BiggerPockets Real Estate Podcast - 299: HGTV Star Ken Corsini on Flipping, Rehabbing, & Building Homes Like a Pro!

Episode Date: October 4, 2018

Ever wonder about the REAL story behind the house flipping tv shows? On today’s show, we interview Ken Corsini, star of HGTV’s Flip or Flop Atlanta! Ken pulls back the curtain and shares fantastic insight and knowledge into several areas of real estate investing, from house flipping to new construction to owning a real estate brokerage! In this episode, we cover Ken’s methods for finding deals in hot markets, how to recognize general contractor “price creep” (and what to do about it), and how to craft multiple exit strategies that will serve you in any market. Ken also shares some fantastic insight regarding his technique for staying flexible to protect himself from market downturns that you do NOT want to miss (if you value keeping money over losing it)! In This Episode We Cover: Why Ken kicks himself for selling houses he flipped How he adapted to a changing market when hedge funds took over  How he started a construction business to keep up with the growing demand for big rehabs How he recognizes what the best strategy is for each market What “price creep” is—and what to do when you find it Why adaptability is your best ability And SO much more! Links from the Show BiggerPockets Forums The Office (TV series) BiggerPockets’ Calculators BiggerPockets’ Rehab Estimator Calculator Turn-Key Property Investing: An Interview with Ken Corsini How to Buy Your First Home or Investment Property with No Down Payment (Carleton Sheets) Books Mentioned in this Show Good to Great by Jim Collins Fire Round Questions What are thoughts on building a duplex or triplex, or something like that? I’m trying to figure out how to estimate what the new home(s) will be worth What have you found as the best financing for new construction of investment properties? What type of insurance do you all recommend for short term real estate holding and construction? Could I hypothetically take a whole rundown neighboorhood and turn it into a highly desirable place to live? My question is what is the best way to legally structure to protect us both and also best structure tax wise? Tweetable Topics: “I don’t think you can stay relevant if you don’t watch the signs and learn to adapt your business.” (Tweet This!) Connect with Ken Ken’s Company Website Fix or Flop Atlanta (HGTV) Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 299. Man, I don't think you can stay relevant in this business if you don't watch the signs and what's happening around you and learn to adopt your business. 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 Bigger Pocket. com, your home for real estate investing online. What's going on, everyone? This is Brandon Turner, host of the Bigger Pockets podcast here with my assistant to the regional manager,

Mr. David Green. Oh, I love when you call me that. That was your joke because I took it and now it's my joke. Yeah, you took it and used it against me. Yeah, for those who don't know, you got to watch the office. I was going to say you got to watch the office. We're going to change my name to Dwight Shrewt instead of... Green. That's actually, you know, pretty close. You guys are like brothers. Anyway, what's up,

David Green? How you doing? I'm good, man. I just got back from hanging with you in Hawaii for the last 12 days. I didn't even know. It seems like forever ago because you missed me when I'm gone, but I got a nice little tan going on. I'm refreshed. I get to jump back into the grind of selling real estate. And it's not so bad when you've got Hawaii on the mind. Tan. That's not the burn that's on your chest. Ooh, from your insult that you just delivered. No, from the fact that you wouldn't put sunscreen on when I told you to. Oh, yeah. That's a problem, man.

Like 30 seconds of the white instead and I'm crispy. Yeah, there you go. Well, anyway, I had a good time with you. It was a lot of fun. And we have an amazing show today with a guy that I've looked up to for a long, long, long, long time. And I've been wanting to get on the show now for like 299 episodes. Mr. Ken Korsini, who is the star of HGTV's Flip or Flop Atlanta.

and he's also an avid bigger pockets member, been involved for many, many years. He and his wife are just rock star house flippers, new construction, they own some rentals. We talk about all that stuff today here on the show. You guys are really going to love this. I mean, like,

just his idea of like adaptability and how that matters so much, this idea of price creep. And then make sure you listen to his deep dive, the deal deep dive we do towards the end of the show. He talks about making like, I mean, this deal is just fantastic and how he worked with a new investor

to make it happen really is, inspiring for people who are brand new because of what this investor that brought on the deal got out of it. So anyway, super cool. But before we get to that, let's get today's today's show with Ken. We talk a little bit about estimating rehab costs, a little bit about the construction process. And so I wanted to actually mention here in case you were not aware, you know, a lot of people know that we've got a rental property calculator and a flipping calculator and burr calculator and wholesaling calculator on BP, and they're used a lot. But what a lot of people don't know, because honestly, we haven't done a great job of talking about it, is that we built a rehab estimation calculator.

And just this morning, I'm sitting on this couch with a buddy of mine who's visiting a name Jeremy. And Jeremy is a new investor. He's actually on our show a few years back in one of the newbie episodes, but he is hanging out with me and I'm showing him this tool because he's talking about estimating rehab costs kind of how he struggles with that. And I'm walking him through this thing and I was like, this is really, really good. Like, this is really cool. We don't talk about this enough. So I just want to throw that out there in a not so quick to quick tip. Go check it out if you haven't seen it yet. BiggerPockts.com slash kelk. That's kind of the short code to get you to that page. And check out the rehab estimation tool. It is really, really cool. So that's your

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insurance can't be an afterthought. Most policies were designed for a single property, not multiple rentals, LLC ownership, short-term stays, or properties mid-rehab. That's where blind spots can creep in. NREG works exclusively with real estate investors. They understand portfolios, how risk compounds as you grow.

why insurance should protect your upside, not just a checkbox. One uncovered claim can undo years of progress. Before your next acquisition, review your insurance. Talk to NREG and get investor-specific coverage from specialists who actually understand real estate at NRE.com slash BPPod. That's N-R-E-I-G.com slash B-Podd. So, David, anything else you want to cover before we get into the show? You guys need to be prepared for an awesome show. I mean, Ken is an experienced investor who's very successful. He's on TV. He's flipping houses. He's owning rentals.

He's building new stuff. I mean, you're going to learn a lot in this episode, no matter where you are in your own experience. So this is probably one you want to listen to twice, and I'm excited to get you guys into it. There you go. All right. And the last thing before I get into it,

Ken's new episode of his show, Flipper Pub Atlanta airs on October 11th. And then it's on, I think he said Thursday nights after that. So make sure you guys watch it. Support Ken, support a bigger pockets member who's making waves in the world of television. And we do talk about the TV show. later in the show, we talk about, is it real? Find out what he says about that later. So with that,

let's get to the interview. All right, Ken, welcome to the Bigger Pockets podcast. Good to have you here. Good to be here. Thanks, guys. Yeah. So besides being an international heartthrob and movie star or, you know, television star, you are also a real estate investor. And you've been doing it for a long time. In fact, you were on Bigger Pockets, I'm sure, before I was ever on Bigger Pockets. And I remember years and years and years ago watching a video that you did an interview with. Josh, you know, it was like the pre-Bigger Pockets podcast world, like back when Josh did it by himself, just YouTube-wise. So you've been around for a long, long time, which is cool. So we kind of hear the whole story today. Been around. That's why I got the great beard to show for it,

too. There you go. So let's go at the very beginning of your journey. I mean, what did you do before real estate? And how did you get into this? So I graduated from University of Georgia. I had a business degree in risk management. So I came out. of school and went right into working for an insurance brokerage. And it was specifically on their software, the software side. It was risk management information systems. And I did that for five years. And it was an awesome career start for me. But like any entrepreneur, anybody that's got the itch, it wasn't fulfilling. I had to get into something that was my own. And so I was exploring different business opportunities. I actually almost opened a Chick-fil-A at one point in time.

I couldn't do that whole process. And then ultimately I decided, you know what? I just like real estate so much. And I was listening to Carlton Sheets. You guys remember the original Carlton Sheets, No Money Down CD course. I had bought that at a garage sale for $10. And I was just wearing those CDs out, listening, you know, driving back and forth to this corporate job, listening to Carlton Sheets every day and just fell in love with the idea of real estate.

And so I had to find a way to exit. the corporate world and get into real estate. And so I was actually researching different franchises and I actually found a quasi franchise out of Seattle. They sort of did training. You sort of bought a territory. It was they were a little bit shady. I'm not going to lie. Some of them may or may not be in jail right now. I'm not sure. But it was it was actually really good. So for the first two years, essentially what I did is I wholesaled lease options, which is a real. sort of specific niche. It was a cool business model where we would partner investors with potential lease purchase tenants. And then we would sort of broker that deal and carve out an assignment

in the middle. And so this was in 2005. So 2005, as you remember, it was a fantastic market. I mean, everything was clipping along. Everybody was getting alone. And two years later, 2007, then the world started crumbling around me. And they actually went out of business, this quasi I was sort of struggling, what am I going to do next? You know, this business model doesn't really work. It was sort of predicated on appreciation, which, you know, everybody just assumed, hey, hustles will appreciate forever. And that went away. And so in 2007, 2008, I remember just thinking to myself, what am I going to do next? The market's crumbling around me. And that's when I changed my business model to the turnkey model. And so I did the turnkey model for a number of years.

