? We’re there. I’m there with 25 other people and you know, are these things getting into just crazy bidding wars. I mean, what can people really expect, somebody who hasn’t gotten in. By the way, a tip that I’ve got is, if you’ve never been to one, you need to go. Just go and watch. I mean don’t bring your wallet. Just show up and you know, the experience is one that you don’t want to miss, but you know maybe you could tell us a little bit about what that’s like.
Travis: Yes, I went to one, a number of them in Mobile. I’ve been to here where I live in Eugene, but that’s a great tip, what Josh said. Great place to find buyers.
Josh: Oh yes.
Travis: Great place to find private lenders. Just go and watch and you will see other people that are just going to kind of watch. I don’t know about a lot of markets, but in Mobile, there’s only two buyers. When it comes down to it, you get a few random people, but it’s only two guys, the guy that I’ve worked with and the other guy. You know, that’s it. You’re going to buy it…
Brandon: That’s all you really need. You don’t need a million buyers like we’ve talked about. You don’t need a thousand buyers on your list.
Josh: Well you’re talking end buyers right? You’re not talking about there’s two people buying at the courthouse steps. You’re talking about there’s two people buying the properties from the guys who get the properties from the courthouse steps, if that’s confusing to anyone. It was confusing to me too, but you’re talking the end buyers for the wholesale?
Travis: Yes, no, I’m talking about the bidders.
Brandon: Oh, I’m way off.
Travis: There’s only two guys.
Josh: Oh yes, everybody giving me eyeballs here and I was totally on the ball, Brandon.
Josh: You’re the one guy. You’re on of the guys obviously.
Josh: There’s literally two investors in Mobile who are buying property.
Travis: Yes, so half a million.
Brandon: Not after the show. Just kidding.
Travis: Half a million population, you know, and really, you have two buyers. Part of that is legal stuff. I mean there’s some guys that got in big trouble because they were bid rigging. In other words, they were going before hand and saying, hey look, you bid on this one, I’ll bid on that one. Those guys—I mean they ended up in prison.
Travis: That cleared out a bunch of the competition.
Josh: Wow, that’s crazy so alright, so the two of you guys are literally punching each other in the face at every auction and there’s like five people just gawking at it. Is that kind of what it’s all about or are other people not bidding? What’s the deal?
Travis: Yes, not so much the punking, punch from the face, more of the technique I told you earlier, but yes, it’s just. Yes, they’re bidding, I mean, everybody’s got their own set of buyers. They may have more of landlord buyers for the low end section eight stuff and you know, maybe the other guy has more buyers for the, maybe some of the higher end stuff and sometimes they’re crossing over and competing.
Josh: Well, you know, really quick. That’s actually an interesting thing right? You go to the courthouse, say you watch for a couple weeks and you see who’s bidding on what then you obviously now know, hey this guys is always going to bid on the multis, this guy is always going to bid on this, this alright. You find the niche where there’s not a lot of competition.
Josh: You know, start working it.
Travis: Yes, you got it.
Brandon: That’s awesome. I don’t know why nobody has ever. I’ve never even heard that before, this suggestion of you know, meeting your buyers and your—I’ve read a lot of real estate books and I’ve never heard people really advocate that. Go to the courthouse, bring your business cards and just network and I love that idea.
Josh: It’s a good idea, but if you read BiggerPockets, you would know about it.
Brandon: I’ve heard of the site, BiggerPockets before. I just.
Travis: The problem is, yes, the 9,000-word article, sometimes it’s hard to get through.
Brandon: Yes. Thank you Travis for sticking up for me.
Josh: No, but it’s a very good piece of advice, you know. Yes, that’s awesome.
Brandon: I only went to one ever in my county and there was like—two guys were there and one was like a lawyer down from Seattle. He drove three hours to say, I don’t know what the word he said, but he had to say something out loud at the courthouse steps and then turn off and walk. He drove two hours down or whatever it and said two or three words and drove back.
Travis: That’s awesome.
Brandon: He said he does that every week like to random places. I don’t know what—like he has to like file some thing. I don’t know what it was, but anyway, and then the other guy who was there was watching so nobody bid on anything at my courthouse. Nothing. It was just sitting there and I though man, I really should be taking advantage of this, but I don’t—I don’t know, hence the reason why I’m putting these questions to you, like.
Brandon: I wrote this down because I want to know. I’m missing out on something. There’s an opening in my area so.
Brandon: Anyway, alright so, you put an offer. You’re bidding with this guy and you tell the auctioneer that you’re going to pay 40,000, nobody else tops you and what happens next?
