Making Twice as Much with Half as Many Doors and 100+ Flips

Ashley:
This is The Real Estate Rookie Podcast episode 187.

Welby:
Every state has a area, several areas outside of the major city that everybody wants to play in, every state. I don’t care what state, throw a dart on the wall, there’s going to be areas just outside of your area where you can play. So it’s okay to humble yourself and admit the truth that you can’t move in the manner how you want to move because the market is too aggressive.

Ashley:
My name is Ashley Kehr, and I am here with my co-host Tony Robinson.

Tony:
And welcome to the real estate rookie podcast, where every week, twice a week, we bring you the inspiration, information, and stories you need to hear to kickstart your real estate investing journey. So Ashley Kehr, the wonderful co-host from the beautiful state of New York, what’s going on?

Ashley:
Well, first of all, talking about beautiful. I just checked the weather for next week, and finally we’re going to get in the eighties.

Tony
There you go.

Ashley:
High of 78, high of 80 a couple days next week.

Tony:
That’s funny.

Ashley:
Yeah, I guess I’m looking forward to that. And I’m looking at myself right now in the recording here and I feel like I’m pretty washed out. I got my white sweater on, I got a white background, my white AirPods, and then my white pale skin, so I’m looking more to some sun.

Tony:
When you said speaking of beautiful I checked out, I thought you were going to say a mirror or something, and that you were blown away with how beautiful you felt about yourself, but you were just talking about the weather. Well, how are things on the business side? What’s cooking?

Ashley:
Yeah, doing good. We’re getting pretty close to finishing our A-frame cabin, which is so exciting.

Tony:
Awesome.

Ashley:
I finished the tile selections today, so that project I can’t wait to be done because it’s the first project that I tackled with my new business partner, so it’ll be his first investment property under his belt, so I’m really excited to see that finish.

Tony:
And you’ve been doing a great job of sharing that on your Instagram, so if you guys aren’t following Ashley, be sure to follow her @wealthfromrentals, you guys can follow me @TonyJRobinson, but I’ve loved seeing that one come along. How much more time do you think you guys need before it’s live and up and running?

Ashley:
I would say we probably have a month left on it.

Tony:
Okay, all right, that’s awesome.

Ashley:
What about you, what’s new with your projects? Because you have how many flips going on right now? Or rehabs?

Tony:
Yeah, we have four active rehabs going on right now. We literally just walked a property yesterday that I think they’re going to accept our offer on, that’ll put us at five. And it’s been a challenge. We’ve got a crew that we work with out in Joshua Tree, but he’s running at the red line right now as well, so he’s been struggling to find more guys for his crew. So he came back to us yesterday and said, “Hey, I think the most that I can handle at one time is three flips.” So he’s already over capacity. We’ve experimented with some other crews out in Joshua Tree, and none of them have really worked out. The last one we literally had to pull him from the job halfway through just because it wasn’t working out. So finding good people has been a big challenge for us, but we’re not going to let that stop us, we just got to go out there, keep looking for more folks, and hopefully we’ll get lucky and find somebody.

Ashley:
I know we have an episode to get into, but let me ask you, when you pulled that contractor, how hard was it, or how did you find somebody to replace him immediately to get in there?

Tony:
So we pulled him, and then we had our main crew that were working on other houses, and we just pulled them and said, “Hey, don’t touch anything on the houses you’re working on, just please come finish this job first and then go back to the other one.” So we literally had to stop work on our other projects to free up that manpower, so it’s been a challenge for sure. All the joys of being a real estate investor, right?

Ashley:
Yeah, yeah.

Tony:
Yeah. But that does tie into today’s episode, because today’s episode, we have Welby Accely, and he’s an investor who lives in New York but invests in Connecticut, and his whole strategy is flipping houses to build capital, and then dumping that flip capital into buy and hold rentals, and he does a really good job of talking about how he chose his market, how he built his team and expanded his team, how he manages his rehabs, and just really listen for the part too where he talks about the mindset and the discipline that goes into his business and how that’s allowed him to scale the way that he has.

Ashley:
Yeah, this is definitely in an episode to get you guys pumped up and motivated. Welby, you can tell, you can feel his passion as he’s talking about real estate investing. So make sure you guys have a notepad ready, take notes, he does go through a lot of numbers on deals to give you guys examples, so I think that’s great. You can see how he actually figures out what his numbers are, and figure out the ARV on a property before he’s even putting in offers, and how that’s really important to him, the ARV, which is the after repair value of a property.

Tony:
Yeah, so before we bring him in, also if you guys haven’t yet, please do us a big favor, leave us an honest rating and review on whatever platform it is you’re listening to this podcast, whether that’s Apple Podcast, Spotify, wherever, the more reviews we get the more people we’re able to reach, and obviously that’s a big goal of us here on the podcast, is to help more rookie investors just like you. So do us a favor, leave an honest rating and review.

Ashley:
Welby, welcome to the show, thank you for coming on. Obviously you are not a rookie investor. We’re not going to get too much into your backstory, if anyone wants to check out your BiggerPockets OG episode, that can be found on episode number 464. But today we have brought you on because we want your expertise on your strategy, so you want to start off just telling us what your strategy is?

Welby:
Well, I’m mostly known for flipping properties, so I’d say in last three and a half, four years I’ve done well over 100 plus flips, and the strategy basically for me is that in real estate you need money, even though there’s a narrative that you don’t need money, but you need to have the money come from somewhere. So where I found, where I can get the money is I flip properties, generated income from those properties. I stay disciplined enough not to spend that money on frivolous things, like buying a new car, or lavish trips, and I stay disciplined to then utilize that monies as down payment monies to acquire rental properties. So that’s basically the gist of that, and then I’m sure we could go into more details about what I do in that process.

Ashley:
Before we even get into that, I want to know how do you have the discipline to do that? Did you always have a strong financial foundation? What was your personal finances like that when you started to get into real estate, you knew that you had to save, you had to save that capital from the flip houses to invest into long term rentals?

