Epic Real Estate Investing - BRRRR Method Done-For-You | 1106

Episode Date: December 15, 2020

“The BRRRR method is all about you! It’s all about YOU buying a property, at a discount, then hold it, refinance it, and reinvest that money into another property!” Mercedes Torres Therefore, in today’s show, Mercedes, The Turnkey Girl is joined with Mike Pulley, a real estate expert who has done more than 150 Done for You BRRRs so you can learn from his experience and apply it to your real estate investing! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing show for Turnkey Tuesdays with your host Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays brought to you by Epic Real Estate Investing. My name is Mercedes Torres, your turnkey girl, and I help busy professionals acquire passive income through real estate investing so that they retire even sooner. With that said, I created this show to share tips and advice and real life, real estate experiences so that you two can create passive income in your world.

So if this is your first time here, glad you made it, make yourself at home. If this is not your first time here, welcome back. So last week, we talked about the economy and what we see is going on out there. And one of the struggles I see that investors are encountering, including myself, is the shortage of inventory that is currently transpiring in our space. I mean, it is getting harder and harder to find real estate investing deals. And while they're out there, homeowners that are selling their houses think their property is worth a whole lot more than what the market says the property is worth.

So I did some digging because there are a few things that I know are facts. First, it's a given that the key to building wealth is buying and holding properties. In fact, when I interview real estate investors across the gamut, specifically investors that have been investing for many, many, many years, they often say when I ask them, what would you have done different? They often say, I wish I would have held more property. So with that being a given, it is for sure a fact that the key to building wealth is buying property and holding it. as much as long as possible. Second, investors always want a deal. Investors are always looking for that bargain.

They're always looking to find at a discount. Third fact, some investors or some individuals that are wanting to become investors, they know that they don't always have the knowledge, but more specifically, the time to do all the work that a property requires to bring it to a cash flowing position. Yet many investors want a bit more control over choosing aspects of their rentals. And I mean aspects like the floors of a property or, you know, kitchen cabinets or a bathroom.

They want a little bit more control of their rental because it not only makes them feel better, but they feel in many cases that no one is going to take care of their dollars the way they do. So having said and shared these facts with you, my wheels started turning because I thought, what if, what if we created the ability for a real estate investor, whether it's a new investor or an experienced investor, what if we created the Burr method for them? that an investor can buy a property, rehab the property, rent it, refinance it to keep it, and then repeat the process. So that they, the investor, can A, have some say over the creation of their investment, a little bit more control, that is. B, they can have the potential

of equity as they can build up the quality of the rehab without overpaying for it. C, they can buy a property at a discount. D, they can finance the rehab. And E, most important, it could be managed and all done for you. So, as my wheels started to spin, voila. We created it. I have created a done for you fully turnkey burr method so that you can benefit from buying a property, overseeing the rehab, having say over the rehab, refinancing, and repeating the process

to help you create passive income. So I, rather than try to try to. to explain the ins and outs of this dynamic creation. I thought that it would be best to have the expert explain it to you because after all, this Burr method is all about you. It's all about you buying a property at a discount to then hold it, refinance it, and reinvest that money into another property. So, help me welcome to the show. show, a man, my partner, who has done over 150 done for you, Burge, so that you can learn from this experience. Help me welcome to Turnkey Tuesdays, Mr. Mike Pooley. Mike?

Thank you for having me, Mercedes. I'm excited to be here. And we're doing great over here. It's a little bit cold in Missouri. So, yeah, how are you? I'm doing fantastic. Thanks for asking. Let's jump right in because I am so excited about what we have going on for the new year that's going to take people just by storm. So before we just jump into anything, Mike, tell me a little bit about Mike and Mike Pooley's real estate operation. Tell me about it. Yeah. So I started in real estate. I would actually say from the age of five, that's usually where I start my story, that we moved here to St. Louis.

my dad got into real estate and predominantly he worked with investors and that was growing up all through and he still does but that was growing up and all through high school and whatnot I would help him. I also worked with my uncles who were general contractors and was able to learn a lot on the construction side from them. I had fallen in love with architecture and I'd fallen in love with the real estate in St. Louis. And there's a lot of beautiful historical homes here. So fast forward to when I first started actually in real estate. And I was a freshman in college. And I had realized I did not like living in the dorms. And so I ended up between my freshman and sophomore year, I ended up buying a house right

behind the university. And this is back in the days, you know, this is 2003. So if you had a pulse, they give you a loan, right? There was no documentation. They'd be like, oh, you make five, bucks an hour. Yeah, let's give you half a million dollars, right? I remember those days. I know. And it's no wonder in 2008, we had everything fall apart. But yeah, I bought a house. I was working at the YMCA, making 10 bucks an hour, working 20 hours a week. So $800 a month. My mortgage payment was 950.

