Perfect Time Line for a House Flip (030)

Perfect Time Line for a House Flip (030)

Transcript:

Steven Butala:                   Steve and Jill here.

Jill DeWit:                            Hello.

Steven Butala:                   Welcome to the House Academy show, entertaining real estate investment talk. I’m Steven Jack Butala.

Jill DeWit:                            And I’m Jill DeWit, broadcasting from sunny southern California.

Steven Butala:                   Today, Jill and I talk about the perfect timeline for a house flip and I can guarantee you that we have different opinions on this.

Jill DeWit:                            I know. Right before this show, I said, “Hey, hold on a minute, Steven. I would like to share with you my timeline just to make sure we’re on the same page,” and Steven replied with, “It really doesn’t matter. We can get into an argument right here if you want to.” I’m like, “Okay,” because I know I have my timeline and you have yours.

Steven Butala:                   I sure do.

Jill DeWit:                            You know what’s funny, is I think people would probably guess that mine is more forgiving and I think they would be surprised.

Steven Butala:                   Yeah. Before we get into the topic, let’s take a question posted by one of our members on the houseacademy.com online community, it’s free.

Jill DeWit:                            Mary asks, “I just received a 22 unit rental house group of houses from a mailer. Rental house group. Does this happen to you and how should I proceed?” Go back. What a 22-

Steven Butala:                   I think she means … she means that she sent a mail campaign out and somebody responded and said, “Hey, not only do I want to sell you this house, but I have 21 other houses that are all rented out. How about you just buy all of them and get me out of this nightmare landlord position I’ve created for myself?”

Jill DeWit:                            Now that makes sense. All right. How would you recommend she proceeds?

Steven Butala:                   Well, you know, those things can be … The good news is that you generated the deal. You didn’t go on the MLS and try to undo it, so you got there first. That’s the good news. But I personally … We get these probably every month and I’ve never done one because there’s always real good houses in a portfolio and real bad ones and that’s just not our business model.

Steven Butala:                   We have a real specific acquisition criteria and a real specific business model and we just churn it constantly. So there’s a small chance that 22 … There’s 22 houses this guy has that are rented and they’re reasonably priced and they don’t need a ton of work. There’s a small chance of that, but my experience has been landlords either stay in the business and they work it out or they don’t.

Jill DeWit:                            Right.

Steven Butala:                   So I’m not knocking it and I would actually-

Jill DeWit:                            And they’re usually jumping for a reason.

Steven Butala:                   If I’ve got a 22 unit deal in, and we just got one that was eight units in just recently, I looked at them all, I analyzed them as if I was going to buy them and we didn’t get into the inspection point because half of the portfolio was in a really bad neighborhood. So, I just said … And he didn’t want to separate them out, which is typical. I understand that.

Jill DeWit:                            I have one that was so funny too. Well, I had one like this where the gentleman, he knew that there were problems and he kept saying, “Are you sure you want to buy?” What’s funny is I didn’t pick up on the red flags and his hesitation. He knew we were going down this path and he knew darn well I wasn’t going to pull the trigger because I was a professional. Then at the end when I said, “Yeah, we’re not buying this,” he’s like, “I’m not surprised.” It was so funny. He’s like, “I know. I kind of thought that. I wish you all the best.” I said, “Thank you. You too.”

Steven Butala:                   They can work, but you got to be set up for them. I’d rather get 22 single unit deals in. This is the exact opposite with land, by the way. When we get a 22 unit dealing on land, everybody jumps up and down around the office, especially if it’s all in one county and the offers are signed. But with houses, they’re in all guaranteed different situations. Especially if they’re rentals. Today’s topic, the perfect timeline for a house flip. This is why you’re listening.

Jill DeWit:                            Smarty pants, I want you to go first.

Steven Butala:                   Jill and I renovated exactly two houses in our careers investments, before we said never ever again would we renovate, actually physically renovate, or rehab a house to resell it. The first one cash in, cash out took 45 days and we made about $28,000 and I just about wanted jump off a bridge. When you really look back on it, 45 days as smashingly awesome with escrow, in and out. We sold it for cash to this Canadian woman, the nicest lady ever. It was the most atrociously awful experience I’ve ever had, which is good, you got to have those to devise another system.