Welby:
Well, you’re too kind, because I’m not as smart as people might think that I am. I’m not, it’s a lot of trial and error. When I first started in this real estate business, I talk about the good, the bad, the ugly of real estate, which is why a lot of people in our line of business gets turned off by me, because I give the people the truth, and I give the people my experiences. So as I said, again, I’m not the smartest person in the room, I took a lot of the information that was presented to me, I started back in 2004 and it looked simple. It’s supposed to be, hey, you want to get up tomorrow morning and be a real estate investor, then just get up and be a real estate investor, it’s going to work.
So when I bought my first property, my first initial properties, I was buying them basically with 106% financing. If anybody understands what happened with the subprime mortgages, I was buying them with 106% financing. I didn’t understand cash flow, I didn’t understand ROI, I didn’t understand purchasing correctly, I was buying just to buy, and I felt that because I was able to get qualified to get a mortgage I won, like a lot of people do today, they think that they won because they were able to get qualified. So I lost, if you guys go to my BiggerPockets interview, number 464, shameless plug, if you guys go to that I talk in detail about how it took me, from my initial start, 13 years to start realizing the mistakes that I was making, and within those mistakes, to answer your question, the importance of being disciplined, having cash reserves, the importance of having down payment, understanding your numbers was so important. So it was a lot of me losing trial and error, making major mistakes is what gave me the discipline to understand the importance of what I’m doing today.

Tony:
There’s a lot of important lessons to be learned when you’re getting beat up by life, and we talk about that a lot in the podcast, how sometimes those darkest moments give you the momentum you need to go forward and find success eventually. Before we keep going Welby. Can you just give us an overview of where your business looks today? So I know you’ve mentioned that you did 100 flips in the last four years, which is incredible, but what about on the holding side? How many units do you have currently?

Welby:
Here’s the thing, right now I go up and down as far as the holdings that I have. So I still continue flipping, last year, 2021 was last year, I did just about 20 flips last year. This year it’s a little bit slow because obviously you guys to see what’s going on with the after effects of the pandemic, so I’m only around maybe six or so, seven, I got to check. As far as my rental portfolio, I go up and down and I fluctuate, but here’s the thing I want to say, the reason why I don’t promote “doors” is because it’s a misrepresentation to people.

Tony:
Totally.

Welby:
What happens is is that people are more concerned about being sensational on saying, “Hey, I got $1000, I got $1,000,000, I got $500, I got $50.” I know people that have triple the amount of doors that I have, and don’t make half the money in net income, and it’s very important that people understand net income is what you put in your pocket, don’t make half the net income that I make. So I don’t really push that narrative of, hey, I have X amount of doors, because it’s a false representation to people, especially for the new investors walking in the business not understanding the business, that it’s not about the quantity, it’s more about the quality.

Tony:
I love that breakdown, Welby, because I think that is a misconception that a lot of new investors have is that they’re just focused on how many doors can I get to? But like you said, if I could have $1000 in net cash flow with two units, versus $1000 in net cash flow with 20, I’m probably going to go with two because it’s less headache. So if you can maximize the revenue per unit, there’s something to be had there.

Welby:
That’s my primary focus, is the quality of what I have in relations to what it cost me to acquire it, to how fast I could recoup that initial investment, to then basically have infinite return, not having none of my own money in that actual property. So if I could give a really quick example, the reason why I state that, I’m from New York, but I do most of my business in Connecticut. I have a good friend of mine who’s in the real estate business as well. I have a four unit building that after all expenses I’m netting roughly around $3,600 a month. Well actually it’s a six unit I’m talking about now, I’m netting in that six unit just over $5,000 a month. I purchased that property at 270,000, but its value is well over 550-600,000. So I have a 50% appreciation on that property.
A good friend of mine was looking at a property that was a 12 unit. He was paying 1.2 million for that property, and all he kept thinking about is that he got a property that he paid 1.2 million and it’s so big, it’s 12 units. By the time he finished breaking everything down and putting down a down payment, his down payment would’ve been 20%, roughly about 200-220,000, give or take. He was going to be netting roughly $5,000 a month in net income. So now it took him to make that $5,000 in net income $200,000 of down payment money, while it cost me $70,000 of down payment money to make the same money in net income, which means if I would’ve duplicated what I did times three to match how much he spent, I would be making roughly $15,000 for the same debt that he’s making 5,000.
So it goes right back to the point I’m saying about the quantities doesn’t mean that you have a better quality, but he could not wrap it around in his mind because all he kept saying in his mind is he’s got a 12 unit building. Well I could tell you now, as he’s owned it, how many years now he’s owned it, we both bought ours roughly simultaneously, he wished that he’d bought what I bought now because now he understands. So I hope that breakdown helps you out a little bit.

Ashley:
That was a great example, I think you really broke that down and gave two really good examples of different door amounts, different price points, but really, at the end, that’s what you care about. And I think if you are going to set a goal of say you want 100 doors, you’re setting that goal because you know you’re purchasing properties where the cash flow is $300 per door and you’re putting 20% down, or you’re doing a burn, you’re not putting any money in. So if you are setting that goal of how many doors you want, make sure you’re working, you’re starting with a dollar amount, or something, that’s your goal, but then you’re working backwards and saying, okay, I need 100 doors to get to that dollar amount, and not just saying, I want 100 doors, just to accumulate.

Welby:
You just make my heart skip. I love that. The reason why I love it is because I’m so passionate about this business. I’m so passionate about educating the people, because those fundamentals, people don’t understand the importance of the fundamentals that you, what you just said. And people that are in the industry that are doing this business to scale, if you asked a question, the odds are we’re going to come up with roughly the same answer, maybe presented differently, but the result will be the same answer because we understand the fundamentals of that. So you saying that is wonderful, I love it, that’s beautiful.

Ashley:
Welby, what kind of properties are you actually going after? So you mentioned you had a six unit, are you doing single family flips and then small multi-family on the rental side? What does that look like?

