Brant has rehabbed so many of his own investment properties I lost track in the interview. He also owns (can you guess?) a rehab business! Rent Ready Contractors who, by the way, has a perfect positive record in the Lifestyles Unlimited feedback program with 35 raving clients reporting how great they are, an no negative comments at all.
We talked about rehabbing, of course, and also some additional helpful information. Like a good rule of thumb for knowing how much a rehab is going to cost. And how to get the best contractors and a fair price. Brant has a lot of experience with alternative financing and shared his experience with me.
This interview with Brant was fun. You can tell he enjoys what he does and his entrepreneurial spirit is inspiring, and infectious.
Transcription by SpeechPad
Damon: Welcome, everybody to Eyes on Investors. I’ve got a great guest with me here today, Brant Phillips. He’s the owner of Rent Ready Contractors. He’s done tons of real estate investing and lots of different deals, lots of remodeling. We’re going to talk about a lot of things today. Brant’s got tremendous experience in lots of different areas. So, I’m looking forward to really digging in, Brant, and finding out all the things that you know. We’ll be very interested in that. You’re smiling because I hear a phone ringing, right? It just makes the interview more real.
Brant: It’s turned off but not the fax machine.
Damon: So, there goes my phone. It’s ringing, too. Let me turn that off.
Brant, let’s start off by talking about how many deals you have done. How many properties have you owned over the years?
Brant: Well, right now, I own about 35 rental properties, and I don’t know. I’ve probably flipped 20 or so houses over the last few years. Actually, just in the last couple of years is when I really started flipping and gotten more aggressive with my flips. My rental properties, like I said, are about 35 doors. For me, that’s kind of where I want to be. I had bigger aspirations, but for me that’s a good place. I’m not really wanting to push that too much more, just because I really enjoy the flipping side of things.
I wasn’t planning on starting a contracting company. It’s just kind of the way that life turned out. It was like, hey, I’ve got this opportunity. So I really spend a lot of my time running the company and helping other investors, really. I still usually have one to two flips going on at a time. I really, really enjoying flipping houses. So it’s kind of my new business passion the last couple of years.
Damon: Okay. So let’s talk about flipping houses then because a lot of people are interested in that. That seems to be working better the last couple of years than it did prior to that. What is it about flipping houses that appeals to you?
Brant: Quick cash. It’s an exciting kind of ride just with my entrepreneurial kind of spirit. I’m not like a big gambler or anything, but there’s something a little bit like Vegas, a little bit like Wall Street kind of mixed in between the two. And I really just like analyzing the deal, looking at the numbers, doing the rehab and game planning the rehab and really digging into what is going to make this house so compelling over the other houses in the neighborhood and doing it really, really quick. It’s just exciting to me, and like I said, it is a lot like . . . people ask if it’s like those TV shows that used to be all the rage a few years ago.
Damon: Like “Flip my House,” that type of stuff.
Brant: Flip this house and all that kind of stuff. It actually is. There’s like a lot of, I guess, misinformation on some of those shows, but a lot of it is kind of like that. It’s a roller coaster ride for a few weeks, and then when you get the contracts, it’s totally worth it. I enjoy it. It’s something to do.
Damon: Let’s talk about the process of flipping a house then. You need to find a house. That would be the first step, right? How is it that you find a house that’s appropriate for flipping?
Brant: The most simplified recipe to flip a house is you’ve got to find it, finance it. You got to fix it, and then you got to sell it or flip it. When I started investing, I had a full-time corporate job, worked a lot, a lot of hours. I was married, wife and children. So, one thing, I didn’t have time to find deals.
So I’ve always relied upon wholesalers and real estate agents to bring me deals. I’ve just never had the time to go find deals. Well, I guess I could have made the time, but I didn’t want to use my time for that. So, I’ve always, always used other people to bring me deals. And so, that’s been one of the keys.
I can tell you that I say no to a lot of deals, and I think one of the biggest obstacles people have when they get started is finding the right deal. And then unfortunately, sometimes they’ll pull the trigger on a bad deal just because they’re chomping at the bit to do a deal. I can tell you that I might say no to at least 10, and I recently went through a span of maybe 30 or 40 deals that were deals, not just junk but like considerable deals that I just said no to because it’s a tricky market right now. So you have to know to pick the right deals. And then, back to back I picked up two within just a matter of days because they both fit what I thought was going to work out.
Brant: To me, using other people’s time to find deals has been critical for me because I did not have time to go out and find my own deals. I search on the Internet, putting out Bandit Signs, doing mailing campaigns. I just did not want to do that.
Damon: You just don’t want to do that. So you’ll go to people who wholesale deals. They already have those. They’ll give them to you. You’ll look at it and make your own decision as to whether that looks like it’ll work or not.