Travis: When you win the bid, now you got to fund day of. That’s a big, I mean, I don’t know, I guess, you’d say hurdle, but it’s good because it eliminates competition.
Travis: You have to fund it that day, cashier’s check. That’s it so if you’re using that eliminates most private money, hard money. They’re going to want to see clear title. They’re going to want to be on the no mortgage so what we did is we put together prospectus for private lenders along with a video that says, “Hey look, this is what we’re doing. We’re basically in need of line of credit so it’s really not going to be secured by a specific property until a few days after we pay for the property and get title. Are you okay with that?” You know, some are and some aren’t. We just take the ones that are and we have to have that cash the day of to be able to pay for the property then we can put them on a no mortgage when we get the title for it.
Josh: Got you. You know, you mentioned something. You talked about clear title. When you go and buy a REO foreclosure from the bank, those come with a clear title so you know you’re getting property, you don’t have to worry about secondary liens or anything like that. However, at the courthouse, that’s not the case so you know. Let’s talk about that and how do you learn about what’s going on, on these properties because I—you know, I remember, when I first started investing, I heard all these horror stories, you know, you’d have these investors who are like, “Oh my God, that’s a screaming deal. I’m going to go. I’m going to get it.” They get it and they get it at a great price, a really good price, except it’s not a really good price because it doesn’t take into consideration all the liens on the property that they now have to take care of. You know, for anyone listening, pay close attention to this because you know, that’s—this is the biggest danger to bidding on properties at auction. Other than not being able to see them, are these liens so talk about those.
Travis: It gets back to what Brandon said, relationships so a title company and specifically the attorney there who can do a prelim, a preliminary title, search a report for us and frankly most of the time, there’s stuff that he just says, “Boy I’m not sure about this.” Anything like that, we’d just say, “Leave it alone. We’re not going to do it.” Most of them says, “Yes. Looks fine.” Now, I’ve never had a problem. The agent I’m talking about in Alabama has never had a problem. He’s been doing it for six years, but I’m sure somebody could if they didn’t know what they were doing. They don’t have that good relationship so that’s how we deal with that and we haven’t had a problem yet.
Josh: What does that mean? You find a property, they do the preliminary and maybe they find a couple liens on it, you know, when you say there’s no problems, does that mean there’s no liens?
Travis: Yes, most of them we do are no liens or it’s a mechanics liens, look they put in HVAC and it’s seven grand. We say that sounds crazy. Seven grand for HVAC?
Travis: For this little place? If we have time, right, we can go and say hey, will they take a thousand? We see if there’s some way to deal with that. If not, by the sales, we let it go and if the sale doesn’t happen it just goes back to the lender. We can still go after it.
Josh: Yes, okay so ultimately, it’s up to you to. You’re doing some underground due diligence before you even get to the auction. You found out about these liens. You’ve reached out to whoever has put the lien on the property and you try to negotiate it and once, you know, based up that then you proceed forward or you don’t.
Josh: Got it.
Brandon: Nice. Did you say, do you pay for those preliminary title report or is that just relationship? Free? Relationship based?
Travis: Yes. Relationship.
Brandon: That’s awesome.
Brandon: I guess you never know that if you can get that unless you ask so.
Brandon: Again, I’m going to call up. Last week, there was something I had to call the title company and I’ll do it again this week.
Josh: Oh yes. Yes, title companies are really neat, are kind of the best friend of investors, I mean you really want to be in with those guys because they’ll—they—first of all as an agent. They love you. They love agents. Agents can ask title for anything, they’ll buy you lunch they’ll buy you dinner. They’ll you know as long it keeps them in business, they’re happy with that, but same for investors. You know, if you’re going to bring business to a you know, a single title company they’re going to be very happy to work with you. You know just be honorable, you know, don’t shop to 20 title companies, you know, find one that you’re happy with and work with them. Be solid and you’ll get everything you need.
Brandon: That’s cool.
Travis: The courthouse is a—I mean it can be a good source of entertainment too so it’s not just.
Josh: Oh yes, sounds like there’s a story so let’s hear it.
Travis: We go down there, there’s this place, one family member foreclosing on the other family member.
Travis: They’re standing off on two sides and it’s, you know, the mom and one of the brothers, and the other brother is on the other side and this tiny little lady she’s crying. I mean at the auction, not crying, sobbing, but.
Brandon: Oh man.
Travis: Just breathing it off and so we go.
