BiggerPockets Podcast 041 with Douglas Larson Transcript
Link to show: BP Podcast 041: How to Profit Through Long Term Flipping and Lease Options with Douglas Larson
Josh: This is the BiggerPockets podcast show #41.
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Josh: Alright everybody, what’s going on! This is Josh your host of the BiggerPockets podcast here with the man from Japan, Brandon Turner!
Brandon: I’m about as far from Japanese as I could be. I am pasty white here and very Swedish-looking.
Josh: Indeed, you are. Indeed, you are. What did the fox say, Brandon?
Brandon: What does the fox say? If you guys don’t know that reference look it up on YouTube. It’ll make you laugh.
Josh: And don’t blame me for it, or you can because you’re going to get really mad when you look at that YouTube reference.
Brandon: Yeah, and you wake up in the middle of the night singing the song in your head. Yeah. I have Josh to thank for that. Anyway! How ya doing?
Josh: I’m good. I’m good. You know what? It was pretty cool. For those of you who don’t know; Brandon and I went to an event this past week in St. Louis. It was a financial blogger conference, and got to spend some good quality time together and hang out with some fun, financial folks. Say that five times fast; Fun, financial folks.
Brandon: I was going to say we’re going to have photos of that in the show notes if you want to see me and Josh together. You can see, actually, how much larger I am than Josh. It’s ridiculous. Including the one of me choking him out and us in a fight. So, yeah, come check it out! BiggerPockets.com/show41
Josh: Yes, yes, yes. Nah, it was good. It was great seeing you. We got to overlook the Cardinals beating the LA Dodgers.
Brandon: Yeah, that was cool. Like, literally overlooking it in a skyscraper looking down into the stadium.
Josh: Yeah, it was awesome.
Brandon: Pretty sweet. Cool.
Josh: Anyway. Yeah, yeah, yeah, but things are good. Good to be back to work. Not that we weren’t working, and very excited to move forward and kick off another set of shows after our 40th.
Brandon: Yeah, awesome. Let’s do it.
Josh: Yeah. One more quick thing, this week is kinda cool, we passed a bit of a landmark here on BiggerPockets. This past Tuesday, the 22nd of October, marked the 9th Anniversary of BiggerPockets.com. Yeah, yeah! So, pretty big milestone. Very exciting to get past 9 years. I just want to make a personal thank you to everybody because, you know, without all the folks who come on the site and listen there would be no community. There would be no BiggerPockets. I would be nothing. I would be locked in a room home alone with no one to talk to.
Brandon: And I would be working in, like, a bank in Seattle and miserable. So, thank you.
Josh: Nice. Yeah, thanks. You’re awesome. No, seriously, but thank you. Really do appreciate you guys coming to the show and being a part of it and I wrote a little piece and put it up on the site. We’ll link to it from the show notes at BiggerPockets.com/show41 so check it out!
Josh: With that said, should we…?
Brandon: Let’s introduce the guest.
Josh: You can do that. Introduce them. Who’s the guest? You do it.
Brandon: Okay, fine. Hey, I don’t get to do it! This is exciting.
Josh: Yeah, c’mon Brandon c’mon you can do it! Do it!
Brandon: Now there’s pressure.
Josh: Alright, alright.
Brandon: There’s pressure. Alright, I’m going to do it. Alright, today’s guest is Douglas Larson, Josh… Douglas Larson is an investor out of the Utah area and he is fascinating. I just have to say that. So, I was excited to get him on the show today and I’m sure Josh was excited as well to have him. So, that is his intro cause I want to get into the show cause it is packed full of really good information. So, without further ado, let’s bring him on.
Josh: Alright, Douglas! Welcome to the show, man, good to have ya!
Douglas: Hey! Good to be here! I can’t believe I’m in the presence of greatness!
Josh: Ahh, that means you’re in the presence of me!
Brandon: Yeah, apparently.
Josh: Not Brandon!
Brandon: Yeah. Yeah, yeah, yeah, yeah. Well, we’re glad to have you today!
Josh: Nah, we are, we are. We’re just regular dudes. So, no greatness here.
Brandon: Hey, speak for yourself.
Josh: Okay. Alright. Alright, man, so tell us about yourself. How did you get started in the world of real estate? What’s your story?
Douglas: I would love to tell you all about me! I take long walks on the beach—
Douglas: I love puppies, international travel. No, hey, you guys started—I know you’re not doing the Quick Tip, but—
Josh: That wasn’t bad, man!
Brandon: That was not bad.
Douglas: I’m working on it. You gotta do one for me. Let me do the Quick Tip.
Brandon: We’ll do it all together right here. Are you ready?
Brandon: Do we have a quick tip?
Douglas: One, Two—I have the quick tip!
Josh: Oh! Oh, okay.
Brandon: Perfect. Alright, here we go. One, Two, Three
Brandon, Josh and Douglas: Quick Tip
Brandon: Wow. Memories.
Josh: Alright, what’s the Quick Tip Mister Larson?
Douglas: Okay, it’s an unashamed plug, but I really think that you guys need to somehow need to put a bigger button on the Forums home page that gets somebody to the resources page. Fifteen years ago when I started out I would have killed for some of those resources, you know, the real estate forms, tenant screening, hard money lenders, it’s there and it’s free and I think most of your readers probably don’t even know where to find it because you have to do two or three clicks to get there, but it’s awesome.
Josh: Aw, that’s a great Quick Tip. Well, there is a link in the Blue Navigation bar at the top of the page, I believe, that says Resources, correct me if I’m wrong. I’m not actually looking at the site so I think it’s something like that, and there’s a link to it in there so you can find it from any page, but that is a good quick suggestion regardless.
Brandon: Quick Suggestion.
Douglas: Alright, so more about me.
Josh: Yeah, what about you? So, fifteen years ago you started real estate and what did that look like?
Douglas: Well, probably like most people. You know, I either read a book, or, you know, a lot of people saw an infomercial and I saw—gosh, it was Late Night Carleton Sheets and he was selling his No Money Down for three easy payments of $59.95 and I was like, “Yeah, man, I could do that! This guy’s making millions!” So, I bought the course, and it was really good basing information, but the guy was talking about buying houses for $30,000-$40,000 and I’m like, “Dude!” I was in San Diego and I’m thinking, “that won’t buy a trailer let alone the land to put it on”. So, if you add a zero some of his numbers and concepts would work, but it was still— it was probably another two years before I actually put that stuff into action. It was a good start, I’ll say that.
Josh: Alright, so you got this thing, you got the basics and two years later you said, “hey, you know what? Time to do it. Time to take action,” and how did that go? What did you do? Did you flip a house? Did you buy some land? What on earth happened?
Douglas: Alright, well, I try never to flip, but I try to buy everything as if it were a flip because you’ve gotta have exit strategies. The first thing I bought was just a single family residence. It was in Riverside County which is a more affordable area near San Diego County, they touch the northern edge of San Diego County, and I paid about $128,000 for a single family home. It didn’t need much, moved in, sold it about a year later for $155,000-$157,000, something like that. I remember coming away from closing with a $15,000 check after all the fees and everything were paid and I thought, “you know what? That was pretty good. I need to do this more seriously”. I had a day job at the time and so I just thought, “you know, that’s it”. Well, shortly after that I moved to Maui.
Josh: Aw, you’ve had it rough. Aw, poor Douglas I had to live in San Diego and then Maui.
Douglas: Don’t be a hater!
Josh: Oh, man, I feel really bad for you.
Douglas: Well, I now live in Utah so in a couple months when I’m up to my neck in snow you can throw me some sympathy then.