Brant: Yeah, and the thing I like generally best is, with a wholesaler, they already have it under contract. It’s kind of like, it’s immediately right there. You don’t have to go through the whole process of submitting an offer, wonder if it’s going to get accepted. It’s kind of just instantaneous gratification. You’re like, okay, I’ve got it. Let’s do it. The numbers work. Let’s go.
Damon: I see. Are there particular wholesalers that you work through, or is there a website that you go to, to get these deals?
Brant: Yeah, there are several. I have a handful, probably like three or four wholesalers that I have really, really good relationships with that I’ve worked the most with. And then I have others that are in the Houston area that send me quite a few deals in e-mails. But I really stick with three or four wholesalers for the most part because it’s relationships. I know they’re not going to waste my time, and I can kind of trust their judgment. They don’t send me things that they know that I’m not interested in.
Damon: They know what you’re looking for, and they’ll filter out a lot of stuff before they send it over to you.
Damon: The key here then, for people listening, is if you want to get deals from wholesalers, go and establish some relationships with a few wholesalers. Get to know them. Let them know you, and then work with them. Once they have confidence that you know what you’re doing, you’re going to buy their properties, they’ll bring the deals to you when they see the good deals. Is that right?
Brant: And the same for real estate agents as well. I have some agents that will send me deals, not as often. But it’s good to have because I’ve had a couple of really, really nice deals that came through agents. That’s just it. When you’re building relationships with wholesalers, you’re not going to say yes to a bad deal.
When you say yes, when you commit to buy property, they want to feel confident that you’re going to close and that you’re going forward like you contracted to do because they have a lot of people who waste their time or they’ll get cold feet right at the end. That’s one of the biggest things is that you don’t waste their time.
Damon: I put you on mute there for a second because my phone’s ringing. I apologize for that. We’ve having phone issues today, but I think it’s done now.
So, you don’t want to waste their time. When they send a deal to you, what are you looking for to make that determination as to whether it’s going to be a good flip for you, whether it’ll be a good investment?
Brant: As far as a flip, a lot of times it depends on the neighborhood. Of course, we’re going to go off the value. I tell people the minimum after all of your repairs and your purchase price and your repairs, a minimum of 70 percent, minimum. But I really like to be in the 60 to 65 percent of ARV.
Damon: Okay. ARV is the After Repaired Value of the property, how much it will be worth after you fix it up.
Brant: Yes. Really minimum in a good market, or if it’s a really, really good neighborhood, you can go 70 percent. I would not go above it. Just say no, walk away but get down in that 65 percent. Then it really comes somewhat on the house, but I’m really, usually more concerned with the neighborhood, the amount of inventory in that neighborhood.
Damon: What do you mean, how many properties are on the market?
Brant: What’s for sale, what’s the competition, and what’s the days on the market for that neighborhood, and what are the characteristics of that neighborhood is generally more important than the house, a lot of times itself. I always try and look at when I buy and fix up a house, I want to make sure that I can make it as nice or nicer than pretty much everything else in the neighborhood and price it, at least, in that same price range or even lower. And that’s been a formula for success, because if you can have the nicest house in the neighborhood, that’s priced better than anything else, generally you’re going to get all the showings, which means that you’re going to get the contract.
Damon: You’ll get more interest and more qualified buyers looking at it, I would imagine, more demand.
Brant: And always price it to sell. Don’t get greedy with pricing. I’ve done that a couple of times, and it’s ended up costing me because for days on the market it’ll sit longer.
Damon: I see.
Brant: So, price them to sell. Don’t get greedy with how much you’re trying to make.
Damon: Don’t try to eke every dime out of it. Just price it properly. Let it move quickly and be satisfied with that.
Damon: Okay. Good advice. The thought that comes to my mind then is you want to get a minimum of, say, 60 to 65 percent price based on the ARV, but one of those factors is how much it’s going to cost to repair. Let’s say the ARV is $100,000 and they’re saying, well, we’ll sell this house to you for $40,000. You look at that and you say, well, that’s a really good percentage, but what if it’s got tons of damage and it’s going to cost $40,000 to fix up or some $50,000 something like that?
At the time that you make the decision to buy the property, do you already have an idea of what it’s going to cost to repair?
Brant: Yeah, I do. I guess I have an unfair advantage because I do so many rehabs for other people. What I tell customers or new investors is I have a rule of thumb I’ll use just in my mind before I’ll even look at a deal or a wholesaler sends me a deal and they’ve evaluated the repairs. Say, for example, the average deal on a house, on a flip or just generally like a total rehab, is a 1975 to 1990 construction.