Welby:
Well, I focus on what my market gives me. So this is why I tell people you have to understand, which I think we’ll talk about when I say I do, excuse my word, if I’m saying it right, reconnaissance, somebody that’s in the army, or whatever, I go and I scope out the environment I’m looking to invest in, and based off of the environment I’m looking to invest in, I deal with what the environment gives me. I don’t force it. So in areas that I’m investing in, so if I’m buying a single family home, I already know from out the door I’m buying a single family home with the intent of flipping it to sell for profit. If it doesn’t align up with what I have to acquire the property for, to what it’s going to cost me to rehab it, to what I’ll be ultimately able to sell it for, I’m not buying it. If I do buy it, and I know, with a strong estimate, I project to be able to profit X amount of money after all expenses are paid.
I might even do the same approach on a duplex, because I’m not looking to keep even a duplex, my intent is to purchase that property with intentions of fixing it, acquiring it correctly to renovate it to ultimately sell it to flip, but then I’ll be looking for a different type of client because the odds are the person that will be buying that property might be a person that’s looking to move in one unit as their primary residents, and then rent out the other for the assistance of what the rental unit can provide them. Outside of that, anything that I purchased, three units or more, I already know my intentions is to keep it. So that’s pretty much it, anything that’s one or two, one, I’m definitely flipping it, two, I’m pretty much flipping it, three units, four units, five units, six units, seven units, I’m keeping those for long term holds.

Tony:
So Welby, I want to get into the nitty gritty of your strategy here because I think it’s a really powerful one for a lot of new investors to leverage, and I think your point at the beginning of the episode about there being this misunderstanding in the world of real estate investment that you don’t need capital, but you do need money, it doesn’t always necessarily have to be your money, but the money has to come from somewhere. So I definitely want to get into how you’re leveraging that piece, but I think if we take a big step back and we just go 30,000-

Welby:
Can I say something please? You make my heart skip as well. You make my heart skip as well, I love it, man, I just love it. Yes, yes, go ahead, yes, correct.

Tony Robinson:
The money’s got to come from somewhere, right?

Welby:
Yes.

Tony:
But I want to take a 30,000 foot view of your strategy, maybe you can walk us through step by step. So if I’m a complete rookie, and I just want to clarify this as well, so you’re in New York, but you said you’re investing in Connecticut, so you’re investing out of state. So if I’m a rookie, how do I go about choosing which markets to even get started in? I guess walk us through your decision making, why not invest in your own backyard versus going to Connecticut?

Welby:
Well, here’s the trick though, Connecticut is my backyard. It’s literally an hour, hour and a half tops drive. So it is my backyard. So people have a misconception of investing out of state means that you have to catch a flight to go and look at your properties. So I used to invest in Atlanta while I was living in New York. One of my downfalls of why that wasn’t a success, one is because of the lack of knowledge that I had, and two, to be frank, it was just too far away from me to mind my business, to handle my business, to take care of my business. I was depending on other people i.e. property managers and out-of-state realtors, that I can’t keep my pulse on the finger of my business to confirm what was being represented to me, especially as a new investor at the time.
So of course now everybody know New York is one of the most expensive cities in the world. I did a lot of business in New York, but then what happened is I had realized that with all of my mistakes, all of my losses, because I got wiped out multiple times trying to build this business up to zero, I realized that New York was the big fishes out here and I was a bit too small to play in the manner that I wanted to play. But I had made enough experience, I made enough money, and I realized that I don’t have to go too far away from my backyard to find other markets that can allow me to walk in at the financial level that I’m at, at that time.
So I looked around, and I could have went upstate New York. Just like any other state that you want to, every state has an area, several areas outside of the major city that everybody wants to play in, every state, I don’t care what state, throw a dart on the wall, there’s going to be areas just outside of your area where you can play. So it’s okay to humble yourself and admit the truth that you can’t move in the manner how you want to move because the market is too aggressive. That’s one. Two, New York is predominantly great for appreciation, aggressive appreciation. What people don’t want to accept, what a lot of influences are putting out to the country, is that they want people to believe that the way that things are appreciating in New York, Los Angeles, Seattle, California, big cities, most of America does not appreciate like that.
So you have to understand, I had to understand that I had to start focusing on cash flow. I had to start focusing on cash flow, and the cash flow in the manner how I wanted it I was not going to get it here in New York. So then by accident I would say, friend of mine said to me, “Hey, why don’t you come to Connecticut?” He’s lived in Connecticut, and it was really by accident, by the grace of God, by me talking and conversing with people, networking, I was told, “Why don’t you come out to Connecticut?” When I went out to Connecticut is when I started doing my investigating, looking at all the different towns, the different opportunities, then I realized that I could play here, because I had bigger city money, I could do it in Connecticut. So that’s what I started doing.

Tony:
So Welby, you mentioned something I think that is super, super important, and you said that even though you could get appreciation in New York, that wasn’t what your goal was initially for real estate investing. So as a rookie you have to think about what is your goal as you get into this. Is your goal to build long term appreciation so that when you retire, you have a multimillion dollar net worth? Or is your goal to build up cash flow in the short term so that maybe you can walk away from your job, because those two goals are going to dictate very different approaches and strategies when it comes to real estate investing. So it was a really important lesson, Welby, so I wanted to make sure we didn’t skip that.

