BiggerPockets Real Estate Podcast - 1: Building a Successful House Flipping Business and Losing Millions with Marty Boardman

Episode Date: January 17, 2013

Today we’re excited to announce the launch of the brand new BiggerPockets Radio Podcast. Each week, we will be bringing you incredible real estate investing tips, training, and interviews with actual investors who are in the field, making it happen. You can listen online (below), download it to listen later, on your smartphone, or via iTunes: all for free. Last week, Marty Boardman wrote a killer post for the BiggerPockets blog called “How to Lose a Million Dollars in Real Estate: A Step by Step Guide” which was an instant hit among BiggerPockets readers. We knew that Marty would make a great first guest on the new show. Read the transcript of Episode 1 with Marty Boardman here. In This Week’s Podcast, We’ll Explore How Marty Lost over $8,000,000 in the Real Estate Crash The Best Advice Marty Ever Received about Real Estate Investing How to Find Local Mentors to Teach, Train, and Bring You Under Their Wings How to Quit Your Job and Become a Full Time Real Estate Investor Using The Four Flipping Boxes to Flip Houses How to Raise Private Money for Your Real Estate Investing Deals Why Wholesalers Do Not Need a Buyer’s List – and What They Do Need The Four “Must Haves” in a Real Estate Partnership How Marty Got a Book Deal for a new House Flipping Book Marty’s Favorite Real Estate Investing Book Links from the Show: Marty’s BiggerPockets’ Profile FlippingPhoenixHouses.com 2012 BiggerPockets Summit Conference Audio – 25 Hours of Training – $125.00 How to Lose A Million Dollars in Real Estate: A Step by Step Guide BiggerPockets Forums Marty’s Partner J Scott’s BiggerPockets Profile Marty’s Partner Manny Romero’s BiggerPockets Profile Books Mentioned in the Podcast Fixing and Flipping Real Estate: Strategies for the Post-Boom Era Rich Dad Poor Dad Rich Dad’s Cashflow Quadrant The E-Myth Revisited The Intelligent Investor – by Benjamin Graham The Snowball: Warrent Buffet and the Business of Life Tweetable Topics: Quit wasting time and money having gurus teach you real estate investing. Find someone local, add value to them, and learn. Tweet This I’ll work with anyone – but they gotta do 1 of 2 things: bring me money, or bring me deals.Tweet This Investing in real estate is hard work – but it’s rewarding. Tweet This Think about your financial goals – and then work backward to figure out what to do now. Tweet This Creating a brand for yourself is vitally important for a fix-and-flip investor.Tweet This You have to have a good track record to raise capital. Tweet This Find a good deal – and the money will come. Tweet This Marty is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing. Connect with Marty on his Blog, FlippingPhoenixHouses.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. Hey, everyone, thanks for joining us on our first ever Bigger Pockets Radio podcast. My name is Josh Dorkin. I'm the founder and CEO of biggerpockets.com. With me today is I co-host Brandon Turner, a real estate investor.

He's the head of our community and he is a fantastic co-host. Of course, this being our first show, you're about to find out. So what's up, Brandon? Nice to have you here. Hey, thanks, Josh. I am really excited for this podcast. This is going to be great, man. This is going to be great.

Well, listen, before we get started, let's talk a little bit about the podcast itself. I want to share with everybody. for those of you guys who are actually unfamiliar with Bigger Pockets. Bigger Pockets is essentially the premier community for real estate investors online. Essentially, Bigger Pockets is this incredibly amazing social network that's been designed to make you a better real estate investor. We've got over 100,000 members, a vibrant forum community. We've got hundreds of conversations happening every day. There's over 10,000 articles on real estate and investing.

And we've got weekly contributions from dozens of leaders in the industry because all that is known as the credible destination in the niche of real estate investing. So with that said, let's get to the show itself. On today's show, we're excited to talk with Marty Boardman. Marty's an Arizona real estate agent, a house flipper, and he's doing some pretty incredible stuff in real estate. Marty is also a weekly, regular weekly contributor to the Bigger Pockets blog, which is BiggerPockets.com slash R.E. News blog. And Marty actually put on a two and a half hour flipping boot camp for us at the 2012 Bigger Pockets Real Estate Investing Summit, which we put on last March.

Marty last week wrote a post, which will be linking to in the show notes at BiggerPockets.com slash show one. This post, he talked about losing $8 million. Let me repeat that. $8 million, millions of dollars during, I mean, there's no other way to say. That's crazy. He lost $8 million during the real estate crash. And we're going to be talking to him about that, amongst other things on the show.

You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed, sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking.

And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed.

And listeners of the show will get a $75-sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring, Indeed is all you need. Do you ever notice how every passive investment somehow turns into a very active lifestyle,

active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, in the best markets across the country, without making real estate your second job? That's exactly what rent to retirement. does. They're a full-service, turnkey investment company, handling everything for you. In some cases, investors get 50 to 75% of their down payment back at closing, plus interest rates as low as 3.75%. They've

partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action. The flip steps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that

possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host, but could use some help find a co-host at Airbnb.com slash host. Without further ado, why don't we get this thing going?

Marty, welcome to the show. Thank you, Josh. Thank you, Brandon. Yeah, no problem. It's good to have you, man. We're very excited to kick off the podcast with you, and hopefully we could learn a thing or two about flipping. We can learn how not to lose $8 million. That was legit, wasn't it?

Oh, yeah, it was. You know, the music stopped, and I didn't have a chair in 2007. I'm sure that we probably have some listeners and some followers of Vicker Pockets who can relate to that. But, yeah, I mean, I was sitting on about 65 properties in 2007, and, you know, the market here in Phoenix dropped in value by almost 60%. And, you know, I was anticipating, I was anticipating some correction. You know, I knew the market was hot. I knew that, you know, that at the pace we were going, that the regular increases in value of, you know, six to ten percent a month weren't sustainable.