Brant: We’re dealing with houses that are 20 to 30, 35 years old, generally those houses need a full rehab – paint, carpet, light fixtures, countertops, tubs, tub surrounds, floors, all that kind of stuff, landscaping. If so, the equation I use is $10 a square foot times the amount of square footage. So if it’s 1,500 square foot, you times that times ten, it’s $15,000.
Brant: Now, that generally does not include roof, foundation, or AC. So, I would add those items in accordingly. If it needed a new roof, say, $3,000 or $4,000, AC ditto. You might be in the $25,000 range or AC, foundation or roof might be fine and you’re at $15,000 and say it has good cabinets and countertops, you’re going down. But that’s just a good way to evaluate a deal without driving around and looking at every deal, because I’ll tell you what, that $10 a square foot guideline is I would say at least 70 percent of all the houses we do and houses that I look at. So that’s a really good guideline to use.
Of course, if it’s a rental and it’s not in bad shape, you can take that number down. They say if it’s like a 2005 construction, of course, it just needs paint and carpet, you’re not going to use that guideline.
Brant: That’s kind of what I do to quickly, in my mind, calculate repairs.
Brant: And make a decision on the house.
Damon: That’s perfect. So, the $10 per square foot rule applies to really all the cosmetic stuff that’s going to be updated and modified in the house. And then, as you mentioned, big things like foundation or roof or AC, those would be apart from that, and you would just need to go and inspect the property to find out if those are issues or not.
Brant: Yes. And what I did, because I get this phone call a lot from investors asking me and wanting to do bids or they’re just analyzing a deal that’s not under contract just because we don’t have time to estimate every house that people are just looking at. So, I made a website that people can go to. It’s called FreeRehabEstimator.com.
Damon: Okay. FreeRehabEstimator.com?
Brant: FreeRehabEstimator, and there’s a link to it, also, on Rent Ready Contractors.
Brant: It’s essentially an Excel spreadsheet that goes through, I’d say, 99 percent of every item that can come up on a rehab. And they can just plug in the square footage or the linear feet or what have you, and they can go line by line and analyze the deal pretty quickly.
Damon: Oh perfect. Okay. That sounds like a really good tool. I’m going to go check that out.
Brant: We’ve had a lot of really good feedback from it.
Damon: Oh good, because when I’m teaching . . . I teach people over at Lifestyles Unlimited how to do property evaluations, and that question comes up a lot. How do I know how much things are going to cost because that’s an important factor to know if you got a good deal or not? I’ll look at that resource and be able to refer people over to it.
Brant: Those prices on there are also general contractor prices where they’re very, I guess you would say, safe where it’s almost worst case scenario. A lot of those things, say, if they’re going to manage the rehab themselves or get a handyman, they can generally get that stuff done for that price, and then on a lot of items they can actually do it a little bit cheaper.
Damon: I see.
Brant: They’re safe and conservative numbers when they’re estimating their deal.
Damon: Which is really important when you’re doing your estimating to make sure that you’re being conservative.
Let’s talk about your company, Rent Ready Contractors, because you do this kind of work for people all the time. If it’s your own property, I assume you have a bit of an advantage because you’re paying these guys a wholesale price, I guess, to go and do these jobs on your properties
But for other people that need to get all this work done, is there very much difference in price if they went with, say, your company versus a general contractor versus a handyman? What kind of direction do people need to take when they’re looking at these rehabs and hiring people to do it?
Brant: Well, I would say on smaller, little handyman jobs, it’s definitely in their best interest to just go with the little handyman kind of route for just doing a single sheet rock patch, things like that. It’s not always wise to hire a general contractor, but where the general contractor comes in to really the value, I guess you’d say, like on your larger rehabs.
If you’re working a full-time job, you don’t have much time, you definitely, definitely don’t want to get hooked up with a bad contractor because it will make your life miserable, which is kind of my, the Rent Ready story because I started investing in real estate when I was working a full-time corporate job. Actually, the first rehab I did, I did a turnkey general contractor remodel, and it went very, very well, very, very painless and easy. I had lower bids, but I was fearful to go with the cheaper guys. And so, I paid a little bit more, and there was value there. I was very, very happy with that process. So, soon after that I started getting cheaper labor and doing things myself. I paid for it in the pocket and with headaches.
Damon: The quality of the work went down.
Brant: The quality of the work, the time of not getting the job done, in a reasonable time, guys not keeping their word, just no really attention to details and cosmetic appeal of the house, where these guys were just laborers trying to get a paycheck. And so, I can tell you that it cost me in a lot of ways. So, that’s why I kind of just stumbled upon there was a huge need for a good company to help investors do turnkey rehabs for people who didn’t feel like babysitting contractors and worrying about if their job was going to get done.