Josh: Alright, alright, fair enough.
Douglas: Alright, so, yeah. I moved to Maui and again it was another jump up in price and I was like, “man, can I really do this real estate thing?” but I did. They were giving out money at pretty easy terms at those times; it was just hard to find what looked like a good deal, and you know how everybody says you make money on the purchase, but everything was at market value. There were no “great deals” to be had that I could see. So, I bought a few things with some good terms and I did five different sort of long-term flips I call them, you know, rented out for 1-3 years and then sell. That kinda thing.
Josh: Gotcha, gotcha. Now, were those properties that required work or were they properties that you just acquired right around market value, put people in and then potentially made just a little bit of appreciation on?
Douglas: Some of each. So, the second house that I bought on Maui I found in the Maui Bulletin, it’s just the local paper there. Some guy was kind of a motivated seller, but he wasn’t really bending on his price and he was willing to do a lease option. So, I went to look at the house and talked to him. Really nice guy. He wanted $10,000 down and $400,000 for the house and $3,500 a month. I thought about it, kinda dragged my feet, finally called him back oh, maybe two weeks later, and said, “have you sold it yet?” no, he hadn’t found the right people, so I offered him $3,000 a month, $5,000 down which I borrowed from a credit card. I didn’t really negotiate that contract price cause I thought it was fair and if he was willing to help me out on the other things we could work it. Then it had an Ohana unit, which is a mother in law apartment, it was a really tiny little one bedroom and I moved into that and rented out the main house which was a 3/2 and it worked out really well. I think it’s Brandon—is it you that always advocates, you know, buying a Duplex and living in half?
Josh: Yup, that’s exactly what you did isn’t it?
Douglas: Well, I couldn’t really afford to do it any other way, and it worked. It was an expensive market and you have to make it work and so a little creativity never hurt. About 14 months later I closed on the house and got a loan and closed him out and then I sold it about a month after that for $507,000 and a true net gain of about $65,000 so yeah it was good.
Douglas: And it was nearly a no money down deal and I think a lot of your listeners are kind of—
Josh: Well, $5,000, right? Was what you put down from the credit card?
Josh: Yeah. What—so let’s talk about that a little bit more. So, that’s a lease option. Can you, for those people who have never done one, kinda walk us a little bit more slowly through a lease option. I find a property, you know, the seller is slightly motivated and say he’s trying to sell the thing for $100,000, just for easy numbers, what would this deal look like?
Douglas: So, $100,000, maybe that’s right at market value, maybe he hasn’t found a buyer yet, maybe it smells like wet lab, I don’t know. Everybody loves the smell of wet Labrador first thing in the morning.
Brandon: That’s what my cologne is.
Josh: That’s why everybody was running away from you this weekend in St. Louis, huh, Brandon?
Brandon: Yeah, that must be why. Now I understand.
Douglas: That sounds like another good story. Anyway, so let’s say there’s issues, or maybe just—there’s a lot of sellers out there that just want to thumb their noses at real estate agents and just say, “I’m gonna do it myself no matter what it takes,” and whatever it is they’re willing to do something. Maybe it’s tax reasons, whatever.
So, maybe they’re willing to do a lease option. Maybe it’s something that you suggest or maybe it’s something that they have heard about and then come up with. So, I guess what it would normally look like is you would make a rent payment and usually it’s about a standard rent payment. I don’t know, let’s say $700 a month, $800 a month on a $100,000 house, but let’s say you both decide that you want to put not only a little bit down at the beginning, maybe $5,000 or $10,000 down to start with and that’s usually considered a non-refundable deposit.
Then you also put a little bit every month toward the down payment so eventually when you go to purchase it 12, or 18, or 24 months down the line you’ve got a nice little chunk there. When I have structured lease options with people I might ask for $900 a month in rent, but I might say half of that, or $500, goes toward the down payment because I’m telling you when people when they start feeling like they have ownership in a property they will take care of it and they usually don’t back out. So, when they start seeing after 18 months that they’ve got several thousand dollars stacked up toward the down payment they’re pretty motivated to make that happen.
Brandon: Yeah, that’s a good tip.
Josh: That’s a great tip, yeah. Very good strategy. Alright, so we’ve got this one Maui lease option deal that sounds good. You said you did a couple other deals as well, 4 others, were those also lease option?
Douglas: Nope, I think the other ones were straight purchases. One of them was really ugly. The guy, sadly, had been kind of a paranoid schizophrenic and he stripped the walls to the studs, this was a condo, a townhome, down in Kihei, and he took out all the wiring, the electrical wiring, because he said that the government was listening to him.
Brandon: Weird, I had a tenant at the last eviction I did that said the same thing. She didn’t remove the wiring, but she said they were listening through the wiring.
Josh: Yeah, but you know what that’s really not that weird. These guys are actually ahead of their time because the government is listening to us.
Douglas: Just ask the folks in France right about now.
Josh: Yeah, yeah. They were a couple years ahead of their time except we don’t rip wires out of walls.
Douglas: Indeed. So, I had a lot of work to do on that one, but you know when you find something in complete disarray it’s a blank canvas. You can have a lot of fun with that and very often your competitors will shy away from something like that so if you’re not afraid of that you can do it. I think I only ended up making about $25,000 or $30,000 on that deal, but I sold that one on a lease option and that worked out well for me and for the buyer. By the time I sold it, you know, by the time he had actually qualified and purchased it it had gone up in value quite a bit so it really was a win-win-win.
Josh: You know what’s interesting; I’m sitting here and I’m listening to you describe these deals and I’m thinking to myself real estate investors seem to remember every deal that they’ve done, you know?
Douglas: Yeah, and almost every number and detail. You know which ones you remember the most? The ones you lost money on!
Josh: Yep. Right, right, right. Alright, cool. So, you were off to a pretty good start, and it sounds like, I think you had mentioned earlier, to the lady who says I don’t listen to my interviewees, I think you said earlier something about back in the day when you were working a full-time job. It sounds like you at some point stopped that and went full-time, is that correct?
Douglas: Yeah, that’s correct. So, I had a full-time job. I was a dental hygienist. My father was a dentist and gosh when I was young I thought I was going to be a famous, wealthy artist, but it didn’t take long to figure out why they called them starving artists.
Douglas: So, my father had always complained about his underworked and overpaid dental hygienists and I thought, “you know, that sounds pretty good. I think maybe I’ll try that,” so I went back to school for a little while and got a dental hygiene license in three states; Colorado, California and also Hawaii.
Douglas: Worked in California a little bit, worked in Hawaii. You know, it was a good paying job. If you have to have a job it was a good job.
Josh: Yup. Especially when those guys with Halitosis walk in the door.
Douglas: Ooh, don’t remind me. Yup.
Josh: Alright, so you were full-time back in the day.
Josh: You’re doing your thing. How are you getting these deals on the side, right? So, what was it like to be a full-time dental hygienist and an investor on the side? Were you working during lunch, were you working nights? Weekends? How were you doing your deals and when?
Douglas: Yeah, nights and weekends, and, you know, this was before smart phones. All we had was dumb phones, and so I’d hop on the internet sometimes on my lunch break. They had a computer at the offices where I worked and I was calling real estate agents on my lunch break or in between patients sometimes and a little bit of text message here and there and you just fit it in. if it’s what you want to do you just squeeze it in and then as far as renovating the properties, if they needed it, yeah it was nights and weekends. Make it work.
Josh: Did you do the work yourself?
Douglas: I would say it’s always been a split. There’s some things that other people can just do faster, better, and/or cheaper. Things like carpet. Have either of you ever laid your own carpet?