So I thought I was being conservative, you know, buying around 70 cents on the dollar. But, you know, the market corrected itself by 60 percent. and yeah, the music stopped and I didn't have a chair. Wow. Unbelievable. So greed is good except when you get over leveraged. Exactly. And it's really hard, I think, well, it was at the time, to know how much was over leveraged. And it's funny, I tell people all the time, I'm actually grateful for the global economic collapse and the real estate market.

going into the tank because it actually saved my marriage. I've been married 14 years and thankfully the whole rest of the world, the rest of the country, fell apart as far as real estate is concerned as well. And eventually my wife went from believing that, you know, I was just a complete moron to understanding, you know, that, you know, there was more to do with it than just, you know, me not understanding what was going on. And it was funny every time, every time a layman brothers would go bankrupt or Bear Stearns would go out of business or or countrywide would get absorbed by Bank of America. You know, I would put the newspaper down on the kitchen table in the morning and go, see, honey,

see, I wasn't the only one who didn't see this coming. Nice, nice. Well, why don't we, let's come back to this story because it's really fascinating. And I think in the article, we talked about, you talked about the lessons learned and things to avoid. But before we get there, why don't we, why don't we talk about your background? How did you get started as a real estate investor? What's your, what's your, what's your background?

Sure. Well, I got into real estate investing full time in 2002. Prior to that, I was a TV news cameraman. I was the guy that you could see schlepping around the camera gear, you know, hundreds of pounds of camera gear. And here in Phoenix, you know, we would, in the summertime, we would, you know, be covering brush fires and we'd be chasing bad guys. I'd like to say we were always chasing ambulances and raindrops.

You know, whenever it rained here, it was a huge breaking news story. And then, of course, you know, chasing, you know, fire trucks and ambulances. And, yeah, I just got to a point, you know, where I decided that I wanted to have more financial freedom. And I wanted something a little more stable. I wanted to do something that didn't require working nights and weekends and holidays. So, you know, here I go choosing real estate, right? which is, you know, you have to do that. But you know what, at least I'm doing it.

I was doing it on my own terms. And, you know, I mean, the problem was, you know, being a cameraman, you know, most corporate corporations, I was trying to find a job. And most corporations, you know, companies look at my experience and they didn't see that I had any marketable skills in other industry. So I really didn't have much, many options. It was, you know, either real estate or, you know, I don't know, there really wasn't much else for me to do. I actually read around this time read Robert Kiyosaki's book, Rich Dad, Poor Dad, and I was like, okay, real estate's the way for me to go. I started the same way.

I read the Rich Dad, Poor Dad Book, and I remember thinking of the time that it put into words kind of what had been filling up my head for quite some time. That was kind of the tipping point for me was reading that and then finding bigger pockets and moving forward from there. So that's cool that we kind of have that same background. I actually think Kiyosaki is somewhat required reading for new real estate investors in the past probably decade or so. Yeah, yeah, I agree. You know, and guys, it's probably been more than 10 years since I read Rich Dad, Poor Dad,

but I still have that cash flow quadrant burned into my head, right? The ES, you know, B and I, employee, self-employed, business owner and investor. And, you know, I teach classes for realtors on how to work with investors. And I also teach a class on fixing and flipping homes. And I usually start to class out by writing that plus sign, you know, that quadrant up on the board and writing an E at the top and S at the bottom left, a B at the top right and at the bottom right and saying, hey, you know, this is how I got out. This is, this, this is, this is, you know, was crystal clear in my mind, you know, when I read. I read this book 12 years ago and I think about it almost every day. That's great.

That's great. Well, so you decided to take the leap. You're going to become this real estate investor and change your life and find financial freedom. And what was the next step? Obviously you had to do some learning, some research. You didn't just jump in and start flipping houses, did you? No. I do what all newbie or a lot of newbie real estate investors do.

You know, I spent a lot of money and I flew far away. to take a boot camp on how to buy foreclosures and do lease options. It was actually right there in your backyard, Josh. It was in Denver. It was the Colorado Association of Realtors, or rather Colorado Real Estate Investment Club. And it was a weekend deal where they brought in all these different gurus and they were selling, well, at the time they were selling cassettes. They weren't even doing stuff back then.

What are those? Yeah, Brandon's like 12 years old. So we don't really, you know, we'll have to school in a little bit. Yeah, so the cassettes, you know, on lease options and foreclosures, you know, I got back here to Phoenix. This was 2001. Came back to Phoenix and, you know, I actually convinced my wife after listening to these cassette sets that I knew enough about investing to quit my job and going to real estate full time, you know. And luckily for me, you know, she had a really good job and was able to support me for a while.

And, you know, I guess you could say she was my sugar mama. Nice. When people say, hey, when I get into investing, I want to quit my job, I'm like, well, you got a sugar mama? You're going to need one of those to get started because you need some source of income while you're figuring this thing out. But, you know, I was fortunate in that way. You know, things didn't really work out. After about a year, I wasn't making any money. I think I made about, you know, 10, 12 grand my first year.

And my wife started using this really bad word job. She started saying, you know, you need to go and get a job. again because this real estate thing isn't seem to be working out. So I did what all newbie kind of real estate investors do next. I spent more money and I flew further away. I flew, spent $2,700. I flew to Atlanta and I went to a four-day workshop called How to Get Lenders fighting to give you money. And it was pretty really ridiculous. You know, what the advice they gave us is, you know, just basically walk into a community bank and ask for a line of credit, you know, to do real estate deals because, you know, you need the money to build an inventory of homes.