So, you know, that math, you know, for anybody can tell doesn't really work. And so I was smart enough to have some friends come in and rent, you know, out bedrooms. So I had the three bedrooms upstairs rented out for an average of, you know, 400 apiece. And then we had a huge finish basement. And then I had three friends in each corner. And then I had one of the corners to myself and downstairs. And so, yeah, I was making another $750. So I was clearing over $1,000 every month after my mortgage payment, after utilities, which we split seven ways. So, you know, I think I was paying like 15 bucks a month for utilities. Fast forward a couple years later, we quickly, not quickly, but we learned that, you know, that really wasn't legal because I didn't know the occupancy laws.

You know, I was young. I was a sophomore in college. And so we had the city come and breathing down our neck and told us we had to get right. And so we did. But it was still a huge benefit. I learned a lot from it. And that's when I got my. my itch. That's when I was like, all right, we can do this. That is the true definition of passive income. Now, mind you, you didn't know that you were doing it illegally, but literally you were renting out each room and you were cash flowing. A thousand dollars a month. I mean, that's genius, not to say that you weren't doing it legally, but the concept of it, if you legalized it, is amazing.

I mean, even when we followed compliance, we were still bringing in 1,200 a month. mortgage payment was only 900. So, you know, we were still clearing money every month. And it was great. And at that point, we were compliant. And, you know, it made it really nice for me working in a nonprofit at 10 bucks an hour to have that freedom and flexibility to not worry about where is the monthly payment coming from. And really, if you think about it, you know, we hear this term house hacking thrown around all the time. And that was like the epitome of house hacking, right? And it was great, too, because all my friends that I brought in, like one of them had a Peter Vitale, a pool, So super nice slate pool table.

We had every video game system you could think of. We had big screens. We had surround sounds. We had foosball. We had, I didn't have to pay for any of it. It was great. Awesome. That's like the two definition of college living at its finest.

Way better than a dorm. Way better than the dorm. For sure, for sure. Okay. So then you graduated college. And how did we end up with the operation that you have now? So I graduated college. I went into the professional world for two years.

I worked in the nonprofit world. And, you know, the promise was right out of college I was going to jump into this amazing nonprofit career, making 40, 50 grand a year. And I jumped in at $32,000 a year. And my wife was making about the same in her profession. And within a year and a half after being married, she wanted to be a stay-home mom. And it was like right after we had our daughter. And 32 grand a year just wasn't going to hack it.

Right. And it was even with us at this. point we had moved upstairs and we moved some people downstairs and we built a little apartment downstairs and even with that we were still barely breaking even and some months even living on credit cards and so my wife and i fixed and flipped our first house in 2000 i would say seven and we made $41,000 and change on that and it took me three months really one month's worth of time if i had actually dedicated full time to it but uh three months and so i sat there thinking i'm like man I made more in three months than I did an entire year with a fraction of the effort.

And so I put in a month's notice at my job and two hours before I finished my last day, I got fired. And I'm actually super grateful for that because had that not happened, and then when times got tough for us in 2010, I'm sure I would have said, oh, well, times are tough. I can go back to my fallback of what I know. Right. But by that point, my wife and I were both like, hey, we're so done with all the stuff of, you know, just the corporate world. I mean, I know a lot of people listening to this podcast, they deal with a lot of the corporate world. They deal with a lot of the corporate world. They deal a lot of with the politics and in her office just junk where if that wasn't in the way, they could be super successful. And I'm sure that's why they're listening to this because

they're looking for opportunities to enhance what they're already doing or escape the rat race. of everyday life. Yeah. You know, it's amazing, Mike, how when there is no plan B, when there is no fallback plan, you just get it going. You know, you do what you need to do to succeed in whatever it is that you're doing. Because if you don't make this work, what else are you going to do? In fact, that's how Matt and I started. We didn't have a plan B. We had no choice. This was that it's there was no surprise to, you know, when we share, we were. broke. We had very little money. We had horrible credit and we just had to make it work. And when you don't have that option, and some people are lucky that they have that fallback plan,