And actually it was the downturn that grew our business more than anything because there was just a plethora of REOs and huds. And they were, especially here in Atlanta, they were just so ridiculously cheap. And finding houses, it was like shooting fish in a barrel. It was amazing. Can you explain what turnkey is for those who haven't heard that term? People ask me that whenever I do like a webinar, people always ask me, well, what do you think of turnkey? So I'm curious to also, what is turnkey? And then what do you think of it today?

What's the pros and cons? Yeah. So turnkey is essentially you're creating a product turnkey that you sell to an investor. So that's us taking a distressed house, typically like an REO or foreclosure, fixing it and putting a tenant in place. So you've created this cash flowing asset. And then we would sell that asset to investors. And typically we were selling to out of state investors. So I did a lot of traveling and speaking back and forth in California.

A lot of those Rias out there, a lot of those clubs and just sold a boatload of turnkeys in Atlanta. And of course, I'm kicking myself now that I didn't keep. more of them. They were just such sweetheart deals now in hindsight. I mean, I sold hundreds and hundreds of houses for $70,000 and $80,000, you know, that today are worth $150,000 and they're spending off great cash flow. And it was a good, but it was a great deal for your investors. Yeah. I know, yeah. Yeah. Good for them. We'll win, right. So what do you think of those today? I mean, like, a lot of people want to know, should I just go buy Turnkey today? Do you think that's still a model for investors to do? Yeah. In the right market, it is. You know, it's tough in Atlanta.

I mean, Atlanta is a hot market. I mean, we're at the top of the market, I'd say, right now. So finding the houses where those deals make sense are hard, which is why we don't really even do turnkey anymore. Now we're really just a fix and flip operation. But there are other especially Midwest, I think, markets where turnkey still makes sense. Some of the smaller markets, maybe mid markets that the Kansas cities and the Indianapolis and Memphis, you know, where you can still buy at a reasonable price and get strong cash flow.

I think it's a great viable model for any investor that's getting into the space. absolutely. Yeah, I always say like, you know, Turnkey can be great, just like any real estate can be great if the numbers work out, right? The problem I've usually had with Turnkey is that sometimes the numbers aren't up to par. And like some companies are much better than other companies that I've seen. But, you know, some of them are like, yeah, you don't need to worry about repairs. We already fixed the house. You don't need to worry about vacancy. It will never be empty. And I'm like, well, it will be eventually. Like, you should probably calculate something for that, right? Yes. But yeah, I mean, like, yeah, don't let anybody else do your homework. If you do your math

homework, then who cares if the deal is being sold by a bank, be sold by a turnkey company, being sold by, you know, some little old lady, a deal is a deal if it's a deal. That's right. Yeah. And to your point, it is all about the operator. Who's selling you the house? Are they reputable? Have they been around?

And then the other component is property management because they could sell you the house and then they're gone. Who's managing that property for the next five years for you? That's a critical component. And there are a lot of bad property managers out there. So many bad. So many bad property managers. All right.

So what came now? So you got into flipping houses. I mean, they fixed and flip. That was your focus for a number of years, right? Yeah. So 2008-ish is when we carved out this turnkey model. And it was funny.

It wasn't even called turnkey at the time. I mean, I think maybe I thought I invented turnkey because I felt like maybe I was operating in a little bit of a vacuum here. And I didn't know anybody else was doing the exact same thing I was doing. And we lived on that, man, through 2013. and 14 maybe is when our business really started to shift. And it was, it got more challenging. It got more challenging because the funds sort of descended on Atlanta, the big hedge funds.

Yeah. Then all of a sudden, they're gobbling up all the inventory and the prices are starting to shoot through the roof. And that's, again, where we had to adapt and say, all right, this is, this market's changing right underneath our feet. How do we, you know, sustain a viable business? And that's when the market was strong enough that we just, you know, started flipping houses. Let's just, you know, maybe half of them were turnkey, half were flips, and then

gradually they all became flips and almost no turnkey. Interesting. Yeah. So you moved away from that into regular flipping. So that you're buying distressed houses still, fixing them up and selling them just now to retail buyers. That's right. So why did you not do turn, like, why didn't you not do retail just from the beginning? Like why turnkey over retail? Why would you sell to investors and not just to, you know, the higher price point buyers. Well, partly because they just weren't around. There was just so little demand for inventory because, I mean, even think about 2011, 2012, I mean, at least here in Atlanta, there had not been any recovery yet.

And the market was still just stagnant. So the prospect of fixing up a house, putting a lot of money into it, and it's just sitting on the market for months on end was still very real prospect. And for us, if you had a good sales pipeline, man, I don't. much rather sell a turnkey house and know that I can make a quick 10 or 15 grand, then try to make 30 grand and it sit on the market for six months. Sure. If you had a good pipeline of investors, that was just the model for us was volume.

And so, you know, Turnkey, you could do volume. Retail, you just, I mean, I don't think the inventory existed then to do any sort of volume with just straight flipping. Yeah, that makes sense. So there's like this theme I see throughout your career. And I know like now you've gotten into new construction I hear as well, right? Right. Yeah. So yeah, there's this like theme of you adapt or you're changing strategies quite often. Now, a lot of newbies we talk to brand new investors and say, you know, focus on something. Yet your career shows that you've shifted from different things. Why is that? Man, I don't think you can stay relevant in this business. If you don't, you don't watch the signs and what's happening around you and learn to adapt your business. And that's really been the story of our lives for the last 13 years that I've been in this. I mean, I was in. I was in. it for two years and then the crash. And then I did turnkey for, you know, six, seven years. And then when

the market changed and the hedge funds came, I had to adapt again and start, you know, doing just the straight flips. And now it's interesting, even the area that I concentrate in around Atlanta has changed, where I used to really work in the suburbs. Well, now the opportunity in Atlanta is in town. It's a lot of those urban neighborhoods where you're seeing the transitions and people want to be back closer to town. They're tired of their commutes and some of those blighted neighborhoods. are turning around. And so zip codes that I swore off that I would never do deals. Most of my deals are in those zip codes now. That's funny. And again, it's just because you have to adapt. Where's the opportunity? What's the market giving you? And then you have to be able to, you know,

shift your business in that direction. Yeah, that's cool. So you know, Brandon and I talk about what you're referring to a lot about the need to be adaptable. And Brandon had just really, really good analogy. I do. Where he refers to the, well, you have one. I have one analogy. Great. All right. I go. I've rubbed off on you and improved your game. He talks about how the more you know about real estate investing, the more tools you have in your tool belt, and you can fix more problems when you have more abilities, more different like solutions and things.

So if all you have is a hammer, everything's a nail. You can't handle screws. You can't saw anything. You can't fix as much stuff. And the real estate market is cyclical by nature. And that's a good thing because it allows smart people to make money. If it wasn't,

if it was just this like steady linear progress, you'd have to wait forever before you can make any cash. You probably wouldn't even cash flow when you first bought a house. So you should embrace that as cyclical, but knowing that you have to be able to be adaptable because what worked in 2005 would not work now. And what works now isn't going to work around the next time we have a 2005, right? So I love what you're saying, Ken, that you're like, it almost sounds like you believe that your strength is that you can adapt to the market.

You talked about Atlanta was your home market and hedge funds like landed on it. And that's exactly what we see. We see, you know, we had the crash and then they started buying in California. And then those hedge funds moved into like Phoenix and Las Vegas. And they just hammered that. And then they went to Atlanta. And then from there, they moved on into like, like North Florida. And now there's a lot in like Huntsville, Alabama.

You see a lot of that stuff. Memphis was another big one. So you have to be able to adapt your strategy because the big boys are going to come in after they see a good thing and they're just going to wipe you out. Can you give us a little bit of advice for like how you got to this point that you recognized that adaptability was one of the best traits you could have and became the business person that you did? Yeah, I don't know if five years ago that I would have even maybe connected the dots that that's why we're still in business.

