BiggerPockets Real Estate Podcast - 27: Fix and Flipping, Wholesaling, Marketing, and More with Jason and Katherine Grote

Episode Date: July 18, 2013

On today’s episode of the BiggerPockets Podcast, we talk with the dynamic husband and wife team ofJason and Katherine Grote about their adventures in flipping and wholesaling, while specifically dealing with some of the unique ways they find deals for their real estate investing business. This show was really a ton of fun to record and will give you both ideas and many good laughs as you hear the Grote’s story and tips for you and your investing business! Read the transcript to episode 27 with Jason and Katherine Grote here. In This Show, We Cover What a “wholetail” is – and why it can be profitable The first direct mail campaign that… flopped. When to “buy and hold” and when to “flip?” When to Quit your job … and when NOT to. Flipping in hot vs. cold markets How to wholesale without being a time-stealing “bottom feeder” Dealing with foundation problems Tips for working with your spouse Links from the Show The New BiggerPockets Real Estate Calculators and Analysis Tools Fix and Flip Analysis & Reporting Tool Lending Club BP Podcast 010 : Flipping Houses 101 with J Scott BP Podcast 018 : Flipping, Marketing, and Wholesaling with Danny Johnson 5 Key Takeaways From the Inman Real Estate Connect SF 2013 Conference How to Create an Awesome Lead Generating Website in Under an Hour with No Technical Abilities Books Mentioned in the Show: Rich Dad Poor Dad by Robert Kiyosaki Tweetable Topics Anything worth anything is all about hard work (Tweet This!) People decide whether or not they’ll buy your house in the first 3 minutes.(Tweet This!) We’re passionate about real estate… it’s fun! (Tweet This!) Who needs a book when you have BiggerPockets! (Tweet This!) Connect with Jason and Katherine Jason’s BiggerPockets Profile Katherine’s BiggerPockets Profile The Grote’s Website: www.IBuyAustinHouses.com Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 27. 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. What is going on, ladies and gentlemen? I am Joshua Dorkin, your host of Viguerpockets. this the 27th episode of the Bigger Pockets podcast here with my good friend and co-host,

Brandon Turner. Hey, Brandon. Hey, Josh. It's good to be back in the state of Washington again. Really? Where were you? Well, if you would have listened to last week's podcast, I was going to San Francisco. There you go.

What were you doing in San Francisco? All right. So I went to the Inmin, Minut Connect conference. I mentioned it last time. It was awesome. It was really cool. I was meeting a lot of people, real estate agents and people in the industry. So, yeah, learned some cool stuff.

I saw some robots on stage. Nice, robots. Well, and I know you're writing a little piece on your experience there, correct? Or you've written one by the time this goes live, right? Correct, yeah, that should be out. If not, it'll be out this afternoon. It'll be there. Yes, yes.

The part about the robots is a little bit strange, a little interesting. and those of you who are listening can check out the show notes and we'll have a link to Brandon's article on it. But I guess people instead of doing tours are now using robots to do the tours because they don't want to walk around houses. Yeah, that's the idea

is that these little robots can do a house tour for you, but I don't think it's going to take off. But anyway, there's going to be a video on that page as well. So yeah, show notes, biggerpockets.com, slash show 27. You can see a link to that. And yeah, come check out the robots. Awesome.

Awesome. Well, so we've got a really cool show ahead today. And in it, we're talking with Jason and Catherine Groat. They are the real estate investors and professional home buyers in the Greater Austin area. They currently working in short-term residential investing, fix and flips, wholesaling and actually they are moving into buy and hold and we'll talk to them in just a minute but before we do we want to do our quick quick tip and for today's quick tip Brandon what were we going to we were going to talk about our brand new calculators and

analysis tools weren't we yes we are we just released them this week there if you are a house flipper or you want to be a house flipper or if you are a wholesaler or you want to be a wholesaler, that's what these are for. Basically, they are analysis tools right on bigger pockets that kind of connect to your account so you can go in there, you can enter all the information about a property as much or as little as you kind of want, and it'll shoot out a nice analysis for you until you kind of give you a good estimate of how much you're actually going to make on the property. And it accounts for all of the facts and figures, not just, you know, I've been.

bought a house for 50 and I put 20 into it and now I'm selling it for 100. You know, it's, it's more complicated than that, but in a really easy to use way. So that's holding costs, all sorts of other really. It's awesome. It's pretty cool. And then the nice thing about it is it also prints out a fancy, schmancy report, which you can use to hand to a hard money lender if you're, if you're looking for financing. It's great. We just, just launched that a couple days ago. And you can find a link to it on BiggerPockets. If you go to BiggerPockets.com, go to our blue nav bar,

and you'll see the analyzed drop-down menu, and you'll see investment calculators there, and just go there, and you'll see a suite of calculators and analysis tools. We've got a couple more in the works, including a wholesaling calc, and a buy-and-hold calculator-slash-tool. So keep an eye out for those,

and definitely jump in and check out the fix-and-flip analysis and reporting tool, the 70% rule calculator that are currently live, and of course we've got a quick and dirty mortgage calculator on there as well. So not such a quick, quick tip, but

it's an important new tool, and since we are talking to fix and flippers today, we thought it would be fairly relevant to discuss. Really quick, before we go to them, one last thing, podcast. Thank you so much to everybody who's

been listening. The show's going great. We've actually got 334 ratings on the show, 324 of which were 5-star, and we've got 210 awesome customer reviews from you guys on iTunes. So thank you very much to everybody who's left this one. And if you haven't left this one already, please do jump on iTunes and leave us a review on a rating. And that's pretty much it. With that all said, let's jump into the show. We've got a fantastic interview, as I already said, coming with Jason and Catherine Groot.

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Head to Costsegregation.com before April 15th. Hey guys, how's it going? Thank you. Glad to be here. Thanks. It's good to be here. Awesome. Thank you.

Yes, yes. All right, guys. Well, let's jump right in to this and talk about what kind of investing do you guys actually do. We are primarily fix and flippers. We buy houses, remodel them, and then get them back on the markets. Either we will do a light rehab and do. what we call a whole tail or we'll do a major rehab and we just call that a full uh full uh retail rehab uh we also are moving back into buy and hold and what what is a whole tale a wholesale a whole tail is a mix

between a full retail rehab where you take it and you and you're pressing the comps getting top dollar for the house doing a full remodel making it really nice um it's a mix between that or actually you're just putting it on the open market, on the MLS with a realtor, but you're not doing much with it. So it's basically just lip-sticking it and putting it on the market, which works in a hot market like we're in right now primarily. Okay, okay, cool. So let's go back and start it. That's where you guys are today. How did you get started?