but I have seen throughout my 14 years of doing this that for those people that have the fall black plan, they just, they're not as successful because they always have something to fall back. Right. Anyway, so you didn't have this plan. It was you, your wife, and you just went. We just got going. And the first couple of years, we did tons of fix and flips. And we, you know, we started seven. So obviously, we know what happened in 2008 market crash. And that's actually, we rapidly grew then. And that's when we jumped into the fixer upper model as well. So we were doing. So let me ask you a question about that one second. So you said, you know, you started in 2007. You were fixing and flipping. So you were only fixing and flipping for one

year. Tell me about before the market crash, right? So I started. before that and I was fixing and flipping and I only got stuck when with one flip I was projected to make about $80,000 and I made $8,972. Don't ask me why I know that number. But when you're expected to make, yeah, you're expected to make $80,000 and you only make $8,000. It is the biggest blow to the face. So when you started that, were you stuck with any flips from the market? So we did. Yeah, actually, we had one that just kind of hung out there, you know, was pretty much, we finished at mid-8. And that's when everything really started to hit. And then it went on the market.

Well, it stayed on the market through fall of eight, which is when everything really was blowing up. And so, you know, we were anticipating making same as you, about $80,000. Now, mind you, this is a project that I had worked on 60 to 70 hours a week personally, you know, swinging a hammer, driving my. my truck down there, hauling materials. And when all of a sudden done, made about $5,000. But if you break it down math-wise, it was something like 15 cents an hour is what I made.

You know, I could have done better being a server and making tips and even not making tips, you know, making the minimum wage of a couple bucks an hour as a server. And so it was a really great learning experience, a expensive learning experience. I would say not as expensive as, you know, college because, you know,

that stuff is just looming, that debt's just looming over people, right, forever. And the value I got out of that was so much more powerful than I, than any college experience I had from learning. So, so yeah, we got stuck with one. And it was one of those we had to change out the countertops that we just put in because the buyer's like, I love the house, but to make the deal happen, they wanted a different countertop color. So, and they're granite counters. It just breaks your heart to tear out something brand new to putting something else brand new. But to get to the, get to the, get the deal done and get it off your books, you know, it's important. So, and that's when we really shifted into that fixer upper model, which is, you know, what we're going to be discussing today.

So we did the fixer upper model and jumped in dealing with clients and Fannie Mae and FHA have renovation loan products. And so we started making it cool before anybody else did. And, okay, so let's talk about that. You talk about a fixer up a model and then we're talking about fix and flipping to the average person that doesn't do what you and I do, single day, there may not be a difference. So we understand what fixing and flipping is. You buy a property, you fix it up, and you flip it for a profit. You're talking about this fixer upper model. What does that mean to you and your organization? So Mercedes, the fixer upper model isn't, I mean, it's new for a lot of people, but for us,

it's not a new concept. We've been doing this since 2008. In 2008, we, you know, we talked about our experience as far as fix and flips and the market shift. And so in 2008, we were approached by a renovation lender that does loans for Fannie Mae and FHA. And, you know, he said, hey, why don't you look into these renovation loans? And so we really looked into that. We dove in and what we did was we created a model and a process and an estimating program that allows us to quickly and rapidly go through the fixer upper process. And so fast forward, you know, 10 years later,

by 2018, we had done 149 homes. Oh, my God, I love it. It was so much fun. We worked with homeowners being able to find, you know, the biggest thing was we were able to hope homeowners that couldn't find homes on the market, or maybe the homes just needed way too much work, and they didn't even know where to begin. We were able to work with them in putting together a budget, scope of work, get them connected with the lender, and then they were able to purchase the home and have the renovations

rolled in all in one package deal. And straight, fixed 30-year mortgage, which made it really reasonable, really affordable for them to be able to take action. So that had become our specialty for 10 years. You know, we were, like I said, we were cool before anybody else was cool, before Property Brothers entered the scene, before Fixer Upper. Now you watch HGTV, and that's all it is, you know, these groups doing turnkey type renovations for owner occupants. And so. Yeah. The reality is that the Fixer Upper model, uh,

on TV isn't always what it's glammed up to be. So, yeah, let me take you back just a little bit. Okay, so tell me specifically what is the flipper upper model. Explain it to our listener that is very new to this concept because they've heard of fixing and flipping, but they don't really understand what fixer upper means. So let's break that down and dissect that for a second. Right. So the fixer upper is, you know, right now we're seeing one of the biggest pain points for

for, you know, for us as investors as well as your investors that you work with and the people listening is there is a massive lack of inventory, right? Correct. You know, and I hear all the time I have turnkey investors that we've worked with that are like, hey, I just can't find properties or the people I buy properties from can't find properties. And so, and I think you mentioned to me the other day, you have more buyers than you have properties, right? You have more people interested in buying. And so, so what we do is, you know, 2018, we shifted out. of doing the fixture upper model for clients. We started just solely focusing on our own investment stuff between my family and I and even my 14-year-old daughter bought her first rental last