Welby:
May I add to that too, if you don’t mind? I give examples, everything I speak on I have world examples, because this is what I’ve been through. Anything I talk to you guys about is not what I heard, this is what I do, did, or I’m going through. So I have another friend of mine in the New York area, because everybody wants to invest with me now, he bought himself a, I think it was a three unit building in Long Island. He paid 700,000 for the property. The mortgage on it, I can’t tell you off the top of my head, but with taxes and everything his mortgage and everything had to be close to $6-7,000. He had three units, everything’s about the math for me, he was renting out each floor for roughly $2,500. $2,500 times three is $7,500 a month, so he was netting, netting after all expenses, I don’t know off the top of my head, roughly $1,500.
Now that’s cool, I’m not telling you that you’re right or wrong. But then I gave him another example of exactly a property that I have in Connecticut that was a three unit, that at the time I purchased it I paid $120,000, at the time. When I’m looking at properties I’m looking at properties this way, it has to be distressed and or underperforming. Those are the two things for me, distressed and or underperforming. So I bought a property for 120 that was worth, by the time I would be done to it, at that time, 300,000. So I had over 50% of potential appreciation by the time I start adding value to that property.
But before I even owned the property I already knew that that property, that was a three family, there was a street level basement, which I knew I could convert to a legal apartment. So now that three family I knew I could make it a four family. Before I even own that property, with the relationships I have with the city, with the programs that I have, I knew off the top I was going to be able to generate out of that building well over 5,000 plus on that property. That property today is worth over 400 something thousand. Remember, I bought it for 120, I put 20% down, I was financing 90,000 on a property that’s worth three quarters the price that I purchased it originally. The net cash flow on that building to date is $3,600 a month. So I got right now over 300,000 in equity, with a cash flow of over $3,500 a month.
My net worth, compared to the two buildings, is higher than his, yet he paid way more than mine. You understand? So this is why it’s so important, everything in this real estate business is about the numbers. Everything is about the numbers, and what Ashley had broken down when she said, which was beautiful, on how you calculate what you can rent out each apartment for, to what it cost you with your mortgage taxes, insurance, and everything, subtracted by whatever, that’s what you got to do, and if the numbers don’t add up, you have to have the strength to say, this is not a deal for me, I’m going to walk away.

Ashley:
Welby, that’s a great point, don’t get emotionally attached just to get that unit count too.

Welby:
That’s right.

Ashley:
It’s that emotional side of it like, oh I haven’t gotten a deal this month, I’m just going to buy this and I’ll make it work.

Welby:
Absolutely.

Ashley:
And also don’t fudge the numbers either to make the deal work, make sure that you’re using accurate numbers that you verify. So I want to know about your team. What kind of team have you put in place, and what advice would you give to rookie listeners as to the first person, or maybe couple people, they need to add to their team if they want to start doing flips and purchasing buy and hold property?

Tony:
And how to find them, if you can, Welby, I think that’s a really critical piece today too.

Welby:
Believe it or not, my team started out with just a father and son. That’s how I started with my team. To date now we grew the team to, I would say consistently six, seven people, but then we have an extension of the team from subcontractors that we use. So how I started out with it’s okay, stop trying to chase everybody else, what everybody else is supposedly doing. I’ve met a lot of these people, and listen, I’m sure you guys have met them too, and you know what I’m trying to say, it’s not what you think it is. You understand? So it’s okay to humble yourself and understand that this is a marathon, it’s not a race.
So I started off with a father and son. When I start off with a father and son, it’s so important as an investor, so all you new investors understand that this ship, this car, this boat does not move without you, so I need you to be empowered to understand that this ship, this car, this boat does not move without you. Given the fact that you understand that you need to make sure that you educate yourself enough to then be the captain of your ship, to direct the people that work for you.
So given the fact that I understood the process of what to look for when I was looking for my first flip, how much I should buy that property for, then I went through the process of understanding a rough estimate of how much it’s going to cost me to rehab, I made sure I purchased the property correctly. Then I started with my friend’s father and his son, and those were the two guys that essentially renovated a lipstick property for me. I didn’t get a gut job, I didn’t get a property that was destroyed, I just got a property that you’re just going to show it a little bit of love, put it back on the market, and sell. So we actually grew together. So in our first year we-

Tony:
Let me ask this, Welby, let me ask this before you go on. So how did you find those two guys? Because you said you started with those-

Welby:
We were friends, we were friends, and they had ambition not to do what I do, they wanted to do construction. They knew how to do Sheetrock work, they knew how to do little bit of electrical, stuff like that. Listen, we all understand in this business there’s gray areas. You got to do what you got to do. So that’s how it started, I had to get in and get started. But what I had to do too is I had to understand that that was the two first people I started with, then I had to get introduced to realtors in the area. Most realtors will not understand the mindset of an investor. Every realtor thinks that they do because most realtors just understand if it’s for an investor, selling it to him hopefully low so that he can sell it high. No, it’s more than that.
So I had to educate the realtors, even the realtors that had more years on this planet than I did, in the business, had to explain to them, I need you to give me what that value of that home is going to be when I beautify it to the standards of what you’re telling me it needs to be. I need you to give me the ARV of this property. When they would tell me what the ARV of this property is, I would know roughly, I’m sure most of you people know what the 70% rule is, it works, I would calculate the numbers and then present to her, this is what my offer is. Most realtors, if they understand the way that us as investors have to move, they’re not going to want to work with you, that’s the truth, because most realtors do not want to work as hard as you need them to work with you to accomplish the goals that you want. So you have to kiss a lot of frogs in this business, people, you’re going to have to kiss a whole lots of them.

Tony:
And Welby, that’s true for every person that you bring on your team, right? You’re probably going to have to go through several contractors, you’re going to have to go through several insurance agents, title companies. I’ve cycled through all those different people as we’ve built our business. But when you find the people that work, you got to make sure that you treat them right, that you make it a mutually beneficial relationship.

Welby:
And if you understand the root of it for everybody else, it’s about money. Hopefully we’re going to be become friends, and maybe family, but everybody’s coming to this table because they see you as an opportunity to make money from you. Some people, some realtors want to make you believe it’s a partnership, some mortgage people want you to believe that it’s a partnership. No, it’s not. No, it’s not. Let’s be real about it, you guys all work for the investor, because the investor is the only one that has a calculated risk in this equation. The only one. Nobody else has to sign that contract, nobody else has to guarantee that loan, nobody else but that investor. So I want to empower investors, new investors, old investors, that this does not move without you.