Josh: I’m like this guy’s evil, he’s laughing about the old lady crying. Alright, we’re talking about the crier, we’re talking about the auction runner.
Travis: The little old lady. Yes. She’s reading it, it ends up not to, you know, goes back to the lender, so we’re there and you know, my partner goes up gives him his card and says, “Hey, you know, if I can help you out. Just let me know.” He says, “I’ve got about,” I think it went for 120 or something. He says, “I got about $80,000 cash in the duffle bag in my trunk.” We’re just like what? “Sorry, I mean the sales already happening, that’s not how it works.” Later in his office that afternoon, he calls up and he says, “I found a friend to give me another $15,000.” He said, “So I took all that cash and I just laid it out all over my bedroom and me and my old lady were just going to roll around in it because we’ve never seen that much cash before.”
Josh: Nice. Yes. That’s awesome.
Travis: You never know what you’ll find.
Josh: That’s funny. Alright, so courthouse, the process, you know, there’s a couple things to look out for. You make your offer you’ve got to have cash and some way shape or form. You got to be able to close on it and you know, once you’ve acquired those properties then you’ve got to look at your exit strategies.
Brandon: Are you wholesaling? Or you holding these or flipping?
Travis: Yes, so we’ve wholesaled them and again, that’s same strategy as any other way we acquired them, and now we’re at the part where we’ve started making mistakes.
Brandon: That’s good.
Travis: My first mistake was I started rehabbing and I mean I really didn’t—if I just read that book Flip, I would have either not done the deals or done them totally differently, but you don’t know what you don’t know so.
Travis: I started rehabbing some of these and my partner didn’t have a lot of experience in rehabbing either. In other words, the guy who’s an agent who bid on them and we’re not talking about moral, ethical, dishonest, we’re talking about expertise here or ability. You know, he said, okay, we’re going to rehab this thing and I said go for it. I had no, I mean I wasn’t looking at repairs men, I was not interviewing contractors, I wasn’t looking at pictures, I was not giving them draws and inspecting their work to release the next draw and all those things that a good rehabber does, I was not doing. I mean we had two that we went, just blew the rehab way, just in the stratosphere cost and I mean, it was bad. A lot of tips there, specifically, related to rehabbing.
Josh: It sounds like you lost money on these guys, yes? In the end.
Travis: Yes, lost money on one, was finally able to sell it, took nine months, lost money on that. Then the other one, man, we couldn’t, we ended up selling it with seller financing just to get it gone.
Travis: We will end up taking the full loss when the note balloons in a couple of years.
Josh: Despite acquiring these properties at a good price, you still kind of a-crow and that was all on just not getting those numbers right. It was all on the estimating portion of the puzzle and well, sounds like, I mean, the releasing of the draw probably didn’t end up screwing on the bottom line, but you know, the estimation was pretty much the fatal blow here, yes.
Travis: Yes, the conversation was pretty much how much do you think it will cost to fix it up? It’s this and you know, the end of the conversation was how much did you spend was double. I mean, that was how it went.
Josh: How do you end up spending double. I mean, I and I’m not trying to dig in and make you feel bad, I’m just you know, because I think a lot of people can learn from this and I’m sure you’re the only one who’s not—who’s going to listen to. Clearly, Brandon’s made that mistake before.
Brandon: Oh yes, I think I’ve tripled.
Josh: How do you? How does that happen and how do you avoid it happening?
Travis: The name of the house, I won’t say the name of the house, but it was also a woman’s name and my partner and I said, “There’s no risk of us ever naming our daughters after that.” We don’t want to hear that name again. How it happens is probably in the first place, you know, I doubt we even got repair estimates or bids or quotes from more than one contractor and could have probably said, “Hey look, John said he can do it for 25 grand.” He went in there and he spent 25 grand and he was half-way done. He said, “I need another 25 grand.” We gave him another 25 grand.
Travis: Then he said, “Okay, I’m done.”
Josh: Well, how do you not let that happen? How do you get to, “Oh snap, I just spent 25 grand and he’s only half way done.” How does somebody prevent that? What do they do?
Travis: Yes, so we would have got three at least different contractors and said, “Okay, John still says 25, but here’s Bob that says 50, and now here’s Joe, maybe he says 45.” Now I say whoa, 25 doesn’t look right anymore, maybe we’re going to look at line by line, okay, what are they each saying here. Then we’re going to go back to our ARV, our After Repair Value or our eventually selling price say, “Okay, what do we need to do to get this price?” I think, an again, I don’t know everything that we did, which is probably the problem because I wasn’t managing it or somebody wasn’t managing it. I think we did a lot of things that didn’t translate to selling it for more.
