BiggerPockets Podcast 050 with Mike Simmons Transcript

Link to show: BP Podcast 050: Getting Started and No Money Down House Flipping with Mike Simmons

Josh: This is the BiggerPockets Podcast, Show 50.

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Josh: Hey, what’s going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast here with Brandon.

Brandon: Hey everyone this is Brandon, cohost of the BiggerPockets podcast here with Josh.

Josh: Wait; are you making fun of me?

Brandon: I would never. Make fun of you.

Josh: Son of a.

Brandon: I don’t make fun of people. I’m respectful of all.

Josh: Yes, that’s not true.

Brandon: Yes.

Josh: That’s not true.

Brandon: Yes, I know.

Josh: Yes, yes, yes. Alright, alright. Well listen. Happy holidays to everybody listening and we got a really really good show ahead.

Brandon: Yes.

Josh: We’ve got a really fantastic interview and we’ll get into that in a second, but before we do, we’ve got our Quick Tip.

Brandon: Quick Tip. Yes.

Josh: Today’s Quick Tip, listen to the whole show guys. If you’re new, especially listen to the entire show. We know that these things can be a bit long sometimes, but we definitely want to encourage you to make it all the way to the end because there’s definitely some amazing stuff. In particular, in this show, there’s a lot of really juicy advice at the very end. If you’re the type who listens for five minutes and thinks that you got it all and you know it all, well you certainly don’t.

Brandon: You don’t.

Josh: You’re certainly missing out so make it to the end guys.

Brandon: Everyone’s like that’s a lame Quick Tip.

Josh: Yes, it was a lame Quick Tip and what was with that voice, man? You sounded like you were going to kill somebody. Hello.

Brandon: I was adding emphasis to that.

Josh: Okay, you’re not being Batman again are you?

Brandon: No, I’m not going to be Batman. Come on. Sheesh.

Josh: Okay, alright, alright. Before we introduce our guest. I want to encourage you guys as I do every week to jump on the show notes at BiggerPockets.com/Show50 and come and ask our guest questions or just let them know that you listened to the show. You know, our guest put a lot of time into just being here and giving you guys advice and they love spending the time to answer questions. They really do and they get a lot out of it so you know jump in and let them know how you feel about the show. Otherwise, of course, if you guys have not left a review or rating on iTunes yet, I really want to encourage you to do so. We’re at 524 reviews and we’d love to see that number get 1,000 by tomorrow. By tomorrow 1,000, let’s double a year’s worth of work by tomorrow.

Brandon: By tomorrow we’re doing it, alright.

Josh: Yes, so jump on iTunes. Let the world know what you think of the show. Leave an honest review there. We’re not going to bribe you to do anything. That’s not how we roll, but come and do it. Alright, leave us some feedback and we appreciate it. With that, it’s time for the show. This is the Big Show.

Brandon: What?

Josh: I don’t know. I used to watch wrestling back in the day and there was like.

Brandon: Wow.

Josh: A guy named Big Show and it was like.

Brandon: You know, this says a lot about you Josh that you used to watch wrestling back in the day. It all makes sense now. It’s all coming together.

Josh: Aw come on Brandon, you’re telling me you didn’t watch Hulk Hogan in those yellow spandex back in the day?

Brandon: I was like four years old.

Josh: You weren’t even born. Yes. Yes, yes, alright for today’s show, we’re going to sit down with a guy named Mike Simmons. Mike’s a real estate investor from the great state of Michigan. He started flipping houses back in 2008 and has some really keen insight into the best ways to get started in any niche of real estate. Mike’s also a really funny guy so I think you guys are going to love the show and as somebody in Michigan, we’re going to have an interesting debate later on so stay tuned. With that, why don’t we get this show going? Mike, welcome to the show my friend. Good to have you.

Mike: Thanks guys. Good to be here.

Brandon: Awesome. Good to have you. Let us begin at the beginning. What kind of investing do you do?

Josh: Begin at the beginning. That’s a great place.

Mike: I am going to begin at the beginning.

Brandon: Thank you.

Mike: I was born in a small town, no.

Brandon: Maybe not that beginning.

Mike: No, I won’t go. I’ll go pretty far back, but I’ll make it quick because kind of to me it’s relevant how I got started even before I bought my first house.

Josh: Sure.

Mike: I was an adult working in the working world and you know, I was approaching my thirties and I thought, you know, I don’t want to work the rest of my life. That’s not really my goal to work. You know, and I was kind of doing the math too, going okay, I know what I make, I know what my bills are, I know how many kids I have and at the end of the day, I’d have to live to be like 180 to really be able to retire so I started.

Brandon: Yes.

Mike: Looking online and I thought you know my first inclination was maybe stock market. Maybe day trading sounded cool.

Josh: Nice.

Mike: Yes, I got online and started really researching the stocks and stock market and what the terminology was and I found every time I got on there and started like trying to research stocks or just the stock market or how do you even go about this whole thing. I would always end up on NFL.com or ESPN.com because what I found after a.

Josh: Shhh.

Mike: Yes, exactly. What I found after a few you know jaunts out into the real estate, I’m sorry, the stock world is I hated it. It was boring. It was god-awful. It was like reading insurance novels. It was just. It was the worst.

Josh: You’re wrong by the way.

Mike: I agree.

Josh: I was, I totally.

Mike: No, I agree.

Josh: No, I was stock trader for a while so I did it.

Mike: Yes.

Josh: A fascinating, exciting, fast paced, crazy and you lose you’re A-S-S.

Mike: Yes.

Josh: If you don’t know what you’re doing, but…

Brandon: You have to have a boring personality to be a stock trader.

Mike: Well luckily, I got bored by it because I’m sure I would have lost my A-S-S. I think so. Yes, I just—it just—it didn’t excite me. I just could not.

Josh: Yes.

Mike: I tried. I wanted to get into it so bad. It seemed like a cool thing, but I just couldn’t get into to it. Anyways, when you go online and you type into Google or at the time, Yahoo or whatever I was on. You type in “investing,” you will get stocks and stock trading and I kind of think but inevitably, you’ll also come across real estate investing so as I was scrolling down and trying to look for stocks that interest me, I came across real estate, real estate investing sites and real estate investing people out there that are online and pushing their wares and things like that. It really piqued my interest. I realized that I just couldn’t get enough of it. The more I read, the more interested I was and I just. It sort of built—early on, I built that way. I developed a liking for it or real interest in it. Now, the people that I was reading and things, a lot of times it was kind of salesmanny and kind of bad that way, but you know, it at least planted that I at least liked this whole thing called real estate investing and then you know, you move on from there. We can jump to maybe my you know, when I really got involved.

Brandon: Well and you know, as much as we like to make fun of you know, the gurus and those are selling their wares and all that, but I mean, you are right like a lot of us are in the game because of them. Whether not, you know, whether or not their tactics are terrible and their upsells are terrible. We are, a lot of us are you know their responsible for our future success so there’s something to say for that. Not that I’m saying that you know I love them, but you know. Josh, what are your thoughts?

Josh: Argh.

Brandon: That’s what I thought, anyway.

Mike: Yes, I mean sometimes they plant the seed and that’s really what it was.

Brandon: Yes.

Mike: They plant the seed and I really dodged the bullet because I talk to people and I hear a lot of stories about people who, you know, unfortunately, spend thousands and thousands of dollars on kind of BS systems before they realize that they were taken and then they move on and do the right thing. I didn’t do that. I was far too cheap to spend that kind of money so for me it was just a lot of reading and that kind of thing.

Brandon: Yes.

Josh: Got you. Got you. Alright, so you’re interest was piqued and then what?

Mike: Then I did what a lot of people do and what I really advice people not to do is I started reading and then I thought flipping houses sounded cool and then I thought buy and hold sounded cool and then oh my god, there’s wholesaling. Well, what is a lease option and I started just running toward every shiny object that I saw. What I basically did was I just created this paralysis by analysis and I started learning a little bit about everything, but I didn’t really know much about any one way of doing it. To answer your question Josh, I sat on the sidelines for years, really. I sat there for probably four or five years before I really took the first real step into real estate. I just allowed myself to get too caught up in the reading and the analyzing different processes and models.

Josh: Got you so and on that, you know, I don’t think the reading is bad. I don’t think there’s any fault in that. I think the issue comes in being and this going to come off as a negative on you, but it’s not meant to be. It’s you know, on the indecisiveness, the inability to narrow down those options to one option and then focus exclusively on that option. Work it and then once you kind of figure it out and get your thing, get it going with that then potentially moving to the next and to the next. Would you say that’s fair?

Mike: Yes, it’s totally fair. It took someone; someone had to tell me to focus on one thing. Forget about everything else. Pick one that you think that you might like.

Josh: Yes.

Mike: Really, really apply yourself. Someone had to actually, like basically have an intervention and tell me I had to do this otherwise, I might still be just reading and looking at shiny objects. I don’t know. I just—it seemed like how do you focus on one thing? There’s somebody making money with this and that and this guy says this is and the problem is everybody that talks to you has their own opinion right so it’s tough to focus if you’re talking to all kinds of different people who are doing all kinds of different models.

You get swayed and they’re very—you know, some people are persuasive. They say, “Oh man, wholesaling is where it’s at. Why would you flip a house? Why would you want to have, you know, tenants? You need to wholesale, man. You buy the houses. You never have to do anything.” Then the next guy goes, “What are you talking about? If you flip it, you make all the money. Why would you wholesale it? Keep these houses and flip them. It’s not that big of deal.”

Then of course other people go, “That’s not investing. You need to buy and hold for the long term.” I kept getting pulled in different directions because luckily I was in a mastermind, a real estate mastermind like local one, like one where you go to it. There was a lot of really knowledgeable people. People doing some good stuff and really knew their thing, but every time I sat down and talked to the next person who really knew what they were talking about. They really knew what they were talking about and their specific way of doing it and then the next, you know, time I went I would sit by some other guy who was really helpful and really great, but he was convinced his way was the best.

Brandon: Yes.

Mike: It was really tough for me to focus. You know.

Josh: Yes, yes and that’s a problem that I’d say the vast majority of people who are probably listening to this show are dealing with. I’d say the vast majority of quote “real investors,” you know, those guys who say, “I’m an investor.”

Mike: Yes.

Josh: I just read a book.

Mike: Yes, yes.

Josh: You know, that—it’s something that a lot of people face and it’s good to hear that you know it’s something you went through because hopefully, it gives people some hope that you do narrow down your focus and start working at that one thing then you can find your way.