Brandon: Actually I lay my own carpet. Not anymore as much, but I always did. I’m a carpet guy and I hate it, it’s the worst job ever, but I don’t know.
Douglas: You know, most of the time you find guys that can just do it better, and faster, and cheaper with certain things.
Douglas: You know, same with floor tile. I’ve dabbled with that a little bit, you know, I’ll do a backsplash in a kitchen cause those guys want $12 a square foot. I’m like, how come it’s four times the price to do the easy stuff that’s where I can reach instead of being on my knees with a bent back? I don’t understand it. They’ll do the floors for cheap, but it’s the detail work that I end up doing myself.
Brandon: See, I’m not good at the detail stuff so I do the grunt labor there. But, yeah I’ll spend 2 days doing carpet work in an apartment and I could hire a guy for $300 or $250 to do the whole thing. I always feel stupid after I’m done. I’m like, “why did I do that?”
Douglas: Well, you should feel stupid.
Josh: You are my favorite guest of all time.
Douglas: Sorry, Brandon, sorry.
Brandon: That’s alright. So how did you—I mean, after that, you’re in Hawaii, so how did you get to full-time? How were you able to quit your job eventually and start doing this?
Douglas: Well, it was kind of a two-fold thing. I had done five deals in Hawaii and then I was, I actually met a girl on a singles cruise. She was from Utah and—
Josh: Oh yeah!
Douglas: What happens over the ocean, stays over the ocean. So, yeah, our first date was Jamaica and yeah, it was awesome.
Josh: Sounds like she had it rough.
Douglas: Well, so I decided it was about time for me to make a move somewhere else. I was ready to try something different so I proposed to her and moved to the Salt Lake area of Utah. I had some family that was living in this area as well, and so it just made sense. Soon as I made the move I said, “honey, I have somewhat enjoyed having a day job, but I think I’m ready to go full-time now,” you know, I had proved to myself mostly that I could make money in it on a consistent basis and I said, “if I throw myself into this 40 hours a week then I know I could make this happen,” and I’m sure she was thinking at the time, “dude, I married a surf bum and he just wants a sugar mama!”
Josh: That’s awesome. Don’t we all?
Douglas: But, you know, she’s a numbers girl. So, after the first deal, and it only took about 3 months; I wasn’t intending to do a flip per-say, I just saw a sweet deal and I just thought, “I’ve gotta buy this house, this is great,” and I’ve got to say moving from Maui to Utah it was like everything was on sale. My wife was like holding me back. It was twice the house for half the price and I’m like, “I’ve gotta buy this!” and she was like, “what? You can’t buy everything,” so the first one, I think we made like $40,000 and it was very minor renovations. Literally like $2,000 for a little paint and a little cleaning, but it was a newer home and so she was like, “okay, I could see this, this could buy a lot of shoes”.
Josh: Alright, so let me jump in. So, she’s talking to you, she’s saying, “listen, hold your horses, you’re going a little crazy here,” houses are less expensive than they were in Hawaii and you get twice as much space, but that of course doesn’t mean that you’re getting a deal, now does it?
Douglas: No, you’ve got that right.
Josh: So, maybe talk a little bit about that, especially for the new folks who are listening in and thinking, well, you know, oh, here I go again, oh, stop me, stop me, Detroit, Detroit.
Brandon: Don’t say it!
Josh: Oh, man, I had to say it.
Douglas: Don’t say the D-word.
Josh: Alright, ready? I’m going to pick a new place to pick on.
Brandon: Don’t pick my town.
Josh: Rochester, New York.
Brandon: Okay, good.
Josh: Alright, or Buffalo, there you go. Now, so like you go to Buffalo and you’re Scrooge McDuck over there, you’ve got $10,000-$20,000 you can buy half the neighborhood so what—you know, but that doesn’t mean you’re getting good deals, right?
Douglas: Yup. Well, as you know, you guys are experience in this and you’ve had a million guests on as well, it’s all about ARV, or what you can get for the house compared to its neighbors. So, you’ve got to find out what people are really buying, what they want and if yours is not a phenomenal deal when it stacks up to what is selling then nothing else matters. So, yeah, I kinda had to reign it in a little bit. I would even go to the grocery store and I got the cart full of, like, Frosted Flakes and everything, and I’m like, “it’s only $2 a box!” My wife Lisa was like, “it’s always $2 a box”.
Josh: Well, you’re used to paying like $10 a gallon over in Hawaii, right?
Douglas: For gas? Yes, for milk?? It’s like $20 a gallon! I swear every box of cereal got, like, a first class seat to fly to Maui. How can it be that much?? But, yeah, so, you know, it’s all about value. The other thing is, to be honest, I bought a house in the Salt Lake area first up in the East Bench, you know, nicer neighborhood, and then after that I found Park City, Utah. It’s a Ski Resort town, and it’s almost exactly the flipside of Maui. So, it’s all based around winter and snowboarding and all that kind of stuff, but it’s a resort town and I understood it. Smaller houses, higher price tags, but here’s the key point: People pay good money for turn-key and that’s important.
Josh: Gotcha. Yeah, Park City’s awesome. I’m a huge fan of Park City, I love it there, but okay. So, really quick, just for those folks who are listening; this is show 41 of the BiggerPockets podcast. If you want to check out the show notes go to BiggerPockets.com/show41. Just wanted a little reminder there, but yeah. So, that makes a lot of sense. Park City would seem to be very similar to different resort-y towns in Hawaii. In terms of finding deals what were you doing? Were you looking in Park City? Or were you looking back at Salt Lake?
Douglas: Once I did the Salt Lake one somebody told me about Park City and said I should check it out, and, again, I was really new to Utah and I thought, “yeah, I’ll go check it out,” and I saw all the tell-tale signs of a good, healthy real estate market, thing’s about to pop. This was 2004, and I saw inventory dropping and the prices hadn’t skyrocketed, but all of the cheap inventory, and by cheap inventory I mean under $300,000, had gone away. There just was none and I thought, “I’ve seen this before. I’ve seen this in California, I’ve seen this in Hawaii, and this is gonna get good,” so I started buying everything I could and made my wife even more nervous, but she was on board and we had some great deals there. It was more of a strategy of buy and hold and we’ll see how it goes. You know, they were giving out money for free in those days and it wasn’t really free, but it was really easy to get those loans, you remember em.
Douglas: So, you know, I just bought as many as I could. Mostly homes, a couple townhomes, a couple condos. Some needed work, stick some renters in there, and then after a year, or two, or three, it made sense to sell. Maybe take some profits and move it to something else and yeah, you know, I usually go in thinking that I can make $60,000 minimum on a property. If I don’t know that I can make $60,000 then I don’t do it, and sometimes you get surprised to the up-side, but sometimes you get surprised to the low-side, we’ve all been there, but if you only make $25,000 or $30,000 you’re still okay.
Josh: Yeah, alright. So, this was ’04 and two to three years later we’re pretty close to the collapse of the housing market so what happened for you? Did you get out before the market collapsed? Where were you at that point in time?
Josh: Doesn’t sound good already. I like it.
Douglas: Good question. You guys have done this before.
Josh: What? Pick people until they cry? Yeah. That’s Brandon’s job.
Douglas: Yeah, 2008 and 2009 were pretty painful. We felt the sting like anybody else. Thankfully we did not have to default, or even have a 30 day late on a single property, but I tell ya it was ugly. There were several properties to make them close I had to bring money to the closing table, you know, maybe it was only $3,000-$5,000, but when you went in thinking, “man, I’m going to make some money on this,” and then you have to pay money to have it close, not to mention you lost your down payment and everything else, those are painful.