And so that was a waste. And then, you know, right around the same time, you know, 2002 or so, going into 2003, after I got back from that boot camp, I called a local real estate attorney here in town who had written an article I read. And I asked him, you know, I told him this story about I'd been to Denver and Atlanta. And he said, you know, Marty, it's really the best piece of real estate investment advice to this day I've ever gotten. He's smarty quit wasting your time and your money flying all over the country paying these gurus to teach you how to invest in real estate. Find somebody there here in Phoenix

who's investing and find a way to serve them. Find a way to make it worth their while to teach you the business, you know, bring them deals, mop their floors, bring them coffee, you know, whatever you got to do. And so that's what I did. I actually ended up going to just a local class on foreclosures. It was actually a class for realtors. I met a guy in the class who was working with the local investor who was buying homes at the courthouse steps, and those guys kind of took me under their wing and showed me the way. And I worked for them for about a year and a half. It was like an apprenticeship. It was a real estate investment apprenticeship. And last about a year and a half, I did about, I don't know, 20, 25 deals with those guys.

And we split the profit three ways. I was basically their bird dog. And then from there, I had enough of a track record. I could start raising some of my own capital. It started out with family members and friends and then grew. And the next thing, you know, I had, you know, $2.5 million in investment capital and 65 houses. And then it went by-bye. Yeah, yeah. Oh, geez.

From, you know, a net worth of $8 million to negative $2 million, you know? So, you know, I never really, you know, through the process, lost hope. You know, I've always felt like, you know what, hey, if I was able to build a business like that in three years, you know, I can rebuild it. So, you know, we had, you know, some pretty frustrating times. I mean, we at one point, you know, towards the end of 2008, going into 2009, we were burning the furniture to stay warm. Wow. I mean, I was selling stuff on Craigslist. I had a Rolex watch.

I hawked at a jewelry store. You know, I sold my Mercedes, you know, started driving a 94 Honda Accord. You know, it was a humbling experience. But, you know, I'm grateful for it because, you know, during the process, I read a lot of books, you know, books about, you know, like Abraham Lincoln and Thomas Edison and, you know, Walt Disney. And every one of them has had a monumental failure in their life. And it's kind of helped them kind of regroup. it's just a right of passage for any entrepreneur to fail miserably at least once or twice in their life. So, you know, I'm fine.

Well, at least, look, I mean, you lost two million. Donald Trump lost how many billion, you know, so, you know, you're not a big shot yet, man. I'd like to go back to something you said earlier, Marty. I think you mentioned when the best piece of advice you ever got from that friend of yours who said, you know, find an investor that you can, you get close with and that will teach you. And what you said was you find a way to add value to them. And I think that's, you know, a lot of people come to the bigger pockets, the forum, and they talk about, I need a mentor.

I need somebody to, you know, teach me the ropes. And I think that a lot of people miss that is what kind of value can you bring to the mentor? Like, what can you do to make it worthwhile? I mean, this isn't a charity case that somebody just wants to pick somebody up. So I think that's huge and something that newbies definitely need to keep in mind. Yeah, you know what? I tell people, Brandon, and you know, when I'm teaching classes, I just got a class today for realtors. And I also, like I said, teach one about fixing and flipping.

And I'll work with anyone. But they got to do one or two things for me. They got to bring me money or they got to bring me deals. That's how they add value to my business. And, you know, most people have one of two things. They either have time or they have, they have, they have they have money uh those who have time you know what bring me deals if you've got money well then uh you know we'll go find deals and and work together but uh you know i'll sit

out i'm happy to sit down with you know anyone here in my market and show them exactly how they can bring me deals uh yeah i'll explain it to them i'll give them you know six steps you know which includes you know go get your real estate license because i believe in this market here in Phoenix, you got to have a real estate license to do deals because you need access to the multiple listing service to find those short sales, to find those REO properties, to comp properties, to get access to properties. So that's part of the process. But I'll tell you, you know, most people are completely unwilling. They're too lazy. They're just not motivated enough to do exactly what I tell them to do. And it just never works out. It rarely ever works out. I think they'd rather pay

somebody $5,000 a guru to tell them how to do it. So, you know, I decided, and this is just something that kind of came to me here in the last few days, you know, and really it's something I've been doing. I didn't really know I was doing the last three years and writing on my own blog on flippingfenixhouses.com working for bigger pockets. And, you know, I just, you know, wrote a book. I'm sure we can talk about that in a minute, but about flipping houses. I'm really on a mission, I've decided to show people and to tell people as loudly as I possibly can how hard it is to do this business, how hard it is to fix and flip real estate, how hard it is to buy and hold real estate, how hard it is to invest in real estate. It is hard work. It's rewarding.

I'd much rather do this than dig ditches or slept camera gear, but it's not easy, you know, And I just get so frustrated just here in the last week. I've attended a real estate investment club in Milwaukee because a partner and I, Jay Scott, who's a member of Bigger Pockets, him and I have joined Ventured on some flip deals in the Milwaukee area. I went to a workshop or rather a local real estate investment meeting there last week, and they brought in a guru who talked about how easy it is to raise private money. I watched a video today online of a guru saying how easy his system is. to master and how quickly motivated sellers will be calling you once you use his system.

And it just makes me sick because it's not easy. I wish these guys would stop saying that. But the truth is, is if they didn't, I guess nobody would buy their programs. Yeah, pretty much. Well, so first of all, good plug. Flipping Phoenix Houses, that would be your website. And we would love to talk about the book Fixing and Flipping Real Estate that came out this year. I really quick want to touch upon what you had talked about, the difficulty in becoming a successful real estate investor.