Brandon: Well, you know one thing, in the Ultimate Beginner’s Guide to Real Estate Investing that we put out like a year ago, one of the things we talk about in there is how in real estate, there is a whole lot of different niches. Then there’s a whole lot of different strategies you can use within those so all together, when you combine them all together, there’s you know, like you said, flipping, wholesaling, buy and hold, whatever, lease options, subject to and I mean these are niches and strategies that when you combine them, there’s like hundreds of ways to make this work and everyone of those you can find somebody on BiggerPockets who succeeded in doing it. Yes, it’s shiny object, exactly like you said.

Josh: Hey what…

Mike: Can I?

Josh: Really quick, what was that? It was called the what, Brandon? The Ultimate?

Brandon: The Ultimate Beginner’s Guide to Real Estate Investing at BiggerPockets.com/ubg.

Josh: Okay.

Brandon: Look at that.

Josh: There you go.

Brandon: How about that?

Mike: Yes, you know, it is sites like BiggerPockets that actually is a tremendous, tremendous tool, tremendous, tremendous resource, but also a source of so much good information. You could literally read and read and read and read for days and never get out there. At some point, you have to I hate to say it, you have to click off, you have to hit that little x up at the top.

Josh: No.

Mike: Alright, I take it back. Just keep reading BiggerPockets.

Josh: No, get out. You’re right. Get out.

Mike: You have to get out there and that’s what I wasn’t doing. I, you know, at the time, there—you’re website wasn’t around, but I was you know, on different forums. Boy, you can find a lot of really bad information too, that’s you know, part of the problem. You start going down the wrong the road every once in awhile and it takes you some time in talking to people to figure out you know, you’re kind of going down a path that isn’t really going to be successful. Yes, I mean, basically, I did that. I’ve learned a ton, but you know the best way to learn is to go out there and do it. I would venture to guess anybody you talk to in real estate who’s successful will say they didn’t really know anything until they did their first couple of deals and you learn.

Josh: Yes.

Mike: A ton by getting out there and doing it. That’s how I’ve learned most of what I’ve learned. I’m not a super big book reader. I don’t devour books on real estate, but I get out there and do it and you just learn a ton that way.

Brandon: Yes, yes, definitely. Well, let’s talk about that. Let’s talk about your first deal. How did that first deal come about? What was it?

Mike: Okay, well, the first house. I’m only talking about the first house ever got under contract first.

Brandon: Sure.

Mike: It wasn’t my first deal, but it’s important because I started investing in real estate or I at least made the decision that I was going to pull the trigger and really do it in 2008 right? It was like one of the worst times in the world because house prices were plummeting and so I put an offer on a house. I got the courage up to put an offer on a house and I got the money from a very local, small bank, very very small, local bank and they approved me. It was all set up. We had a contract. We’re waiting for closing and the bank went out of business.

Brandon: Ooh. Ouch.

Mike: Like literally was gone one day. Yes so we had. We put down.

Josh: Wait, did they have the stickers on the door saying, “This bank was shut down by the feds.”

Mike: Yes, foreclosed. Yes, I actually looked in. I bought it because it was a good deal. No. Yes, no, they went out of business and I couldn’t find anyone else to fund the deal in time and I had put a thousand dollars earnest money down and long story short, I lost it and I thought, “Oh my gosh. End of the world, I just lost a thousand dollars my first, you know, venture out into real estate and I just lost a ton of money.” The funny thing was, four months later, I bought a house one street over for half the price that I was going to pay for that house so you can imagine when I finished rehabbing. By the way, it was going to be a fix and flip. When I would’ve finished fixing it up and try to flip it, you can imagine what the house prices would have been like. I would have lost way more than a thousand dollars. I mean it would’ve been a disaster.

Josh: Yes.

Mike: Luckily, I didn’t get that first one. Like I said, a couple, a street over a few months later I bought my first deal. We used a traditional mortgage financing. We went to a bank, got a mortgage, and then we had to put the down payment down obviously and then we used our personal funds, my wife and I to do all of the rehabs so we basically took all of our chips and symbolically pushed them to the middle of the table and said we are all in. Here’s all our money. We’re going to try this and we think we can do it. We learned a lot and I’d be happy to tell you if things we did right and wrong, but at the end of the day, we made money. It was really, really good—it was one of the best deals we did for quite awhile actually.

Josh: Alright, let’s hear it.

Brandon: Yes.

Josh: What did you do? Well, let’s hear what you did right and then I can pick on you what you did wrong.

Mike: Okay, well, what we did right was we didn’t over rehab it. Right? We didn’t go in and do what some new investors do and they think if I were living here, I would want granite and I would want expensive fixtures and I would want. You know, they over do it for the area that they’re in and then they realize they can’t make money because they just spent way too much on rehab. Now, it was our money and it was all of our money and there was a very definite end to that pile. There was a number that we were going to stop rehabbing no matter what.

Josh: Yes.

Mike: We had to budget within that and we were smart enough. We had enough context to know that we should go to open houses around the neighborhoods and in that community look at the other houses, find out what our competition is basically and then make sure we’re a little bit better than that, at least a little bit better than that, but not light years better than that. Just better than that so whenever someone goes to look at our house and you know, they’re going to look at other houses that day too. They’re going to look and they’re going to—and the houses that we bought that one in particular was a three-one, brick with a basement, a garage.

It was a decent little house, good price, but when people go look at other houses like that or in the neighborhood, they’re going to see 1950s kitchen, they’re going to see you know carpet covering up hardwood. This nasty carpet so that was our competition and we knew that’s all we had to beat so it was pretty easy in that neighborhood. Just put in new cabinets. They didn’t have to be the best cabinets in the world. As a matter of fact, I think we went to Home Depot and got off the shelf cabinets, but they were new and it was—it made the house better than every other house in the neighborhood. We refinished the hardwood floors, paint, I mean it was really a basic rehab, but it worked out really really well for us because we didn’t go overboard.

Brandon: Did you do the work yourself or hire it out with a contractor?

Mike: We hired a contractor. Okay, so we want to get into what we did wrong now?

Josh: You hired a contractor what did we do wrong?

Mike: We’re at the point of the show. Yes, oh my god, what didn’t we do wrong? The first thing I did wrong was I went on Craigslist and I said, “Looking for a contractor to renovate a house.” Gave them my phone number and guess what happened? My phone blew up. Pretty soon my voicemail was locked up and it was just, it was a mess.

I was answering calls form all these guys that wanted to go right then and look at it so I set up appointments to talk to six different contractors and I set them up so I would have an hour with each one and then a half an hour buffer in between in case it went a little long. Right, so you can do the math. I was there forever, right so I thought the first contractor come in, I talked to him for an hour, a little buffer in case I had to go to the bathroom or get something to drink or whatever then the next. Like it let appointments with professionals right? I was there for.

Josh: That’s the first problem.

Mike: I was there for like hours. I talked to two contractors the rest of them were no shows. I was furious and I said I am never ever ever ever going to do this again so here’s one little tip for you. This, maybe people do this, but I had to learn the hard way. I do, when I’m looking for a new contractor, I have one now that I love, but when I need a new one, I will make an appointment with six contractors in one hour and they all show up at the same time. I walk every one of them through one time and if some of them don’t show, who cares. If at least one person is there, it’s worth my time. That way they see that there is, there is competition, there’s a sense of competition there that they are bidding against other people that are real and you know that’s how we found some really good contractors along the way, but I—and I—some people have said, “It’s rude, don’t do that.” It’s rude just for me to sit there for ten hours too.

Brandon: Yes.

Josh: Yes, so I was going to ask about that. I mean I don’t think it’s rude. I think you know, it’s just a matter of you know using best use of your time. I’m curious if you’ve experienced a situation where these guys kind of, you know, there’s a lot of machismo in that space right? Is there kind of beef? Is there any battles between these guys ever or?

Mike: No, I didn’t have any problems. I haven’t had any problems.

Josh: Okay.

Mike: I mean I show up first obviously and I’ve got everything organized. I make a bunch of different copies of the work order or the scope of work. I hand it out and I walked—I just lead it through. I lead them through and when they’re done, I basically say that’s it. Please give your—you know, send your quote to me in the next couple of days or whatever. I don’t give them a lot, they don’t, they’re not standing around drinking.

Josh: Yes.

Mike: Coffee and eating donuts and hanging and talking. Otherwise there would be problems. That’s something I found going back to my very—I only really have like one or two things that I did right. I have a lot of things that I did wrong on my first house so we’re going to spend more time there so anyways, I didn’t do that in that for the first one. I stayed there for ten hours. I found a contractor and the way I picked my contractor was he was about my age. He seemed like a pretty cool guy. Somebody I could get along with. Somebody I would probably enjoy talking to. I thought that was the way I should go. I’m going to pick someone kind of like me. Someone I kind of like and he seemed like a good dude.

Josh: This is for a book club or for your…?

Mike: Yes, I know, exactly. No I was just apparently, I was looking for friends at the time. It turns out the worst contractor ever. I mean the work that he did was alright. It wasn’t great. At the end of the day, he didn’t pay the electrician.

Josh: Nice.

Mike: Her thousand dollars. It was an electrician company, that he didn’t pay them their thousand dollars that for the work that they did. Of course, I paid him for that and believe it or not, this is going to shock you so hopefully everyone is sitting down and ready and rested for this. He didn’t answer my calls when I tried to find out what happened with the contractor.

Brandon: Wow.

Mike: Why he didn’t pay them so.

Josh: No.

Brandon: Shocked.

Mike: No, yes, I feel bad to this day. It makes me cry a little bit. Yes, he didn’t call me back. I couldn’t get a hold of—he fell off the face of the Earth whatever so I called the contractor and said, listen, this is what happened. I already paid for the work and their response was as it well should be, “That’s fine, but we didn’t get paid and we need to get paid and our only recourse now is to put a lien against your house and you’re not going to sell it unless you pay us.” I was like, “Good lord, this is my first house. I’m like come on. Alright, maybe I can figure out a deal.” I talked to the person and they agreed to cut it down to $600 from a thousand.

Josh: Wow! That was really nice.

Mike: They shouldn’t—yes, really nice.

Josh: They didn’t have to do that by the way.

Mike: They understood. Did not have to do that so I’m going to chalk it up to negotiating skills and we’ll put that in the area of things I did well. Since I feel like there’s not enough in that column, but yes, I talked to them and they agreed to cut it down. I cut my losses paid them and moved on.