year. And so we've made it a total family affair. But now what we're doing is we've had a lot of just feedback and questions from like especially turnkey investors. And I know the conversation you and I had the other day was this can open a whole new slew of opportunities, meaning we can get homes that typically couldn't be gotten by a typical investor. For your turnkey investors, it works, right? So like for me, for you and I as an investor, you know, say a house is worth $100,000. Right off the bat, you and I, we have to go put an offer in for at least $70,000 if it doesn't need repairs, right? But if it needs repairs, then we have to reduce out the cost of that.

So maybe we're buying it for $50,000, right? in order for us to get our profit margins, have the carrying costs, all that stuff, and then to be able to turn around and sell it to maybe a turnkey investor that would buy it as a rental. Now, what the difference is with us is we can actually hit up properties on the MLS. We can hit up stale or expired listings that maybe we're at 70 or 80 cents on the dollar, and they still need that 20 to 30 cents from repairs. And then it still hits those margins for a turnkey investor, right? Correct. So you are still a, because there is a shortage of inventory during this time, and we know that my investors, my VIP investors in our queue are experiencing when they're receiving properties, normally they would receive easily 10, 15 properties a week. Now they're lucky if they even see five, because that's just what's available. So what we've done or what you've done is we are now buying properties could be from the MLS or different sources that you have, but you're buying.

them at a discount because they need work. Correct. Is that correct? Correct. So we're offering a discounted offer, but when our investors come in and decide that they want to buy this property, they can qualify for the discounted property and the rehab amount in order to buy this turnkey because it's still turnkey just because we're doing all the work for them.

it's just a little bit of a different model because we're buying discounted pre-rehabed, but by the time they buy it, we already know exactly what the rehab cost is. The bank loans on the rehab cost so that the individual can buy the property still with 20% down. Is that correct? That is correct. Awesome. Okay. And to that effect, too, there's a lot of more advantages to that, right?

So, you know, people, well, you know, I think people look at it like, hey, I really don't want to fix her up her, right? They get scared off by it because of whatever married of reasons, especially, you know, if they're in another city and we're managing a project here in St. Louis, how do they know that things are going to be done right? Well, you know, like you said, we put together the budget and the scope of work and we submit that to the lender as well as, you know, the investors so they know what work is being done on the home. And you don't get that in a typical investment, right, when you're buying a turnkey. You don't know what work has been done. And it might look pretty. And they might say what their work was done.

on it, but you don't know to what effect, right? And so with us, we give a detailed report of what that would look like. We also do design packages. So the investors that we work with, they actually get to pick from designs and finishes. And we're always changing that to match the trends. So the turnkey owner can get the top rent possible for that house. Like we have one that we just sold last week. And, you know, the projected rent was $1,300. And with the finishes that we did in, it and that were selected, they were able to get $1,500 a month. And that changes the return on investment significantly, right? You're talking to another $2,400 a year that that adds to the bottom line.

That's huge. That's huge. That's like a whole whopping 3% to your ROI additionally. Okay, so let me just take that back for a second. So our buyers are buying a property that's pre-rehabed. You were giving them not only a scope of work, but a full-on physical design of what this house is going to look like. prior to them purchasing the property that they're going to purchase.

Okay. And then we're going to have this scope of work that we then send to the bank for pre-qualification. But in addition to that, you give the investor, in this case, our client, the opportunity to choose the finishes to the floor, the bathroom cabinets, the kitchen cabinets. Now, they're going to have limited choices, but the investor gets to choose what they want for their investment property. Did I hear that correctly, Mike? That is correct. I love it. To my listener, I have been looking for something like this for a very, very long time.

I've been doing turnkey for about 11 years, and I've yet to find the right team on the ground that was going to be able to take this on the way that I wanted to roll it out to you. So walk me through really quick, the lender aspect. Now, I know, Mike, you are not a lender. I am not, no. But I know that you've worked in cahoots with someone tightly on all of these hundreds of, what do you call this? The fixer uppers. Okay.