As you said, the gurus do make it sound really easy. And, you know, I think, frankly, people want things handed to them. And I think that's why you find you have found that so many people have just not come through for you because they think it's going to be. be easy. They think, you know, whether they're hoping to believe what these guys are saying or they're just not realistic about the approach to getting started as a real estate business person, because I really do truly believe, and I think we all do, the three of us, that you need to run your real estate life as a business. But these guys have these false hopes. And I'm glad to hear that, you know, you're taking this mission to make it, make people understand how tough it is, you know,

with bigger pockets. We really try hard to make sure people are realistic about getting started and being successful. It's just, you know, for everybody listening, I just want to really emphasize how important is to understand that real estate is not a joke. You don't just go and say, hey, I'm going to go buy a couple of houses. You need to plan, you need to map out your path, and you need to be detail-oriented in your approach to moving forward. And I'm assuming, you know, I'd like to actually talk about that a little bit with you a little more. And then, you know, I actually also want to get into four flipping boxes, which is something that you taught over at the Bigger Pocket Summit.

So why don't we talk a little bit about, you know, the business approach to real estate planning, plotting? You have any insight in that? Yeah. I think what I advise anyone who approaches me and says, hey, want to get in real estate investing. You know, what I do is I instruct them or advise them to think about what their financial goals are, you know, three years, five years, you know, five years, you know, one, three, and five years down the road. So, you know, I would say, you know, you want to work backwards and to figure out what it is you're going to do. Like, I consider fixing and flipping, you know, this is my day job, right? This is my business. I fix and flip homes to generate

enough revenue to buy income, you know, cash flow producing real estate. That's why I fix and flip. So, you know, how much money do I need to generate from my fix and flip business to cover my nut, right, just to pay the bills to, you know, pay my house payment and, you know, put groceries on the table and keep the lights turned on. And then how much above and beyond that do I need to earn to put towards my investment properties? So, you know, what I encourage people to do when they're starting out is just say, okay, how much money do I need to make, you know?

And if it's, let's just say it's $10,000 a month, that's your goal. Well, that means, you know, if you can, you can net. $10,000 on one flip property, it sounds like to me you need to flip 12 houses in the next 12 months, right? And how much money is that? How much money do you need to buy and sell and rehab 12 homes? Well, I don't know. I don't know what your market's like. I don't know what your niche is going to be, what type of home you want to buy, what price point, how much it's going to cost you to rehab it. But you need to sit down and figure that out, figure out, you know, how much is going to take to buy these and to rehab them and how much is it going to take to hold on to them and how long is it

going to take them to sell. And so you just work backwards from there. So then you really, your goal kind of shifts from flipping, you know, enough homes to earn 10 grand a month to how do I raise the money that I need if you don't already have the money to flip 12 homes a year, you know, one a month. So you really kind of have a couple of different goals kind of working together there. So that's what that's what my business partner, Mani and I did. When we first started, we sat down and we decided, you know, how much money we had, we wanted to earn, how much, how much we wanted to use and put towards our revenue generating properties. And, and then we just said, okay, here's our goal. So our goal became, you know, to raise two million bucks. If we had two

million dollars in investment capital, then we can fix and flip, you know, five to eight homes a month and at the end of five years that would allow us to not only pay our bills but by between 18 and 20 rental properties that would cash flow between 17 and 22,000 a month. So I just tell people sit down and figure out how much you need and then work backwards from there. That's great. I think Brandon, you and I have talked a bit about that and I believe that's the approach you tend to take as well, the work backwards approach. Yeah. It is definitely. I mean, I look at cash flow like that. I say, well, how much money do you want to eventually have in passive income? And if, you know, if that's, you want to earn $5,000 a month, well, how many

houses does that take? You know, if it's $100 per unit, you know, that's, what, 50 houses or 50 units. So that could be a 150 unit apartment complex or 50 single family homes. I mean, I look at it at the exact same way going backwards. And one thing, Marty, you said earlier, I thought was just really, really good. You talked about how you need, you don't have to, I guess, flipping houses is not an investment as much as it is a day job for you. You said, like, that's how you pay your bills. And that's one thing I always tell, I guess, new real estate investors.

They say, well, how can I get involved in real estate investing? And I always tell them, well, find a job that you love. you know like flipping is the one that gets all the the show on TV and all the popularity flipping's you know a popular cool thing to do and it's a lot of fun i mean i've done a lot of flipping too but flipping's not for everyone and so i think that's what i always tell everyone is find a job that you absolutely love and that you get excited to do when you wake up in the morning and if that's flipping or if that's wholesaling then great jump in with both feet but if that's working at mcdonald's or if it's being a math teacher then go work at mcdonald's and be a math

teacher, but invest on the side. That's one thing that I found that people don't have to necessarily flip houses or be a wholesaler to be involved in real estate. No, you don't, Brandon. I mean, I, you know, I fix and flip homes just because I like fixing and flipping houses. It's my job, and I love it. And I couldn't imagine doing anything else. But it generates enough revenue to, again, pay the bills. And I enjoy doing it. I have a brother-in-law, and he lives in Austin, Texas, and he buys a couple investment properties every year. But he has a wonderful job at IBM as a senior-level engineer, and he likes that. So he uses the income that his job generates to buy investment properties.

I use the income that my fix-and-flip business. You know, and, you know, it's interesting. There's been some debate on... bigger pockets in some of the forms about whether or not fixing and flipping is actually investing or not. I don't get involved in all that. I mean, it's all semantics. I think, you know, the definition, the Webster's, I think, definition of investing is investing a principal amount of money and getting a certain rate of return and expectation back. So I guess technically it is, but, you know, if you stop fixing and flipping homes, if I stop tomorrow, the income stops coming in, at least with

with investment properties, whether you work or not, you get that mailbox money every month. So, yeah, it's definitely not for everyone. And I encourage people who are going to fix and flip for a business. They need to systematize, systematize just like, you know, I read the book, The E-Mith, and it just talks about franchising and putting as many systems in place as possible so you can control costs and create a brand for yourself and a product that, you know, people, you know, can expect, you know, or other realtors who are looking to show your flip properties know every time they're, they look the same, they smell the same, they feel the same.