Josh: Got you. I think that’s great advice on the bids, you know, that low bid is—especially in this case, it’s an outlier right? If it were three bids, it was 40, 45, and 50, you know, okay, the low bid, is a little lower, but you know, less of an outlier than 25 versus the 40 and 45 so that’s a big fat red flag for anybody. You know, yes, we’re all inclined to be cheapos as investors, but you know, you don’t want go for that guy who’s super underbidding everybody because there’s something not right probably.
Brandon: You know, I know this isn’t interview Brandon, but if I could share a quick story of a lesson I just learned on the exact same thing that you just went through. I was remodeling this little house, I mean tiny house, 350 square feet, it’s at a studio house and got this contractor, brand new, never used him before. He did really good work, but it took him three months to finish this little 300 square foot house, three months. The thing I learned is, I thought, “Oh, little project whatever.”
It was only originally, I think a 10 grand budget, somewhere around there. What I didn’t do, I didn’t have periodic draws that were defined ahead of time. Had I said, “When you get flooring done, you get this amount. When you get this done, you get this amount.” Because that would have encouraged him to go faster and to stay on budget. Because and then if he wasn’t on budget, after the first draw, if he was double then, then I know it’s going to be double the whole project. We ended up about 50% over budget, which on 10 grand, it was about 15 so it wasn’t the end of the world. You know, that’s five grand that I no longer have on that property because of it so.
Josh: Yes. Well, so on that, on the draws between the both of you, or Travis goes because we care about him.
Josh: Yes, what, you know, I’m going to go and do my first flip. I find a house, I get it, I got it. I’m good. Right? Now it’s time to start. I got the interviews, I found the guy, that I want to do the job, the contractor, how do you arrange payment? What are you doing? Are you giving x amount up front and then what are the periodic draws look like? What’s kind of your standard deal that you’ve been doing?
Travis: Well, the piece to the puzzle is whoever is going to be selling the property or whoever is the expert, I mean it could be you, it could be an agent, they should be part of that conversation too.
Travis: You’re all looking at, because a contractor may or may not have the expertise as to the rehab level for the neighborhood so they may say granite counter tops. The agent says, “Granite counter tops is not going to get you a penny more.”
Travis: They’re all part of that discussion so you go through there and then you all agree, “Look, this is what were going to do, this is how much it’s going to cost, this is how long it’s going to take, and we’re going to give you 50% now and 50% when you’re done or by thirds.” Or however, depending.
Travis: You know, the bigger the amount divide it up more. The way you’re going to get the next straw is whoever is going to be selling it, we’ll just say the agent. They’re going to take pictures and they’re going to say, “Yes, this is what we talked about.” Right? All three of you are going to say, yes, this is what we talked about. They say, “Okay, here’s the draw, all the way to completion. Yes, this is what we talked about. This is ready to sell in this market for this price right now.”
Travis: Instead of the contractor’s doing his thing and whoever is going to sell is doing their thing and the investor is doing their thing, you know, nobody really knows what the other is doing.
Brandon: Yes, and like you said, I mean it’s the relationship thing and that’s where you find a good agent to work with. I love that idea of—I work really close with my agent on the same thing. I don’t—I’ve never had him take pictures and I kind of like that idea. It’s kind of putting the requirement on him kind of makes me not the bad guy, but I don’t know, I like that, but. If I were to do mine over again, I’d probably do, I paid for materials. I just put it on a Home Depot card and get the 12 months no interest or whatever it was. I bought all the materials at one big chunk up front. I probably would have offered the guy a $1,000 up front, you know, just so he could pay other guys or whatever and then probably divided the rest over four payments. One each week and he should have been done at the end of the month. Like that’s probably how I should have structured it. Yes, next time.
Josh: There you go. There’s two different ways to divvy it up right?
Josh: Yes, alright, well listen, so let’s talk about, you know, a little bit more about kind of your process and then we’re going kind of start speeding through it because we’re starting got run out time here.
Josh: How many hours a week do you think you put in on your business right now and I know you’re reading the work week book.
Josh: What were you putting? What are you putting in?
Travis: Yes, well I discovered, again from reading the book, I discovered that I was spending a ton of time on stuff that either didn’t make me any money or somebody else could do, but I felt like man, I need to be busy because when I had a job, I always had to be busy or else I got in trouble.
Travis: I got to always be busy and I’ve discovered, wow, it really doesn’t take too long to do the things that only I can do.