I think maybe 13 years under my belt and realizing that it's, I feel like it's almost every year. It's like, okay, what's going to work this year for us to stay relevant? It's really dynamic. I mean, this industry, it changes so fast. Yeah, it does. Strategies that we were employing to acquire a property last year, it's like everybody catches on. So the hedge funds catches on, but so does everybody else. everybody else in your market's like, hey, man, robodialing works.

We should all robodial. And then that doesn't work. These postcards, man, these were fantastic. Well, you know, a year later, that doesn't work because everybody's doing it. So it's just now realizing how important it is to adapt. I mean, I'm constantly, I mean, I sent an email off today to my general manager just about the end of the year. Here are bullet points of what we need to tackle between now and the end of the year because

I'm already seeing shifts in our market just in the last couple months. And so you have to constantly be front of mind that, okay, I got. I got to be watching for the signs that I can be nimble. For any, really, that's the thing about the hedge funds. They're not super nimble, you know, but once they get, they gain momentum in steam, then they just, you know, then they're a jug or not that'll just blow over you. But we're small enough that we can kind of shift and adapt more quickly than they do. I love that.

I think that's like super important to realize. Like, a lot of people think like, oh, the hedge funds or these, these big investors, you know, that are buying dozens of houses. How am I going to compete with them? Well, when you're small, like, you're much more nimble. And you can do things that they can't do. you can test more easily. So on that note, a lot of people, you have to shift off at times, right?

Especially your marketing. You want to be the top of your game. How do you discover, like, how do you personally like discover the next big thing? How are you learning new tactics? Like the robocall or the postcard or the, you know, and not just, I'm not talking just marketing, but just in general, your business. How do you stay on top? That's a great question.

You know, honestly, so I've been in a mastermind for a couple of years, real estate mastermind. And I would say for any real estate investor, doesn't have to be a mastermind. mastermind it, but it should be a group, whether it's a RIA or it's a small group inside of a RIA or it's just other people that are in the industry. So you can bounce ideas and share ideas off of each other. Being in a mastermind has been huge for me, especially guys in other markets where maybe their market is seeing something we haven't seen yet, but it's sort of indicating, hey, this is coming. A lot of times Phoenix sort of for shadows, what's going to happen

in Atlanta. So knowing people in those markets has been real helpful and other guys are experimenting. So, you know, some guy might have experimented with this and it worked and everybody's like, wow, okay, I'm going to try that in my market and see if that works. Yeah. So I don't want to take too much credit. Usually I'm just stealing other people's really good ideas. You too. Well, that's exactly what I was hoping you would say because I'm like that, like, by just hanging around with other real estate investors, like especially in other markets, like you learn what worked for them and you're not competing with them because you're in a totally different markets. So like they're usually not that shy to share what they're doing. Totally. Yeah, we're actually, so I don't think we've

even talked about this on the show yet at all yet, but we're coming out with a journal in like a few months here at the end of the year for real estate investors. And as part of that, one of the things we're building right now on the site is a kind of a form your own. And I don't want to say too much because we're still in process of development, but like a form your own mastermind group kind of thing where you can jump into the site with other bigger pockets members and form your own little group. And it'll just be included as part of like, you know, getting this journal, which I think is kind of cool. But I'm just teasing that right now. So you all know that's kind of coming. Very cool. Yeah. That's a great idea. Yeah. Thanks. I think it's pretty.

cool. Like, again, people like when you surround yourself with like-minded people and learn what they're doing in their markets. Yeah. So anyway, that's coming soon. So everyone, stay tuned for that at the end of the year. But, uh, all right. So that's cool. So the last question on this, on this front. And then I'll stop hogging the mic from David. How does somebody know, like, what strategy works in a given market? If adaptability is key, which I totally agree. And, you know, turnkey worked for a while. The lease option worked for a while. Flipping worked for a while. Now new construction is working really well for you right now. It sounds like. And we'll talk that in a minute. How do you know what market, what works in today's market? I guess, you know,

if you're, if you're a newbie, you know, you probably just going to a RIA and meeting other investors and seeing what they're doing, probably clue you into what's popular. I mean, if you've been around for a little bit, it's usually pretty obvious. I mean, if you're in a market where the rents just make a lot of sense based on how much you can buy a house for, then, you know, it's probably a good turnkey, turnkey market or even a buy and hold market. That's what you're looking for. You know, If you're in a really hot market, you know, where it's low days on market, houses are turning quickly. That's probably a strong flipping market, potentially. I think it's probably more obvious than most people think. I mean, if you're in the market, you probably see what's going on.

Yeah. Yeah. If somebody else is successful at it, you probably will be too. I mean, you could be too. That's right. Yeah. Yeah. Well, I always try to let my frustrations guide my decisions. And it's a weird thing to say. I've probably articulated that weird. But when you catch yourself saying, man, I can't find any rentals. These houses are just selling so fast and they're selling for so much and people are overpaying. Don't just sit there and keep banging your head against the wall saying, I need to find buy and hold. Start flipping houses in that market because that's obviously what the market's telling you that you should do and find a different market to do your buying holds, right? Or if you're a house flipper and you're like, man, my inventory is just sitting on the market forever and I can't move it.

And even when I fix it up, nobody's really paying that much for it. Well, that's an easy market to start buying rentals in because there's less competition and the houses sit on the market a lot longer. If you have that ability to have a screwdriver and a hammer, you can use the one that works best for the situation that you're in. I think what stops a lot of people from moving forward is they're comfortable with like knowing how to run numbers on a spreadsheet, but then actually doing the work that goes into managing a rehab or flipping a house or understanding, like design ideas is a little more tricky to them. So Ken, can you share a little bit about some of the skills you develop regarding estimating rehab costs, running construction crews, like what newbies are going to struggle with? and what they should be prepared to encounter when they start. Sure. Well, so that's been a big evolution in our business as well.

I mean, for a long time, it was turnkey. And turnkey rehabs, maybe $15,000 to $20,000 rehab. And we had a lot of just, you know, local small GC type guys. We could turn the whole project over to them and then come back in a month and it was ready to go. It was lipstick. And you could put a tenant in place where as our business evolved, so did our construction department to where now we have a full-blown construction department. I mean, with construction manager, multiple project managers, multiple handymen on payroll, it's just now it's a behemoth,

unfortunately. It's a lot to manage. But it's, but it's the function of the business we're doing now. Now our literally our average rehab right now is $90,000 right now. These are big stinking projects. And so, and really it doesn't make a lot of sense for us to just go out there and hire GCs because, you know, they've got an average of 30% markup in that. Well, that's my stinking margin. I mean, I need that. So we've had to basically build out our own teams to run and build these projects. So not only we are just an investment business, but now we're a full-blown construction

business. And to do that, we've had to develop systems and budgets and estimates and accountability and all that. And there's been some growing pains for sure over the last couple years. but I feel like every year we've improved and improved and improved to where we sort of have it down to a science with, you know, all those right tools in place to manage the construction business. Yeah, that's fascinating to me that you like, you know, you saw, hey, the general contractors are making way, you know, they're taking my profit, right? So I want to maximize their profit. I'm going to bring it in-house. Now, do you have all of your contractors generally in-house, just specialties out? Or is it just your top level, then you hire, you know, grunts from other places? How does that work in the construction part?

It's a little bit of mixed bag. It's a little bit of everything. And we still have some smaller GC crews that, you know, maybe we'll turn over a smaller project and say, hey, you do this part, but you know, we're going to handle this,

this and this. So some of, especially the larger ones, we just do better if we manage it in-house with our own guys. You know, we have, you know, a handful of subs that will,

you know, contract ourselves. And we actually have a lot of guys that we call daily guys that are just from unskilled to highly skilled, just daily guys that we can move from project to projects. And we just have control over that, which we need. That's a, it's another testament to your flexibility. Like that's, I keep seeing this theme coming up.

You're like, well, we have all these projects going on. I need a guy that I can pull out from here and plug into there. And he can kind of do both jobs. And it just seems like your business is growing so fast because you're so flexible. You know, Bruce Lee had to quote the heat that you should be like water because water takes on the form of whatever you pour it into. If you pour it into a glass, it takes on the form of a glass. If you pour it into a teacup, it takes on the form of a teacup.

And I really think that's a skill that people need to understand is like power is in flexibility and your ability to adapt. 100%. Yeah, that's cool. All right. So on the construction team, I want to go a little bit more on this. Do you think, like at what level would you, I guess, advise somebody they should consider bringing their construction in-house? Or do you just kind of feel it when you're there? Yeah.