Creating that brand, I think that's really important as a fix and flip investor. If you own a large or complex rental property, congrats. And I'm also sorry. One day you're building a portfolio. The next, you're reconciling six accounts, five states, four LLCs, three partners, two property managers, and running your portfolio starts to feel like. running a median size accounting firm. And if you got into this to get your time back,

that's not ideal. That's when you need Stessa Pro. Stessa Pro is built for investors who've outgrown other tools. One dashboard, every property, every entity, real-time performance, clean reporting, tax-ready documents in a click. If your portfolio has grown up,

it's time your tools did so too. Go to stessa.com slash mKTG slash bigger pockets to try Stessa Pro and get six months free. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country.

Their local teams handle the build, the property management, and the details, so you don't have to. In some cases, investors even receive 50 to 75% of their debt. down payment back at closing, and there are interest rates as low as 3.75%. They've been trusted partners with BiggerPockets for over a decade, and if you want to learn more, visit BiggerPockets.com slash retirement. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late night fridge raids.

Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport, while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money.

Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications. It can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of,

and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Wouldn't it be great if your house plants paid rent while you were out of town? I mean, they've got the whole place to themselves, lots of sunlight, zero responsibilities.

But no, they just sit there waiting for someone to spray them with some cool mist like a bunch of leafy loafers. But guess what? Your home actually could be earning you money while you're not there. Airbnb has a great feature called the co-host network, which makes hosting your home so easy. If you live far from your property or are away for extended periods, you can hire a local co-host to take care of the hosting for you.

These co-hosts are vetted locals who already have experience hosting on Airbnb. A co-host can handle all the details like messaging guests, creating your host space and managing reservations. So everything runs smoothly. It's a practical way to earn a little extra money, maybe even some cash toward your next trip. Plus, you get to share your place with someone traveling to your area while you're off making memories somewhere else.

Your home might be worth more than you think. Find out how much at Airbnb.com slash host. Well, that's great information. Let's talk a little bit more about partners. You know, I know that you went at it alone for a while and then you brought on Manny, your partner, who's a great guy, and of course, the Milwaukee flip with Jay. Can you talk about just getting into these partnerships, why you decided to partner with these

guys, you know, is there something that they bring to the picture that you couldn't do on your own? And let's kind of go that way. Sure. Yeah. I mean, going into business with somebody partnering with someone, it's a lot of like a marriage, you know, and ideally you find a partner who's got strengths you don't have, and ideally, you know, you have strengths, they don't, and they complement each other.

You know, when I started working with Manny, you know, it was really out of necessity. I mean, I was really, I had the technical ability to operate the business and find the properties and get them fixed up, but I didn't have the working capital. Danny had those connections. So it was a really good partnership because he was able to find and meet new investors and help us raise capital to fix and flip houses. And I could focus on the technical side, which is just acquiring the properties and making sure they got fixed up properly and got sold.

And likewise, with Jay, we met at the Bigger Pocket Summit last March and decided to start doing some flips in the Milwaukee area. Big reason why we did that, you know, there's just a nice discrepancy or difference between, you know, what retail homes are selling for and what distressed properties are selling for. We actually had Steve Cook, who's a contributor to Bigger Pockets, you know, look that up for us. And he found there was about a 51% difference between, you know, distressed properties in the Milwaukee area and in regular sales, homes that aren't in foreclosure. And, you know, it was a really good fit with Jay because, you know, he's a very, he's very detail oriented. He really gets into the technical side of flipping homes.

He really understands the mechanics of it. And frankly, I'm not really into that. You know, I'm more into the art of the deal and putting the deal together. And I'm more into analyzing, you know, the numbers and in the market. So, again, it's a really good fit. And so, you know, we work really well together. It's interesting, Mani and I and Jay were all the same age. We're all 40 years old.

We all have young kids, you know, so we're all in similar stages in life. And so it just makes a lot of sense. But I think, you know, for people who are out there thinking about bringing on partners or partnering up, you know, you really have to think it through and make sure that, you know, you have the same temperament that the expectations are laid out, you know, before you get started on your first project. And I would say take it slow, just like when you're dating, right? I mean, you don't meet somebody new and then move in with them a week later.

You take it slow. And I think that's what you need to do with partners. Just do one deal, then do another, and just get to know each other. And you don't have to do a formal LLC and operating agreement. Maybe just do a joint venture and just see how it goes. Well, good advice. Let's talk about this four flipping boxes. I mentioned it to Brandon.

He was unfamiliar with it. and and I think it's it's I think it's it's going to be somewhat difficult to translate over over the airwaves without pictures but you know hopefully you can do a little bit of justice and maybe fill us in on what is four flipping boxes and you know just to everybody listening for flipping boxes is a class that Marty taught over at the summit and he also I believe teaches it locally so fill us in a little bit sure so I mentioned, you know, when the market went in the tank, you know, we were really struggling, my wife and I. And, you know, I was fortunate enough. I was, I met, or I was introduced to a real estate investor here in Phoenix. Actually, he was introduced to me by my church pastor. And, you know, this guy is a very successful real estate investor here in Phoenix, flips a lot of homes. And he introduced me to him. This is when I was really struggling trying to get, you know, trying to stay afloat back in the spring of 2009.

And I actually went to work for this with this guy. It's kind of like a project manager overseeing some of his flip deals. You know, I was doing everything for him. I was hanging ceiling fans. I was hanging blinds. I was installing door hardware. I was cleaning toilets, you know. These are all flip properties that he'd bought.