Josh: Yes. Wow, wow. That’s definitely something to learn. Now how would somebody go about avoiding that? Right, so you know you’re paying a GC and there’s subcontractors underneath that they’re responsible for paying and of course if they don’t you’re on the line, which is you don’t know that guys that are listening, that’s the way the world works.

Mike: Yes.

Josh: How do we protect ourselves from these guys not paying their subcontractors?

Mike: It’s pretty simple. It’s called a release of lien and you make your general contractor sign it and all of the subcontractors need to sign this release of lien. You know, basically saying that they are not going to put a lien against your house for non-payment as long as you pay and obviously, you pay with checks, don’t pay with cash. You know, don’t do some of those things that people do where they get burned. Make sure it’s all above board. I’ve had contractors say, “Oh, you know, can you pay me in cash.” You know, whatever reason. They have a ton of reasons and I just say, “I’m really sorry I can’t do it that way. It really has to be with a company check.” We’re all going to sign a release of lien. I have my contractors sign like basically an agreement before they get started about how the work is going to be done and in it spells out everything, the scope of work, how they’re going to pay their subcontractors, how the release of funds are going to go and that kind of things. You do it with contracts unfortunately or a paperwork of some kind that stipulates certain things and a release of lien is the thing that we learned on our first flip there that we had to do otherwise, people can come back and say that you didn’t pay them and that’s just the way it is.

Josh: Got you. Got you. Alight, so what else did you do wrong? Sounds like there’s a lot of them.

Mike: Well, you asked me that. I know there’s more. Believe me, there’s more. Well, you asked me who did the work right, so I’m going to say this. I’m not carpenter. I’m not a builder or finished carpenter or anything like that. We didn’t do the bulk of the work, but we did think that we could do certain things that were like manual labor that didn’t require a ton of skill like. We thought it would be a good idea to scrape the paint on the back of the house and repaint ourselves. That seemed like a good way to save.

Josh: Yes.

Mike: You know, $200 or whatever it was.

Josh: Sounds like a good Sunday activity with the family.

Mike: Sounds like a yes—my wife and I went out there with putty knives and I scraped about a one by three foot area and was cussing and saying, “This is ridiculous. How much did we save again? What exactly was this going to cost us?”

Yes, I think we actually didn’t even finish. We just said, “ You know what, we’ll just pay them to do this. This is insane. This is taking all day and this is ridiculous.” The other was there was a basement like I said and we thought, “We can paint a basement no big deal.” We did. It wasn’t the end of the world, but it took us way longer than it would have taken a contractor.

We held him up a little bit because we weren’t done with certain things and just little things like that we thought. You know, we are saving a $200 here, a hundred there, $300 there, but what really you do is you’re just adding so much time to the job that doesn’t have to be there and you know, the idea when you’re fixing and flipping houses is to turn them as quickly as possible. You know, holding on to them for six months to work on them isn’t the way to go. We were going into the Christmas season too so had we known more, we would have been even more concerned about getting done with the job faster because we ended up selling the house like December 10th or something. It was horrible.

Josh: Yes.

Mike: We held it for too long and made all of those mistakes. We talk—okay, the next mistake. I’m just running through them now because you just made me realize another one.

Josh: Oh, I’m such a screw up.

Mike: I know, this is horrible. This is good stuff though. People need to know.

Brandon: Yes.

Mike: I mean it’s things that a lot of people do. We found a realtor. I don’t even remember how we found this realtor. She might have been recommended to us and I said, “I want to sell the house and I want to sell it quickly. What do you think is a good,” and by the way, I didn’t do my after repair value too much, like not I should’ve at least.

I kind of got lucky a little bit, but I should have known what the house was going to be worth really very well myself before I got too far into this, but I trusted her and said, “What do you think it’s going to be worth? What should we put it on the market for?” She gave me a price. I sais, “Alright, I don’t want to hang on to this forever though so make sure we’re not being to aggressive with this price.” “No, no, no, no, I think we can get it.”

Well, long story short, took us like four months to sell it. It was—she priced it so high it was a complete joke. I mean she was trying to make a big commission I guess and maybe tried to do us a favor buy making us a lot of money, but you know how it goes. If you over price the house and then it sits there for a month, now you’ve got a house that sitted there for a month and nobody knows why it’s not selling and they have to assume something is wrong with it and you down that road, and that’s kind of we were chasing out tail the entire time. We would drop by five thousand and then nothing and then we drop it. Then you got a house that keeps dropping in price every other week and then that creates a stigma. It was just kind of a bad deal from that point of view, but we still, you know, I live in Michigan so the house we bought for $40,000.

Josh: You live where?

Mike: In the great state of Michigan.

Josh: Oh, this is going to be fun. Really?

Mike: Yes.

Josh: Alright, continue where you were going. We’re going to have to move on in a second.

Mike: Yes, yes, okay, so in Michigan you can buy a house for $40,000, at least in ’08 you could.

Josh: Buy for a dollar my friend.

Mike: For $40,000. I said Michigan by the way. I’m being state specific. Not city specific. I don’t know what city you’re talking about, but so we bought it for $40,000. You know, we put like $15,000 into it, sold it for like $85,000 and you know we made $15,000. It was a good deal for us. It was a good first deal. We didn’t have any partners so that was good, right? We weren’t splitting it with anybody. Even with a high price point to begin with and what we ended up getting for it, we did alright. I was fine. We just should have priced it lower. We probably could have made more if we would have not priced it quite to high to begin with.

Brandon: Yes.

Josh: Got you. Got you.

Brandon: That gives me bad flashbacks to my early flipping days.

Josh: Yes, I think every flipper has had that experience.

Mike: Yes.

Josh: Let’s stop for a second here. Hold on; hold on so you said you’re from Michigan yes?

Mike: Yes.

Josh: Okay and Michigan is a great state. I love Michigan. Never been there. Love, love the state.

Mike: Oh this is so condescending. What do you love about it Josh?

Josh: There’s nothing. You know, the people are great. The landscape is gorgeous. You know, the industry that it, oh wait, hold on.

Mike: What do you drive Josh? What do you drive?

Josh: I drive all Japanese baby.

Mike: Okay, alright then I don’t have a point. Go ahead.

Josh: I’m a Honda, Toyota man so if American cars were better for crying out loud. Okay, I just lost a third of my audience.

Brandon: Yes.

Josh: Okay, so you’re—alright, now are you in De—what is it? Detroi—Detroit? Are you in Detroit?

Mike: I am, no I am not in Detroit.

Josh: Aw, man.

Mike: I’m not in Detroit.

Josh: Do you invest in Detroit?

Mike: Yes, we can go there too. I have invested in Detroit.

Josh: Oh we’re going there.

Mike: I have some stories for—I have some Detroit stories.

Josh: It’s gone. Okay so this is—let me just—let’s just do a Segway here. This is show 49 of the BiggerPockets Podcast and for about 48 of the previous shows in some way shape or form; I have implied or directly bagged on the great city of Detroit.

Brandon: I think the word is “mocked.”

Josh: I’ve been calling.

Brandon: You’ve mocked.

Josh: I haven’t mocked. I have not mocked.

Mike: Listen. I listen. I’ve listened to a ton of your shows right. You crowbar in shots at Detroit. Even when there’s nothing to be said about it.

Josh: So, so.

Mike: You talk to people and go, “Oh, where are you from? Chicago? Isn’t that near Michigan? Isn’t that where Detroit is?

Josh: Let’s get to this. Let’s get to this whole discussion because I think it’s a discussion that needs to be had. We’ll keep it really brief and then we’ll move on just because I get so much grief from people for my little crow bar.

Mike: I’m going to represent Detroit now. Here we go.

Josh: Do it, do it. Alright, here’s the deal so people are always out there saying you know you can find these. You know, okay, let me stop and circle back. My issue with Detroit is this. The city, the industry, everything is kind of going the wrong the direction and has been for a long long long time. You know, they want to raise, I don’t know how many properties do they want to raise? Thousands and thousands of properties that they’re trying to just like, literally, destroy because the economy and everything else, there’s such a problem. My issue is people are out there trying to get unsuspecting, unknowing, real estate investor quote on quote to come in and buy property in Detroit.

Brandon: Why are you looking at me?

Josh: You know, it really concerns me and they is obviously a big they. It can mean one of lots of different folks, but tends to be some of the unseemly folk who are doing it and you know, yes, you can buy a $1 property. You can buy a $50, a $1,000 dollar, or you know, a $5,000 property and you know, if you can get the rents and if you can actually get somebody to live there. You know, certainly you can make some money, but you know it scares the crap out of me that people who aren’t aware think, “Oh, I can buy a super cheap property. Cool.”

Well, cheap doesn’t mean, you know, it’s cheap. Inexpensive doesn’t mean cheap so that’s my biggest thing with Detroit and Detroit really acts as representation of all those other cities around the Rust Belt where you know, the cities are kind of going in the wrong direction. Where people are trying to get what I think is a lot suckers in to buy property that are potentially going to be big fat losers in the long run. That’s my take and it’s really out of you know, a worry for folks more than anything else. I have nothing against Detroit. I’ll say it now. I really don’t.

Mike: Wait a minute. How are you going to take back everything you said?

Josh: Oh, I’m in said squad.

Mike: No I’m not.

Josh: No, you know what.

Mike: What?

Josh: Click. Oh we just lost Mike, sorry everybody, next guest.

Mike: No, no, no, okay, alright, let me address that. Here’s—alright so in real estate, there’s a lot of people like we talked about earlier. There’s a lot of people that would purposely lead you astray. Forget Detroit for a minute. Just in real estate in general, right?

Josh: Absolutely.

Mike: Buy my course, $5,000, zero value in it. It’s all fluff. It’s garbage.

Josh: Sure.

Mike: Then you turn and say, you know real estate investing is for schmucks and it’s for swindlers and I’m not going to invest in real estate. It’s no good. Detroit is the same way. Detroit has really bad areas that you should never—forget about investing or buying a house. You should never drive through them. They’re just not areas that are safe to be in. There are areas in Detroit that are not bad and I know that’s going to get a chuckle, but I’m telling you, I did invest in Detroit for a short period of time, had an idea. It didn’t work out so well and I’ll tell you why.

Josh: Chuckle.

Mike: Yes, it didn’t work out so well. It didn’t work out so well for a lot of the reasons why you’re talking about it.

Josh: Was the idea really quick because I’m going to predict your idea.

Mike: Oh, here we go.