Tony:
Yeah, so Welby, but you gave a really good example of how you’ve built your team out in that market, and obviously the realtor is an important piece to that because they’re the ones that are helping you find the deals that are going to make sense. And you mentioned the 70% rule, I just want to recap what that is really quick for our listeners. So ideally if you’re able to purchase a distressed property where the purchase price and the rehab come to about 70% of the after repair value, then typically you know that you’re going to be able to turn a decent profit on that. So, Welby, as you’re working with these realtors, what kind of properties are you telling them to look for for your business? What is your criteria when searching for a new flip?

Welby:
I’m not limited to anything. I don’t care if it’s a auction property, because you got a lot of people that get caught up about the source of where you find that property. That’s irrelevant. The process of you evaluating a property to understand if it’s a good deal or not is irrelevant to the source of where you getting that property. So I don’t care if it’s an auction, I don’t care if it’s coming from a family friend, I don’t care if it’s word of mouth, I don’t care if it’s off the MLS, and give you guys a secret, 90% of the properties that I buy that I flipped has come off the MLS. So the source of where I get the properties are irrelevant.
The number one question that needs to be answered, and I tell every investor, please listen to me with this, you have to lead with ARV. That’s your number one question that you have to ask at all times. The ARV gives you the follow through on everything else that you need to be able to calculate to determine what your maximum offer is going to be. So who cares what they telling you that you could rehab it for if you don’t know what the ARV is, who cares what you can do with anything involving that property if you don’t understand that. So I tell everybody, always lead with the question of what is the ARV of that property, especially when we’re talking about a flip.

Ashley:
Welby, when you are analyzing your deals, when you’re going through… Well first of all, before even that, I want to know about the MLS. You said 90% of your deals are from there, and I think very common thing we hear is there’s no deals on the MLS, how can I find deals? So can you let us know what is your secret, and how are you making deals work on the MLS? Is it just throwing out low ball offers? Is it looking for listings that have been on the market for a long time? Why do you think that you’re getting so many deals on MLS?

Welby:
Well, if you look at the amount of offers that I put out to how many I get told no to, excuse me, that I actually… Let me say that again. If you look at how many offers I put out to how many I get a yes to, I’m doing horrible, but that’s the nature of the business. So new investors don’t understand that, you have to put in, especially in a regular market, you have to put in, sometimes I put in 100 offers and I get told no to all 100 of them, but I just need that one yes. Now as far as what do I look for, I don’t look for anything. What I do is, here’s the thing. For everybody to ask as an investor do you need to be licensed? No, you don’t. I don’t have a license to do anything in this business, I just have a legal right to be in this business as an American. So everybody has a right to be in this business.
Now everybody that’s going to be working with you, i.e. what I call my starting five, my realtor, my contractor, my attorney, my accountant, my… Where’s the last figure? I wrote it down because I know I was going to forget, my funding source, my mortgage lenders, whomever. Every one of those people that are wrapped around you have to be licensed to be able to provide that service to you, except you. Given the fact that these people, so we talking about the realtor, I don’t have to do anything. Let the subject matter expert, which is your realtor, do the job. You give them the criteria of where you need to be at, after a while of you working with your realtor, your realtor is going to see a property on the MLS, or see a property driving and just know, Welby’s going to buy that property if I sell it to him. You understand?
So let your realtor do the job, let your realtor go through, break down to your realtor what your quick criteria are going to be, so in my area I’m looking for properties I can add value to. I’m not looking for a property that was listed by an owner that’s looking just to sell at retail price, I’m not looking for anything to be purchased at retail price. I need the realtor one day present it to me, my realtor has to present to me real simple, “Hey Welby, I found another property in the area that you’re in, the ARV is this.” That’s all I need. That’s all I need. Based off of that basic information, we all have these cell phones, let the cell phone work for you.
We all have, the same way we have Twitter, Instagram, and all those other apps, we also have apps for us investors. What are they called? Zillow, Redfin, Realtor.com. Use the app, click on the app and look at the photos through the app. Look at the square footage of the property that you’re looking to buy, look at the area that the property is in. If you start doing enough work in the area you’re going to be able to come up with a strong, which I talk about in my courses, and I talk about in my books and stuff, you’ll be able to come with a strong estimate so that you could put your offer in. Put your offer in and leave it to God. At least you in the game because you put your offer in. Now as an investor, the odds are you’re going to be told no. That’s just the odds, you’re going to be told no more than you’re going to be told yes. That’s okay, keep going. Eventually you’re going to get a phone call from your realtor, “Guess what? They took your offer.”

Tony:
Yes, right.

Welby:
You keep pushing it hard enough, believe it or not, I’ve had weeks where I’ve gotten accepted offers of 10 houses. I don’t know what the hell I’m going to do with all 10. So you got to keep pushing, pushing, pushing, you just can’t stop.

Tony:
So Welby, we talked a little bit about how you chose your market, how you’ve built this team of your starting five around you, but what about actually managing the rehabs? Are you going to the job sites every week? Or do you have your team doing that? Are you picking the materials? And if so, how are you determining between your flip houses versus your rentals? Just walk us through your process for managing your rehabs.

Welby:
You’re never going to do this business to scale if you’re doing everything by yourself. When I first started I was out in the field, I’m still out in the field, but I was more out in the field involved in a project. While I was caught up in a project I could not go out there to get more projects, which meant I couldn’t keep the guys that’s working for me busy. So what I did is the position that I was in in the field with my guys, I talked to my guy, his name is Jeff, Loosa Home Improvement for everybody, and I said to Jeff, “Jeff, you are going to have to take my position, what I’m doing with you out here, you’re going to have to pull in whomever, your father, whomever, into your position, and you’re going to have to pull someone else outside and find somebody to stand in a position your father was in.” That’s how we started doing it, so that I could slowly wean myself away so I could focus on scaling.
So because, once again, we got these smartphones, if there’s an issue you better call me on WhatsApp, FaceTime, show me where you at with things. When you start building up enough with that, they start to understand. When you start doing enough with these flips, it’s not HGTV, we’re not building theme houses, we’re not building the Count Dracula house today and the princess house tomorrow, every property that you’re going to do, the formula’s going to be the same. The gray tone walls with the white trim is what’s been in style for the last 10 years, so we have buckets of those in our warehouse, so we already know, when we bought the property, this is what we coloring all the walls with after we fix all the walls.
If the kitchen layout can be an open floor plan, you don’t have to ask me, “Welby, should we open up a floor plan or not?” We’ve done enough, you already know, we knocking down these walls. We have to renovate the bathrooms, we have to renovate the floors, or resurface the floors. When you start doing enough of these, the same thing you did in the first one is what you’re going to do in the second, third, fourth, fifth, et cetera. So you want to try to automate your business as much as possible so that the people that are working for you don’t have to think too much, they already know what they have to do. So that’s what I do, and I maintain a lot of my business through my phone, so I keep up with them through video chats and updates, and things of that nature.