And I was helping him out. And, you know, when I first met him, he sat down with me. And he said, this is how. our business works and he got out a piece of notepaper. If you can just visualize, you know, a page of lined note paper. And he wrote, he drew four boxes on the piece of paper. And he wrote in each box. In the first box, he wrote acquisition. And the second box, he wrote rehab. And the third box, he wrote sales. And the fourth box, he wrote Raising Capital. And he said, a fix and flip business consists of these four boxes, acquisition, rehab, sales, and raising capital. He's like,

and you've got to have somebody in each one of these boxes and almost, you know, to keep things running, you know, at all times. And he's like, my focus is the raising capital box. I raise capital. He's like, my partner, he focuses on acquisition. He makes sure we've got deals in the pipeline. We're always, we've always got a new deal coming. He's like, and then he'd hired two people. He hired someone to handle sales and he hired somebody else to handle the rehab and overseeing the rehabs. So I just thought, you know, he just called it his four boxes concept, but I'm the one who added flip into it. So I thought, wow, I've never really thought about a house flipping business like this. And it just really cleared things up for me. It made me, it helped me think about each phase of

our business. And it is a business, you know, fixing and flipping homes is a business, you know. And it just really helped me to focus on each aspect of the business as we've acquired properties and rehab them and the importance of keeping that cycle or that pipeline full and keeping things going. And so when I teach people and I teach the class, it's really simple. And as a matter of fact, on my blog, I have four categories, acquisition, rehab, sales, and raising capital. It's one of those four things, you know, subjects that I'm going to be talking about. all the time. And it's easy to kind of break down the business that way when you, when you, when you think of it like that. I'd actually love to know more about the raising capital part. I mean, out of the other, out of those four boxes, you know, I feel like in my flipping,

I've been all right in the three, but it's the raising capital that I always seem to struggle with. Like, what are your, I guess, thoughts and suggestions on that, Marty? So look at, you know, when, when you've got guys, you know, like Bernie Madoff, right, and all these other sheister's out there ripping people off. I mean, you know, it makes raising capital that much more difficult, right, with all the news stories. I tell people all the time, you have to have a track record to raise capital. You can't just, you know, wake up one day and decide you're going to start fixing and flipping homes or buying a bunch of rentals or, you know, it doesn't matter what type of business it is. You know, I've got a buddy of mine.

I just talked to today. He's got a landscaping business. He owns back in the Midwest, and things are starting to go pretty well, but they haven't been in business very long. and he's trying to raise money. I told him, I go, look, without a track record, it's going to be tough. I mean, I look at, Brandon, I look at two experiences I had. You know, when I first got started in real estate investing, you know, I was working for a guy and his partner who are buying homes down at the courthouse steps, and I worked for those guys

and I was basically a bird dog for a year and a half. This is what happened, Brandon. My friends, my family, my former coworkers, who all thought I was crazy when I equipped my job. You know, after a year and a half, here I was, I was making money. Things were starting to happen for me. I was working with some investors. They saw that, right? They saw I was doing deals. And they wanted to get, you know, they wanted to get, you know, they wanted to invest with me. You know, they wanted to, you know, so we did promissory notes and they do, you know, deeds of trust on properties and, you know, I'd secure them and give them, you know, a rate of return, you know,

10, 12%, you know, but I had a track record. They saw, you know, after a year one, by, I quit my job, and here I was doing real estate. They're like, wow, he's not living out of a cardboard box. Must be doing something right. And then, you know, fast forward to 2009, spring of 2009. And, you know, this investor, Keith, I was telling you about it taught me the four flipping boxes concept. You know, I started working for him and helping him out, you know, with his jobs.

And, you know, I actually was a realtor, you know, so he actually started having me list some of his homes. And right around that time, my business partner, man, he called me up and he was, you know, out on the road doing another business. And I told him, yeah, man, I'm helping this guy that I met through my church and he's an investor. And, you know, I'm helping him out, you know, getting these things fixed up and I'm listing him for him. And he's like, well, why couldn't you do that? And I'm like, well, I could if I had some money. And he's like, well, I've got, you know, some investors who've got money. I mean, you've got the track record to fix and flip these homes, you know, you know what you're doing. Let's partner up. So that's really the trick. I mean, I think people

kind of put the cart before the horse. I mean, you've got to establish a track record. Well, how do you do that? Well, you work with people who know what they're doing, you know, and that's really, I mean, I look at, you know, Warren Buffett. I read his book a few years ago. It's called the snowball, Warren Buffett and the business of life. And his story's fascinating. You know, I mean, a lot of people think Warren Buffett just, you know, had this, this wisdom, you know, and this knowledge to to invest in the stock market, you know, the day he was born. He actually had a mentor. It was a guy by the name of Benjamin Graham.

He wrote a book in 1949 called The Intelligent Investor. He was 20 years old when he read that book. And he knew a little bit about investing in stock market, but not a lot. He read this book. He actually went to New York City and rolled at Columbia University and took Ben Graham's classes and actually went to work for him. And if you buy the book, The Intelligent. investor now. Warren Buffett, you know, has written a forward to it. And, and he, he acknowledges that

Ben Graham was his mentor, his coach, his friend. I mean, you know, you just, you know, even Warren Buffett didn't roll out of bed and know how to invest in the stock market. I mean, you got to have someone that's going to kind of show you the way. And once you start to learn, people around you are going to take notice. I mean, you know, another great way, Brandon, to raise capital is just go find a good deal. You know, you find a good deal, the money will come. I'm telling you, There'll be people that are going to want to work with you, you know. No, that's true. There was a house I found about a year ago, and the lady had it listed, the day she listed it,

she listed at $30,000. I offered her 15 on the spot, and she took it right then and there. Immediately I had three people that wanted to buy it. So I ended up wholesaling it for about $8,000, and it was the best wholesale deal I'd ever done. And so that's a perfect example of that. You know, I found the deal, and, you know, the money just showed up. I didn't have to try for that one. And that's exactly what I was doing when I got started.