Josh: Yeah. So, you had some significant upside-down situations that you got out from under at this time?
Douglas: In 2007 we had about $5,000,000 in real estate. It was 13 properties and i could tell you about each one, but you don’t have time. Many were rented and yeah, we as quickly as possible ushered our tenants out cause we saw the writing on the wall kinda coming this way; California, Arizona, and we were like, “uh-oh, it’s coming”. So, mortgages were just simply drying up and so we tried to sell everything as quick as possible. A couple of them we got left holding the hot potato, if you will, and yup, those were ugly, but thankfully we had enough money to ride through the ugly times. I did not buy a single house in 2008 or 2009, even though I tried, but the deals were just not good enough and it was in free fall.
Brandon: Yeah. Well, so what would you say you learned during that time? Like, what could you tell other people from your experience? How can other people avoid the same thing?
Douglas: Well, I would say, you know, anybody that was in my shoes you gotta make sure you have three or four exit strategies. So, here’s some tips that I’m sure you’ve seen similar things on the forums and stuff. You’ve probably written similar things, but exit strategies like, number one - can I cash-flow lease this, or lease option it and make some money that way? Can I sell it traditionally? Do I know that I can sell it and there’s enough padding in there to make everybody happy? Can I potentially sell it owner-financed? Maybe can I sell it in a, or can I put it into a non-traditional rental situation like a seasonal thing, or an executive rental? Sometimes you have properties in the right area and you put furniture in them including beds and dressers and everything and there’s short-term people that want to rent sometimes, or even kinda move into it. That’s an option as well.
I know a guy who lived in a modest home, he was a construction guy doing spec-homes, built a big gorgeous mansion and couldn’t sell it, couldn’t sell it. So, he sold his modest home and moved into the mansion and hung out there for a while, and when things picked back up again recently he sold it and made his money.
Josh: Gotcha, gotcha, gotcha. So, yeah, that’s great, and those are all things that people want to think about before they get into any property, right?
Douglas: Before they get in, yeah.
Josh: Yup. Yeah, so, you know, for those guys who think, “I’m going to buy a house and flip it,” don’t just think about what’s your After Repair so you can sell it ask yourself all these other things too. Are these feasible alternatives and if not are there any? Because if you limit yourself to one option then the odds of bad things happening if the world turns on you are much higher, right?
Douglas: Bingo. Yup, you got it.
Josh: Right on. Hey, so you mentioned short term executive rentals. Have you ever done that before?
Douglas: Not really, but I did have a creative rental situation. I think I threw this up on the forums a while back. So, I had a property I was holding in Park City. Went into escrow in late 2006—no maybe it was late 2007, and it fell out of escrow 45 days later and it’s winter time and this was more of a kind of home that a family buys not really a second home buyer and I was like, “uh-oh, it’s going to be a long, cold, lonely winter”. So, started asking around and found out that a lot of the resorts need housing for their employees. Most of their employees at these resorts they fly them in from places so I put in some beds and dressers and stuff and I rented it out to 10 employees from the Canyons resort and it actually cash-flowed amazing. It was $4,000 a month in rent and then in the spring when they moved out I was actually able to sell it and do a little bit better than the first contract I had.
Josh: That’s great.
Brandon: That’s creativity right there. That’s awesome.
Josh: Yeah. Now, really quick, sorry Brandon, on that, though, there are some laws, and I’m not going to say I’m familiar with them cause I’m not, about boarding houses and rental houses that kinda stuff when you’re stacking a whole lot of people, aren’t there?
Douglas: There are. In Hawaii I know for a fact that it’s a maximum of five unrelated people. Many neighborhoods will have that in different places, but to be honest in many of the resort towns they’re kind of used to seeing that. College towns the same thing, they’re kind of used to seeing it. So, as long as they’re not partying, making noise and stuff it can usually work out. I don’t recommend breaking the law, but sometimes it’s easier to get forgiveness than permission I’ll just say that.
Josh: Spoken from the words of Douglas Lucky Larson. Lucky’s his middle name for one reason, isn’t it?
Brandon: Alright, so I’m wondering; we’re going into the winter season here and now, again, if people are listening to this podcast in the future we might be in another season, but we are going into the winter here so do you have any tips then on keeping tenants in the winter and finding them when the snow starts to fall?
Douglas: It’s the usual thing, just try everything. If there’s something that works in the Spring, then do that as well as five other things. If it means putting it out on your Facebook page, if it means talking it up among all your friends, if it means Craigslist, if it means your local—I even say do your local newspaper and sometimes there’ll be bulletin boards at the grocery store near where your house is and make sure to put the search terms that people are looking for. So, if it’s near a certain very desirable school or a park make sure that those search terms appear because a lot of people are searching for a couple very specific things and you want to make sure that you’ve got everything in there even if you’ve got six paragraphs describing your home. Do the important things up at the top and then do six more paragraphs of every possible search term so it’ll pull up.
Josh: That’s a fantastic tip. That’s really, really, really good because in the world of the web today that stuff’s gonna come up and it’s not gonna come up if you don’t have it so if you’re in New York City and you’re renting in the Upper East Side you’re going to want Upper East Side and you’re going to want close to the park, talking about Central Park, and you’re going to want any of those other land marks that people might be searching for because if I’m going to go live in the Upper East Side I want to be close to the park so I’m going to put park in there, right? So, that’s great.
Douglas: Hey, let me throw another tip in there that I got from some of the other users on your forum. So, BP, everybody knows that it’s a great place to learn about stuff you don’t already know and some things sometimes it’s something that you think, “man! How could I have not known that?” So, I guess there’s a website called PostLets.com, right? And you can create these nice little adds and you can throw it out from there onto Craigslist and about six other sites in a couple easy steps. It’s a great way to go and it organizes your photos a lot better and it gives you a better look than just going on Craigslist and doing four stupid little photos.
Brandon: Yeah, no, we’ve been using that a lot lately so that is a great tip. So, let’s move into the modern realm here. I guess we talked about your past, we talked about the market crash. After all that happened you’re going to start buying again, I’m assuming, so what has changed? What does your business look like now, then?
Douglas: Well, so in about 2010 I figured a way to retool and start buying on stuff. I made a whole bunch of offers on short sales, but none of those offers panned out. I must have made 75 offers on short sales, and I know a lot of people have had success with those, but only about 3 of those actually came down to the wire and then suddenly second mortgage wanted another $10,000 outside of escrow. Not only is that illegal, but it made me mad. I’m like, “wait a minute! I negotiated a price and that’s what I want to pay,” so, anyway, none of the short sales worked out for me, but I started buying some bank owned properties. Some through auctions and some just off the MLS. Almost all were MLS or real estate agent recommendations or auctions for me in the last 3-4 years, yeah.
Brandon: Alright. So, auctions. Are you talking about online auction things like Auction.com, or where you actually go and hold up a number? What are you talking about?
Douglas: I have not done the court house steps—well, successfully. I have been to the court house steps, but you talk to those guys and they’ll tell you gotta have access to title and records and you gotta have it fast and I just didn’t have that. So, I didn’t feel comfortable doing those. In some areas where you’re spending $20,000 for a house that’s fine, but here it goes to auction on the court house steps and you gotta pony up cash $200,000-$250,000 it’s like, “I gotta know a little bit more than what I know”.
Josh: So you said you did do some of the online auctions, what was that like?
Douglas: Yep, you know, online and also the ones where they come around in tuxedos and they sing the songs, have you been to some of those events?
Brandon: I have not.