Josh: The idea was you were going to buy an entire block and you’re going to go in there and clean up that whole block because you can buy the block for like you know $5,000-$10,000 bucks and you’ll have the clean safe block and everybody—there’s good comps. Everybody’s happy and safe right?

Mike: No, I’m not that ambitious. I’m not going to…

Josh: I had that idea once.

Mike: No.

Josh: Bad idea.

Mike: I mean here’s the thing with Detroit and I suspect it’s a lot like this with a lot of big cities. I mean Detroit gets a bad rap and a lot of it is deserved and some of it is not. There are good areas of Detroit. There really are. To be general, you know, the west side, the northwest side, there’s some very nice neighborhoods. I’ve drove through them for a year. I’ve drove through them and looked at houses and they really were nice. Now, there’s areas of Detroit that are really really bad and the problem with it is, you’re right. I can go on and buy a house for a dollar, for a $1,000, for $5,000, and try to pawn that off on somebody for $10,000 and move on and there are people who are doing that every single day. There really are.

Josh: Yes.

Mike: There are areas in Detroit where you can buy a house. The problem is if you’re buying it for $5,000, you can go ahead and make the logical leap that, an assumption that it’s a bad area. Probably is and if you’re buying a house for $5,000 and you don’t think it’s a bad area, go visit the house at night and look around and see what’s happening, right? If there’s a lot of bad stuff happening then you know you’ve bought a bad house. There are houses in areas—there are areas in Detroit that are family blue-collar areas where people are investing and they’re doing alright. I know people who buy and sell houses in Detroit all the time.

Josh: Sure.

Mike: The problem is I’m not from Detroit. That was my number one mistake. I don’t know the areas. Now I partnered with a guy who is from Detroit that did know the areas and, but still he grew up there. He doesn’t live there now; he hasn’t live there in 15 years. He still doesn’t know enough about it and the bottom line is we had a lot of problems, right?

The problems you would associate with Detroit. You’re in decent areas, but it is what it is. It’s a unique area to try to invest and it takes a certain kind of investor. Like I said, I do know people who do invest Detroit. They are successful. They are not bad guys. They’re not doing the wrong thing. They understand the city. They understand how to rehab a house. They understand what you have to do during a rehab. You have to watch the house. You can’t—in Detroit; you don’t leave houses alone for a week at a time and expect nothing to happen.

Josh: Yes.

Mike: Something will happen, but the bottom line is too, there are people who want to live in Detroit.

Josh: Sure.

Mike: There’s people who can afford to spend a $100,000 on a house and you’re not doing anything wrong. They want to live in Detroit. They’re looking for a nice neighborhood with a house that is in good repair and is safe for their family and if you can provide that. Great. If you’re selling them a house that’s in a crack neighborhood and they have little kids and you’re selling to them for way more than you should. Yes, you’re a bad guy.

Josh: Yes.

Mike: That’s not all that happens.

Josh: I think that’s a good point. You know, all jerking aside, you know, people legitimately want to live in Detroit. People either because they have to or because they want to and you know it is unfortunate. You know, for me, it’s really more, I’m a big political guy and I think it’s a big political commentary on kind of the state of the state so to speak and you know it really is saddening to me more than anything to see you know one of our greatest cities in the country and frankly, one of the greatest cities in the history of the world in terms of industry.

You know, see such an utter and horrifying collapse and you know, I think investors can play a very important role in Detroit, but I don’t think it’s for the newbie. I think you know investing in an area like that is really for folks who have—what you said, have an experience level. Have a really deep understanding of the city who get you know, the demographic trends, who understand that you know you can’t mess around. Like you said, I mean you know, somebody new coming in goes to flip a house, has all their materials locked away in there and they come back. It’s gone. You know, I mean, there are a lot of problems that Detroit has and it’s not only in Detroit, but you know, I think we just—people just need to be cautious and I think it’s a place for the experienced investor to focus versus newbies.

Mike: Yes, you’re absolutely right. You have to know what you’re doing. It’s a very specialized market. I mean I’ve had break ins of houses that I’m flipping in the suburbs in the nice suburbs. It happens.

Josh: Sure.

Mike: It’s just—it might be a little bit more frequent in Detroit that’s all. I had someone break in to a house. I actually—just quick story, I had someone break in. We did a rehab. Very nice rehab, completely done the next day I went there to go look around and then the keys and everything. I had the keys. Keys not working in the door. What’s the problem? Look in, somebody has clearly has been in there. I call my contractor. He goes those are not the locks I put on the door yesterday. They’re different.

Brandon: Nice.

Mike: Somebody came in took off the locks, rekeyed it. Put a new lock on. Move in. I called a lawyer and said, “Okay, so here’s the deal. I’ve never experienced this before, but here’s what happened.” He said, “Yes, I know what you’re talking about. You have to evict them.”

Josh: Yes.

Mike: I said, “What do you mean I have to evict them? The moved in. They broke into my house and changed the locks.” They’re like, “No, you have to evict him. I mean that’s just the process.” It took me 90 days to get him out. It was.

Josh: I had the same thing happening in St. Louis. I had evicted somebody from a unit in a building. They had broken into the adjacent unit. Changed the locks and I had to evict them out of that unit there after so this is—I mean and that’s one of the reasons I tell people. Really, you know, especially in lower income areas, you’ve got to be careful, you know because a lot of that stuff happens.

Mike: Yes.

Josh: It’s unfortunate, but.

Brandon: Why am I paying a mortgage? There’s like vacant houses in my neighborhood.

Mike: You know what, I mean like I said; I think this happens in other cities. I don’t have experience in other cities, but in Detroit, there are just people who go from house to house to house to house. They get evicted. They break into another house. Unfortunately, like Josh was saying, there’s a lot of houses that needs to be torn down.

Josh: Yes.

Mike: There’s a lot of bad areas where the houses are abandoned because the neighborhoods are so out of whack that nobody wants to live there so people just break in and that’s it. They live there for three or four months and they just do that every, you know, every three or four months they move around and that’s how they live.

Josh: Well, hopefully somebody listening to this show is somehow related to the folks in power over there and maybe they learn a thing or two about you know, how screwed up things are and can start their. I know there’s a lot of forward thinking folks in there now and I think they’re trying to drive a lot of industry and I think there’s a lot of really exciting looking plans to be honest. I mean I’ve seen some really cool stuff where they’re really trying to turn Detroit into this very very progressive green city, but it’s going to take a lot of work. It’s going to take a bloody fortune to do maybe free. I’m not going to get into my politics.

Mike: Yes, you know. It’s I can’t—I definitely can’t defend the city itself and the decisions I have made over the years. I can’t. It’s tough. I’ve lived. I grew up about an hour south of Detroit and I now live a half an hour north of Detroit. When I was growing up, nobody went to Detroit. You just—there was nothing there to go do. Nobody wanted to be there. We went—you know I lived in the border of Ohio and Michigan. We’d go to Toledo. That’s where everybody went and now that I’m an adult. I’m living north of Detroit, we go down there for Tiger’s games, baseball games and Lion’s games and the area around those stadiums is actually pretty nice. You can really have a nice day and enjoy yourself, good restaurants, but you can’t venture too far out. It’s just not a good idea.

Josh: Yes.

Brandon: Yes, so you are, you’re then—you’re flipping in kind of the outskirts of Detroit? Right? Is that kind of where your strategy and location is now?

Mike: Yes, it’s technically called metro Detroit in this area so when someone says I live in metro Detroit. I real estate invest in metro Detroit. What they’re saying is the suburbs around Detroit.

Brandon: Okay.

Mike: Basically.

Brandon: Alright, that’s different so why don’t we jump back into that if you guys are done with your little.

Josh: Argh!

Brandon: Debate.

Josh: No, I.

Mike: Alright.

Josh: I you know, really quickly.

Mike: It’s tough to defend, but yes.

Josh: No I wasn’t, listen I mean I’m glad to have somebody on the show who’s from there and because I really do think it’s important that we talk about it. You know, it is an important city in this country and I think you know, it is reflective of other cities potentially as well and you know even though I bag on it, I do so because it really is representational of other stuff so I’m glad to hear that all that all of my bagging is correct.

Mike: Oh man, that’s how we just wrapped it up.

Josh: Ouch! It’s my show son!

Mike: I have to go outside Josh. I have to travel around alright.

Josh: Okay so Mike Simmons is a big fan of Detroit.

Mike: Yes.

Josh: Don’t target him guys.

Mike: Come one, the Tigers are great.

Brandon: Wow, alright, well hey, let’s go back to your deals that you’re flipping primarily correct? I mean that’s your deal now?

Mike: Yes, that’s yes, I have one rental, I got it kind of gun to my head kind of a thing it was. I got remarried and it was a house that I owned. I couldn’t sell it because it was completely underwater and I have tenants. I basically, took the first tenant that came to me with the money and it was just like everything that you can do wrong on a rental I’ve done too so.

Josh: Nice.

Mike: What I didn’t realize was, until really not that long ago, I got someone in there and they’re covering the mortgage and everything and I always thought this is the worst situation. I have bad bad tenant. I’m not charging enough. It’s a horrible like numbers wise. I’m making $300 a month on this rental. It’s not actually a bad rental if you look at it that way. It’s just I didn’t really screen the tenant too well so getting that money each month, I’m earning every bit of that money so.

Josh: Nice. Nice.

Mike: I primarily flip, yes.

Josh: Listen, you’re not alone in that either because.

Mike: Yes.

Josh: You know, I think there well the reason BiggerPockets exists today is because I am you. You know, I made every friggin mistake in the book and then I made it again and then I made 20 others. You know I don’t want other people to go through that and that’s why the show is around and that’s why the site is around and so yes, don’t feel bad. You know a lot of people go through it and we all kind of suck it up and either we lick our wounds or we get the hell out.

Mike: Yes, that’s we learn. I’ve learned a lot obviously.

Josh: Yes, yes, so where are you finding your deals? Is this marketing, MLS, what are you doing?

Mike: It’s primarily MLS. I do, you know, I do have bird dogs basically who are out there. They are not out there everyday. There’s a lot of people that are in real estate that know what I do and I you know, create a network of people that kind of throw deals at me here and there when they see something comes up or you know, they can’t handle it for whatever reason, don’t have the funds.

Don’t have the time. They’ll push it my way, but honestly, the vast majority of the deals that I get are through the MLS. I’ve got a—I work with a realtor, one specific realtor who really knows my business, knows me. We have a high level trust in each other and he sort of gets it. He pushes a lot of things my direction and let’s me look because he knows I’ll look at them immediately. I’ll make an offer on the spot if it’s a good deal so you know, it—we work very well that way and I do use him pretty much exclusively.