It's, I mean, I think you probably feel it when you're there. I mean, obviously, most people are going to start by just finding a good GC that they know and like and trust. and maybe you get a couple under your belt. You know, the pricing is good. You're still making money with them. And honestly, as long as you're making money and you've got a solid GC that you're working with, then maybe you never need to change that. Maybe that's fantastic.

But as you grow and you see, here's what happens. A lot of these GCs, you start seeing price creep. You've used them and they realize they're not making enough. And this next project came in 5,000 higher than the last one. And this one's 10,000 higher than last. All of a sudden you start to feel that squeeze a little bit. And at that point, then, you know, maybe you bring on. I think for us, the first person was just like a project manager who just oversaw the GCs and held them accountable and went to the projects and just kind of oversaw that.

And eventually that project managers became, he developed our business more into where he became the construction manager and hired project managers underneath them and brought in subs and brought in daily guys. But that first hire for us was just him just being a project manager, just overseeing the other GCs. and then it just evolves from there. That's cool. That's exactly what I find happening in my business as I've moved from being a police officer into a real estate agent. You have this vision for how you want to grow. And then I find that like it never goes the way I thought it would.

It goes in the direction of the people that I find. Like I get a talented person who can really help me in this area. And I'm just like, okay, divert resources in that direction because we have a good operator that can help there, right? I mean, and it's like that for everything. From what market I'm going to invest into what strategy I'm going to take to where I'm going to put my time, finding good people. people is so important.

And when you find them, that becomes a platform you can build on. And maybe your building doesn't take the direction you thought it would take. But it's like so good. And then when you find the next piece, like now it's going to move that direction. And I love that you're saying that, like maybe you don't need to start a construction company. If you have an awesome GC and he's or is or she is content with making a certain amount of money and they do right by you and they just want to put their kids through college and they're

not greedy, like you don't ever have to worry about that. You move in a different direction for your growth. But if your frustration is, man, this price creep, I love that term. It just keeps coming up, you know, like I keep cutting it down and it keeps coming back again. Maybe you need to look at a different alternative and grow in that direction. Yeah, I like what you said too about sometimes you don't plan for it, but you hire talent. And then that talent sort of steers you in a certain direction. That happened with us too.

I mean, our first project manager, he was sort of unproven. And we put him in that role. And it was really, he was the driving force behind, hey, Ken, I can get this for cheaper. Let me do this. And he's the one that ended up building out our construction department for us. how do you find talent like in your business? How do you find and recognize talent? That's a million dollar question right there.

I mean, I wish I could say that we were so meticulous when we hired people and we did all this personality testing and we just don't. We should. I know I've got friends that do and have more of a science behind it. I mean, for us, obviously, I always ask for referrals first. If there's a position and in fact, speaking of which, so our, my construction manager, who's been with me four years. He's actually on the show with me as he's leaving to take another position, actually in the ministry.

So I can't blame him for that. But now we have to go find somebody to fill some really big shoes. And so the first place that I go is referrals. So every agent, you know, I know, every person I know. It's like, you know the role that we need to fill. And we got so many good leads just from that. and I'd much rather hire somebody that somebody else knows that's referred to me. But we also put, you know, we'll go on Indeed and put a job description out there

and look through a ton of resumes and interview 20 people, bring five people back for second interviews and figure out who the best guy is and just cross your fingers that you got the right one. What are you looking for? What stands out to you where you're like, oh, that's talent right there. I should dig deeper. That's, honestly, resumes, you know, it's really sort of a gut. feeling it depends on the position. I mean, sometimes you just take a chance on somebody and sometimes, you know, like a position like this, like a construction manager, I need to see a lot of experience.

I need somebody that's been in this for a long time. And luckily, we got a lot of really good resumes with people that really know the industry. But sometimes, you know, just for example, so I've got an acquisition specialist on my team right now. He started off as a door knocker for us just in neighborhoods, knocking on doors. And he wanted a chance. And I, you know, I was like, well, yeah, we'll see. We brought him in and the dude is crushing it for us right now. And it's just sometimes it's that it's, you know, that intangible, he's just driven.

It's just somebody that's got that motivation, that fire in their gut to be good at something. And I don't know, sometimes it's just instinct to pick up on that in somebody. Well, I think a person like that that has such a drive is going to be like a sponge and pick up everything that you're doing, right?

Like he's probably learned things being around you that he never would have learned on his own where there's another person that can be around you, just as often and it just bounces off of them. Like everything you're doing, it doesn't really absorb because they don't want it that bad. And that's where, like, that guy's attitude is exactly what made him successful. He's like, I don't care. I'll go knock on doors, whatever it takes. I just want to be good at this.

And then he gets to train at like, you know, the feet of a Jedi. And it becomes a Jedi himself. And now you're like, he's crushing it for us. And that's where opportunity comes from. Every listener who's hearing this, like you got to understand if you're not getting the results you want in life or the opportunity that you're looking for, people can sense that you don't have a great attitude, right? Like, if your talent and you're coming with a talented perspective, they're going to want you around. They're going to be like, hey, do you want to come hang out with me

and see this thing I'm doing? When your mentality is like, give me, give me, what's in it for me? Or I don't want to do that. Or how do I get successful without having to be adaptable or flexible or change anything? It just turns people off. And they're just not going to be very drawn to you. And you get the right attitude. You get around a rock star and it's just you're going to explode. Yeah. And I'll say the other quality, too, is just initiative. Man, when you hire somebody and you see that they have initiative, It's, I mean, to a business owner, I mean, there's nothing else like it because that's what you want to see. Somebody out there that's driving your business in new directions and somebody that wants to take on more responsibility. To me, that's a phenomenal quality in somebody.

Yep. Yeah, I agree. Hey, Ken, do you do, do you do rentals as well now or do, are you strictly flipping? No, we have rentals. I don't have some massive portfolio of rentals like you do, Brandon, but I do have a, I do have a handful of rentals. I don't know, maybe I couldn't even tell you how many I've got, I don't know, maybe 10 or 15. Okay. Some in different markets.

And right now, interestingly, we're we're picking up Airbnbs right now over just straight rentals. And we've got a handful of those. And I got three or four more in the works right now. And that's kind of a cool niche that we've carved out and had some success. And that goes back to that having that backup strategy of, you know, the only reason we got into Airbnb is because I got stuck with a house that wouldn't sell. And it was a high-end house.

And I was bleeding money on this thing. And I was like, we got to stop the bleeding folks. I said, let's try Airbnb. It's already staged. There's already furniture in there. And next thing you know, the thing's renting like crazy. And it was covering itself. And I was like, holy cow, this works.

That's cool. And once we figured that out, we started doing it, you know, a couple more times, a couple more times. Next thing you know, we've got a little Airbnb business going. And the rents have been stronger than just on a, you know, normal 12-month lease. Yeah, that's neat. So the exit strategy thing is important, right? Like in any deal.

So when you go into something, like how much do you think about that? Like, what's my backup if this doesn't work out? Did you always have that or do you just kind of stumble into it? it's uh i don't think i always had it you know luckily the turnkey business early on was such a good way to cut my teeth on this business because when a house didn't sell it almost didn't matter because it was rented and it would cover itself yeah and i could always keep it if i needed to there was always a buyer if it was rented eventually and so i think having that you know as a foundation for me i always fall back on all right if this house doesn't sell i'm renting it and selling it to an investor or

are now Airbnb's a great backup or I did a lot of lease purchases early on. That's another great backup strategy. So it goes back to David, to your analogy of the toolbox. I think we've just been able to develop a lot of cool tools that over time, if something's not working, there's always something to fall back on for us. Yeah, the Airbnb strategy is a perfect example of that because right now that is a hot way to get really good returns. It's working super good. But you see like a lot of cities are unhappy about that. There's a lot of political pressure against the Airbnb model. And if you go all in and say, that's what I'm going to do, I'm going to learn Airbnb, and it's all that I'm going to do, you might find yourself 18 months from now having Airbnb

illegal where you live. And now you're screwed because you thought your rents would be $3,000 and your rent drops down to $1,700 a month or something and you're not making your nut. It's, you have to be adaptable. You have to know, well, if I buy this house and I do this, is there enough equity in it that I could then sell it and make a profit that way to 17, 18 months from now, whatever the case is. I believe would you say, Ken, that like your main business right now is flipping houses. Is that kind of your bread and butter? It is. It's our bread and butter. I guess I'll quickly digress. So we've got three main businesses and we've got three local offices. One is the flipping business. One is the new construction business. And then one is just a just a retail

brokerage. And so all three of those sort of exist in separate locations with separate people that's sort of at the helm. But they all sort of work together too. They all sort of feed each other, which is nice. It's sort of a big happy family. But honestly, our retail brokerage is growing faster than any other arm in our business right now. I'm sure the show is fueling that, but also just a pretty cool model that we've put together of, and we brought on literally 100 agents in the last year. And our growth trajectory is pretty fun on that. That's cool. So the agency thing is something that, you know, David here has gone into and I have not. Do you recommend investors get their license? Should they have that when they get into real estate or should they, is it just a, I guess,

distraction? You know, that's a, that's a great question. That's, it's funny. That's an age old, I feel like debate. Yep. And it depends on the person. If you have any inclination to do any sort of traditional agency, you know, represent friends, you know, or occasionally get a listing here or there, which is decent income and on the side, then I don't think there's anything wrong with it. I think the only tricky thing is, is then you fall under RESPA. And so as an investor, there's some things you can and can't do when you're an agent. and you have to disclose that you're an agent, everybody you talk to.