Hundreds of these fixer uppers. Tell me what that process is like and just briefly tap on what the loan is all about. Right. So, again, not a lender, but we've done enough of these to know the intricacies of them because they are a little bit different than a typical loan, right? And so, say we find a qualified property, right? Say it's that $70,000 purchase. We have a $30,000 renovation. So all in $100,000. Say it's worth $100, $110. It's going to rent for $1,000 to $1,100. So what will happen is we have that qualified property. We've put together comps. My wife is a real estate agent. So we actually put together comps. And we're very

conservative on them. We don't go pull the crazy comps, the one off that was like got the highest number. We get really the average across the board. Like what do we think this will be worth? So that way when we give it to our, you know, turnkey investor buyers, they know what the value is, right? So from there, then they obviously will go through the pre-qualification requirements. And I know you already deal with that with the lenders that you work with. Very, very similar. I mean, it's in every aspect, it's similar. The only difference is when it comes to these renovation loans, they're just going to, like you said, the as is price or the current value of what the house is plus the renovations. And they do what's called a subject to appraisal.

So they'll have an appraiser come out. And they look at, yes, the current condition. But then they also take into account the finishes and the budget and scope of work that we put together. and then they stack that up against what the other comparables are in the market around it. And so from there, they do the appraisal, comes back. We just had a bunch coming this last week. We were expecting, I was anticipating $260,000. We were being conservative.

The appraiser came back at $290. So great advantage for this turnkey buyer because now they're walking in with $30,000 more per unit, you times that by four. So now they're projecting out $120,000 in equity that they weren't anticipating because of the future value of the property. Now, they're only going to be into it for X amount of dollars after they put down their 20%. So their equity positions even greater. So let me get this straight. When the buyer comes in, they pay the purchase price of the property, press the renovation, and they can get a loan for all of that.

Correct. they still have to come in with a 20% down payment, like a convention alone. Correct. But if the value comes in higher, then the buyer doesn't have to come in with the difference. That's just equity for their pocket. Is that correct? So in some cases, yeah, they could end up doing a refinance to get their initial 20% investment back. Right.

So if in the case of these properties, right, they appraised for much higher, that 20% that this turnkey buyer is putting in, they could end up refinancing after the project is complete and get their initial investment back, and then they can roll that into other opportunities. I love it. So in essence, this is like the Burr method. That is correct. Okay. So explain that a little bit more to me.

Well, in essence, this is a turnkey burr method because we're doing all the work for the investor. They still get to benefit for absolutely everything from Brian. a pre-rehab property, financing the rehab, choosing the finishes to their property. And in addition to that, if there's equity, they get to keep the equity for themselves. And then we can just do a refi for them or they can do a refi as well. Is that correct? That is correct. I absolutely love it. This is kind of genius. We like to think so. And we've done it several times. And we've got two projects that we're working on right now in the same format. And we've got another four teed up and we've got due diligence on another 10 that we're working on right now. So, you know, we've,

we've had a track record of success with it. We're really excited to really launch this. We just started this process back in July. And so we're really excited to bring this back because this is what, you know, in our one of my masterminds that I'm part of, this is what we call my genius zone. This is where we've shined. We did the fixer upper model for a decade and got away from it. But now we've had, you know, we see the demand. We see that there's a demand for turnkey investors. Like you said, they might have had 15 options previously, but now they have five.

And now we can open up a whole new pool of opportunities for them. I absolutely love it. Now, let's talk about the reality of what's happening. So you've been doing this since last July. So about a year and a half, this specific model. How many have you done of this specific model for the last, I don't know, 18 months? So it's actually been since this July. Okay.

Of this year. Okay. Now, so we just launched it. Now, our experience on the 149 has given us the opportunity to really advance this and enhance this. So when you're dealing with owner occupants, it's a lot more complicated than investors, right? Because there's, when we were doing this for our occupants, we were dealing with three main. things, right? We were dealing with the family. We were dealing with the house and their home, and we were dealing with their finances. So stress levels are through the roof, right? And in those

149, we had done a half dozen for investors. And we never really made a push for that because at the time, that wasn't really our focus. Now looking back, I realize, hey, we should have made that our focus. Because for investors, what do they care about? They care about the bottom line. They don't get emotional, right? Because they don't need to be emotional, right? They just look, what's the bottom line? Am I making what I'm going to be making? They care about the quality, right? So they care about, is this house going to be the quality that I like? And so, you know, I heard somebody talking the other day about people buying from turnkey operations in the past, right? And two years in, they have all these issues and rehabs and repairs and things like that.

where I think we're with us, they know that they're getting a quality product, plus the warranties anywhere between one to five years, depending on what we select inside these projects. So there's the bottom line, there's a quality factor. And what's the success of that project too over life, right? So we really are making a push for this right now.