How did you guys get into the field of real estate and real estate investing? And obviously you guys work together, which is why we've got the two of you here, correct? Yes. Yes. Well, our first stab was back in 2000. It was a terrible stab. It was poor marketing. We did a direct marketing campaign and it flops.

We put out about 3,000 postcards, got five calls and no deals. We hung it up for about six years and we were watching flip that house and we just said I was with my dad. I said, dad, we can do this. He said, well, go find me two houses, son. And I did within 30 days. And they're the largest projects I've done to date. They were monsters, and I knew nothing about construction.

Nice. So those two flips, those two rehabs took a year and four months to turn. Wow. To rehab. Wow. You know, that's actually a funny pattern I've seen a lot of flippers, is that you'd think like you'd start small and get bigger, but most whippers start way too big and then get smaller.

And that's a lesson for new people. And I think the reason is is because it's easier to find properties that are totally messed up. And the longer you do it, you become a little more access. You have more access to just better flip properties that take less work and can make a better margin. So let me jump in here really quick. The interesting thing about that, though, is that those two projects, although we're extremely difficult, it was this learning curve. And we learned everything there is to learn about construction and rehab and flip.

When he drove me up to one of the properties, I remember driving up and you could see through the house because there were walls missing and windows. Are you kidding me? This is the house? And so we learned a lot about that. And I think for a lot of flippers, what happens is when they get projects like this, you know, they lose their shirt, they flip out. They, you know, no pun intended, but, and, you know, and they completely just, they're like, oh, I can't do this and they bail out. But for us, you know, we're both entrepreneurial-minded. We both own businesses. I think we just dug our heels in. And his parents are also involved in the business. It's the four of us. We all just dug our heels in and just said, no, we're going to do this. And so it really just inspired us to move forward at that point. Now, did you guys make money on those? I mean, you held them a long time. So, yeah, the longer, obviously, to those people listening who may not have a lot of experience, the longer you hold on to a flip,

the smaller your profit margins become. Yeah, in fact, it's a funny story. The first one we did, we put $70,000 into the house, and we literally sold it, the house for what we had in it. So we broke even, but the caveat was that we had, it was two lots. So we sold the empty lot right next to it that came with the original house. house for $22,000 and that was our profit. There you go. There you go.

Nice. And really quick, let's talk about that marketing campaign that was an absolute failure, six years earlier. You had gotten five leads and why did those just not work out? Was it inexperienced? What could you guys have potentially done differently if you look back today as somebody who's experienced? Honestly, I have looked back and they were just badly.

I mean, they were just, they weren't good. I remember one of them, they had no equity. And the other one was this convoluted family affair. I think the family was going through divorce and the house was a mess and the titling of it was a mess. And we gave it a good shot. We got in there and we built a relationship with the family, but they just eventually did something else.

And the other ones, I don't even think I made it to the door. So I just think, yeah, some lack of experience, but I think the area where I sent the cards out to, and the cards themselves were terrible. Okay, but had you guys continued marketing, eventually a lead would have come through that might have worked, but maybe, you know, it was just, at that time it was kind of just too tough, right? Yeah, it just took the steam out of us. And we didn't know about, we didn't know anything about direct marking that, you know, the more you send it out, the, you know, the better the return. is and we didn't know any of that stuff. We really knew nothing. Yeah. And so that and that's great advice again for those folks listening. You know, you got to stick with it and you got to find a good market. You got to farm, a good area. And, you know,

you probably want to target those kinds of leads that you have the best shot of working with, right? So in your case, that divorce was kind of messy. That was kind of tough, right? So, if, you know, I guess would you have recommendations for somebody starting on what kinds of leads to market to, that might be the easiest? Yeah, like you hear over and over, you know, the high equity leads are going to be the easiest because you're not going to have to deal with a bunch of, you know, convoluted stuff. Basically, you're going to have people that have equity. It's just a matter of buying the property correctly. So, I mean, that's probably the best thing. even out of town leads, you know, landlords and stuff like that, they're great too because

they're usually no real estate a little bit, so they're easy to deal with. And that's the most common direct marking leads from what I've heard is those two, the high equity and the non-resident homeowner, the non-resident owner. Yeah, that makes sense. So you mentioned earlier that you guys, you flip houses, but you're also doing a little bit more buy-and-hold. I'm wondering why did you start flipping houses? Why have you transitioned a little bit more to buy and hold? And kind of what's your philosophy behind why you do what you do?

Initially, it was really just about our capital. The kind of the money we had access to, you know, my dad's our money man in our business deal here. And so we didn't have that much capital to work with. So we needed to flip houses and build capital. I needed income. We wanted to transition out of our businesses that we own into making an income through real estate. And buying hold takes a lot longer to do that. You know, flipping houses, you can transition into that probably in a couple, three years if you do well.

And so, but now it's become a tax liability. So the buy and hold, that's why we're going back to buy and hold and help us out with some of our taxes. And, you know, and it's just wise. You know, you just put, someone else is paying for a property that you own. Instead of you paying the note month over month, I mean, just the basics, you're having someone else pay for the note. And at the end, you've got yourself a house paid for, and you've got this asset that you can work with. And so that's why we're doing it. We're wanting to transition to about 15 buying holds in the next two or three years.

Right on. And you had mentioned three years as kind of like, you know, I think what you said was reasonable for somebody to kind of transition from maybe a job to three years of flipping, you know, becoming kind of full time at that, right? Right. So you don't think it's reasonable that somebody quits their job after, you know, like 30 or 60 days of becoming a real estate investor. Like, hey, quit your job. You're going to get rich in 30 days. I think that's insane. It's insane. And I think, again, this is where you see people who fail.

They get this idea that they're going to get rich quick. I mean, not always. I don't want to generalize. Some people do. But they do. They do. And the gurus, there's lots of gurus that feed into that. We hear it all the time here in Austin.