Josh: Okay, so say that again because I think that’s something people really need to be paying attention on. You know, in order, I think to be taken seriously and in order for other professional real estate investors to really consider you, you want to be able to and you have to be able to act quickly. Is that correct?

Mike: Yes, there’s just no way around it especially if you’re using the MLS to find houses. You have to act very very quickly because if it’s a good deal, there’s a lot of other people looking at it and like I said in Michigan, house prices aren’t what they are in California, some of these other states so a lot more people have gotten into quote real estate investing because they had an extra $40,000 sitting around and think they can do it so you have a lot of people making a lot of offers. If you’re not quick and you’re not the first one there, you know, a lot of the times you just miss out so yes, being fast is key.

Brandon: That creates some problems too in that. I mean, for a new investor, somebody who’s just getting started, the key is to go fast, but the key is also not to screw up and do your numbers wrong.

Mike: Yes.

Brandon: How do you reconcile that for a new investor? What kind of advice can you offer for somebody? How do they do it quick, without screwing it up? They don’t have time to go you know, posting on the BiggerPockets forums, debate it for a couple of days, how do you do that?

Mike: I guess my number one advice for someone in that situation would be find a mentor. Find someone who’s doing it and can give you some advice and show you how to—working the numbers really isn’t that hard. It doesn’t take that long if you know what you’re doing. It’s not like I go into houses and I pull out a spreadsheet and I have to do these advanced calculations. It’s pretty quick, but you need to find a mentor.

Find someone who can kind of short cut some of the mistakes that you’re going to make right off the bat. The real easy ones and work with them and maybe just shadow them for one or two deals and just watch, observe, maybe help if you can, but I would say, don’t try to like right out of the box, don’t try to do it all by yourself without talking to anybody and think you can figure it out. You will totally screw it up.

Josh: By mentor, you mean, find a successful real estate investor in your area.

Mike: Yes.

Josh: Who’s willing to take you under their wings versus.

Mike: Yes.

Josh: Spending ten, $20, $30, $50,000 for a mentor.

Mike: Yes, exactly and really they don’t even have to do a lot. I mean there’s a real estate investing club in most cities so find one that’s close to you, go there. Spend—go to a couple meetings, try to you know identify. Talk to people obviously, network, identify some of the people who are the players in your area and maybe just take them out for lunch and just ask them some questions. Ask them some of the things that you need to be aware of and what are the pitfalls or what are the things that you know I’m going to do wrong.

Like, these guys know exactly what you need to do when you’re first starting out. They need—they know how to calculate the numbers. They can show you how to calculate the numbers like I said it doesn’t have to be rockets science and I know I’ve listened to people on your show who are engineers and things and they have very sophisticated algorithms for how they’re going to buy houses and that’s great, but when you’re just buying one or two, you know, or your first one, you really don’t have to make it that much of a science, but there’s numbers that you have to be aware of.

After repair value being huge, I mean that’s huge. You need know what it costs to—if you’re going to do a flip. You need to know what it costs to rehab the house, right? If you know what you can sell it for and you know what it’s going to cost to rehab it and you can calculate a couple of other things like the realtor’s commission, and maybe some holding costs and then you know what you have to pay for it if you want to get a certain profit. They can work these basic numbers through, but I think you need to sit with someone who’s done it and just pick their brain. That would be the number one thing.

Josh: That’s great advice. Great advice so while we’re talking, my ADD getting the most of me unfortunately and I decided to go look up some information and I’ve go to just digress for a second here and.

Mike: Oh boy.

Josh: No, you’re going to be really pleased about this. Alright, so I found a really cool article on Business Insider and hopefully we can we’ll point to it in the show notes.

Mike: Okay.

Josh: It’s all about things going right for Detroit and I just wanted to kind of make sure that everybody knows that I’m equal opportunity here.

Mike: Alright.

Josh: The car business is booming, housing prices are up year over year, 19% as of March of this year. Housing starts have seen gains, 11 over the past 13 quarters. Payrolls haven’t seen a negative month since April 2010. Manufacturing growth has outpaced national average every month since March 2010. Local household finances have improved 11 of the past 13 quarters. City saw 68% increase in hotel night stays from 2012 to 2013 and on and on and on. There’s actually a lot of positive things happening right now so.

Mike: That place sounds like a utopia.

Josh: It sounds awesome. I love it a lot.

Brandon: I’m moving right now.

Josh: Yes, anyway.

Mike: No, it’s true. It is—things are on the upswing. I know because I buy and sell houses so I do realize that house prices are going up and the industry is picking and yes, there’s definitely a lot of good things. I’m not going to say that Detroit is the greatest place to invest. As a matter of fact, the city is a very very very difficult place to invest. If you don’t know what you’re doing, but metro Detroit or those of us who are in the suburbs around Detroit. I mean, like it’s probably like most other suburbs around the country. It’s just, you know, nice neighborhoods and a good place to invest.

Brandon: Yes, that’s cool.

Josh: Yes, sorry to jump into that, but.

Mike: No that’s good.

Josh: I just like, I felt really bad. You know, you made me feel kind of evil.

Mike: No, don’t feel evil.

Josh: Yes, well so let’s kind of move forward really quick through a couple of other things. Can you potentially walk us through a typical flip? How are you paying for it? How much are you spending on rehab? What are you selling it for? That kind of stuff.

Mike: Yes, sure so like I said, here in Michigan, I mean, I got—I always imagine people listening in other states and I know you’re in Denver, right Josh?

Josh: Yes.

Mike: Or Colorado, ok?

Josh: Yes, I’ve lived everywhere though.

Mike: Okay.

Josh: Except Detroit.

Mike: I don’t know what the housing market is like there, that’s it. I’m going to get you a little place here. I’m going to spend $5,000.

Josh: Yes.

Mike: I’m going.

Josh: Do you [Inaudible][50:48].

Mike: I’m going to get you a place right near downtown and I’m going to let you spend a week there.

Josh: As long as you buy a $5,000 matching gun to go with it, we’re good.

Mike: Yes, so you can buy real estate relatively inexpensively here so our typical buy in in my market that I work is. It started off like I said around $40,000 when I first started investing. It’s you know, probably closer to $50,000 now. We have to spend to buy a house. We’re spending…

Josh: Is that for the entire house or is that…?

Mike: Say it.

Josh: Is that for the lot? Or is that for like just the bathroom or is that the entire house?

Mike: That is the entire house.

Josh: Nice.

Mike: Yes, great deal huh?

Josh: Yes, it’s not bad.

Brandon: Yes.

Mike: So $40—I don’t know, like $50,000 buy in. No, the houses that I’m buying are like a three-one, three-two maybe, brick ranch, thousand square foot garage and basement. I mean, pretty straight forward so 50,000 buy in, we’re going to spend 15-20, probably closer to 20 on the rehab and sell it for usually around 110, 115 somewhere in there.

Josh: Not bad.

Mike: That’s a pretty typical deal. The way that I finance my deal—the first deal I did like I said, we got a mortgage and we went all in with the savings and paid for everything ourselves. What we did right and oh in the right column, I forgot I didn’t finish the topic.

Josh: Come on.

Mike: It just occurred to me what I did right. I didn’t mention it. One thing we did really really well was once we had that first house going, we hadn’t even closed on it yet, but we sort of had an idea that we were going to make money. We thought it was going to go alright. We started going to these real estate groups and these clubs and our mastermind we were in and just talking to everyone. Telling everyone what we were doing.

We started a Facebook, at the time, they were called fan pages. I think they’re called business pages now, but we started on of those and got on there and started posting video. Posting pictures, talking about what we were doing. Just putting ourselves out there as much as we could. Anywhere we could and based off that networking and putting ourselves out there and putting videos up and doing tours of the house that we had renovated like before and after type stuff. We had people start approaching us and saying, “Hey, you know, we like what you’re doing. You seem like great people. It looks like you did a good job. We have a little money. We’d like to invest. You know, how do we get this going?” We sort of felt our way through the process and made some mistakes. We did a few without any contracts at all. Just here’s $80,000.

Josh: Wow.

Mike: Let me know what you make and we started getting a little bit more professional.

Josh: Can you get me the phone numbers of those folks who blindly gave you $80 grand?

Mike: Well, luckily, we were honest people and it all went well.

Josh: Yes.

Mike: You know, then we started getting a little bit more professional and when we found a house and got it under contract, we would actually create basically an investment portfolio for the house where we’d show them pictures. We would go through the list of what we were going to do to it. Show them the comps for after repair values and we kind of created a—basically, a little kit or each house that we did that would present to investors and show them what we were going to do.

Just a little bit more professional, but that’s basically how it started. Just networking and talking and then you know, word got around and we started getting asked to talk at these local real estate clubs. You get up on stage and speak and then you know, soon as you do that, you get a little bit of, you know, extra credibility and more people will approach us and pretty soon at the time, we weren’t doing very much. We were getting more money than we could use. We kind of, unfortunately, we had money sitting on the sidelines that we just, we couldn’t use it all.

Brandon: Yes, no that’s an awesome like tip too. Is just by getting out there and telling people what you’re doing. I mean, I say that a lot. Just tell everyone what you’re doing. Talk about your business all the time.

Mike: Yes.

Brandon: I mean don’t be annoying, but yes, and people—if you’re doing a good job, people are going to be attracted to that. People are attracted to success.

Josh: Hey, I’m Brandon from BiggerPockets.

Mike: Yes, I mean, you know it’s true. The thing was is I’m not a real network guy like I don’t love going to things and talking to people I don’t know and it felt kind of braggy at first, but if you do just get out there and start talking to people. I mean I know people that do way more than I do in real estate. I mean they’re just killing it and nobody knows about them and they’re number one complaint is I can’t find enough money to do deals, but if people knew how good they were. What they were doing and how much money they were making and how many houses they were flipping and how—what a great professional job they’re doing. People would trip over themselves to get to them to try get on board and be part of that.

Josh: Yes.

Mike: They don’t like networking. They just kind of do everything in a bubble and they’re doing great. They’re killing it, but nobody knows.

Josh: Yes, Brandon and I have a lot of discussions about real estate investors and everyday and you know one of the things that we really end up always backs on is you know there’s a lot of estate investors who think everything is good. For them it probably is, but I—he and I both argue that every single investor has wants and needs of some kind. You know, we’ve all got some kind of needs. You know, if you’re going to be a successful investor in real estate, no matter what, at some point in time you’re probably going to end up needing more funds to help you grow and continue to grow your business.