Douglas: Oh, those are great, man! I won’t name company names, but they wear the tuxedos and they’re dancing around, the auctioneer talks a million miles an hour, or the online ones. What’s interesting about the online ones, I’ve learned this now, is that you’re not just bidding against other potential buyers, you’re actually bidding against the house. I found that out on the very last deal that I just did. So, I’m on my iPad and I’m watching these houses and I’m like, “you know, this could be a really good deal at $200,000,” I put in an offer of $200,000 and said, “I’m not going over that,” I watched for the next 2 hours as the bids went up incrementally to about $234,000 and I thought, “wow, that’s just too rich for my blood, oh well”. I checked my little email inbox on my laptop that’s next to me and it says, “you’re the high bidder!” and I’m like, “what the??” and sure enough—
Josh: Are they phantom bidding to get people to overbid each other?
Josh: What?! Scandal! Oh, goodness gracious. Well, don’t name names, but, well, maybe do name names, but that’s crazy if that’s really happening.
Douglas: No, but here’s the thing. Here’s the thing. How many times have you watched some of those online things and you think, “why is this property coming back on again and again two weeks later, three weeks later,” I’m sure it’s because of that phantom bidding going on, but I did not have confirmation of that until I called the unnamed auction company to see about selling a different property of mine that needed a cash buy and so I asked them, “how can we make sure we hit our target price? We can set anything we want as the reserve price, I know we don’t have to disclose that, but how do you help us get to that price?” And he said, “well, you know, here’s some things that we can do. We can enter bids on your behalf,” that’s how they call it, “and if you authorize us you can enter bids on your behalf not much different than what a bank does on the court house steps making sure that they get their minimum amount,” so I’m sure they’ve found a way to do it legally, but I bet most people don’t know that they’re bidding against a phantom.
Josh: Yeah, that’s very revealing. It’s like those online poker rooms from back in the day where you’re playing against the computer and only the computer.
Douglas: Yup. Well, I did get that house and I closed on that house. I just put it into a lease option and it’s going to be another good one so I’m happy I bid, but just a word to the wise; bid what you’re going to bid and then step back. Even if it says on there, “reserve not met,” if that’s what your max bid is don’t feel bad about it. Step away and then maybe they’ll call you back in about 2 minutes after and say, “yeah, we were kidding on the other ones. You’re the winner”.
Brandon: Oh, wow. That’s funny. So, how are you funding these things then? Do you use your own money? Private, hard money, banks?
Douglas: Since 2009-2010 it’s been all my money. I take that back, I’ve done two hard money deals and they were smaller but I was tapped out so I borrowed $50,000 hard money against a different unrelated property and bought the thing and then paid it off within 6 or 8 weeks. Something like that.
Brandon: Alright, cool. What about—I guess let’s move on a little bit to a couple of other things I want to make sure we get time to cover before we’re done today. One of those is, you mentioned in an email to me, you talked about you work with your spouse. Can you kind of, I guess, share some thoughts on that and how that all works?
Douglas: Well, so, I mentioned at first I’m sure she was thinking I was just using her as a Sugar Mama trying to build my business, as it were, and I’d love to say that it was my masterful powers of persuasion that got her, but it was really getting a couple deals done and then she could see, “hey, there’s a lot of potential in this”. You know, once she saw how the numbers work out and everything and once she started watching HGTV then she was fully on board. She absolutely loves being immersed in the projects along with me. She designs some of the floor plans, you know, when we want to blow out a wall or make a master bigger or something like that. She decorates, she does the staging when we’re done, she loves the process.
I see a lot of posters on the forums, and they’re like, “how can I get my spouse on board?” I’m like, “dude, get her to watch HGTV she’ll be on, and make some money on a deal or two and buy her some shoes!”
Brandon: I mean, I never thought about it in that way before, but that is an incredibly good tip for getting your spouse on board.
Josh: Buy some shoes?
Brandon: No, no. Watch HGTV. I mean, I think that’s how I got my wife on board originally was watching Flip That House and Design to Sell and all those different shows that were on back then. There are kind of fewer of them nowadays, but, you know, we need a BiggerPockets TV show. That’s what we need Josh.
Douglas: That’s what you need!
Josh: Yes. We do, we do, we do.
Brandon: We’ll have to call the HGTV folks up and tell them what’s up.
Josh: Well, I’m sure somebody’s listening that’s got some influence. Maybe they’ll decide that we can get some of these guys on board and do something fun, yeah.
Brandon: We need to do like Flipping Wars or something. Fighting amongst each other. It’d be good.
Douglas: Well, how about that Will Bernard guy? You’ve had him on here before. That guy’s an animal. I’ll tell you what, he posted pictures, that little YouTube video of that house he reno’d and that’s beautiful. That could be a TV show right there.
Josh: Oh, yeah. Well, really you can take any of the stuff that you and these other guys are doing, and the work, but these shows want drama. They like the drama. So, they like to take the reality of what it is which is like, “hey, here we go again more nails and hammers,” and they turn it to like, “contractor shooting nails at other contractors!”
Douglas: And every time it’s like, “oh, I didn’t realize it was gonna cost that much!” Every. Single. Time. Oh no, what are we going to do? With the head, and the hands and the, “oh, honey, can we afford it??” it’s like, “you know, we’re not going to fall for that every single time so think of something else”.
Josh: Well, so back to your tip. That was a good tip on getting your spouse to watch TV. What about just kind of separating, right? Separating your work life from your home life because once you start to get that deep integration, I mean, there are things—the lines get fuzzy so do you have any advice for folks on just kinda keeping a happy, that of course is assuming that you guys are happy—I hope you guys are happy, but you know a happy-go-lucky relationship while surviving working in business together?
Douglas: Well, my wife will tell you that she just loves to be involved in many of the decision making processes. Sometimes there are sometimes where, like say on that one auction property I was just talking about I bought earlier this year, you know, I didn’t really consult her on that and she was a little bit hurt. She didn’t get to see it or plan for it or anything, and I’ve taken her to some ugly houses and she likes to be involved. She’s stepping over dog crap and cockroaches and she’s like, “I see potential here! If we just bump out this wall…” so it’s being involved. When they’re not involved and they feel like this is just something you’re doing off and by yourself maybe doesn’t work. As far as the separation, you know, every couple has to figure out what that looks like. We’ll watch some of those shows together and talk about some things we liked or didn’t like and where trends are going. I think our business life spills over into our personal life quite a bit actually, for good or for bad.
Brandon: I don’t know about you guys, but every conversation my wife and I seem to have anymore, we don’t have kids, so like every conversation revolves around our business and we have to like fight against that, like to stop talking about our renter that we’re tired of or whatever drama happened. I mean, we’ll do it full time all the time.
Josh: Well, you know, what I started doing, and really only recently, is, consciously set a time every day that’s family time. There’s no work, it’s not work time, it’s not discuss the crap of the day, it’s time to just thaw, and so I make it a practice not to really get into work stuff and I think that works. From say 5-7 every day we’re not talking about work period, and maybe that’s a good Quick Tip.
Brandon: That is a good Quick Tip.
Douglas: I think that’s a great suggestion. I decided to do a couple of flips in San Diego in 2011 and so I talked my wife into it. I missed the beach and that’s where I’m from so I convinced her to go down there. We took the family, we took the two boys, and when you’re living in the renovation project it’s really hard to keep that separation. So, literally, just like you said Josh, almost every day I’d have to say, “okay, we’re going to the beach. We’re going to start a fire in a fire ring. We’re going to roast some marshmallows. Daddy’s gonna take a couple waves. The kids are gonna play on the swings and then we’ll come back home,” and my wife would be like, she was like a slave driver, “honey, we still gotta do these windows,” hey, we gotta take care of the fam.