Steven Butala:                   So by anybody’s measure, cash in, cash out on a house sake for 45 days, it’s great. By mine, it’s atrocious. So we do a lot of front end works. I do a lot of front end work to pick a market by zip code or by subdivision to make Jill’s life on the sell side really easy, where there’s days on market are less than 30 days.

Steven Butala:                   So the perfect timeline for the wholesale deal that we do is three weeks cash in, cash out, three weeks and we cleared more than 25,000 bucks. That’s a perfect deal for us. Do we ever hit those? Yeah.

Steven Butala:                   We just had a house, it took almost four or five months to sell because we retail it out and we all knew that. We also made 80,000 bucks on it, $70,000 or $80,000. so it depends on the deal, is my answer but if it’s a regular, good, take it into possession, wholesale deal for us. Three weeks.

Jill DeWit:                            We’re on the same page.

Steven Butala:                   Really?

Jill DeWit:                            Well here’s how I broke it down, though. Let me tell you, I went one step further. I wasn’t talking about doing a renovation. I’m talking about a flip, the way we flip, which is we don’t do anything to it. I don’t even sweep. So I want to be cash in, cash out in two weeks, because we’ve done this, this isn’t … you said perfect, I came up with perfect because we have done this. I want 30 days in a perfect scenario that the offer comes in, to cash out 30, days.

Jill DeWit:                            Let me tell you how this works. So day one, the sign offer letter comes in, we are on it, we’re out there that day, or the next day we get the inspection, we open escrow, we are doing everything perfect. Then on day 15, that’s when we’re cash in because we’re closing on the buy side. So that’s when I’m putting the money in. Then a perfect world, day 16 I had an open house-

Steven Butala:                   Wow Jill, you’ve got to [inaudible 00:06:13].

Jill DeWit:                            We’ve done this, you said perfect, I’m giving you what’s possible. So don’t please don’t beat yourself up if you don’t have the exact dates. This is not the norm.

Steven Butala:                   You’re talking to me or the listener?

Jill DeWit:                            The listener. Please don’t beat yourself up listener, if you don’t have this exactly. This is the exception, not the rule. We have done it. So okay, so letter comes in, day 15 I close on the buy side, now I’m cash in. Day 16, because I was all ready to go, I knew on day 13, 14, 15 I’m getting this open house ready to advertise and push a button and hold it now fast.

Jill DeWit:                            I have investors lined up ready to go and show up. So now on day 16, I’ve had my open house. I’ve got six investors in there that I’ve worked with before, or maybe I’ve haven’t worked with them before. I’ve got six serious investors in though because we’ve been talking for the last week and a half getting ready for this so I told them what was coming. They’re in there, they’re walking it, they know time kills deals.

Jill DeWit:                            So that night I’m entertaining offers, the next day, now day … So that was 15, day 16, so they’re like day 17 let’s just say, I’m reopening escrow and then in a perfect world, on day 30 I’m closing on the sell side. Why can I do it that fast? Because I’m working with investors, they are also cash people and I did a hold up in policy so the back side went even faster.

Steven Butala:                   Two things have to happen. Jill nailed one of them. The person that you’re selling it to is a professional real estate investor, they want to have it done as fast as you do because they want to get in there and rip it all apart and get it back on the market all cleaned up.

Steven Butala:                   Number two, and this is a little more tricky, is you have to have a seasoned escrow, slash title agent, slash closing lawyer on a short leash. That’s a little harder to do, but once you’re in the market for a while and you’ve been doing some deals, you should be able to find a perfect situation. Or at some point soon here, you’re going be able to use Title Nine to do it.

Jill DeWit:                            Exactly. Exactly. How’s that?

Steven Butala:                   So thirty days cash in, cash out.

Jill DeWit:                            No, actually that was … No, 30 days from the letter coming in and going out. I’m talking-

Steven Butala:                   Oh okay. So we’re saying the same thing.

Jill DeWit:                            It’s like 15 … You said three weeks, I said two weeks.

Steven Butala:                   So cash in cash out, for me is three weeks-

Jill DeWit:                            Cash in.

Steven Butala:                   … but it takes a week before you have to put the cash in. When you get that letter, it’s … We’re saying the same thing.