Ashley:
Is there any software or apps that you’re using that correlate with just keeping up on everything on your cell phone? I mean, are you using spreadsheets to track the rehabs? Do you have a dashboard you can look at?

Welby:
I have a program, I can’t remember it off the top of my name, where it’s an online software, I paid a bunch of money for it, but it’s great when it coming to flips, that I am able to keep track of what was spent, and I could tell you to the penny, by the time the project is done, how much I made. Years before if you would’ve asked me, “Welby, when you sold that flip, how much money you made?” It was guessing, I didn’t know. I could tell you to the penny how much that I made on each of my properties. Also too I learned how to simplify my process. So I give an example, most of the rookies that you guys are going to be speaking to are going to be utilizing hard money. Hard money is going to be based off of, they’re going to be re… What’s the word? Not-

Ashley:
Refinance?

Welby:
Not refinance, drawing you the monies that you pay when you’re rehabbing, they’re going to draw you X amount of funds for the rehab that was done. Reimbursed, that’s what I want to say, I’m sorry. They’re going to reimburse you based off of the monies that you spent off the draws. I show the people how sometimes new investors make the scope of work too complicated. I show you how to simplify the scope of work so that you can get your monies from the hard money lender faster while you’re doing your project. So everything for me is to make everything as simple as possible, which is why people think, when they watch me on Instagram, that I make it look easy. No, it’s just I’ve been through a lot where I’m trying to simplify my process as much as possible so that I could make my life a lot easier.

Tony:
Can you elaborate on that a bit, Welby? So you say simplifying the scope of work and just simplifying the process. Does that mean that you’re, are you just paying the contractors more money up front, that way that your draws are easier? Or what does that process look like?

Welby:
For myself, with a scope of work, when I was saying that you’ll see a rookie when they’ll give a scope of work to a hard money lender, they will give, it’s basically a spreadsheet with lines on it, and obviously to the left you’ll see 1, 2, 3, 4, 5, 6, and let’s say hypothetically the scope of work was going to add up to $60,000. The rookie will have 50 lines, and they would break down the screws, the hand fixtures, the Sheetrock, and they make it complicated. So now what’ll happen is now when you now want to do a draw, the inspector that’s coming to the property, they’re going to have to go based off of the scope of work, and they’re not going to reimburse you until you 100% completed based off of the areas of the scope of work.
Myself, with the same scope of work that would’ve been 60,000, my lines of scope of work might be eight, maybe 10 lines scope of work. So I want to be as generic as possible so that when the inspector comes, he’s looking at a generic wording that I have there so that I know he’s going to give me that monies that I need to continue what I’m doing so I can get my project moving forward. But for myself, I don’t really do draws, we can maybe talk about that a little later, my draws is a bit done differently because normally I do one draw and that’s normally at the end of the project, but we can talk about that in a little bit if you want.

Ashley:
Welby, is that just the scope of work that you’re minimizing, is that just for the bank or the hard money lender, and do you have a separate scope of work with the contractor that really itemizes everything that needs to be done?

Welby:
Yes and no. I know that the way I deal with contractors I think is a bit unorthodox to most people, because obviously dealing with contractors, they can make or break your business, and a lot of the fears that people have, which I’ve gone through when contractors either ran off with the money, or did not do the quality of work that I needed them to be done, and there was no recourse for getting your moneys back, and also dealing with a contractor that gave you a price initially and then through the process of doing the work they then wanted to change the pricing, and if you weren’t willing to that, they would either say they’re not continuing, or you have to come up with the money. So I approach contractors and I deal with them a bit differently, that keeps them in line so I don’t have problems with contractors, as far as getting my jobs done.

Ashley:
So you think just because of how you build that first relationship with them, you don’t have to go into a huge detail scope of work because you’ve already built that trust, is that what you’re saying, I guess?

Welby:
Yes and no. Here’s the thing, once again it’s all about the money. That’s what the people are here for, it’s not because they like you, they’re here to make money. If you know and understand how to control the money, you going to control your project. And the manner in which I talk in my courses, and stuff like that too, the manner in how I handle a contractor, the contractor can’t do nothing to me. They can’t Rob a penny from me, and I’ll even pay a contract 100% upfront, I don’t care.

Tony:
So, Welby, you’ve given us so much information on how you’ve put everything together, I think the last piece that I want to go back to before we wrap up here, is just the financing piece. So you talked a lot about hard money, is that how you’re funding most of your flips?

Welby:
Most of my flips I’m doing hard money, correct, and then now I have private money that I started introducing to my business as well. So they give me better terms, and I’m able to cut a lot of the red tape, so I do a mixture of both. And sometimes, if it’s necessary, I have cash as well, I have plenty of cash, so sometimes I’ll even use that temporarily, so those are some of the options that I have.

Tony:
So I think every new investor’s dream, especially for those that are flipping houses, is to use private money. It’s typically easier, like you said, less red tape than hard money. So can you just give us a quick crash course on how you were able to find that hard money lender, and then what those terms look like and how you’re able to manage that relationship.