Josh: We should have a BiggerPockets like surf-a-thon somewhere. That would be fun.
Douglas: Yeah! Let’s do it!
Josh: Hawaii! Larson’s paying for it!
Douglas: Will Bernard’s paying for it. Does that guy actually work? He’s got like 10,000 posts and he’s doing these big flips and I’m like, “how on earth??” he’s gotta be doing the four-hour work week and then with the other thirty-six hours he’s on BiggerPockets.
Brandon: I think so. He is an active guy.
Josh: He’s just a fan. I mean, it’s okay. There’s nothing wrong with all that posting guys. Really, if you’re listening and haven’t posted yet you’re missing out and that is true, by the way, Douglas can attest to that.
Josh: So, I wanted to switch to something here really quick because Brandon had mentioned something to me I want to hear it from the horse’s mouth here. There’s a rumor that back in the day you spent some time in a guru sales center, and we won’t mention names, but let’s hear a little bit about what this whole thing was about.
Douglas: Okay, confessions. Father forgive me for I have sinned. No, like many investors I had a bleak outlook for my income prospects from that 2008-2009 banking collapse and property values were just sinking. You know, we had enough money saved up during the boom years we weren’t facing homelessness or bankruptcy, it’s just, you know, I didn’t want to take a job at Home Depot or go back to scraping teeth and giving shots so I thought, “you know, there’s gotta be something else I can do to use my skills. I’ve got some skills, yo”.
So, late 2009 I heard an ad for a real estate mentoring company looking for inside sales people and I thought, “you know, that’s gotta be a perfect fit. I’ve been a successful investor for ten years,” five of those had been as a full timer for three different states, and I thought, “you know what? I can do this. I’m a landlord. I’ll pay the bills with this for a while and protect my investment capital until the free-fall is over and then I can start investing again,” well, you know, in hindsight, first red flag was when they told me in their interview process that real estate investors quote, “don’t usually make good sales people,” and I was like, “hmm, that sounds interesting,” and the second red flag they said, “we want you all to sign this big, lengthy, five-page long disclosure,” so, again, I can’t mention the names of the mentoring company or the gurus, but I will just say that everyone has heard of these big names, but, you know they say it’s because they’re protecting their proprietary sales techniques, but there was some scary stuff.
So, as a part of the two-week training there was an emphasis on, there sales was not really cost-benefit. You’re not saying, “here’s the features and here’s why it’s so much better than anything else,” it was more about talking to people and finding their fears and their failures and their pain and vulnerabilities and poking at those until they finally agree to buy your stupid over-priced crap. That’s pretty much what it’s about.
Josh: How do you really feel, Douglas?
Douglas: Well, you know—
Josh: You don’t like, you know, poking people while they’re down? I mean, you’re not a fan of taking the lady who just lost her husband and really shaming her to buy your over-priced course? C’mon.
Douglas: You know, the last straw, and I had really only been on the sales floor for a couple of days so training for like two-weeks and sales floor for a couple of days, and I was like, “this is just wrong!” I mean, they’re calling people names on the phone and stuff and there’s—it’s a room full of like, 50 sales people, just a total boiler room.
Josh: I was gonna say—it sounds like Boiler Room the movie.
Douglas: Yeah! And then there’s—you go to the mentor room and there’s two people taking phone calls and that’s it. 50 sales people and 2 mentors. That’s off. Anyway, so there was a lady right behind me and she was always one of the ones getting awards in the weekly morning sales meeting and that kind of stuff and she talked some old guy, and you could tell cause she had to speak REALLY LOUD to this guy. She talked him into maxing out two credit cards for over $12,000 and it was the right thing to do because he could leave a legacy for his grandkids and they always say, “failure it not an option with our company behind you,” but it just literally made me feel sick.
Brandon: That is my biggest beef with the guru crowd is encouraging people to max out credit cards for education and with the hope that you’re making an investment. I mean, it’s a lie that you’re making an investment in yourself. Sure, it’s worked for a few people out there, but yeah, it’s just been scary to me.
Douglas: Yup. Who was that note guy you had on a while back?
Brandon: Dave Vanhorn?
Douglas: Yeah, he bought like his first 8 or 10 houses with credit cards. I mean, that’s a good use of a credit card.
Brandon: If you can be smart with it, it’s not—there’s a lot of debate on BiggerPockets about that, but I’m—I generally fall on the line of if you can be smart with them it’s probably okay.
Josh: I’m on the line of be careful. I’m older than Brandon here.
Brandon: What was that, Josh? Can you say that again? A little louder?
Josh: I’m old. And sad.
Douglas: I’m older than you, if there’s anything I’ve learned from being a part of that Boiler Room it’s that, you know, there are a lot of people that get excited about real estate. They want to be a part of it and maybe they do need a little bit of hand holding and they’re not afraid to pay for it. The thing is if they got a good personalized action plan out of it I could totally see it and support it, but the sad thing is is that, after they max out their cards, almost always they’re told that they’re going to go to this great boot camp or something else and they’re going to get all this personalized instruction and all they’re going to get is another sales pitch. They could be into it $20,000, $30,000 or $40,000 and really have no practical knowledge.
Josh: And that’s my issue, and for those folks listening, Tuesday, this past Tuesday, was the 9th Anniversary of the founding of BiggerPockets.
Douglas: Happy Birthday to you!
Josh: C’mon, Brandon, sing! Yeah, love the enthusiasm. Anyway, so I actually wrote a post, and we’ll link to it, about kind of the origins of BP a little bit and that was really, that was the big thing for me that was a turn off about that whole aspect of investing. You know, I think, you know, I’m not one who’s going to spend $997 on a course. I’d rather go get a college class at an accredited University, or I’d rather, at least at that time, today I’d rather find a local expert, a local mentor who’s doing it. If I’m in Salt Lake I’m going to go try to link up with Doug, or if I’m in Aberdeen I’m going to link up with Brandon, you know, so there’s no reason to pay. Anyway, so that was really such a big turn off for me seeing how people were just—it was just one sales pitch to the next and I said that’s crazy. We need an alternative. That’s why I created BiggerPockets. I didn’t want to trust the information I was getting elsewhere because everybody was tied into these guys and anytime there was info I was like, “well, is this legit or is this kind of like a they’re going to sell me on something five seconds later if I listen to this? I don’t know what to do”.
Douglas: I don’t honestly know how much the gurus really know about these boiler rooms so I can’t 100% fault them. I’m sure the checks roll their way, no doubt about it, but I don’t know if they really know what’s going on inside there.
Douglas: But I will say the stuff that I saw just in that one call center was not okay at all.
Douglas: I will say that even with BiggerPockets, BiggerPockets is awesome and you’ve got great people, but I would seriously pay money to go with that note investor guy, Dave was his name?
Brandon: Yeah, Dave Vanhorne.
Douglas: Or you had on a while back, you know, Aaron the Riverside wholesaler who never even leaves his desk, you know, and Anson, you know, it’s that virtual kind of wholesale. You know, I see their business model and I’m like, “dude, that is clean! That sounds easy,” it may not be as easy, but I would pay some money, if I needed to, to actually sit in a chair next to them for a day or two and really see what it’s like, but that’s not what was being sold to these people and I think that’s what they thought they were getting.