You know my quick plug is you know we’ve got the BiggerPockets Marketplace. It’s BiggerPockets.com/marketplace. You know, just post your needs and wants. I mean if you’re a successful investor and you’re killing it and doing great things. Show people, you know, show them in our success stories area. Let them know that because the more you do that and we’ll link to this stuff. We’ll link to the success stories in the show notes and we’ll link to the marketplace, but the more you can demonstrate to other people that you are successful that you’re doing a good job. The more attracted other people are going to be to you so you know it’s not a matter of bragging. It’s a matter of you know this is how you build a business by telling people that you’re doing well. You know, they don’t know otherwise so do it and make sure to put it out there because when you put it out there it’s circles back.

Brandon: Now with that though, how do you do that if you’re just starting out? You know, a lot of our listeners are just starting out. How do you brag about it or talk about it? Whatever, how do you? How do you build up that reputation when you have no reputation?

Mike: Like I said.

Josh: Don’t lie.

Mike: Yes, well what we did is we went to our local real estate investing clubs. You know what, there’s a lot of people there who are just talking about real estate and they show up every month. It seems like they’re doing stuff, but they’re really not. They’re just talking about it. They just like the environment and they never get out there and do anything, but there are a lot of people or some people I should say, not a lot, but there are some people at those clubs that are really doing great things and at least in my area investors show up to those clubs.

People who want to be in real estate maybe don’t have the time or the inclination or the knowledge to actually go out and do it, but they have money and they want to hook up with people who know what they’re doing and know what they’re talking about and I’m telling you, I—that’s how I have found most of my private money is just doing exactly that. I know people who have had great success. They just bump into a guy. They start talking and turns out this guy has got money and he really wants to invest and he likes what you’re doing, but if you never go to these things. If you never network, if you never talk, if you never discuss what you’re out there doing then they don’t come to your door and look for you. You have to go out there and make yourself available.

Brandon: Yes, that’s true. Say I have one more question kind of involving this the raising money thing. This is a question that people ask all the time on the forums and it’s a state specific and it’s a case specific things so I know you’re not giving legal advice here, we’re not lawyers and we don’t play one on TV, but how are you structuring your partnerships? Are you doing LLCs, corporations? Or how do you manage that side of things.

Mike: Well, I have an L, my business is an LLC, but as far structuring the deal, the financing with the private investor. When I started out I had the philosophy and the philosophy was basically told to me and I’ve heard you guys say it, “50% of something is better than a 100% of nothing.” What the advice to me was listen, you’re new, you haven’t really done that much, if you find someone who is willing to partner with you and you can give them 50% of the profit and they will put up all the money then do it. I created pretty quickly a large pool of investors who were willing to do just that so what I have been doing for the last years is pretty much 50/50 deals; however, I do have a few investors that will work on a greater return.

That’s just what they’re interested in. They want a greater return and that’s fine and I’m trying to kind of branch out. I got kind of spoiled for awhile because I had a lot of investors and I had more money than I could use and, but they were all 50/50 deals so now what I’m trying to do is find other avenues and other investment means where, you know, it’s maybe a little bit, you know, more profitable on my end than just a 50/50 every time. I still do a lot of 50/50 deals.

Josh: Can you explain what a rate of return is for folks who may not understand?

Mike: Yes, sure. Like it would be someone who says, alright, I have a $100,000 right? The deal is going to be—let’s just say it’s a little expensive for my area because I’m near the D-town word. I can get a house for $40, let’s just say I had to pay a crazy amount like $70,000 and it was going to cost me $30,000 to rehab and somebody says I have a $100,000 that I’ll loan you, but I want a greater return. I want 10% on my money and basically you’re paying them just a simple interest 10% every month until you pay them back so if you—if it takes you six months to renovate the house and another year to sell it, you’re probably not going to make out better in that situation. That’s just what you know, you decide on before start so basically it’s a monthly payment, a simple interest monthly payment rate of return each month.

Josh: Got it so in that $100,000 example, if it were a 10% rate of return, is that 10% so I’m paying $10,000 month one or am I paying $10,000 spread over the amount of time it takes.

Mike: Yes, it would be spread over the amount of time it takes so there’s no guarantee that it’s going to get to that $10,000 if you buy the house and sell it within three months. Well, that’s great, you’re not going to end paying as much as you would if you held on to it for a year.

Josh: Got you. Got you.

Brandon: Do you put each house in each partnership into a separate LLC? Or do you run it all in your business LLC?

Mike: I run it all onto my business LLC and basically what we do for our investors is we’re signing a private mortgage and the way I structure it to protect them is I give myself a timeframe. I basically commit to a timeframe and usually it’s six months just to be fair to everybody so, but from the time I take their money on a loan, for six months—I have six months to sell it. At the end of the six months they’re within their rights to foreclose on a house. They can take the house from me. If I take forever to sell it, if I just hold onto it, you know, I say I’m going to borrow your money because there’s no payments. Let’s make that clear too. I make no payments.

Brandon: Okay.

Mike: They pay for the cost of the house, the EMD, the rehab, everything, everything comes out of that money so it’s basically, we have a couple of different contracts. One of them is a mortgage and then we have a joint operating agreement that we sign, right? Each one we have joint operating agreement and then we have a loan for unsecured that which should be the rehab amount, right? The money we’re going to use to fix it so there’s three documents and then at the end of that six months, we have to pay them back in full plus 50% of the profit or they can foreclose on the house.

Josh: Yes. I got to tell you, that’s pretty ballsy of you to offer that out and I think you know, I think what that does is that makes you very attractive for private money investors and I think for folks listening who are thinking of kind of getting into this and borrowing people’s money. You know, you said something that really struck me and you know, I think I’ve heard that from the vast majority of our guests who do take private money. It’s your job, your goal, is to make your investors feel at ease and I think I can’t press upon it enough that that’s probably the most important part of the entire thing. Would you agree?

Mike: Yes, absolutely and you know, I don’t know if it’s the area I’m in or the people I’m dealing with. A lot of my investors are also barely you know savvy when it comes to real estate investing. They don’t go out and do it themselves, but they understand it. They’re in the circle so they sort of get it. A lot of them want to know the first questions, especially when I was new so these contracts and my system set up basically when I was new and I just—I’m not afraid of it because like you said, I guess it’s a little ballsy, but I’ve never anyone foreclose on a house because I get a sole and I’m aggressive.

Josh: Yes.

Mike: About buying. I’m very very aggressive and very very into the rehab management too. I’ve gotten that down and I’m very comfortable with that. I don’t go over my timeline. I don’t go over budget and I get the houses sold because it’s just. I’m very aggressive in that end of it so for me to offer that six months or whatever, you know, foreclosure clause. I’m fine with that.

Brandon: Yes, yes, that makes sense. I love the partnership thing. Again, like you said, you’ve given away some of your profit. I know that it’s pretty much the same way I structure mine, but I really like what you said about not having payments during the time when you’re flipping. That’s kind of a neat way to do it. You split the profit at the end 50/50, but you make no payments in the meantime.

Mike: Yes, there’s just zero. We get all the money up front too. I mean I don’t get releases. I get the you know, they buy the house obviously and then whatever we’re going to use for rehab, I get that all at one time and then I decide how to dole that out to the contractor.

Brandon: You’re.

Mike: It’s pretty convenient.

Brandon: You’re pretty much doing these with no money down? I mean essentially right? All these new.

Mike: I mean none, yes, none, yes, I have none of my money into the deals at all. I have not put in any money into the deals since the first house I did.

Brandon: That’s awesome. That’s awesome so it can be done people, it can be done. Why don’t we move on a little bit to I guess a little more of this starting out stuff. We want to talk about you know, when people first get going. I’m wondering if somebody is listening to this show who has not done any real estate investing yet whatsoever. What is the first step that they should do? I mean like they don’t even know what field they want to get into. They don’t know. Like what should they do to get started?

Mike: I think the first thing they need to do is get educated. It’s a really slippery slope because of what I talked about. We talked about it at length what I did. I spent too much time getting educated, but I think the bottom line is anything—anytime you’re going to get into something like this where you’re going to be spending a large amount of money and maybe somebody else’s money. You better know what you’re talking about.

You better know what you’re doing so I would say get on—like I mean not to plug, over at BiggerPockets is just a great place. It’s a wealth of information and you should get on there and start reading and figure out what excites you the most and start reading about that and really educate yourself. Then the next thing would be like I said, find a mentor. Someone who is willing to sit down and just give you some guidance. I mean, you guys both know if someone came to you and said I’m going to start.

You know, I’m going to start investing in real estate, I’m going to do it. You can’t stop me and I’m not going to ask anyone for any help. I’m just going to go out find a good deal, throw money at it and I’m going to go for it. You know that they would probably likely fail if they did that way so if you could sit down with them and just spend 20 minutes, half an hour. You could probably save them so much time and so much money. I mean a half an hour isn’t enough, but even a half an hour, you would probably get them out of so many jams that they don’t have to get into so just finding somebody who knows what they’re doing and then talking to them and befriending. Don’t be a pain in the butt. Be friendly. Be personable, try be charming, don’t be fake and don’t ask for everything under the sun. Just listen. Just ask them some questions. Let them talk to you.

Josh: You know and I think you know I’m going to put out a plea from the flip side here. You know, I—there’s so many of us who listen to the show and who are out there, so many people who are doing well. You know, I’m going to challenge you to—if you’re one of those folks to you know, step out of your comfort zone and reach out and find somebody who’s new and who doesn’t have the chops yet and help them out because you know, you’ll actually be amazed. You’ll probably learn something yourself from helping them and you know, it’s—we all started from somewhere. Everybody started at the very beginning and everybody’s made mistakes and if you can help you know, one person out. I mean we can better the community that way.

Brandon: Yes.

Mike: Yes, I totally agree. I think a lot of people are willing to do that, but you’re right. I mean, we get so caught up in what we’re doing, we don’t think to necessarily stop and help someone, but you know, someone just comes up to you and says, “Hey, I really want to get into this and I don’t really know what I’m doing.” Just give them a minute of your time.

Josh: Well, I think part of that comes from this mindset, which is a false mindset. I think it’s a false mindset of the competition. I’m helping my competition and you know, in some ways, you are, you know, but in the end, you know, especially in real estate, your competitors are going to be your deal flow and many many cases if you do it right, you’re going to work with these guys so I think it’s a mindset thing.