Welby:
To be easy, a good friend of mine, Mark McMahon, Mahone, Mark, and it’s another couple of guys, Dan USA Land Ventures and Full Auto, Gerald, we actually have a mentorship group that we’ve put together called Campfire Feal Estate, so watch out for that, it’s going to be amazing. But Mark, he’s actually the one that educated me. Once again, I don’t know everything, I like to be in a room with people that are smarter than me or I respect, and he’s the one that educated me on the private money side of the business. So what happened is I train a lot of people in this business, I’ve trained a lot of people, and a lot of people I’ve helped train are multimillionaires themselves in this business now. One of my students, believe it or not, has become my private money lender, one of my private money lenders.
So you imagine, for everybody that doesn’t think that this real estate business is possible for you, one of my students was brand new, just like you guys, he put his head down and worked, worked, worked, and he put himself in a position to become one of my private money lenders. The way we structured that business deal, I was actually able to buy two multi-units actually the beginning of this year, sometime early February, I was able to buy one commercial property and a four unit building, but the commercial property is also residential, and I was able to buy both of those properties for $495,000 using all private money. So I was able to walk into that property not coming out of pocket a single dime out of my own pocket, the private money lender funded that for me.
Reason I was able to do that is because the value of those properties combined is going to be roughly around 1.1, 1.2 million for the two properties that I purchased. So I put him on the insurance, but the contractual agreement that we had was 10% on an annual percentage rate, between those two properties. So the mortgage on that, interest only was roughly $4,125 per month interest only. But don’t forget, I didn’t put up any money buying these properties. The four family just got finished renovated, and I’m actually putting a mortgage on it now, and then the commercial unit building should hopefully be done in the next month, and I’ll be putting a mortgage on those.
Given the fact of how I was able to buy them, if I could break those two down separately, the four unit building that I bought for the 240 is valued at 400,000. The banks will be willing to give me a mortgage of 70% of the 400,000, which I can’t remember off the top of my head, but it’s roughly around 280,000. But I’m all out of pocket 240,000. So all I want is the 240,000. I don’t care about doing the bird strategy, or doing any of the cash out refi.

Tony:
Cash out refi, mm-hmm.

Welby:
I don’t do that, I focus on what my cash flow is. So that building is going be netting me with a mortgage of around $1,700, with none of my own money out of pocket that mortgage will be around $1,700 on a building that’s going to be cash flowing $4,800 per month. So I think that’s a beautiful win. The five unit building, which is a commercial building which I paid 255,000, the structure was exactly the same, that building is going to be grossing me over $6,350 a month on a mortgage of $1,800.

Ashley:
I just want to ask real quick, what are, for our rookie listeners, what are the main upgrades or the main value ads they should be doing so that they’re getting these great returns that you are?

Welby:
What I would tell people to do in the rentals is have the attitude, would you live here? Too many rookie people, too many landlords, have an attitude of I’m not going to live here so I don’t care. So they think it’s sufficient enough to just slap paint on the wall and who cares, I’m not living here. That’s going to give you the quality of the tenants that you’re going to have, and it’s also going to then limit to the increase of the rents that you’re going to have. My apartments, when I’m acquiring these properties, these apartments, are distressed, one more time, and or underperforming. So these same apartments that I bought, for example, the four family were being rented for $625 three months ago. By the time I finished, the apartment is pretty much fully rented now, and everybody’s paying $1,250, for the same apartment that was being rented for half that price.
I put in updated kitchens. If the kitchens can be refurbished, I don’t rip them out, I clean them up and I do professional paints on them. I put laminate floors, waterproof laminate flooring. One of the big things I tell everybody to do, install recess lights throughout the apartment. It’s inexpensive, but what the effects will be at the tenant when they walk into the apartment, it brightens everything up. Then I don’t rip down walls, I try to fix what’s existing. So I’m sure a lot of the rookies that are going to go into these apartments, you’re going to see these wood panel walls, people are going to rip those out. I never rip them out, I fix them. After I fix them I get them primered and then I do a beautiful paint job on them. What happens is is that it beautifies the apartment, and because of the wood paneling, it gives character to the walls.
I change all the outlets and switches, and I give love. That’s what I honestly do. So my attitude is, would I live here by the time I’m done? And it’s yeah, I would live here. Also, I want to give something else that’s very important. My business model for how I do, because people are going to ask me how much is it that I’m looking for in terms of cash flow. In a manner of how I’m buying in the area that I’m in, I put 20, well today’s market’s going to be 25%, I put a minimum of 25% down. I’m looking for a property that’s distressed and or underperforming so I can add value to it. Given the fact I’m buying the rental distressed and or underperforming, the value of it, the equity is already built in because I bought it for the right price.
I invest the money to rehab that property, pretty much all of my rental properties that are three units or more, one third of the property covers all expenses. The other two thirds is pure profit. So I give an example of a three family that I have, I purchased the property, the property was worth 300,000, I bought it for 150. I put down 20% down, I financed 130,000. The mortgage, especially before the interest rate went up, the mortgage is $947. I got receipts people, I could show you exactly what I’m talking about. I got receipts.

Tony:
And I like how well you know your numbers too, Welby, and there’s so many.