We're seeing a lot of traction with it because that lack of inventory. And also there's that excitement level too, right? Okay. Yeah, totally. Investors, these turnkey buyers, they typically don't have a say in what gets done on these houses, right? They just look at the numbers like, I like that one. That one makes sense financially. Well, now not just doesn't make sense financially, but now they get something that's going to be a quality product that they get to actually be a little bit of a participant in as well, as far as the finishes and design aspects. Yeah.

So I always talk about having a little bit of control, and this allows them a little bit of control. trust me, not all turnkey investors want to dabble, but for those that do want to dabble, now you're giving the opportunity to be able to kind of jump in. So I will have to say, Mike, sometimes, and now I'm an investor myself, and I know that there's always the good, the bad, and the ugly. So you've told me all the good. Right. You know, tell me what would be something bad. What's a give me a worst, not the worst possible scenario, but give me a true scenario that you've experienced. that has not been all roses. Well, I mean, we've had, obviously we've had enough in our own fixer upper career,

as well as we have one of these projects that we're working on right now where we just have delays with crews, right? So like right now, we have the ability to do everything in-house and outside on the property with the exception of the roof, right? We just, because of our insurance, we can't handle the roofs. So we have to hire that out. So our typical roofing crew, we had them on the schedule and our. closing got delayed. And we got delayed a month with this with this investor. And it wasn't anything that was

really out of control. It was just just the nature of what's going on in the market. Right. So we missed our window of opportunity to have a regular roof or do the roof. And so I call them up day of closing. I'm like, all right, we're ready to rock and roll. And she, you know, the lady who runs the business with her husband, she's like, calls me back. She's like, I'm really, really excited. But I'm really hoping you won't tell us. You won't need us until February. I'm like, yeah, I need you next week. You know, and so, and the reason is, is we could do demo, but we couldn't do anything after that. We had to wait for the roof to get done because the roof was leaking.

So we can't put anything back until the roof is complete. You know, fast forward three weeks after closing, we finally get the roof done. So that delays a project, right? So we can't do anything inside for three weeks. And so we always like to tell our investors, hey, we average. spend about 10 grand a week. It's going to be a minimum of six weeks just because we have to wait for cabinets and flooring and materials to get in. So typically we say it's going to be a minimum of six weeks, but also buffer for an additional month should just anything happen. Right. And so that's

kind of the worst case scenario. As far as the renovation loans are concerned, the renovation loan, they factor in a 10% contingency. So if something comes up in the project where, you know, I mean, I don't have X-ray vision. My project manager does it. have x-ray vision. Our estimator doesn't have x-ray vision. So we don't know what's going on behind the walls. So we could open up a wall and find out we had one probably seven years ago where we opened up the wall in the kitchen and there was a fire in there previously and how these cabinets and wallboard was staying up on the walls beyond me because there's no two-by-fours really behind it. So it just seemed to be floating there. And so stuff like that, you just open up and you find

problems. So the lender has a 10% contingency of the total purchase, or not purchase, but of the total renovations set aside. So should something like that come up, it comes from the contingency account. I love it. Okay. So let's talk about that for a second. How do we know that the lender, or how do we know that the contractor is actually going to be doing the work on this project? So that's actually where we step in. We do the project management. We do the design. We see the project through to the end. We are our advocates. We are the advocates for the investor. We have every incentive to get it finished. We have been making this shift in the last month, bringing everything in house. So that is a process as well. And what that'll do is it allow us to control the environment

a lot better, being able to not be at the mercy of, say, a roofing contractor. You can't get to us for a month or two months or three months, it'll allow us the ability to bring that in-house and to control that aspect. And, you know, hopefully bring down costs too because then we don't have to sub it out or, you know, sub-out certain aspects. We can bring that in-house and do a lot more volume,

especially as we are projecting with you and some of our own endeavors as well. Yeah. Awesome. So tell me, why would an investor want to do this model versus just a typical turnkey property from cash flow savvy. What's the advantage to the investor? The advantage would be going back to, for me as an investor myself,

if I were to buy a turnkey, I, because I'm by traded contractor, I would want to put my eyes on it, right? I'd want to look at it. And yes, there's home inspections that are done on these, right? but I want to put my eyes on it because what looks great in a photo may not be the same quality as what you can see in person, right? The home inspectors are more looking for what's the deferred maintenance issues, what's your safety and liability issues? They're not looking at the quality of finish, right?