And then, I was always coming from the viewpoint, when I bought my first house, my wife and I lived in an apartment. We literally had no money in the bank. We had just paid off our student loans, all of our credit cards. So we were in a good position. We had good credit, but we didn’t have money. We were married a couple of years with a kid and just trying to make it. Then I got this crazy idea to start investing in real estate. To me, time was very, very valuable. And so, with my very first rehab, I was able to rehab it, rent it, and get a renter in before my first mortgage payment was due. And so, I always had that mindset that I’m getting this house rehabbed. I’m getting it rented before my payment’s even due, and it wasn’t even an option. I’ve kept that mindset now that time is absolutely critical for rehabs.
Damon: Yeah. Well, you were mentioning that if you have a contractor who’s not reputable or they’re not doing quality work that there’s a price to pay for that. When I was preparing for this interview, I went and looked at your Rent Ready Contractor Company on the Lifestyles Unlimited website where people who have used your service can post comments. It was interesting. You’ve got, I think it was 35 positive comments, no negative comments. It’s just clearly you guys are doing the right thing because people are very happy with how you’re doing it.
Brant: Well, we just paid them to give us good comments.
Damon: Oh, that’s it. There you go.
Brant: It’s not an easy business to not have any negative feedback.
Brant: I’ll tell you it’s painful sometimes because rehabbing is . . .
Damon: There are unexpected problems that come up.
Brant: There are all kinds of problems. I can tell you we’ve taken losses on a lot of jobs, if there was a problem on our end or guys did something wrong, to make customers happy. Unfortunately, just from experience and from other people, I know a lot of contractors won’t do that. They’re looking to dig their customer every chance they get.
I really enjoy the Rent Ready Contractors because it’s fun seeing people . . . I’m very entrepreneurial, so I like to see people take an action, and it’s fun to help them and see them succeed, do well. We’re proud of not having any negative comments. We work hard to keep it like that.
Damon: It sounds great. It’s very commendable. I wanted to tell you that last week I sent an e-mail out to all of our members, all of the Lifestyle Unlimited members in Houston, about 2,500 people, and I asked them the question, “What is the biggest challenge that you have in real estate investing?” The feedback that I got, about 60 percent of the people said that getting financing, had to be qualified for buying properties, finding the money to buy the properties, that was their biggest challenge.
I know that you have experience with financing the deals that you’ve been doing. So, I want to talk about financing and see if we can probe this and understand what can people do to get financing. What kind of financing have you done? What do you have experience with?
Brant: Well, I’ve been fortunate that when I started investing, conventional financing was available and, quite honestly, it was very, very easy, a little bit too easy. Like I said, my wife and I were living in an apartment. We didn’t have any money. We just had good credit. We had good income, good credit, good jobs. I was able to go out the very first year and buy ten properties, rental properties, all in the first year and get those. I purchased them all with hard money, rehabbed them, full rehabs on all of them, and refinanced them very, very quickly. And so, that was my first introduction to financing. I remember just like this just seems like this is a little bit too easy, and come to find out it really was too easy.
What happened was I was so aggressive with my buying. Around the same time I was buying number 10, I was also buying number 11, 12 and 13 at the same time and then not doing my homework on the financing end. When I called my mortgage broker, which is Blake at Capital Concepts, I called him and said, “Hey, I need some more refinances.” He was like, “Well, you can’t get anymore. You’re tapped out.” I was like, that didn’t sound too good.
That led me to using partnerships to do some deals. I quickly got on the phone, started wracking my brain. Even with butterflies in my stomach, kind of making these phone calls, “Hey, I’ve got some investment properties. Would you be interested in using your credit to refinance out of these, and we’ll split any profits that are in the cash flow and we’ll sell it?”
Damon: Who were you calling when you were calling these people? Were these people you knew?
Brant: Well, not all of them, actually. My wife is a hair stylist and, of course, she knew about my situation, my predicament. Just through the course of her talking to the customers’ small talk. One day she’s like, hey, I was just talking about, someone is asking what your husband does and she told them. She was like, “Oh I’d be interested in that.” I called the lady up. I didn’t know who she was. She came over and hung out with my wife and I, had dinner, and met the family. A couple of weeks later, we were buying a house together. I still have that property.
One was a cousin, and one was actually a mutual . . . it was one of my wife’s clients, but also someone I had met a couple of times that I knew was pretty well off financially. So, I called him. We actually bought several houses together, and who was the other?
And then, I formed another partnership with another investor like myself on down the line. That’s when we learned about private money financing. And so, a friend of mine, we created a partnership and started raising private money together and using both of our expertise because he was really, really good at actually finding deals.