Josh: What were some of the things you cut out?
Travis: Email and phone calls. Those are probably the two biggest ones?
Josh: You don’t talk to anybody and you don’t even email? Travis is the loner guys.
Travis: Forget about it.
Josh: All of you have to do is knock on his door like we do at Brandon’s house.
Josh: Yes, right. Alright, so what portion of email and phone calls, what are we specifically talking about?
Travis: Well, most of it was again just thinking, listen, I should get an email on this, I should get an email every time somebody comments on my BiggerPockets comment or whatever. It was just—there were days, that’s all I spent on.
Josh: It’s a great idea, by the way. I mean, I don’t know what you’re talking about, but I think that’s fantastic.
Travis: Right. Yes, there’s a balance.
Josh: Yes, of course.
Travis: You know just talking to people, spending all kinds of time with people. If I talk to the REA, people would call and say, hey I heard you speak to the REA, like they had no agenda for the call so it ended up being like a counseling session.
Josh: Yes. Hey, you know, I think I know what you’re talking about because, you know, I kind of got a self policy which is, you know, if somebody is like, hey Josh, let’s hop in a call. I will never—I don’t answer calls from people I don’t know. I don’t hop on calls. I just don’t do it because inevitably, my week is gone if I do that so if I’m going to talk to somebody, I literally, they have to email me and tell me what are we talking about. What’s the agenda? What’s the point? Because you know, next thing you know, you’ve spent an hour on the phone with somebody and you’re like where did that hour go. I just wasted an hour—I just helped somebody, that’s great. You know, but I could have done that in two sentences responding to an email question. You know.
Brandon: That’s very Tim Ferris of him, isn’t it Travis?
Travis: That’s right? You read the book.
Josh: All that and I didn’t even read the book so.
Brandon: You’re already Four Hour Week-in.
Josh: Yes, there you have it. Yes.
Brandon: Alright, well cool, well what other like, you talked a little bit about—you and I did before, technology, things that you’re using to kind of make your business run smoother. I guess can you share any examples of that?
Travis: Sure. Yes, so I used a virtual assistant to submit the HUD bids, you know, what I mean by that is the VA can go onto HUDHomeStore.com. They can search according to my criteria. They can export the properties to an Excel, they can come up with a list for the agent, you know, case numbers, and bid amounts.
Travis: That’s a lot of spreadsheet work, that’s a lot of website, spreadsheet work, something that they can do, really efficiently for a few bucks an hour.
Brandon: Now, that seems, I mean, if you’re going to be putting offers on these properties, and you’re going to have earnest money on the line for all of them, to me it just seems a little nerve wracking to give that to somebody that you don’t—I mean that you’re paying, what 3-4-5, what ever dollars an hour to overseas.
Brandon: How do you know you’re—I guess how do you know what you’re doing is correct I guess is what I’m wondering.
Travis: Well, I did it myself first. I mean, I’m not teaching or giving the VA anything to do that I haven’t done so there’s quite a few checks and balances in place there and again you wouldn’t do this often, but if you get an offer accepted that you don’t want, all you do is you don’t send the earnest money in.
Brandon: Okay, yes.
Travis: Yes, so. I’m not saying do that a whole bunch because of course, you’re going to lose credibility with everybody, but the worst case scenario, you get an offer accepted and something is wrong then you just don’t send the earnest money.
Brandon: Because it’s not binding ‘til they have the earnest money right?
Brandon: Or at least not a deal until they get that.
Brandon: I don’t know how you’d call that. I’m not sure how the legalities work of the HUD, but yes, you’re not going to be out or anything if you didn’t submit the money yet.
Travis: Yes. They just cancel it. That’s it.
Brandon: Alright, well, that whole thing is very E-Myth right? I mean, like, you’re making system—you’re making your whole business into systems with different moving parts that all work well together so that you that you can pull yourself out of that system. I mean that’s again comes back to the same idea. We’ve had a lot of guests talk about on the show is the business aspect of running your business. That seems to be one thing that you’re doing really well and you’re improving upon so kudos to you for that.
Brandon: Alright, well we got to get moving. Buy and hold? Do you do any of that yet? Why or why not? Will you?
Travis: Yes, good question. The answer probably by accident, if I was honest. Right now, we’re holding properties that we either wanted to wholesale or fix and flip.
Travis: We weren’t able to.
Josh: You have an alternative to your exit strategy, which is buy and hold.