Josh: Well, and I think that’s very different. I don’t know that any of the gurus are selling that. That’s something that you’re only going to get from—you know, and honestly I bet you if you called up Anson, or Aaron or Dave and said, “I’m in town, would it be cool if I sat down with you?” I bet ya they’d let ya! You know, and they would say, “are you kidding me? I’m not going to charge you a dime,” I think people, it’s a different mentality, right? Somebody who goes to become the guru their job is not to teach, their job is to sell versus the guys who are kicking butt and who are just trying to help people out. They’ll help you out. They’re happy to do it. I know plenty of investors who gladly will mentor and help folks for nothing, and they’ll do it because they want to see other people be successful like they’ve become.
Brandon: And they’re giving back, and if nothing else, just being on the BiggerPockets forums. I mean, I think the podcast we did with Aaron has well over 100 comments now of people interacting on that thread and then in the forums he’s posting continually all the time. I mean, all those guys are. So, I mean, yeah. That’s the point. It’s community building each other up. That’s where the value is.
Josh: And a little plug for BP, that is what our forums are. Our forums are a group of thousands and thousands and thousands of mentors helping each other. I mean, that’s pretty damn cool I think.
Douglas: Very cool. Yeah, I threw something out on your Happy Birthday 9 years thing. If most of the people in America, if all of the people in America, knew about your site the gurus would be out of business because it’s almost the total complete package you need to start doing this stuff.
Josh: Yeah. For sure.
Brandon: Yeah, well, why don’t we move on to our second-to-last section of the show and we have our cool little Fiver intro right here.
It’s time for the Fire Round.
Brandon: Exactly. That sounded great. Alright, so Fire Round today. These questions all come from the BiggerPockets forums and they are questions that people ask and we are going to fire them at you, Douglas. So, starting number one: What is the average timeline for flipping a property?
Douglas: Average timeline. Well, I’m a little bit different from most. I buy everything hoping that I can find a good 1-3 year hold strategy. Now, wink-wink, I’m not a flipper, I’m an investor, I’m not a dealer. So, every once in a while, maybe a couple times a year, I find a rental property that just doesn’t work out so we try to move it. Mine are taking 2-3 months on the renovation part, and if I have to sell it— not that I want to, but if I have to—if it’s not selling in one month and you haven’t gotten an acceptable offer you’re probably priced too high or there’s something else wrong.
Josh: You know, I like what you just said, “I’m not an investor, I’m a dealer,” I actually think that’s—
Douglas: Other way around.
Brandon: He’s an investor.
Josh: Well, not a dealer, I’m an investor, right, right, right. Sorry, apparently I don’t listen to the lady who says I don’t. Anyway. You know, I think it’s an interesting classification because, you know, we have a lot of discussion about, “what is an investor?” and a lot of the purists will say, “well, an investor is somebody who buys and holds and everything else you’re kind of working a job,” and I think dealer is kind of a good classification, potentially, to explain the wholesalers and the flippers because that really is somewhat of what you do.
Josh: Alright, Right on. Alright, Fire Round question number two; Your contractor wants in on the deal, would you do it?
Douglas: Of course it depends on the deal. I think you guys have said many, many times that a percentage of something is better than percentage of nothing, or all of nothing. So, you know, it would depend and it totally depends on the contractor.
In fact, you guys, usually in your Fire Round, ask about contractors and how do you find good ones and you guys—remember that Home Depot tip you guys tell a lot? It depends on where you are, you know, there’s people you can talk to in all different parts of the country and they’ve got their own special way to find people. We’ve got a website here called KSL.com. In California I used Craigslist and asked for references. In Maui it’s all about word of mouth because there’s a lot of people who can, “talk story brah,” but not everybody gets it, but I’m pretty much the general and then I farm out a bunch of sub-contractor work to other people. You know, plumbing and electrical and flooring and stuff like that.
Josh: So, somebody in Hawaii should build a platform in the middle of a great surf beach and have a sign up like, “hey, I’m a surfing contractor and—
Douglas: “—I can get the job done, brah”.
Josh: There it is.
Douglas: Hey, another little quick tip about contractors that just came to me. You know, if I’m on a deadline and my subs are leaving for lunch and say, “hey, I ordered pizza! Stay,” I can’t tell you how many times my subs have left and they’re gone for 2 hours or they’re gone for the rest of the day because they got another opportunity to give a bid and I’m just like, “what??” So, if I’m on a deadline I will order pizza, I will bring back some hamburgers from Carl’s Jr and I’ll keep them on the job so they get it done.
Josh: That is a really, really, really good tip.
Brandon: Yeah, that’s awesome.
Josh: People definitely like free and particularly—I’ve actually offered food to contractors who have been working on stuff before and that keeps them local which is nice, that means the job gets done faster.
Douglas: Well, you can buy em some Red Bulls and it’ll get done even faster.
Brandon: A few crooked lines, but, you know.
Josh: Yeah, versus the guy in the post this week, and I think Brandon will link to it in the show notes, there was somebody posted a photo of a contractor who was painting their house—
Douglas: And they fell asleep!
Josh: They fell asleep on the ladder!
Douglas: That was awesome!
Josh: How do you do that??
Brandon: That’s funny. Alright, number three of the Fire Round; When is the best month to buy property in? Is there one?
Douglas: Oh, tough call. I do a lot of land as well. I bought, you know, a couple dozen pieces of vacant land. I love buying those in the late Fall and Winter cause it’s on extra sale and then I like to pop those back on the market in the Spring, maybe after holding them for a year or two, because that’s worked out well for me. Probably the same can be said for buying an extensive rehab. I’m not one of those guys that buys the really cheap ones with thin margins. Again, I like to go in thinking I can make $60,000-$70,000 so if I can buy it in November that’s ideal. Work it, manage the job, and pop it back on the market in March and you’re golden.
Brandon: Yeah, that’s good.
Josh: Alright, if there’s an old cast iron drain in the property—well, if there are cast iron drains in a property would you replace them all to modernize even if they didn’t leak yet?
Douglas: Wow, a tough one. You know, to be honest, I try to stay away from anything older than the 70s just as a general rule. I say that and I have a house from 1966 I’m just starting a renovation on now. So, ask me that next time around and will let you know.
Josh: Yeah. It’s funny, I was just, we were just, in St. Louis for a conference and I was visiting my brother who lives in a 150 year old house and I walked in, you know, it’s got a lot of charm and it’s really cool, but man-oh-man. It’s like, I see the plaster, I see everything and I’m like, “wow, this is not for me. Give me 2000 or sooner,” you know, I’m in a mid-50s house right now, but I can’t deal with the old stuff.
Brandon: I love the older stuff. Like, almost everything I have is 1920s or earlier.
Douglas: But it can nickel and dime you.
Brandon: Yes, it can.
Josh: That’s the problem. That’s the problem for sure.
Brandon: Alright, well, what is your favorite color door for a flip?
Douglas: Oooh. You know, I like a burgundy. Red door. It just says, “look at me”.
Brandon: I have to plug mine in real quick. I’ve been, I’ve switch recently from a burgundy to like a plum-purple color and I love it. It’s kind of weird, but it looks amazing.
Josh: So, if you go around and find a bunch of houses with purple doors those are his.
Brandon: They’re like a dark purple so it’s like, I don’t know what you’d call it. Anyway. Alright, last question, Josh.
Josh: Last question; where do you buy most of your materials?
Douglas: Yeah, Home Depot and Lowe’s.
Brandon: Yeah, me too.
Josh: Right on, right on.
Brandon: Alright, our final section of the show today, and my favorite section of the show, which is the—
Josh and Brandon: Famous Four
Josh: Where were you on that one, Douglas?
Douglas: Sorry! Slow to party.
Brandon: Alright. Number one; What is your favorite real estate book?