Brant: And I was good, of course, at rehabbing and managing. So, we kind of partnered and started doing deals using private money financing.
Damon: By private money, you went out kind of like what you were doing before, just talking to individuals when you and this other fellow got together, and he was going and finding the money. You guys were getting money from different individuals and pooling it into a fund, or how did that work?
Brant: Well, basically it’s a private mortgage with a private individual, and what we did, and this is what my primary source of financing still to this time is. We find people who have either cash, or it could be an IRA or some type of money that they’re not using or not using properly. It could be in a CD or money market account that they can pull out, that they’re getting, say, one or two percent or losing money.
We essentially agree on terms. Most of our loans are interest only loans, and we’ll create a mortgage. We have closing at a title company. They essentially become the bank, and we use the money to purchase and renovate houses. Terms are very flexible, but generally we have them as low as 6 percent to 12 percent interest, interest only, from as little as one year to, I think, we have one out at five years.
Brant: Just very similar to a lot of your small banks, because I have several bank loans through local banks that I’ve also been able to get financing through. And so, it’s just a much easier process going through private lenders. It’s really handshake kind of stuff, and then everything’s done at the title company, but there’s not a big loan committee and all this kind of stuff. You show them the deal. If they like it, you agree on terms and . . .
Damon: Then you can move forward.
Brant: Yeah. It’s super, super easy. There’s just an abundance of money out there that people don’t realize. A lot of this money has just been taken out of the stock market. It’s just sitting.
Damon: It’s in the bank earning hardly any interest.
Brant: People don’t realize it’s just there. It’s waiting. I always say that good deals and good investors, good trustworthy people will attract money. You become like a magnet.
Damon: Are you and this fellow still doing these private money loans?
Brant: It’s all I do. I closed on a house last week that I used private money on, and I’ve got another one under contract that I’ve got private money lined up.
Brant: I would say that’s my . . .
Damon: That’s your primary source of funding. What can people do? Do you know of any company that actually an individual could go to, kind of like the brokers private money loans so that they can access to these, or do they need to establish their own relationships with private lenders?
Brant: It’s all through networking. It really all comes through networking. When I first started investing, I did, I networked a lot just going to the Lifestyles meetings and other local meetings, calling friends, family members and things like that. But it all essentially came through networking.
Brant: I will say that when I began investing, like I said, I used only hard money. And I still recommend, highly recommend that people use hard money lenders, especially the beginning investors. I really actually like to see them use hard money because, to me, the new investors will, at times, pull the trigger too early. Like I mentioned, they’re just so eager to do a deal that they’ll go by what’s actually not a deal.
Brant: What I like about hard money lenders is they’re kind of a safeguard, meaning that they’re not going to lend an investor money on a deal unless it’s a deal, unless the numbers work.
Brant: That was actually a really good way for me to get started because I built the relationships with the hard money lenders, and I still have that relationship. I talked to one the other day because there was a deal I was looking at. I wasn’t sure if a private lender was going to come through. It was a really big deal, and it had definitely, I guess you would say, issues that I was a little bit concerned about.
So, I called some lenders. I called my hard money guy as a backup and just kind of picked his brain as well. I ended up backing out of that deal. But I remember my first year of investing there was a deal I really, really wanted. My hard money lender was like there’s no way. He was like, “I’ll loan you half of what you want.” I got so frustrated. I’m like, “Why? This is great.” And then, in hindsight, it wasn’t that good of a deal. So I recommend hard money as a really, really good route.
Damon: That’s a great point, because the hard money lender is going to be making sure that they’re protecting their investment. They want to make sure you’re getting a good deal so that they get the return that they’re looking for and they’re not putting their money at risk. In a way, even though they’re looking out after their own interests, they’re actually your advocate to make sure that you’re getting into a good deal. I like that.
Brant: Like Dale says about the progression of a real estate investor going from single family homes to apartments, that’s the way I see with financing. It’s good to start with hard money. You learn the process. You get more experience, more credibility. Then, you can progress towards using private money because people can get burned in real estate. As many people make money, a lot of people, if they don’t do things the right way, can lose money.
This way, it’s a really good way to get started in training, and before you’re going to take someone’s retirement money, you want to make sure that you know and you’ve been through this before you just go start borrowing people’s money.
Damon: That makes sense because a private lender is probably not a real estate investor. They’re not going to be able to analyze the deal and determine if it’s a good deal or not. They’re lending you the money and having faith in you that you know what you’re doing. And so, it’s better to have some experience before you go get private money is what I’m saying.