I mean, I was wholesaling. You know, I started out as a bird dog. And, you know, I would just assign the contract. You know, I would write a contract, the homeowner that would say, you know, my LLC is the buyer. And then I have an end or assignese clause on the contract. And then I would assign it to this investor I was working for. And he'd give me three, four, five thousand bucks. Well, eventually, when I'd done enough of these and, you know, I had family members and friends

that I had the success I was having. They started investing the money with me. And so I was able to start taking these deals down on my own. And I remember, it's funny, I read stuff all the time, you know, on bigger pockets and elsewhere about wholesaling. Everybody wants to wholesale and trying to figure out the secrets and the key to it. There's really no secret to it. And there's no, you know, you don't really have to work very hard to get a buyer's list together. All you need to do is find a good deal. I remember I was, I had just kind of gone out on my own. I, finally got some of my own capital together. And I found a deal.

It was in Mesa, about 20 minutes from where I live here in Gilbert. And I bought, I got a homeowner to agree to sell to me for $85,000. And I knew it was worth between $140 and $150,000 all day. And needed about $20,000 in rehab. So I bought it for $85 and I listed it. I actually put an ad in the newspaper, the Arizona Republic. This is, you know, going back to 2003. Newspaper, what's that?

I put an ad and I put you know I put the cross streets of the house and the in the details and I got I post a guy a dozen phone calls on that house and I think the first three or four guys who called me said hey this is a great deal and I sold it to the first guy who called me I wholesale it for about 10 grand and he told me said before you call anyone else you call me I'll buy every one of these you got and there was about two or three other guys who also called me on that house And it was from one newspaper ad that cost me about $200. And those guys bought just about every home I bought over the next two to three years. I mean, there was no need to go out and put this buyers list together and do all this crazy stuff.

I mean, it's because I had deals. It was easy to find the money. And it was easy to find the buyers. I tell people all the time, just find good deals and the money will find you. That's great advice. great advice man I can't tell you well I can't tell you because you know but I'm you know we read this all day these the the new wholesaler questions the the guru of the moment is telling them to you know get out there and and build these buyers lists well

great you've got a buyers list of what for what find the deal you find the deal the buyers will come and you you mentioned something else you actually went and spent money you spent $200 on an advertisement. I think that alone puts you in the 20 of the 80-20 rule when it comes to the folks who are learning starting out wholesaling. People think that wholesaling is free. Now, with the internet, it's a little easier. But still, you know, you were willing to pony up a couple bucks to promote this thing.

You know, you need a little bit of money to. to do this business. You can't just jump in with nothing. No, you've got to invest in yourself. You know, I mean, you know, I think it's Stephen Covey and the Seven Habits of highly effective people. He talks about, you know, sharpening the saw. You know, I mean, this is a profession.

This is a business. I take it very seriously. And I believe that, you know, I have to invest in myself and in my education. And, you know, I read books all the time about business, about entrepreneurship, self-improvement. You know, I mean, you've got to invest in yourself and in your business. And sometimes, you know, it's going to work and sometimes it isn't. I mean, I think I wrote a post for Bigger Pockets a few months ago. I think I called it the direct mail fail.

And, you know, I did a bunch of direct mail, spent a bunch of money, and I didn't get a single lead out of it. I mean, I got a lot of calls, but none of them really turned out, you know, to be anything. And, you know, I got some great feedback and advice from some bigger pockets readers who have had a lot of success with direct mail. But, you know, I just, I came to the, you know, conclusion that it's just not for me, you know. Frankly, I don't like being on the phone for hours and hours talking to people who really aren't motivated to sell me their home, you know. And I just, you know, to me, it's like finding a needle in a haystack. It's just not my thing. I'd rather, I'd rather scour the MLS.

I'd rather, you know, buy the courthouse. So this business is about finding a nil. I mean, there's a lot of different ways to make money investing in real estate. There's a lot of different ways to acquire real estate. But you've got to be willing to spend some time and some money, you know, kind of figuring out what that is and figuring out what works and what doesn't. You know, it's funny, Josh, you're talking about buyers lists and, you know, all the education there is out there and how to build a buyer's list. It's, I don't, they're not really buyers list. They're not really buyers list.

They're not trying to find a legitimate buyer. You're trying to find some sucker who's going to probably, you know, pay you. overpay you for a home or overpay for a home that you've acquired that it's not really a deal. Yeah, for sure, for sure. Well, listen, we're kind of running out a little bit. Don't want to cut you off here too much, but we've got a couple of things that we've got to talk about, including your book. Tell me about the book, what got you writing this thing, and give us a synopsis.

Again, it's called Fixing and Flipping Real Estate, and we'll have links to that along with pretty much everything else that we've talked about on our show notes at biggerpockets.com slash show one. But let us know what's going on with this book here, Marty. Sure. So back in April of last year, 2012, not long after the Bigger Pocket Summit, I had a book publisher, send me an email and approached me. And Josh, you probably remember you and I, you gave me a lot of advice on this and negotiating the contract with the publisher.

But they approached me. They'd been reading my blog, flipping Phoenix houses, and had seen some of the postings, on bigger pockets and like the way my style of writing and just, you know, asked me if I'd ever thought about publishing a book. And I said, sure. And I actually wanted to call the book for flipping boxes, but they decided that that wouldn't really translate, that the readers would have a hard time figuring out what that meant. So they changed the title to it's really wordy, you know, fixing and flipping real estate strategies for the post-boom era. And, you know, I'm really proud of the book because number one, it's really my story, you know, from, you know, domination to

crash, to crisis, to chaos, you know, to come back, right? It's my story. So I was able to weave this story, you know, over the last 10 years into the book and a lot of hard lessons I learned and mistakes that hopefully that the readers of this book can, you know, can see and learn from. But it is the four flipping boxes concept, and that's how the book is kind of laid out, including the story of how I met Keith, who taught me how to fix and flip homes and taught me the concept. But the book, again, I think it's a pretty easy read, and, you know, it's not an A to Z how to do this, right? It's more like a blueprint, you know. You know, everyone's different. everyone has a different way of doing things.