There's constantly seminars that come through. Hey, use other people's money. You know, make $50,000 and $30, I mean, it's ridiculous. And so inexperienced people are like, wow. oh, I could do that. And that's what they do. They quit their job, and then they get frustrated, and they get broke, and they're just, and they give up.

And so I firmly believe that you need to keep your day job, and it needs to be something that you constantly work towards. You're educating yourself, you're learning, you're learning the tools of the trade, and you're building a portfolio, and you can work a full-time job and do a flip. Is it hard? Absolutely. But anything that's worth something is going to be hard. work. So I'm all about taking the slow road for it.

Well, well said. Well said. All right. So flipping, does it work in any market? And can we talk maybe a little bit about flipping while the market's hot versus the market being cold? Well, what's funny is we actually have two flip properties that are on the Highland Lakes. One is at Lake LBJ, which is about an hour from Austin, our west, and then Lake Buchanan, we have one. It's about an hour and 30 minutes west. And then we- Killing us. They're killing us. Who's killing you? These properties. Oh, no. Why? It's dead because we're in a drought and there is no lake. Oh, that's not good. Right. And so we have this contrast of, we have properties in the city limits of Austin. And, I mean,

they're no-brainers. They just fly off the market. Then you've got the, we have these contrast of these properties on the lake that are just sitting. And so can you buy, can you flip houses in any market? Well, if a house won't sell, if there's no buyers in the market, then no. But there are buyers in the market, then, you know, really, if there's just a few, if it's a pretty cold market, you've got to buy it cheap. That's the only solution is buying it cheap because if you buy it cheap, you sell it cheap. Everybody wants a deal, and if you have the best deal on the MLS at the end, you win.

Right. Okay. So let's talk about that because people come in. You know, there's experience people listening. I mean, they all get nuggets out of these shows, but, you know, the beginners are really the ones who get the most out of this, I think. How do I buy a cheap? I mean, how do you find a cheap property? We talked a little bit about marketing, but, you know, how do you do it?

What do you do? this is my philosophy with it it's kind of you reap what you sow if you sow into your marketing you will reap if you don't sew into your marketing you're not going to reap

and sewing takes time sewing does I was sewing a dress the other day for my wife and daughters and it can be bloody too but sewing just like a farmer they don't just go out there and put the seed down and then, bam, they got all their fruit.

No, it takes time. So I think that's the key is, you know, with a, and that's why I like about bigger pockets. There's so many ideas. And you can just become so overwhelmed with ideas. You know, just grab a few. One of our favorites, this is actually what, initially, what kept us alive. We called it the Dirty 30.

30. Hold on, Brandon, you're ready? Dirty 30. Good. And I've heard it also called Dry for Dollars. But we drive a neighborhood and we look for in a neighborhood that we want to buy in that we already know is got good investment potential. So it's really focused marketing. And you go and you drive and you look for houses that the roofs are bad. They obviously cannot afford to put a new roof on the house, a distressed situation.

The yards are overgrown. You know, things like that. There's about five or six clues that we look for. And we'll write down the address and we'll go home and we'll send them a handwritten letter. and we did this for the first three or four years. We had a, it was a 3% return. So we'd sent out 100 letters and pick up three houses. So you actually, so the 3% was not response rate.

It was a 3% purchase rate. That's correct. Wow. And that's pretty good. What were those letters? What were those letters? What did they say? They basically said, hi, we were in your neighborhood, saw your property at, and then you put their address on it.

And we are interested in buying a house in your neighborhood. We are able to purchase the property and can close at your convenience. If you have tenants in the property, we are willing to close now or when their lease expires. Please call me. and then put my name and my number, and that was it. Wow. That's awesome. That's great. That's great. And it's obviously very effective. You had talked about five or six different things.

You talked about roof overgrown lawn. What are the other factors that you guys kind of peep out when you're looking for distress situations? I know this kind of sounds silly, but the one that always catches my eye is a dented or messed up garage door. Okay. So that one, the roof, the yard overgrown, obviously, debris. You can look on the sides of the house. If they're collecting junk, then to me that's a good sign that... Car parked on the lawn.

Yeah, yeah, the giveaways, the car parked on the lawn. Obviously, the sidings messed up, you know, stuff like that. Or, you know, of course, the obvious ones, papers on the front doorstep where, you know, maybe they're not home or maybe it's vacant or something like that or maybe the person is in the hospital or something like that and just sending letters to what it looks like are distressed homeowners in distress situations. The houses are distressed because the people are distressed. And that's what we're looking for.

And then your job is not to further their stress, but to help them resolve their situation and get through it by getting this property, which obviously if the property is in bad shape, it means they're incapable of taking care of it for one reason or another. And you take it off their hands, right? Right. And some people just need, you know, I can't tell you how many people grabbed our letter and said, hey, this is from God. I mean, we saw your letter and said, I knew that you could help us.

You know, they're just people that just, you know, they're desperate. You put a letter in their hand and they're like, this is a good solution. This is what I need. I didn't even know what I needed to do, but I really do need to sell this house, get down the road and start over. And so it's a great opportunity to help people. Right on. Right on. That's great.

That's great. All right. Well, let's kind of talk a little bit about this flipping business that you guys have established. So you started, you know, obviously now you're transitioning a little bit to. to buy and hold, but how is your business grown? What steps have you taken to continue to build it out? Obviously, and we'll talk a little bit about marketing in a bit, but, you know, just how do you keep the flow of deals coming? How do you manage your opportunities? Maybe kind of expand into it a little bit. Sure. You know, of course, as the deals flow in, we just learned to kind of grow

with it administratively. My wife is, you know, Catherine's the real estate agent. She handles, once we acquire the properties, goes into her hand, she is a transaction coordinator, gets him to close. And then at the end, when we go to market them, she handles all the marketing and the selling them on the MLS. My dad is the money man. He handles the closings. He handles the just all the money stuff. And then I'm the one who actually goes and, you know, meets the motivated sellers, acquires the properties, gets them under contract. And then I handle the, the construction aspect or managing the construction or the general contractor. And so we just had to morph into that. We just had to grow into that. But really, the only way to grow it is like you're saying,

is marketing. And the more leads, the more business. and the networking as you need to network. I don't believe in just network, just to network. I believe networking should have a purpose. And everybody knows that. You're not going out and meeting other investors because you want more friends. You go out and meeting other investors

because you can have a mutual business relationship. All right. So, yeah, that's awesome. So let's actually talk more about that, the networking stuff, because I think a lot of new people struggle with that of getting in touch with other investors and people who might matter in their life.