Douglas: Oh, yeah. I was ready for this one. So, I’m going to say Robert Kiyosaki, but not the usual one, I did read Rich Dad, Poor Dad, but you know what I really liked was Success Stories. Some of it’s just regular business entrepreneurial stuff, but a lot of them are real estate stories and they’re creative and they’re cool and I just really liked that one, Success Stories. I listened to it on CD.
Brandon: I agree, I really liked that too. I read the whole thing once in a Barnes and Noble. I just went in and sat down and read the whole book there.
Josh: Nice, Freeloader.
Douglas: There’s a quick tip for you.
Brandon: Yeah, if you want to freeload some books just go sit in a Barnes and Noble and read all day.
Josh: Nice, nice. So, what’s your favorite business book?
Douglas: Ooh, hard to nail it down to just one. I’ll give you three. Millionaire Next Door, Seven Habits, that’s old school, but great for getting your mindset on things that matter the most and getting rid of the clutter. Freakonomics. Loved Freakonomics. Those good ones.
Brandon: Hey, nobody’s said that one yet on the show.
Josh: Freakonomics, yeah for sure.
Brandon: Well, we will link to all those, again, in the show notes at BiggerPockets.com/show41 and final two questions. Josh, you want to take the next?
Josh: Well, truthfully I was half-listening because I remember hearing from a website that guy John T Reed who likes to talk about the gurus and I was like, “let me look up that phrase, that ‘failure not an option’ thing,” and he’s got a page of the BS checklist and on the BS checklist number 47 is, “Use of the sentence, ‘failure is not an option’,” then he goes on and talks about if customers of gurus are scared they’re about to waste their money blah, blah, blah, and, anyway. So, that was interesting. I remembered seeing that somewhere before. Anyway, alright. Crazy, crazy.
Alright, second to last question here is hobbies! I certainly gather that you’re a hang-ten kinda guy, you’re a surfing dude. What else do you do for fun?
Douglas: well, you know, bought a couple snowboards when I moved here. Traded in the surf boards and love to ride the mountain. It’s good stuff. Colorado, you know what I’m talking about.
Josh: Yeah, baby, I would know even more with less kids, but, you know.
Douglas: I’m hearing it, I’m hearing it. You know, spending time with the family, travel, a little bit of everything, it’s all good.
Josh: Yeah, perfect.
Douglas: Don’t take your kids on a really long vacation, I will say that. I took my family last year to England. Great, great scenery and stuff to see, but man, by the end of it—three weeks I was like, do you remember seeing that, oh, you know, The Shining! I was starting to lose it.
Josh: Nice. He’s BACK!
Brandon: Alright, final question of the day, I think; what do you believe sets apart the successful investors, Douglas, from those who give up and quit or never get started in the first place?
Douglas: You know, a lot of your interviewees in the past have mentioned drive and determination, and those things are absolutely crucial, but I think Anson a couple shows ago? Anson, he nailed it. Throughout most of his thing he was talking about, you know, he had a lot of knowledge, he had a lot of experience that he learned the hard way doing grunt work for Agents and stuff, but it was when he and his dad put together an action plan. That’s really hard when you’re a beginner, truly a beginner, because you—take action on what? You know, sometimes you need a little coaching from BiggerPockets or another source, but if you put together an action plan and then follow it consistently? Dude, you’re there. That action plan has to include your skill sets, your abilities, your relationships, you know, what you bring to the table, and then you have to understand your weaknesses, too. You know, if you cannot swing a hammer and you don’t even know anybody who does then fix and flips are probably not your thing right now. Go to some Home Depot clinics and learn it maybe, but you gotta know your strengths and weaknesses, put together an action plan and make it happen.
Brandon: Nice. Great.
Josh: Yeah, that’s great advice. I’ll add one, I never really jump in on this one, but because of the 9th Birthday for BP I did this post and I sent emails out to folks and what somebody responded to me and they said, you know, I’ve seen you over these 9 years and the one thing that you really demonstrate is perseverance and I thought and it and I was like, “yeah, you know, that’s probably the best word to describe it”. The reason I bring it up is; I think if you look at investors over the long term, I mean, you’re a pretty good example, Douglas, the market beat you up a little bit. You got whacked down when the market was hurting everybody and you came back and you persevered and got back in the game and you’re doing well. There’s going to be ups and downs as you do this and if you are incapable of persevering and fighting through the challenges then this may not be the right industry for you.
Josh: I’m deep sometimes.
Brandon: Deep. Alright, well, let’s close this thing up. Douglas, where can people find more about you at?
Douglas: LuckyLarson.com and certainly on BiggerPockets. You can @ me anytime and we’ll chat.
Josh: Alright, I gotta ask a question; where did Lucky come from?
Douglas: You know; it was a High School name. I had a math teacher call me Lucky once and it kinda stuck and I pull it out every now and then. You may notice sometimes when I throw something out there on BiggerPockets I’ll put, “make your own luck,” it’s so easy for people to say, “oh, good luck,” and it’s not like luck just falls from the sky, you know? One of my favorite quotes is, “it takes twenty years to become an overnight success”.
Douglas: It’s about the perseverance, it’s about, you know, shaking the trees and when you’re out there shaking the trees all the time with a plan, you know, stuff falls down. That’s how it works. You make luck.
Josh: Awesome. Awesome. Awesome. Well, listen, Douglas, we really appreciate you for being on the show. We want to thank you a lot for joining us and of course for participating on BiggerPockets. We’ll be sure to link to your profile and some of the other stuff on the show notes at BiggerPockets.com/show41. So, thanks a lot for being with us!
Douglas: Hey, my pleasure. You guys are great.
Josh: Alright guys! That was our show with Douglas Larson! Man, there was a lot of good information in there. Definitely worth a listen, and a second listen if you missed anything. As always if you have any questions for Douglas Lucky Larson make sure to post them to the show notes at BiggerPockets.com/show41 or you could just hit him up on BiggerPockets.com and look him up and you’ll find him. Otherwise, look, yeah, that was great and hopefully you guys are deeply engaging in the community! It’s kinda cool. We’ve been watching the analytics on BiggerPockets over the past months and years and what’s kind of cool to see if we’re watching people get more involved. Spending more time, getting deeper into it, and I can’t really quantify it, but I feel like we’re getting a lot more happy members responding with emails and messages of joy after learning something new and things like that. Would you say that’s fairly accurate?
Brandon: Yeah, I definitely think so. I think the community is being strengthened and there’s more and more good information on there. So, yeah, if you’re not part of that do it.
Josh: Yeah, don’t just read. Make sure to respond, answer, get involved and be a part of it. No matter how beginner or sophisticated you are. So, yeah, definitely check us out there. Also, make sure you’re following us on Social. Check us out on Twitter, Facebook, G+, LinkedIn, we share stuff and get into discussions on those platforms that we don’t get into on the site itself on occasion so definitely do that; and of course those are great places to keep up with any news that we’ve got to share.
Otherwise, again, thanks for listening. Jump in iTunes and share some feedback, ratings and reviews of the show if you have a chance and we actually added a cool new photo to the top of our Podcast page on BiggerPockets.com/podcast. I think it’s kind of fancy, Brandon and I together, so check that out, but that’s it. Thanks for listening. That’s show 41. I’m Josh Dorkin, signing off and I think we’re going to let Brandon close the show today.
Brandon: Oh, this is awesome. Okay, this is—
Josh: Oh, I was just kidding! This is Josh Dorkin signing off!
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Brandon: I was hoping you’d do that. I thought that would be funny. We have like the same sense of humor.