Brant: It definitely is, because if you don’t know what you’re doing and you’re going out there and borrowing people’s money and you haven’t had that experience and that training, you don’t have the right mentors, that can be a disaster. If you take your time, do it right, I guess, say practice if you will, use hard money lenders. Use that safeguard. Get that experience. Then, what has become, I guess, what could be a risky situation has turned into one of the very, very best investment opportunities for you and your private lender when you do it the right way.
Damon: Right. Now, one of the challenges that people have told me they have when they go do hard money is that they need to qualify for a conventional refinancing, or they need to qualify to refinance the hard money loan into a conventional mortgage after they get the house fixed up. If they don’t qualify for a conventional mortgage, then they’re unable to get a hard money loan. Are there any options for people that are in that situation?
Brant: Well, I think that private money would be an option to get refinanced if you have a lender that’s going to loan you that money long-term. However, I don’t think that’s the best option. I only see two options. One is that you could find a partner. You could partner with somebody and use their credit to refinance you out. Or two, if you can’t get qualified for your long-term loan, I think there’s some underlying issues that individual probably needs to get taken care of. That’s not the answer they want to hear, but maybe there’s issues. A lot bit of patience, analyze their situation. Figure out why they can’t get that refinancing.
Brant: Then, a year, two years, what have you, do the steps required to get to that position. But me, I’m very entrepreneurial. If you hit that dead end road, look at other avenues. What I did was I turned to partnerships, and then I turned to private money. Those would be options, but at the same time, if they go that route, I would say they need to work on their personal issues.
Damon: Maybe they need to build their credit score up, or they need to get more cash in the bank, things like that. Would you recommend for somebody that doesn’t have cash, if they’re looking at doing flips, flipping houses, to build up some cash so that they can get financing and do long-term? Do you see that as a risky thing for them to be going and doing rehabs if they got private money or if they partnered up with somebody?
Actually, if they partner up with someone who’s experienced with that, then they’ll be able to learn how to do it, even if they don’t have their own money to put up for it. What are your thoughts about that?
Brant: Well, if they’re going to partner with somebody and they’re not bringing cash to the table, then I don’t think anyone’s going to partner with them. It’s usually, if someone’s bringing cash, they’re expecting you to bring the experience into the deal, so that they, essentially . . . my partners a lot of time won’t even look at the house ever, and they’re relying on me to do that and just, basically, send them a check at the end
Brant: So, what I say, because this is actually a very common mindset or game plan. People say, “Well, I can’t get refinanced on my rental, so I want to start flipping some houses and build up some quick cash.” In theory, it’s good. In practice, it’s a little bit more difficult than that, because I like personally to see people go out and do some rehabs and do some rentals because it’s so, so easy.
When you get into the flips, it is more complicated. I know, one of the best experiences I ever had was on the very first flip I did, I lost money. At the end of the day, I lost about, I think, it was $3,000, but it was a great learning experience because I learned. I did everything the wrong way. I took too long on my rehab, overspent on my rehab because I didn’t have a good game plan in the beginning where it was kind of like, let’s do this. Now, let’s do that, which is just a disaster waiting to happen.
I priced it wrong. I got greedy. I pushed the value of the house further than making it an appealing offer, the irresistible offer we call it. The best rehab at the best price. That’s probably the best price. I did not do that. I accepted a contract with a very shaky buyer. They ended up losing their financing. So, I had to go back, put it on the market again, and this was in a hard money loan. So by the time, seven months later and, like I said, losing about $3,000. I’ve used that whole experience on my other flips. I went through a streak where I had about eight flips and had contracts all in less than 10 days, but all that came from doing 50 to 100 other rehabs in the meantime, rentals and with customers. So I really honed my skill.
Brant: For someone to just go out and start flipping houses, it can be done, but I’d like to see them make sure they’ve read several books. They’ve been, at least, to a boot camp or two and had some good mentorship and really, really, really make sure they find a good property and that they know what they’re dong when it comes to rehabbing. So, it can be done. I’ve seen it done with new investors, but I’ve seen the opposite happen where they go out and do a bad deal. It sits on the market, and they lose money.
Brant: You’ve got to do it the right way, but it can be done.
Damon: Okay. What books do you recommend that people read? Do you have some that you can recommend that would help them with this?
Brant: Nothing out of the ordinary. I started with Guy Kawasaki, like everybody else. But I think that Stephen Covey is pretty impactful for me, “The Seven Habits,” actually almost more than any other real estate book. I did read a pretty cool book that was called “Investors in your own Backyard.” He does not talk about real estate. He just talked about finding partners for your deals and joint venturing. So, those are just a few that come to mind, but I’ve read everything by Kawasaki. He’s been the most, I guess, inspiring to me in terms of business.
Damon: I’ve been very helped by him as well. I read his stuff years ago, and that got me interested in all this. He just lays it out in a very understandable way a lot of the principles and concepts that we want to work with.