So if you really just want to be an investor, you have no interest in being in a traditional brokerage, then I don't think you need to. I didn't. I actually purposely never became licensed when I got into the business because of that. I actually made my wife get licensed. I'm not going to be licensed, but you're going to be licensed. Yeah. Yeah.

I don't think there's a right or wrong answer to that, though. Yeah, I agree. So RESPA, you're referring to the Real Estate Settlement Procedures Act, which was like a bill that was passed that outlined, what agents can and can't do and what the ethics will be that govern them. And you can get into some hot water because if you're trying to buy a house from someone

and you're a real estate agent and they're listening to your and taking your advice as if you're a licensed agent, you say, I'll buy it for $200,000. And they go, oh, I guess it's only worth $200,000. And you don't tell them, you might be able to sell this for $300,000. Maybe it's an older person and their kids can come back and sue you

and say you ripped off my mom or my dad or whatever buying this house. And so if you're not looking to actually learn how to be a real estate agent and do it as a job. In most cases, it probably hurts you know, like, and because when you're buying properties, you're not paying your agent anyways, which is really, you know, where you're going to make the most money. But I'm just, I'd love to talk with you more about how you're growing it so fast and how that's going because you've got this really good synergy between the different businesses that you're opening. And Brandon and I were just hanging out

in Hawaii for like 12 days. And we talk a lot about how the best businesses to open is one that will be benefited by a business you already own, you know, and then you build that one up and then you look for, well, how are these two going to interact and kind of help each other? But on that note, I know you're in new construction, which is something so many people have taken on and failed. It's like this Bermuda triangle of all these pilots that want to fly and fly through there. And then you never see them again. You know, we hear these horror stories of it. Tell us how that's been going and like what you found is working for you and why you think you've been successful when so many others are not. So in 2007,

when everything was crashing around, I decided, you know what, this is a great time to go back and get some education. And so I went to, I enrolled in a master's program at Georgia Tech. And in 2009, I came out with a degree in building construction and was able to go get licensed.

And I only did it really for the education and for the licensing. And so that I knew at some point when the market came back, that all these other builders had just been demolished. And when it came back, there was going to be an opportunity for new construction.

And it was really just sort of, planning ahead that at some point I'm going to get into this. And sure enough, the market, of course, and its cycle came back. And there were so few small builders in Georgia because they had been wiped out. And it was really just your big production guys that were left. And so there was a real opportunity for us to carve out a niche here in Atlanta. And really it was our small little town, our little suburb of Woodstock, Georgia, which is north of town.

That's really where we do the majority of our new construction. And it's really where we've built our brand. So our new construction brand is red barn construction. Our agency is red barn real estate. And so we've built a nice little brand in the small community that people recognize us now. And then I hired a really good G.C. Somebody that had worked for one of the nationals, a buddy of mine from church that I knew, just a real solid guy and brought him in.

And like I said, the reason we've had success is because we've carved out a niche. I'm never going to compete with the big nationals or the big regional players who can build it just stupid, you know, cost per square foot. Yeah. But I could build something that they're not building. And so for us, that was large lots. You know, most big builders, they want as small a lot as possible. They want to squeeze as many houses in there that they can.

So for us, we, let's carve out some big one acre lots. And then let's build in a style that nobody else is really building. And for us, that was farmhouse style, which is real popular right now. I mean, that's sort of the rage with really nice custom finishes, you know, again, that you're not going to see in a production built house. And there's a market for that. I mean, we don't have to do a ton of houses. I think maybe we'll do 20 this year.

But there are, you know, $600,000 houses. And there's, you know, 20 people that'll pay $600,000 for one of these houses this year. And it's a good little boutique new construction business. Can you walk into the numbers of a new construction deal? Like typically, what are you kind of paying for a lot? What does it typically cost to build? What do you typically sell it for? And so what's your profit kind of look like?

What we've, we've got a major development going on right now of 20 homes. And so the lot costs on that's a lot higher because you've got stormwater and paving and all that stuff. But honestly, our bread and butter has been taking little five and 10 acre tracks and doing what's called a minor subdivision where literally it's just a gravel road. And I don't have to spend all the money on infrastructure as long as it's five lots or less. And that really has been our sweet spot of these little minor subdivisions. And so in our area, I can buy an acre for about 50,000 an acre. And then if I do a minor subdivision, it's maybe another 25,000 in development cost on that. So I can be in a one acre lot nice, like in a, you know, it's a good part of town for 75,000 bucks.

And then I can sell that for five to 600,000 and probably make about 75,000, maybe to even 100,000. Okay, that's cool. Which is good. You don't have to do a whole lot of those. Those are pretty good margins. Yeah. And like I said, I have no aspirations of really growing any bigger than this. I like being boutique, kind of small.

And I don't want to be the guy in two years that gets stuck with a neighborhood because the market turned on us. That's exactly what I'm always afraid of with new construction. It's like if I own 10 of them or 20 of them in a one little subdivision, like and then the market tanks, I got 20 houses. I mean, that's a scary proposition to be in. Well, we don't do a ton of specs either. I mean, most of the time we're doing customs for people. Okay, that's cool. We have our houses or pre-sales, I should say.

We call them pre-sales. Okay. So you basically like that idea you buy the lot, you subdivide it. Now you put up a big sign saying for sale, we'll build a suit or whatever. And then they, that's awesome. That's cool. That's a good way to reduce some of the risk and they'll have the fun of building. On the last episode, Brian and I recorded, we were talking to a multifamily investor and we were, you know, talking about how buying single family homes, it's very like there's more flexibility.

You can't really scale as much, but you can adapt much quicker. It's like riding a jet ski. And if you see a wave come in, you can zip off to the side. Whereas when you're in this big multifamily space, it can take two years before you build any money. And it's like trying to control an aircraft carrier. It takes forever to get that thing turned around. It's powerful. But you're exposed when the market shifts.

Like, oh, there's a storm coming. How do we turn out of the way? It's very difficult. And I love the contrast we're getting from your method, which is like, I don't want to be bigger. Because if I'm bigger, I'm exposed. I can't move when I see something coming down the pipe that is. harmful or it's going to change. I like to be small. I get in there. I make the money when I can. I see it's bad. I get out and I zip back into a different area. And I can see like with an attitude like

that, you're just going to learn so much about so many different things and you're going to, you're able to do this forever. You'll, you know, 80, 90 years old and you'll be able to be investing in real estate still, regardless of what the market's like or how real estate works at that time. That's the goal. It's funny. You watch and you learn. I think maybe maybe all of us were fortunate to see what happened in 2008 and see how many people just lost their shirts. And I was fortunate that I wasn't one of them. But now that's still a lesson learned for all of us is I saw what happened to those folks. And I don't want to be that guy. I want to be prepared when the market does turn. Yeah, that's really good. So much better mentality than I'm just not going to

invest in real estate, right? I'm just going to use that as my excuse to not get started. Well, people lost money at one point. So I'm not going to do it. That's true. Yeah. Yeah, people make that excuse all the time. So Ken, tell us about the TV show a little bit. Like, how did that come up? How did flip or flop Atlanta like become a thing? Well, They were looking for the most handsome man in Georgia. Yeah, that's what I thought. It was 2015, and I just got a random call from a casting director. I think she was, she worked for a production company, and so she was probably Googling, you know, different websites for investors and whatnot.