Jill DeWit:                            Yeah. So cash in cash out is less.

Steven Butala:                   For land out, we were getting reports back from some of our members that they’re closing deals in three days with lawyers because with land there’s no real due diligence. “Yep. I want to buy it. I can clearly see that this is exactly what I want.”

Jill DeWit:                            Exactly. I don’t need to walk in it and feel it and be there.

Steven Butala:                   We are forever talking about the pros and cons of buying and selling land versus houses forever on both shows. There’s pros and cons to all of it.

Jill DeWit:                            I have to share something which is interesting me, that I had never heard of this before. So it’s a long … This is a shining example of why we want to do it our way versus the other way, like going the long real estate way. I have a really sweet friend who’s an agent in our area and she just held a twilight listing, a twilight open house. I didn’t even know that was a thing.

Steven Butala:                   What is that?

Jill DeWit:                            It’s where … and she hired a band, had it catered and everything. So people could come and view the home-

Steven Butala:                   She had a party.

Jill DeWit:                            … at sunset, to see what is possible in this home. Not just walking through and going, “Yeah, I like it. It’s a great view. It’s got the bedrooms I want, the bathroom I want, maybe I’m going to change the carpet,” whatever. No, it was a whole twilight …

Steven Butala:                   Why didn’t we get invited?

Jill DeWit:                            We were invited.

Steven Butala:                   Why didn’t we go?

Jill DeWit:                            We were busy, we couldn’t go. We had people in town and we couldn’t go.

Steven Butala:                   That’s awesome that I don’t know any of this.

Jill DeWit:                            You know what, actually that might’ve been our move day. Now I think about it. I think it was a move day.

Steven Butala:                   Thank you for not letting me know any of this.

Jill DeWit:                            Yeah, you’re welcome. Honestly, we were invited. I would have liked to go, but I think it was move day and I couldn’t go. I’m staring at boxes and I have Russian men in my living room and a lot of boxes, I can’t go.

Steven Butala:                   You like that?

Jill DeWit:                            No.

Steven Butala:                   Oh you don’t like to have Russian men in your living room?

Jill DeWit:                            No, I mean, you know what it’s like. Who loves moving day? Nobody loves moving day. Anyway, but the end result of moving day, as you can see, was pretty good. It worked out okay.

Steven Butala:                   We moved up, not down.

Jill DeWit:                            But we missed our twilight listing. So my point was though, you want the perfect deal just get in, get out.

Steven Butala:                   Did she sell the house?

Jill DeWit:                            It’s under contract right now. So yes, that did-

Steven Butala:                   So did it work?

Jill DeWit:                            Actually she did.

Steven Butala:                   It really worked?

Jill DeWit:                            Yeah it did. I thought I told you that. I’m sorry I didn’t share with you.

Steven Butala:                   I’m sure you did, I’m sure I [inaudible 00:10:36]. Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for another interesting episode.

Jill DeWit:                            And we answer your questions posted on our online community found on houseacademy.com and it is free.

Steven Butala:                   You are not alone in your real estate ambition. You know what I heard people also that people do on these high end houses? Is they make a movie.

Jill DeWit:                            Yeah.

Steven Butala:                   Like a short little eight minute movie about … With characters and stuff in a [crosstalk 00:11:03].

Jill DeWit:                            Oh, I haven’t seen that.

Steven Butala:                   They shoot all the scenes in the house and stuff.

Jill DeWit:                            Showing like the beautiful, perfect Christmas morning opening presents around the tree?

Steven Butala:                   You know, you just wrote the script in your head.

Jill DeWit:                            All right.

Steven Butala:                   The ones that I’ve seen didn’t involve houses. It involved having a little dinner party, almost like a little music video.

Jill DeWit:                            Well she did a version of a dinner party. She did a party like, “Here’s what you could have here at this house,” and I think I worked.

Jill DeWit:                            Wherever you’re watching, or wherever you’re listening, please subscribe and rate us there.

Jill DeWit:                            We are Steve and Jill.

Steven Butala:                   We are Steve and Jill. Information …

Jill DeWit:                            And inspiration …

Steven Butala:                   To buy undervalued property.

 

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