I want to go back and touch on remodeling and rehabbing just a little bit more. What do you recommend people do in order to make sure that they get a good contractor? How can they determine whether they’re getting a good contractor or not is, I guess, is what I’m asking?
Brant: Well, I think they need to verify some references. I’d say that’s the most important thing that they want to make sure that this contractor has done this before and that they’ve done a good job with multiple people. I tell people, verify with hard money lenders. I think it’s a very good source. They’ve seen and have approved a contractor’s work.
Damon: That’s a great idea.
Brant: Of course, Lifestyles. That’s actually what I tell most people. Go to the vendor list for contractors and other investors. One of the fatal flaws I see other contractors make is they can’t handle it when they get real busy, the amount of work load that comes in. The problems with the general contractor business model is, one, a lot of times if they’re doing the work themselves, they own the company. They’re writing paychecks. They’re bidding jobs. They’re going to buy materials, and they’re actually doing the work. You can’t do that. Many of these guys are really good guys and they have good intentions, but their business model just . . .
Damon: It’s broken.
Brant: It’s broken. And so, then they’ll say they’ll get another job or two or three jobs, and then that’s where you run into, why isn’t anybody working on my house for three, four, five days in a row? It’s because he’s at Home Depot, bidding another job, working on another job because he doesn’t want to pay somebody.
So, I recommend if you’re going to use someone like that, you need to find out how busy the work load is, and you need to hold them accountable to a time span. Of course, there needs to be penalties if they go over that.
Damon: I was going to ask. Is it standard to build in penalties then if you say this job needs to be done in a week and for each day that you go over, there’s going to be some associated penalty.
Brant: Yeah, I definitely recommend it.
Brant: We factor that into all of our bids unless there’s like a real thick permitting job because sometimes those things are out of control.
Brant: Eighty percent of our rehabs, we put a time frame on our bids. What I do just to keep us safe as well as the customer, I generally will add on seven to ten days of what I really think it’s going to take. It’s still a reasonable amount of time frame, and then we start taking money off after that. And then, also, just make sure that they have agreed upon draw schedules, because I’ve gotten that phone call a lot where people call me and the contractor walked off. Most times they walked off because they got paid and, therefore, lost their incentive.
Damon: So, don’t give them the money until the work is actually done, right?
Brant: It’s a tricky situation because you do have to give them some money.
Damon: Well, they’re going to have costs. They have to go buy material.
Brant: Sometimes, we dump $4,000 or $5,000 into a project in the first three or four days. We buy a big material dump. We’re laying down tile and tubs and things like that. We’ll dump thousands and thousands of dollars the first few days, so we won’t start a job if we don’t have a check because we’ve been burned by customers before.
Brant: It’s kind of a catch 22, and you just have to find that agreeable spot for you and your contractor because . . . what I say is you don’t want the contractor to get too far ahead of you in terms of money, but the contractor doesn’t want you to get too far ahead of them. So, maybe instead of doing three draws, break it into five draws or whatever works. You’ve got to give them some money, but it can’t be an unreasonable amount where they’ll walk.
Damon: Right. That totally makes sense. It’s got to be a two-way street.
Brant: And sometimes I’ve seen customers, they’ll be unreasonable like, say, you don’t want to pay them until the end of the job. Well, you owe them $10,000, and the only thing left is a couple of touch-up spots on paint and things like that. Then maybe give them a little bit of the sum and then hold back $500, whatever’s reasonable.
I was in law enforcement for my first seven years out of college, and there was a sign on the wall at the police academy. I’ll always remember. It was, “Common sense and good judgment.” Just do that, and more than likely, they’ll be fine.
Damon: Excellent. Good advice. The last subject I want to cover with you is being an entrepreneur. You mentioned that you had a corporate job. You broke away from that. You’ve got your own business now. You’ve got all these investment properties. You’ve done all these rehabs, flips, buy and hold, all these different things. I’m interested what is it about being an entrepreneur? What is it that motivates you to structure your life the way that you have to where you don’t have that corporate job and you’re doing your own thing?
Brant: Well, I didn’t realize I was an entrepreneur. I just thought I was an unhappy person for a while. I didn’t realize that I’m just not supposed to be here, because I had all these ideas that I could do things, not necessarily better but differently, more effective and use my time other ways.
So after a while, it was like, okay, I need to stop complaining about the way these guys do things here. I just need to remove myself and pursue my own ideas and my own visions and dreams. And so, that’s always been my motivation.
When I first identified it, I guess, four or five years ago that I wasn’t getting the most out of life and that I wanted more and I really wanted more time, freedom and just to be able to help people and have more of a purpose in my life rather than what I was doing, which was just a corporate sales job selling chemicals and soaps. It wasn’t too much fun.