They're not looking at like, was the drywall done, you know, to a top level finish? Was the paint done well? Was the, were the cabinets installed properly? where, you know, they don't really look at that stuff. They just look at the, you know, what are the major issues that could come up over time, you know, that should be addressed. So for a turnkey investor, you know, if I were a turnkey investor, that's what I would look at. And that's what I encourage any turnkey investor to look at is like, you know, as well as I do, you can take pictures and edit them and make, you know, the ugliest thing look absolutely stunning. But once you get there in person, it's a totally different thing.

So for us, the advantage is having a quality finished product, right? The other advantages, like in the case that I shared earlier, potential equity, it's not going to happen on every deal, right? But there's that potential equity that's there. We weren't anticipating that $30,000 per unit in that scenario we shared earlier in equity. That's big. That's game changing, right? Yeah, but it's not there all the time.

And, you know, the other advantage is, you know, if they want to participate in the finish selection, they can. They don't have to. If they just say, hey, you guys go ahead and run with the whatever design, you know, we've got the one that has the roof issue. The investor, he just let us put together an entire design package. We sent it over to him. And he's like, you know, just gave us a thumbs up. He's like, I approve. So he was very hands off in that aspect, but he loved the finishes, right?

and it's beautiful. And I'll send you over the design aspects on that particular house too. So you can share that with your audience so they can see what kind of design aspects we're going into that particular house. I would love that. I would also, I'll love to share that and our audience is going to be able to dive into that. You know, this is, you said something very interesting just about Turnkey in general. This is why I harp on two things.

Number one is I harp on them doing their own due diligence. I'm big on inspection. So I always encourage that for our clients. And then I also encourage our clients when they're given a choice to be able to say exactly what your last client said, I trust you, please choose from me. I mean, we have, I've done over 2,000 transactions in my lifetime. Trust me, I have experience on choosing what works better. But sometimes the investor wants to be able to say, hey, I want carpet instead of hardwood floors

for whatever reason. And that's you're right. So when you're given that option, run with it. Mike, I want to ask you just a couple of questions that I ask, everybody that I interview. And it's basically to our experts doing whatever it is that they're doing. What advice would you give a new investor who's considering doing this turnkey burr method? What would you tell them? I would tell them, you know, one of my biggest pieces of advice I give to any investor is don't get emotional, right?

The second you get emotional, this game over, you know, you've already lost money the minute you've gotten emotional. And I don't see that really being the case too much with turnkey investors because they're presented with just straight facts, right? Here's the return on investment. Here's the property. Here's this. So there's not as much to worry about that as typically like you and I, we love to venture into fix and flips. And sometimes we just find that one that we're like, I really want this one because it'd be so amazing. Right. And so that's always my biggest thing, right? The next thing would be is, you know, in this case especially, right? You got to buy it, right? And in this case, that kind of is a little bit different because they can still buy it right and they can still do the renovations and it still hits that, say, 1% rule or whatever it is as far as the turnkey model is concerned. So they can still buy it right in that aspect. But,

you know, I've seen it way too many times. We dealt with an investment, a realtor and an investor out of Dallas who, you know, she trusted another realtor here in St. Louis. And just because they were the same brokerage and that realtor helped them buy all these properties that, you know, all in before they even started renovations, they were already $100,000 over budget. And so, you know, and that's per house. And so you. factor that in, you put that on the market. Well, now it's, you know, they're into it for 100,000 more than any house is worth in that neighborhood. And so knowing the market, having a great team in place, you know, people who are out for your best interests. And, you know, we can pull comps. You get into St. Louis City. I can pull comps within a quarter to a half mile radius. But you have to know the streets, right?

There's a street where if it cuts off here, anything below that, I mean, or above that could be totally different. We've got a house where, you know, we bought it for $100,000. It's worth $200,000 right now. But if I go three blocks south, that same house would be worth $600,000, right? And so, and we knew that. We knew that going into it. We just didn't, you know, but another investor might come in and buy it for $300 and be like,

oh, it's worth $600 grand. And it's only going to be worth, you know, $200, $250. And so that's the biggest thing is like making sure that you have a good team. You know, there's that saying trust, but verify, right? Yeah, absolutely. Absolutely. We always encourage that. We always encourage that.

Even with us, you know, it's like, look, we're human. Mistakes can be made and things can be missed. But, you know, we do our best, the best that we can to make sure all the due diligence is done and present it. And from there, your investors or our investors, can take that information and digest it properly. Absolutely. Absolutely. Mike, tell me, what is something that you know now,

that you wish you would have known when you first started investing? Oh, man. I know I was an idiot back then. Are we all when we first get started? Yeah. You know, I think it's, I don't know, I spent last week going through and looking at all of our past projects and just, you know, I look at, I actually pulled comps on a big majority of them and just to see the equity position we'd have now versus then.