So what can you tell us about networking? How do you do it? And how has it affected your business? Well, what I can tell you is the first four years we did zero networking. We had absolutely no networking. And I think it affected our business. It limited us greatly. So we met one investor and it changed our whole business. That's all I can say.

He's been such a help. And he's actually one of my best friends now. and I bounce everything off of him. He bounces stuff off of me. But it's just great to have a colleague that is doing the same thing you're doing because there's so many weird situations and so many little nuances that you're trying to work through. It's just great to have someone there to help you. And then through bigger pockets, if I can plug bigger pockets, is that okay?

No, you can't plug bigger. Okay, I didn't think so. I've actually picked up several deals. In fact, I'm working on the house right now from a gentleman I met through Bigger Pockets. Lamar is his name, and he's wholesaling and doing a great job here, but he gave me a lead, and we're in the middle of rehabbing that now. And I've met others here in Austin that I'm connected with, and it's just great,

just to have that ability to bounce things off of, and then it's a great way to pick up deals, turn deals, and just learn more. I love it. That's BiggerPockets.com, for those of you who are listening, Be part of the bigger pockets economy like the groats. Do it. Sign up. All right.

Let's get back to us. That was awesome. They did not get paid at all for that time. Not yet. We need a hold of a little signs that says we did not get paid for that. Well, let's actually talk about the wholesaling thing a little bit. You said this Lamar guy's wholesaling. That was going to be one of my questions.

Do you buy from wholesalers? So apparently you do. Do you have any tips for buying from them? And do you have any tips for people who are wholesalers on selling to you? Yeah, we normally do not buy from wholesalers just simply because there's few wholesalers that market for their own properties. They're usually just what I call, you know, bottom feeders. They're just kind of taking scraps from other people, other deals, or the MLS or, and they're just trying to make something happen with any kind of a lead. And they're usually just not very good.

So they're kind of time stealers. but wholesalers that market their own properties. That's what I ask. Are you sending out letters? How are you marketing? And it's not because I want to find out how they're getting their deals. I want to see that they are getting real off-market properties. If they're not, I won't deal with them.

And so that would be my cue to other wholesalers listening is get a marketing campaign together, get a good, solid marketing campaign, and bring real deals to the table. Otherwise, your name is just going to be associated with junk. That's awesome. That was going to be my follow-up question, which was going to be, how do you not be a time stealer and how do you not be a crap wholesaler? But so with these guys, you know, a lot of them, what you'll see, a lot of these new wholesalers will, they're scared.

You know, the thing I've noticed is they're afraid to tell you about the property because they're afraid you're going to steal the property from them. So maybe you could give some advice on what is it that a wholesaler could do to not be so worried that people are going to steal deals from them? And is there a way that they can protect themselves from that happening? You know, it's funny. I had the same fear. I think it's natural. You know, it's very precious.

When you get a good lead, man, that's precious. It's good stuff. And so, but, you know, I think you have to. build relationships with others and that's where the trust comes in. I wholesale to two or three different guys. I have just a handful of guys I wholesale to and I don't even put, we don't even put their wholesale fee on the contract or on an assignment contract with them. We literally shake a hand and he said, yeah, I'm going to pay you this much after closing. And so it just makes things simple and so that would take away the fear. I'd say it's building trust, but

until you build trust, you just need to cover yourself. You need to, you know, there's a right way to do it. And, you know, that's get under contract and, you know, seal the deal up. And then when you go and show people that you've got a deal, then you have to worry about it. So what you're saying is if you have the deal in a contract, then you don't have to worry about it, correct? Yeah, exactly. Okay. So that's the thing that blows my mind, all these guys.

So they're like, well, I don't want to share it with you. I don't want to share it. I'm like, well, is it your deal or is it not your deal? If it's your deal, it's not going anywhere. Nobody's going to take it. And if they do take it, you've got recourse. And I think they're afraid to get it under contract in fear of not having an end buyer. And that's where inexperience comes in.

And that's where it's tough. That's where a wholesaler has to break through to the place where they can trust their decision. And that's where you've got to have a good realtor. you've got to have good comps. You've got to know what the rehab cost is going to be. Your analysis has to be there. And I think if you don't have the experience, you need to just go team up with someone

until you get that experience. Otherwise, it's just going to be rough. That's great advice. All right, so one more thing along those lines of wholesale. So you had mentioned that you guys will actually wholesale deals. And by nature, you're the fix and flippers, rehabbers, and you're able to wholesale and you need to wholesale,

presumably because your marketing campaign is so good that you've got all these extra leads that you can't work at any given time. So that's how you dispose of them. Is that correct? That's exactly it. We basically fill up our pitcher, you know, our tub, and then when our tub is full, we'll turn them. Or there are some deals that really don't fit our business model. I like to stay a little closer to home if possible. If I get a hot property on the other side of town, I'm going to work it. But if it's close to my home, it's mine. But if it's far away and I don't, I know it'll fit someone else, then I'll more likely turn it. Yeah. That makes sense. I think Danny Johnson said that the same thing that, you know, if it fits within his business model, great. Even if it,

you know, even if it might be a really good deal, if it's outside his specific business model, he's not going to do it. So I think that's awesome. Well, let's talk about your marketing a little bit, because obviously you have good marketing. So how do you do you do? do it. I mean, what's working for you right now? Well, our number one is our website. I mean, that's actually what transitioned us from

just doing a couple every few months to just, you know, one or two a month. Yeah, the website was a big deal, and I never thought there was people looking on the internet, which is so dumb, because everybody looks

on the internet for everything. I mean, I was like, I don't know what my problem was, but it was my air conditioner sub convinced me and actually built my first website. And we SEOed it, and eventually it just started bringing in some leads, and we just took it and ran from there. But it changed everything. It changed. When he first came to me and told me about starting a website, I have to tell you,

I said, oh, no, it's a terrible idea, especially when I started thinking about the costs to SEO it, how expensive it is a month. And things were really tight at that time. Our business was not doing well. And I was against it. But I just have to say that I was totally wrong. I can absolutely admit that. It has changed our business completely and taken us to a whole other level. And I'm glad you admitted that publicly because, you know, Jason's been waiting a long time for you to say that. Yes. Yes. No, that's awesome, though. I mean, nobody else has actually said that yet, that their website is like their top kind of producer. I mean, what about your website's doing so well, do you think?