Travis: Yes, so we’ve done—we’ve got a few that we did a short-term lease option on to get around the 90 day anti flip for, you know, the deed restriction. Then like I mentioned, the other one we weren’t able to sell retail so we seller financed it. Yes, so it’s on a note, but it’s got a year, two year balloon.
Josh: Got it. You know, I mean knowing how to get out of these deals is definitely something important so you don’t end up holding the bag and not knowing what to do right?
Travis: You got it.
Travis: I do.
Josh: Go ahead, sorry.
Travis: I want to, I mean, originally, my goal was and I want to keep that goal of holding one out of every ten properties.
Josh: Got it. Yes and really quickly, we talked about exit strategies a lot in the Ultimate Beginner’s Guide that if anyone hasn’t read it. Definitely check that out. It’s BiggerPockets.com/ubg for Ultimate Beginner’s Guide. Also, just to rehash, this Show 38 of the BiggerPockets podcast and if you want to check out the show notes, please do so at BiggerPockets.com/Show38. With that, I we should.
Fire Round Announcer: It’s time for the Fire Round.
Josh: Yes, that’s scary Brandon.
Brandon: Thanks. I try.
Travis: Do you notice that Brandon looks like he’s kind of got a fu man chu mustache when he goes down over the mike there like that.
Travis: Right there, yes.
Josh: Yes, it’s kind of awesome.
Brandon: Yes, you know, I once had a fu man chu. It was blonde back in the college. I colored it in with mascara. Yes.
Josh: Okay, you don’t want to admit this in front you know 13,000 plus people.
Brandon: It get’s better. I had a mullet, raging black mullet that went down, I don’t know, down the back. I mean I did it on purpose, it was college, we do stupid things so for the fun of it.
Josh: I didn’t have a mullet in college.
Travis: Yes, I didn’t either.
Brandon: All the cool guys have a mullet in college.
Travis: Did you get it permed in the back too?
Brandon: It naturally curls, alright, I have naturally curly hair. I did dye it black. Anyway, long story, I got my girlfriend who’s now my wife during that time so it worked.
Josh: You got your wife during the mullet phase?
Brandon: I didn’t meet her, but I asked her out during the mullet phase.
Josh: She said yes?
Brandon: She’s the one who cut my hair into the mullet so. Yes, she was a friend that cut my hair and then yes. Anyway, long story, we’ll talk about this some other day.
Josh: Can we get back to the Fire Round?
Brandon: Alright, Fire Round, alright. These all came from the BiggerPockets forums so we’re just going to fire them at you and you’re going to fire them back at us. Number one, if you could only do one thing, flipping, wholesaling, or buy and hold for the rest of our life, what would you choose and why?
Travis: Wholesaling because, boy, low risk, you can do volume and you can put systems in place for more than you could with the other strategies.
Josh: Right on.
Josh: What about condos? Would you buy another condo for other flipping, wholesaling, or buy and hold? Well, just answer that first.
Josh: Why not?
Travis: Because of HOA. I wen to one meeting and it was like a mini, a US Congress. One meeting, there was one guy. All he said the whole time was “Who authorized this?” “Who authorized this?”
Josh: That was me.
Travis: It was other board member just sat there crying. You know, for an hour.
Josh: That’s awesome. Yes, I’m not a huge fan of dabbling in the condo, not even condos, but properties that exist in an HOA, you know, scare me, coops even more. Coops I think are the—I’ve got a friend who’s been, who’s got an apartment that he’s been selling in New York City. I can’t tell you what an enormous pain in the backside it is to have to negotiate with a bunch of old folks who, you know, who’s power comes from owning a property and managing. You know, who gets to live there, who doesn’t get to live there because HUD, you know, Fair Housing rules don’t apply to coops. It’s like that guy, well geez, we can’t have. Yes, coops man, scary, scary stuff. Alright, rant over.
Travis: What was the question?
Josh: The question was, Brandon, what is the question?
Brandon: Yes, next one. How do you find a good contractor?
Travis: Good contractor, wow, boy, I don’t know that I’ve found a good contractor yet, but I’ll put that on. That’s my fault. Not the contractor’s fault. Just interviewing, getting references, getting current references, you know who—what was your last job? Can I talk to them? What jobs are you on now? Can I talk to them? That’s about all I know as far as finding a good contractor.