And I'm like, oh, my gosh. I should have held it, right? I should have not pulled it. Yep. Yep. So, so the things I wish I had known was I wish I, I wish I had trusted other people. And I mean, like, growing up in real estate, right? I shared that I grew up with this since I was five.

And I'd been around it all throughout my years. I'd worked in construction and doing my own fix and flips. What I wish I had known was how to be humble and how to go to people who knew more than I did or who had experienced more than I did. Because what I found myself doing is whenever I got in a tough time, I had kind of positioned myself as the expert in some things. and in reality when times got tough, I wasn't humble enough to go to other people

and talk to them about what we were experiencing and being able to have them help me navigate through that process, right? And so as hard as we all try, you know, and as hard as we all work, there's just times we need a friend, we need a confident,

we need somebody to trust and support and lean on. And it's the biggest key is finding somebody who's been where you want to go. Right. So I know where I want to go. You know, and that's that's how we ended up having this conversation, right, prior to us talking on this on this podcast and surrounding yourself with people who have been where you want to go and being real, being authentic, letting him know where you are, letting him know, hey, what's that term you just said? I don't understand that. Or, you know, not just running for the sake of running, but actually stopping, pausing, evaluating.

I think that's the biggest thing, right? Because anybody can learn anything, right? It's those things that can end up that can end up being the most costly that we're too either embarrassed or too shy or too whatever to discuss. Yeah. Wow, Mike, that was so well said. In fact, you said something in hindsight with your investing career and you look back at all the projects that you did and all the projects that you sold and you look at the equity position. And where would you have been had you not sold those properties? It is amazing because, you know, when we, I know, I know. It's $3.7 million.

Oh, my God, that is painful. And, you know, I will say that, you know, when Matt interviews people on the podcast and just when we've interviewed legends, I mean, true legends in our space, and people in general that have made it in real estate. And, you know, we asked them to reflect on their careers and their lives. And without a doubt, the one common denominator between all of the huge people that we've interviewed that, you know, big or small, they always say, I wish I would have held more. It's just one of those things that in the moment, when you see that,

shiny penny for that flip, you want to sell it. But when you go back in hindsight and you look to see what you gave up, it's painful. So thank you for sharing that because that is something that are people I think need to hear because, you know, Matt and I say it all the time that, you know, creating wealth, real estate is that one thing that will allow the average person to become wealthy. So thank you for sharing. that. Are there any final words, Mike, that we want to share with our listeners? No, I think I'm just grateful for the opportunity. And, you know, we're and, you know, look for some stuff that we're going to be handing over to you to share with your listeners.

Very cool. So I do want to share that I have been, you know, I often share with, with you listeners that I'm a big fan of mastermind groups and everything happens for a reason. reason. And, you know, as Mike just shared, we align ourselves with people that are doing what we want to be doing so that we can present opportunities to you, the listener, to help you create your financial future and to help you create passive income in your world. So I'd have to say that the way Mike and I and our partnership came together with serendipitous, I was looking, as you know, I am a turnkey operation. And I was looking to offer this. Burr method done for you. And let me tell you, I have searched and searched and I do my share of vetting. So finally, when Mike and I met and decided to partner to make this happen so we can roll it out for you, it was just, for the lack of a better term, heaven sent. So I hope you take advantage of this opportunity. Feel free to come on board and become a turnkey investor for the bird method for us. reach out to me if you want more information through our website.

Go to cashflow savvy.com. That's savvy with twobies. Click on the contact me and in that section write the word fixer upper. Mike and I will automatically send you an actual property, the one that we are working on now, so that you can get an idea of what it would be like so that you can become a brer investor with this amazing method. Mike, thank you so, so much for your.

knowledge, your time, and really for sharing authentically the good, the bad and the ugly, and this amazing creation that you've made, turnkey or Burr Method. I thank you very much. Thank you. Mike, have an amazing day. And to that listener, to my listener out there, have an epic day with cash flow. It's key. Does your money work for you as hard as you do for it? If not, no worries. You do not have a money problem. merely have an idea problem. We're cashflow savvy.com, and we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival.

Go to cashflow savvy.com and download a free investors package. Cashflowsavvy.com. You do not have a money problem. Merely an idea problem. Cashflow savvy.com. More ideas, less worries. Cashflow savvy.com. This podcast is a part of the C-suite Radio Network.

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