Is it just like Google's bringing new people? Yeah, I mean, just being on top of the search engines for just the main keywords. You know, just the basics, just basic internet marketing. You just got to find out in your area how people are going to search for you. And I will give a million dollar tip right now. You all ready? Drumroll. Here we go.

Whatever the bandits. signs say, that's what people are searching for. Ooh, that's good. Interesting advice. If they say, I want to, I need to sell my, you need to sell your big fat house. And that becomes the buzzword. That's what people are going to search. So, you know, that's the number one tip there.

But if you do that and you just have a website that is warm and friendly and not a bunch of junk on it. I mean, I can't tell you how many times we go to different investor sites and there's just so much, I'm just overwhelmed. I can't even, it just stresses me out. I have to leave that website because there's just too much information. I know a few, a couple months ago, I wrote a post on the, on the blog on how to build a website and like under an hour or whatever, but I used your guys as website as a sort of a example. Example, yeah, in there of what a good website looks like. You guys, yeah, I thought yours looked awesome. So we'll link to it in the show notes too.

But yeah, it looked really, really good. Thank you. Hey, and something else that you guys do on the web stuff since we're talking about is you blog, right? I mean, you're a writer. Well, you're an investor, but you write and you write about real estate. And that's how we are, I believe,

originally ended up kind of getting to know you guys and you came over and started writing for us. presumably blogging on your site and then eventually as you came over and started writing with us, I mean that's been beneficial the blogging part, correct? Yeah, it has

I guess for SEO value it's very helpful. The people that were trying to attract to the website aren't reading real estate blogs. So in that sense, it's kind of indirect, you know, it's building up a presence

just like you're doing with your website Josh, that's why we came over to the bigger pockets was the exposure, the, you know, just being able to add and receive from all the information. But ultimately, to get a seller to commit to selling you their house, you know, none of that really matters to them. But it does help your website, and it makes you look like an authority, whether you are or not. Well, let me say one more thing just really quickly on the blogging topic. I think that the other thing it helps, for example, on our website, I think when a motivated seller or someone who's looking to buy our house goes there and can read about that, I think it's a good way for them to also get to know you a little better.

I know that sounds a little crazy, but on a personal level, and a lot of these people are looking for someone that they can relate to. And I think, if you will, it gives them a little bit more warm and fuzzy to read and feel like they're really getting to know whoever it is that's going to buy your house. Yeah, it builds trust. Right. In particular, if you're writing about deals that you've done, what it does is it establishes a track record for you. That's it. So a new person or not a new person, but somebody who's worried, they're like, who the heck are these people? Can I trust them?

Do they know what they're doing? Looks you up and they say, wow, this guy's done 12 deals and they've closed quickly. You know, you've demonstrated it by writing about it and talking about it. that's going to make them more likely to want to work with you. That's it. And the other thing is referrals. And, you know, we do a good job with people we work with. We've gotten several deals from referrals like that. Additionally, we also have reviews on our website.

People will review us, and that's important. People, you know, nowadays they're turning to sources like Angie's List and Yelp to get reviews on people. And those are all important, especially for real estate investing. That's a really interesting point because I don't think we've heard that one before. So do you have a button on your site that points to your profile on Yelp and Angie's and ask your folks to review you over there? We do.

I believe we have a button for Yelp, Better Business Bureau, and Google reviews. Interesting. Well, that's a great piece of advice. And frankly, I think anybody listening should probably do the same thing. I think that's awesome. Yeah. Yeah, that's really cool. I say, I have a question about when you get a call from a motivated seller,

like how does that play out? Like, walk us through, if you would, real quick. Like, you talk to them first time. When do you go look at their property? When do you make them an offer? What's that look like? What's funny is I was listening to Danny Johnson's podcast and, you know, what we do is identical.

He, you know, he's grinded out and figured out basically the same things that we've figured out all by herself. But what I did learn from him, I think I'm going to start doing is when we talk to someone on the phone, I'm already, my wife's a realtor, we're already looking at the comps. Before I even get into a depth, in-depth conversation, I know what their house is generally worth. So if they're asking for retail value plus or something that's not going to work for us and I know, I'll just start negotiating on the phone with them. We're asking what their best deal is. And if they say, well, it's 90 and the house is worth retail 100,

which is not a good deal for a wholesaler, then I'm going to just tell them, listen, we buy wholesale, not retail. And I don't want to waste your time. And my time's precious also. But before I come out and take a look at your house, I need to feel like we're in a ballpark range of where. we can be. And so we'll try to determine that. If not, we just part ways and I usually try to send

them on a positive note and say, listen, you could list it with a realtor and do a little better. So I turned probably, I would say, almost half of my leads to real estate agency. My wife's not even taking listings anymore. So I would just say, go find a realtor, go find a good realtor and list it. And so it's not this like, hey, we can't help you. You know, you're not selling me your house cheap enough, so kick rocks. So when we do go into the field, we actually go to the house, I usually acquire 70 to 80 percent of the houses I actually look at. Wow. That's awesome. That's like shock. It's all about the need for efficiency. Well, it's all about that screening, huh? It's essential. Yeah. It is. Yeah. And the other thing

is, some of the ones that he will tell, look, you need a retail value for your house. You know, a wholesaler, an investor can't help you. There's been several people who have called us back, you know, a month or so later or weeks later and say, okay, we just can't do this. We trust you. You know, you've given us good advice. You weren't trying to steal our house. We're ready to come down. We're ready to be realistic about this and sell to someone like you.

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Age, style, anything in particular. What's the Jason and Catherine, you know, bread and butter house? The bread and butter house is your 80s built, three-bed, two bath, you know, 14, 1,500 square foot house. And in Austin, there's about a million of those. So they're easy. The construction is so simple. We can almost expect the same issues every time.

So when rehab in a house, that's our bread and butter. High equity, maybe a landlord looking to get rid of their property. Someone that has maybe just, they understand how real estate works. They're easy to deal with because you don't have to handhold them through. It's great. Okay. Have you found that it's been more difficult to get those really good, deals now that the market's going up and everyone knows the market's going up. Is it getting tougher?