Mike: Yes, I agree and a lot of people do look at it as competition. I really don’t either, even in my local market. I’m—I swear I’ve gotten more back from helping people than I’ve lost. It’s never negatively affected me. I’ve never had an issue with that so you help people and their—they just—they want to help you back and you end up, you know, like you said, deal flow. Perfect example, that’s the kind of thing that happens.

Brandon: Do you think then that flipping is a good ideal to get into when you’re first getting started because that’s what you did or would you advice somebody to start somewhere else?

Mike: That’s a good question. I think you can really screw up worse when you flip houses right off the bat. The problem with wholesaling when you start off and I’ve listened—like I said, I’ve listened to a ton of people you guys have talked to and I’ve heard vastly different opinions on this, but you talk to someone named Sharon Vornholt and her—she said something I thought made a lot of sense.

When it comes to wholesaling, you have to know how to buy right, you have to know how to renovate or at least you need to know the cost of—what it costs to renovate a house and then you have to have someone to sell the house to you. You have to know what it’s going to sell for and at the end of the deal. You have to have so much already under your belt in terms of knowledge. I think it’s very tough to start off wholesaling personally. If you don’t have the connections, you don’t have people who want to buy, you don’t have people who want to sell, and you don’t know how to renovate a house or what it costs. I just don’t see how you can really do it. I know you’ve had people on and they’ve said they’ve done it that way and that’s how they started. I believe it, I just—it seems hard for me.

Josh: Yes.

Mike: I do think that flipping houses is a good way to start honestly. Especially if you just get a little help from someone who’s done it before. Now, it might be easy in my market to say that because the amount of money we’re talking is not astronomical so for me, that was a good way to start. If I lived in southern California, I don’t know, maybe that wouldn’t have been a good way to go. Maybe it would have been cost prohibitive. I wouldn’t even be able to do it, but in my area fix and flip is probably a great way to start.

Brandon: Well and that is a really good point right there. It’s not going to be the same for you as it is for Josh. For Josh’s neighborhood, the houses are going for a million dollars or $500,000 and you’re $40 so in a different area, different methods work for different personalities so it’s kind of a blending of those three things to try to figure out how you should get started.

Mike: Yes and I enjoy the managing of the contractors. Dumb as that sounds. I like managing the pro—I don’t know if I enjoy managing the contractor, but I enjoy managing that process. I like the timeline thing and I like having a budget in a timeline and seeing how you know close to that or how much better I can do than that. I enjoy it. I kind of thrive off of that.

Brandon: See I don’t like that at all.

Mike: For me it works.

Brandon: I’m the opposite. I don’t like managing the property, but I love finding the deals and managing the tenants. I don’t mind that part of things as much so it just, yes, different personalities. I love that.

Mike: Yes.

Brandon: Wrapping here before we kind of get to our final rounds. What is your plan for the future? Do you just plan on flipping continually? You have one buy and hold do you plan on doing more of that? Where do you see yourself in then next few years?

Mike: Yes, ironically I do plan on doing a lot more buy and hold, next year. I do flips now like I said, you know, I’m not getting any younger. I’m starting to realize that if I ever want to you know, be able to retire or have some time to myself where I’m not working all the time. The only way to really do that in my opinion or the best way to do it is with buy and hold real estate so you know, flipping is great, but I’ve got to be there everyday right? I’ve got to be on top of it. It’s a full time job. I am going to do a lot more buy and hold in 2014. That’s my plan so I’m just going to be a little smarter about it. You know, tenant screening and that kind of thing that I didn’t do with the house that I currently have. I’m going to be a little bit more methodical and systematic about it and yes, that’s my goal for next year is to do a lot more buy and hold.

Josh: Nice. Nice and Brandon wrote a really great article on tenant screening that that’s pretty thorough. I don’t know if you’ve read it already, but we’ll link to it in the show notes.

Brandon: Thanks Josh.

Mike: Okay.

Josh: It’s fabulous.

Mike: Very cool. Yes, it’s—that’s something I have to show. That’s a skill that I don’t have that I need to sharpen.

Josh: Yes.

Brandon: Cool.

Josh: Right on. Right on. Well cool, oh go ahead so.

Brandon: Oh I was going to say we do have a short link, but it’s just BiggerPockets.com/tenantscreening will actually go right there so.

Mike: Okay, awesome.

Brandon: Anybody cares. Alright, well why don’t we get to the.

Announcer: It’s time for the Fire Round.

Mike: The sound effects are fabulous guys. It’s like George Lucas is working on the show.

Josh: That’s how we do it man. Just got raise the bar right?

Brandon: Yes, there you go. Alright, these questions all come from the BiggerPockets forums. These are questions that real people are asking and we want to know your advice so we’re going to fire them at you. You can fire them right back. Number one, you hire a bad contractor who doesn’t do the work right. For whatever reason you fire him. Now he’s threatening to file mechanics lane? What do you do?

Josh: Perfect.

Mike: That’s a tough one to start with. Is this a question that I put up there? Do you guys look for my questions? Well, hopefully people are listening to this show and they’re going to have people sign a release of lien before they even get started. That’s key. You know, the way you get around legal problems in real estate in my opinion or the way you avoid a lot of problem in real estate is with paperwork, contracts, people sign things up front.

You have agreements that you can present. Other than that I would say, you should never pay your contractors with cash. It’s very difficult to prove that you’ve paid them when you pay them with cash so you know, use business checks or at least a check or some kind that’s traceable and I would say have them sign off on everything you’re paying them for. I mean don’t hand money to anybody that isn’t in the form of a check and that they’re not signing something that’s stipulating what it is they’re taking the money for. What’s been done? What are you paying for, that kind of thing.

Josh: Come on Mike, you know, I’ll charge you 75% of my rate if you pay me in cash.

Mike: Yes. Yes. No, that’s alright, I’ll pay the full rate. I’ve had that too.

Josh: Of course.

Mike: Hey it will cost you less if you use cash.

Josh: Yes.

Mike: Not really. Not in my experience.

Josh: Yes, yes.

Mike: It cost me more.

Josh: There you go, there you go. Alright, next question, is it worth it to texture walls on a flip?

Mike: Texture walls? Funny, I had a good experience with that too. I don’t texture walls on a flip and I didn’t even know that texturing walls was desirable until one of my contractors in the past did without asking me. I saw it. I saw that he did it and honestly I thought he did something that made it look cheap and I like went ballistic. I like blew a gasket and then I got—I left the site and I turned to one—I called one of my friends that was in real estate.

He had been flipping houses for a long time. He really knew stuff. He was somebody I kind of—he was sort of a mentor to me and I said, “Can you believe what this guy did. He textured this walls! It looks like bleep and I’m so pissed off. I’m going to fire him.” I was just sop beside myself that he did this house this way and he’s like, “Dude, come down. People love that. I pay extra for that.” I was like, “Really.” I went back and said “You know what, I thought about it. I’m going to let it go. I’m not mae anymore. Don’t worry. Just do it without asking me. He just thought it was funny, but I don’t do it to answer your questions, but I hear people like it.

Brandon: No, yes, definitely. I like it I need to actually texture my bedroom one of these days so.

Josh: You should texture your face and get rid of that beard of yours.

Brandon: I did shave. No shave November is over. Look at this it’s shorter.

Josh: Thank god. Oh my god, I have to talk to this guy. There were like owls coming out of his face.

Brandon: Got to live somewhere. They got to live somewhere. Alright, next question. Should a house flipper get their real estate license?

Mike: I don’t have my real estate license so it would be kind of hard for me to say that they should. I don’t think you need to. I don’t think it’s all that important personally. If you want direct access to the MLS if that’s something that really excites you then you probably should. I don’t think it’s a good use of my time to be trolling the MLS and that kind of thing. I have a realtor that I love. He does a great job for me. He’s very timely. He shoots properties at me. He’ll do anything that I need him to do that I can’t do as a non-realtor so yes, I don’t think it’s important personally. I’m sure a lot of people are yelling right now.

Josh: No, no listen.

Brandon: You’re wasting so much money.

Mike: I don’t think it’s a waste. I have a very good friend who flips houses in my area. He went and got his real estate license. He thought it was a good idea for him. I just never felt like I needed to.

Josh: Got you. Got you.

Brandon: Good, good, me neither.

Josh: Alright, great. This question is perfect for you. What do you look for in a neighborhood Detroit? Sorry I had an itch.

Mike: I look for a declining economy and entire street blocks that I can buy for what’s in my pocket. What’s important for me is that every house in the area that I’m in is essentially was built the same timeframe, same era, very similar houses so I’m buying a lot of three-ones with a basement, a garage, brick ranch, and there’s so many houses like that in the areas that I buy houses that I—there’s a very predictable after repair value and that’s really important to me. I don’t want to be in an area where every house is unique and it’s on a weird road.

It’s sort of out in the country like, it’s very hard to predict the prices of those houses. What they’re going to sell for. I like to be in very predictable neighborhoods. The neighborhoods that I work in are very densely populated. You know, very run of the mill thousand square foot ranch houses. I just know with very little research exactly what it’s going to sell so it kind of speeds up the process of sifting and sorting through houses.

Brandon: Okay, yes, makes sense. Alright, next question. Josh, you want to take it?

Josh: That was my question.

Brandon: Was it? Oh.

Josh: Yes, yes.

Brandon: You’re right.

Josh: Don’t—no problem. How’s your nap. Did you wake up?

Brandon: Yes, petting my cat, alright.

Josh: What?

Brandon: My cat it’s keeping me warm. My feet. Alright, next question. What are your—alright next question. Are we going to get through this?

Josh: You realize that 16,000 people or 17,000 or whatever the heck we’re at these days now know that you’re sitting here petting your.

Brandon: Yes, yes, whatever. Alright, next question. What are your thoughts? Let me. Alright, next question. What is your opinion about hard moneylenders and flipping houses?

Mike: I have never used a hard moneylender to flip a house. I think they’re fine. I think there’s a place for them. You know, the deal with hard money lenders for me is usually you’re making payments while you’re flipping the house and the amount of money that you’re going to have to pay them at the end of the deal is probably going to be more than what it would be if you just partnered with somebody and just split the profits in my estimation so I just—you know, and there’s tons. There’s paperwork involved there too.

It’s almost like you’re going to a bank, but getting the worst so I don’t usually go to hard moneylenders for that reason. If I can’t move extremely quick like I can with a private lender then I’m just going to go ahead and get a mortgage and pay way low interest rate. A lot less of an interest rate and not have all the points and things so to me it’s like it’s between private money and a bank, you know, mortgage. It’s like the worst of both worlds. It’s not fast and it costs you a lot.