I try to pursue my passion and like doing stuff that makes money and spending time with the family and working out and just doing stuff I like to do. That’s my motivation. To be quite honest, I probably work more now. I’d say I work more now than I did back then or at least as much, but it doesn’t feel like work.
I wake up in the morning, and I’m excited to go out. There are challenges, but they’re fun most of the time. It’s been an incredibly enjoyable ride so far. Although I can say that it’s not for everybody. I can tell you that much, because when I first quit and some of the risks I’ve taken, it’s scary. It’s a different threshold, and I know it’s not for everybody.
But, if it’s for you and you’ve got that calling inside, you’ve got to act on it, because you’ll wake up an old person one day and you’re going to regret it. I just don’t want to have any regrets. I’d rather go down in flames saying I tried rather than not, saying I played it safe. Just for me, that wouldn’t work.
Damon: I totally relate to what you’re saying. I had a similar experience where I’ve had corporate jobs for many years. I always did things on the side, but it wasn’t until about four years ago that I decided I don’t want to do this any more. I’m in my 40s. I need to actually accomplish some of my dreams and go after the things that I’ve been wanting to do, instead of limiting myself by just feeling like I have safety in this job.
One of the things you mentioned that’s intriguing to me is that when we were talking about financing, you said, “Well, when challenges come up, I’m an entrepreneur. I figure out how to overcome them.” And that, I think, is an element or characteristic of somebody who can succeed in doing real estate because there are challenges that come up, and the challenge may be initially being unable to get financing to do deals. How do you approach resolving these challenges that you probably face constantly in your investing, in your business and all these things? How do you face that? How do you overcome those?
Brant: It’s just not an option. You just have to. I’ve been asked to speak a few times, and I’ve been able to do some workshops, me and a friend of mine. One of the main things we teach, and I like to teach this very first, upfront, foremost, most important thing. It’s not your financing. It’s not the ability to find deals or rehab deals or whatever. It’s the mindset that you have. It’s the most important thing over anything else, period, end of story, because I’ve had a lot of challenges, a lot of obstacles, a lot of oh crap, what do I do now. Whenever something happens, when you get something that you feel like you can’t overcome or whatever, I don’t know. It’s just not an option to me to give up and give in.
Now, sometimes it’s been painful, I guess, or I have to work really, really hard, or I have to make a phone call or tell somebody, hey, this happened. You just have to be honest and ethical and say, look, this is what happened. I’m very sorry or whatever it is. Or I have to tell my wife, hey, we’re a little short this month because this deal or whatever didn’t work out the way I thought it was going to work out.
You do things in an honest, ethical manner, and you make it right, whatever that may be. For me, that’s been minimal to the amount of stuff that’s been good. But whenever stuff happens, you just have to find a way to get it done. And you have to have that mindset, because if you don’t, then you’re going to take the easier path, which is going to be some type of shortcut which is not going to be good for your long term. Because to me, your name, your reputation is everything. So, just when stuff happens, you just have to be accountable and make it right, whatever that may be.
Damon: You mentioned that the book by Stephen Covey, “The Seven Habits of Successful People,” was a good book to read, and I think that really touches on what you’re talking about here. That book’s not about real estate. It’s really about the mind and how we approach life and how we see things, what our perspective is and what we choose it to be.
I found that in doing the real estate investing and doing this entrepreneurial stuff that it does make all the difference, that mindset. For anyone listening, if they haven’t read that book, I would highly recommend it as you did as well, because if you can get your mindset right, you can accomplish pretty much anything you set your mind to do. But if you don’t have the right mindset or you don’t have the integrity, especially your personal integrity, it’s going to be a painful road.
Brant: Yeah, I agree.
Damon: Well, Brant, I really appreciate you taking the time to do this interview today. I learned some things, and I’ve been inspired by what you’ve done. I’ve got three rental properties, and I’m a partner in an apartment deal. I’m just sitting here thinking, if you can do all that stuff, I can do it too. I think I need to raise the bar for myself. So, I’m feeling inspired, and I’m going to go out there and hit and road and get some more stuff done.
Brant: That’s great. I really enjoyed the interview, and that’s what I’ve liked about Lifestyles network meetings. You go and meet people, like, “Man, look at what they’re doing. I haven’t done anything compared to what they’re doing.”
Damon: Exactly. Thank you again for your time. Again, if anybody wants to go take a look at your company, RentReadyContractors.com is the website, right?
Brant: Yes, sir.
Damon: Okay. Excellent. Thanks again. Take care.
Brant: Thank you. I enjoyed it.