It happened to find our website, called me up out of the blue, and asked if I wanted to do just a Skype call with them. And it's funny, it wasn't the first time I had ever been asked to have that conversation. with the production company. But for whatever reason, the timing was right. It's like, you know what? Why not? Let's just see what happens. And so Anita and I together jumped on a conference call with his casting director,

did a Skype. And neither of us took it seriously. Like Anita had literally just come home from the gym. It was all sweaty. She's drinking her tea, just answering their questions. And I think they like that authenticity that we just didn't care that much and that, you know, our future didn't hinge on whether or not we got a reality show. And so that turned into, it got green lighted for a sizzle reel.

If you're familiar with a sizzle reel, you've filmed a self as a sizzle. So you know what that is. Or basically they come out and film for a couple days and they turn it into like a four-minute video that just sort of highlights who you are and what your business is. And so then that sizzle reel got highlighted and green lighted at a HGTV for a pilot. And so they came back out and we shot a pilot over the course of a couple months, which was just one house all the way through the process. And then that pilot aired, I want to say in 16 in the summer of

16 and I guess we got enough of the right ratings that they green lit the series. And then they ended up folding us in or early on we were called flipping the south. Oh yeah. I remember that. I watched the pilot when it was flipping the south. Did you really? You put it on Facebook and I was like, God, I got to check that out. Ken's on TV.

That's awesome. Yeah. And then they folded us into the flip or flop franchise, which was obviously fantastic for us because there's always some name recognition there. And then it still wasn't until 2017 that the season. I mean, it was a long, it was from March of 15, from first contact until the season aired, which was almost two and a half years later. And the season did well enough that we got renewed for season two. So we filmed that last year.

And so the season two is about to premiere October 11. That's awesome. So here's the question everyone always asked about TV, right? Is it real? Like, is, are you just making everything up? Or how does that, how does that work? That's, you know, that's a good question. It is funny how many people just assume that it's just all fantasy.

It's not real. And it, I mean, I guess I'm here to state. It is, it's real. I mean, it's, these are our houses that we would have done whether or not the show was here. I mean, the renovations we would have done. They're the problems that we run into. And it really is just docu-style. I mean, the guys show up with the cameras. And if there's mold in the basement, there's mold in the basement. You know, if we need to replace the roof, we need to replace the roof. And so, you know, at least our show, I feel it's very genuine, very authentic to our real business. That's cool. Yeah, I mean, like, that's one thing you find about flipping houses is that, is that, like the drama is really. There's been so many times where my wife and I are having a conversation and we're like, this is totally like what you see on TV. Like it's not always exactly like that.

And like I find my own life a little more boring because it's not in 30 minutes versus it's, you know, three months to flip a house. But like, but the drama, like the arguments that my wife and I will have like the little like, you know, debates in the middle of a project are just like you'd see on TV.

Yeah, it's realistic. I think from what I've seen just shrunk down into a very condensed, you know, 30 minute hour long. my producer is actually good a lot of times he'll already know that there's an issue in the house and won't tell us and he'll like don't walk in the house just wait don't walk in because he wants to capture our real reactions and we like it i mean i think it's i'd much rather you know not have to fake it i'm not i'm not a good actor i would be incredibly robotic if i had to but if he'll what do i do with my hands i don't know all the time yeah what i do that would be a very bad show

if I had to act. I heard, I heard, remember the Chronicles of La Narnia, the Lion Witch and the Wardrobe movie that came out, like, I don't know, 10 years ago or whatever. The scene where like Lucy walks through the,

the wardrobe and into like the winter wonderland. Like I heard that they filmed that whole thing with her not showing her at a time. And they actually had her pop out of a box or whatever. And to her reaction was the actual reaction of like, I'm in a winter like magic wonderland thing. So yeah. Wow. Yeah.

That's smart. Yeah, because how many little kids can act that well. Yeah, I know. Yeah. But they do it away. Anyway, super cool. All right. So the new season premieres on October.

What was the date? October 11th. October 11th. So set your DVRs or make sure you watch it. That's super cool. Thursday nights at nine. Thursday nights at nine. Do it.

Do it. All right. Very, very cool. So, all right, well, we want to get moving on to the next segment of the show, which we call our deal deep dive. 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

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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. This is the part of the show where we dive deep into one specific deal that you've done. And so we ask our guests to come up with a deal and we're just going to ask a bunch of pointed questions about it.

So first question, they're very specific and you can go as deep or as shallow as you want to go on this. What is the deal you want to talk about, first of all? I chose a deal that we were still kind of in process in. I mean, half of the deal is done. Half of it's not. And it's one that's kind of close to our house on the north side of town. But there's certain cool aspects to it that I think are worth discussing. Okay.

And this is a house flip, I'm assuming? It's a house flip and a new construction deal together. So it was a house. I don't know how much deal. You want me to go here? Sure, you can go. Yeah, go ahead. We'll ask like finding it, funding it, negotiated it in a minute. But you can explain the deal a little bit. So this particular deal is it was an old house built in 1980 on 2.6 acres, which is what really attracted me to it. It was in a really good part of town. It's sort of like an equestrian area. So people like the, you know, the acreage and the house was just really bad, had zero character whatsoever. But the fact that it was on. on 2.6 acres is really what attracted me to it. Okay. Cool. Next one. How did you,

so how did you find the deal? Was that MLS or something more fancy? I wish it was MLS. Man, I wish we could find deals on the MLS. That would be fantastic. Make life easy, wouldn't it?

I would. So this one came from, I guess you could call him a wholesaler. It was actually a buddy of mine. Actually, it was somebody who had bought one of our new construction houses a couple years ago. We'd stayed in contact. He had gotten into real estate a little bit.

He had a full-time job. He's listening to bigger pockets every day, you know, listen to the podcast, reading that, you know, he's very involved. And he found a deal through his postcard campaign. And it was one of those things. The lesson here is it was a postcard he had sent out a year ago. It sat on this guy's counter for a year. And he was finally ready to sell.

I think somebody maybe had passed away. And he got the phone call. And he's working a full-time job, didn't really have the capacity to flip it and just said, hey, Ken, I got this deal, you know, can I wholesale it? to you, you know, what should I do? And I, you know, I took a look at it and I love the deal. I was like, this deal is awesome. How about you just give me your deal and I'll cut you in on the back end. We'll just, I'll give you a percentage of my profit. And for him, not necessarily having the resources to fund it and do it took some level of expertise for him. He's like,

that's fantastic. I'll take. And it was 15% of our profit. Oh, cool. Of whatever we truly made on the deal. Just, just, just for basically assigning the deal over to me. And so we ended up buying this deal for 200,000 bucks, which in this part of townhouse, you know, the land is literally almost worth 200,000 bucks. So we knew it was a good deal. And so, yeah, that's basically how I got it was through this guy. Yeah, you can ask before you jump onto the rest of this deal. How are you finding deals today mostly? Is it mostly wholesalers? It's everything. So we have, we do have a pretty good size acquisition department, acquisition manager to acquisition specialists. We send out a ton of postcards, send out a bunch a mail. We do direct dialing. We still do a little bit door knocking. And then we do wholesale.

I have one, one of my guys is only assigned to every wholesaler in town. So we vet all the wholesale deals to decide which ones are worth picking up. And occasionally we get lucky and get an MLS still here and there, but probably like everybody else, it's a shotgun approach. Just throw it up there. There you go. So with this deal in particular, once you found it and you knew it was good, how did you negotiate the price to $200,000? He already had it locked up for $200,000. So he went in there and like I said, I think somebody passed away. So it was, I think there was a sense of urgency to get the house sold. So he got it at a good price. He brought it to me. I didn't really have to negotiate. The only negotiating I did really with him was, you know, don't wholesale it to me. Just

give it to me. And then let's split, split the back end profits together, which I think is great. Yeah, I love that. He may have asked for more money up front than the you might have to give, right? And if you do a really good job with it, he realizes I made more with 15% of what Ken did that I would I made it with 100% of what I would have done. I'm giving Ken all my deals, right? You didn't just get a deal. You just got like a deal source from that point forward. That's what I love is if you're better and more efficient at doing this,

it's better for him to be giving stuff to you. And you had the vision to see that. So I love that. I bet you he'll probably follow along more closely with the deal as well to see what you're doing, how you're doing it and probably learn a ton from this process. Yes, absolutely. He was involved, which is great because he's learning. And so we flipped it last year, maybe sold at beginning of this year.

that had the house, we ended up fixing it and selling it. He was involved in the process. And I will say since that time, he has quit his job and he is a full-time investor now. And he himself is crushing it. I mean, I love to see somebody quit their job, get in the business. And his deal flow is fantastic. Super. And I think this was a big part of that. Very cool. All right. How did you fund it the original purchase of this deal? Yep. So we fund most of our deals just through private lenders. We have a pretty good stable of private lenders that we've developed over the years. And it's real, our model is super simple. It's just 12% interest only, no points.