Yeah, it is actually. It's thinned out a little bit. Even our website, you know, and Danny said on his website, his leads had gone down and he thought it might be because of his phone book, but what was so wild, it confirmed something I had heard from an investor in Dallas who has a lead generating website. They were having the same problems since January, and so have we. And then so is Danny. So it's just the market right now. I think there's more investors in the market than ever right now. So yeah, they're a little thinner. You just got to work a little harder. But the plus is when you go to sell it, it's easier. So the buying them's harder, the selling them's easier. Yeah. And really quick on the website thing, if you go to Google Trends or something

called Google Trends, you could Google It, Google, Google Trends. What you'll actually see is that interest in real estate and real estate investing terms are dramatically lower than they were back in the day. I haven't looked recently, but I know Brandon and I have. They're definitely on their way up again though, but yeah, they definitely bottomed out here about a year ago. Yeah. Yeah. So that's a good way to kind of keep track of like what's, yeah, what are people searching for in Google? Yeah. And yeah, it's definitely, yeah, it's definitely on the climb up right now. So, well, so what do you What do you guys do in a typical flip? What repairs are certain absolutes that you're going to jump in and do? Typically, roof, AC, foundation is pretty big, the foundation repair. We like to do all flooring, paint inside and out,

remodel the kitchen countertops where you try to keep cabinets if we can. Now, these are houses that will for 200 or less. When you start getting over 200, 250, you know, you've got to change out cabinetry usually. You know, all the fixtures. We like to put in cans because they're recessed cans because they're so inexpensive and they have such a nice feel. Front door. That's one of our favorite. We love changing out the front door, getting a nice pop on the front door, landscaping. We believe in curb appeal. We believe that people make their decision whether or not they're going to buy the house in their first three or four minutes, which includes when they pull up and they walk in the first two or three rooms they see, you're going to have them or not have them

by that point. So we try to make those the outside and then the main areas like the living, the family, the entry pop. And so that's where we put our focus. Nice. You mentioned foundation issues. Now that scares a lot of people. A lot of investors are just freaked out by that. So let's talk about that real quick. What's, what's a What's a bad foundation look like, how bad is too bad and what can you do about them? Well, I actually, strangely enough, worked for a foundation repair company when our business got really slow. And so I did foundation repair estimating on slab foundations for about a year, and I learned

so much. Now I even have my own level, and so I'll take it out to the properties. And it's a great negotiating tool because nobody thinks, they'll just say, I don't have a foundation problem. I just have some settling. Well, duh, that's what a foundation problem is, is when your slab settles. So it is to what degree and how much it's moving. You know, one inch variation in 20 feet is guideline for FHA and VA.

So we're always looking to the close, to the end buyer, are we going to freak them out? Of course, we repair the drywall cracks and what you don't want, and this is what we calculate. When we repair the drywall cracks, are they going to come back? after we repair it. If we feel like they're going to show back up, then we fix the foundation. If we feel like, and we've done this on a few that have foundation cracks, but you could tell those cracks had been there for 20, 30, 40 years and it hadn't moved much, and we won't fix that foundation. But if the house is 10, 12 years old and it's got foundation cracks, you need to at least stabilize it, put peers underneath it.

Because you don't want to sell a house and then that people move in and then the crack starts showing back up, you don't want to do that. Typically, what's it cost to fix a minor foundation problem like a crack? I know that's a general question, but what are people looking at? Yeah, well, typically it's about $300 a pier, and I would say the average foundation repair cost is about $5,000 to $7,000. Okay. Well, but knowing that, you can now go ahead and estimate it, right? And so you're going out, you're looking, and the average guy who doesn't quite understand

what that cost is, they're going to see a crack, they're going to think, wow, it's going to cost me 10, 20, 30, whatever they think. Whereas, you know, knowing that it's potentially right around 7, you can now put that into your estimation costs. Yeah, so we have a comfortability with foundation repair. I think it gives us a little bit of edge, and we have flipped many houses with foundation repairs. In fact, we have one under contract right now.

The lady had it on the market and it wouldn't sell because it had a foundation problem. She was referred to us and she had the listing agreement canceled with her agent and sold it to us. And we're about to close on that one Friday. Nice. Are there any problems that you guys stay away from? I don't think so. We're not really afraid of much. If the house is just, what we look at is basically we can put as much money into a house as possible.

but can the neighborhood support it? You know, it's just a matter of if we put that much money into a house, can it support it? If it can and we can make a margin, we'll do just about anything. One of the houses that we bought a few years back would partially burn down. I mean, you know, you throw money at anything and you can make it look good. And as long as the neighborhood will support it, the comps will support it, we can make a deal off of it. I don't think we're really afraid of it. And one more thing about foundation, sorry.

here in central Texas, people are used to it. I heard a foundation expert once say that I think it's something like three-fourths of all homes in this area either have had foundation repair, need foundation repair, or we'll need it. It's just the fact of the matter here. Seems like a good business to go into down there. Yeah, it's huge. My area's the same way we're built on a swamp,

and so my whole county is built on a giant swamp. Do you guys hire... That explains a couple things, by the way. Thank you. Do you hire an inspector to look at your properties, or do you just do it all yourself? No, we never have. We just inspected them ourselves. And now we just look for the big things, mainly as we walk through. We just look at the AC, the roof, the foundation, and then just make some quick notes about, you know, kitchen bath, cabinets, flooring. We already, there's some things we just gut always. And then we just look at the ones that we try to keep and remain. And then so we just kind of keep it simple. We just do it ourselves. ourselves and we've never run into anything that's killed us so so far. I'm also wondering then you guys, I'm assuming you don't do your own labor. So how does that work with hiring contractors?

Do you have any tips for finding good ones? I ask a lot of people this because this is a question that I deal with constantly. And you're not alone, Brandon. I have the worst. I have the worst, we have the worst sub list that we've ever had right now. it's uh and it's because it's crazy construction's crazy busy here and so all you know they're going and fleeing to people that are willing to pay top dollar we're not and so we go on the back burner and then we go looking for new subs it's rough but i think the key is to just take care of the ones

that uh do a good job just pay them timely take care of them but you can't control how they come in and out, but finding them, Craigslist, other contractors, and this is where networking comes in. Some of the investors I work with, I get some of the greatest subs from them. Nice. Yeah, that makes sense. And I'm just going to throw this out there for those who haven't heard, because I bring it up every so often. One of Jay Scott's tips was to go to Home Depot at, like, you know, six in the morning and see who's standing around the pro desk. And those are the guys that are, you know, good. I love that tip. Yeah, very, very brilliant. So, well, cool. Well, Well, you guys both work together.