Josh: There you go, there you go. Well if you are looking for hard money lenders, we have a directory of hundreds them on BiggerPockets at BiggerPockets.com/hardmoneylenders for anybody listening and.

Mike: I just crapped all over them too sorry about that.

Josh: That’s all good man, I mean, I listen, different strokes for different folks.

Mike: Yes, exactly.

Josh: You want to vet anybody whether it’s private, hard money, or even traditional and see what works best for your situation so just cause I think Detroit sucks doesn’t mean that it does.

Mike: Oh that’s great. I can’t wait to hear your next show when you talk nicely about Detroit. I think you’ve turned over new leap. I think—I got that article you sent by the way. I saw that you sent it during the show. I got that and I’m going to post that on BiggerPockets.

Josh: You should.

Mike: I’m going to get that out there.

Josh: You should.

Mike: I want to hear the change of heart.

Josh: I have a change of heart. I think that’s really positive. Like I said, there’s a lot of good things happening, but stop interrupting me on my Fire Round okay? Geez. Alright, Fire Round final question. Do you use a smartphone to help you run your business and if so, how?

Mike: Oh man, I’m all about the smartphone. Yes, actually I do, well obviously, I’m using it for texting and emailing like everybody else, but you know that’s a lot of it. There’s a lot of emailing that goes on in real estate investing so tons of emailing. I have created some just fairly simple spreadsheets that help me work through some of the numbers. When I’m in a house that I’m looking at and I basically create them in Google docs and I open them through Google docs app and can plug in some numbers real quick to help me just sort of sort through some things. Yes, I use my smartphone for that.

Every—you know a little bit, I don’t use it a ton, but I get on Zillow once in awhile and use that just to do some double checking on certain things and see what’s out there. Yes, I use my smartphone for almost everything to answer your question, but specifically for the business I have created some spreadsheets that I use when I’m you know going through and evaluating the flip and what I’m going to spend.

Josh: Right on. Right on. Cool, alright, well, with that said, it’s time to wrap this show up although I am so saddened by it, but.

Mike: That’s nice to hear. I’ll come back tomorrow.

Josh: Yes. Sure. Sure. Speaking of sure. We’re going to bust out the.

Announcer: Famous Four.

Brandon: Our Famous Four, these questions we ask everyone as you know, so question number one, what is your favorite real estate book?

Mike: I’m going to bum Josh out. I know he gets so bummed by a lot of the answers.

Josh: I really don’t get bummed.

Mike: Alright, alright.

Josh: I just sound bummed. Just cause I sound like I haven’t gotten through puberty, doesn’t mean I’m bummed.

Mike: I would say you know, probably the one that had the biggest influence. I mean it was Rich Dad, Poor Dad. I know that’s a little bit of a cliché. It’s a bummer. You guys are going to have to figure out a way to ask this where you say, “What’s your favorite book.”

Brandon: Other than.

Mike: “You can’t say.” Yes, exactly, Rich Dad, Poor Dad. I’ll throw this one out there too. This will be a little bit of a curve ball that most people will probably snicker, but it did, I don’t know if it’s a business book or more of a real estate book. A little both or maybe neither, but The Art of Deal. I liked it. I—it was a book that was motivating to me. I thought it was really cool and it just sort of got me. Just like Rich Dad, Poor Dad. I mean, it just sort of got me thinking along you know, that line of real estate investing. Obviously, I’m not buying houses or apartments in Manhattan and flipping buildings there, but it was a book that I liked that had an influence on me so.

Brandon: That’s Donald Trump right?

Josh: That is Donald Trump.

Mike: Donald Trump, Art of the Deal, yes.

Brandon: I read that a long time ago. I don’t remember much of it.

Mike: Right, it’s an old book.

Brandon: Yes.

Josh: Yes.

Brandon: I actually really enjoy reading. Like I read one of Donald Trump’s newer books, mostly entertaining read I’ve ever had.

Mike: Yes.

Brandon: Like it was just hilarious because.

Josh: He’s probably one of the greatest self-promoters in the history of histories.

Brandon: Yes.

Josh: I mean he really is.

Mike: Yes.

Josh: You know, that’s at least I’d argue his a lot of his business today is certainly in that promotion. The branding and the promotion versus the real estate, but certainly obviously he’s doing real estate so that’s a good real estate book, Art of the Deal. I actually really enjoyed it as well. What about favorite business book that’s not Art of the Deal, not the any of the banned book list for Josh Dorkin?

Mike: I like the four, no I’m just kidding. I won’t go there.

Josh: Three-Hour Work Week.

Mike: Exactly. Are you still on page 27 by the way? That’s the last I heard.

Josh: I am.

Mike: Alright, that’s fair. I like a book called The Millionaire Next Door.

Josh: Yes.

Brandon: Yes.

Mike: By Thomas Stanley. That was a cool book. I liked that. It had a lot of influence on me. It was kind of eye opening. Some of the concepts in there that I hadn’t really thought about. I also do like to read some Dan Kennedy stuff. I don’t know if you guys read him at all.

Josh: No.

Mike: I have a book called Wealth Attraction for Entrepreneurs. Its just one that I read recently of his that I really liked so just a cool guy, motivating guy. You know, he has a lot of books out there that no BS series basically is what he writes so I read some of his stuff.

Josh: Right on. Right on. Very cool. What about hobbies? Do you do anything for fun? I don’t know, like skateboarding through downtown Detroit at 11 o’clock at night.

Mike: Yes, it’s a game we call kick someone out of the car in Detroit and see how long they last. I’m kidding. For hobbies, you know what, actually, I don’t know if it’s a hobby. It’s something that I’ve been involved in my whole life, but I’m actually a fourth grade black belt and I used to run a full time martial arts school and I’m still involved there. There’s a school with my name on it still that I don’t necessarily run, but.

Josh: Really.

Mike: It bears my name and I go there and help with testing and some promotional stuff there.

Josh: Nice. Nice.

Brandon: You should fight Joel Owens.

Josh: I was going to say that. Joel is like a third degree black belt.

Mike: Oh yes.

Josh: We got to get you two actually kicking each other’s butts and then Brandon Turner over here. My fabulous cohost.

Brandon: I’ll take you both on.

Josh: Who likes to pick fights with people twice his size or more skillful than him. That would be fun.

Mike: I would have to hopefully be more skillful because I am not twice his size. I guarantee that.

Josh: Well, he’s like eight feet tall.

Mike: I’m also kidding. Oh okay, I’m definitely not.

Brandon: Yes, I fight 16 foot tall people. Yes.

Mike: Yes, yes. Plus I’m getting old. I can’t do that anymore.

Josh: Nice.

Brandon: Alright, final question of the Famous Four. What do you believe sets apart the successful investors from those who never really start?

Mike: I think the thing that sets them apart is they take action and then they keep taking action. To me, that’s the beginning and the end of what it takes to be successful. You don’t have to be incredibly smart. You don’t have to be, you know, born into money or anything like that, but you have to take the first step, which is scary as hell and then you have to keep doing it even if things don’t go perfectly the first time so action and then consistent action. That’s it for me.

Brandon: Good. Good.

Josh: Awesome.

Brandon: Some tweetable topics in there.

Josh: Yes, for sure. Awesome, well listen, Mike, it’s a—been enjoyable I think this is a historic episode. I think lots of people are going to stop tuning into BiggerPockets.

Mike: How many people have we alienated so far?

Josh: Well, there’s only like 16 people who live in Detroit. So…

Mike: That’s great. Alright, I’m still finding that $5,000 house and you have to come and live in it.

Brandon: Yes.

Josh: You know that would be a serious challenge. Can Josh survive the week in downtown Detroit?

Mike: I’ll do it. Exactly. Downtown, I’m going to give you a bottle of water and a pocket knife. Let’s see what you can do.

Josh: That’s awesome. That’s awesome. Alright man, well listen. it’s been a pleasure. Lots of really really good tips and feedback and your story is fascinating and as our, you know, everybody has got their own unique story and it’s so cool to just see how we all kind of make our way through this world. How can people find out more information about you? Where can they reach out to you?

Mike: They can find me at I have a website called Just Start Real Estate. They can go there and check me out. They can email me at [email protected] That would be a good way to get a hold of me.

Josh: You also have a podcast, yes?

Mike: I do have a podcast ironically called Just Start Real Estate and basically just you know, it’s for people who are just starting out really. I’m trying to give advice to people like you talked about the challenge right? Just trying to find people and talk to people who really haven’t done much of anything or even nothing and answer some of those questions that keep people. They even make them too afraid to even get out there and get started so.

Josh: There you go. Well, awesome. Listen, thanks so much for being on the show. We really appreciate it.

Mike: Awesome. I had fun guys. Thank you.

Brandon: Yes, thank you, Mike.

Josh: Alright everybody, that was Mike’s Simmons. Hopefully you guys enjoyed the show. There was a lot of really really good stuff in there and we definitely appreciate Mike for taking the time for being here with us. As we said a couple times, if you’ve got questions for him, check him out on the show notes at BiggerPockets.com/Show50. Otherwise, definitely make sure to connect with us over on the various major social networks, Facebook, Twitter, G+, LinkedIn, and Pinterest now.

We’re trying to share some cool stuff over there as well. We are sharing and engaging over on these networks with things that we’re not doing on BiggerPockets so definitely make sure to follow us and connect with us on those various places. Otherwise, of course, you want to also connect with us on BiggerPockets at BiggerPockets.com in case you missed it and you should do that. Why should you do that Brandon?

Brandon: I don’t know. I got nothing.

Josh: Why do we pay this guy? You should connect with us on BiggerPockets because you’re going to get a whole lot of value out of it and you’re going to meet guys like.

Brandon: Oh yes, that was it.

Josh: Mike and you’re going to learn a thing or two and you’re going to build your network and we definitely encourage so if you’re not interacting, if you’re not connecting or even of you have a profile and you do anything with it. Just take some action and start connecting so that’s it. I enjoyed it. What do you think Brandon? Merry Christmas, my friend.

Brandon: Merry Christmas. Let’s wrap it up. Don’t shoot your eye out.

Josh: Do it. Wrap it up.

Brandon: Alright this is.

Josh: Alright, I dog dare you my friend.

Brandon: This is the BiggerPockets Podcast.

Josh: This is Josh Dorkin, signing off.

Brandon: Dang it.

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