Balloon, no. You get paid when we get paid. That's awesome. And we went to one of our private lenders. Very simple. So basically what you're saying there is like they lend you the money. And let's say they, you have the loan for exactly 12 months,

then they would make 12% interest on that and they get paid all of it at the end. So you're not making monthly payments to them. 100% correct. Perfect. Yeah, I love that model. I don't know why like when I got started with real estate, like I never even thought that was. was an option, the balloon payment or the delayed, like paying the money. So every, pretty much

every flip I've ever done. I've just paid monthly interest until like two years ago. The lender actually was like, I don't want to deal with checks in the mail. Just send me it all at the end. And I was like, I can do that. Like, what? That's allowed? That's allowed? Like, wow. And it actually made sense. I mean, if he trusts me enough with the money anyways, what does he care if he's getting a check in the mail every single month, I have to go deposit it? Or if he just gets it all at the end. I mean, he trusts me regardless. And it made my life way easier. So yeah, that's how I typically work now too. So all right, cool. All right. Next part of that. What did you do with it? So what we did, we took this 1980 style house, which honestly, it says

1980 in the tax record, but it looked like 1960 on the inside. I'm not 100% sure it's right. I mean, it was shag carpeting. I mean, it's, you walk in and there's just all these little compartments of rooms and kitchens that are all really small. So we went into this ranch style house and just blew it open. I mean, just opened it wide open. There were no more dining room, kitchen room was all one big space. We vaulted the ceiling to make it feel even bigger. There's a basement that we ended finishing out and getting all this extra square footage in the basement. Put a gable in the front. It had just a real flat, plain roof line. And so we made a nice big front porch with, you know, big cedar gable, crow's feet. I mean, just really added some

curb appeal to it. And we subdivided that house onto one acre and left a lot for our on 1.6 acres. And so we ended up putting in, I want to say, about 125,000 into rehab. Big rehab on this house. I mean, it was before and afters were phenomenal on this thing. But we sold that house. So we ended up selling just that house on one acre for $440,000. Wow.

Which it was a net of about $125,000. It's $125,000. because on the 1.6 acres, we left a cost basis on that of 50,000, if that makes sense. So when we bought the whole thing for 200,000, the cost basis on the house was 150. The cost basis on the lot was 50,000.

That's just sort of in our minds. That's how we segregated them out. Okay, yep. So on the flip, like I said, we cleared about 125,000 on it, but now we've got this lot, you know, that's 1.6 acres. And honestly, in that area,

that lot's worth 150,000. So right out of the gates, we've got a lot that's got all this equity in it. And so that's the other half of this deal right now is that we're in the process of building a farmhouse on this lot. And at the end of the day, we'll make probably $200,000 bucks on that, just on that new construction. And of course, my buddy that brought me the deal, he's going to get paid on that as well. He'll get another $30,000 check when we sell that. That's fantastic. It's awesome.

Yeah, I love that whole picture of what happened. there with bringing the guy in. Do you have any advice for people? I know this isn't really part of the deep dive, but like who are in his shoes? You know, somebody who wants to get more involved with an experience investor, maybe work like that? Like what it, like just because he brought the deal to you, is that why you wanted to work with him?

Was there something else that stood out and made you want to work with him on this? Yeah, he was, he was just hustling, man. I love a hustler that's out there who's, you know, knocking on doors and calling leads and source and deals. And as you start to get a little bit of traction, if you're networking, And he was very good at networking. He networked with me. He really chased me down. And, you know, that you see, again, that drive, that initiative. And I saw the fact he's chasing me down. And he found this great deal. And I looked at a couple other deals that he had. He just stayed in front of me. I mean, he was just tenacious. And that's such a good quality. Just get after it. And if there's somebody you want to do business with, just stay in front of them. Just be a little squeaky wheel until they look at your deals. And then there's room. I mean, if you've got a deal, I don't care who they are. They're going to be interested in working with you. If there's money to be made.

Well, that's the key is you want to stay in front of them if you're getting deals, right? If you're just annoying the crap out of them, that's a good way to get yourself blocked and lose any opportunity that you would have had. So on this deal in particular, can you tell us about the lessons that you learned? You know, interestingly, we had set the ARV, I think, at like 350 on this thing. And the house, we put more into it than we plan, which happens sometimes. You get into a rehab and you're like, you know, we really got a German smear this brick, which we did. on the foundation or we really got to rebuild this deck. And so we ended up probably, we probably overspent by 50,000 bucks on this house. But at the end of the project,

it was such a good house that, you know, it's funny. Anita and I, I remember clearly standing in the kitchen with her and looking at the comps and I was like, you know, we were going to list this thing for 350 and we're sitting there staring at these comps and we're like, you know what, let's just stink and go for it. Let's just put it on the market at 440 because it was hard to comp because a lot of the houses around there were bigger houses, bigger estate lots selling for seven, 800,000 bucks. So this was hard to comp. It was sort of below that market. So we didn't know what the market would bear. And sometimes when that's the case, you just freaking go for it. Yeah. And so we listed at 440 just to see what would happen and got offers immediately. And we're just

one of those pleasant surprises that was the right opportunity to just kind of swing for the fences. I wouldn't, I don't advise always swinging for the fences, but there are those opportunities. Just swing for the fences. What's the worst that's going to happen? No activity. Pull it off. the market, wait a week and put it back on a more realistic price. Yep. So have a flexible attitude towards your price and you can be successful, right? You can take that big swing. And if you miss, you're like, okay, well, now I got two strikes.

I'm going to, I'm going to choke up on the bat. I'm just to make sure I put the ball and play. That's exactly right. If you have that mentality, because sometimes houses are hard to comp and people don't realize that that if you're talking about like track homes in Las Vegas and they're all the same thing, it's very easy to know what it's going to sell for. But you're talking about basically building an almost a house from the round up on a really on a lot that you had to buy independent of everything else and the comps were

twice as much money. It's very hard to know what buyers are going to want to pay. So sometimes you have to just plan for the worst and hope for the best and it's awesome to hear that worked out. I want to ask you, I know that you've mentioned a lot about all the different things you're doing, like the brick you're going to put in or what foundation work you're going to do. How much do you think investors should learn about construction themselves and how much should they just be relying on the person who's going to be doing the construction and just getting the number for it. That's a great question. I mean, you should, if you're an investor that's doing any amount of flips, you should absolutely

have construction knowledge so you're not getting taken to the cleaners. I think that starts with getting multiple bids on houses. I mean, obviously, if you find a construction, you know, GC that you like, I mean, there's nothing wrong with sticking with them. But early on, you should absolutely be getting multiple bids from multiple GCs to see who's in line and start to learn the pricing. The other thing was that with any bid, you need to have so much detail on that bid. I want to see line item by line item, what I'm spending for each of this, and then compare

those across multiple bids and start to learn what's the market rate for each of these things that I'm paying for to put tile in the bathroom or these appliances or this countertop or these cabinets. You need to know what the market rate is. If you're doing this in any sort of volume, you have to be able to hold your GCs accountable to the appropriate pricing. Yeah. Really good, really good.

All right, well, we got to shift out of this section and get into the next segment of the show, which we lovingly call our Fire Round. It's time for the Fire Round. All right, let's get to the Fire Round. These are the questions that come direct out of the Bigger Pocket's forums, and we're going to fire them at you, Ken. Are you ready for this? I'm ready.

All right, number one. Maybe. I'm looking to get into multifamily, but they're hard and defined in my area. So what do you think about building, like a duplex or a tributtal? Is that something that could be profitable? Absolutely, it could be profitable. It depends on the market. I mean, are you in a market that bears that?

What are the rents in the area? I sure heck would look for an existing duplex before I'd start building them. But if you can find a builder that'll build at the right price and the rents are strong, absolutely it could be a viable strategy. All right. Next question. We are looking at developing a city block into several multifamily units, which will be in line with the city code. We're looking at a way to finance this project.