We talked about that earlier. You're kind of a team. I'm wondering if you have any tips for working with your spouse. I know a lot of people, a lot of real estate investors, is one of the benefits of being an investor. It's a lot of times you get to work with your spouse. So what are your thoughts on that? I think it's really important to that everyone knows their place and what their job is.

I think that's probably the most important thing. Can you rephrase that really quick? Because, you know, I know if a guy tells that to his spouse, She's not going to be real happy about that. But I guess coming from Catherine, it's cool. You know your place, Jason. Yes, I do. Go ahead.

I got to take over. There's a phone call. She's been waiting for all morning. She's got to take. But, yeah, basically, defining your position, you know, of course, I have the tendency to dominate and take over some of my wife's jobs. Of course, she says that as she leaves the room, which is like wrong. Okay, now let's be honest.

No, but it's great. You know, we have a great marriage, so it makes it nice and adds another dimension. But it's so helpful. You know, we work together. We're, you know, at night, I'm like, oh, hey, did you forget to do this? Or did you do this? And we can just be laying in bed and said, oh, yeah, I took care of that. Not that I advocate, you know, talking about real estate all night long, but it's just nice.

It's easy to do, isn't it? It is. I mean, because we love, we're passing. passionate about real estate and it's fun. And so it's just another dimension. But working together, you understand and know each other more. And let's just face it, if you have issues or problems, you get mad at one another, you've got to work through it.

You're married. Yeah. Yeah. And what about selling? What about selling? Obviously, you get these things. You get the curb appeal. Where do you guys price your houses?

what do you mean by how do we price our house? Well, you know, so say the average comp of a house in an area you're doing is, say, 150,000 and matches pretty well. You guys finish it fairly nicely. Are you going to price it at that 150? Are you going to drop it to, say, 140, 145 and try and bid it up? Are you going to, you know, what's your pricing strategy on selling one of your flips? Okay.

Well, you know, we don't have a cookie-cutter philosophy. on it, but basically what we do is we want the house to sell within the first three weeks or get, I'm sorry, get a contract within the first three weeks because after three weeks, I believe the seller leaves the driver's seat and gives it to the buyer. And that's when you start getting lowball offers. And when you see, everybody knows when you see houses on the market for two, three, four months, you're not in the driver's seat as a seller. The buyer is they're going to come in

and they're going to tell you how it's going to go down. We don't want to give up that position, obviously. So everything we do is we try to price it to where we believe it'll sell within the first, really 14 days. Okay, so what does that mean? So that means, for example, if we did a full remodel, a nice remodel, and the comps are at 200 for a full remodel,

you know, we're going to list it right around there. We used to try to push the comps up a little bit and really stretch things, and we will if the neighborhood's super hot. And so Austin's a little bit of an anomaly. Many neighborhoods, the average days on the market's seven, six, seven days, which is basically enough for people to go in and out of the house and then try to work through all the multiple offers. It takes six, seven days to do that.

So we can really push things up, like recently we just got, and we fact, we actually, we have it under contract. It was on the market seven days, this house we had. And the most of a house that ever sold from that neighborhood was 205, I think. And we listed it at 214, 5. And we got under contract in seven days. So there's so many variables that we take into consideration. Awesome. Awesome. All right. Well, let's move this right along. We're almost out of time here. So very quickly, we're going to do our new segment that we've been doing recently called the Fire. Fire round. Yeah, we should get one of those like monster truck guys to announce that.

Sunday, Sunday. Yeah, that's what we'll do. I'll get a guy on Fiverr to do that. All right, so these questions all came from the Bigger Pockets forums. These are actual questions that people are asking. So if you are a listener and you have questions, go throw them on the forums and we might read it on your, on the next podcast. So here we go. Number one, what is your average profit per, what is your average?

profit per flip. Five times fast, say it. Average profit per flip. 30,000. Okay. And what is your minimum profit per flip? 15. Okay, okay.

Windows, refinish old wood ones or update with new vinyl? Update with new vinyl. Would you buy a house that's, and I think I know this answer, you kind of said earlier. Would you buy a house that was severely burned? Yes. That's a quick fire round. The password is. What about a pool?

If there's just like a real nasty looking pool, do you guys remove it, refinish it? What do you do? Oh, we forgot. We don't buy houses with pools. I knew there was something. Blasted.

Every house we ever bought with a pool is not gone well, but we will do it. Will you fill it in or do you make it look pretty? Depends on how much the cost is. I would say $2,000 or less. We'll keep it. More than that, we will make it a garden.

So really quick, I saw a, I don't know, it was one of the 10,000 flipping shows, and this guy buys a house with a pool, and the pool was all jacked up. And he had all this debris from the renovation of the house. He put it in there. He's got a big old pile of debris, and he literally gets his buddy.

And they start throwing all the crap into the pool. And, you know, just like, yeah, this is going to fill it. and then we'll just cover it with a little layer of dirt. And the contractor comes running out and is like, what the hell are you doing? Are you at the time to do that? And obviously, in the end, you know, they had to, you know, they had to do it the right way and take out the concrete and fill it appropriately and throw their garbage where it belonged instead of chucking it in a hole in the backyard.

Well, I thought it was a great idea until you told me you couldn't do it. That's funny. That's funny. All right. Don't listen to all those flipping stuff, guys. I mean, there's some crazy stuff. They're helpful for sure. Yeah.

All right. Do you charge a late fee for contractors who don't finish on time or do you have any other? What do you do when contractors don't finish on time? We beat them. Okay. I was drinking water and I came this close to spitting it across the screen. I could see that happening. I could as well.

Well, that'd be awesome. No, no, seriously, we don't really have anything like that, but, you know, really not really have a big problem with it. We don't use general contractors. If I do use a general contractor, then we obviously have something built in there. Right on, right. All right. And the last of the fire round is wood floors.