Welby:
Before you own it, before I own the property, I can tell you how much money I’m going to make off of that property in my pocket. So that building, my mortgage on it is $947, that’s including taxes, insurance, maintenance, everything. So let’s just round it to $1000. The first floor, I’m getting $1,500 on the first floor. So just of that one unit I’m already netting $600 a month. Second floor I get $1,300. The third floor I get $1,300. So just off of that building alone, in my pocket, after all expenses, I’m putting 3000 plus in my pocket.
Now here’s the trick. Remember I told you guys, I put down $30,000 to acquire that property. The way I handle my contractors, what will cost the average person to rehab that property costs me minimal. This takes time, of building these relationships. Now here’s the beautiful thing about it, my goal is I got to recoup back the money it costs me to acquire this property. I’m not making no money until that $30,000, let’s make it $40,000 to make it even better, I’m not making any money until that $40,000 is back in my account. You talk to the average person, that $40,000, based off of the way that they’re acquiring and buying, is going to take them on average six, seven years, barring no issues. Tenants not paying, roof not leaking, boiler breaks. On average it’s taking me roughly around 18 months or less to recoup back my initial investment.
So now I had to go look, about six months ago I look at the last seven properties that I own, I have none of my money in those properties. Every one of those properties have given me back what it cost me to acquire them, and then some, so in the last year, two years, all the monies I make is pure profit. And then you know what I’m doing now, with the money that is generating I don’t have to flip as many houses as often as I was having to do before, because what it costs me to acquire a rental, I’m doing it monthly, more than that. So you want to know what? You know what I’m going to do when we talk about sacrificing, I’m not going to buy me a new car this month, or I’m not going to go on that trip this month. I’m not going to do for the next two months. I’m going to save up X amount of money based off of my cash flow so I can buy me another baby so I can add to the cash flow.

Tony:
Yeah, that’s the machine, and as you start to build it it starts to feed itself, it starts to feed itself. But like you said, Welby, you got to to sacrifice for that short term to be able to reach that point, because I think so many people, they see the cash flow, they see the number of doors, but they don’t see the sacrifice that happened behind closed doors to be able to get to that point.

Welby:
It’s worth it, it’s worth it. I tell everybody, it’s worth it. I encourage everybody, it’s worth it, it’s worth the fight, it’s worth the long days, it’s worth the arguments, it’s worth the doubt, it’s worth it, just don’t stop.

Tony:
So Welby, before we wrap here, first, we just want to thank you, man. You’ve been like a wealth of knowledge, and again, I just think your strategy of flipping to create capital, using hard money, using private money, and just using that to build this machine, is a strategy that every rookie should seriously, seriously consider. So before we wrap up, though, we have a few more things we want to hit with you, first is our rookie exam. So this is the test that we make every guest pass, and if you don’t pass, well fingers crossed. But we’re going to jump into it. So the first question is, what’s one actionable thing that rookies should do after listening to this episode?

Welby:
Right now go download my free ebook. That’s the first thing that you should do. I give a really strong play on exactly what I do. So I would definitely do that, and I would say the most important thing, getting the money is the easy part, buying the property is the easy part, anybody can do that. Please educate yourself, educate yourself, educate yourself, that should be the first thing.

Ashley:
Okay, Welby, the second question is, what is one tool, software app, or system in your business that you can’t live without? Is it your phone?

Welby:
Oh yeah, yeah, yeah, definitely. Yeah, my phone, my phone, my phone, it’s everything, definitely my phone.

Ashley:
You had mentioned an app or a software that you use earlier too for your business. Maybe you can email that to us later and we can include it into the show notes.

Welby:
I remembered it now, the program is called Flipper Force.

Ashley:
Okay, thank you.

Welby:
That’s very good for keeping track of your expenses. And then what’s beautiful at the end of it, when you’re completed with the project, it’ll tally up for you and it’ll tell you exactly how much money is it that you’re going to profit after you finish selling, paying the realtor, and everything else like that. So Flipper Force.

Ashley:
Okay, awesome, thank you.

Tony:
All right. And then last question for you, Welby, where do you plan on being, or where do you see yourself five years from now?

Welby:
I just want to do what I want to do, when I want to do it, how I want to do it. That’s it. I’m not trying to be bigger and better than anybody else, I just want to run my own race, I want to take care of the people that I love. I like cars, so if I want to go and get that Lamborghini truck, I just want to just go get it. That’s what I want to do, and I want to help, I want to help people. I really believe that the market is going to be changing, horribly, soon, and they’re going to need people that’s going to navigate them through this, so I hope I can be a beacon for a lot of people to help them navigate through this, because it’s going to be a great, great, great, great opportunity for people to really become wealthy in this business if they position themselves and take advantage of the opportunity that’s coming, because if you’re not, you’re going to get ran right over. So I hope I could be a beacon to a lot of people.

Ashley:
I think so, because you definitely passed our rookie exam there, Welby, so thank you for sharing.

Welby:
Yes.

Ashley:
We want to give a shout out before we end to this week’s rookie rockstar, who is Mason M. So Mason finally officially closed on his first flip, he used private money to do so, and he ended up actually losing $1000 on this flip.

Welby:
Congratulations.

Ashley:
So the purchase price was 30,000, the rehab was 20,000, and he sold it for 70,000 cash, but there’s an opportunity cost here because Mason learned some lessons, rural markets are harder to comp for ARV due to fewer recent sales, and he should have spent more time on his own numbers instead of trusting the realtors’ numbers. And although he is handy and could do all the work himself, he made a rookie mistake that caused redundancies, and the value of time has never been more clear to him than it is now after completing this flip. So Mason, first of all, we made you the rookie rockstar because you actually told us about a loss, a deal that went bad, but you took the positives out of it, the lessons learned in that opportunity cost, so I hope that you’re sharing this with us because you’re going to keep going and you’re going to do the next one and use the lessons that you learned to continue, so thanks for sharing that with us, Mason.

Welby:
Congratulations.

Ashley:
Yeah, taking action, getting that experience. Think about how much people pay for courses and material to learn how to flip a house, and you just paid $1000 to get that hands on experience. Well, Welby, thank you so much for joining us today. Can you tell everyone where they can find out a little bit more information about you, and possibly reach out to you?

Welby:
My Instagram is @atmybest197, that’s A-T-M-Y-B-E-S-T-1-9-7, and you can also click the link in my bio and you’ll be able to see all of the courses that I have, the free ebook, definitely go check out the free ebook, and you can also go to my website, atmybest197.com, and yeah, that’s how you can find me.

Ashley:
Rookie listeners, thank you so much for joining us this week, I hope you took a lot of value from this episode. I’m Ashley @Wealthfromrentals, he’s Tony @TonyJRobinson on Instagram, and we’ll be back on Saturday with a rookie reply.