Josh: Hey, can I bounce off that for a second. I know it’s a Fire Round and I always tend to screw it up, but they were doing a flip in my neighborhood and I walked over one day and was talking to one of the contractors and I was like, hey guys, what’s going on? I’ve noticed it’s taking a little longer than it should be. What’s the deal? They’re like, yes, we’re flipping another property at the same time and I was just like, “Wait a second, you’re literally simultaneously doing.” Well, you know and some contractors can do that, but this was like the—this was a team of two people or three people and they were all one site or all on the other and that scared the hell the out of me. I was like, my God, you know that’s—that would be horrifying to experience because suddenly the 30 day flip is the 90 day Brandon flip.
Brandon: That’s why I think mine took so long. I think he was doing another project. He said he wasn’t, but.
Josh: What do you do to avoid that? I mean that’s just something that—it’s over my head. What do you do?
Travis: The only thing I can think of there, and again, is this enforceable? Probably not.
Travis: Signing some kind of agreement then hey, listen, you’re going to be having this many people on the job. This amount of time if you go over, it’s going to cost you this much per day beyond what we talked about. I mean, I would just have an upfront conversation with who you choose and say, “Hey look, is this the only job you’re working on? Do you have enough guys and if you don’t that’s okay, just tell me I may or may not use you, but if you say you don’t and you do or vice a versa. Is this going to be the only job that you’ll work on for me.”
Josh: I think having those deadlines and having penalties in there potentially might work. I know we’ve kind of talked about this on the site and the contractors go crazy and they’re like, hell no. You know if they want the job I guess.
Brandon: Cool, alright, let’s move on.
Josh: Okay, so how do you find a good private lender. I know you’ve talked about working with them. What advice do you have on that?
Travis: Well, I learned this from the guy who raised five million dollars in private money and what he said is he said, “Go and talk to people.” I mean, one on one, but he talked about groups whether it’s a REA or a landlord association and just tell them what do to and how you do it, just briefly. Don’t pitch them. Don’t ask them for money. Just tell them what you’re doing. I’m buying these houses at deep discounts. I’m putting tenants in them, whatever you’re doing and just let them know if they want more information. You know, that they can contact you and people will want to invest with you if you have credibility. They like what you’re doing and you’ll be more effective than if you go up front and say, “Hey look, I’m raising money.”
Brandon: Yes, so is that one of the reasons you had mentioned that’[ you go to different real estate agencies and you kind of basically talk about the guide, the guide to working with investors for agents. You kind of talk about how to work with them. Is that why? Is that kind of part of your strategy?
Travis: Yes, that article, cause I’ve spoken at REAs and at real estate agencies before, but when I read that article, I thought, hey, this is perfect so I can go to real estate agencies and say hey, look I’m going to do something, a class, or a presentation, whatever you want to call it that’ll help with agents work with investors or work better with investors or not work with investors if they decide they don’t want to. I’m not there to sell them on the idea. I’m there just to help them make the decision and I will find—that way I’ll find buyers, I’ll find sellers, I’ll find private money by networking and that article worked great. I just took the article, made it into a presentation.
Brandon: Alright, next question, if your goal is to make $2,000 a month in passive income, how do you make it happen in seven years. That formal question. In seven years, you need to have $2,000 a month in passive income. Starting now, like what’s your plan to do that?
Travis: $2,000 a month in seven years?
Travis: I would probably do one of two things, which would be similar, but I’d hold some property, either with seller financing or just as a straight rental or lease option. I mean, $2,000, and figure a couple $100 per right, you’re not talking about a lot of properties. It’s only ten properties.
Travis: In seven years, that’s, I mean in seven you can probably do that with them mostly paid for.
Travis: Depending on where you’re buying, but yes, that’s what I would do.
Brandon: Okay, cool.
Josh: Right on, right on. What is last, but not least, what is your version of the perfect deal?
Travis: The perfect deal. The perfect deal is you’ve got a motivated seller, you’re able to get the property at a price that’s low enough that if you had to turn it around and sell it tomorrow on the MLS, you would still at least break even after paying all of your closing costs, commissions, front and back and everything. It’s a property that you can have multiple exit strategies with, so you can wholesale, you can fix up and flip it. You can rent it. You can turnkey. I mean, all those available so it’s a 3-2 bread and butter. It’s not crazy high end, crazy low end. It’s not in a war zone, perfect deal.
Josh: Got it. Nice. Cool. Let’s very quickly move onto our.
Both Josh and Brandon: Famous Four.
Brandon: Alright, these are the Famous Four questions.
Josh: The eyeballs, we’re getting eyeballed. He doesn’t like your. Yes.
Travis: Barbershop in there.
Brandon: I used to be in a Barbershop quartet, anyway, Josh take us up.