But I think it lays out how to start a fix-and-flip business, whether you want to flip one home a year or 20 a month. It lays out how you would go about doing that and how you'd set up a business. Brandon, for you, it does include a lot about raising capital and finding money and building that track record and attracting investors into your business. A lot about acquisition, really two-thirds of the business. book I talk about acquisition because you make your money when you buy, you know, not when you sell. So that's the focus is on acquiring properties. But what I think is really cool about it

is the publisher had me do some research prior to writing it. And as far as we could tell, there hasn't been a single book written about fixing and flipping homes since the crash. I think a book written in 2007 on flipping on Barnes & Noble and Amazon. I'm not sure who the author is, but really there's been nothing written in the last four or five years about fixing and flipping homes post crash. So, you know, my hope is that people will see it on Amazon on Barnes and Noble or hopefully someday I might end up on the bookstore shelves there and say, hey, wow, a book about flipping homes after the crash, you know, I want to buy it. So I have a lot of tips and information and a lot of things that I share with the reader on how to kind of navigate

the market in the post-boom era when we're dealing with a lot of REOs and short sales and auction properties and dealing with homeowners who have little or no equity. And so I think that of everything I've written about in the book, that's what the reader will find most valuable. That's great, man. Well, listen, again, we'll make sure everybody has a link to the book via the show notes and, you know, can certainly get out there and pick up a copy. I have not yet read the book, but I'm anticipating doing so soon, and I will urge everybody to do so because Marty is the real deal, and this book is certain to be great. Before we head out, we've got one last thing we're going to do.

We're going to do a really quick speed round here, so I'm going to ask you a couple quick questions and let's let's hear what you've got to say. First, should investors get a real estate license? Absolutely. I believe investors should have a real estate license, mostly because you've got to have access to the multiple listing service. I mean, how are you going to comp properties? How are you going to look for deals, short sales and REOs, and how are you going to get access to them? I mean, it's unrealistic to ask a real estate agent, especially a good one, to do all that stuff for you. They've got better things to do with their time than show. you how to do that and meet with you. So do it. Even if you don't plan on listing or writing

offers, do it. It's worth it. And forget about what people tell you about fiduciary responsibility and disclosure. You know what? You run your business the way you're supposed to you won't have anything to worry about there. There you go. There you go. All right. Favorite real estate book other than your own? Favorite real estate book other than my own. You know, rich dad, poor dad is probably the closest thing to a real estate investment book I've read. I'll be honest with you. I mean, I see these real estate books on the shelves and I look through them and, you know, they turn me off a little bit. You know, I don't, it's hard for me to believe that, you know, the authors, these, some of these books, you know, are practicing what they preacher are really, you know, at it.

So, you know, I would say rich dad, poor dad is my favorite. And I also, more on the personal development side. I think think and grow rich by Napoleon Hill is a fantastic book. You know, I mean, so those those are actually just above me here on my bookshelf. I keep those out and I flip through them all the time. Nice, nice. Favorite business book, non-real estate. I would say the E-Mith is my favorite non-real estate related book because, you know, it talks a lot about McDonald's, about franchising, about systematizing your business. And, you know, I think any business owner can get something out of that book and find it valuable. Fantastic.

Fantastic. Best advice for a new real estate investor. You know, the best real estate advice I talked about earlier that I ever got was, you know, stop wasting your time and money with these gurus and find a real estate investor in your own backyard and hook up with them, serve them somehow, create a win-win. Great advice, great advice. And lastly, what is your favorite vacation? location.

There's a spot. It's about three and a half hours south of here. It's called Rocky Point, Mexico. And I can get, you know, door to door down there in about three and a half hours. It's right on the Gulf of California, the Sonoran Sea, they call it. And condos are really cheap to rent down there. It's like, to me, it's like being in Hawaii. It's just absolutely beautiful.

And I love the Mexican culture. Manny and my partner and I and our families go down there. We vacation down there quite a bit here. last couple of years and I just love it. It's like paradise. Fantastic. All right, guys, well, listen, Marty, thank you so much. You can find Marty at flippingfenixhomes.com or on the BiggerPockets, real estate news blog at Biggerpockets.com slash R.E. News blog. Also, everything, like I said, that we discussed, we'll have links to books and things like that and Marty's site at our show notes at biggerpockets.com slash show one.

And, you know, thanks so much for being the first guest on this inaugural podcast from Bigger Pockets. Thank you. I'm honored. Thanks, Brandon, for being a great co-host. I think this is going to be a great success, and we're looking forward to the next couple episodes. So join us for show number two, the next episode.

Sounds like a Star Wars thing or something, but... We'll see you then. Hey guys, that was our interview with Fix and Flipper, Marty Bordman. Before we sign off, I'd love to get your help. Please, please head over to iTunes and leave us an honest review of this podcast. Remember, the more five-star ratings we receive, the better the chances others are going to find this podcast and learn how to become better real estate investors. So please help us out and leave a rating.

Also, be sure to check out our show notes at www. www. biggerpockets.com slash show one. This is Josh Dorkin, signing off. Thanks again, and we'll talk to you next time. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the height, you're in the right place.

Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, and the best markets across the country, without making real estate your second job?

That's exactly what rent to retirement does. They're a full service, turnkey investment company handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered with Bigger Pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more.