What have you found as the best financing for new construction of investment properties? So we do our new construction through a regional bank. So local and regional banks absolutely develop a relationship. You know, get yourself a local business banker. They're the ones that I, you know, any sort of new construction, whether it's commercial or residential, to me that's your best source. And then on the equity piece, you know, a lot of times we'll put together partners on the equity piece or even private lenders on the equity piece because there's going to be some

sort of down payment component. So, you know, a combination of, of actual institutional lenders, local institutional lenders and some private money to me is the winning ticket. All right. Cool. Next one. I'm trying to figure out how to estimate what a new home is going to be worth. The neighborhood I'm looking at is mostly older houses in the 70s. So the new house I want to build, I'm not sure how to estimate the value of that new construction. Any tips? That's tricky because we run into that. We do some infill, new construction as well. And so I always, look at the, you want at least see a renovated comp. I'll look at the best renovated comp in the area

and try to get like a price per square foot and assume, I mean, I think that's a conservative estimate is if new construction, you'll sell at least at their cost per square foot for a really nice renovated comp, hopefully more. All right. That's easy. I love that. Like pretty simple, you know, look at for the first renovated comp because it's going to be as close to a new home as you can get and adjust from there. Great advice. Okay. Okay, next question, and this is something that comes up all the time. I'm very interested to hear how you answer it. I am partnering with an experienced flipper in my area.

I am a realtor and we will be 50-50 partners. My question is, what is the best way to legally structure to protect us both and also best structure tax-wise? We have our own LLCs, but should we start a new LLC for this project? I would. I would. Yeah, I mean, in my opinion, in a good operating agreement, should outline exactly who's getting paid, what, what the responsibilities. At the very least, if you don't go that far, have a really good memorandum of understanding that documents who's doing what, who's responsible for what, who's

putting what money in, and so that there's no disagreement or misunderstanding afterwards. But I don't know to me, if it was me, I'd do an LLC, even if it's on a single project and just have a good attorney draft up a really solid operating agreement that outlines the terms. All right. Good deal. Hey, when you mentioned memorandum of understanding, I actually did did one of those recently, but how would you explain what that is? Honestly, it's not, it's not even necessarily an official document. It's more of, I'm putting on paper how I perceive this deal. And you do the same. And then there's always some back and forth. Okay, well, I wasn't thinking that. Okay, well, now I understand what you're thinking. And then when you put your signature on the

bottom of it, again, to me, it's just formalizing what you're agreeing with somebody else. Yeah. I love that. Yeah, because I'd not heard of that before. And then an attorney said, we had a deal. we were partnering on and with a buddy of mine. And we decided that he decided that that would be the best way to go. And it basically just puts everything we've been talking about in the world on a piece of paper that we can go refer back to later and be like, look, this is what we agreed on. It's not quite as fancy and legally as a operating agreement, but it's there. It does its purpose. That's right.

Cool. Well, everybody worries about the LLC question, right? Like, oh, do I need an LLC or not? And they get stuck there. But really, what's going to hurt you is the expectations that are missed. between you and the other person. And it's what you don't know that's going to be the problem where, well, I assume that would obviously be you.

And they're looking at it like, well, why would that be me? That should be you, right? And that's what's going to hurt your relationship and what's going to cause problems of the deal. And ultimately, that's what's going to lead to a lawsuit, which is what you're trying to avoid. So, yeah, like the memorandum of understanding and the operating agreement is, in my opinion, so much more important than the tax structure that you're using for this thing.

That's really what you want to nail down and get right. Yep. Yep. There you go. All righty. Next, actually, that's the last question. So the next segment of our show, it's the Famous Four. Famous Four.

This is the Famous Four, the same four questions we ask every guest every week. But before I ask them to you, let's hear from Mindy on what's going on this week on the Bigger Pockets Money podcast. Okay, Braden and David, are you sitting down? Good. Monday's episode of the Bigger Pockets Money podcast will blow you away. We spent almost two hours with certified financial planner Kyle Mass. discussed about a million things to make your money work harder for you. Kyle gave us so many ideas and things to consider when planning your money's future. He shared information about what exactly

is a CFP. How do they get paid? And most importantly, how to properly bet a CFP so you're working with someone who can best help you. Now, I like to think I know a lot about money and managing it, but I learned about a thousand things from Kyle. This episode truly is for anyone who has money and wants to have more. Okay, guys, thanks for letting me butt in. Now it's time for the famous four. And with that, let's get to the famous four. Number one, Ken, what is your favorite real estate related book?

You know, I'm going to go with the most influential in my life, which was the Carlton Sheets, No Money Down System. Nice. Because that's what, I mean, it's not, I guess it's technically not a book, but it's, that's what influenced me more than anything else. I haven't read, I'm honest, I don't read a ton of. real estate books. I guess I just sort of educated myself in the process. Probably dumb on my part. But at least what's impacted me and influenced me the most would be that corny course I did

13 years ago. Cool. That's awesome. What is your favorite business book? I didn't think about this one for a second. I think, again, the one that's probably still I go back to in my mind in terms of the principles more than any other book I've read is good to great, my Jim Collins. Okay. And some of the principles that he extracted about leadership. and about having the right people on the bus and the whole hedgehog concept. I feel like I go back to that in my mind a lot when making decisions.

Yeah, I like that. How about some of your hobbies? Hobbies are, you know, if you guys have kids, you know that you have pre-kid hobbies and post-kid hobbies. That's so true. So like pre-kid, I mean, I play guitar.

I played sports. I was on football, flag football teams and softball teams. And I feel like I don't do any of that. Now I coach. A lot of little league teams. I've coached a lot of soccer teams. Hey,

in fact, I coached my son in his baseball. He's eight years old. And my little man, a little plug for him, he knocked a Homer out in the outfield. And I might have been the proud of his dad in the world. It was such a good.

So, I mean, honestly, you know, when you're busy and you're in your career and you've got young ones, any of your spare time is with them. I mean,

at least it is with me. We're four wheeling. We're camping. We're swimming in the pool. We're playing their sports. I mean, I feel like those are my hobbies now, at least at this stage of life.

Yeah, that's fantastic. Last question for me, what do you think sets apart successful real estate investors from those who give up, they fail, or never get started? You know, we talked about that a little bit. I mean, I think drive is one of them. Some people are just driven to grow and succeed. Some people are content, and there's nothing wrong with that. I mean, it's the people that are really driven.

And then I think second to that would be the people that overcome their fears. there's a lot of folks that, you know, like the idea of being real estate or flipping a house, and they just can't get over that fear of what if I fail, the people that can get beyond that and push through that fear and learn from their mistakes, I think those are the ones that you see having success. Yeah. Great answer. Yeah, I love it.

All right, Ken, where can people find out more about you? Just Google me. I'm everywhere, guys. Just kidding. No, red barnhomes. is sort of our home base, and it's a portal to some of our different brands and the different businesses that we do. And there's some pretty pictures of Anita and me on there, which you can look at. Yeah, you're also on the cover of Team Beat magazine. This is that, is that even a thing still?

I don't know. Probably. All right. Teams have no interest in a 42-year-old man. I'm going to talk with the producers over at Team Beat magazine. We'll get you on the cover. We'll work on that. All right. Well, Ken, this has been fantastic. Thank you so much for joining us today. I love this stuff. So, yeah, good luck on the, on season two of the show as well and keep it up in your real estate. Thanks, guys. I appreciate having me on.

All right. That was our interview with Ken Korsini. Dude, he delivered it just like I was hoping he would. I mean, again, I've always looked up to this guy for years. I've looked up to Ken. So now you all know why. Yeah, Ken is a stud. And I think the coolest part is that he doesn't have that like, I'm too cool for you because

I'm on TV attitude here. down-to-earth guy, totally willing to share like his failures and what isn't going good. And, I mean, you could just sit back down and have a beer with that guy. He's like everybody else. Yeah, he really is. He's super cool. And again, check out a show on October 11th. If you're watching this or listening to this show right now live, well, when the week it comes out. And if you're watching the future, make sure you go and check it out and support Ken and Anita and the family and the show. So with that, that's all I got. I'm, you know, I'm going to head out of here and go talk real estate. I got my buddy Ryan Murdoch here, who we call the real estate mercenary. And he's hanging out, helping me out get some stuff done at my house.

We'd be talking a lot about our mobile home park that we're working on together. And, you know, I'm going to go hang out with him for a while because he's better looking than you. Sorry, David. That's debatable, but I will allow it. All right, guys, thank you so much for joining us today. If you enjoyed today's show, please leave us a rating review in iTunes or Stitcher or SoundCloud or wherever you listen to this. And let people know that you like the show and maybe share it with somebody on your Facebook page today. and say, hey, I think you'd like this show and just go post it on their wall.

For BiggerPockets.com, this is Brandon and David, assistant to the original manager, Green. Signing off. I stole it. 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. Be sure to join the millions of others who have benefited. from biggerpockets.com. Your home for real estate investing

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