What do you guys do, dark stain, light stain or no stain? It depends on the property. It depends. example, if it's dark inside the house, we're going to want to do something a little lighter to lighten it up. Actually, we're going into a property right now. We're kind of doing a modern update on it, and we're doing wood look tile. Wood plank tile in it. I've heard of that. I've never used it. That's awesome. Yeah, it's very contemporary, has a contemporary feel. Yeah, that's cool. I've heard about using that in like basements because

it's, you know, tile, so it's waterproof or whatever. That's an interesting idea. Yeah. It looks like wood. You guys should take some pictures and post them up so we could see it. Yeah. Yeah, I'll do it. Do it. All right. It's that time again.

Oh, Brandon. What time is it? It's time for the famous four. That was awesome. Yeah, that was good. And did you see Jason's face as we did that? Yeah. I think he was going to explode.

Am I part of that famous four? Oh, you could join us. You want to do it? Sure. Yeah. Come on. I'll be baritone. All right, here we go.

Three part harmony. One, two, three. Famous for... The best we've done yet. Yes, absolutely. She just called us. All right, so Famous Four. What is your, and you would refer to one, both, or either of the Groat clan over here.

What is your favorite real estate book? Rich dad, poor dad. Good. Catherine? I don't have one. Sorry. That is... She can't read.

Hold her out, man. Come on. 10,000 plus listeners. And now, you know, that wasn't right. For those who didn't see that... Let me say something really quick here. I don't have time to read. I'm too busy investing.

Oh. Nice. Got you. And she did just punch her husband in the arm. That was pretty great. Did you see that? I did. I have that saved.

Okay. That was saved. All right. Favorite non-real estate business book, Jason. Honestly, I don't have one. I know that sounds ridiculous, but we don't. You're smart enough and gosh darn it. People like you.

Oh, I got the right answer. I got the right answer. Who needs a book when you have bigger pockets.com? Damn. Oh, I like it. That's a bonus right there. Seriously, I read a few books in the beginning, but since then, I mean, they just got us started. They got a little foundation going.

I think once you have a foundation going, experience is how you learn, not books. Fair enough. Fair enough. All right. You guys are a very fun couple. What do you guys do outside of real estate? What kind of hobbies do you have? Hobbies, man.

We got three kids. Got three. I have hobbies. Seriously, though, we're real involved in our church. and in our community and with our kids. That's what we do. Wow. Cool.

No, you know what? I just had my third kid. So I will be turning to you for advice, I'm sure. I also just had my third cat that I have. Okay, not only just live in a swamp. He's a crazy cat lady. That's the scary thing. It takes a lot of work to take care of three cats.

Almost the same, Brandon. Almost the same. I know, exactly. So it's just minus the litter boxes. Exactly. Yeah. I mean, it's, yeah. All right.

What do you believe sets apart the successful house flippers from those who just come and go and never really gain any kind of traction? I think some of it is just a matter of going out and doing. I think you can get so consumed with all the information that's out there that you ever, never actually do anything. You just sit there and you, you always gain information, but you need that experience. I think the other thing is, I think there's a lot of people who don't treat this as it's a real business as much as you were opening a storefront business. And they say that I think it's something like 95% of startup businesses fail in the first five years. And I think that applies to this as well. You've just got to be able to dig in and learn from your mistakes and just be determined to hold on and press forward.

and don't let the setbacks just knock you off course. Yeah, that's great. And of course, your husband needs to know his place. Yes, if that happens all as well. Now, I didn't mean that exactly. And that in a good business structure, everyone knows their jobs, is what I was trying to say. It's okay. It's okay. Cool.

Did you have anything to add to that, Jason? Yeah, I think it's discipline. And that's what she's getting at. as a business owner, it's being disciplined. If you're not organized and disciplined, you're going to fail because this business takes, it just takes discipline. You've got to put everything in its place. Your time has to be put, you know, separated out correctly from, you know, pleasure to business, and you've got to work hard in your marketing, and you've got to follow up with your leads. You've got to be diligent. Yeah, fantastic. And one more, one more thing, as he talks

about discipline, I wish y'all could see our desks right now with all the piles all over it. I could see it. What are they talking about? Nice. Yeah, I see it. Nice. Well, cool. Well, thank you guys very much.

This has been a really fun show. It has indeed. Yeah, we're glad to have had you. Definitely. Where can people learn more about you guys? Our website, www. I buy Austinhouses.com. And you can't learn a whole lot more about us there, but you could always hook up with us on

BiggerPockets.com. Send a colleague a request. and we love having conversations through bigger pockets. Nice. Interesting. What's that site? Bigger pockets, P-A-A-N-O-C-E-T-S dot com. There you go.

There you go. Awesome. Listen, thank you so, so much. We really enjoyed it. And we will see around the site. And obviously want to continue to hear about your successes and hopefully you'll be sharing those on your site and ours. So thank you.

Absolutely. And thank you all for having us on the show. We thoroughly enjoyed it. Thank you both. I appreciate it, y'all. No problem. All right, everybody. That was a fun, fun show with Jason and Catherine Groot of Ibyaustinhouses.com. I know I picked up a couple tips there and hopefully you guys did as well. Thank you very much for listening. Brandon, hopefully you enjoyed yourself a little bit, the Swamp Monster. Thank you. Yes, that was fun. It was. It was. So listen, we've got lots of great shows.

head scheduled for you guys. Definitely make sure to stay tuned. If you want to find out more information about some of the things we talked about on today's show, go to biggerpockets.com slash show 27. And otherwise, of course, as always, be sure to check us out on Facebook at facebook.com slash bigger pockets. Twitter at Twitter.com slash bigger pockets. YouTube at YouTube.com slash bigger pockets. We got a group on Facebook. We got a group on LinkedIn. We got a group everywhere. Of course, come on Bigger Pockets, join us, hang out with us, introduce yourself, interact, learn, engage, and like the growths, I mean, these guys are doing business because they're active and part of this community. They're doing business with other people on Bigger Pockets.

So, you know, what else do I have to say? Jump on and be part of that. And that's pretty much it. Again, really quick note. Again, we launched the brand new calculators and analysis. tools and things on Bigger Pockets. So you can check them out at BiggerPockets.com and just go to our analysis or analyze. I believe it's Analyze menu option

and you'll see it right there. And jump in and check it out and start using it. It's pretty incredible. So until next time, thank you very much. Brandon. Bye. Goodbye. You're listening to Bigger Pockets Radio.

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