Josh: Yes, Famous Four. What is your favorite real estate book and I’m guessing I know it, Flip.
Travis: Yes, and Millionaire Real Estate Investor. We talked about all the hype. I think those are—there’s hardly any hype in there, I mean.
Travis: I just I read those probably each one took me a month and I put in—I put together manuals based on that, training, everything for myself and or employees because it’s specific and so detailed. Those are great.
Josh: Fabulous, alright.
Josh: Favorite non-real estate book? Did I—was that your question? I’m going to take it though.
Brandon: No, that wasn’t my question. Take it. I don’t care.
Josh: Yes, what’s your favorite non-real estate book? Favorite one, what is it? Quick.
Travis: I’d say Four Hour Work Week. Yes.
Brandon: Yes. Another, chalk it up for Brandon. I’m going to take your question then. Hobbies? Travis do you have any hobbies? What do you do for fun?
Travis: Yes, like I said, I was in between middle school and high school, kempo karate. That’s been for years, one of my favorite things, but anything outside, racquetball, tennis.
Travis: Hiking, any of that stuff.
Josh: Kempo is the style with the big ole sticks right?
Travis: That’s kendo.
Josh: Oh that’s kendo.
Josh: Kempo, got you.
Brandon: I do kempo x was the insanity work out.
Travis: I’ve heard about that. I haven’t seen it, but I heard about that.
Brandon: It’s a good workout. I don’t know how similar it is, but anyway.
Josh: I was kind of excited about the kendo because you know.
Josh: Yes, like Star Wars, like light sabers. I just read now, pretty much a reality and so like I can imagine doing kendo with like these lasers. It might be fun. Okay nobody’s.
Travis: Lasers? Are you one of those guys that gets in line and re-enacts light saber battles.
Brandon: He is.
Josh: You know that fat kid from the video on Youtube, back in the day where he was spazzing out. Yes that was.
Brandon: That was Josh.
Josh: That was definitely not me.
Brandon: Alright, final question, what do you believe sets apart the successful wholesalers or flippers from those who never really gain traction?
Travis: It’s action. I mean there’s good people, you guys have all met them, nice people, they mean well, but we’ve all seen people that have been a member at the REA or whatever group and they went to the seminar, they read the books, and they just haven’t done anything.
Brandon: Yes. Cool.
Josh: Hey, listen, it’s been a pleasure, we really do appreciate you taking the time and I know folks will look forward to asking you any questions that they’ve got on the show notes at BiggerPockets.com/Show38 and I know you’ll be there happy to answer them. Hopefully answering those emails that do come in with alerts, but listen, thanks so much for being on the show. We appreciate it.
Travis: Thanks guys. Really appreciate it. I told Brandon, as far as I’m concerned, I’m still learning and I’ve just had some great teachers so really thankful.
Brandon: That was awesome. That’s what BiggerPockets is all about.
Josh: He was clearly talking about people other than Brandon and I.
Brandon: Clearly. Alright, well, thank you Travis.
Josh: Thank you so much Travis.
Travis: Yes, thanks.
Josh: Alright guys, that was our show with Travis Daggett, man there was a lot of good info in there. Wasn’t there, Mr. Brandon?
Brandon: There was a lot of good info in there especially wanted to learn more about buying at the courthouse thing so.
Brandon: That’s cool.
Josh: That was good.
Brandon: I’m going to back to mine again. I haven’t done it in probably a year and a half, two years. I haven’t been there, so.
Josh: Nice, do it man and HUD stuff is cool. I wish I was flipping around on the HUD Home Store site and looks kind of interesting so hopefully our listeners will dig around if they haven’t done so already, but listen, let’s wrap this thing up. As always, guys don’t forget to leave your favorite quote from today’s show on social media, Facebook, Twitter, or G+ using the #BiggerPockets and get a chance to win a free six month BiggerPockets pro account. Thank you again for those of you who have left us reviews on iTunes.
That’s especially awesome and those ratings and reviews are very helpful to spread the word so please keep doing that if you haven’t already. Come connect with us on G+, LinkedIn, Twitter, and Facebook. If you are not already following us on those channels, please do so and obviously, definitely start connecting and growing your business by engaging on the BiggerPockets forums at BiggerPockets.com/forums where there’s just a ton of incredible content shared everyday. Finally, as always if you’ve got any questions for Travis, make sure to leave them for him, questions, comments, feedback, anything. Leave them for him at the show notes at BiggerPockets.com/Show38 and keep listening, keep learning, keep making things happen guys. I’m Josh Dorkin signing off.
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